COMMUNICATION SERVICES IN WESTERN EUROPE: TRENDS AND FORECASTS

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1 RESEARCH FORECAST REPORT COMMUNICATION SERVICES IN WESTERN EUROPE: TRENDS AND FORECASTS STEPHEN SALE and MICHAEL LANE analysysmason.com

2 About this report This report provides an outlook on the mobile communication services market in Western Europe (WE). It provides forecasts for voice and messaging services provided by both mobile network operators and OTT 1 providers. A complete set of forecast results is provided in the accompanying Excel data annex. The forecast is based on several sources: Analysys Mason s internal research, including our regional forecasts, Connected Consumer surveys and various trackers in the Future Comms and Media research programme interviews with stakeholders in the communications market around the world. WHO SHOULD READ THIS REPORT Strategy and planning executives who are responsible for mobile operators communication services strategies and partnerships with OTT players. Executives in mobile operators technology and innovations teams who are responsible for developing communication services. Marketing executives at vendors of communication services equipment and software, as it will help them understand the needs of their operator customers and size the addressable market for their products. 1 The term over-the-top is used throughout this report to refer to services that are made available to the general public via the public Internet. The term is defined from the perspective of network operators and is somewhat controversial for this reason, but is nevertheless widely understood. GEOGRAPHICAL COVERAGE Regions covered in this report: Worldwide WE region France Germany Spain United Kingdom Forecast results provided in the data annex: Worldwide WE region Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Rest of WE region KEY METRICS Non-operator/OTT services Voice and messaging Active users by device type Outgoing traffic by device type Operator traditional services Handsets Circuit-switched (CS) voice and SMS Outgoing traffic Operator IP-based services Active users by service type VoLTE, Wi-Fi calling, IP messaging Outgoing traffic by service type VoLTE, Wi-Fi calling, IP messaging Retail revenue Voice and messaging Average spend per user 2

3 Contents 5. Executive summary 6. Executive summary 7. Worldwide trends 8. Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in Worldwide: OTT messaging services will be used by over 60% of the population by Worldwide: The platform proposition advanced by LINE and WeChat is spreading beyond core Asian markets 11. Worldwide: Smartphones will continue to be the dominant communication device 12. Worldwide: Strategic responses from operators vary markedly in different regions 13. Worldwide: Operators are migrating smartphone users to VoLTE services nearly 2.4 billion subscribers are expected by Worldwide: Many operators are rolling out Wi-Fi calling, principally to improve indoor coverage 15. Worldwide: Google s involvement may boost Rich Communications Services, but usage is likely to remain low 16. Regional trends 17. Western Europe: SMS is in steep decline in the region, with WhatsApp as the main beneficiary 18. Western Europe: Operators will remain dominant in voice, but will be severely challenged by alternatives 19. Country-level trends 20. France: Operators have an opportunity to strengthen their communication services with IP-based innovation 21. Germany: WhatsApp dominates in Germany; operators will struggle to differentiate their own IP-based offerings 22. Spain: The near-ubiquitous reach of WhatsApp poses a major threat to operator-provided voice services 23. United Kingdom: Operators are focusing on Wi-Fi calling and VoLTE, but they will struggle to contain VoIP 24. Forecast methodology and assumptions 29. Forecast outputs and definitions 30. Forecast methodology 31. About the authors and Analysys Mason 32. About the authors 33. About Analysys Mason 3

4 List of figures Figure 1: Messaging traffic, Western Europe, Figure 2: Mobile voice traffic, Western Europe, Figure 3: Messages sent by message type worldwide, Figure 4: Messages sent by message type and number of OTT messaging active users worldwide, Figure 5: OTT messaging users by device worldwide, Figure 6: OTT voice users by device worldwide, Figure 7: Retail revenue for operator mobile voice services worldwide, Figure 8: Retail revenue for SMS services worldwide, Figure 9: Active users of VoLTE services by region, Figure 10: Wi-Fi calling service users and traffic worldwide, Figure 11: Traffic for all mobile operator messaging services and number of operator-provided IP messaging service users worldwide, Figure 12: Messaging traffic, Western Europe, Figure 13: Mobile voice traffic, Western Europe, Figure 14: Messaging traffic by message type, France, Figure 15: Messaging traffic by message type, Germany, Figure 16: Messaging traffic by message type, Spain, Figure 17: Messaging traffic by message type, United Kingdom, Figure 18: Overview of the main forecast outputs Figure 19: Overview of the forecast methodology used in this report 4

5 CONTENTS EXECUTIVE SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS FRANCE GERMANY SPAIN UNITED KINGDOM FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON 5

6 Messages sent (billion) Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in 2015 Several messaging apps have user bases in the hundreds of millions. High usage levels have resulted in these apps rapidly overtaking SMS in volume of messages sent. WhatsApp is the largest messaging service in the world it reached a billion active users in February Several other services have huge user bases: for example, Facebook Messenger had 900 million active users at the end of April 2016 and WeChat had 597 million at the end of Figure 3: Messages sent by message type worldwide, User base in billion individual app users billion handsets billion Users very often have multiple apps. We estimate a global average of 1.9 apps per person in There were around 2.3 billion individual users of messaging services worldwide at the end of 2015, with nearly 2 billion of them on smartphones. These applications have driven high levels of usage by offering a strong user experience, typically with no charge. WhatsApp reported a peak of 42 billion messages sent over a 24-hour period in February We estimate average app usage to be much lower, but still over 500 messages per month. 1 Traditional operator services benefit from a larger addressable market, but have a relatively poor user experience and much lower average usage levels. The average smartphone user sent 132 SMS messages per month in billion There are several factors that prevent us from simply extrapolating from WhatsApp s usage (which would imply average usage of >1000 messages per month). First, WhatsApp reports peak, not average, volumes. Second, usage levels of other popular apps are typically much lower than those of WhatsApp. Finally, some traffic will be caused by spambots and application-to-person services. SMS OTT/Non-operator IP Source: Analysys Mason 8

7 Messages sent (billion) France: Operators have an opportunity to strengthen their communication services with IP-based innovation France is one of the few developed markets where SMS services have not been replaced by OTT alternatives. Average SMS usage was 255 messages per month in 2015, which is well above the regional average, and usage levels remain steady. WhatsApp Messenger has yet to gain the traction in France that it has in most European markets. Facebook Messenger is the most popular messaging app; Skype is also strong. We do not expect France to remain immune to OTT messaging and are forecasting adoption rates of 75% of smartphones by Alternative services will gain scale, which will adversely affect SMS services but usage will be high compared with that in other countries in the region. The strength of SMS offers an opportunity for operators to migrate their messaging base to IP-based alternatives. France is one of the few countries where operators have time to do something about RCS. Bouygues was the first operator to launch VoLTE services (in November 2015). Orange announced plans to launch in 2016 and the other operators are likely to follow its example in the coming year. Orange offers Wi-Fi calling via an app (Libon), but we expect native Wi-Fi calling services to be widely available in France in % FORECAST METRICS % 340 BILLION 46% Figure 14: Messaging traffic by message type, France, MILLION SMS OTT/Non-operator IP Operator IP messaging Source: Analysys Mason 20

8 CONTENTS EXECUTIVE SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS FRANCE GERMANY SPAIN UNITED KINGDOM FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON 27

9 About the authors Stephen Sale (Research Director, Consumer Services) oversees Analysys Mason s consumer research and is also the lead analyst for the Future Comms and Media research programme. His primary areas of specialisation include next-generation communication services, over-thetop (OTT) player strategies and mobile pricing. He also has extensive experience in analysing operator strategies and forecasting fixed and mobile service markets. Before joining Analysys Mason in 2004, Stephen worked in the industry on areas that include VoIP, next-generation service architecture and broadband access. He has a degree in economics and an interdisciplinary MRes from the University of London. Michael Lane (Research Analyst) works for the Consumer Services research team, analysing the consumer surveys that underpin the Fixed Broadband and Multi-Play, Mobile Devices and Mobile Services programmes. His interests include statistical inference, forecast model fitting, auction theory and game theoretical approaches to problem solving. Michael holds a BSc in Mathematics from Imperial College London. 28

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