1. Western Europe telecoms market: interim forecast update 2013–2018
December 2013
Hilary Bailey, William Hare and Pablo Iacopino

2. About this report This report provides:
an interim update of our five-year forecast of more than 200 mobile and fixed KPIs (see Figure 1) for Western Europe as a whole and for 16 individual countries, which was previously published in June
an explanation of the significant changes to our previous forecasts for the region and for six key markets. For the complete data set, see the accompanying Excel file.
This update is based on a historical dataset as at the second quarter of
Upward or downward revisions to our previous forecasts occurred mainly as a result of:
market developments, based on the latest operator and regulator data
changes to the macroeconomic outlook, competitive and regulatory environment
changes to historical data because of newly available information and restated data.
Figure 1: Summary of report coverage [Source: Analysys Mason, 2013]
Geographical coverage
Major KPIs
Regions modelled:
Western Europe
Countries modelled individually:
Austria
Belgium
Denmark
Finland
France4
Germany4
Greece
Ireland
Italy4
Norway
Netherlands
Portugal
Spain4
Sweden4
Switzerland
UK4
Connections3
Revenue3
Mobile
Handset, mobile broadband, M2M
Prepaid, contract
2G, 3G, 4G
Smartphone, non-smartphone
Fixed
Voice, broadband, IPTV, dial-up
Narrowband voice, VoBB
DSL, FTTH/B, cable, BFWA, other
Service, retail
Handset voice, messaging, data
Voice, broadband, IPTV, dial-up, BNS
ARPU3
Voice traffic3
Mobile:
SIMs, handset
Handset voice, data
Fixed and mobile
Outgoing minutes, MoU, SMS sent
1 See Western Europe telecoms market: trends and forecasts 2013–2018. Available at
2 The previous forecast was based on a historical dataset as at the fourth quarter of 2012.
3 Most results are provided for the business and residential segments as well for the total market.
4 Country forecast changes and drivers are discussed in this report.

3. Contents Executive summary
Slide no.
Slide no.
Executive summary
We have slightly reduced our forecast of retail revenue in Western Europe, largely because of recent steep declines in mobile revenue
Mobile revenue will contract further because market pressures are eroding voice and messaging revenue
The outlook for telecoms retail revenue has worsened in all but two countries
In the first half of 2013, traditional mobile revenue declined more steeply than in previous quarters, and at an accelerating rate in some markets
Key trends since our previous forecast: voice and messaging revenue is eroding more quickly
Key trends since our previous forecast: the changing composition of markets will have an impact on the mobile and fixed markets
Summary of forecast drivers for each Western European market [1]
Summary of forecast drivers for each Western European market [2]
Forecast highlights for major markets
France: Intense competition has continued to drive down mobile revenue, and this pressure is set to continue
France: Mobile voice revenue contracted sharply in the first half of 2013, and this trend will continue to affect our forecasts
Germany: Mobile revenue has contracted sharply in a competitive market
Germany: The poor outlook for messaging revenue has brought total forecast revenue down, despite market consolidation
Italy: Price competition in both consumer and business segments has intensified dramatically in 2013
Italy: We now expect traditional mobile retail revenue to decline more than anticipated throughout the forecast period
Spain: Low-price operators are winning market share, and quadruple- play bundles are gaining momentum
Spain: We have revised down our retail revenue forecasts for all revenue streams, with the exception of mobile handset data
Sweden: Mobile voice outperformed our expectations in the first half of 2013
Sweden: Faster-than-expected smartphone take-up will reduce voice revenue over the forecast period
UK: The UK market has underperformed in the first half of 2013, leading us to downgrade our estimate for the year
UK: A stronger trend for fixed voice and broadband (including IPTV) has resulted in an increase to our long-term forecast
About the authors and Analysys Mason
About the authors
About Analysys Mason
Research from Analysys Mason
Consulting from Analysys Mason

4. List of figures Figure 1: Summary of report coverage
Figure 2: Telecoms retail revenue by service type, previous and new forecasts, Western Europe, 2013 and 2018
Figure 3: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Western Europe, 2010–2018
Figure 4: Telecoms retail revenue by service type, and growth rates, Western Europe, 2012–2018
Figure 5: Connections by type, and growth rates, Western Europe, –2018
Figure 6: Telecoms retail revenue growth by country, previous and new forecasts, Western Europe, 2012–2018
Figure 7: Year-on-year change in mobile voice retail revenue, by country, Western Europe, 1H 2011–1H 2013
Figure 8: Year-on-year change in mobile SMS retail revenue, by country, Western Europe, 1H 2011–1H 2013
Figure 9a–b: Summary of major changes compared with our June forecast for Western Europe
Figure 10a–b: Major forecast drivers and impact, by country, Western Europe, 2012–2018
Figure 11: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, France, 2009–2018
Figure 12: Telecoms retail revenue by service type, and growth rates, France, 2012–2018
Figure 13: Connections by type, and growth rates, France, 2012–2018
Figure 14: Telecoms retail revenue by service type, previous and new forecasts, France, 2013 and 2018
Figure 15: Telecoms retail revenue by service type , and previous forecasts for total and mobile retail revenue, Germany, 2009–2018
Figure 16: Telecoms retail revenue by service type, and growth rates, Germany, 2012–2018
Figure 17: Connections by type, and growth rates, Germany, 2012–2018
Figure 18: Telecoms retail revenue by service type, previous and new forecasts, Germany, 2013 and 2018
Figure 19: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Italy, 2009–2018
Figure 20: Telecoms retail revenue by service type, and growth rates, Italy, 2012–2018
Figure 21: Connections by type, and growth rates, Italy, 2012–2018
Figure 22: Telecoms retail revenue by service type, previous and new forecasts, Italy, 2013 and 2018
Figure 23: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Spain, 2009–2018
Figure 24: Telecoms retail revenue by service type, and growth rates, Spain, 2012–2018
Figure 25: Connections by type, and growth rates, Spain, 2012–2018
Figure 26: Telecoms retail revenue by service type, previous and new forecasts, Spain, 2013 and 2018
Figure 27: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Sweden, 2009–2018
Figure 28: Telecoms retail revenue by service type, and growth rates, Sweden, 2012–2018
Figure 29: Connections by type, and growth rates, Sweden, 2012–2018

5. List of figures
Figure 30: Telecoms retail revenue by service type, previous and new forecasts, Sweden, 2013 and 2018
Figure 31: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, UK, 2009–2018
Figure 32: Telecoms retail revenue by service type, and growth rates, UK, 2012–2018
Figure 33: Connections by type, and growth rates, UK, 2012–2018
Figure 34: Telecoms retail revenue by service type, previous and new forecasts, UK, 2013 and 2018

6. Executive summary
Forecast highlights for major markets
About the authors and Analysys Mason

7. We have slightly reduced our forecast of retail revenue in Western Europe, largely because of recent steep declines in mobile revenue
Figure 2: Telecoms retail revenue by service type, previous and new forecasts, Western Europe, 2013 and 2018 [Source: Analysys Mason, 2013]
We have fine-tuned our forecasts for 16 Western European countries in light of recent market developments. We forecast that total telecoms retail revenue will reach EUR201 million in 2018, and that mobile services will account for 51.0% of the total, which is slightly reduced from 51.5% in the previous forecast.
Many mobile operators in Western Europe experienced an even steeper decline in their revenue during the first and second quarters of 2013 than in previous quarters.
Heightened competitive pressures in some markets, the widespread adoption of unlimited voice and messaging packages, and the increased threat from over-the-top (OTT) applications and quadruple-play services, all contributed to a sharp drop in traditional mobile revenue.
To reflect the strength of these factors, we adjusted our mobile revenue forecasts downwards (by 2.4% in and 4.0% in 2018), on the basis that there is now demonstrated appetite for OTT alternatives to traditional voice and messaging services in many markets, which will erode traditional revenue faster than previously estimated.
Our fixed market forecasts are largely unchanged: we have reduced them overall by 0.5% to reflect heavier losses in the voice market.

8. Connections (million)
Mobile revenue will contract further because market pressures are eroding voice and messaging revenue
Figure 3: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Western Europe, 2010–2018 [Source: Analysys Mason, 2013]
Figure 4: Telecoms retail revenue by service type, and growth rates, Western Europe, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (EUR billion)
CAGR 2012–2018
2012
2018
New
Previous
Mobile voice
71.8
44.6
–7.6%
–6.4%
Mobile messaging
17.7
7.7
–12.9%
–10.0%
Handset data
20.1
38.4
11.4%
10.9%
Mobile broadband1
7.6
7.2
–0.9%
–0.1%
M2M
1.2
4.2
23.2%
25.0%
Fixed voice and narrowband2
52.6
–5.1%
–4.8%
Fixed broadband3
36.1
39.1
1.4%
1.5%
Business network services
21.3
21.2
–0.0%
Total telecoms
228.2
200.8
–2.1%
–1.7%
Pay TV
24.9
26.9
1.3%
Total
253.1
227.7
–1.3%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 5: Connections by type, and growth rates, Western Europe, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
New
Previous
Mobile handsets
485.5
488.8
0.1%
–0.1%
Mobile broadband
38.0
42.5
1.9%
2.4%
M2M
30.6
195.5
36.2%
35.6%
Fixed voice
205.0
185.2
–1.7%
–1.5%
Fixed broadband
129.5
153.2
2.8%
IPTV
22.5
34.2
7.2%
5.5%

9. The outlook for telecoms retail revenue has worsened in all but two countries
Figure 6: Telecoms retail revenue growth by country, previous and new forecasts, Western Europe, 2012–2018 [Source: Analysys Mason, 2013]
Revenue will decline in all countries in Western Europe during 2012–2018. The UK will have the strongest market performance, while Greece’s market will decline the most (mainly because of its poor economic outlook). Our forecasts have improved for the UK1 and Portugal as a result of stronger fixed broadband revenue. Portugal experienced double-digit year-on-year growth in fixed broadband revenue during 2013, and its ARPU rates will remain higher because of a growing proportion of fibre in the mix of access technologies.
We have made the most significant reductions to revenue growth in France1 and Sweden1, where we expect greater losses in mobile voice and messaging revenue because of intense market competition and the strengthening threat of OTT applications. The same trends will affect Belgium, the Netherlands and the Nordic countries.
1 See slide 16 for discussion of France, slide 24 for Sweden and slide 26 for the UK.

10. In the first half of 2013, traditional mobile revenue declined more steeply than in previous quarters, and at an accelerating rate in some markets
Figure 7: Year-on-year change in mobile voice retail revenue, by country, Western Europe, 1H 2011–1H 2013 [Source: Analysys Mason, 2013]
The most significant trend in the first half of 2013 was the sharp decline in mobile voice and messaging revenue. This is already a familiar development in Western Europe, but the pace of decline has been particularly fast in some markets.
Year-on-year mobile voice revenue growth declined at an accelerating pace in all the countries shown in Figure 7.
The fastest decline was in Finland, where voice revenue declined by 20% year-on-year. In France and Greece, it fell by 17%.
Finland’s decline in voice revenue is attributable to the OTT threat in a market where smartphone take-up is high (65% of handsets in 2012) and 4G is already established. The trend in France is the result of intense competition, while Greece’s decline primarily represents the effects of economic downturn (which has affected all revenue).
For messaging, revenue performance worsened in almost all countries. The sharpest decline was in the Netherlands, which serves as a useful indicator of the impact of OTT applications on traditional messaging revenue.
We have therefore adjusted our forecasts for these two revenue streams to be more pessimistic. This directly impacts total mobile revenue because there is no compensatory increase in mobile data revenue.
Figure 8: Year-on-year change in mobile SMS retail revenue, by country, Western Europe, 1H 2011–1H 2013 [Source: Analysys Mason, 2013]

11. Key trends since our previous forecast: voice and messaging revenue is eroding more quickly
Figure 9a: Summary of major changes compared with our June 2013 forecast for Western Europe [Source: Analysys Mason, 2013]
Change
Description or driver
Mobile voice revenue:
The outlook for mobile voice will be slightly worse than expected 
We have observed a significant downturn in growth rates for mobile voice revenue in several markets. This is the result of factors we have previously identified – such as competition between operators, the threat from OTT services, and increasing take-up of unlimited bundles and quadruple-play bundles – but their impact on revenue was marginally greater than we had previously anticipated.
We have reduced our forecast of mobile voice retail revenue from EUR47.9 billion to EUR44.6 billion.
Mobile messaging revenue (SMS):
The decline in traditional messaging (SMS) revenue will be steeper than previously forecast
Some markets demonstrate more-robust volumes of SMS usage, but revenue has continued to decline strongly. OTT alternatives are becoming more established, and less revenue is being attributed to the service because of growing adoption of unlimited bundles.
We now expect mobile messaging retail revenue to decline at a CAGR of –13% during 2012–2018, compared with –10% in our previous forecast.
Mobile handset data revenue:
Mobile handset data is generally performing a little more strongly
We forecasted strong growth for the data element of handset revenue during The actual growth slightly exceeded our forecasts. We rely on the accounting protocols adopted in operators’ reporting, and have observed that operators tend to attribute more revenue to the data element. Updates to LTE launch plans have also impacted this metric.
As a result, our forecast for handset data revenue in 2018 has increased from EUR37 billion to EUR38.4 billion (up by 4%).
Mobile broadband:
Large-screen mobile broadband growth will be rather slower than in our previous forecast (impacting directly on the total)
In 10 of the 16 countries covered, year-to-date data suggests that the decline in large-screen mobile broadband is happening even faster than we previously forecast, largely because of the proliferation of public Wi-Fi, and widespread use of handset tethering and non-3G tablets within the home.
We have cut our forecasts for large-screen mobile broadband, while our mid-screen numbers remain largely the same. We now expect there to be 1.6 million fewer mobile broadband connections in 2018.

12. Key trends since our previous forecast: the changing composition of markets will have an impact on the mobile and fixed markets
Figure 9b: Summary of major changes compared with our June 2013 forecast for Western Europe [Source: Analysys Mason, 2013]
Change
Description or driver
Mobile competitiveness:
The competitive outlook in some markets has changed, following consolidation, new entrants and MVNOs 
We expect mobile revenue to be more robust than previously forecast in markets where consolidation plans have been announced since our last report (such as the sale of E-Plus to Telefónica in Germany).
However, revenue will be depressed in markets with fierce competition and aggressive MVNO activity. For example, Ziggo in the Netherlands launched an MVNO to create a quadruple-play offering. As a result of this and other factors, we have cut our mobile retail revenue for 2018 in the Netherlands by 9%.
Convergence between fixed operators:
Recent or anticipated mergers will impact some markets
Acquisitions have occurred in some fixed broadband markets – for example, Vodafone’s purchase of Kabel Deutschland in Germany, and UPC may merge with Ziggo in the Netherlands.
ARPU rates may stay a little higher in consolidated markets, and the footprint of effected technologies will be a little stronger. Our forecast for the region’s cable revenue is 2018 is 5% higher than previously.
Fixed NGA:
Some markets have announced revisions to their fixed rollout plans
Operators in some countries have revised their next-generation access plans. For example, Deutsche Telekom’s decision to pursue vectoring was approved by the regulator in Germany in August 2013, and so we expect the higher speeds will enable VDSL to counter the threat from cable more effectively in that market during the forecast period.
We now forecast that NGA (VDSL, cable and FTTH/B) will account for 57.4% of total broadband connections in 2018, compared with 57.1% previously.
Pay TV:
Our pay-TV forecasts have been fully re-worked
We updated our pay-TV forecasts for Europe in August We have incorporated these into the latest core forecast results and adjusted further for recent market developments, such as the decision of Mobistar in Belgium to suspend IPTV services.
In 2018, we now expect IPTV subscribers to number 34.2 million, compared with 31.3 million previously.
1 See Pay-TV and OTT video services in Western Europe: forecasts and analysis 2013–2018. Available at

13. Summary of forecast drivers for each Western European market [1]
Figure 10a: Major forecast drivers and impact, by country, Western Europe, 2012–2018 [Source: Analysys Mason, 2013]
Drivers:
Economic and regulatory
Competitive outlook 2012–2018
Technological outlook 2012–2018
Country
Real GDP growth (CAGR 2012–2014)1
MTR reduction 2012–20182
Mobile: level of competition
OTT impact
Quadruple-play prevalence
Likelihood of fixed consolidation
Year 4G reaches 5% share of handsets
Smartphone share of handsets at 2018
NGA share of fixed broadband connections 20183
Austria
1.2%
46%


2014
79%
31%
Belgium
0.6%
67%
82%
41%
Denmark
83%

2013
78%
45%
Finland

87%
38%
France
0.5%

Germany
1.1%
69%
71%
43%
Greece
–1.8%
73%
2016
26%
Ireland
1.6%
81%
74%
36%
Impact of a high value for this driver:
Drives up revenue in all segments
Reduces mobile service revenue
Reduces mobile revenue
Reduces voice and messaging revenue
Drives up fixed broadband revenue
Reduces mobile data revenue
Drives up mobile data revenue
Key:  = very high;  = very low.
1 Source: European Commission, May 2013.
2 Source: Analysys Mason estimates based on reported regulatory glide path.
3 NGA is defined as cable,VDSL and FTTH/B.

14. Summary of forecast drivers for each Western European market [2]
Figure 10b: Major forecast drivers and impact, by country, Western Europe, 2012–2018 [Source: Analysys Mason, 2013]
Drivers:
Economic and regulatory
Competitive outlook 2012–2018
Technological outlook 2012–2018
Country
Real GDP growth (CAGR 2012–2014)1
MTR reduction 2012–20182
Mobile: level of competition
OTT impact
Quadruple-play prevalence
Likelihood of fixed consolidation
Year 4G reaches 5% share of handsets
Smartphone share of handsets at 2018
NGA share of fixed broadband connections 20183
Italy
–0.3%
79%


2014
74%
33%
Netherlands
0.0%

85%
40%
Norway Na
65%

2013
94%
63%
Portugal
–0.9%
78%

71%
35%
Spain
73%
29%
Sweden
2.0%
86%
Switzerland
83%
38% UK
1.1%
80%
39%
Impact of a high value for this driver:
Drives up revenue in all segments
Reduces mobile service revenue
Reduces mobile revenue
Reduces voice and messaging revenue
Drives up fixed broadband revenue
Reduces mobile data revenue
Drives up mobile data revenue
Key:  = very high;  = very low.
1 Source: European Commission, May 2013.
2 Source: Analysys Mason estimates based on reported regulatory glide path.
3 NGA is defined as cable,VDSL and FTTH/B.

15. Executive summary
Forecast highlights for major markets
About the authors and Analysys Mason

16. Connections (million)
France: Intense competition has continued to drive down mobile revenue, and this pressure is set to continue
Figure 11: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, France, 2009–2018 [Source: Analysys Mason, 2013]
Figure 12: Telecoms retail revenue by service type, and growth rates, France, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (EUR million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
11 442
6 652
–8.6%
–6.0%
Mobile messaging
3 897
1 721
–12.7%
–8.5%
Mobile handset data
2 573
5 968
15.1%
14.8%
Mobile broadband1
845
1 021
3.2%
4.2%
M2M
206
953
29.1%
27.0%
Fixed voice2
7 879
5 870
–4.8%
–3.6%
Fixed broadband3
7 156
7 100
–0.1%
1.7%
Business network services
3 070
3 104
0.2%
TOTAL
37 068
32 389
–2.2%
–0.9%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 13: Connections by type, and growth rates, France, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
62.4
72.4
2.5%
2.3%
Mobile broadband
3.4
5.1
7.0%
7.8%
M2M
4.7
38.2
42.0%
38.7%
Fixed voice
39.6
31.8
–3.6%
–3.4%
Fixed broadband
23.7
27.1
2.2%
IPTV
12.3
14.9
3.2%
2.0%

17. France: Mobile voice revenue contracted sharply in the first half of 2013, and this trend will continue to affect our forecasts
Figure 14: Telecoms retail revenue by service type, previous and new forecasts, France, 2013 and 2018 [Source: Analysys Mason, 2013]
France’s mobile market suffered a further sharp revenue reduction during 2013, as price competition remained fierce.
Quadruple-play bundles have become increasingly popular: Orange’s quadruple-play users accounted for 31% of its contract base in June 2013, compared with 15% 1 year before. The result has been severe erosion of mobile revenue during the first half of 2013, impacting both voice and SMS: mobile voice revenue declined by 17% year-on-year.
The intensity of mobile competition shows no sign of easing (Iliad might even introduce a subsidised tariff) and historically strong SMS volumes are finally showing signs of peaking.
Operators’ LTE plans have progressed as expected, but a planned smartphone tax will be delayed until This will strengthen data and weaken traditional revenue.
As a result, we have reduced our forecast for 2018 mobile revenue by 8% to EUR16.3 million.
IPTV has become the mainstay of quadruple-play offerings, and we have increased our IPTV connections forecast to reflect this trend. However, we also anticipate that competitive quadruple-play services will dilute the fixed broadband market value faster than previously forecast.
We have also reduced our valuation of VoBB revenue following a revision to our modelling methodology.

18. Germany: Mobile revenue has contracted sharply in a competitive market
Figure 15: Telecoms retail revenue by service type , and previous forecasts for total and mobile retail revenue, Germany, 2009–2018 [Source: Analysys Mason, 2013]
Figure 16: Telecoms retail revenue by service type, and growth rates, Germany, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (EUR million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
11 084
6 401
–8.7%
–7.2%
Mobile messaging
2 810
1 179
–13.5%
–7.6%
Mobile handset data
4 140
8 146
11.9%
Mobile broadband1
1 287
973
–4.6%
–4.8%
M2M
109
732
37.3%
39.6%
Fixed voice2
9 259
4 918
–10.0%
–9.7%
Fixed broadband3
7 681
8 493
1.7%
2.2%
Business network services
4 368
4 049
–1.3%
–1.5%
TOTAL
40 737
34 891
–2.5%
–1.8%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 17: Connections by type, and growth rates, Germany, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
100.1
94.5
–1.0%
Mobile broadband
5.4
5.1
–1.8%
M2M
2.5
32.3
53.6%
51.8%
Fixed voice
51.7
48.1
–1.2%
Fixed broadband
27.9
34.1
3.4%
3.8%
IPTV
2.0
5.3
17.4%
18.4%

19. Germany: The poor outlook for messaging revenue has brought total forecast revenue down, despite market consolidation
Figure 18: Telecoms retail revenue by service type, previous and new forecasts, Germany, 2013 and 2018 [Source: Analysys Mason, 2013]
We have reduced our forecasts for telecoms revenue in Germany in response to indications in the first half of that traditional messaging is losing out to OTT applications and .
SMS volumes continued to grow during 2012, but declined for the first time during the first half of They had declined by 15% year-on-year in the second quarter of 2013.
The new forecast reflects this trend, whereas our previous forecast assumed that messaging revenue would be more resilient because of the relatively low penetration rate for smartphones. This change directly impacts total mobile revenue, but other services are largely unchanged because we expect that the anticipated consolidation (such as the sale of E-Plus to Telefónica in 2014) will keep prices strong.
The fixed market will remain stronger than mobile in Germany, where smartphone and tablet use is still relatively low compared with other countries. Fixed services continue to be the preferred method of accessing the Internet.
The number of fixed broadband connections continued to grow during the first half of 2013, but at a declining pace. Cable services have the strongest growth, and the consolidation in the fixed market (Vodafone’s acquisition of Kabel Deutschland) will keep fixed revenue strong – particularly for cable.

20. Connections (million)
Italy: Price competition in both consumer and business segments has intensified dramatically in 2013
Figure 19: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Italy, 2009–2018 [Source: Analysys Mason, 2013]
Figure 20: Telecoms retail revenue by service type, and growth rates, Italy, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (EUR million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
9 607
5 812
–8.0%
–6.8%
Mobile messaging
2 143
1 177
–9.5%
–9.3%
Mobile handset data
2 148
3 664
9.3%
7.6%
Mobile broadband1
1 055
1 135
1.2%
2.4%
M2M
268
637
15.5%
18.5%
Fixed voice2
7 777
5 770
–4.9%
–4.4%
Fixed broadband3
2 990
3 318
1.8%
1.0%
Business network services
2 224
2 248
0.2%
0.1%
TOTAL
28 212
23 760
–2.8%
–2.6%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 21: Connections by type, and growth rates, Italy, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
80.0
81.3
0.3%
–0.9%
Mobile broadband
8.6
9.5
1.6%
2.6%
M2M
6.1
30.7
31.0%
29.7%
Fixed voice
24.6
22.5
–1.5%
Fixed broadband
13.7
16.2
2.9%
2.7%
IPTV
0.3
0.0
–100.0%

21. Italy: We now expect traditional mobile retail revenue to decline more than anticipated throughout the forecast period
Figure 22: Telecoms retail revenue by service type, previous and new forecasts, Italy, 2013 and 2018 [Source: Analysys Mason, 2013]
We have slightly changed the fixed–mobile retail revenue mix for Italy because mobile price competition is intense, whereas fixed services have been more resilient than mobile. Despite this, our total retail revenue forecasts are almost unchanged: we still estimate a –3% CAGR for 2012–2018.
2013 will likely be the worst year in terms of mobile retail revenue (which will decline by 8.9% year-on-year) because operators have used aggressive price competition to retain customers and win high-value users.
The main downwards revisions occurred on mobile voice and messaging revenue (SMS volumes contracted at a double-digit rate in the second quarter of 2012).
However, we have increased our forecast for mobile handset data revenue (the CAGR for 2012–2018 is up from 7.6% to 9.3%) because of a more-positive outlook for smartphone adoption. Growth continues to be solid, and Italy has long demonstrated an appetite for advanced mobile services, having been an early adopter of 3G and smartphones.
Retail pricing in the fixed market looks stronger than mobile, and we have increased our fixed broadband revenue forecast to reflect new NGA plans (Telecom Italia plans to accelerate its NGA roll-out) and to include WiMAX. However, fixed voice revenue will continue to decline sharply (at a CAGR of –4.9%), which offsets the growth in fixed broadband.

22. Connections (million)
Spain: Low-price operators are winning market share, and quadruple-play bundles are gaining momentum
Figure 23: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Spain, 2009–2018 [Source: Analysys Mason, 2013]
Figure 24: Telecoms retail revenue by service type, and growth rates, Spain, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (EUR million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
9 009
5 470
–8.0%
–7.3%
Mobile messaging
675
222
–16.9%
–15.2%
Mobile handset data
2 027
3 584
10.0%
8.7%
Mobile broadband1
1 118
783
–5.8%
–3.8%
M2M
105
323
20.6%
25.2%
Fixed voice2
4 844
3 297
–6.2%
–5.7%
Fixed broadband3
3 398
3 402
0.0%
0.5%
Business network services
1 430
1 445
0.2%
TOTAL
22 607
18 526
–3.3%
–2.9%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 25: Connections by type, and growth rates, Spain, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
52.7
53.8
0.3%
Mobile broadband
2.5
3.4
4.9%
6.1%
M2M
2.8
16.7
34.7%
36.8%
Fixed voice
21.0
18.5
–2.1%
–2.0%
Fixed broadband
11.4
13.7
3.1%
2.8%
IPTV
0.8
0.7
–1.5%

23. Spain: We have revised down our retail revenue forecasts for all revenue streams, with the exception of mobile handset data
Figure 26: Telecoms retail revenue by service type, previous and new forecasts, Spain, 2013 and 2018 [Source: Analysys Mason, 2013]
Competition in Spain’s market has increased because of the growing presence of low-price operators in the fixed (such as Jazztel) and mobile markets (such as Yoigo and MVNOs).
The ongoing recession is driving customers to change their buying behaviour in order to get better value for money.
Take-up of quadruple-play bundles is accelerating: Telefónica’s Movistar Fusión has 2.6 million subscribers at September 2013, about 1 year after launch. Yoigo launched fixed–mobile packages in October 2013, after signing an LTE network-sharing agreement with Telefónica.
Main downward revisions occurred on:
mobile voice, as prices are high compared with other large markets in Western Europe (such as France, Germany, Italy and the UK) and with fixed prices in Spain, and are therefore vulnerable to competition
mobile messaging, because of a sharper than anticipated decline in SMS volumes.
We have increased our forecast CAGR for mobile handset data revenue (from 8.7% to 10.0% during 2012–2018) as a result of fine-tuning forecasts for smartphone and LTE users. All operators in Spain have launched LTE, but we do not expect this to boost data spending significantly because of consumer budget constraints.

24. Connections (million)
Sweden: Mobile voice outperformed our expectations in the first half of 2013
Figure 27: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, Sweden, 2009–2018 [Source: Analysys Mason, 2013]
Figure 28: Telecoms retail revenue by service type, and growth rates, Sweden, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (SEK million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
18 817
12 108
–7.1%
–5.6%
Mobile messaging
3 056
1 313
–13.1%
–12.7%
Mobile handset data
4 973
10 851
13.9%
12.0%
Mobile broadband1
3 444
3 367
–0.4%
0.2%
M2M
604
846
5.8%
8.8%
Fixed voice2
12 496
9 237
–4.9%
–3.8%
Fixed broadband3
8 820
8 927
0.9%
Business network services
4 849
4 929
0.3%
1.5%
TOTAL
57 059
51 578
–1.7%
–0.9%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 29: Connections by type, and growth rates, Sweden, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
12.1
11.5
–0.7%
–0.8%
Mobile broadband
2.1
2.2
0.8%
0.9%
M2M
4.0
8.5
13.5%
15.3%
Fixed voice
4.6
–2.6%
–2.3%
Fixed broadband
3.1
3.3
1.5%
2.6%
IPTV
0.6
0.9
6.1%
5.4%

25. Sweden: Faster-than-expected smartphone take-up will reduce voice revenue over the forecast period
Figure 30: Telecoms retail revenue by service type, previous and new forecasts, Sweden, 2013 and 2018 [Source: Analysys Mason, 2013]
We have slightly increased our forecast for total telecoms revenue in Sweden in 2013 (by 1.1%) to SEK57.4 billion.
The main contributor is mobile voice, which outperformed our expectations in the first half of 2013, offsetting declines in mobile broadband, handset data and fixed services.
However, our forecast for 2018 is reduced by 4.6%, to SEK51.6 billion.
We have downgraded our 2012–2018 CAGR forecast for mobile voice from –5.6% to –7.1% because of a reduction in the price per minute, which has been driven by competitive pressures from traditional and OTT services.
Mobile broadband revenue has also declined, because of intensified smartphone substitution, but it is still higher than in most Western European markets because of the prevalence of second homes. By 2018, it will account for 11.8% of mobile retail revenue, compared with 7.1% for Western Europe.
The fixed voice forecast has declined because slight growth in price per minute did not offset the decline in traffic.
Our expected saturation point for residential fixed broadband penetration has been reduced to take account of the large proportion of second homes outside fixed coverage areas in Sweden, which are better served by mobile.

26. Connections (million)
UK: The UK market has underperformed in the first half of 2013, leading us to downgrade our estimate for the year
Figure 31: Telecoms retail revenue by service type, and previous forecasts for total and mobile retail revenue, UK, 2009–2018 [Source: Analysys Mason, 2013]
Figure 32: Telecoms retail revenue by service type, and growth rates, UK, 2012–2018 [Source: Analysys Mason, 2013]
Service type
Revenue (GBP million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile voice
8 695
6 333
–5.1%
–6.0%
Mobile messaging
3 373
1 193
–15.9%
–13.4%
Mobile handset data
3 663
6 679
10.5%
10.1%
Mobile broadband1
674
614
–1.5%
–0.1%
M2M
174
609
23.2%
24.9%
Fixed voice2
8 507
8 117
–0.8%
–1.4%
Fixed broadband3
4 124
5 226
4.0%
2.0%
Business network services
3 500
3 557
0.3%
0.1%
TOTAL
32 708
32 328
–0.2%
1 Includes USB modem, and mid- and large-screen, but not handset-based data.
2 Includes narrowband, VoBB and dial-up Internet access.
3 Includes IPTV.
Figure 33: Connections by type, and growth rates, UK, 2012–2018 [Source: Analysys Mason, 2013]
Connection type
Connections (million)
CAGR 2012–2018
2012
2018
Current
Previous
Mobile handsets
77.8
75.1
–0.6%
Mobile broadband
5.0
5.7
2.3%
3.2%
M2M
5.2
35.1
37.3%
37.1%
Fixed voice
34.0
32.6
–0.7%
–0.4%
Fixed broadband
22.0
26.2
3.0%
2.8%
IPTV
0.9
3.8
28.6%
13.0%

27. UK: A stronger trend for fixed voice and broadband (including IPTV) has resulted in an increase to our long-term forecast
Figure 34: Telecoms retail revenue by service type, previous and new forecasts, UK, 2013 and 2018 [Source: Analysys Mason, 2013]
Telecoms retail revenue in the UK will reach GBP32.8 billion in 2013 – a 1.5% reduction to our previous estimate.
We have decreased total revenue for 2012 by 0.8%, based on the latest available data. Most of the change is in fixed services, where a revision to business network services (based on new data from Ofcom) had the largest impact.
Data for the first 6 months of 2013 caused us to revise down our mobile revenue forecasts – particularly for mobile broadband, where we now expect revenue to decline by 3.6% in 2013 year-on-year.
However, our forecast for 2018 has increased by 2.7%, to GBP32.3 billion (which is still lower than the 2013 value).
Fixed revenue is stronger: voice connections have remained strong, and the absence of mandated naked DSL means that they will not be further eroded.
IPTV has been revised up, because of strong results from BT and TalkTalk. Revenue will reach GBP446 million in Cable ASPU is also continuing to grow, so our forecast for overall fixed broadband revenue in 2018 is higher.
However, the threat from OTT services has strengthened, driving down messaging revenue at a CAGR of –16%.

28. Executive summary
Forecast highlights for major markets
About the authors and Analysys Mason

29. About the authors
Hilary Bailey (Senior Analyst) has worked for Analysys Mason for more than 20 years. She specialises in quantitative forecast modelling: she manages and is a key contributor to Analysys Mason’s European Core Forecasts research programme, and helped to develop and implement our converged core forecast methodology. She manages and is one of the key contributors to Analysys Mason's Telecoms Market Matrix, which tracks and compares telecoms metrics and market shares for all the major fixed and mobile operators in Europe. She has previously specialised in telecoms price comparison studies encompassing fixed, mobile and the converged fixed/mobile markets. Hilary has a degree in Economics from the University of Bristol, and an MPhil in Economics from the University of Cambridge.
William Hare (Analyst) is co-leader of Analysys Mason’s Global Telecoms Forecasts programme, and is a key contributor to the modelling behind the Telecoms Market Matrix. He joined Analysys Mason’s Consulting division in 2007, before transferring to the Research division in William’s primary specialisations include business and market modelling and data analysis, for both the mobile and fixed telecoms markets. He read mathematics at the University of Cambridge.
Pablo Iacopino (Analyst) focuses on forecasting and analysing telecoms markets in Europe and Latin America. He is co-leader of Analysys Mason’s Global Telecoms Forecasts programme and the lead analyst for research on the Latin America region. He is a key contributor to the Telecoms Market Matrix and European Core Forecasts. Pablo joined Analysys Mason in 2012, after 8 years in the telecoms industry. He worked for 5 years in Strategy and Investor Relations at Telecom Italia, where he was responsible for European telecoms benchmarking, followed by 3 years in investment banking as a senior equity research analyst covering telecoms stocks. Pablo specialises in industry analysis, benchmarking, modelling, forecasts and valuation. He holds a Master’s degree in business administration and a postgraduate Master's degree in statistics and economics from Università degli Studi di Roma ‘La Sapienza’.

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