MWC 2018: Telecom Price Wars Continue to Rage
Amid the product launches and eye-catching devices at Mobile World Congress, wireless markets around the globe remain on a slippery slope toward becoming telecom utilities. PwC’s new study provides a close-up view of the state of the industry, including regulatory and pricing factors, market differentiation strategies, and the overall value of product and services offerings.
The commoditization of the global wireless telecom industry continues at full tilt. A potent mix of saturated markets, booming data demand, new market entrants, ongoing consolidation, and vicious price wars is pushing wireless service providers to battle for market share. Average revenue per user (ARPU) continues to decline in many markets around the world and dropped 5% last year alone across the 59 markets studied.
The trend toward commoditization is not, however, entirely uniform. Several markets are maintaining a comfortable level of differentiation, while others have even reversed the commoditization trend. Many companies are pursuing “re-differentiation” strategies to gain an edge on the competition. This year’s report measures the degree of commoditization in 59 markets using ARPU spread (difference between the highest and lowest ARPUs among the operators in a particular market), and market share spread (difference between the largest and smallest shares).
Overall, the news is better for consumers than wireless operators. PwC’s global aggregate commoditization index rose from 0.66 in 2016 to 0.67 in 2017, a 2% increase from 2016 and a 9% increase since 2007. ARPU has fallen 3% just since last year, and 34% over the past 10 years. Market share spread has also declined: by 2% since last year, and by 11% since 2007. This decrease suggests providers have been reasonably able to maintain their market positions, even in the face of the greater pricing efficiency of their markets.
The picture shifts when viewed at a regional level. No region has managed to stave off the commoditization trend since 2006, and only the Middle East and North Africa have become less commoditized in the past year. North America remains the least commoditized region, but the rate of commoditization appears to be speeding up, as both technology and new regulatory schemes reduce barriers to entry. Latin America has highly saturated markets, but the shift away from prepaid to post-paid plans is allowing premium segment players to retain market share. Still, average ARPUs continue to trend downward.
Asia-Pacific sees most markets on the edge of commoditization. Only Indonesia, still dominated by a single player, remains considerably differentiated. Europe has high saturation in every market, and in most, revenues are shrinking, due to declining ARPUs and very tight market share spreads. The Middle East and North Africa region too is now highly saturated, especially in the Gulf Cooperation Council markets.
While increased commoditization appears inevitable, several providers are deploying strategies to “re-differentiate” by creating more value from product and services offerings. With a perfect storm of widespread market saturation and enormous demand for data, the telecom price wars are in full effect. Regional market analysis and differentiation strategies will be important tools as providers chart the path forward.