Challenging market landscape for service providers

Over the past few years, service providers have put significant efforts into deploying 5G networks, as well as promoting 5G data plans. To date, around 290 5G networks have been launched commercially,³ of which more than 40 service providers are offering services based on the more advanced 5G standalone (SA) technology. At the same time, global 5G subscription uptake has reached 1.6 billion, corresponding to 18 percent of all mobile subscriptions.

A complex market

There is a positive momentum with the deployment and uptake of 5G around the world, including the exploration of new services and business opportunities.

However, the telecom market is characterized by fierce competition and a global mobile subscription penetration of over 100 percent. In addition, the financial landscape is hardening, with surging inflation and increasing costs of operating and maintaining networks. The economic situation is putting pressure on margins, forcing service providers to find new ways to drive profitable growth.

On the positive side, there are signs of service revenues growing. Over the past 3 years, from 2020 to 2023, global mobile service revenues increased by around 15 percent in total, or 4.6 percent per year. This is a significant change of trajectory, following years of declining service revenue.

Inflation contributes to both higher costs and growing revenues. Some service providers have started to adjust prices in relation to changes in the Consumer Price Index (CPI), but they have also managed to upsell to more expensive packages, with larger data buckets, higher speeds, and digital content. Another growth factor has been the expansion into Fixed Wireless Access (FWA), representing an estimated 20–25 percent of recent revenue growth. In addition, 5G brings cost efficiencies by reducing energy consumption and supporting service providers to manage increasing data traffic volumes, which will be vital to profitable growth.

Increasing ARPU indicates solid demand

In conjunction with growing service revenue, the global trend also shows an increasing average revenue per user (ARPU), pointing to a solid demand for telecom services.

Since 2020, global ARPU has grown at a CAGR of 1.7 percent per year, or over 5 percent in total. One explanation for this is the shifting mix of prepaid and postpaid subscriptions, with the share of high-value postpaid subscriptions increasing from 33 to 36 percent over the period. 5G subscriptions typically belong to the postpaid category.

Additional subscriptions and fees for devices such as smartwatches, alarms and other consumer IoT devices contribute to increasing service revenues, but that growth is not necessarily reflected in ARPU figures reported by service providers, as these typically lower-ARPU subscriptions have a diluting impact on blended ARPU.

Service innovation key to profitable growth

Challenges and opportunities in the market may shift over time. However, the key for service providers to drive profitable growth is to keep exploring innovative ways to sell mobile data services, together with the wider ecosystem of application developers, device manufacturers and system integrators. In this context, the early deployment of 5G networks, the increasing uptake of 5G subscriptions, and the growth of mobile service revenue is only the beginning of a longer journey, where service providers will play a vital role in delivering value for consumers, enterprises and society.