#1 – Unlimited data plans are back, and there is no looking back
In 2018, pricing plans with unlimited data will become widespread in Europe, and this time they are here to stay. Such plans are expected to drive data usage per SIM (as has been the case in Finland) but we believe that operators will be able to manage the increase in data traffic in the next years thanks to technology advancements. Over time, unlimited data plans will increase the cost pressure on operators, strengthening the trend for operator consolidation and network sharing.
Pricing plans that include unlimited mobile data usage are not new to the telecom industry. Such plans proved unsustainable in the early 2010s due to the rapid proliferation of smartphones and growth in data traffic, which forced operators in most markets to shift to tiered pricing for data. However, during the past year we’ve seen a number of operators (usually those in a “challenger” position) launch unlimited data plans in Europe. Examples include Tele2 in Sweden, T-Mobile in the Netherlands, Iliad in France, and 3 in Ireland and the UK. As unlimited data plans gain traction, we expect more operators to follow suit in 2018.
This trend has both technology and commercial drivers. Technologically, operators have enough capacity at present thanks to steady LTE and LTE-A rollout and capacity upgrades, more efficient use of spectrum through massive MIMO and carrier aggregation, Wi-Fi offloading etc., that let them support more customers on unlimited plans. Commercially, operators are looking for differentiation and an increase in average revenue per user (ARPU) by upselling more expensive unlimited data plans to customers.
One of the important consequences of unlimited data plans is significant growth in data usage since consumers no longer need to monitor and manage their data consumption (similar behavior to fixed broadband consumption). The best example of this is the Finnish market, which has had high adoption of unlimited data plans for years and today ranks first in Europe in data consumption, exceeding 10GB per SIM/month.
The key questions for operators are: as unlimited data plans become widespread and drive data usage, are they sustainable for operators? Furthermore, what will be the impact on managing network capacity and on market dynamics in the next few years?
At a time of stagnating revenue growth (especially in Western Europe), we believe that operators will do their utmost to keep their CAPEX-to-revenue ratio constant. Therefore, operators will continue to manage traffic growth thanks to technological advancements: we also believe that unlimited data plans are sustainable in the years to 2020. Beyond that, 5G and new spectrum will help to manage traffic growth. Unlimited data plans are here to stay.
With regards to market dynamics, we believe that as unlimited data plans become widely adopted, operators will be under even greater pressure to transport data as cost efficiently as possible. This increased focus on cost optimization will benefit large players that already have large customer bases to justify the necessary CAPEX investments. This will in turn accelerate and strengthen the trend for operator consolidation and network sharing.