handelsblatt exclusive Study: Telecoms Rapidly Losing Out to Free Online Services

The European telecom market shrank by 1.8 percent between 2014 and 2016, while free online services such as Skype and WhatsApp have rapidly gained market share, a study obtained by Handelsblatt has found.
Quelle: dpa
Whatsapp and other online communication services are gaining market share.
(Source: dpa)

Telecommunications companies are rapidly losing market share to free online communication services, according to a McKinsey study obtained by Handelsblatt.

By 2018, free online services such as Skype, WhatsApp, Allo and iMessage will control nearly half of the communications market. According to McKinsey, online services will send 60 percent of all text messages and make 50 percent of all land-line calls and 25 percent of all cellular calls over the next year.

In 2014, these services sent just 24 percent of text messages and placed 16 percent of land-line calls and 5 percent of cellular calls. The market for online communication services currently has a volume of about €60 billion ($64 billion).

The online upstarts pose a serious challenge to the traditional European telecom market, which shrank 1.8 percent between 2014 and 2016. At the same time, telecoms are being forced to make massive investments to satisfy the growing demand for broadband. That spike in spending will lead to a 15 to 30-percent drop in their income, according to McKinsey.

To answer  this dilemma, telecoms need to become leaner and focus more on business customers, the study said.