global wireless data market 1h 2008 update - sept 2008 - chetan sharma consulting

8/7/2019 Global Wireless Data Market 1H 2008 Update - Sept 2008 - Chetan Sharma Consulting

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Global Wireless Data Market1H2008 Update

Chetan Sharma Consulting


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Chetan Sharma Consulting, All Rights Reserved, 2008 Sept 20082http://www.chetansharma.com

Global Wireless Data Market 1H 2008 Update

Global Wireless Markets continued to grow rapidly especially in India and China where the carriers are adding over 9Mnew subscriptions every month. India crossed the 300M subscription mark in Aug while China whizzed past 600M in

September. Overall, the global subscriptions penetration edged past 50%. During the 1H 2008, revenues furthertilted towards data services. The overall global mobile revenues (including equipment) for the year are likely toreach 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 servicerevenues.

For some leading operators, data is now contributing close to 40% of the revenues however increase in data ARPU is notcompletely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to thenew 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 globalmarkets and the nation to study and learn from w.r.t. new services and applications. The US market expanded itslead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months tocome.

Buoyed by the global launch of iPhone, Apple is likely to eclipse the 10M goal in Q308. Its App-Store launch along withAndroids 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 engagein data services.

WiMAX vs. LTE debate took over the EV-DO vs. WCDMA chatter and while majority of the industry is consolidatingaround 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 datatrends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy tohyper 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.
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Global Wireless Data Market 1H 2008 Update 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 countriesregistering on an average 9M net adds per month. India and China combined to add approximately 107M new subscriptions duringthe 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 Japanin 1H08 mobile data service revenues. China with $7.8B was ranked number 3. US registered the highest growth amongst the top 3with over 18% increase from EOY 2007 levels followed by China at 9% and Japan at 7%. These top 3 markets account for just under50% 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-MobileUSA to round up the top 10 operators by wireless data service revenues. It marks the first time, T-Mobile USA enters the top 10list 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 islikely 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 datarevenues 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 yearsalone 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 werefrom KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest dropin 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 overallARPU 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 USArespectively. SK Telecom, Sprint and O2 UK experienced declines. (For a complete US Market Update, please see our Q208research note).

In 1H 2008, SMSs vice like grip on data revenues continued to loosen a bit with many carriers seeing an increase in non-SMS datarevenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around50-60%, and Western Europe around 20-40%.
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NTT DoCoMo regained its position vis--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 voicerevenues is at least compensated for. There are very few operators who have experienced increase in overall ARPUs. Comparing theARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATTexperienced 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 andsocial experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since theintroduction of i-Mode almost 10 years ago (see slide on page 17). During the last 9 years, overall ARPU has declined 33% though dataARPU increased over 1800% and now accounts for almost 40% of DoCoMos service revenues. The voice ARPU has declined almost60%. 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 whats 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 oneof 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 ARPUis around $2.3. For India, data ARPU continues to stay below $1 for all major carriers with Reliance experiencing a 50c data ARPUduring Q208.

China Mobile with 428M (as of Aug 08) remains the #1 carrier in terms of total number of subscrptions followed by Vodafone at 269Mand China Unicom with 171M subscriptions. Telefonica, Amrica Mvil, SingTel, Deutsche Telekom (T-Mobile), and Orange (FranceTelecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and VerizonWireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5 (Verizon will overtake ATT after its Alltelacquisition goes through later this year). The two Chinese carriers round up the top two positions and are likely to stay perched attheir 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 oraccelerate 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 continueto expand their 3G base with both reporting over 80%+ penetration. 3G has picked-up steam in both western Europe and NorthAmerica per our forecast in the 2005 cover story article 3G: Hitting the Mass Market published in theWireless World Magazine.Western Europe and US are at approx. 30% 3G penetration (Italy being the exception exceeding 40%).
http://www.chetansharma.com/http://www.chetansharma.com/cover%20story_3G.pdfhttp://www.chetansharma.com/http://www.chetansharma.com/cover%20story_3G.pdfhttp://www.chetansharma.com/


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Global Wireless Data Market 1H 2008 Update China and India represent the biggest opportunities for the Infrastructure providers. China postponed its 3G decision again and

couldnt launch a network for the otherwise wildly successful 2008 Olympics. India is also going through its 3G spectrum poli cy and

is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts will come from these twocountries 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 andKorean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of3.5G technologies such as HSDPA and EV-DO Rev A (and B) is also gaining momentum. Networks are getting deployed and market isbeing seeded with some of the early handsets. For 4G, there is a strong momentum behind LTE, proponents of WiMAX are pushingthe technology as a 4G candidate, and though it is starting to lose its time advantage, all eyes are on the imminent Clearwirelaunch.

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 capturedindustrys imagination. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, MobileCommerce 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 seekefficiencies 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 atbargain basement prices. In Europe, Blyk continues to make good progress with its unique mobile advertising-based model. Asianmarket 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. Nokias global market share edged past 41%. Samsung at 15%, Motorola with 9.5%, LG with9.3% and Sony Ericsson with 8% rounded out the top five. For the year, the industry looks to again eclipse the 1 billion handset markfor 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 Verizons Open Network initiative elevated the consternationin the ecosystem. Apple launched its 3G iPhone while Androids first device is slated to see the light of day next month cour tesy ofT-Mobile USA.


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Apple launched its App-Store with iPhone 3G which has been quite successful though there is significant clutter tomuddle through. The company is likely to announce soon that it eclipsed its 10M goal in Q308, a full quarter earlier thanthe 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 worldaccounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accountingfor 76% of the subscriber base and are likely to increase to 85% by 2018 (see slide 8). For a more detailed analysis, checkout our research paper sponsored by The United Nations Foundation on Mobile Services Evolution: 2008-2018. It waspresented at The Rockefeller Foundation Healthcare summit in Bellagio, Italy in July 08. (Note: The dichotomy betweendeveloped 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 areconsidered developing in todays 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, forpurely the purposes of comparison and illustration, we are using the existing definitions to discuss the shift in themobile ecosystem).

Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile andVodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia and Google are getting active in thespace as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space and while it sloweddown during 2008, it is likely to pick-up again in 2009 as consolidation looms.

Wireless Broadband continues to be a significant growth driver for the industry. We partnered with our good friend VernFotheringham - a true industry entrepreneur and who has been behind many of the industry firsts, to write an exhaustive

treatment of the subject in our upcoming book - Wireless Broadband: Conflict and Convergence being jointly published byIEEE Press and John Wiley (see below). Details forthcoming.

Your feedback is always welcome.

Chetan Sharma

Disclosure: Some of the companies mentioned in this note are ourclients.
http://www.chetansharma.com/http://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/blog/2008/09/28/introducing-wireless-broadband-conflict-and-convergence/http://www.chetansharma.com/blog/2008/09/28/introducing-wireless-broadband-conflict-and-convergence/http://www.amazon.com/dp/0470227621?tag=wirelessdatas-20&camp=211189&creative=373489&linkCode=as1&creativeASIN=0470227621&adid=1QVT71NVDMW2HA8V41FS&&link_code=as3http://www.chetansharma.com/clients.htmhttp://www.chetansharma.com/clients.htmhttp://www.amazon.com/dp/0470227621?tag=wirelessdatas-20&camp=211189&creative=373489&linkCode=as1&creativeASIN=0470227621&adid=1QVT71NVDMW2HA8V41FS&&link_code=as3http://www.chetansharma.com/blog/2008/09/28/introducing-wireless-broadband-conflict-and-convergence/http://www.chetansharma.com/blog/2008/09/28/introducing-wireless-broadband-conflict-and-convergence/http://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/UNF%20-%20Mobile%20Services%20Evolution%20Final.pdfhttp://www.chetansharma.com/


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Mobile Markets: The New World Order

Rank By Subs By Data Revenue

1 China US

2 India Japan

3 US China

4 Russia UK

5 Brazil Italy



Shifts in Mobile Ecosystem


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Wireless Data ARPU of major global carriers (1H 08)



Top 3 nations: Wireless Data Service Revenues



Monthly Net Adds: India vs. China



Mobile subscriber growth in top 3 markets



Top Carriers by Wireless Data Revenues



3G Subscriber Growth



NTT DoCoMo ARPU Trend



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