Industry Sector Weekly by Lloyds TSB

UK telecoms has been affected by the recession, but less so than other parts of discretionary consumer spending such as air travel and restaurants. Nevertheless, operator-reported retail revenue fell 2.6% in 2009 to £30.4bn, following average annual increases of 5% between 1998 and 2008. UK Telecoms – prepare for better times?

UK telecoms has been affected by the recession, but less so than other parts of discretionary consumer spending such as air travel and restaurants. Nevertheless, operator-reported retail revenue fell 2.6% in 2009 to £30.4bn, following average annual increases of 5% between 1998 and 2008.

The fall in operator revenue last year was across the board. In particular, revenue from mobile services fell 3.5% to £14.9bn, the first decline since mobile telephony became widespread in the late 1990s. The fall in revenue came despite increases in mobile connections, call volumes and messaging volumes, and was a result of sharply declining prices, due in part to ‘bundle’ discounts.

As basic mobile telephony and broadband have joined fixed line connections as low margin activities, the key area of revenue growth is likely to be in content provision including through mobile internet services via smart phones and portable devices such as tablets and e-readers, as well as through web-enabled TVs and games consoles. Revenue derived from data services is likely to continue to rise as a share of total revenue, but capacity constraints suggest that large investments in infrastructure will be required to maintain growth in new services in the medium term.

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