Global Wireless Markets continued to grow rapidly especially in
India and China where the carriers are adding over 9M new subscriptions
every month. India crossed the 300M subscription mark in Aug while
China whizzed past 600M in September, says Chetan Sharma Consulting.
Overall, the global subscriptions
penetration edged past 50%. During the 1H 2008, revenues further tilted
towards data services. The overall global mobile revenues (including
equipment) for the year are likely to reach the 1 Trillion dollar
landmark later this year (enough to bailout an economy or two), with
approximately $800 billion attributed to service revenues. Data
revenues now account for almost 20% of the global service revenues.
For some leading operators, data is now contributing close to 40% of
the revenues however increase in data ARPU is not completely offsetting
the drop in voice ARPU for most operators. From the true and tested SMS
messaging to the new services such as Mobile Advertising, Social
Networking, Commerce, Mobile Wallet, and others, different services
helped in adding billions to the revenues generated for 1H 2008. Japan
remains the envy of the global markets and the nation to study and
learn from w.r.t. new services and applications. The US market expanded
its lead over Japan in mobile data service revenues for the year and is
unlikely to cede ground in the months to come.
Buoyed by the global launch of iPhone, Apple is likely to eclipse
the 10M goal in Q308. Its App-Store launch along with Android's
imminent arrival dominated the news. Other manufacturers also
introduced challengers to iPhone, most notably, Instinct by Samsung on
the Sprint network which has also been quite successful in getting
users to engage in data services.
WiMAX vs. LTE debate took over the EV-DO vs. WCDMA chatter and while
majority of the industry is consolidating around LTE; open-platform
advocates are watching the arrival of WiMAX in the US with great
interest. Google, Sprint, Motorola, TWC, Comcast and others put new
life into the experiment called Clearwire.
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.
- The global mobile markets continue to grow at an explosive pace
reaching 3.6B subscriptions by 1H08 up 9% from EOY 2007 levels and will
likely cross the 4B mark by the end of 2008. Significant growth is
coming from India and China with both countries registering on an
average 9M net adds per month. India and China combined to add
approximately 107M new subscriptions during the first six months of
2008. Overall, the world market is now over the 50% penetration mark.
- US edged past Japan again as the most valuable mobile data market in
service revenue with US adding $15.7B vs. $13.6B for Japan in 1H08
mobile data service revenues. China with $7.8B was ranked number 3. US
registered the highest growth amongst the top 3 with over 18% increase
from EOY 2007 levels followed by China at 9% and Japan at 7%. These top
3 markets account for just under 50% of the mobile global data service
revenues.
- NTT DoCoMo continues to dominate the wireless data
service revenue rankings with over $6.8B in service data revenues for
1H08; however, Q/Q growth is declining. DoCoMo crossed 84% in 3G
penetration and is expected to touch 90% by end of the year.
- DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T,
Sprint Nextel, China Unicom, Softbank, O2 UK, and T-Mobile USA to round
up the top 10 operators by wireless data service revenues. It marks the
first time, T-Mobile USA enters the top 10 list as it went past SK
Telecom. All the top 10 carriers exceeded $1.5B in data revenues for
the first half of 2008.
- For the last couple of years, NTT DoCoMo
has been the only carrier exceeding $10B in yearly mobile data
revenues. In 2008, it is likely to be joined by China Mobile, KDDI,
Verizon Wireless, and ATT in the exclusive 10B club.
- Data
revenues for the top 10 operators increased 10.3% from EOY 2007 and now
account for almost 50% of the global mobile data revenues though their
subscriber share is around 30%. - Most of the major operators
around the world have double digit percentage contribution to their
overall ARPU from data services. Operators like KDDI, DoCoMo, and
Softbank are approaching 40%. 3 UK, O2 UK, Singtel, and 3 Sweden
exceeded 30%.
- In March, India edged past the US to become the
number two wireless market (by subscriptions) in the world. In last two
years alone it has added almost 175M new subscriptions (in comparison
China added 169M and the US market added 39M).
- ATT reported the
highest increase in data ARPU from 2Q07 with 32% growth. Other notable
percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3
Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile
Austria. The biggest drop in percentage terms were registered by the
Indian operators with average data ARPU dropping to $0.65.
- In
terms of absolute dollar amount, NTT DoCoMo and 3 UK lead the pack with
$22 data ARPU. Operators who reported overall ARPU above $60 were 3 UK,
Singtel, Rogers, and 3 Sweden.
- The biggest jump in data revenues
was experienced by the US carriers, the top 3 being ATT, Verizon
Wireless, and T-Mobile USA respectively. SK Telecom, Sprint and O2 UK
experienced declines. (For a complete US Market Update, please see our
Q208 research note).
- In 1H 2008, SMS's vice like grip on data
revenues continued 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
regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their
data coordinates stand at ($22, 39.5%) and ($20.3, 37%) respectively
(please see slide 10 for reference).
- Most of the operators in
developed nations are contemplating future strategies to boost data
revenues such that decline in voice revenues is at least compensated
for. There are very few operators who have experienced increase in
overall ARPUs. Comparing the ARPU for last 2 years, amongst the top
operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK,
Verizon Wireless and ATT experienced increase in both overall and data
ARPU.
- NTT DoCoMo has been at the cutting edge of the mobile data
evolution by creating new markets and exploring new technologies and
social experiments ahead of almost anybody else in the market. We
looked at the data revenue growth at NTT DoCoMo since the introduction
of i-Mode almost 10 years ago (see slide on page 17). During the last 9
years, overall ARPU has declined 33% though data ARPU increased over
1800% and now accounts for almost 40% of DoCoMo's service revenues. The
voice ARPU has declined almost 60%. 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 and
technologies in these markets to get a sense of what's coming.
- 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 66% (or $3) contribution
coming from the data services. Philippines is also one of the most
active messaging nations where users average a message/hr round the
clock.
- Even though China reported approximately $7.8B in data
revenues for 1H08 and the percentage contribution is over 27%, data
ARPU is around $2.3. For India, data ARPU continues to stay below $1
for all major carriers with Reliance experiencing a 50c data ARPU
during Q208.
- China Mobile with 428M (as of Aug 08) remains the #1
carrier in terms of total number of subscriptions followed by Vodafone
at 269M and China Unicom with 171M subscriptions. Telefonica, América
Móvil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France
Telecom) are the next five largest telecom groups in the world. In
terms of individual carriers in a given country, AT&T and Verizon
Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo,
which is at #5 (Verizon will overtake ATT after its Alltel acquisition
goes through later this year). The two Chinese carriers round up the
top two positions and are likely to stay perched at their lookout
vistas for many years to come.
- China Mobile remains the most
valuable telecom operator with over $200B in market cap. It is followed
by Vodafone at around $125B. Telecom groups in mature markets are under
enormous pressure to either come up with a global expansion strategy or
accelerate their existing plans. Carriers in Japan and Korea are the
most under duress.
- As far as 3G is concerned, there were over
350M 3G users (69% of them are WCDMA users vs. EV-DO). Both Japan and
Korea continue to expand their 3G base with both reporting over 80%+
penetration. 3G has picked-up steam in both western Europe and North
America per our forecast in the 2005 cover story article "3G: Hitting
the Mass Market" published in the Wireless World Magazine. Western
Europe and US are at approx. 30% 3G penetration (Italy being the
exception exceeding 40%).
- China and India represent the biggest
opportunities for the Infrastructure providers. China postponed its 3G
decision again and couldn't launch a network for the otherwise wildly
successful 2008 Olympics. India is also going through its 3G spectrum
policy and is likely to resolve some of the contentious issues shortly.
Some of the biggest infrastructure contracts will come from these two
countries that are looking to expand coverage into rural areas.
- Carriers with nationwide 3G networks and good distribution of handsets
are seeing strong uptick in data ARPU. The Japanese and Korean carriers
along with operator 3, Verizon, Sprint Nextel are all seeing benefits
of rolling out their 3G service. Deployment of 3.5G technologies such
as HSDPA and EV-DO Rev A (and B) is also gaining momentum. Networks are
getting deployed and market is being seeded with some of the early
handsets. For 4G, there is a strong momentum behind LTE, proponents of
WiMAX are pushing the technology as a 4G candidate, and though it is
starting to lose its time advantage, all eyes are on the imminent
Clearwire launch.
- In terms of applications, messaging accounts
for the lion-share of data 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 also
captured industry's imagination. Alternate devices with wholesale
cellular agreements are also flooding the market. In Japan, Mobile
Commerce is expected to do much better than the other hot category -
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.
- 1H 2008 saw the demise of the last
standing next-generation MVNO in the US market - Helio, which got sold
to Virgin Mobile at bargain basement prices. In Europe, Blyk continues
to make good progress with its unique mobile advertising-based model.
Asian market is also opening up for MVNOs.
- Nokia eclipsed
100M/quarter unit sale in both the quarters thus far. It has sold over
237M handsets in 2008, more than the next three handset manufacturers
combined. Nokia's global market share edged past 41%. Samsung at 15%,
Motorola with 9.5%, LG with 9.3% and Sony Ericsson with 8% rounded out
the top five. For the year, the industry looks to again eclipse the 1
billion handset mark for 2008.
- While the talk of "Open Access"
and "Open Platform" consumed much of North America, it barely
registered a decibel elsewhere. Several significant events including
700 MHz Auction, Android, and Verizon's "Open Network" initiative
elevated the consternation in the ecosystem. Apple launched its 3G
iPhone while Android's first device is slated to see the light of day
next month courtesy of T-Mobile USA.
- Apple launched its App-Store
with iPhone 3G which has been quite successful though there is
significant clutter to muddle through. The company is likely to
announce soon that it eclipsed its 10M goal in Q308, a full quarter
earlier than the stated target. These days, any new device that gets
launched in the market is looked through the prism of iPhone.
- 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 (see slide 8). For a more detailed
analysis, check out our research paper sponsored by The United Nations
Foundation on "Mobile Services Evolution: 2008-2018." It was presented
at The Rockefeller Foundation Healthcare summit in Bellagio, Italy in
July 08. (Note: The dichotomy between developed and developing nations
is a very simplified concept that has been around for about 50 years.
It is clear that a transformation in the distribution of wealth
worldwide will change the picture in the next 10 years. Countries that
are considered developing in today's definition will become economic
superpowers in 10 years and more dominant than some of the developed
nations, even if they have not caught up then with some in terms of GDP
per capita. However, for purely the purposes of comparison and
illustration, we are using the existing definitions to discuss the
shift in the mobile ecosystem).
- Several operators reported Mobile
Advertising as their key strategic focus for the coming quarters, esp.
China Mobile and Vodafone. Sensing the opportunity to seek new sources
of revenue stream, Nokia and Google are getting active in the space as
well. 2007 saw tremendous M&A activity in both the online and
mobile advertising space and while it slowed down during 2008, it is
likely to pick-up again in 2009 as consolidation looms.