G20 special COM March 29, 2009Posted by chetan in : US Wireless Market , add a comment
at London Calling, being hosted by Andrew Grill. Also, check out his blog for great mobile advertising insights and analysis.
Understanding the wireless opportunities in the world’s top two markets - China and India March 23, 2009Posted by chetan in : BRIC, CTIA, Carriers, IP, IP Strategy, Indian Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 3 comments
The first time I spoke on the topic of Opportunities in the BRIC Mobile Markets in a conference setting was back in the summer of 2006 in Moscow at the inaugural Interop conference. At the time, BRIC mobile markets were just emerging to be a big force. Net adds in the four countries amounted to 159M in 2005, in 2008, just India and China exceeded 212M. In the first two months of this year, India alone has added over 28M subscriptions. We were amongst the first ones to forecast this tremendous growth that was going to shake up the global mobile markets.
We summarized our observations in the special report for the Wireless World magazine.
Fast forward 3 years. I am putting together another presentation on the subject focused on India and China and the mobile opportunities in these markets. Interesting enough, some of the basics remain the same, and they have more to do with Business 101 than anything else.
The lure of a billion subscribers is quite tempting but these markets are not for the faint-hearted. If you go in without understanding the markets and how business is done, you will be spit out of the market in no time. The fate is similar for big and powerful players like Vodafone to small startups you may have never heard from. Companies like Real Networks who have had success worldwide learned the hard way that these markets are no walk in the park.
Here are some of the factors, IMHO, that any company needs to keep in mind before spending too much energy in these markets. They are:
Understand the market by spending time on the ground: Many a times, companies think they can enter the market from a distance, parachute some executives, and things will fall in place. Rarely are things that simple. One must spend time in the markets with potential customers, suppliers, partners, analysts, and others to get a “real” grip of the market.
Perseverance: The customers in India and China can wear you down and if you have the enough strength to last long, you are likely to be rewarded. That’s one of the reasons, even some of the stronger players didn’t succeed but smaller players like Venturi Wireless (Disclosure: VW is a client of ours) have done well with carriers in these markets.
Build Relationships: Relationships and trust matters more in Asia than in the western markets. If you have spent enough time building relationships with key companies, suppliers, individuals, it might take a long time, but in the end, that’s are what is likely to pay off.
IP Protection: IP has a different meaning in these markets. It is not enough to just file patents, technology must also be protected or else the probability of it being copied are high.
Hire local: To be successful, it is rare that you can manage and operate from afar. It is not only inefficient, it is also a risky proposition. You have to be close to the customer. Hiring local talent who understands how business is done and when “yes” actually means “yes” is critically important.
I will be discussing these and other areas in my talk at the BRIC Mobile Markets conference at CTIA on 31st March.
Business Week article: Prepaid Wireless Takes Off March 20, 2009Posted by chetan in : US Wireless Market , 3 comments
I had a chance to talk to Olga Kharif at Business Week about the US Wireless Market. Article below.
We first noted the trend to prepaid in the Q308 update and then expanded on the impact of the recession on the wireless industry in the Q408 and year-end update. Overall the picture is still murky since this time the fortunes are inextricably tied to the consumer sentiment and the economy which remains fickle like the Seattle weather. We will have a better sense of the direction after Q109 results are announced.
TELECOMMUNICATIONS March 20, 2009, 12:01AM EST
Consumers are abandoning traditional subscription plans, which may curb growth for AT&T, Verizon Wireless, Sprint, and T-Mobile
By Olga Kharif
It looked, for a while, like the wireless industry might shrug off the worst of the recession. AT&T (T), the biggest U.S. phone company, in January reported a respectable 13.2% increase in fourth-quarter wireless sales, fueled by strong subscriber gains. Things were looking up this year, too. Surveys showed consumers would rather reduce purchases even of food and clothing before ditching cell phones.
It was nice while it lasted. Fresh survey data show that U.S. consumers are rapidly switching to cheaper calling plans, often choosing so-called prepaid packages that give carriers smaller, less predictable revenue streams.
On Mar. 19, Washington think tank New Millennium Research Council (NMRC) released results of a survey showing that 17% of Americans have already switched from contract-based plans to cheaper prepaid services in the past six months due to concerns about their jobs and the recession. Those sticking with contracts are migrating to cheaper plans and cutting such extras as texting and e-mail. “Millions of Americans are on the verge of discontinuing expensive cell-phone plans,” says Graham Hueber, a senior researcher at the Opinion Research Center, which conducted the study commissioned by the NMRC.
FEWER MINUTES, LESS TEXTING
Other evidence also suggests consumers are taking a closer look at their wireless bills. Of 2,151 U.S. cell-phone users surveyed online by JupiterResearch in November, one-third were considering cutting back on wireless spending and the number of minutes and texts they use. In February, Sprint Nextel (S) indicated that “economic uncertainty” was partly to blame for a sales decline and customer losses in the fourth quarter.
One maker of air cards, Sierra Wireless (SW), announced on Jan. 29 it would lay off 10% of its workforce amid a drop in fourth-quarter revenue. “We are going to see more and more of this in the U.S. and the rest of the world,” says Carrie Pawsey, senior analyst at researcher Ovum.
Of course, some carriers are faring better than others. “Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company,” AT&T Chief Executive Randall Stephenson said during the company’s January earnings call. AT&T wouldn’t say whether it’s seeing an impact from the worsening economy now.
AND FEWER DATA CARDS, TOO
But consumer cutbacks are sure to catch up with carriers in the coming months, and those reductions could result in slower revenue and customer growth. Of U.S. consumers who have wireless contracts, almost 40%, or 60.3 million, are likely to curtail cell-phone spending to save money if the economy worsens in the next six months, according to the NMRC survey. Some 41% of survey respondents are considering paring back on extras like text messaging. Many already are scaling back on data cards for computers, which, according to wireless industry consultant Chetan Sharma, contribute about 12% of carriers’ data revenue.
Even smartphone users, typically among the most profitable customers, may soon trim usage. As professionals in finance and other industries continue to lose jobs, Sharma estimates that 10% to 20% of the people who own these souped-up, Web-surfing phones may downsize plans this year. Smartphone users typically pay $70 to $200 a month for wireless service. As they reduce spending, U.S. wireless data revenue may grow only 15% this year, vs. 38% in 2008, Sharma estimates.
Carriers that specialize in prepaid calling may be among the few beneficiaries of cutbacks. Now, only about 15% of Americans use prepaid wireless plans, which can cost 50% to 75% less than contract-based plans. In contrast, 68% of Britons already use prepaid plans. “There’s clearly a lot of additional movement that could take place,” says Allen Hepner, a scholar at the NMRC. “Thanks to the recession, the U.S. marketplace is undergoing fundamental changes.” Indeed, prepaid may grow to 20% of the market by yearend, Sharma estimates. In the fourth quarter, prepaid customers accounted for 57% of new subscribers at T-Mobile USA, up from 23% a year earlier.
Some consumers are leaving the four largest carriers—AT&T, Verizon Wireless, Sprint, and T-Mobile—for smaller, prepaid carriers. In the fourth quarter, MetroPCS (PCS) saw net subscriber additions surge 74%, to 519,519, from a year earlier. In the same quarter, Sprint Nextel lost 1.3 million customers, most of them postpaid. Sprint executives are hopeful that the industry will nevertheless fare better than other areas of the economy. “We believe wireless has become so important in people’s lives, we won’t see as much impact as other industries.”
Providers of prepaid calling, typically considered the domain of younger callers or those with bad credit, are taking steps to make their plans more alluring by adding features and better phones. Such services as MetroPCS and Leap (LEAP) are available in more markets. On Mar. 9, Leap expanded into Philadelphia. Nowadays, users can purchase not only voice but also data plans that permit texting and e-mail.
And prepaid phones have turned from clunky to cool. On Mar. 10, MetroPCS introduced Research In Motion’s (RIMM) BlackBerry Curve 8330 smartphone, which features a Qwerty keyboard and rich multimedia capabilities, in many of its markets. For only $50 a month, without a contract, users of the device can talk, text, browse the Web, and send multimedia messages and e-mail. Steps like that are helping foster loyalty. Leap’s monthly subscriber turnover declined to 3.8% in the fourth quarter, from 4.2% a year earlier.
DEVELOPING WAR IN PRICE CUTTING?
Contract carriers are responding by updating and rolling out new prepaid plans and lowering prices. This year, T-Mobile USA began offering a $50-a-month unlimited voice plan to longtime subscribers to prevent them from leaving.
But the recent flurry of cheaper, unlimited plans from T-Mobile, Boost Mobile, Alltel, and Zer01 Mobile raises a red flag for Sanford C. Bernstein analyst Craig Moffett. “As growth slows, pricing [war] risk rises,” he wrote in a recent report. As more carriers start offering unlimited voice calling and data plans, they increasingly will have to compete on price.
The hope for some within the industry is that when economic prospects improve, “people will go back to postpaid” calling plans, Sharma says. But the more attractive prepaid plans become, the harder they will be to shake.
Kharif is a senior writer for BusinessWeek.com in Portland, Ore.
NY Times: Apple Shows Off Next Version of iPhone Software March 17, 2009Posted by chetan in : US Wireless Market , add a comment
I had a chance to talk to Brad Stone of the NY Times to discuss Apple and the new iPhone OS 3.0. Article below.
March 17, 2009, 2:12 PM
By BRAD STONE
CUPERTINO, Calif. — In a shot across the bow of other mobile phone makers that are rushing to emulate aspects of its popular iPhone, Apple on Tuesday previewed some features that are due out in the next version of the phone’s software.
IPhone OS 3.0, as Apple calls it, will allow developers to create multiplayer games that work over a local wireless connection, better integrate the maps that Apple and Google have developed for the device, and “push” messages to users through their programs.
That last improvement could unleash a new wave of creativity on the iPhone. Companies like ESPN.com can send score updates to sports fans, and instant messaging can now become far more practical on the device. Programs can solicit the attention of users with either a pinging sound or a text message. Apple said it was late developing such “push notifications” because of the challenge of preserving battery life and processing power.
Apple said the new operating system would be available to current iPhone users at no charge sometime this summer. It will sell for $9.95 to owners of the iPod Touch.
The new software will also give developers new ways to make money on the device, allowing them to sell monthly subscriptions, new levels in a game or items in an online store without asking users to leave the application. So for example a seller of electronic books on the iPhone can sell digital texts right within its application, instead of directing iPhone users to their Web sites.
Representatives of the game developer Ngmoco were at Apple’s event and demonstrated how players of its virtual pet game can buy clothes for their digital animals, and how users of its shoot-em-up games can pay small amounts of money to upgrade their arsenals.
Purchases are tied into the iTunes store, where users have already stored their credit card information.
Scott Forstall, an Apple senior vice president, added that developers who make free applications available on the iPhone will not be able to later charge within their program, saying that “free apps remain free.”
Apple demonstrated a long-awaited “cut, copy and paste” function, so users can select a piece of information in one program — say, a FedEx tracking number in an e-mail message — and then paste it elsewhere — on FedEx’s site in the Web browser, for example. Other mobile phone platforms, like Microsoft’s Windows Mobile, have long had their own versions of that feature.
Apple also said it was adding support for MMS, a way to send and receive multimedia files like photos and audio files over the mobile phone network, and is extending Spotlight, a feature of its desktop operating system that allows users to conduct searches through all information on the device.
At a similar event last March, Apple first introduced the App Store, which has become a significant source of revenue for Apple and the central focus of its advertising for the iPhone. More than 25,000 applications have been created for the device, and they have been downloaded more than 800 million times over the last eight months.
But the iPhone itself could use a boost. Though Apple exceeded its public sales goals for the device, it sold 6.9 million phones during its fall quarter, then only 4.4 million units over the holiday months.
Many Apple watchers believe the company is preparing to unveil new hardware updates to the iPhone over the summer, and they speculate that they might include a less expensive version.
“The numbers indicate there is some leveling off of excitement,” said Chetan Sharma, an independent wireless industry analyst. “Sometime later this year they have to introduce something different or the competition from the Palm Pre, Google’s Android, RIM or other device makers will be significant.”US Wireless Market , add a comment
As usual good set of posts to read. Vanessa at VisionMobile does a good job assimilating the best readings of the week. Our post on “What’s your carrier strategy?” gets an honorable mention
What’s your carrier strategy? Go Global or Go Small? March 13, 2009Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, European Wireless Market, Japan Wireless Market, Mergers and Acquisitions, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 7 comments
I work with a ton of mobile startups and entrepreneurs and one of the questions that we address is invariably the carrier strategy. How do you decide which carriers to pursue and if you go for smaller operators or go for the big ones?
There are two missions that a startup needs to have - traction and revenue. You need to have both. One can argue that one implies the other but the question is how much traction and how much revenue. If you look at the global mobile services revenue breakup, over 50% of the revenue comes from just 10 operators, that is staggering. Out of thousands of operators worldwide, only 10 players control more than 51% of the revenue base. If you add another 10 carriers, the share jumps to 62%. (we will have more details in our upcoming Global Mobile Market update for 2008)
So, clearly, by focusing on one or more of the top 10 or top 20 can pay off big because the reach offered is tremendous (of course, not every product requires direct carrier involvement and approval). If the product is good, unique, IP protected, there is a good chance you might one of the big ones to endorse and off you go.
But, then one needs to wonder, what if, after all the focus and energy, the contract doesn’t pan out for whatever reason, will the company have the resources to outlast the approval process? Many companies have gone under, CEOs have lost their hair and some sanity waiting for the approval. It is tough on the other side too as the carriers are inundated with thousands of requests and only 1-2 persons to manage it. Appstore 2.0 is going to change that a bit but the issues are still there (more on this in an another post).
However, there is another strategy that can work quite well before you got to the big guys and that is to pick and choose smaller carriers and work with them to get the kinks out from the s/w. Smaller carriers are nimble and hungry for new stuff and they can decide quickly. Companies such as Ontela and Mobile Posse have pursued this strategy to great effect. Both these startups worked closely with some of the smaller regional and local carriers to trial and then launch. Once the momentum was built, they got traction with the big boys more quickly. Since, the market had already tested the products, the big players didn’t have to invest time and effort in sizing the opportunity or the technology and worked out to be a win-win for all.
Finally, there is a market question. Sometimes a given market is not ready for a technology so you have to look elsewhere, whether it is trailblazing markets like Japan and Korea or developing markets like India and China.
So, the answer to the carrier strategy isn’t black and white, it depends on the product, resources you have at your disposal, and the strategy you can pursue to gain traction AND revenues. Getting only trials might make you feel good but won’t get you the necessary revenues and working only with smaller players might get you some early revenues but not the hockey stick growth that your spreadsheets show. It might take a mixture of strategies to figure out what works best for a given startup or for a given technology and where.US Wireless Market , 1 comment so far
Earlier this week I talked to John Boudreau of Mercury News on the impact mobile devices are having on our lives and how the ecosystem is evolving. Some excerpts.
New apps are changing how people use cell phones
Posted: 03/13/2009 12:00:00 PM PDT
They tell us where to eat, how to find friends, when to make a left turn.
Oh, and they can also make a phone call.
An explosive proliferation of software applications — and easy ways to get them, most notably through Apple’s App Store — is changing peoples’ relationships with mobile phones. The always-connected era is dawning. The cell phone is becoming more a companion than merely a means of one-on-one conversation.
“I can’t live without it,” said James London, a 19-year-old De Anza College freshman, cradling his iPhone. “It’s like water or food.”
Though Apple was the first company to create an easy and orderly way for developers around the country to sell smart-phone software, the rest of the industry is trying to catch up.
All the major mobile-phone operating systems — Research In Motion, Windows Mobile, Palm, Symbian and Google’s Android — are gearing up their own online application stores. Independent app sites are also popping up, offering unauthorized software for the iPhone.
Soon, nearly every imaginable function of the office and home entertainment center will be delivered to the computers that fit our palms.
“I’m a big believer that the mobile phone will become the remote control of our lives,” said Chetan Sharma, an independent wireless industry analyst. “Anything that we touch and see and feel, and whomever we communicate with — we will control that with our mobile phones.”
Though the recession is slowing sales of so-called smart-phones, futurists view app-packed mobile devices as the next tech tsunami to hit society and fundamentally change how people navigate life.
“It’s a new category of activity,” said veteran valley forecaster Paul Saffo. “Voice (functions) are an afterthought.”
Already people are using their smart-phones to locate friends at nearby bars and restaurants or find a service station with cheap gas. They stream TV to their phones, update Facebook pages on-the-go and play sophisticated games.
The Shazam program allows people to instantly identify a song and artist by holding the iPhone up to, say, a radio. The Trapster program for iPhone and BlackBerry uses crowd-sourcing to avoid speeding tickets — the phone signals a warning when entering ticket zones. The Android Cab4me app helps hail a cab.
“It’s my lifeline,” said Grace Redmond, a 20-year-old San Jose State University student. “My iPhone was broken today. It ruined my day.”
Redmond, who grew up in Virginia, relies on GPS-enabled programs to help her get around, and avoid getting lost in the Bay Area. She found the Urbanspoon app indispensable during a recent vacation to Seattle. “My phone told me where to eat,” she said.
Giovanni Valasco, a 24-year-old Campbell resident, treats his iPhone like a pocket Yellow Pages by using the famous business listing’s program. “I use it all the time.”
Freshman London worries about an affliction common to BlackBerry users: sore neck. “I’m constantly looking down at my iPhone — every 10 minutes.”
Because their smart-phone is with them everywhere they go, people develop far closer attachments to the devices than to their home PCs or laptops, said B.J. Fogg, a Stanford University researcher author of “Persuasive Technology: Using Computers to Change What We Think and Do.”
Sharma said people using smart-phones spend 70 percent of their time doing things other than talking.
“They have become devices people use for productivity and leisure,” he said. “They save time and they kill time.”
Last year, some 34 million smart-phones were sold in the United States, about 20 percent of the nation’s overall mobile phone market of some 173 million units, according to research firm IDC. But by 2013, it predicts nearly half the mobile phones purchased in the United States will be smart-phones.
“The sea-change is starting to happen,” said IDC analyst Sean Ryan.
But there are barriers to smart-phone ubiquity. Perhaps the biggest challenge is the cost of data plans. Apple’s U.S. iPhone partner AT&T, for instance, offers a basic data and voice plan for about $80 a month, with taxes. That’s almost $1,000 a year, which can be a hard sell to the general population, particularly in tough economic times.
“The prices of service plans are big impediments for many people,” said Shaw Wu, analyst with Kaufman Brothers. “It’s not cheap.”
But service providers have a lot at stake — analyst Sharma said they pulled in $34 billion last year in data charges — and are likely to compete fiercely, which could push down costs and expand consumer options.
Hints of the future can be found at Apple’s App Store, which now offers some 27,000 iPhone applications, according to 148Apps.com, a San Francisco-based Web site that reviews iPhone apps. Some of those are given away for free, while many are sold for less than $3. As of mid-January, Apple said there had been 500 million downloads from the App Store, which opened in July.
“It’s like a concierge. When you have a problem, it can help solve it for you,” said Stanford’s Fogg. “Nothing is as close to us all the time — not even your spouse or partner.”
Carnival over at Ubiquitous Thoughts March 10, 2009Posted by chetan in : US Wireless Market , add a comment US Wireless Market , add a comment
US will push for more spending by countries like China, India and G7 who haven’t done enough in terms of boosting internal demand. While new rules of managing International Trade and Financial markets are needed, now is not the time to be tinkering with the same or putting too much energy, focus should be on getting the global economy out of this mess.
Globalized Recession March 8, 2009Posted by chetan in : US Wireless Market , 3 comments
One thing we are sure about this recession is where it started and how it started. The defaulting and fraud mortgages in the US sowed the seeds of this massive recession. What’s not clear is how deep and wide the impact will be. What’s complicating things is the highly globalized and interconnected world economy.
Some folks had suggested that the growth in developing markets like China and India will help cushion the impact of this recession on global markets. World Bank now says that the Global Economy will actually shrink in 2009.
The World Bank also warned that global trade would shrink for the first time since 1982, and that the decline would be the biggest since the 1930s.
“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” said Robert B. Zoellick, the World Bank’s president. “We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”
The impact of the global slowdown varies widely among countries, and the drop in prices for oil and other commodities has created both winners and losers, But as a whole, the bank said, the so-called emerging-market countries face a combined financing gap of at least $270 billion and as much as $700 billion over the next year or two.
China’s economic growth will plunge in 2009. The United States is in severe recession. For the world’s economy to recover, these two economic powerhouses must cooperate and become the engine for the Group of 20. Without a strong G-2, the G-20 will disappoint.
We also know that Eastern Europe in the brink. EU countries are obviously looking out for their own countries and backlash from the populace and hence rejected the pleas for help.
While each country or at least the top 10 global economies are watching their own back, by ignoring the globalized economy or the world economy, we are risking the impact from unintended consequences. The longer this recession lasts, the more countries will go in their respective shells to protect jobs and economy at home. But the economies are so interconnected that ripples travel fast. Chinese economy is dependent on exports. With US retailers falling off the cliff one by one, the relative impact on China is going to be massive. Similarly, India’s IT industry will be impacted as the projects start to disappear and/or shrink in size and scope. Similarly, Germany, Japan, France, Korea, and others are feeling the pinch already.
So, for recovery, the world shouldn’t just look towards US. A more calibrated and coordinated effort is needed. The upcoming G20 summit will be a good place to start that discussion.
3G Delays in India March 6, 2009Posted by chetan in : US Wireless Market , 1 comment so far
India is doing a China when it comes to 3G. Government can’t get its act together and get the license auction scheduled. It has been postponed for the umpteenth time. Not that market is dying for 3G, but some of the operators need more capacity in certain zones + the whole market is in a state of limbo. With the general election looming in April/May, it is quite likely that the auction will pushed to mid-year and the actual network deployment well into 2010. Infrastructure providers who have been counting on some of the really lucrative contracts will have to ride this out.
After, many years of delay, China finally got the spectrum thing in place and how the three operators will roll out 3G. India will lag behind China in 3G penetration for several years.
CTIA: BRIC - Emerging Mobile Markets March 4, 2009Posted by chetan in : US Wireless Market , add a comment
31st is going to be a busy day. After the User Generated workshop, I will jump back into the BRIC conference being hosted by my two good friends Ajit Jaokar and Larry Lockhart and the agenda for the day is shaping up really nicely.
I am doing a couple of sessions in the afternoon.
1:00 - 1:30 Understanding The Wireless Opportunities In the World’s Top Two Markets: CHINA and INDIA
This session will look into the ecosystem of the Indian and Chinese wireless market, with introduction to the value chain, the major players, key challenges and opportunities. We will dive into the numbers and stats in detail and discuss what they mean as well as where they are headed. This session will also address the application and service areas that are gaining traction and the to-do list for companies trying to venture into the market.
1:50 - 2:30: SuperSession: Operators And Experts, An Open Discussion We bring together the top mobile carriers and experts together in an open discussion format.Subjects covered include infrastructure plans, increasing ARPU, operational guidelines, government regulations, acquisitions, reducing churn, the differences between developed and emerging market consumers, handsets, lowering operational cost, customer service, competition challenges, creating a positive customer experience, attracting new subscribers/marketing, educating subscribers to new services and more. We will open the floor to your questions. Led By: Chetan Sharma N.V. Subba Rao CEO & President - Tanla Mobile Inc - Former COO of Bharti Airtel Ltd (Bio)
Brasil Telecom - TBA Others TBA
If you having looking to invest in the BRIC markets, this event is for you. Insights you will gain in networking and form the sessions will worth more than a trip eastboundUS Wireless Market , add a comment
I will be participating in a workshop on how to make money from user-generated content. Hope to see you some of you there.
9:00 am - 12:00 pm | Tuesday, March 31
Workshop 02 | Room S230
Monetizing User-Generated Content: A Symbiotic Approach
Successful monetization strategies around user-generated content need to follow a basic axiom: they cannot leave the mobile operator out of the value chain. The most prevalent strategy employed today by sites that offer mobile UGC content creation/consumption/management is to accumulate users at any cost, and grow large enough to let advertising revenue help break even.
A more beneficial and long-term monetization model is one that works in collaboration with the mobile operator. Any monetization strategy with UGC must consider that UGC is moving from text and pictures to video, which consumes a lot of bandwidth. Second, the mobile operator still has direct reach to millions of subscribers, and can help achieve a critical mass, preventing the undesirable outcome that mobile UGC becomes a ‘niche’ experience for only tech-savvy users.
This session will explore how operators can create these UGC offerings, netting mutual benefits for both operators and vendors.
Head of Marketing
Dr. Virmani is head of marketing and product direction at Aylus. He was responsible for architecting and implementing parts of Winphoria’s (now Motorola’s) Push-to-Talk solution and was an architect for the Lucent SoftSwitch. Dr. Virmani has PhD CS, holds many patents and has spoken at many industry events.
Director, Next Generation Voice and Multimedia Business Line
Nokia Siemens Networks
Mr. Aktas is director within the Next Generation Voice and Multimedia Business Line of Nokia Siemens Networks and located in Munich, Germany and managing strategic partnerships. He is representing Nokia Siemens Networks in the GSMA RCS Industry Initiative.
Chief Marketing Officer
Dr. Arunachalam is responsible for driving the product and strategic development of the company. He maintains the company’s global leadership in providing successful digital lifestyle services to mobile operators with the innovative NewBay LifeCache product suite.
Vice President, Marketing Operations
Mr. Glagow is responsible for Orange Partner, which is the worldwide partner and developer programme from Orange. This program provides mobile application and content developers with the tools required to build solutions that satisfy the requirements of a 100 million-plus customer base across the globe. Mr. Galgow joined Orange in December 2003 from Hewlett-Packard where he was director of software developer programs.
Vice President and General Manager
Mr. Gill serves as vice president and general manager of Veveo’s consumer video service, vTap. In 2008, vTap delivered web-based video to over 10 million mobile consumers in over 150 countries. Veveo’s unique approach to video search, discovery and personalization is now powering video applications for CBS, Nokia, SonyEricsson, Motorola, Verizon and Telecom Italia. Mr. Gill has 13 years of media and entertainment experience having performed a broad range of roles including executive management, marketing, and product development.
Chetan Sharma Consulting
Mr. Sharma is one of the leading strategists in the mobile industry. He has served as an advisor to senior executive management of several Fortune 100 companies in the wireless space, and is the author or co-author of five best-selling books on wireless.
Mr. Tucker has been instrumental in driving innovative strategies for companies in the enterprise and carrier markets. Most recently, he was the chief technology officer of Tatara Systems, an Acton-based network infrastructure company.US Wireless Market , add a comment
As expected, Amazon is reaching out to other platforms to pursue its e-Reader strategy. It is doing a smart thing by considering a hybrid strategy. Kindle is expensive so to get more traction, it needs to be on other devices. I know, I know, what can you read on a tiny screen, but by getting this distribution experience, Amazon will learn and adapt. Microsoft and RIM made mistake of not licensing and not reaching out with their s/w to other devices. Microsoft finally relented and started licensing Activesync which has been hugely successful. RIM not so lucky though it tie up with Nokia, it was just too late to recognize the market opportunity.
Well done Amazon.US Wireless Market , add a comment
Regular readers know that we have been making the case for Broadband Stimulus package for long. John Chambers, CEO of Cisco makes the similar case in GigaOM’s post - Broadband Speeds Our Economy.
Looks like he has been reading our book or our blog post
Coverage of our US Wireless Data Market Report at: March 2, 2009Posted by chetan in : US Wireless Market , add a comment
FierceMobileContent - US mobile data revenues grow to $34B in 2008US Wireless Market , add a comment
The best readings are over at GoldenSwamp. Thanks Judy for all your work in making COM tick.3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Middleware, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Speaking Engagements, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments
US Wireless Data Market Update Q408 and 2008
The US wireless data market continued to ignore the recession doldrums in Q4 2008 and grew 7.3% Q/Q and 38.7% from Q407 to reach $9.4B in mobile data services revenues. In 2008, the mobile data services revenues reached our original estimate of $34B. Even as the global industry crossed 4B in subscriptions and $1T in total revenues, the nervousness due to the current recession has been palpable. While the flailing economy has started to hit hard on the wireless data ecosystem esp. the infrastructure and handsets segments, consumers haven’t really pulled back on mobile data spending overall, just yet. There are sub-segments within mobile data revenue stream that are starting to feel the pinch like data card subscriptions and downloadables. Also, in an event of a longer recession, the fate of the US mobile industry will be more closely tied to the overall economy this time compared to the previous recessions.
US Wireless Industry in Recession - A collision of two perfect storms
Back in 2005, we published a paper titled “3G - Hitting the Mass Market” in which we presented the case for an explosive market growth in the US market riding on the back of 3G and posited that by 2009, US will become the leading nation in terms of the number of 3G subscribers. As of 2008, US crossed 100M 3G subscribers catapulting ahead of all industrialized nations in terms of total subscribers (% penetration was around 40%). The paper was based on our work in various markets and study of diffusion trends in the global markets. That study became the subject of several articles and cover stories and was one of the central documents (including our testimony in the case and a report to the President) referred to in one of the most prominent wireless industry cases in front of the US International Trade Commission. Our basic thesis was simple - once you have the favorable ecosystem factors in place, the market is ripe for explosive growth.
2008 was a key year for growth in the mobile data services adoption in the US market. The confluence of 3G, better devices and the smartphones, and the applications ecosystem set the stage for tremendous growth. We already saw signs of significant user adoption and the market grew 7-9% QoQ each quarter in 2008. From almost being in the bottom-most square in 2005 (in our 9-box ARPU charts), US market gained strength to find itself amongst the leaders by the end of 2008 (more on this in our Global Wireless Data Market update for 2008 coming out later this month). At mid-2008 point, 2009 looked to be another year of growth and adoption.
However, the current recession is not your parent’s recession. The problems with the economy are so deep and its impact on the consumer spending and sentiment is so massive that most economists are scrambling to make sense of it. Nobody really has a firm grip on how to fix the current mess because a recession of this magnitude complicated by a globalized economy hasn’t occurred before, so there is no playbook to lean on. We might get lucky and things could turn around in a couple of quarters but things could also take a turn for the worst that might take many more quarters to recover. Markets are incredibly volatile and so are the consumers. All consumer confidence indices are down to their worst ratings ever (The Conference Board Consumer Confidence Index was down to 25 (on a relative scale of 100) to reach yet another all-time low in February (index began in 1967)).
So, we stand at the junction of two perfect storms - one that has the promise of an incredible surf to take the mobile industry to new heights while the other is hell bent on destroying everything in its path. Will the growth surf be strong enough to absorb the economic tidal wave? or will it set us back in time? or will we end up somewhere in between?
The answer lies in how quickly the consumer sentiment and market psychology improves and stays consistently positive over a period of 3-6 months. If the situation improves in the next 1-2 quarters, the recession will be all but a blip in the overall US mobile data market historic charts. If however, this downward spiral continues and the confidence in the markets is not restored, consumers will start cutting some of the discretionary mobile data spending, even cutting down some family lines, and downgrading of mobile plans (including data) at an accelerated rate. If it is the latter, we are in for a fundamental reset of the economy as Steve Ballmer eloquently outlined in his talk to the Democratic Caucus in Feb.
Impact on the US Wireless Industry during Recessions (Slides 11 and 12)
The current recession is not the first one that the US wireless industry has faced but it is quite different this time around. The first one came in 1990 and lasted for one year and the second came amidst the dot-com bubble and terrorist attacks in 2001 and lasted for two years. Historically and logically, GDP and consumer spend is closely correlated. When the economy contracts, so does the consumer spending. A look into the income elasticity of demand indicates a change in consumer mobile services demand as a result of drop or change in consumer income. Different patterns of consumer demand emerge in different countries depending on the state of the industry during the specific downturn.
To put things in perspective, US represents 21% of the global economy and the US services revenue represents 1.1% of the US economy as of 2008. In access of 70% of the US economy is linked to consumer consumption so you can see the tight linkage between the GDP and the consumer spending (the US consumer spending alone is more than the economies of China and India combined).
If we compare the US GDP data to the mobile services revenues and subscriber data, there is some correlation during recessions i.e. service revenues contract but the state of the industry was quite different around on previous occasions. The % change in mobile services revenues and subscriptions went down with the drop in GDP in both instances and recovered as the GDP pulled back after the recession. During the first recession, mobile was a niche service. By 2001, mobile had passed the inflection point on to become a mass-market phenomenon but data services market was largely non-existent. By 2008, the US mobile market had matured with high-degree of subscriber penetration and mobile data had become a healthy and vibrant industry.
Let’s look at how the mobile industry behaved in the various recessionary periods over the past two decades.
1990-1991 The % GDP change (GDP compared to previous year) dropped from 5.8% in 1990 to 3.3% in 1991. The mobile services revenues % change dropped from 36% to 26% over the same time period, the subscriber % growth dropped from 51% to 43%. Subscriber penetration at the end of 1990 was around 3%. Given the smaller base, the drop in mobile numbers can be partially attributed to the fact that as the % subscriber penetration grows the % change numbers come down anyway. In 1992, when % GDP jumped to 5.7%, the % change in mobile services revenues and total subscribers jumped to 46% and 37% respectively, thus quickly reversing the downward trend.
2001-2003 The % GDP change dropped from 5.9% in 2000 to 3.2% in 2001. Over the same period, % change in mobile services revenues dropped from 31% to 24% and % change in total subscribers dropped from 27% to 17%. However, as you would see in slide 11, these numbers have been slowly dropping regardless of the recession as the subscriber and revenue base grew. The subscriber penetration in 2000 was 39%.
2007- The % GDP change dropped from 4.8% in 2007 to 2.3% in 2008. Q4 2008 reported a drop by 6.2% QoQ in one of the sharpest declines in the last quarter century. The nature of this recession is quite different as well. While the previous recessions were limited to certain segments of the overall economy, the current recession has touched almost all sectors with a vengeance. The subscriber penetration at the end of 2008 was 89%. The overall ARPU stayed pretty steady around $50 between 2001 and 2008, while data ARPU became a growing component of the overall mobile services revenue.
What to expect in the coming months?
As we noted in our Q3 2008 note, in some sense, the Christmas quarter might have masked some of the microtrends within the mobile data segment of the industry though Europe started to feel the pinch in Q4. If one looks deeper into the sub segments, as we contemplated in our Q3 research note, it is clear that the layoffs are having an impact on the data card revenues (which account for approx. 10-12% of the overall mobile data revenues in the US) as the enterprises are dropping access cards with employees. Downloadables revenues were down from some segments of the user base as discretionary spending tightens.
Also, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid constituted 57% of the net-adds in Q408 sharply up from 23% in Q407 (though Suncom subscriber base probably has something to do with it). Rising unemployment has accelerated another trend - landline replacement by Mobile which reached almost 20% by Q408 (of course this benefits the mobile industry). This trend is irreversible unless new experiences can be introduced.
Messaging continues to grow. The messaging volume jumped 15% and messaging revenue was up 5.5% QoQ. The data access (excluding data card) including flat rate data plan subscriptions have also showed significant strength offlate. In addition to smartphones, we are also seeing increased mobile data activity amongst feature phone users.
The key question is - will the increase in the mobile data subscriber base nullify the loss in data subscriptions? and the answer seems to be - likely yes. But, if the job losses continue at the current rate, we will start to see flattening of data revenues in Q109 for some operators and a gradual decline over the course of the year. We have already started to see infrastructure (operators are slowing down 3G/4G investment) and device segments (replacement cycles are getting longer) getting hit pretty hard. Smartphones remain a bright spot, which in turn has a direct positive impact on the data revenues. Even with the decline in handset sales, smartphone segment will continue to increase in 2009 accounting for almost 30% of the overall device shipments.
As we eluded to earlier, another factor at play is the growth in 3G and smartphone penetration in the US market, both of which have been responsible for increasing the usage and hence the data revenues. At the end of Q408, 3G penetration was approximately 40% and the data penetration had reached 60%. Smartphone penetration has been inching up as well. In fact, all the service providers and OEMs have been targeting sub-$200 price point, which seems to be a good sweet spot for consumer adoption. The above two factors have also been helping negate any cancellations or downgrading of data plans.
We are likely to see continued price and margin pressure on subscription plans and as a result, voice ARPU will continue its downward trend and data ARPU will become a more prominent factor of the overall ARPU mix by the end of 2009. The longer the recession lasts, the more permanent the shift in voice ARPU becomes. Customer retention will edge customer acquisition. Same would be true with the consumer behavior and expectations. This will lead to new business and pricing models for e.g. some will find the low flat rate pricing untenable in the long-run without a fundamental rethink of the network and business architecture.
The percentage contribution to the overall ARPU from data reached almost 25% in 2008 and is likely to exceed 30% by the end of 2009. For the first time since 1998, the voice ARPU dip below $40 in the US.
During the last downturn, the likes of Google emerged. These players didn’t have much to do with the mobile market at the time but have gradually put their indelible stamp on the future of the industry. It is almost certain that new media and telecom models will emerge as a result of the current crises with new players shaping the next decade of the mobile industry.
Whether this recession invites regulatory intervention remains to be seen. Government can encourage mobile adoption by reducing taxes and fees on mobile services, avoiding unnecessary regulations, making more spectrum readily available, increasing competition, investing and incentivizing in mobile broadband.
Also, will the industry price or innovate its way out of this recession? The short-term knee-jerk reaction is to generally lean on price-differentiation but innovative services and business models can lay the ground work for a more sustainable differentiation and long-term benefits from new services adoption.
Coming back to the 2008 forecasts, our estimate of the mobile data revenues was spot on. The annual mobile data services revenue stood at $34B. We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings. Q109 numbers will give us a better insight into the impact of the current recession on the US mobile industry and the global markets at large.
The bottom line is that in an event of a long and deep recession (i.e. beyond 2009), which I am afraid seems to be the case, the fate of the US mobile industry will be more closely tied to the overall economy this time compared to the previous recessions. If the consumer and market sentiment improves within the next 3-6 months, the mobile data industry will continue its rapid growth. Despite a difficult environment, we expect the mobile data services revenues to grow by at least 15% YOY in 2009.
Against this backdrop, the analysis of the Q408 and 2008 US wireless data market is:
Service Revenues (Slides 14 , 21, 22)
- The US Wireless data service revenues grew 7.3% Q/Q to $9.4B in Q408. Compared to Q407, the data service revenues grew 38.7%.
- AT&T’s data revenues grew the most - 12% QoQ and 52% YoY. Verizon experienced a 42% lift and T-Mobile saw a 30% increase in YoY data revenue growth. As expected, both AT&T and Verizon became two of the four operators to exceed $10B in data revenues for the year for the first time by (global) operators besides NTT DoCoMo (China Mobile is the other carrier to join the club).
- AT&T surpassed Verizon in data revenues for the first time since 2005 though for the year Verizon still ended up being ahead for the third straight year.
- AT&T and Verizon now account for 62.5% of the market data services revenues. Sprint had a third consecutive quarter of data revenue growth after falling behind its peers for the past couple of years.
- The average industry percentage contribution of data to overall ARPU reached 25%. In 2007, the percentage contribution stood at approximately 19.3%. US market is likely to exceed the 30% mark in 2009.
- T-Mobile USA edged past O2 UK to secure the 8th spot in the top 10 rankings of global mobile operators by data revenues. For the year, Verizon and AT&T improved their rankings to #3 and #4 respectively at the expense of KDDI which dropped to #5. Sprint Nextel maintained its # 6 spot. AT&T and Verizon are in the select group of four global operators who are now generating almost $3B or more in data revenues/quarter (the other two are NTT DoCoMo and China Mobile).
- Overall ARPU decreased by $0.36. Average voice ARPU declined by $1.13 while average data ARPU grew by $0.77 or 6% but couldn’t negate the drop in voice ARPU.
- AT&T led in postpaid data ARPU at $16.30 (or 27.35% of the revenues) followed by Sprint at $14.50 (or 25.89%).
Subscribers (Slides 19-20)
- In 2008, the US market added almost 15M new subscriptions down 32% from 2007. Q4 also saw a decline from Q3 net-adds for the first time in recent memory.
- The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q408, Verizon had 74% of its subscribers using some form of data services. The messaging volumes in the US market now average over 110B messages/month or at the frequency of a message/sub every 2 hours. In comparison users in Philippines average routinely send on an average, a message every hour.
- In terms of net-adds, AT&T led in Q408 with 2.1M net-adds, edging its friendly rival Verizon which added 1.4M net subscriptions. Sprint lost another 1.3M in Q408.
- With its Alltel acquisition, Verizon became the number one carrier in the US easily overtaking AT&T. It now has 80M subs and secured the bragging rights to being the biggest operator in the Americas.
- The 3G penetration in the US touched 40% in Q408. Verizon led the pack with over 65% 3G subscriber penetration. T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.
Applications and Services
- Non-messaging services continue to grab 50-60% of the data revenues for the US carriers.
- The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe started to take firm roots in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 15% of the consumers have flat-rate data plans. We will see a further acceleration of this trend aided by the recession.
- There are probably 18-20 sub-segments within mobile data services and consolidation looms. Who will be the last man standing post the nuclear winter? While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene will heat up by Q309.
- Will Mobile Advertising be the rising star from the crisis or one of its victims? Clearly, there are a number of advertisers and brands that are scaling back on the experimental dollars thus shrinking the mobile ad spend. On the other hand there are some savvy brands that are pulling back from the traditional mediums like print which don’t really work and putting more money into digital including mobile. Mobile offers the best ROI of all mediums but there is lot of ground work to be done before it becomes a thriving advertising channel. In fact, for the mobile media and content ecosystem, mobile advertising lends very well to the belt-tightening trends. It will be interesting to see if operators use this opportunity to lay the foundations of a long-term mobile advertising strategy or ignore it completely. Stay tuned for some of our thoughts on the subject. Incidentally, this week marks the one year anniversary of our best-selling Mobile Advertising book. Our thanks to all the readers and companies who have adopted it into their education and sales curriculums and product strategies making it a worldwide success.
- As we had mentioned back in July, Apple easily surpassed its 10M target in Q308 buoyed by its 100 country expansion plan. The broadband and appstore capabilities are quite attractive to consumers and it shows. VPN and direct access to Exchange is helping in getting many more users into the mix and making IT folks less apprehensive. The clearcut business model of 30/70 split is also attractive. While there is no dearth of applications, findability remains a challenge.
- Apple’s success is inspiring carriers and OEMs to launch similar app-stores. Many operators launched an upgraded version of their existing Appstore offerings (and so did Google and RIM, even Microsoft and Nokia) along the lines of Apple’s initiative with promises of greater control to the application developers. However, many of such initiatives will fall flat due to weak developer ecosystems.
- Nokia eclipsed 100M unit sale in Q408 for the seventh straight quarter. It sold over 113M handsets in the quarter, more than the next three players combined. Nokia’s global market share stood at 38.6%. Samsung surged to 52.8M in handset sales for the quarter. For the year, the industry again eclipsed the 1 billion handset mark for 2008 and had a modest growth of 3.5% but the overall handset sales are likely to decline by 10-15% in 2009 (though still exceeding 1B).
- The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - metered billing, UMA, Femtocells, Hotspot buys, WiMAX, LTE, and others. We deal with the whole topic of Wireless Broadband in great detail in our recently released book “Wireless Broadband - Conflict and Convergence” (IEEE Press/John Wiley). We will have more to say on the subject in the coming days and months.
- Q4 also saw the launch of the fabled G-phone as G1 Google phone launched by T-Mobile in the US market and it is slowly making its way into Europe. While G1 is no iPhone, it introduced long-awaited features such as multiple processes, more open APIs, and others. Motorola, HTC, and others are said to be planning to launch more Android devices in 2009. The smartphone segment has clearly shaken up the market with Apple, Google, RIM, and Nokia being the main competitors. Microsoft appears to be waking up from its slumber and is rethinking its mobile strategy starting with an easy button.
Misc. (Slide 23)
- Not surprisingly, Venture money in the mobile sector experienced a rapid decline. Compared to Q407, venture financing declined by 36%, and the yearly totals are 26% lower than what they were a year ago. (Source: Rutberg)
- While WiMAX was launched with great fanfare with several key players participating in the investment pool, its long term prospects look uncertain as the delays in getting a nationwide network by a major operator in a major economy threatens the underpinnings of this nascent industry segment. To be relevant, the WiMAX fraternity needs to figure out some solutions in a hurry.
- In a sign of convergence battles to come, T-Mobile’s @Home and various Femto cell initiatives started to take hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service. Don’t be surprised by some acquisitions in 2009.
Preliminary Global Update (Slides 21-22)
- China and India continued their red-hot growth throughout 2008. Combined, they added 212.8M new subscriptions with India edging China by 15% for the first time in yearly net-adds. India made mockery of the current economic climate by its unprecedented growth. In fact, for the past 5 months, India has been displaying Phelpsesque like flair (minus the pot excursion) in setting and beating its world record for 6 straight months. For the last 5 months, the market has been exceeding 10M net-adds/month with Jan 09 being at a whopping 15.4M making it a record for monthly net-adds in a given country at anytime in the history of the industry or any industry for that matter (we are still trying to figure out what led to such a jump).
- NTT DoCoMo continues to dominate the wireless data revenues rankings with over $4B in data services revenue in Q408 and almost $15B for the year. Almost 42% of its overall revenue now comes from data services. DoCoMo also crossed 88% in 3G penetration in Q408 and will cross the 90% mark this week.
- Most of the major carriers around the world have double digit percentage contribution to their overall ARPU from data services. Many operators are consistently exceeding 30% with DoCoMo and Softbank being over 40%.
We will be keeping a close eye on the trends in the wireless data sector in our blog, future research reports, and articles. The next Global Wireless Data Market update will be issued in March 2009 and the next US Wireless Data Market update will be issued in May 2009.
To the 1% of you who have made it this far, thanks very much for your time and attention.
Your feedback is always welcome.
Should you need assistance in navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.
Disclaimer: Some of the companies mentioned in this note are our clients.