The Dutch mobile services market showed small signs of improvement in the third quarter, with revenues down 4.4 percent on an annual basis and up 3.5 percent from Q2. The four network operators generated service revenue of EUR 1.2 billion, according to the latest research from Telecompaper. T-Mobile and Vodafone led the drop in sales and lost market share to KPN and Tele2.
The quarterly growth of 3.5 percent was better than the usual seasonal pattern, when revenues are often flat or lower. The annual drop in revenue of 4.4 percent was also less than the 5.6 percent fall recorded in Q2. Nevertheless, the operators continue to suffer from price pressure in the face of tough competition.
Telecompaper's Dutch Mobile Operators Q3 2016 report shows that T-Mobile experienced the biggest drop in revenue, down 8.8 percent year-on-year. T-Mobile was hurt by the contraction in the prepaid market as well as the ongoing promotions hurting pricing power. Vodafone's service revenues were also down sharply, at a loss of 7.4 percent, which the company attributed in part to the cuts in roaming prices.
Market leader KPN showed the smallest drop in sales, and Tele2 actually grew revenues on an annual basis. KPN improved its market share by 1.3 percent points year-on-year, to take almost 43 percent of service revenue in Q3. T-Mobile and Vodafone each lost 1 percent point, for respectively 32 and 21 percent of revenues. Tele2, the newest entrant on the market since a year ago, took 4.0 percent of service revenue.
Market outlook: more declines to come
Telecompaper expects the market to contract by 3.7 percent over the full-year 2016 to service revenue of around EUR 4.7 billion. Over the five-year period 2016-2020, the market researcher expects a negative CAGR of 1.5 percent, to reach revenues of EUR 4.6 billion in 2020.
The outlook is based on the expectation that competition will intensify with four operators, despite the planned merger of Vodafone and Ziggo. Growth in data services revenue is not enough to offset the structural decline in revenues from voice and SMS. Other negative factors include regulation, such as the proposed further cuts in mobile termination and roaming rates, new rules on increasing transparency in handset costs and pressure on ARPU from increased bundling of fixed and mobile services.
While mobile data traffic is still showing double-digit growth, the growth rate is slowing. Operators are also struggling to translate the higher volumes into increased prices and revenues, according to the researcher. With the strong competition in multi-play packages, the mobile operators are left with little room to grow.
Modest growth in SIMs
At the end of September, the Dutch market had a total 20.2 million SIM cards in use, including the MVNOs but excluding M2M. The total was up by 1.3 percent year-on-year, led by growth in postpaid subscribers. Mobile penetration was at over 118 percent. Telecompaper expects the market to grow by around 0.6 million SIMs in the coming five years to 20.8 million in 2020.
