a Social Network bubble?

Remember the Internet bubble? You’ll enjoy the Social Network bubble !

Let’s have a look at a few metrics of the Facebook stock market introduction.

Facebook is worth according to the markets $ 100B for 900M users so roughly $110 per user. On the other side Facebook is making $ 4B turnover so an ARPU (Average Revenue Per User) around $4.4 per year, $0.37 per month. ($4B / 900M users = $4.4 per user) This the value of 4 SMS.

One can imagine the markets love for a mobile operator with a revenue of 4SMS per month and per user.

Hence the markets are confident that Facebook can retain every customer around 25 years. (!)

If you have a look at a classic Telco business, things look a different. Let’s take the case of one of its Telco giants Orange/France Telecom group. Orange is serving 226M users worldwide (Mobile, Fixed, and DSL). It makes a turnover of € 45B with a market capitalization of € 26.7B.

  Facebook Orange
Customers / Users (M)
900 226
User valuation $ 110 € 118
ARPU $ 4.4 € 199
User payback (years) 25 0.5

One would argue that the CAPEX used for these businesses are of different scales. Facebook CAPEX is around 1B whereas Orange is investing € 18.5 B during 2011-2013 period so around € 6B a year.

Facebook CAPEX is expected to double in the coming year, so one can imagine comparable CAPEX in the midterm.

The real challenge for Facebook is now to squeeze its ecosytem to maximize its revenue. Either Facebook can increase dramatically its ARPU in the coming years or we are facing a new bubble.

Touchscreen devices for the masses

I read a little bit confusing article on Telecoms.com ‘Touchscreen handsets driving decline in UK spending’

The author described the touch screen devices as the main factor of declining ARPU in the UK market. I believe he is quite wrong in his analysis. The input method isn’t the right factor for declining revenue.
Touch screen have a been a high feature for a few years but given the attractiveness of the iPhone and its UX other manufacturers have introduced touch screens not only on their Windows Mobile, Symbian and Android devices but on feature phones. You can find among those devices: Samsung Tocco, LG Renoir, LG Cookie, etc.
For unaware consumer, these touch screen devices are as cool as the iPhone. But as they are working with a proprietary OS they cannot download cool applications that uses a lot of data and they don’t have the latest browser supporting Flash. So with a device with limited capabilities the consumer uses less data and services.
Touch screen is just becoming a standard feature available from low end to high end devices.
What would be interesting to know is the correlation between the ARPU and

  • the size of screen,
  • the open OS
  • the Qwerty keyboard

One can assume that the bigger screen you get the more you consume data services, and with a real Qwerty keyboard one tends to do more emails.
And last and not least all the Open OS maybe not equal. Some may generate more data ARPU than others.
It would have been interesting to know but unfortunately only operators have the data and they like secrecy…

Vodafone results – The trends behind the figures

I had a look like everybody at the latest Press release from Vodafone about their 31st March 09 results. Beyond the “we did the best during those tough times” and “we are cutting cost” what can we learn from those statements on the european market. >> see article on Vodafone cost cutting program

Vodafone Fixed Line activity is gaining momentum

I had a look at their revenue per line of activity in Europe. Voice is still the overwhelming service with roughly 68% of the revenue.
revenue per service
I zoomed at the other services. Messaging seems quite stable with 13% of the revenue. But what is really surprising is the Fixed Line revenue which is bigger than the Data revenue. Vodafone, once a mobile pure player, is now becoming a convergent operator as an Orange. Even if the data traffic is growing with 2 digits figure the fixed line activity is gaining momentum.
revenue per service ZOOM

3G devices penetration is at 30% of the customer base

3G devices are becoming mainstream in Europe with nearly a 1/3 penetration rate. As the 3G coverage is now nearly the same as the GSM thanks to the 900 MHz band, 2G will start loosing momentum before the end of the year.

3G devices penetration
2G network capacities are now at a plateau and all capacity investment will go now to 3G / HSPA technology. If you remember the NMT switchover at the end of the 90s, one can expect a 2G switchover between 5 to 10 years from now. This will depend on 2G OPEX vs. 3G OPEX. As soon as they will be close, 2G networks days will be counted.
One can expect the first 3G/HSPA only devices within oprators portfolio in 2010.

The crisis starts impacting consumers’ behaviour

Let’s have a look now at the ARPU in the main countries. ARPU is slightly decreasing in all the countries. That can be easily explained by the price pressure in mature markets. What is more stunning is the dramatic decline in Spain.
ARPU VF Opcos

If now we compare it with the average number of voice minutes used per month, this is a big shock. People are using less their phone in Italy and Spain! Apparently, Spaniards are cutting back on their phone expenses by talking less.

monthly voice mn usage per month

Telecom services are no longer immune to the current crisis. This average voice minute usage per user should be monitored closely by all the operators.

As a Conclusion,

  • The Fixed-Mobile business is now a standard model even for a Vodafone
  • 3G is on the edge of becoming the mainstream mobile technology in Europe
  • Crisis is there. Consumers in Spain and Italy are starting to cut back on their communication bill