Mobile revenues to grow 7.5 per cent in 2004

Voice and text messaging will continue to drive mobile operator revenues in Europe during the next three years. While this may not be music to the ears of those investing heavily in MMS and other types of multimedia applications and messaging, it does at least demonstrate growth.

According to the latest research from Arthur D Little (ADL), revenues will surge 7.5 per cent this year, with the main driver being the substitution of traffic from fixed networks. Then until 2006, growth will average 6.6 per cent per annum.

Philip Shepherd, an ADL director, said in a statement: "Despite strong handset sales, use of MMS services remains sluggish, and it is not likely to make a contribution to average revenue per user until customers become more comfortable with the full potential of MMS."

The comments back up recent claims by some in the industry that phones are either too complicated to use or fall down on support for certain applications.

Few operators - with one notable exception - operate mobile networks without landline businesses. At the end of last year, telecoms consultancy Analysys said operators stand at a crossroads, where they must decide the extent to which they will target fixed line revenues.

On the subject of 3G, the ADL report finds that most operators - with the exception of 3 - will benefit primarily from the extra voice capacity it will provide.

ADL has also forecast revenue growth in the face of competition from virtual network operators such as BT Mobile and Tesco. "Fundamentally, the UK market remains attractive for mobile operators," Shepherd added.

ADL's 'Leaders Hit Back' report, co-produced by brokerage firm Exane, was based on interviews with senior management at operators, equipment makers, and content and service providers.