First ever fall in European voice revenues
Rate of data growth slows, too
The European mobile industry suffered its first ever quarter of decline in voice revenues during the third quarter of 2007, according to Credit Suisse (CS) research analysts Justin Funnell and Paul Sydney.
Funnell and Sydney said that a combination of reduced roaming prices and termination cuts (especially in Spain and Italy) resulted in a loss of 0.4% y/y. Overall growth was 2.6% y/y in Q3 2007, down from 3.7% y/y in Q2 2007 and 3.5% in Q3 2006.
"The average European mobile operator beat our Q3 revenue forecast by 1% and EBITDA forecast by 3%. Sector revenue growth slowed as expected whilst margins fell less than forecast. The UK and Portuguese markets performed particularly well, whilst Norway, Finland and Belgium were weak.".
Belgium's service revenue fell over 6% for the quarter, comparable to last year. Germany's fell just over 4%.
Mobile data service revenue growth (in messaging and non-messaging combined) slightly accelerated, from 17.5% growth y/y in Q2 07 to 17.8% in Q3. Non-messaging revenue grew around 30-40% y/y, boosted, CS said, by datacards (in particular USB modems) and Blackberries, and to a lesser degree more take up of 3G handsets and flat rate data plans. Messaging also continued its low growth, with more uptake of SMS bundles and still growing user adoption beyond the historic youth market.
But there was a note of caution on data service revenue growth, with the analysts warning that the acceleration of growth was at its slowest. For example, growth in the preceding three quarters had leapt from 11.9%, to 14.3%, to 17.5% - meaning Q3's 17.8% growth indicated a slowdown in the rate of growth. Good results within the Vodafone group had also masked poorer results elsewhere, the analysts said.
There was better news on margins though, with only slight falls, meaning the sector scored 1.3% EBITDA growth y/y, "reasonably stable on the last few quarters despite slowing revenue growth", commented Funnell and Sydney.
Of further benefit to the operators was the finding that Capex to sales revenues fell from 10.0% in Q3 06 to 9.2% in Q3 07, an implied c. 6% decline in European CAPEX y/y. CAPEX/sales fell particularly in Germany and Spain, whilst up in France and Scandinavia.
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