Financial Times FT.com

Mobile phone operators 'set to gain on data services'

By Andrew Parker in London

Published: January 31 2007 02:00 | Last updated: January 31 2007 02:00

Mobile phone operators should make significant progress over the next five years in their quest to get customers to spend more on entertainment and other data services, according to a report published today.

Consumers and businesses will spend $150.2bn on data services for mobiles in 2011, compared with $89.3bn in 2006, the report by Informa, a consulting firm, predicts.

However, the report underlines how data services have yet to provide the explosive revenue growth that mobile operators hoped for when they spent billions of dollars on licences for third generation networks.

Informa forecasts that the proportion of mobile revenue derived from data services will increase from 13.5 per cent in 2006 to 19.9 per cent in 2011. The remainder will come from voice services.

Daniel Winterbottom, an Informa analyst and one of the report's authors, said: "Our research suggests mobile operators are going to see respectable growth in revenue derived from data services over the next five years.

"However, the level of growth will fall short of their expectations at the time they bought 3G licences."

Mr Winterbottom said many consumers were happy to use their mobile phones for voice calls and text messaging only, which partly explained why they currently did not spend more on data services.

Of the $150.2bn that Informa predicts consumers and businesses will spend on data services for mobiles in 2011, it says Asia will contribute $61.1bn, Europe $50.7bn and North America $24.9bn.

The contrasting consumption levels reflect how Korean and Japanese mobile operators already offer relatively sophisticated data services, and, for example, that text messaging is less popular in the US.

Informa forecasts that peer to peer messaging on mobiles, which includes e-mail and instant messaging as well as text messaging, will represent 62.6 per cent of data revenue, or $94bn, in 2011, compared with 67.3 per cent, or $60bn, in 2006.

Informa forecasts that entertainment on mobiles will represent 25.4 per cent of data revenue, or $38.1bn, in 2011, compared with 21.1 per cent, or $18.8bn, in 2006.

Another area for revenue growth is expected to be mobile commerce.

However, Informa predicts that web browsing will be a declining source of revenue, because operators are switching from a per minute, per megabyte charging model to flat rate fees.

The operators are increasingly looking to advertising to offset the loss of revenue resulting from flat rate fees.

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