analysis: global cellular market trends and insight, q3 2011

© Wireless Intelligence 2011

Wireless Intelligence

Analysis: Global cellular market trends and insight, Q3 2011September 2011

© Wireless Intelligence 2011 2

World

Connections (million) Market penetration (%)Global mobile connections to surpass 6 billion by year-end• Total cellular connections for Q2 2011 reached 5.7 billion • Wireless Intelligence forecasts that 6 billion will be surpassed by year-end; the

last billion connections being added over just 16 months• Global growth is being driven by Asia Pacific, which accounts for almost 50%

of total connections

Total operator revenue forecast to hit US$1.1 trillion in 2012• BRIC countries (Brazil, Russia, India and China) will overtake the US in terms of

revenue, generating a combined US$200 billion during 2012• Developing economies driving revenue growth and will represent 40% of

global revenue by 2012• Despite tremendous data usage in some markets, voice services will still

represent 67% of revenue

LTE launches gain momentum• 16 operators launched new or upgraded networks during Q2 2011 and 33

operators during Q3• Six LTE networks deployed in Q2: four in Europe (Telekom Deutschland

Germany, TeliaSonera Latvia and Lithuania and Aero2 Poland) and two in Asia Pacific (Smart Philippines and M1 Singapore)

• 12 LTE networks deployed in Q3 across Australia, Canada, Germany, Korea, Poland, Saudi Arabia, UAE and the US

Quarterly forecast accuracy• Our estimates are replaced during the quarter by the actual results reported

by the operator and regulatory community• The delta between our estimates at the beginning of the quarter and the

actual results for Q1 2011 stood at just -0.49%

20152011

Technology split

2015

CDMA (Family)

LTE

OtherWCDMA (Family)GSM


Africa

Connections (million) Market penetration (%)Q2 2010 Q1 2011 Q2 2011

Number of Connections (million)

Total 494.6 574.8 594.8

Contract 18.9 21.5 22.4

Prepaid 475.6 553.3 572.2

CDMA (Family) 17.1 18.8 18.6

GSM 457.4 521.7 535.2

WCDMA (Family) 20.1 34.3 41.0

Net Additions(million)

Total 16.2 21.9 20.0

Contract 0.7 0.6 0.9

Prepaid 15.3 21.2 19.0

Growth Rate, Sequential (%)

Total 3 4 3

Contract 4 3 4

Prepaid 3 4 3

Growth Rate, Year-on-Year (%)

Total 18 20 20

Contract 20 18 18

Prepaid 18 20 20

Market Penetration (%) 51 59 60

ARPU (US$) 10.02 9.11 9.18

2015

CDMA (Family)

LTEWCDMA (Family)GSM

2011

Technology split

2015


Africa

States seek buyers for former incumbents and reveal plans for new licences

Mandatory SIM registration continues to impact connections growth• Nigeria, Congo and Zimbabwe all suffered connection declines in Q2 2011

linked to the introduction of mandatory SIM registration• Further impacts are expected in Q3 in Nigeria, Ghana and South Africa

Orange leads African M&A activity• Orange is currently negotiating to acquire Congo Chine Telecom from ZTE and

the DRC Congo government• New state privatisation plans were revealed for Guinetel Guinea-Bissau,

SahalCom (Sonitel) Niger, Mtel (NITEL) Nigeria and SierraTel Sierra Leone• Multi-Links Nigeria sale to Helios Towers was announced by Telkom in June

after the proposed sale to rival Visafone collapsed• India’s Essar Group forced to shelve planned purchases of controlling stakes in

Warid Uganda and Warid Congo in June after failing to get regulatory approval• Safaricom and Orange announced plans for a joint tower company in Kenya

while Orange and Emtel Mauritius also revealed tower sharing plans

LTE on radar but focus remains on 3G• 3G launches were announced by Econet Burundi, Africell Sierra Leone, Telsom

Somalia and Cell Z Zambia. • Airtel Kenya, Outremer Mayotte, Warid Uganda, Telecel Zimbabwe and NetOne

Zimbabwe all unveiled plans to launch 3G services• Cell C South Africa launched 42 Mb/s dual-carrier HSPA+ in May and Orange

Kenya launched 21 Mb/s HSPA+ in July• MTN South Africa began LTE trials in July• The Kenyan government revealed plans for a single wholesale LTE network

Plans for additional licences afoot• Algeria and Niger plan to issue long-awaited 3G licences while Cameroon

(two), Mali and Swaziland plan to issue additional licences by year end• Airtel was awarded a licence to enter Rwanda in September following

Rwandatel’s licence being revoked for failing to meet licence obligations

Insight: Plenty of options but buyer beware

The African continent has long attracted the attention of operator groups looking for growth opportunities outside of their established markets. Orange’s recent move to add to its substantial African footprint by gaining control of Congo Chine Telecom is a clear case in point. Bharti Airtel, a more recent entrant lured to Africa through its purchase of Zain’s African portfolio, also appears to remain keen on Africa following its recent successful new licence bid in Rwanda.

With additional licences expected to be issued in Cameroon, Mali, Swaziland, and potentially to new entrants in Algeria and Niger, further opportunities will be available for operator groups to expand their footprints. The less competitive landscape in many of these markets the licences are expected to appeal to operator groups looking to grow. Additionally, a number of governments including Guinea-Bissau, Niger, Nigeria and Sierra Leone are currently looking to sell control of former incumbent operators presenting further potential growth opportunities.

Orange should be familiar with the varied political and economic hazards of navigating the African marketplace. However, the group is reportedly facing the threat that the Senegalese government may renationalise Sonatel, highlighting the potential challenges that operator groups considering expansion into new markets may face. Furthermore, many of the government-controlled former incumbents have fallen into a poor state of operational and economic health. They will require substantial capex and management focus to turnaround. A number of recent examples highlight how operator groups will need to carefully evaluate the potential hazards they could face. Rwandatel’s licence was revoked for failing to meet licence obligations; MTN Guinea briefly had its network seized by the government over a financial dispute; the Ugandan government assumed management control of Uganda Telecom; and Essar Group failed to gain regulatory approval to take control of Warid in Uganda and Congo. However, perhaps the clearest example of how quickly things can go wrong is Multi-Links Nigeria, on which Telkom South Africa spent US$410 million acquiring only to recently exit for just US$10 million. Telkom reportedly blames backing CDMA technology which has fallen out of favour. For operator groups evaluating potential expansion opportunities in Africa it certainly remains a case of ‘buyer beware.’


Americas



Total 532.2 581.7 595.7

Contract 91.7 103.6 107.7

Prepaid 440.5 478.2 488.0

CDMA (Family) 26.4 20.6 18.7

GSM 463.8 499.6 507.2

WCDMA (Family) 33.2 51.7 59.5


Total 12.3 14.8 13.9


Prepaid 8.7 11.2 9.8


Total 2 3 2

Contract 4 4 4

Prepaid 2 2 2


Total 11 12 12

Contract 14 18 17

Prepaid 11 11 11


ARPU (US$) 13.64 13.41 13.43

CDMA (Family)

LTE


2011 2015

Technology split


Americas

Rising smartphone demand drives mobile broadband roll out

Solid subscriber growth continues across the region• Of the 141 operators active at the end of Q2 2011, 133 reported positive

quarterly net additions representing a total of 14 million connections, while the remaining eight operators recorded subscriber losses totalling 960,000

• Brazil saw the highest absolute connections growth for the quarter with 7.0 million net additions; Mexico was a distant second with 1.9 million

• In Q3 we expect this growth pattern to continue, with regional connections increasing by 15 million to 611 million

Regulators move to increase competition as well as security• The delayed implementation of MNP in Argentina is now set to go ahead in

mid-2012, while users in Chile can expect it by year-end 2011• The deadline for SIM registration in El Salvador passed in August 2011• Ecuador plans to introduce SIM registration from April 2012, with all

unregistered SIMs being deactivated by July 2012

More HSPA+ networks launch as operators announce LTE rollout plans• Entel launched a 42.2 Mb/s dual-carrier HSPA+ network in Chile while

Movistar’s (Telefonica) 21 Mb/s HSPA+ network also went live in Ecuador• Panama now has a 21Mb/s HSPA+ network courtesy of Claro (America Movil),

while similar launches by Digicel and Mas Movil (Cable & Wireless) are expected in the coming quarter

• UNE (EPM Telecomunicaciones) in Colombia and BTC in the Bahamas both plan to launch LTE in early 2012

Notable smartphone uptake observed in Brazil• TIM Brasil, the fourth largest operator in the region by connections, reported

that 1.9 million or 54% of the handsets it sold in Q2 were smartphones, up from 536,000 (28%) a year ago

• Subsequently the operator’s overall smartphone penetration level jumped from 12% in Q1 2011 to more than 15% in Q2

Insight: Contract competition hots up as region hits 100% market penetration

The Americas reached a significant milestone in Q2 2011 in becoming the fourth world region (of seven) to reach 100% market penetration, yet the market continues to expand at a double-digit growth rate and was up 12% on the same period in 2010. The main drivers behind this are the large South American markets such as Brazil, where the third-largest operator TIM observed that despite having a penetration level of 112%, the market continued to grow due to “the aggressive stimulus of multiple SIM-Card sales, mostly in the prepaid segment”. At the end of Q2 the operator’s prepaid base was up 26.8% year-on-year, largely on the back of the Infinity Pre plan which accounted for 44 million of its 47.5 million prepay customers, while contract subscribers were up 15.3% over the same period.

Yet TIM is the exception rather than the rule in having a faster-growing prepaid base, as its competitors move to increase their contract segments with market stagnation looming. In Q2, Brazil’s largest operator Vivo’s (Telefonica) “excellent sales performance of postpaid plans” led to a 25.4% year-on-year rise in contract subscribers compared to 11.6% for prepaid, while second-placed Claro recorded a 29.3% jump in contract connections compared to 15.8% for prepaid. Total contract connections in Brazil increased by 21.2% over the same period to 43 million or 19.5% of the total subscriber base.

Operators in Brazil will have been able to observe recent activity in higher-penetration markets in the region, where market saturation has all but eliminated the potential for making market share gains in the prepaid sector. Claro (America Movil) blamed this situation for a subscriber loss in Uruguay (133% penetration) as well as negligible growth in Argentina (131%) during Q2, although as these markets have some of the highest contract bases in the region (27.7% and 27.8% of total respectively), operators are in a good position to offset revenue declines from prepaid losses. In addition, Movistar (Telefonica) in Colombia, Alegro (Telecsa) in Ecuador and Mas Movil (Cable and Wireless) in Panama also cited prepaid competition as the reason for subscriber downturns during the period.


Asia Pacific



Total 2,349.9 2,710.5 2,810.6

Contract 430.8 468.9 481.8

Prepaid 1,919.1 2,241.5 2,328.7

CDMA (Family) 253.7 282.8 292.8

GSM 1,871.5 2,127.5 2,183.1

WCDMA (Family) 205.0 264.5 290.6


Total 115.5 123.7 100.1

Contract 9.7 14.5 12.8

Prepaid 105.8 109.2 87.2


Total 5 5 4

Contract 2 3 3

Prepaid 6 5 4


Total 24 21 20

Contract 10 11 12

Prepaid 27 24 21


ARPU (US$) 11.54 10.16 10.90

CDMA (Family)

LTE

TD-SCDMAOtherWCDMA (Family)

GSM

2011 2015

Technology split


Asia Pacific

3G and LTE continue to rise in the East

Another 100 million subscribers added in the region• Of the 162 operators active in Asia Pacific at the end of Q2 2011, 142 registered

positive quarterly net additions representing a total of 102 million connections, while 17 operators recorded subscriber losses totalling 2.1 million

• Outside of China and India, the highest operator gains were recorded by Telkomsel (2.9 million net additions) and Smartfren (1.9 million) in Indonesia

• The most significant losses in the region were in Pakistan where Warid Telecom (Abu Dhabi) declined by 418,000 connections and in Indonesia where XL (Axiata) lost 387,000

Operators snap up spectrum in South Korea and Australia• In August SK Telecom paid US$924 million for a 20 MHz block of 1800 MHz

spectrum in South Korea, while KT purchased a 10 MHz block of 800 MHz spectrum for US$242 million and LG Uplus received 20 MHz of spectrum in the 2.1 GHz band for US$ 380 million

• The Australian 2300 MHz auction ended with NBN winning 24 of the 40 concessions, while Telstra received 12 licences and vividwireless four

• Auctions in the 700 MHz band are planned for New Zealand in 2012

Tower sharing high on the agenda in India• MTNL plans to share 15 towers with Reliance Communications, two with Bharti

Airtel, five with Vodafone, eight with Idea Cellular and one with Aircel• Also in India, BSNL agreed tower sharing deals with Tata Teleservices, Etisalat

DB, Videocon, Bharti Airtel, Aircel and Reliance Communications• In China, 714,000 3G towers were built in the year to May 2011; China Unicom

built 274,000, China Telecom built 226,000 and China Mobile 214,000

Further LTE launches as mobile broadband ramps up in the region• Telstra’s LTE network went live in Melbourne, Brisbane and Sydney in August• In South Korea, SK Telecom launched LTE in the 800 MHz band while rival LG

Uplus also switched on its LTE network during Q3• We expect a third South Korean operator, KT to follow suit in November

Insight: Operators draw up Wi-Fi hotspot plans to offload data strain

Ever-increasing demand for data services in South Korea has given rise to a pioneering joint venture between the three main operators in the country to roll-out 1,000 new Wi-Fi hotspots, with access provided free of charge to subscribers. Despite the country being one of the most advanced mobile markets in the world, with all three operators expected to have LTE networks by year-end, the operators are keen to offload data consumption on to Wi-Fi where possible to reduce network strain. At the end of Q2 there were 15.4 million smartphones in use in the country (of which SK Telecom has 7.8 million, KT 5.5 million and LG Uplus 2.1 million), equivalent to a penetration rate of 32%, but this figure is expected to rise to around 20 million by the end of 2011 and to 48 million by 2015.

An even more ambitious scheme is underway in Japan, where au (KDDI) is installing more than 100,000 Wi-Fi hotspots for smartphone users. The user experience will be seamless as the operator’s contract subscribers will automatically be connected to one of the Wi-Fi hotspots when in range. au will use its existing WiMAX service to provide the backhaul, offloading data traffic from the cellular network. Japan has some of the highest levels of mobile data consumption in the world, and au along with Softbank Mobile are two of only five operators worldwide whose non-voice revenues are greater than their voice revenues. au, which is expected to launch LTE services next year, has already installed 10,000 of the Wi-Fi access points and expects to complete rollout by mid-2012.

Meanwhile, in India, 11 million users are believed to have ported their mobile numbers since MNP was introduced to the country in late 2010, with many subscribers switching from CDMA to GSM-based networks. Subsequently, the all-GSM operators Idea Cellular, Vodafone and Bharti Airtel have made the biggest net gains, while Reliance Communications, Tata Teleservices and BSNL are said to have recorded the most significant subscriber losses.

In an interesting development in Hong Kong, vendor Huawei has been awarded a contract to roll-out LTE network infrastructure for a 50/50 joint venture between 3 (Hutchison) and PCCW known as ‘Genius’. The joint venture was awarded an LTE licence in January 2009 giving it 30 MHz of frequencies in the 2600 MHz band.


Eastern Europe



Total 496.3 511.3 520.4

Contract 102.1 106.3 107.9

Prepaid 394.3 405.0 412.5

CDMA (Family) 5.8 6.9 7.2

GSM 436.6 432.7 434.7

WCDMA (Family) 53.3 71.0 77.5


Total 6.9 -0.1 9.0

Contract 1.9 -0.1 1.6

Prepaid 5.0 0.1 7.4


Total 1 0 2

Contract 2 0 2

Prepaid 1 0 2


Total 6 4 5

Contract 12 6 6

Prepaid 5 4 5


ARPU (US$) 10.70 10.03 10.59

CDMA (Family)

LTE


2011 2015

Technology split


Eastern Europe

Eastern Europe catching up with the West despite 3G inequalities

Market seasonality is readjusting quarterly growth patterns• In Q1 2011, total connections in the region registered flat growth due to the

closure of MTS Turkmenistan and negative net additions in Romania• In Q2 2011, normal seasonality placed connection growth back on track with

the region adding over 9 million quarterly net additions• Nevertheless, over half (53%) of the total number of mobile operators in the

region recorded negative quarterly net additions in Q2 2011 due to higher levels of market maturity and intensifying competition

Dominant large operator groups are leading regional growth• 87% of total connections in Eastern Europe are controlled by the subsidiaries

of large international operator groups• Russia’s Beeline (VimpelCom) was the fastest growing operator in Eastern

Europe in terms of net additions for the second consecutive quarter, with 2.3 million net additions in Q2 2011

• In Russia, Beeline reached 55.2 million subscribers in Q2 2011, up 9% from a year ago, including 630,000 subscribers acquired from New Telephone Company (NTC)

• Overall, Beeline controlled 17% of Eastern Europe’s cellular connections in the first half of 2011

3G growth is promising yet requires high investment• In Q2 2011, Eastern Europe matched Western Europe in terms of total

connections (520 million each) and market penetration (130% each)• But WCDMA/HSPA represents only 15% of total connections in Eastern Europe,

compared to 42% in Western Europe• 3G potential in the region is highly-dependent on network investments from

large international operator groups• Tier 2 operators in Eastern Europe accounted for only 3% of the region’s

WCDMA/HSPA connections in Q2 2011

Insight: 3G rollouts are steaming ahead

In Azerbaijan, market-leader Azercell and second-placed Bakcell are close to being awarded 3G licenses to compete with Nar Mobile (Azerfon), which launched 3G services in late 2009. The latter has also invested US$65 million to expand its 3G infrastructure and deploy an LTE network by the end of 2011. Initially, the operator will cover Baku with LTE services - including the city’s underground system - under its brands Nar Mobile and Azerfon-Vodafone.

In neighbouring Armenia, Beeline (VimpelCom) has expanded its 3G network in parts of Agarak, Berd, Kajaran, Sisian, Talin and other major cities across the country. Beeline’s 3G network has reached a coverage capacity close to 90% of the population.

In Albania, AMC (OTE) won the country’s second 3G licence in late September, consisting of 2×15 MHz paired spectrum (1935–1950 MHz paired with 2125–2140 MHz) and 5 MHz in the 1905–1910 MHz band for EUR15.1 million. Similarly, in Kyrgyzstan, market-leader Megacom (Alfa Telecom) has acquired a 3G licence for EUR1.5 million and will compete with second placed Beeline (VimpelCom) in the mobile broadband segment.

In Bulgaria and Hungary, both governments are planning to issue a fourth 3G licence to compete with the existing trio of operators in each country. Bulgaria’s regulator, CRC, auctioned two blocks of 15 MHz in the 2 GHz band in early September with results expected in the coming weeks while Hungary’s regulator, NMHH, will conclude its auction of three blocks of spectrum in the 900 MHz band in early December.

Meanwhile, both Telenor Serbia and T-Mobile Hungary launched their respective HSPA+ networks in August. In Eastern Europe, more than half (55%) of the region’s WCDMA/HSPA market is based in Russia and Romania and 60% of the total number of countries each had less than 1 million 3G subscribers in Q2 2011. Considering such trends and a WCDMA/HSPA penetration at 15%, Eastern Europe holds promising 3G growth yet this will require high network investments in often weak economic conditions and price-sensitive prepaid markets.


Western Europe



Total 514.1 525.8 527.6

Contract 239.7 249.8 251.8

Prepaid 274.3 275.5 275.3


GSM 332.8 311.3 302.8

WCDMA (Family) 180.9 213.8 224.1


Total -5.6 2.2 1.8


Prepaid -9.1 -0.1 -0.1


Total -1 0 0

Contract 1 1 1

Prepaid -3 0 0


Total 1 1 3

Contract 7 6 5

Prepaid -4 -3 0


ARPU (US$) 32.92 31.12 31.32

CDMA (Family)

LTE


2011 2015

Technology split


Western Europe

Market saturation is driving rapid user migration to next-gen networks

2G to 3G migration accelerates contract growth• Western Europe has been adding around 3.5 million WCDMA/HSPA

connections every month during the first half of 2011• In 1H11, WCDMA/HSPA connections garnered the vast majority of net

additions — GSM net additions have been declining since Q1 2008• GSM connections now represent 57% of regional total connections in 1H11,

down from 80% in 1H08, which represents a migration of 92 million 2G users to 3G

• Over the same period, prepaid to contract migration accelerated leading to the contract subscriber base in the region jumping from 42% to 47% of total

Market saturation is leading to further acquisition opportunities• In June, Orange announced that it is looking at divesting its minority interests

in Switzerland, Portugal and Austria on the back of intensifying competition• Similarly, Vodafone completed the sale of its stake in France’s SFR to Vivendi• In Italy, third-placed WIND Telecom will become a stronger competitor

following its imminent merger with VimpelCom while Telecom Italia is reportedly considering a bid for 3 Italia (Hutchison)

• Vodafone Greece is reportedly looking to merge with WIND Hellas (Greece) while Deutsche Telekom is interested in acquiring a stake in Belgacom

• In Norway, MVNO Tele2 is completing its acquisition of Network Norway

LTE spectrum auctions have met governments’ targets• In France, Orange, SFR, Bouygues Telecom and Free Mobile have secured LTE

spectrum in the 2.6 GHz band in an auction that raised almost EUR1 billion• In Spain, Telefonica, Orange and Vodafone secured LTE spectrum in the 800

MHz and 2.6 GHz bands in an auction that raised EUR1.65 billion• In Italy, Telecom Italia, Vodafone, VimpelCom’s WIND and Hutchison-owned 3

Italia secured LTE spectrum in the 800 MHz and 2.6 GHz bands in an auction that raised EUR3.95 billion

Insight: Price competition increases in the mobile broadband segment

In Germany, Vodafone – which launched LTE in rural areas in December last year – launched LTE services in Dusseldorf in September and is rolling out its network in Berlin. Vodafone offers LTE-based mobile broadband services at EUR30 per month for 5GB of data allowance, EUR40 for 10GB, EUR50 for 15GB and EUR70 for 30GB. Meanwhile, Deutsche Telekom (DT) has started offering LTE services in Cologne in July and is planning to deploy it to a further 100 cities in the coming months. DT is offering five speed-based data tariffs, ranging from EUR5 per month for 7.2MB/s through to EUR55 for 21.6MB/s and up to its LTE-compatible ‘web’n’walk Connect XXL’ tariff which costs EUR75 for 42.2MB/s. DT’s LTE dongle – branded ‘Telekom Speedstick LTE’ – costs EUR150 without subsidies or EUR5 with subsidies. Finally, O2 Germany aims to launch its LTE network in urban areas by the end of 2012. Under licence obligations, the operator launched LTE in rural areas in June 2011 on its ‘O2 LTE fur Zuhause’ tariff which costs EUR40 per month and includes download speeds of up to 7.2MB/s with a 10GB data allowance, a two year contract and a Huawei LTE router priced at EUR50.

The arrival of LTE networks clearly marks the end of ‘all-you-can-eat’ data plans in Europe with operators launching tiered data plans based on data allowances or download speeds as seen in Germany. Similarly, Belgium’s Mobistar has launched a data ‘bucket’ tariff which allows a single data allowance to be shared across multiple devices and SIM cards. Further pricing initiatives are likely to be replicated in neighbouring markets, notably in Spain where both Telefonica and Vodafone are expected to launch LTE services in the coming months following spectrum acquisition last August.

In France, the existing trio of operators – Orange, SFR and Bouygues Telecom – have launched a series of new tariffs and offers in anticipation of the launch of Iliad’s Free Mobile in early 2012. As a result, existing operators have introduced SIM-only offers, online subscription and more multi-play bundled deals – notably to migrate fixed broadband users to mobile – as well as new brands including Orange’s ‘Sosh’ and Bouygues Telecom’s ‘B&YOU’, which are aimed at addressing the data needs of the ‘emerging Internet generation.’


Middle East



Total 281.3 304.8 314.3

Contract 71.2 77.7 80.8

Prepaid 209.7 226.8 233.0


GSM 242.8 248.0 250.4

WCDMA (Family) 32.1 50.2 57.2


Total 10.3 6.5 9.5


Prepaid 7.9 3.9 6.3


Total 4 2 3

Contract 3 3 4

Prepaid 4 2 3


Total 16 13 12

Contract 13 13 14

Prepaid 17 12 11


ARPU (US$) 15.26 14.76 15.07

CDMA (Family)

LTE


2011 2015

Technology split


Middle East

Prepaid-to-contract migration continues as LTE arrives in Saudi and UAE

Steady subscriber growth across the board, led by Turkey and Iran• Of the 52 operators active at the end of Q2 2011, 48 witnessed positive

quarterly net additions representing a total of 9.5 million connections, while the remaining four operators recorded subscriber losses totalling 50,000

• Turkey saw the highest absolute connections growth, closely followed by Iran; both countries added just over 2 million subscribers in the quarter

• In terms of operators, MCI (TCI) in Iran witnessed the largest subscriber gain in Q2 with 1.2 million net additions; Turkcell (Turkey) was next with 1 million

• We expect a broadly similar level of growth in Q3, with total connections for the region increasing by 9 million to 323 million

Contract growth outstrips prepaid for third quarter running• The number of contract subscribers in the region increased by 4.1% over the

quarter to 81 million, whereas prepaid was up 2.8% on Q1 at 233 million• Zain Saudi Arabia’s contract base jumped from 873,000 to 1.6 million, or from

10.3% to 17.4% of total, on the back of new tariffs and loyalty programmes• Regulatory and reporting changes are affecting the prepaid sector – Cellcom

and Orange (Pelephone) in Israel, Nawras (Qtel) in Oman and Vodafone Turkey have all reported declines in their prepaid base for this reason

Three-way TD-LTE launch in Saudi Arabia; LTE also goes live in UAE• All three of the major operators in Saudi Arabia launched TD-LTE networks in

September, the first implementation of this technology in the region• These networks will provide up to 75Mb/s in the downlink and are powered by

Samsung/Huawei (for Mobily), NSN (for STC) and Huawei (for Zain)• As smartphone penetration in Saudi Arabia is just 11% and due to the lack of

compatible handsets, the majority of early TD-LTE take-up will be data-only• Last week Etisalat launched an LTE network using 700 base stations across

the United Arab Emirates, and offering speeds exceeding 100 Mb/s; it plans to have up to 1,000 LTE base stations by the end of 2011

Insight: Regulator maps out future development of Afghan market

Afghanistan, a market that has the third-lowest penetration in the region and has for the last ten years been affected by war, is in line to witness significant change. In August, the Afghan Telecom Regulatory Authority (ATRA) issued a tender for a single 3G licence which will permit use of spectrum in the 2100 MHz band. Bidding for the licence closed on 1 October 2011 and ATRA plans to announce the winner later in Q4. Whilst there was only one new licence available through the auction, the four existing operators will have the opportunity to upgrade their licences to WCDMA by matching the winning bid, meaning a potential five 3G licence holders by 2012 (including existing CDMA2000 1X operator Afghan Telecom and EV-DO operator Wasel Telecom).

One of the five that we definitely expect to proceed with the upgrade is Roshan (TDCA). In Q2 the operator announced plans to invest up to US$100 million in its home market in financial year 2011-12, including the launch of 3G services with rollout expected to start sometime in Q4 2011 or Q1 2012. Roshan is the largest operator by subscribers in Afghanistan, having grown by 36.8% year-on-year to 5.2 million connections in Q2 2011. We expect the company, which is 51% owned by the Aga Khan Fund for Economic Development, 36.8% by Cable & Wireless and 12.3% by TeliaSonera, to increase this total to 5.7 million by the end of 2011.

Also, in a separate development during Q3, ATRA announced that it was sourcing technical support for launching MNP. The regulator is seeking consultation on all aspects of the process including public consultation, the tender process and technical requirements.

Elsewhere in the region, Israel awarded a 3G licence to MIRS (Altice), with the operator planning to undertake a 3G trial in October ahead of commercial launch in Q1 2012. A second 3G licence was also awarded to Xfone 018 (Marathon Telecom), although when the operator failed to secure financing the licence was passed on to third-placed bidder Select Communications. However, Select was then also disqualified after it too failed to provide the necessary financial guarantees. Thus the licence was next awarded to Golan Communications, although an appeal by Xfone 018 has since led to an injunction against this award.


USA/Canada



Total 323.3 345.7 352.1

Contract 239.1 243.1 244.6

Prepaid 48.5 54.1 55.4

CDMA (Family) 174.2 184.4 187.1

GSM 81.4 64.1 58.1

WCDMA (Family) 53.2 80.5 88.2


Total 4.9 7.8 6.4


Prepaid 0.5 2.4 1.3


Total 2 2 2

Contract 1 0 1

Prepaid 1 5 2


Total 6 9 9

Contract 3 2 2

Prepaid 23 13 14


ARPU (US$) 49.79 49.51 49.83

CDMA (Family)

LTE


2011 2015

Technology split


USA/Canada

Prepaid and wholesale services are fuelling connections growth

North America is approaching new milestones…• Total cellular connections in the region reached 350 million in the first half of

the year (1H11) and 10 million net additions are expected to be added in the current quarter (Q3 2011)

• These milestones have been supported by growth in the prepaid segment in the US which has recorded 3.5 million net additions over 1H11, almost twice that of contract net additions

• In both Canada and the US, prepaid connections (as a share of total connections) have increased by 1 percentage point between Q2 2010-11 to represent 21% and 15% respectively

…helped by prepaid and wholesale growth• Tier 2 operators’ market share has increased by 2 percentage point between

1H10-11 to represent 11% of total connections in the US• Clearwire’s market share has reached 2.3% of the US market in 1H11 driven by

uptake of its WiMAX wholesale services• Clearwire’s wholesale subscribers’ network usage increased by 42% between

Q1-Q2 2011, driven primarily by growth in smartphone usage which increased by 74% over the same period

• Similarly, both MVNO and prepaid subscribers have increased by 2% at AT&T between Q1-Q2 2011 to represent 14% and 8% of its total connections respectively (excluding embedded devices)

Contract services remain the largest revenue contributor• Blended ARPU has remained stable year-on-year in the region at US$50• Higher seasonality in Q2 2011 has led to a slight quarterly increase in blended

ARPU in Canada (1.5%) and the US (0.5%)• In the region, contract ARPU (US$59) is still twice as high as prepaid ARPU

(US$28)• Contract ARPU grew by 1.1% between Q1-Q2 2011 in the region, helped by a

rapid adoption of mobile Internet services and smartphone devices

Insight: North American operators leading global LTE rollouts

In July 2011, Rogers Wireless commercially launched its LTE network in Canada followed by Bell Mobility and AT&T in September, switching on its LTE network in five cities in the US.

Rogers Wireless is offering its LTE/HSPA+ ‘Rocket’ dongle in Ottawa, Toronto and Montreal for CAD 80 with subsidies or CAD 170 without subsidies, along with monthly tiered data plans at CAD 45 for 1.5GB, CAD 60 for 3GB, CAD 75 for 6GB and CAD 90 for 9GB. The operator is looking to expand its LTE network coverage to 21 markets in Canada by the end of 2012. In contrast, Bell Mobility launched its LTE network in Toronto, Mississauga, Hamilton, Kitchener-Waterloo and Guelph. The operator’s LTE/HSPA+ ‘Turbo’ dongle is similarly priced at CAD 60 with subsidies and CAD 200 without while its monthly tiered data plans are aligned with Rogers’ tariffs. In the meantime, third-placed Telus Mobility is expected to launch its LTE network in early 2012. In Canada, the expansion of LTE networks to more rural areas depends on the auction of 700 MHz spectrum planned for 2012.

While Canadian operators have launched LTE at 2100 MHz, AT&T and Verizon Wireless’ networks are running on 700 MHz bands. AT&T’s LTE/HSPA+ dongle – branded ‘USBConnect Momentum 4G’ – is priced at US$50 with subsidies and US$250 without, along with a 5GB data plan at US$50 per month and US$10 for any extra gigabytes. AT&T’s LTE network has reportedly been launched in five cities: Dallas-Fort Worth, San Antonio, Houston, Atlanta and Chicago. In contrast, Verizon Wireless has expanded its reach to 117 cities covering 160 million inhabitants compared to the initial 38 cities covered by its LTE network when it launched in December 2010. Furthermore, AT&T announced that its LTE network will match Verizon Wireless’ LTE network within two to three years, starting with 15 metropolitan areas covering around 70 million Americans by the end of 2011.

In the US, we estimate that LTE connections crossed the 2 million mark in Q2 2011 and will hit the 5 million connections milestone by the end of the year. Overall, North America represented 84% of global LTE connections in Q3 2011.


About Wireless IntelligenceWireless Intelligence is the definitive source of mobile operator data, analysis and forecasts, delivering the most accurate and complete set of industry metrics available. Relied on by a customer base of over 700 of the world’s mobile operators, device vendors, equipment manufacturers and leading financial and consultancy firms, the data set is the most scrutinised in the industry. With over 5 million individual data points – updated daily – the service provides coverage of the performance of all 940 operators and 700 MVNOs across 2,200 networks, 55 groups and 225 countries worldwide.

Whilst every care is taken to ensure the accuracy of the information contained in this material, the facts, estimates and opinions stated are based on information and sources which, while we believe them to be reliable, are not guaranteed. In particular, it should not be relied upon as the sole source of reference in relation to the subject matter. No liability can be accepted by Wireless Intelligence, its directors or employees for any loss occasioned to any person or entity acting or failing to act as a result of anything contained in or omitted from the content of this material, or our conclusions as stated. The findings are Wireless Intelligence’s current opinions; they are subject to change without notice. The views expressed may not be the same as those of the GSM Association. Wireless Intelligence has no obligation to update or amend the research or to let anyone know if our opinions change materially.

© Wireless Intelligence 2011. Unauthorised reproduction prohibited.

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Joss Gillet Senior Analyst

Will CroftAnalyst

Jon GrovesAnalyst

Calum DewarAnalyst

analysis: global cellular market trends and insight, q3 2011

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