Mobile
Future Forward is a gathering of some of the most influential minds
in the mobile industry who are helping shape the industry. The
experts and visionaries from around the globe will discuss the
mobile industry 2-5 years forward, envision what the user
experiences and use case scenarios look like, discuss and debate the
challenges and opportunities in the journey to that vision.
The Global Wireless Markets continued to grow rapidly especially
in India and China where the carriers (combined) are adding
almost 30M new subscriptions every month. Amongst the two, India
is outpacing China 2:1. China touched 750M subscriptions while
India crossed 525M by the end of 2009. With 4.6B subscriptions,
the global subscriptions penetration was above 68%.
The global mobile data revenues reached $220B and mobile data
now contributes 26% of the overall global mobile service
revenues.
As expected, the overall global mobile revenues stayed pretty
flat for the year at around $1.1 trillion as many regions were
hit by the recession and the competition pushed the ARPU lower
for many operators. While the countries like US, Japan, China,
and India showed very little signs of pullback, most of Europe
and the developing world experienced a decline in overall
service revenues in 2009. All the major markets have their data
contribution percentages above 10% now.
For some of the leading operators, data is now contributing
almost 50% of the overall revenues. However, the increase in
data ARPU is not completely offsetting the drop in voice ARPU
for most operators. NTT DoCoMo continues to dominate the carrier
ranking in terms of the mobile data service revenues, Verizon
Wireless which became #2 replacing China Mobile and is slowly
edging towards the #1 spot and is likely to overtake DoCoMo
within the next few quarters.
Though 4G as a standard hasn't been defined yet, the discussions
around LTE and WiMAX deployments grew intense. Telia Sonera
became the first operator to commercially launch LTE. At CTIA,
Sprint/HTC became the first players to launch a WiMAX smartphone
and MetroPCS/Samsung took the honors for the LTE smartphone.
2009 also marked the year when the global data traffic (monthly)
exceeded the global voice traffic. In the US, the yearly mobile
data traffic exceeded the voice traffic for the first time.
We are also entering the phase of global mega-mergers in
telecom. Bharti Airtel of India just acquired Kuwait-based Zain
Group to become the 5th largest telecom group in the world (at
the end of 2009, it was #9). There are now 14 telecom groups
with 100M or more subscriptions. While China Mobile’s ARPU is
1/5th of its western counterparts, it operates its business at
higher margin, around 51%. There are a number of global players
mainly in Europe and Asia who have mastered the art of running
lean operations and if they have good bank balance they are
going to go shopping in the days ahead.
From the revenue perspective, the $50 billion revenue club is
more exclusive with China Mobile, Vodafone, AT&T Mobility, and
Verizon Wireless as its sole members.
As we sit at the cusp of the iPad era, there is a bigger
transformation taking place and that is of the connected
consumer electronic devices (CEDs). Few years from now, most
popular CEDs will have connectivity. We are also approaching the
start of phase where pricing of access will start to morph - we
will see the introduction of family data plans (something we
have been advocating for some time), ability to connect multiple
devices to the same GB plan, more granular use plans (per
session/day/week/mo/yr etc, roll-over GBs anyone?). As the
number of connected devices/consumer increases, we will start
worrying about Average Margin Per User (AMPU) or Average Margin
Per Connection (AMPC) because ARPU won’t quite capture the
dynamics of the industry.
Exciting times indeed.
Chetan Sharma Consulting conducted its semiannual study on the
global mobile data industry. We studied wireless data trends in
over 40 major countries - from developed and mature markets such
as Japan, Korea, UK, and Italy to hyper growth markets such as
China and India.
This note summarizes the findings from the research with added
insights from our work in various global markets.
Impact of Global Recession
Telecom in general fared better than other industries. In
some regions, it hardly caused a tremor. However, in most
nations, the impact was felt by the operators. Amongst the
40 major operators we studied, SK Telecom, 3 Australia, KTF,
T-Mobile Netherlands, Rogers, Softbank Japan, Singtel,
Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China
Unicom, and Vodafone Germany experienced increase in both
the data ARPU and the overall ARPU during 2009. Some of
increase was due to the fluctuation in international
currencies e.g. Korea.
Looking at the data at a country level, most nations noted a
decline in overall ARPU. Only Venezuela, Pakistan,
Argentina, Bangladesh, Australia, and Poland showed positive
increase in ARPU since 2008.
Rule of Three is
kicking in most markets with smaller players having to
consider the M&A option to remain viable. T-Mobile/Orange,
Bharti/Zain tie-ups are just the start of that process. We
are likely to see many international mergers in 2010 and
beyond as power in the mobile ecosystem self-adjusts.
5 new players joined the 100M subscriptions club. The new
members are: Bharti Airtel (India), MTN Group (South
Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia).
The top 9 telecom groups in the world are: China Mobile,
Vodafone, Telefonica, America Movil, Telenor, T-Mobile,
China Unicom, TeliaSonera, and Orange.
Service Revenues
US extended its lead over Japan as the most valuable mobile
data market in service revenue with US adding $44.56B vs.
$32.5B for Japan in 2009. China with $20.3B was ranked
number 3. US registered the highest growth amongst the top 3
with over 40% increase from EOY 2008 levels followed by
Japan and China.
The top 10 nations by service revenues are: US, China,
Japan, France, Italy, UK, Germany, Brazil, Spain, and India.
The top 10 nations by data service revenues are: US, Japan,
China, UK, Italy, Germany, France, Australia, Spain, and
Korea.
NTT DoCoMo continues to dominate the wireless data revenues
rankings with over $16B in data services revenue in 2009.
Almost 46% of its overall revenue now comes from data
services. DoCoMo also crossed the 95% 3G mark.
NTT DoCoMo was followed by Verizon Wireless, China Mobile,
AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2
UK, and China Unicom to round up the top 10 operators by
wireless data service revenues.
Each of the top 5 carriers exceeded $10B in yearly mobile
data service revenues in 2009
Data revenues for the top 10 operators now account for
almost 43% of the global mobile data revenues.
The biggest jump in data revenues was experienced by
Verizon, Softbank, and AT&T. DoCoMo saw an 11% increase for
the year.
Most of the operators in the developed nations are
contemplating future strategies to boost data revenues such
that the decline in voice revenues is at least compensated
for. There are very few operators who have experienced
increase in overall ARPU.
China reported approximately $20.3B in data revenues for
2009 and the percentage contribution from data services is
around 32%, data ARPU is around $3.2. For India, data ARPU
continues to stay below $0.50 as most of the new adds are
voice only subscribers and there is continued price pressure
in the market.
China Mobile remains the most valuable telecom operator with
over $195B in market cap. It is followed by Vodafone at
around $122B. Telecom groups in mature markets are under
enormous pressure to either come up with a global expansion
strategy or accelerate their existing plans.
In 2009, SMS’s vice like grip on data revenues continues to
loosen a bit with many carriers seeing an increase in non-SMS
data revenues. On an average, Japan and Korea have over
70-75% of their revenue coming from non-SMS data
applications, US around 50-60%, and Western Europe around
20-40%.
NTT DoCoMo has been at the cutting edge of the mobile data
evolution by creating new markets. They are exploring new
technologies and social experiments ahead of almost anybody
else in the market. Our long history with the Japanese and
Korean markets has taught us that while the individual
strategies in each market will differ, one should study the
trends, technologies, and ecosystem dynamics in these
markets to get a sense of what’s coming.
·
From the revenue perspective, the $50 billion revenue club has
limited membership with China Mobile, Vodafone, AT&T Mobility,
and Verizon Wireless as its sole members.
ARPU
Most of the major operators around the world have double
digit percentage contribution to their overall ARPU from
data services. Operators like DoCoMo, and Softbank are over
46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK,
Telstra, and 3 Sweden exceeded 35% and many others are on
the verge of crossing the 30% mark.
NTT DoCoMo reported the highest data ARPU for the year while
Rogers took away the honors for the highest overall ARPU.
Other notable percentage increases in ARPU were from 3
Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and
T-Mobile Austria. The Japanese operators saw a decline in
ARPU by 3%.
The biggest percentage contribution by data ARPU has been
consistently registered (since mid 2002) by two Philippines
carriers – Smart Communications and Globe Telecom with over
53% (or $2) contribution coming from the data services.
Softbank of Japan looks set to be the first major operator
(outside of Philippines) with more revenues coming from data
services than voice.
Mobile Data Traffic
We have been calling attention to the tremendous increase in
mobile data traffic for some time. The discussion has hit
mainstream and many operators are scrambling to nail-down
their short-term and long-term strategies to manage the data
traffic growth in their networks. See our paper on the
subject "Managing
growth and profits in the Yottabyte era."
The recommendations discussed in the paper are slowly being
adopted by various vendors and operators worldwide.
The global mobile data traffic exceeded an Exabyte for the
first time in 2009. In fact, the data usage is growing so
fast that this year, the two territories experiencing the
most growth - North America and Western Europe are both
going to exceed an Exabyte in mobile data traffic.
2009 also marked the year when the global data traffic
(monthly) exceeded the global voice traffic.
For many of the superphone heavy operators, devices like
iPhone and Android account for more than 50% of their total
data traffic.
2010 will mark the first year when the total number of
mobile broadband connections will exceed the total number of
fixed broadband connections.
For more mobile data traffic analysis, please stay tuned for the
second edition of our Yottabyte research
Subscriptions
India continues to be the hottest market on the planet in
terms of net-adds with (again) a world record-setting month
in Jan 2010 with 19.9 million net adds. To give you a
perspective, this is almost 1.5 times the number of
subscribers US added in the whole year. It is like adding a
Canadian wireless market every month. For the year 2009,
India added 177 million subs vs. 106 million for China.
Combined, one year of growth in these two market is
equivalent to the size of the third largest market - the US,
to date. Making money on the net-adds is a different
proposition all together (more discussion on the
international market in our global market update later this
month)
Thanks to the explosive growth in the emerging markets, the
global mobile market went past 4.6B in 2009 and is likely to
cross the 5B mark in 2010. The global mobile subscriptions
now represent over 68% of human population on planet earth.
China crossed the 700M subscription mark in July while
India's total went past 500 in Nov. In the meantime, US
crossed the 90% subscriptions mark in 2009.
In the last 10 years, the growth patterns in the mobile
industry have completely reversed. In 1998, the developed
world accounted for 76% of the subscriber base, in 2008; the
percentages have flipped with developing world now
accounting for 76% of the subscriber base and are likely to
increase to 85% by 2018.
The top 10 nations by subscriptions are: China, India, US,
Russia, Brazil, Indonesia, Japan, Germany, Pakistan and
Italy.
China Mobile became the first operator (and likely to be the
only one for a very long time) to cross the 500M mark. It
remains the #1 carrier in terms of the total number of
subscriptions followed by Vodafone. Telefonica, América
Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange,
and Bharti Airtel round up the top 10 largest telecom groups
in the world.
Mobile Apps
·
The total number of app downloads in 2009 reached 7 billion
resulting in approximately $4.1B in revenues 12% of which was
from mobile advertising.
·
The number of non-carrier appstores jumped to 38 from 8 in the
previous year.
·
While Asia had the highest percentage of the download share,
North America had the highest share of the apps revenue
accounting for over 50% of the total revenue.
·
The paid ASP in 2009 was approximately $1.9 and the advertising
revenue generated from the free applications was approximately
$0.09/user/app/year
Messaging still accounts for the lion-share of data service
revenues. However, other services such as Mobile Music,
Mobile TV and video streaming, Voice navigation, PNDs,
Mobile Games, IMS, LBS, Mobile advertising, and others have
gradually chipped away the share from messaging. Alternate
devices with wholesale cellular agreements are also flooding
the market. In Japan, Mobile Commerce is expected to do much
better than Mobile Advertising. Though not much talked
about, enterprise applications are also being adopted widely
esp. in North America as more workers become mobile and
corporations seek efficiencies in their operations and
supply-chain.
Nokia dominated the year as usual but the revenue share is
shrinking and so is the lucrative smartphone share. Apple,
RIM, and Google are relentlessly attacking the top tier
while Samsung, LG, and others giving a tough fight for the
bottom tier. We see a new middle tier emerging that has the
form factor of a featurephone and functionality of a
smartphone. The smartphone category is getting further split
into regular qwerty smartphones like Blackberry and the
touch and full browser based superphones like the iPhone and
Droid.
The year was dominated by several blockbuster device
launches like the iPhone 3GS.
Next few years will be big for infrastructure providers as
many countries both developed and developing get into
upgrading their infrastructure.
Willcom, the small Japanese carrier that started the
flat-rate unlimited phenomenon filed for bankruptcy last
month.
In the US, the increase in messaging volume catapulted US as
the number one texting nation by messages/user/month going
past the long-time leader Philippines.
Deployment of 3.5G technologies is in full swing. However,
it is the discussion of 4G that is occupying the headlines,
even though 4G hasn't been fully defined yet and the current
candidates for 4G are nowhere near the performance goals of
4G (150Mbps/50+Mbps). Many larger operators have laid out
their plans for deploying LTE starting this year.
We are also seeing regulators playing an active role in
making the markets competitive and attractive in the
long-term.
·
The velocity with which the smartphones are being introduced
into the market esp. the western markets, one wonders if in five
years, we will be using the moniker to describe devices and if
the "dumbness" in the device market will be practically
eliminated. Led by Apple's Appstore success, significant
investments are pouring into the appstore world. In parallel,
the debate over apps vs. mobile web is intensifying. The
implications of the transition will be significant on the
ecosystem on many levels.
2010 will be a critical year on many fronts. As usual, we will
be keeping a close eye on the trends in the wireless data sector
in our blog, twitter
feeds,future
research reports,
and articles.
The next US Wireless Data Market update will be released in May
2010. The next Global Wireless Data Market update will be
released in Sept 2010.
Your feedback is always welcome.
Thanks.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are
our clients.
Chetan Sharma Consulting is a
consulting and advisory firm helping companies in the mobile and
voice communications sector. Our expertise is in developing
innovation-driven product, business, and IP strategy. We've
helped companies like NTT DoCoMo, China Mobile, Samsung, KDDI,
Motorola, Alcatel-Lucent, Sony, Virgin
Mobile, KTF, Sprint Nextel, Reuters,
Disney, Qualcomm, Motricity, Reliance, BEA, HP, Merrill Lynch,
Cincinnati Bell, Bain, SAP, Vulcan, American Express, and many
others. What can we do for you?
www.chetansharma.com
If you have questions or
suggestions or feedback on this subject or on the wireless & mobile industry at large,
please contact us at feedback@chetansharma.com - we look forward to hearing from
you.
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