New technology, stiff competition and an extremely dynamic environment are all traits of the telcom industry today. To understand where the industry is going in the upcoming year, we decided to break down some key trends and see how they will impact the industry as we currently know it.
New technology has always been at the heart of telecommunications companies as it was used to expend the reach and possibilities of services provided to customers. However, as technology advanced it brought with it a whole wave of new trends in customer behaviour which impact the way in which telcoms operate. As a result, many of them are forced to rethink their strategy in ordered to find sustainable sources of growth for the future.
Competitors who operate in the digital sphere have emerged in the form of so-called over the-top players (OTT) who provide the same staple services of voice, messaging, and video calls that used to be the domain of traditional telcos. As a result, the use of voice services has remained flattish, growing at a CAGR of just 1% in the period from 2011-2018 and as seen on the chart below the trend is poised to continue in the upcoming years.
Global voice traffic (Monthly Minutes of Use)
Source: Ericsson, InterCapital Research
Telephones are no longer used just to make calls, as advanced smartphones offer their users countless opportunities through various apps. As a result, consumers have been displaying an insatiable appetite for mobile data. This is clearly seen on the chart below which shows the strong growth of mobile data consumed, which has grown with a CAGR of 74% in the period from 2011 to 2018.
Global mobile data traffic (EB/month)
Source: Ericsson, InterCapital Research
The main driver of the growing mobile data traffic is the increased video usage. Users tend to spend increasing amounts of time both streaming and sharing videos which adds to their data traffic. This trend is expected to continue further with video accounting for 74% of the total data usage in 2024.
Securing future growth
According to Ericsson’s Mobility report the total number of mobile subscriptions in 2024 is expected to reach 8.9bn with mobile broadband accounting for almost 95% of the amount. Meanwhile, the number of unique mobile subscribers is estimated to reach 6.2bn. Note that the difference between the numbers of subscriptions and subscribers is caused by subscribers who have several subscriptions. Reasons for this could include users lowering traffic costs by using optimized subscriptions for different types of calls, maximizing coverage and having different subscriptions for mobile PCs/tablets and mobile phones. Subscriptions for PCs and tablets with mobile capabilities, however, are expected to show only moderate growth.
Global subscriptions and subscribers (million)
Source: Ericsson, InterCapital Research
Although data revenues are seen as only a limited substitute for voice revenues, the sheer growth rate of the segment has introduced network quality as the preeminent goal for operators. To further enhance the mobile broadband experience, 5G network deployments are anticipated to start from 2020 and to reach 1.5bn subscribers by 2024. With global mobile data traffic forecast to increase more than 5 times between 2018 and 2024, key drivers for 5G deployment include increased network capacity and decreased cost per byte.
Global mobile subscriptions by technology (million)
Source: Ericsson, InterCapital Research
New networks provide new opportunities
The growing demand for 5G networks is also pushed by the growing demand for the Internet of things (IoT). As the IoT application market is widening, more advanced use cases requiring enhanced network capabilities are emerging. Examples of such capabilities are support for optimized voice quality, more accurate device positioning and support for device mobility at high speed. Meanwhile, with the number of IoT connections to expected reach 4.1bn by 2024 one can see why the successful implementation of 5G networks is one of the telcom industry’s main goals.
Think globally, act locally
Despite being a relatively small market, global trends are very much visible in Croatia as well. According to the latest report of the Croatian Post and Electronic Communications Agency (HAKOM), in September 2018, 84% of the populace used broadband internet through a mobile network. When compared to 2017, this represents an increase of 3% YoY. Further growth is expected from the segment which will also drive the growth in data traffic. Consequently, investment in infrastructure can be expected to provide the required capacity.
Among Croatian companies who were the first to tackle the new trend one should certainly highlight HT, Croatia’s leading telcom company. HT was the first in Croatia to realize 5G functionalities in real conditions by using Ericsson’s 5G network devices. The successful implementation of the new technology came after HT initiated the modernization of the radio access network in the whole of Croatia at the beginning of 2018. According to their estimates each citizen will have an average of four devices connected to the internet by 2020, making future development of new technologies such as 5G essential.
