Mobile
Future Forward 2011 - Sept 12 2011
Mobile Future
Forward is a unique gathering of some of the most influential
minds in the mobile industry. The experts and visionaries from
around the world will discuss and debate the future of mobile
industry. Check out
the speakers - exceptional visionaries, extraordinary
insights.
Registration
In proud partnership
with: Qualcomm, AT&T Interactive,
Synchronoss
Technologies,
Millennial Media, Openwave, Real Networks,
OpenMarket,
Ericsson
Inquiries:
info@mobilefutureforward.com
State of the Global
Mobile Industry - Half Yearly Assessment 2011
http://www.chetansharma.com/globalmobileupdate1H2011.htm
Download PDF (56 pages, 3 MB)
The big picture
The global mobile industry is the most vibrant and fastest
growing industry. We expect the total revenue in the industry to touch
approximately $1.3 Trillion in 2011 with mobile data
representing 24% of the mix. Global Mobile Data revenues are
expected to eclipse $300 Billion for the first time in 2011. It
is also the first year in which non-messaging data revenues will
make up the majority of the overall global data revenues at 53%.
We expect the total number of subscriptions to exceed 6 billion
by the end of 2011. The first 1 billion took over 20 years and
this last one is going to take only 15 months. The primary
growth drivers are India and China which are cumulatively adding
75M new subs every quarter. Indian and China are also entangled
in the race to the billion. At the end of Q2 2011, China was
ahead by 50M but India is adding subscriptions at faster rate
and is likely to eclipse China before Q2 2012. By then, both
nations are expected to exceed 1 Billion in total subscriptions
making up 31% of the global subscriptions.
In Q1 2011, US became the first major market to exceed the 50%
mark in smartphone sales. The global figure stands at
approximately 26%. Some operators expect 90% of their devices
sales to
be smartphones by the end of the year. In terms of the
actual smartphone penetration, we expect the US market to
eclipse the 50% mark in 2012.
China leads in the number of subs but US dominates in both total
and data revenue. A number of emerging nations are now in top 10
– Brazil, India, Russia, Indonesia, Pakistan, Mexico while once
dominant – Korea, UK, Italy, Germany have dropped off or slipped
in rankings.
The number of mobile operators with more than $1B in data
revenues will increase to 47 in 2011. This number was only at 13
in 2005.
Japan continues to be the leader in mobile data with NTT DoCoMo,
KDDI, and Softbank Japan ahead of the pack in terms of mobile
data revenue and data as a % of total ARPU. In 2011, it became
the first major market to have more than 50% of its mobile
revenue from data services. Next, Australia and the US have made
good inroads in the last two years. In fact, if we look at the
overall data revenue, US is much further ahead than any nation
due to the size of the market.
While India has the highest subscriber growth rate in the world
right now, the revenue generating opportunity remain down right
anemic compared to other major markets with average dropping
down to $3.50 in overall ARPU. Even with significant subscriber
base, there is going to be a general lack of opportunity in the
market for the next couple of years relative to other markets.
Devices
Apple has had the tablet space to itself. Thus far the response
from the competitors has been tepid esp. on the pricing
dimension. Apple has had such a mastery over the supply-chain
and months ahead of the competition that by the time they figure
out details, Apple already locks up the pricing advantage for
the cycle. OEMs try to catch-up on the features but can’t do on
the margins. OEMs can grow the pie by bringing products at a
better price points that helps attract different demographics to
the mix. Microsoft can make good inroads into the space with its
Win8 tablet release in 2012 but it will be again in a catch-up
mode as the iOS ecosystem will be even more robust by then. The
cheaper Android tablets will do well in the market. As expected,
tablets will pretty much eliminate the need for netbooks and are
starting to eat into the desktop/laptop revenue.
Nokia and RIM are under severe market scrutiny as investors and
developers leave in droves. Lack of product planning and
execution has left their market share in disarray. Nokia’s
valuation has been cut into half while the newcomer HTC edged
past the industry giant in a remarkable story of the year.
Nokia’s release of N9 shows the engineering and creative design
depth but a lot is riding on the first generation of Nokia
Windows Phones. While the market hasn’t shown much appetite for
Windows phone thus far, a good family of devices might be able
to slow the loss trajectory and position the combined team for
the up-for-grabs 3rd spot in the ecosystem. HP’s
acquisition of Palm is finally bringing some new products to the
market but the lack of an effective ecosystem means lack of
traction in 2011. Given that the computing is shifting to mobile
devices, we can expect some of the weaker desktop/laptop players
will exit the industry.
Tablets are primarily being used in the WiFi mode because the
primary use case is indoors and WiFi gives a better (and
cheaper) user experience. Once operators start to roll out
user-friendly family data plans across multiple devices, we can
expect the cellular activation go higher but will still be
dominated by WiFi overall.
The number of connected devices per subscriber and per family
will continue to increase over the course of this decade. As the
cost structure and margin profile for these devices will be
different, we are likely to measure performance of various
operators using margin analysis for e.g. while the ARPU for
connected devices is 5-10 times lower than the postpaid
subscribers, the margins are typically higher due to lower costs
of sales, marketing, support, and subsidy. As such the overall
impact is dilutive ARPU but higher margins. So, instead of
focusing on just the ARPU, the efficiency of operators will be
measured in how well they maintain average margin per user (AMPU)
and average margin per connection (AMPC).
Managing growth and profits in the yottabyte era
As a result of the data tsunami, there are two types of
opportunities that are being created, one that take advantage of
the data being generated in a way that enhances the user
experience and provides value and the other in technologies that
help manage the traffic data that will continue to grow
exponentially.
To be able to stay ahead of the demand, significant planning
needs to go in to deal with the bits and bytes that are already
exploding. New technical and business solutions will be needed
to manage the growth and profit from the services. Relying on
only one solution won’t be an effective strategy to manage
rising data demand. A holistic approach to managing data
traffic is needed and our analysis shows that the cost
structure can be reduced by more than half if a suite of
solutions are deployed vs. a single dimensional approach and
thus bringing the hockey stick curves of data cost more in line
with the revenues and thus preserving the margins.
The decision making process within the operator organizations
will need to be streamlined as well. Operators should also
consider creating a senior post which focuses on both the cost
side and the solution side so they can devise and institute a
sustainable long-term policy and keep the margins healthy.
Competitive landscape
The Rule of Three is evident in all major markets. While the
percentage market share might vary, on an average, the top 3
control 93% of the market in an given nation. It doesn’t matter
if the market is defined by “controlled regulation” like in
China, Korea, and Japan or if it is “open market” driven in
markets such as the US, UK, and India. Eventually, only top 3
operators control the majority of the market. There are niches
that others occupy but they are largely irrelevant to the
overall structure and functioning of the mobile market.
Markets such as US and India experienced similar competitive
environment in their hyper-growth phase. For the US, this phase
was in the nineties-mid-2000s while India has been experiencing
the similar environment in the last 3-4 years. In both cases, at
the start there are 5-6 players with no more than 25% market
share but higher than 10% of the mix but gradually the market
forces enable consolidation. Over a period of 18 years, US is
settling into a “top 3” operator market. India’s brutal price
wars are going to trigger the consolidation in the next 12-24
months and will eventually settle into a structure similar to
other markets.
The competitive equilibrium point in the mobile industry seems
to when the market shares of the top 3 are 46%:29%:18%
respectively with the remaining 7% being allocated to the niche
operators. To achieve some semblance of equilibrium in the
market the top operator shouldn’t have more than 50% of the
market share and the number three player shouldn’t have less
than 20%. This helps create enough balance in the market to
derive maximum value for the consumer.
Mobile operators will face some hard choices in developing and
protecting the role they want to play in a given region and the
ecosystem at-large. The strategy they choose will have a direct
impact on the expected EBITDA margins, investment required over
the long-haul, how investors view them, and on the competitive
landscape of the country. Given, the fast pace of globalization,
new rules and trends might emerge over the course of this decade
that further define “communications” and “computing”
as we know it.
Apps and Services
As expected, mobile commerce and payment discussions are
dominating the ecosystem. There is clearly a lot of investment
and marketing dollars being spent. However, the traditional
payments networks are largely intact. The new opportunities are
being built on top of the existing payment platforms with
convenience (Square) and offers and advertising (Google Wallet,
ISIS, Groupon). Beyond payments, mobile is getting ingrained
into every vertical and every facet of our lives – from
healthcare to education, from energy to entertainment, from
communication to socialization. And we are in the early innings
of figuring out the business models, ecosystem leaders, user
behavior, regulatory needs, and the overall impact on society.
Ecosystem Dynamics
It is very
clear that the ecosystem dynamics can change very quickly, one
just can't take the competitive and friendly forces for granted.
In the past, the silos and segments were clearly defined with
little overlap. However, over the course of last couple of
years, players have been migrating and surfing in segments
across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company
wants to capture the mindshare and piece of the consumer’s
pocketbook. The fine line between partners and competitors can
get obliterated in a quarter. Apple is competing with Cisco,
Comcast is going after AT&T’s business, Visa and Verizon want to
be the payment channel of choice, Amazon is gunning for
Microsoft’s enterprise business. One product launch, one
acquisition, can change the game in an instant. And this is
only the beginning.
Mobile is
fundamentally reshaping how we as consumers spend from housing
and healthcare to entertainment and travel, from food and drinks
to communication and transportation. Mobile not only influences
purchase behavior but also post purchase opinions. When the
share button is literally a second away, consumers are willingly
sharing more information than ever before. Mobile is thus
helping close the nirvana gap for brands and advertisers who
seek to connect advertising to actual transactions. The
long-term battle is however for owning the context of the users.
Having the best knowledge about the user to help drive the
transaction is the simply the most valuable currency of
commerce.
Mobile Future Forward
We will be
discussing the global mobile ecosystem – the challenges and the
opportunities at our annual mobile thought-leadership summit –
Mobile Future Forward
- brought to you in partnership with our terrific partners –
Qualcomm, Millennial Media, Real Networks, AT&T Interactive,
Synchronoss Technologies, OpenMarket, Ericsson, and Openwave.
Hope to see you in Seattle on Sept 12th.
Some of
the distinguished guests include:
Abhi Ingle,
VP – Advanced Mobility, AT&T Wireless; Amit Gupta, SVP
and CTO, INQMobile; Bob Gessel, VP/Head of Technology and
Network Strategy, Ericsson; Braxton Woodham, Head of Engineering,
AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin,
SVP - Products and Technology, Comcast; Dale Nitschke,
former President, Target; Danny Bowman, President -
Connected Devices, Sprint Nextel; David Messenger, EVP,
Head - Online/Mobile, American Express; Erik Moreno, SVP,
Fox; Gibu Thomas, SVP - Online/Mobile, Walmart; Glenn
Lurie, President, AT&T Wireless; Hank Skorny, Chief
Strategy Officer, Real Networks; Janet Schijns, VP,
Verizon Wireless; Jason McKenzie, President, HTC-Americas;
Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP,
MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni,
Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken
Wirth, President, Alcatel Lucent Wireless; Kris Rinne,
SVP - Networks, AT&T Wireless; Mark Rolston, Chief
Creative Officer, Frog Design; Matt Oommen, President,
Reliance Communications; Mikael Back, VP of Products and
Portfolio Management, Ericsson; Mike Mulica, President,
Synchronoss Technologies; Paul Palmieri, CEO, Millennial
Media; Prof. Cliff Nass, Human Computer Interaction,
Stanford University; Rob Glaser, Partner, Accel;
Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO,
Sprint; Steve Mollenkopf, EVP and Group President,
Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja
Chandrasekaran, CIO, Timberland; Will Hsu, Chief
Product Officer, AT&T Interactive
More
information at
http://www.mobilefutureforward.com
Your
feedback is always welcome.
Thanks and
have a great 2H 2011.
Chetan
Sharma
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 Aug
2011. The next Global Wireless Market update will be issued
in Jan 2012.
Disclaimer: Some of the companies mentioned in this paper are
our clients.
