Mobile Internet cuts profits of Ukrainian mobile service providers

Photo: Reuters

Smartphones could play a mean trick on mobile operators. The first half of 2014 has shown that the growing revenues from mobile Internet on «smart» devices no longer cover the melting earnings from the provision of content services and other services for regular «dialers».

Recently, MTS reported on its activities in the second quarter of 2014. During the year the average monthly income figure (compared to the same period last year) decreased by 5% — to UAH 36. The report associates this with an increase in the number of low-margin subscribers. However, there are other reasons for the stagnation of income. Subscribers are increasingly becoming oriented at Internet services. «The profile of use of our subscribers is changing rapidly — based on results of the second quarter penetration of smartphones in our network has reached 24%, the traffic is growing by 3 — 5% every week,» confirms Marketing Director at MTS Ukraine Oleh Reshetin.

Why text messages and calls are receding into the past

Smartphones influence several types of services at the same time. First of all, in the second quarter of this year subscribers talked less than a year ago. Secondly, the usual set of content services, such as text messages or audio conferencing, is becoming blurred. «As a result, we see a gradual flow of traffic from voice and sms-services into mobile Internet,» says Reshetin.

The largest player on the mobile communications market Kyivstar is in a similar situation. «As for the traditional services such as SMS and MMS, there is a notable decrease in both the level of consumption and earnings, which is understandable — these services are becoming obsolete as they are being replaced by more modern and popular Internet messaging and social networking», said Marketing Director at Kyivstar Svyatoslav Horban in a conversation with Capital.

Based on statistics of the third largest Ukrainian operator life :), the use of sms services is decreasing with every passing month. «We attribute this trend to the dynamic growth of data traffic, which amounted to 70% for the year, and the highest rate of penetration of smart phones in the network of life :), which by the end of the second quarter reached 31%,» said the head of the PR Department at life :) Oksana Rudyuk.

Social networks are coming

Recently, in addition to traditional social networks VKontakte and Facebook, which are replacing sms services, subscribers began using Twitter more. Yandex recently published a survey, according to which the Twitter audience has increased 1.5 times up to 430,000 users over the past year and a half. The main upsurge, according to researchers, was registered during the Euro-Maidan.

In total, according to Yandex, 40 mn accounts in social networks are registered to Ukrainian users. Thus, the penetration of services that affect text messages already accounts for 85%. And there is Skype. As Capital wrote recently, at the beginning of the year 1.85 mn Ukrainians used Skype on smartphones. A year ago the figure was quite low.

No compensation

But for now the Internet cannot compensate for companies’ falling revenues. For example, the revenues of MTS Ukraine from the provision of Value Added Services (VAS), among which is the mobile Internet, in the second quarter declined from UAH 772 mn to UAH 747 mn (8%), though revenues from the provision of data transmission services during this period increased by UAH 28 mn to UAH 277 mn.

In absolute terms, compared to the same period last year, other VAS (content services, SMS, etc.) not related to mobile Internet services lost a significant share of more than UAH 50 mn. It has not yet affected total revenues, because for now MTS compensates for these losses through connection of new subscribers (SIM cards) in the amount of 1.5 mn a year. Kyivstar and life :) do not provide detailed data on individual content services.

Hoping for 3G

Now GSM-operators are placing their hopes on 3G. «Sure, it will create a new potential for the telecom-market, seeing as mass access to 3G will provide a new technology platform for a wide range of services such as Internet TV and a range of online services with high quality and interactive graphics that require very high speed connectivity and other heavy content,» says Horban.

The company’s network provides services for more than 7 million different devices — smartphones, tablets and netbooks that support 3G/LTE. «Naturally, at the moment these gadgets cannot give a 100% return to their users, because they operate with the EDGE speed,» says the manager. «Today our active users of mobile Internet, which make up more than a half of the subscriber base of life :), download and upload a fairly large amount of information — on average 25 terabytes per day, which in terms of loaded 2G-network is quite high,» agrees Rudyuk.

By the end of June there were more than 14 mn «smart» devices in the networks of all Ukrainian operators as Capital reported earlier. Yet no one can guarantee that subscribers will pay more to have access to 3G and that revenues from this will cover the declining voice traffic and stagnation in outdated services.