Wednesday, 16 September 2009

A demographic take

An Saoi: Accurate and current information is crucial to giving an up to date view of what is really going on in the Irish economy. The Commission for Communications Regulation (ComReg) have just produced the latest issue of their quarterly statistical review of the communications industry, covering Quarter 2 of 2009 published on 10th September.

A huge amount of relevant current information is available, not just relating to telephones and internet but also to broadcasting. I am glad to see that the number of we refuseniks without cable or satellite connections is increasing. Spending on communications and on television are core parts of household expenditure and substantial cuts in such expenditure suggest major changes in the focus of household budgets.

My own personal interest is in mobile communications. The Report confirms a continued substantial decline in mobile phone numbers with penetration levels falling to 2006 levels. The one area of growth was mobile broadband, which also made up over 50% of the increase in total broadband connections . However there was an overall decline in internet connections because of the reduction in narrowband usage. Internet usage appears to be peaking. The dire state of broadband in Ireland was well covered here on this site by Dr. Dónal Palcic of UL, and for a more sobering view, have a read of this piece by Kathleen Barrington.

I have previously written here suggesting that the decline in the number of active mobile connections was a clear sign of emigration. Local Demographics alone should be providing a substantial increase in the market as there are far more young people reaching the age of their first mobile than customers dying. Michael Taft has produced some interesting figures on the August unemployment figures, which raise similar issues.

The degree of decline in income from mobile calls and texts between Q2 2008 & Q2 2009 is a massive 18% or €75.65M. The moderate increase in Data revenue of €16M hardly makes up for this loss of income, considering the addition costs of hardware etc. The decline has been particularly marked since the start of 2009, however the year on year decline in the first quarter was just 7.5%

The income decline in the Irish mobile market is extraordinary and considerably exceeds that of other mature markets. Indeed it exceeds that of Germany , a country with a seriously declining population. Certainly some of the decline is down to price reductions and economic conditions however the suddenness of the decline suggests the disappearance of a large number of customers.

Between Quarter 2, 2008 and Quarter 2, 2009, the number of mobile phones declined from 4,985,987 to 4,809,857. Natural population increases should have added at least 40,000 customers, leaving a discrepancy of well over 200,000.

The next report is due in the middle of December, and I await its publication with interest.


Donal Palcic said...

@An Saoi

The number of mobile subscriptions fell for the first time in four years in Q1 2009 (although growth in mobile subscriptions had been relatively non-existent since the end of 2007) and continued its downward trend during Q2’09. Since Q4’08 total mobile subscribers have fallen sharply from 5,048,127 to 4,809,857 in Q2’09.

The ComReg report highlights the fact that Vodafone’s change of definition for active pre-paid subscriptions during this period may, in part, be behind the decline in subscriptions. Vodafone used to define an active SIM as “one on which a billable event, i.e. made an outgoing call or sent a text, has occurred in the previous 8 months”. It appears it has now switched to the generic definition where prepaid subscribers are defined as “a customer who subscribes to a prepaid tariff plan and has made an outgoing call within the previous 3 months or who has purchased a pre-paid HSDPA card or modem”.

Had Vodafone’s definition for active pre-paid subscriptions been changed earlier I’m sure we would have seen a more gradual (but still substantial) decline in overall mobile subscriptions beginning before Q1 2009. That said, the considerable decline in mobile subscribers since last year would definitely suggest the disappearance of a large number of customers, quite possibly due to a considerable number of people emigrating as you have already argued in this post and a previous post.

Donal Palcic said...

@An Saoi
Jim O’Leary has an article relevant to your post in the Times today where he examines live register and CSO figures on labour market trends and suggests that net outward migration has recommenced in Ireland.

Nat O`Connor said...

Talking of demographics, the 2009 Eurostat population report came out today.

Ireland's population is projected to soar to 5.4 million by 2020 and 6.8 million by 2060.

Of course, I should say 'was', depending on how migration trends change over the next couple of years; although our birth rate remains high.

An Saoi said...

Dónal, I take your point regarding the once off adjustment in the Vodafone numbers. However our demographics should have provided for a substantially increasing market. The decline in spend at 18% is also massive and suggests far more than just a decline in prices.

I gather from one market operator that the decline has continued in July & August but that it is related to particular markets, which confirm migratory trends. The Q3 figures in December will tell whether I am correct or not.

I read Jim O'Leary, I feel the figures he and Colm McCarthy are talking about lag the actuality by some months. If you are still lecturing Revenue Commissioner staff, there used to be Revenue Stats in my days as a Cigire Cánach, which gave details of permanent cessations of employment during the current tax year. Permanent cessations would arise in the year because of death, students returning to school/college or emigration. Maybe the Revenue could be persuaded to publish the figures and reasons......

I think Michael Taft's piece on the unemployment figures are also interesting. I had a look at the figures at the time as he mentioned and felt that the missing numbers were huge. Time will tell, but the delay in publishing the CSO migration figures is worrying. They will of course only give a snapshot up to April.

Slí Eile said...

@ An Saoi The trend is, clearly, towards net outward migration. A number of caveats:
births are still soaring - hitting 2.1 replacement rate in 2008.
age structure combined with a continuing high birth rate will sustain some level of population growth
net outward migration is likely to pick up only modestly as job opportunities in English-speaking countries will remain limited for at least another two years
the age composition of migration is likely to see concentrations among single, 20 or 30 somethings
next Tuesday may lead me to revise my views as CSO will publish 2009:Q2 data on migration!

Donal Palcic said...

@An Saoi
I would agree that the considerable drop in revenues would suggest more is at play than the impact of the recession and lower prices. We will just have to wait and see what emerges from future CSO data releases to see whether migration is a significant explanatory variable underpinning the decline in mobile revenues.

I was not aware that the Revenue kept stats on permanent cessations. Such figures and the reasons for the cessations would provide valuable information. I'm not lecturing Revenue Commissioner staff until next semester but I can still see whether they would be willing to release any stats in relation to permanent cessations.