Mobile Data Gains Momentum

European mobile data service revenues are growing faster and sooner than expected, according to two new analyst reports, which point to the introduction of flat-rate pricing as the main catalyst for growth.

Financial analysts have been looking for signs of improvement from European mobile data revenues for the past year, and in the fourth quarter of 2006 the region's operators started to show early indications of a turnaround.

Light Reading's recent carrier scorecards on T-Mobile International AG and Orange SA (London/Paris: OGE) highlighted flat and even declining overall average revenue per user (ARPU) trends in those carriers' European operations. Those ARPUs are under pressure from voice price erosion, which only shows how important data services are to future revenue growth. (See Carrier Scorecard: T-Mobile and Carrier Scorecard: Orange.) But there's encouraging news for the carriers. Both Credit Suisse and Dresdner Kleinwort find improvements in the growth of mobile data services -- such as user-generated content, mobile TV, datacards, and mobile email -- in European operators' fourth-quarter results.

On average, mobile data service revenues in the fourth quarter 2006 were up 12.2 percent, compared with the same period in 2005, according to Credit Suisse. Dresdner estimates the average year-on-year data services revenue growth was 14.6 percent in the fourth quarter 2006.

This is a marked improvement compared with previous quarters in 2006. For example, third-quarter data revenues grew just 9.5 percent year-on-year, according to Credit Suisse.

"We are intrigued, even excited about, the changing prospects for European mobile data," says the Dresdner Kleinwort team in a research note. "After a multi-year slowdown, 2006 appears to have seen stabilization of the year-on-year growth rate."

Data services are also starting to take a bigger share of mobile operators' revenue mix. In the fourth quarter last year, Credit Suisse estimates that data service average revenue per user (ARPU) was €5.28 (US$7.00), which is 18.9 percent of the total ARPU €27.90 ($37.00). In the fourth quarter of 2005, data ARPU was €5.10 ($6.75), which was 17.6 percent of the total ARPU €29.00 ($38.00).

"The mix of revenues was a slight surprise, with a slowdown in mobile voice offset by a pick-up in mobile data revenue growth," states the Credit Suisse analyst team.

The bank notes that many operators reported higher mobile data usage, "as more customers react to increasingly flat-rate pricing on data."

And operators continue to introduce more flat-rate data offers. Just today, Vodafone Group plc (NYSE: VOD) launched a new flat-rate mobile roaming data tariff of €12 ($15.86) per day for laptop users, which is estimated to be similar to average hotel broadband charges. For that daily price, users can download up to 50 Mbytes of data. (See Vodafone Offers Flat Rate.)

The new tariff will be available from July and only applies when users are roaming on Vodafone's subsidiary networks around Europe.

Dresdner Kleinwort says mobile data is "hindered by high usage charges" and views Vodafone's new tariff as "an important first step."

— Michelle Donegan, European Editor, Light Reading

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