Mobile operators could be set to reach ‘End of Profit’ in a little over two years, as the costs of building and running their networks exceed the revenues that they are generating, according to a forecast compiled by network solutions vendor Tellabs. North American carriers are most at risk, with the firm suggesting that net income for the region’s carriers could sink below outgoings as early as the first quarter of 2013.

The forecast modelled ‘typical’ operators for North America, Western Europe and developed Asia Pacific and, while based on the firm’s experience of working with “numerous tier one carriers globally” did not relate to any specific carriers, Tellabs said. In Asia Pacific the crossover point could come as soon as 3Q13, while Western European carriers are expected to resist the trend until 1Q14.

Traffic and the cost of provision were taken from Analysis Mason’s wireless traffic forecast for 2010, which posited a seven-fold traffic growth by 2015, for voice and data combined. The capex and opex costs and network design principles were drawn from Tellabs’ own modelling.

A number of other assumptions were made, including that the hypothetical carriers do not deviate from the flat-rate billing models that many are now renouncing as economically unworkable. It was also assumed that all carriers in all regions were offloading a considerable percentage of traffic to indoor, internet solutions, Tellabs said. “A gradual increase to 75 per cent offload by 2015 moves the point where revenues fall below total cost (capex and opex) to 2014 and beyond in  all regions of interest,” Tellabs said.

Timelines for ‘end of profit’ by region.

Source: Tellabs