These graphs show when carriers might expect to see costs exceed revenues, based on a new Tellabs study. Currently, stock markets don’t reflect these predictions, with Forward PE ratios at about 10.
Important assumptions of the underlying model are: a traffic growth of seven fold by 2015 for both voice and data combined, with a revenue decline per gigabyte of 80–85%; and data transport using only GSM/3G technologies (HSPA/HSPA+), since LTE will not be widely deployed by 2015. There also are some questionable assumptions: a flat-rate pricing model (telcos will lobby their way out of this trap) and a high percentage of data offloading onto indoor networks, a key assumption of the model, being a big unknown.
Mobile telcos will experience massive profit compressions in the future, redefining the value chain that has been in existence for almost two decades: network equipments and mobile terminal manufacturers with almost zero profit margins, whilst MNOs enjoyed high margins. Profits are migrating toward new smartphone services, but that it’s a history for another post.