The mobile services market could see more market consolidation, with industry players looking to mergers for growth following a decline in service numbers for the first time in a decade.
During the six months to June 2020, the number of services in operation (SIO) declined for the first time in 10 years by 62,000, to 36.2 million, according to research firm Telsyte.
The knock-on effect is expected to persist for the next two years, with the market facing “increased pressure”, the firm claimed.
To make up for the declines, Telsyte's research pointed to the potential for more mergers and acquisitions in the telco space.
“Telsyte expects this will ... drive more market consolidation (such as the proposed acquisition of Amaysim by Optus) as participants look to mergers for growth,” the research firm stated.
The connection decline comes as part of Telsyte’s Mobile Services Market Study FY2020, which saw the market’s half-year decline primarily driven by a 5 per cent drop in prepaid handset SIOs when compared to December 2019.
Total handset SIOs are likely to remain at similar levels over the next 12 to 18 months, the research firm claimed, with the key factors behind this being due limited population growth and the consolidation of more secondary services.
The study also saw mobile services revenue down by 4 per cent year-on-year, to $13 billion for FY2020, due to lower international roaming revenue and customers looking for more affordable plans offered by mobile virtual network operators (MVNO).
However, the study also found bright spots in the market for the mobile internet of things (IoT) and MVNO segments.
The six-month period saw mobile IoT SIOs reach approximately 4.4 million connections, up 8 per cent compared to the half-year prior, while MVNOs accounted for nearly 16 per cent of all SIOs by the end of FY2020, up 2 per cent from the end of FY2019.
The uptake of 5G smartphones is expected to increase in 2021, with a survey of smartphone users finding 39 per cent seeing 5G support as a priority for their next device. This jumps up to more than half, at 58 per cent, for those that plan to upgrade.
More service providers are also anticipated to adapt 5G for home broadband usage and will join the major telcos in offering 5G “fixed wireless” services as an alternative to fixed line connectivity in the next 12 to 18 months.
“Service providers might consider 5G fixed wireless services if they can generate a better margin than selling similar fixed lined services,” Telsyte senior analyst Alvin Lee said.