In Europe Mobile Phone Penetration is Approaching Saturation But, Like Japan, Users Are Mostly Interested In Communicating With One Another and Not Downloading Premium Services

Philip Stone July 13, 2005

The really good news is that mobile phones usage in Europe Is around 80% with the UK and Italy at saturation point. The bad news for media vendors and phone operators is that customers don’t seem very interested in the premium services on offer. What they really want their phones for are to, well, talk and communicate with one another.

And that marks a major frustration for mobile vendors who have invested millions in any currency you want to name to provide networks that can handle all the marketing dreams possible, and for vendors and advertisers who saw the mobile phone as the one instrument everyone would have in their pocket, the one instrument they could use to reach you no matter where you happened to be.

Forrester Research interviewed 18,000 mobile phone users in France, Germany, Italy, Spain and the UK, and what they found was that most users said they don’t really need sophisticated phones – all they really want to be able to do is to make voice calls and send messages to one another.

A survey by Berg Research in Japan found exactly the same finding in what is the world’s leading mobile marketplace.

Forrester learned, for instance, that 60% of mobile users aged between 16-24 – the prime advertising market – have phones that are Internet-capable, yet only 18% use mobile Internet services. And while 70% use SMS services only 14% use MMS/[picture messaging. In all some 17 million mobile users (only 9% of the European mobile universe) access the mobile Internet. 

These numbers could well change as everyone saw how still pictures and even video taken by mobile phones were transmitted in the aftermath of the London bombings, but it is obvious the marketing folks have a huge task at hand to convince mobile users to take full advantage of all the various services being made available.

With Britain and Italy at basically saturation point, most of Europe has stabilized at about 80% penetration although France still lags behind a bit at 69%.

Vendors have been working hard to provide premium services, but making a financial success of such projects, even given the universe of possible users, is by no means a certainty.

In France, for instance, France Telecom and the television station M6 have struck a deal to broadcast the station to France Telecom subscribers. In an example of true convergence Canal Plus Pay TV, owned by Vivendi, is making 20 of its channels available to the users of the SFR mobile network that also just happens to be owned by Vivendi.

The question is whether mobile users will be willing to pay €7 per month for such 3G delivered programming (which does not include movies or live sports), and also whether screen size is an obstacle.

One thing researchers think they know is that the attention span to watch items on mobile phones is very limited – perhaps just a few minutes. Thus vendors are working on video products that take from one to three minutes in total to watch (and where do you place the ad?), encouraging serialization of transmissions which suits the business model just fine if you get your target hooked.

These vendor experiments will also have a major effect on the world’s largest entertainment market – the US. According to the FCC, more people now subscribe to mobile phone services in the US than they do to fixed lines. The number of mobile phone subscribers now stands at 181.1 million, surpassing the fixed lines by 3.2 million.

A new piece of major research in the UK by Clerical Medical gives an idea of just how large a business mobile phones are, and perhaps a reason why premium services are of little interest.

As part of it’s A Snapshot of Modern Britain project the pensions and life insurance company found that Britons make on average six mobile phone calls a day and send more than eight text messages. The UK population spends £15 billion a year communicating with friends and family via their mobiles.

And it is that cost of communicating with their friends, families and colleagues that may be what is stopping a further spend on other usages. The research found that about 20% of mobile users are already exceeding their mobile monthly budget with about 8% cut off for failing to pay their bills. About 20% have changed mobile phone companies searching for lower costs. The research showed that cost remains a major issue.

So it would appear phone companies are charging as much as they can for the services people really want – communicating with one another – and that in turn is leaving very little spend for the mobile consumer to devote to premium services such as news and information, television and the like.

With the 3G licenses costing as much as they did, and all the development costs therein, the trick now for information providers is how to provide services to mobile consumers who are mostly already over budget for their primary purpose of their communicating with others?

Hark, did I hear someone mention the advertising model?