The Dutch mobile services market fell dramatically in the third quarter. Revenues sank 7.9 percent year-on-year to EUR 1.11 billion. Against the second quarter, the decline amounted to 2.8 percent. Compared to the previous quarters, there are clear signs of a deterioration in the mobile market, according to Telecompaper’s most recent Dutch Mobile Operators quarterly report. The four network operators attributed the accelerated decline in sales mainly to the impact of regulation, as well as increasing price pressure and strong competition.
Vodafone again recorded the largest annual decline (already at 9.6% y-o-y in Q2), while Tele2 Netherlands was the the only MNO marking an increase in revenues, up 18.7 percent from the year before. Relative newcomer Tele2 NL remained the smallest of the four MNOs, but was able to increase its market share by more than 1 percent to 5.3 percent in Q3.
Of the other three operators, Vodafone (including Ziggo's mobile revenue) recorded the largest decrease in service revenue: down 13.1 percent. The operator was the only MNO to lose market share in the quarter, off to 30.5 percent. At KPN, sales declined 7.1 percent but the operator still extended its market lead to a share of 43.1 percent. For T-Mobile Netherlands, sales fell 6.5 percent from the year earlier, while its market share grew to 21.2 percent.
Regulation hits hard
The annual decline in service revenue of 7.9 percent is a marked deterioration compared to previous years, when the decrease was less: it was only at 4.4 percent in Q3 2016 and 1.1 percent in Q3 2015. Network operators attribute this mainly to the impact of regulation, pricing pressure and strong competition. For example, Vodafone calculated the negative effect from regulation at EUR 27 million in Q3 alone, mainly from roam like at home (RLAH) but also mobile termination rate (MTR) and WFT (credit rules). KPN stated in its outlook for 2017 that it sees the impact of roaming regulation at around EUR 40-50 million.
Revenues slide 4.5 percent in 2017
In light of these quarterly results and the current market situation, Telecompaper is guiding for service revenues for Dutch network operators to fall by around 4.5 percent to EUR 4.5 billion for full year 2017. The research bureau also forecasts the market will shrink further in 2017-2021, with a negative average annual growth (CAGR) of 1.9 percent, to revenues of around EUR 4.3 billion in 2021.
The forecast is based on the expectation that competition will still continue to increase among the four mobile operators - despite the merger between Vodafone and Ziggo. The growth in revenues from data services will not be enough to fully compensate for the structural decline in revenue from voice and SMS.
Other important negative factors are regulation - with the newly proposed MTA rates by regulator ACM - and the abolition of EU roaming from this past summer. The transparency of mobile costs and the pressure on ARPU from the bundling of mobile with fixed services also play a role.
Translating demand into revenue
In terms of volume, mobile data traffic continues to grow by double-digit percentages, and this is expected to further accelerate as data bundles continue getting larger and on the back of unlimited data plans, concludes Telecompaper. Operators are struggling to translate demand for data services into higher rates and revenues, and strong competition and the focus on multi-play packages leave little room for this.
