Global Mobile Market
Update
http://www.chetansharma.com/GlobalMobileMarketUpdate2012.htm
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State of the Global Mobile Union - 2012
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Total Global Mobile Revenues to hit $1.5 Trillion in 2012,
over 2% of Global GDP
–
Top 10 operators control 42% of the global data mobile revenues
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Mobile Services Revenue exceeded $1 Trillion for the first
time in 2011
–
The number of mobile operators with > $1 Billion in yearly data
revenues will touch 50 in 2012
-
Total Global Mobile Data Revenues went past $300 Billion in
2011
–
Non-messaging data now owns 53% of the global mobile data
revenues
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Mobile Operator Profits have more than doubled over the last
10 years.
–
However, the wealth is not divided evenly. Asia’s share has
tripled at the expense of Europe whose profit share has declined
by 50%
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Total Global Subscriptions to exceed 7 Billion in early 2013
–
China exceeds 1 Billion, India 950 Million. Subscriber growth is
in Asia, Revenue growth is in Asia+North America
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China and India represent 27% of subscriptions but only 12%
of the global service revenues
–
US represents only 6% of the subscriptions but 21% of the global
service revenues, 26% of the data revenues, and 27% of the
global CAPEX
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Mobile Devices are now exceeding traditional computers in
unit sales + revenue
–
70% of the device sales in the US are now smartphones. Device
Replacement cycle is shrinking
-
Samsung and Apple now account for 50% of the smartphone unit
share and 90% of the profit share
–
Difficult environment for other OEMs esp. when ZTE and Huawei
are coming strong from the bottom. It will be difficult for pure
play device OEMs to survive long-term
-
Tablets (iPads) has created a new computing paradigm that is
having a significant impact on commerce, content
consumption, and developer investments
–
Apple will continue to dominate the segment and iOS will be the
leading OS for the segment. Amazon, ZTE, Huawei, to chip away at
the sub-$200 tier.
-
Mobile Broadband (4G) is being deployed at a faster rate
than previous generations, first time data is leading the
charge
–
Over 1.5 Billion broadband connections by 2012
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Global Mobile Apps revenue has completely (and irreversibly)
tilted to off-deck
–
The decline is directly proportional to the increase in
smartphone penetration by region
-
All major markets are consolidating with the top 3 players
at 85% of the market
–
Regulators will have to be more prudent and proactive about
managing competitiveness and growth
-
Mobile data traffic 2x YOY in most markets. Mobile Data will
be 95% of the global mobile traffic by 2015
–
Many countries are facing spectrum exhaust in the next 2-3 years
(in certain markets)
-
Mobile Signaling takes up 2x the resources as Mobile Data
Traffic
–
Signaling traffic is growing faster than the data traffic on
broadband networks
-
Connected device segment is growing at the fastest pace in
the western markets
–
Operators will have to quickly adapt their strategies to stay
relevant in this segment
-
Several multi-billion dollar opportunity segments are
emerging
–
Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile
Games, and Mobile Cloud Computing to name a few
-
Mobile Ecosystem has become very dynamic and unpredictable
–
The 5 Platform Amigos – Apple, Google, Amazon, Microsoft, and
Facebook dominate though the first two have the real
power
-
Mobile Operator Revenue is under pressure from OTT Players
–
OTT Share of the Global Mobile Revenues increased to 4%
-
OTT players forcing operators to up their game
–
Operators are partnering, launching their own OTT apps,
increasing tariffs to manage the margins
-
Intellectual Property has become a key component of
long-term product strategy
–
21% of all patents granted in US are mobile related. Top 20
control 1/3rd of the overall mobile patent pool
-
Mobile Patent Rankings: US – IBM, Microsoft, Nokia. Europe –
Alcatel-Lucent, Nokia, Samsung. Overall – Nokia, Samsung,
Alcatel-Lucent
–
OEMs – Nokia, Samsung, Sony. Service Providers – AT&T, NTT
DoCoMo, Sprint
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In 3-5 years, with few exceptions, if a company is not doing
majority of its digital business on mobile, it is going to
be irrelevant
–
Majority (by a good margin) of the consumer interactions with
brands will be on mobile
-
Mobile has become the single most important digital channel
for engaging consumers and it shows
–
In the US, mobile revenues were > all Ecommerce And > Music,
ISP, Hollywood, and Cable revenues combined
-
We have entered the mobile 3.0 era where “data” is all that
matters and it disrupts the value chains
–
Data will drive majority of the network growth, Contextual data
will drive majority of the VAS growth
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There will be more changes in the next 10 years than in
the previous 100
–
The value chains will keep disrupting every 12-18 months by the
new players and business models. Several verticals are already
getting redefined e.g. retail, health, education, etc.
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 $1.5 Trillion in 2012 with
mobile data representing 28% of the mix. Mobile data services
revenue stood at 33%. Global Mobile Data revenues eclipsed $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%.
By the end of 2011, the global subscriptions
exceeded 6 Billion. The first 1 billion took over 20 years and
this last one took only 15 months. The primary growth drivers
are India and China which are cumulatively adding 75M new subs
every quarter. China became the first country to eclipse the 1
billion mark in March 2012. India is likely to arrive at the
milestone by early 2013.
Smartphones are driving tremendous growth around
the globe. Amongst the major markets, US leads with 69% sales.
The global figure stands at approximately 32%. Some operators
expect 90-95% of their device sales to be smartphones in 2012.
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.
Global Mobile Data Growth
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.
Country average is now at 60%.
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 other 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 $2.50 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 – Changing Landscape
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.
Apple and Samsung are strong on the top. Huawei
and ZTE are coming up strong from the bottom. The middle tier
players will have a tough time going forward.
It will be difficult for pureplay device OEMs to
survive long-term.
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. 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 (Lumia).
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. Given that
the computing is shifting to mobile devices, we can expect some
of the weaker desktop/laptop players will exit the industry.
Majority of the tablet use is in the WiFi mode
because the primary use case is indoors and WiFi gives a better
(and cheaper) user experience. However, of the users who use
cellular, the churn is low. Once operators start to roll out
user-friendly family data plans across multiple devices, we can
expect the cellular activation go higher (e.g. Rogers, Vodafone
Spain) but will still be dominated by WiFi overall.
Mobile VAS and OTT – The Big Picture
–
Voice – declining and under threat from VoIP
–
Messaging – flattening/declining and under threat
from IP messaging
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Access – rising but margins are shrinking fast
–
VAS – declining in proportion to the growth of
smartphones
–
Voice – launching their own VoIP apps e.g.
Bobsled from T-Mobile, partnering with VoIP players e.g. Skype
integration, charging for VoIP apps e.g. TeliaSonera €6/month
–
Messaging – launching their own IP messaging apps
e.g. Huddle from AT&T, partnering with IP messaging players e.g.
Whatsapp partnership
–
Access – Tiering
–
VAS – launch their own VAS apps and industry
vertical apps and services
Managing Mobile Data Traffic and Profits
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.
Mobile Intellectual Property
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The IP tussles are playing out as expected
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Players with strong IP portfolios will be
able to command better negotiating positions, new revenue
streams, competitive positioning over the long-term
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On average mobile companies file patents 1.7
times more in the US vs. Europe
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Mobile Patent Leaders in US: IBM, Microsoft,
Nokia
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Mobile Patent Leaders in Europe:
Alcatel-Lucent, Nokia, Samsung
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Mobile Patent Leaders in Infrastructure:
Samsung, Alcatel-Lucent, Ericsson
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Mobile Patent Leaders in Devices: Nokia,
Samsung, Sony
-
Mobile Patent Leaders in Service Providers:
AT&T, NTT DoCoMo, Sprint
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Top 20 control 1/3rd of the total
mobile communications patent pool
Mobile Competitive Dynamics
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.
Key Industry Micro-Milestones
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Apple captures 70% of mobile device profits – defies
gravity, obliterates competition
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Apple mobile appstore downloads exceed 25 Billion, 100
Million on Mac – can you spell domination
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Samsung ends Nokia’s 14 year reign as the device king –
brutal execution
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Android 300M activations – Juggernaut
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Paypal does $7B in mobile transaction volume
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Square does $5B in commerce transaction volume
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Google > $5B in mobile revenues
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Microsoft revenues from Android > Windows Mobile
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Pandora’s 70% usage is on mobile, Twitter’s 60% of the usage
is on mobile – heading towards a mobile-dominant world
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Facebook Instagram Acquisition $1B – Mobile only acquisition
to beef up mobile strategy
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Angry Birds approaches a billion downloads
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ESPN does 3.1 billion minutes on mobile in 3/12 – Mobile is
where the action is
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Skype traffic over 150 billion minutes – OTT pressure
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KPN messaging volumes decline 15% YOY – OTT pressure
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Mobile Security threats grow 7x in last two years, Android
threats up 3000% – Mobile IS IT
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Cisco BYOD ratio – 70% (up 52% in 2011) - BYOD is creating
new opportunities for vendors
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US data traffic over 130 quadrillion bytes/month in 2011 –
Data traffic 2X YOY, welcome to the yottabyte era
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Fandango sells quarter of its ticket on mobile – commerce is
happening
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Expedia does > $1B in mobile commerce – see above
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Microsoft Nokia Multi-Billion partnership – It takes two to
tango
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Lightsquared fails – Keep your friends close, enemies closer
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Google Motorola $12.5B – IP becomes key to strategy
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Nortel Patent acquisition $4.5B – IP becomes key to strategy
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AT&T/T-Mobile Failure – DOJ/FCC put down the gavel
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40% of Kenya’s GDP comes from mobile money – impact of
mobile is pervasive
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Millennial Media IPO at $2B – first public market validation
of the mobile advertising space
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HP gives up on Palm – Competition forces Corporate
Schizophrenia
What to expect in 2H 2012
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More
Tiering, faster pace of change of plans. More options,
family data plans
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Cost
reduction is as important as revenue generation. More
players will align their value-chains and cost structures
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Facebook
IPO is probably going to be the single biggest event in the
technology industry in the next few months.
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Radios
will start connecting the digital world with the physical
world with significant disruption opportunity
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Mobile
Payment Networks will remain intact for the near future as
the ecosystem largely focuses on building value on top of
the existing exchange platforms
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The
intersection of Social, Location, Identity, and Gaming is
creating new opportunities
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With
connectivity becoming pervasive, mobile will fundamentally
start to alter the legacy infrastructure – retail, health,
education, energy, computing, travel, entertainment
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Significant tablet adoption in the enterprise directly
impacting the traditional computer manufacturers
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Both HTML5
and Apps will continue to grow, the relevancy to any given
application will depend on the reach and economics
requirements. HTML5 is not going to replace Apps.
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Mobile
data growth will double again in 2012. Significant
opportunities in managed and understanding of mobile data
growth
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Regulators
will need to evolve to keep up with the trend to keep their
nation globally competitive
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More IP
scuffles before licensing settlements
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Consolidation of weaker players, more global M&A
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Significant progress in emerging areas like mHealth,
mPayments will come from the developing world while the
western countries get mired in regulatory and legacy mess
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Several
players face challenging times ahead and 2012 will be
critical in their turn around sojourn.
Your feedback is
always welcome.
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 May
2012. The next Global Wireless Data Market update will be issued
in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are
our clients.
