Development of telecommunication operators' revenue and investments
Published 06.08.2015 | Updated 31.08.2015
In 2014, FICORA collected revenue and investment information of the telecommunications sector from a more extensive group of operators because the collection of information was also extended to newer operators. While the 2013 statistics included information on approximately 60 operators, almost 80 telecommunications operators are involved in 2014. Information was now, in particular, collected from fixed network operators with a lower number of subscriptions, such as cooperatives that organise the construction of fibre-optic connections in sparsely populated areas. Thus, we can obtain a more comprehensive picture of fixed network investments, especially. It can be estimated that the information covers more than 99 per cent of the sector measured in terms of the number of subscriptions, and therefore it provides an accurate picture of its financial development. To be able to assess last year's development consistently, the new operators have not yet been included in the total figures for 2014, even though their figures are brought up separately.
The aggregate turnover of telecommunications operators operating in Finland in 2014 amounted to approximately EUR 4.6 billion. The amount is approximately 1 per cent lower compared to the previous year. The turnover of the new operators included for the first time in the collection of information amounted to approximately EUR 80 million, which constituted slightly less than 1 per cent of the turnover of the entire telecommunications sector.
Figure: Turnover of telecommunications operators 2012–2014
The share of telecommunications turnover was approximately 74 per cent, which is almost the same as in 2013. The turnover fell by 2 per cent in 2014 compared to the previous year. The fall may be explained by the decrease in revenue received from the fixed network by 7 per cent and revenue received from the mobile network by 2 per cent. The share of the mobile network turnover was over 54 per cent in 2014. The fixed telecommunications network makes up 36 per cent of the turnover of telecommunications.
In deviation from targeted communication, the revenue from television broadcasting has increased. The share of television and radio broadcasting of the total turnover was over 10 per cent in 2014, and the share has grown by more than one tenth annually over the past few years. The fast growth in the number of Internet Protocol Television (IPTV) subscriptions, in particular, has boosted the rapid growth in the share of television and radio broadcasting. IPTV subscriptions are similar to cable television subscriptions, where corresponding television broadcasts are received through an internet connection. In 2014, the number of IPTV subscriptions increased by 40,000 and compared to the situation at the end of 2011, the number of IPTV subscriptions has doubled.
The operation of the mobile network and the fixed telecommunications network may be further divided into retail and wholesale services. Retail services include telecommunications services sold to consumer, corporate and organisation customers, such as call and broadband services. Wholesale services, in turn, are services sold by operators to each other, which are further used to offer other telecommunications services. Save the graph data as a CSV file
Figure: Breakdown of the turnover from telecommunications by service in 2014
The turnover of retail services fell by 3 per cent last year and totalled approximately EUR 2.5 billion. Mobile network services constitute 60 per cent of the turnover of retail services, and fixed network services approximately 40 per cent. In the fixed network, data transfer services make up the largest share of retail revenue. In mobile services, call and message services still make up more than half of retail revenue, but their share has fallen annually at the same time when the importance of mobile network data transfer services has grown.
The turnover of wholesale services has fallen evenly every year during the past few years. The turnover of wholesale services was close to EUR 600 million last year, and the turnover dropped by approximately 9 per cent compared to 2013. It is noteworthy that the fall in the turnover of the mobile network is completely explained by the decrease in wholesale revenue, because retail revenue has grown slightly. In contrast, in the fixed network the fall in revenue has been significant just in the retail market, where it has potentially been possible to replace part of the decrease by revenue received from television services. Save the graph data as a CSV file
Figure: Retail and wholesale revenue from fixed network and mobile network operations 2010–2014
In the Finnish telecommunications market, Elisa, TeliaSonera and DNA are clearly the largest operators. In 2014, their aggregate turnover almost made up the turnover of the entire mobile network. In the fixed network, the aggregate share of the three largest operators is approximately four-fifths, and more than two-thirds of the turnover of television and radio broadcasting. In addition to the large companies, 24 regional telecommunications operators operate in Finland under the Finnet Group banner, plus a group of other independent telecommunications operators.
Examined as a whole, TeliaSonera is the largest operator with its 35 per cent share. The difference to Elisa, which comes second, is two per cent. DNA is the third largest operator with a 21 per cent share of telecommunications, and the Finnet Group plus other operators make up a total of 11 per cent share of the market. Save the graph data as a CSV file
Figure: Market shares calculated from the turnover of telecommunications in 2014
By combining information on the number of subscriptions collected by FICORA in 2014 to revenue information, it is possible to calculate the average flow of revenue generated by one household customer to telecommunications operators during a year (average revenue per user, ARPU). This review takes into account all of the almost 80 telecommunications operators that were included in the collection of revenue information in 2014. Because the number of subscriptions of the operators in question is included in FICORA's market information, it is also appropriate to take their revenue into account in the ARPU calculation.
Because the use of different subscriptions deviates from each other, ARPUs should be examined by subscription type. It should be taken into account that fixed network subscriptions are often used by the entire household, whereas mobile network subscriptions are personal, i.e. they often only have one user.
Fixed network subscriptions may be divided into broadband and voice subscriptions. In contrast, with regard to mobile network subscriptions, the situation is not so unequivocal. Even though there are mobile network subscriptions that are intended to be used merely for voice or data transfer, it is, however, possible to use the majority of the subscriptions for both services. Due to this, it is sensible to review mobile subscriptions as a single whole when calculating ARPUs.
In 2014, revenue from the mobile network for one subscription available to a household was EUR 135. For a fixed network data transfer subscription, ARPU was EUR 191 and for a landline telephone subscription EUR 205. The fixed network ARPU has dropped significantly compared to previous years. In both mobile network services and fixed network call services, the revenue generated by one household customer to the telecommunications operator has increased slightly. In the mobile network, the growth in ARPU is explained by the diversification of services. The revenue information collected from telecommunications operators does not include taxes, so to calculate the average price paid by consumers, the share of tax should be added to these amounts. Consumer prices will be presented in more detail in the next telecommunications sector review.
The investments of the entire sector amounted to approximately EUR 610 million last year. Of these, telecommunications investments, i.e. investments in the fixed and mobile networks and television and radio broadcasting, totalled EUR 530 million. Investments in telecommunications fell by approximately 6 per cent compared to the previous year. Approximately 45 per cent of the investments in telecommunications were allocated to the fixed network, a similar amount to the mobile network, and the remaining 10 per cent to television and radio broadcasting.
Among the investments in telecommunications, the investments in the mobile network, in particular, dropped last year. Total investments in the mobile network amounted to EUR 235 million in 2014, and the amount was almost one-fifth lower than in 2013. In 2013, investments in the mobile network were emphasised, which was explained, among other things, by the significant investments in LTE networks made by the national mobile network operators. When already over 95 per cent of Finns live in the coverage area of the 4G network, investments have slowed down for the time being at least. Many investments support both the fixed and the mobile network, which must be taken into account when examining their mutual development.
Investments in the fixed network totalled EUR 240 million last year, representing growth of approximately 9 per cent compared to the previous year. Fixed network investments are increased by investments in the new fibre-optic technology in particular.
Investments in television and radio broadcasting were approximately EUR 55 million last year, and the amount fell by about 8 per cent from the previous year. When examining investments, it should be remembered that the figures do not include the new telecommunications sector operators that participated for the first time in the collection of information. The business of these operators is also very strongly focused on fixed network investments, in particular, which made up over EUR 70 million.
Figure: Investments by the telecommunications sector 2013–2014
Telecommunications is an investment-intensive sector, where the technology in use is replaced or updated at a fast pace. From society's point of view, investments secure the supply of competitive telecommunications services in the future as well. In the past few years, the construction of new technology LTE networks to upgrade mobile networks and fibre-optic connections to provide data transfer services in fixed networks have demanded significant investments.
In 2014, the ratio of investments to the total turnover, i.e. the total investment rate, was approximately 13 per cent. This represents a fall of less than one per cent from the previous year. The investment rate of telecommunications, i.e. the ratio of investments in telecommunications to the revenue received from it, was 15.5 per cent, representing a fall of approximately half a percentage point.
The investment rate of the fixed network was almost 20 per cent, representing an increase of over 3 percentage points from the previous year. The investment rate of the mobile network was approximately 13 per cent, which was over two percentage points lower compared to the previous year. The investment rate of television and radio broadcasting fell by almost five percentage points, and was approximately 16 per cent last year.
If the new operators participating for the first time in the collection of information are taken into account when examining the investment rate, the total investment rate shows a slight increase and the fixed network investment rate even a significant increase. Save the graph data as a CSV file
Figure: Investments rates of the telecommunications sector 2010–2014
The revenue and investment information of the telecommunications sector concerning 2014, published in July 2015, have been supplemented in August 2015.
This article is a part of FICORA's Communications Sector Review 2/2015.