Australia's Mobile Telephony Revolution
John Kain
Economics, Commerce and Industrial Relations Group
1 December 1997
There is a growing appreciation of the increasing dominance of telecommunications
in facilitating all aspects of national economic activity. It also has
significant broader roles in cementing the social and cultural fabric
of the community(1). Within the Australian telecommunications sector,
mobile telephony is assuming a rapidly growing prominence and since the
late 1980s, has expanded significantly in its own right as well as relative
to the fixed telephone market, even though the latter has also shown marked
growth over these years. These trends are illustrated in Chart 1.
The size of the Australian mobile telephony market is estimated (by IBIS
Business Information Service) to grow to some 6.5 million subscribers
by the year 2000 representing an average annual growth of 13.7% per annum.
This rapid rate of growth is significantly higher than the 5% annual growth
rate in fixed network access lines installed by Telstra during the mid
1990s. Telstra has indicated that it expects about 60% of all telephone
calls to involve a mobile component by the year 2000. The Telecommunications
Strategies Report 1997/1998 forecasts an even faster growth rate of
mobiles with 7.5 million to 8.0 million services predicted for the year
2000 representing a penetration of 40 to 45 per cent of the population
compared with 24 per cent as at 1996.
Between 1990 and 1995, Australia's share of the world market for mobile
telephony rose from approximately 2.6 per cent of all mobile subscribers
to around 3.6 per cent, indicating that the rate of growth of mobile telephony
in Australia was greater than that of the rest of the world. This can
be explained in part by the comparatively lower level of mobile telecommunications
tariffs in Australia. A recent OECD study shows that as at January 1996,
the representative basket of Australian mobile tariffs was costed at $US645.93
(US $1995 based on purchasing power parities and excluding tax) compared
with the OECD simple average figure of $US1168.53(2). Between 1994 and
1996 alone, Australian mobile telephony prices are reported to have declined
by 10 per cent on average, this being more substantial than the percentage
cuts in the prices of other forms of telephone service such as international
direct dial or IDD (corresponding figure is 8 per cent) or STD prices,
which declined on average by 8 per cent over the same period(3).
In 1995, Australia had the 4th highest rate of cellular mobile
phone penetration among OECD countries (as measured by mobile phone subscribers
per unit of population). Only Sweden, Norway and Finland showed higher
rates of penetration. The following chart shows the penetration rates
for the 'top ten' countries within the OECD.
The penetration of mobile telephony is indicated by its relative contribution
to overall industry turnover. IBIS has estimated that in 1995-96, mobile
telephony accounted for some 20 per cent of industry revenues, while local
telephony and exchange line rental accounted for 26 per cent and 21 per
cent was attributable to domestic long distance telephony. Industry revenue
in the year 1995-96 is estimated by IBIS to be $16873 million, of which
mobile services accounted for $3465 million. Other major revenue sources
included international call receipts and data service.
Another indicator of the rapid growth and increasing penetration of mobile
services is the ratio of mobile growth to mainline growth. In Australia
this was 39:10 in 1995. This contrasts with the corresponding ratios in
the United Kingdom of 21:10, in the United States 10:10, in Sweden 136:10,
and in Norway 101:10.
Just why Australians have taken to mobile telephony with such enthusiasm
is difficult to say, but it is a phenomenon apparent in our take-up of
other leading consumer technologies such as video recording machines.
No doubt, the relatively underdeveloped nature of the fixed network and
the relative youthfulness of the Australian population profile may be
contributing factors. Personal factors which may motivate people to buy
mobile phones vary. Factors considered in past Australian research include
perceptions that a user of a mobile will be 'taken more seriously in business',
that a mobile 'makes me feel busy and efficient', that it makes the user
'appear contemporary, dynamic and innovative' and that a mobile phone
'makes me more attractive to the opposite sex'.
The relative market shares of the three carriers are presented in chart
3 which summarises overall revenues (including both digital and analogue
mobile telephony earnings) received from mobile telephone services in
1995-96 (in current prices) for each of the carriers.
Relative market shares as measured in terms of subscriber numbers as
at May 1997 are illustrated in chart 4.
The data illustrated below suggests that Telstra enjoys a higher yield
per subscriber from its mobile business than do the other carriers.
- Organisation for Economic Co-operation and Development (OECD) Communications
Outlook 1997, Vol. 1, Paris, 1997.
- OECD, Communications Outlook 1997, Vol. 1, p 129.
- Paul Budde Communication, Telecommunications Strategies Report
1997/1998 p 85.
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