Subscriber growth pivoting to Asia
By the end of 2016, two thirds of the world's population had a mobile subscription – a total of 4.8 billion unique subscribers. There is a clear geographic shift underway, with Asia Pacific set to account for two thirds of the 860 million new subscribers expected globally by the end of the decade. India, already the world’s second largest mobile market, will be the primary driver of this growth, with 310 million new unique subscribers.
By 2020, almost three quarters of the world's population – or 5.7 billion people – will subscribe to mobile services. Regional penetration rates are forecast to range from 50% in Sub-Saharan Africa to 87% in Europe.
4G uptake driving surge in mobile broadband adoption
The generational shift to mobile broadband networks and smartphones continues to gain momentum. Mobile broadband connections (3G and 4G technologies) accounted for 55% of total connections in 2016 – a figure that will be close to three quarters of the connections base by 2020. The proportion of 4G connections alone is forecast to almost double from 23% to 41% by the end of the decade.
5G will see a major shift in how cellular networks are designed and what they are used for. Early deployments will focus on enhanced mobile broadband as the key customer proposition but 5G's capabilities will evolve over time. 5G networks are forecast to cover around a third of the global population by 2025, with adoption reaching 1.1 billion connections.
Mobile revenue growth outlook remains modest
Total mobile revenues reached $1.05 trillion in 2016, up 2.2% on 2015, marking the second consecutive year of rising revenue growth. Developing markets saw a notable improvement in growth rates as the macroeconomic headwinds eased and key markets such as China and India posted encouraging growth rates. However, the future outlook remains mixed, with increasing competition, regulatory intervention and slowing subscriber growth weighing on revenue growth.
Operators have invested $1.2 trillion in capex since 2010. With global mobile capex levels having peaked in 2015, they fell by 6% in 2016. Over the medium term, capex levels will continue to decline but at a slower rate, before returning to growth in 2020. Operators in advanced telecoms markets will begin to invest in the necessary infrastructure to support 5G towards the end of the decade, with any uplift.
Shift in consumer engagement to mobile and the rise of the platform economy
The shift of consumer engagement to mobile is now manifesting itself in the rapid growth of messaging platforms, which are using their scale to monetize a growing range of services. With a global subscriber base that is soon to reach 5 billion, the mobile ecosystem has created a global digital platform that is increasingly connecting everyone and everything. The impact of this digital platform is felt across a broad range of sectors as companies reinvent their business models to offer new and innovative services.
Players across the broader mobile ecosystem have already adopted open innovation strategies and embraced the power of collaborative partnerships, particularly those in the app economy and the mobile internet. Collaboration and open standards allow platforms to scale rapidly – a key success factor when competing digital platforms have already achieved significant scale. Mobile operators are developing new business models that leverage these trends to offer new platforms and services. As well as opening the door to new revenue streams, these trends will allow a faster pace of innovation and raise the prospect of a lower cost operating model for operators at a time when margins and cash flows remain under pressure.
Mobile contributing to jobs and economic growth
In 2016, mobile technologies and services generated 4.4% of GDP globally, equivalent to around $3.3 trillion of economic value. This is forecast to increase to more than $4.2 trillion (4.9% of GDP) by 2020, as countries benefit from the improvements in productivity and efficiency brought about by increased take-up of mobile services.
The mobile ecosystem supported approximately 28 million jobs in 2016. The mobile sector also makes a substantial contribution to the funding of the public sector, with approximately $450 billion raised in 2016 in the form of general taxation. In addition, almost $19 billion was raised in government revenue through spectrum auctions in 2016.
Mobile is essential to realizing the SDGs and addressing social challenges
The UN Sustainable Development Goals (SDGs) and their associated targets outline a broad and ambitious agenda that integrates economic, social and environmental issues across all geographies and applies both to developed and developing economies. Mobile technology provides access to tools and applications that address a wide range of socioeconomic challenges as well as enabling new technologies and innovations to build more efficient and environmentally sustainable societies.
Mobile technology also plays a critical role in fulfilling the ambitions of universal internet access, closing the identification gap and expanding financial inclusion. The number of individuals accessing the internet over mobile devices has doubled over the past five years to 3.6 billion, and will rise to 4.7 billion, equivalent to 60% of the global population, by 2020. The spread of mobile and digital technologies offers a transformative opportunity to achieve development aims and improve access to a range of life-enhancing services.
Rethinking regulation for the digital age
The fundamental changes taking place in telecoms markets and adjacent sectors have major implications for all aspects of policy, including regulatory frameworks, anti-trust reviews and the way spectrum is allocated. In order to drive the transition to more connected societies, it is important that the regulatory environment continues to evolve.
Prescriptive regulatory frameworks, which were designed for a less dynamic era, can be redesigned to encourage innovation and investment. The new features of the digital market call for a different and more nuanced approach to competition policy. Governments should ensure their competition and regulatory frameworks reflect how the market has evolved and provide a sound foundation for ongoing competition, investment and innovation that benefits everyone. Furthermore, the release of harmonized spectrum – in the right frequencies, at the right time, and under the right conditions – is crucial to the development of a rich and vibrant digital economy. In particular, governments need to identify now the harmonized spectrum that will be required to enable 5G to transform economies and societies for the better.
As the digital economy is increasingly global, governments across the world should seek to harmonize international privacy and data protection rules. This requires accountability mechanisms to protect individuals' privacy effectively and enable the cross-border data flows necessary to develop an efficient, global digital economy. The mobile industry is engaging with policymakers to make these mechanisms interoperable. Ultimately, global harmonization will benefit businesses and consumers alike by creating a consistent and clear set of data protection and privacy rules that apply across international borders.
Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.
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