The Cambridge-based research firm predicts that the multibillion-dollar prices that operators are paying for 3G services will push the industry into the red by 2007.

To assess operators’ prospects, the research firm developed a model of average mobile operator revenues in the 17 markets of Western Europe and interviewed 26 mobile operators.

• By 2005, the average operator revenue will decline by 36 percent.
• Average revenue per user (ARPU) will fall by 15 percent between 2000 and 2005.
• Operating profits will disappear in 2007 and take six years to return, leading to bankruptcies and consolidation, leaving only five groups to service European subscribers.
• Due to increased competition, voice, SMS, and data connections revenues are expected to decline rapidly.
• Traditional mobile revenues per user will diminish by 36 percent between 2000 and 2005.
• Wireless penetration rates will peak at about 76 percent by 2005.
• Operating profit will start to decline in 2003, turn negative in 2007, and recover in 2013.

The authors of the report said that as grim profitability prospects and huge capital requirements take their toll, those who remain viable will consolidate into five groups: Vodafone, T-Mobil, France Telecom/Orange, and BT Cellnet, with fifth place going to either KPN, Telefónica, Telcom Italia or NTT DoCoMo.