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State of the Global Mobile Industry – Half Yearly Assessment 2011 July 7, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Connected Devices, Devices, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, Mergers and Acquisitions, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Student Paper Contest, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 6 comments

 

 

http://www.chetansharma.com/globalmobileupdate1H2011.htm

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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 $1.3 Trillion in 2011 with mobile data representing 24% of the mix. Global Mobile Data revenues are expected to eclipse $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%.

We expect the total number of subscriptions to exceed 6 billion by the end of 2011. The first 1 billion took over 20 years and this last one is going to take only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. Indian and China are also entangled in the race to the billion. At the end of Q2 2011, China was ahead by 50M but India is adding subscriptions at faster rate and is likely to eclipse China before Q2 2012. By then, both nations are expected to exceed 1 Billion in total subscriptions making up 31% of the global subscriptions.

In Q1 2011, US became the first major market to exceed the 50% mark in smartphone sales. The global figure stands at approximately 26%. Some operators expect 90% of their devices sales to be smartphones by the end of the year. 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.

The number of mobile operators with more than $1B in data revenues will increase to 47 in 2011. This number was only at 13 in 2005.

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. In 2011, it became the first major market to have more than 50% of its mobile revenue from data services. 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 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 $3.50 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.

Mobile Trends for 2011

1.Total Global Subscriptions to hit 6 Billion

–India and China racing to a billion a piece

2.Total Global Mobile Revenues to hit $1.3 Trillion, almost 2% of Global GDP

–Top 10 operators control 43% of the global mobile revenues

3.Total Global Mobile Data Revenues to eclipse $300 Billion

–Non-messaging data now owns 53% of the global mobile data revenues

4.Mobile Devices are now exceeding traditional computers in unit sales + revenue

–Majority of the device sales in the US are now smartphones. Device Replacement is shrinking

5.Mobile Broadband (4G) is being deployed at a faster rate than previous generations

–Over 1 Billion broadband connections by 2011

6.Global Mobile Apps revenue has shifted to off-deck

–The decline is directly proportional to the increase in smartphone penetration by region

7.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

8.Mobile Data Traffic will be 95% of the global mobile traffic by 2015

–Many countries are facing spectrum exhaust in the next 5 years

9.Connected device segment is growing at the fastest pace

–Operators will have to quickly adapt their strategies to stay relevant in this segment

10.Several multi-billion dollar opportunity segments are emerging

–Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few

11.Mobile Ecosystem has become very dynamic and unpredictable

–Apple, Google, Amazon, and Facebook have become the most important revenue generating mobile platforms

12. There will be more changes in the next 10 years than in the previous 100

– The value chains will keep disrupting every 12-24 months by the new players and business models

13. Intellectual Property has become a key component of long-term product strategy

– Top 20 control 1/3rd of the overall mobile patent pool

Devices

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.

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 while the newcomer HTC edged past the industry giant in a remarkable story of the year. 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. 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. HP’s acquisition of Palm is finally bringing some new products to the market but the lack of an effective ecosystem means lack of traction in 2011. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.

Tablets are primarily being used in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher but will still be dominated by WiFi overall.

The number of connected devices per subscriber and per family will continue to increase over the course of this decade. As the cost structure and margin profile for these devices will be different, we are likely to measure performance of various operators using margin analysis for e.g. while the ARPU for connected devices is 5-10 times lower than the postpaid subscribers, the margins are typically higher due to lower costs of sales, marketing, support, and subsidy. As such the overall impact is dilutive ARPU but higher margins. So, instead of focusing on just the ARPU, the efficiency of operators will be measured in how well they maintain average margin per user (AMPU) and average margin per connection (AMPC).

Managing the data growth

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.

Competitive landscape

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 it.

Apps and Services

As expected, mobile commerce and payment discussions are dominating the ecosystem. There is clearly a lot of investment and marketing dollars being spent. However, the traditional payments networks are largely intact. The new opportunities are being built on top of the existing payment platforms with convenience (Square) and offers and advertising (Google Wallet, ISIS, Groupon). Beyond payments, mobile is getting ingrained into every vertical and every facet of our lives – from healthcare to education, from energy to entertainment, from communication to socialization. And we are in the early innings of figuring out the business models, ecosystem leaders, user behavior, regulatory needs, and the overall impact on society.

Ecosystem Dynamics

It is very clear that the ecosystem dynamics can change very quickly, one just can’t take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumer’s pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T’s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft’s enterprise business. One product launch, one acquisition, can change the game in an instant.  And this is only the beginning.

Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce.

Mobile Future Forward

We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward - brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.

Some of the distinguished guests include:

Abhi Ingle, VP – Advanced Mobility, AT&T Wireless; Amit Gupta, SVP and CTO, INQMobile; Bob Gessel, VP/Head of Technology and Network Strategy, Ericsson; Braxton Woodham, Head of Engineering, AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin, SVP - Products and Technology, Comcast; Dale Nitschke, former President, Target; Danny Bowman, President - Connected Devices, Sprint Nextel; David Messenger, EVP, Head - Online/Mobile, American Express; Erik Moreno, SVP, Fox; Gibu Thomas, SVP - Online/Mobile, Walmart; Glenn Lurie, President, AT&T Wireless; Hank Skorny, Chief Strategy Officer, Real Networks; Janet Schijns, VP, Verizon Wireless; Jason McKenzie, President, HTC-Americas; Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP, MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni, Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel Lucent Wireless; Kris Rinne, SVP - Networks, AT&T Wireless; Mark Rolston, Chief Creative Officer, Frog Design; Matt Oommen, President, Reliance Communications; Mikael Back, VP of Products and Portfolio Management, Ericsson; Mike Mulica, President, Synchronoss Technologies; Paul Palmieri, CEO, Millennial Media; Prof. Cliff Nass, Human Computer Interaction, Stanford University; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP and Group President, Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja Chandrasekaran, CIO, Timberland; Will Hsu, Chief Product Officer, AT&T Interactive

More information at http://www.mobilefutureforward.com

Your feedback is always welcome.

Thanks and have a great 2H 2011.

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 Aug 2011. The next Global Wireless Market update will be issued in Jan 2012.

Disclaimer: Some of the companies mentioned in this paper are our clients.

US Mobile Data Market Update Q1 2011 May 9, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Connected Devices, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile TV, Mobile Traffic, Mobile Users, Mobile Wallet, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Data Market Update Q1 2011

http://www.chetansharma.com/usmarketupdateq12011.htm

 

 

The US wireless data market grew 4% Q/Q and 23% Y/Y to reach $15.4B in mobile data service revenues in Q1 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

Of all the segments, the connected device category registered the highest growth at 9.6% Q/Q while the postpaid subscriptions growth was almost flat for the quarter. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 8% of the subscription base.

For the first time, the smartphone sales crossed the 50% share mark in the US. Also, the US now accounts for approximately one-third of all smartphone sales in the world.

The Big News - AT&T’s proposed acquisition of T-Mobile

The big news during Q1 2011 was of course the blockbuster announcement of the acquisition of T-Mobile USA. We had pondered on the viability of 4 operators in the US market in the past. All the major mobile market eventually settle with three main players controlling the market. So, the news wasn’t a surprise as we had expected something to break loose and conform to the natural market evolution. T-Mobile US has been under tremendous pressure for the last 2 years being unable to expand its postpaid base despite modernizing its network/backhaul and introducing a slew of impressive handsets. It was getting squeezed both from the top (Verizon and AT&T) and from the bottom (MetroPCS, etc.) while duking it out with Sprint in the middle. The decision window was closing as Deutsche Telekom had to decide if it wanted to invest in LTE or not (in the US market). Given that the parent business has been under pressure as well, it decided to take the most attractive available option.

The proposed merger will obviously have an impact on the market structure. The market power will get concentrated in the top 2. The HHI3 Index will go from .22 to .31 but the HHI3 value will be at par with UK, Canada (though the Canadian market is not a good proxy for a competitive market), and some of the other markets. The biggest task for the US regulators will be to analyze the impact on the consumer interest and service pricing on a market-by-market basis.

Putting things into perspective, this move is not unusual for a developed market. On average, the top 3 operators in the developed markets around the world control 94% of the market. The proposed merger roughly resembles the merger that took place in UK last year when T-Mobile and Orange, the number 3 and 4 player (each having approximately 19% of the share) respectively in the market merged to form Everything Everywhere and become the number 1 player in the market with 38% market share.

However, if we look at the history of competitiveness in the US mobile market, the market and revenue concentration will be at its highest in the history of the US wireless industry. Such a move is likely to have an impact on the ecosystem depending on the regulatory policies.

Last month, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets.

Transparency as a competitive advantage

An unfortunate side effect of an industry moving too fast is that regulations are often behind the curve (we discuss the role of regulators in our Competition paper mentioned above). Q2 will see a lot of heated debates around privacy and competition. Current regulatory framework in the US seems ineffective to meet the demands of the digital age. The indecision and a weak regulatory framework can be harmful to the ecosystem. While the industry has done a poor job of explaining targeting and relevancy and the associated consumer benefits, by over reacting, regulators can mess up the potential for better services. It is not the mechanics they need to regulate but the “transparency” of services and policies in plain English. Regulating transparency seems to be a more effective way. The ecosystem players will do better if they use transparency not as a threat but as a competitive advantage.

The new troika - AAG

A couple of years back, I gave a talk about the changing mobile ecosystem and what it means to compete in an environment where the ecosystem stacks get reshuffled every few months. I wrote about that in an essay that was published in the Mobile Future Forward book last year. While innovation is coming from all angles - fast and furious - the troika of Apple, Amazon, and Google is leading the way right now. Their interests are clashing in multiple dimensions - device, user data, cloud, advertising, local, commerce, books, etc. In a fast changing environment, either you define the market or be defined by it. The journey from being an arch-rival to a frenemy (and vice-versa) can be a short one.

A significant shift

As we mentioned in our last research note, 2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). Smartphones and the connected devices now account for 51% of the computing devices revenue in the US (devices include desktops, notebooks, netbooks, tablets, eReaders, and conventional feature and smartphones)

The growth in of connected devices

The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to the higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced.

Apple’s iPad has been, as expected, a runaway success. Several other tablets launched in 2011 but none has come close to being a credible challenge. OEMs will do well to segment the market and price accordingly rather than follow Apple in performance and pricing. Market is fairly young and there is tremendous room for growth. Another trend that is obvious is the development of an alternate ecosystem. 85% of the tablets use primarily use WiFi for connectivity meaning that OEMs need more diverse distribution channels. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.

We do expect multi-device or family data plans to start being introduced in the US market in 2011. Also, the $200-250 Android tablets will start to emerge during the second half of the year to broaden the choices for the consumers.

Turmoil in the OEM land

Another headline grabbing event in Q1 2011 was that of Microsoft’s partnership with Nokia. Nokia’s lack of a credible response to Apple and Android has left the company scrambling for survival. Nokia still dominates the unit sales but the domination of Apple and the Android OEMs has taken away significant profits and ecosystem mindshare. Industry is awaiting the first release of the Windows phone from Nokia which will have a lot riding on it. If the release of iPhone 5 coincides with this release, the Christmas selling season will be interesting.

The OEMs that have impressed the most are HTC and Samsung. The collapsed release cycles and the fierce pace of introduction of new devices have caught many of the traditional players unprepared. These things have a tendency of going in cycles so we expect the pendulum to swing again in the next 12-24 months.

There is a fight for the #3 spot and it is likely that Windows will fill that void. However, for developers, iOS and Android are the only platforms they need to worry about right now.

Verizon finally got its iPhone and as expected it didn’t make a big dent into the AT&T’s financials.

Platforms - Horizontal vs. Vertical

Over the past few quarters, we have seen a fascinating battle brew between the horizontal (Android and Windows) and the vertical (Apple, RIM, Nokia) device platforms. In the US, in the smartphone category, the horizontal platforms (primarily Android) has been gaining significant share since Q1 2010 and now have over 65% share of the new devices sold while the vertical platforms’ share has declined to 35%. However, the revenues and profits are still dominated by the vertical platforms.

What to expect in the coming months?

All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 12th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. Hope you can join us.

As usual, 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.

Against this backdrop, the analysis of the Q1 2011 US wireless data market is:

Service Revenues

  • The US Wireless data service revenues grew 4% Q/Q and 23% Y/Y to $15.4B in Q410. The mobile data services revenues for the US market are expected to reach $67B in 2011.
  • Verizon and AT&T had a good mobile data quarter accounting for 76% of the increase in data revenues in Q1 2011.
  • T-Mobile’s HSPA+ drive is starting to pay dividends. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 27% smartphone base definitely helps.
  • For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 65% of the subscription base.
  • AT&T edged past China Mobile to become #3 operator by mobile data revenues. Verizon is already at #1 followed by NTT DoCoMo. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q1 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators.

ARPU

  • The Overall ARPU increased by $0.11. Average voice ARPU declined by $0.36 while the average data ARPU grew by $0.47 or 3% Q/Q.
  • The average industry percentage contribution of data to overall ARPU was 35% in Q111 and is likely to touch 40% by year’s end.
  • Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 29% of its revenue coming from the data services.
  • We expect data revenues to exceed voice revenues in the US market before Q2 2013.

Subscribers

  • Helped by the growth in connected devices, the overall net-adds increased by 4.9M.
  • For the sixth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now almost 12% of AT&T’s subscription base.
  • Overall, AT&T has 43% of the connected device share of the market. The connected device segment grew 9.6% Q/Q and 48% Y/Y.

· Sprint is on good comeback adding over million customers. Sprint extended its streak of positive net-adds to four quarters by adding over a million subs  for the second straight time since Q1 2006.

· T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers.

Applications and Services

  • While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues.
  • The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. The fight for the 3% block is finally in the open. Operators, financial institutions, and the internet players are all vying for a piece of the mobile wallet. Much more to come in 2H 2011. (We will be going in-depth into mobile commerce and payments in our upcoming Mobile Breakfast Series event on Jun 28th)

Handsets

  • Nokia sold 108.5M units in Q1 2011 accounting for 28% of the market share. Samsung continues to be one of the most agile players in the device business shipping 70M for a 18% share of the market. The nimble team at HTC outclassed its bigger peers and edged past Nokia in market cap.
  • Apple, a company that was given a lifeline by Microsoft in 1997 is now valued 45% or $100B more than Microsoft primarily on the strength of its wireless portfolio.
  • In the US, for the first time, 51% of the devices sold were smartphones. Global average is at 26%. One-third of all smartphones sold were sold in the US making it the hot bed for consumer devices.
  • Smartphones now account for 80% revenue of all phones sold in the US.
  • In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
  • 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.

Global Update

  • Race to a billion - India went past 800M in Q1 2011 subs and is closing on China and we expect that by the end of the year, India will become the largest mobile market on the planet. By early 2012 both India and China will have more than a billion subscriptions.
  • China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux.
  • More details to come in our global market update.

Your feedback is always welcome.

Thanks.

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 Aug 2011. The next Global Wireless Data Market update will be issued in Jun 2011.

Disclaimer: Some of the companies mentioned in this paper are our clients.

New White Paper: The Promise of Mobile Advertising February 2, 2011

Posted by chetan in : 3G, 4G, AORTA, Carriers, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Usability, Mobile Users, Privacy, Smart Phones, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

ATTadpaper1_s

http://www.chetansharma.com/PromiseOfMobileAdvertising.htm

Commissioned by AT&T Interactive

Executive Summary

The world of advertising is changing at a dizzying pace. New media are transforming advertising, and consumer expectations have changed accordingly. In this dynamic environment, no communications platform holds more promise than the mobile device.

Mobile platforms present a unique opportunity to reinvent advertising. With mobile, the perception of advertising will shift from interruptive broadcast messages to targeted information services of real value to consumers and positive interactions that have an immediate top-line impact.

Advertisers care about two basic metrics – reach and purity. They want to communicate with as many people as possible (reach) and they want to reach the most accurately targeted audience possible (purity). In the past, advertisers have tried to compensate for a lack of purity by casting a wider net, spending inefficiently and often failing to reach their target audience.

With mobile, advertisers can deliver the right information to the right target at the most opportune time; delight the consumer with instant gratification; complete transactions and measure direct correlations between advertising, transactions, and return on advertising (ROA). With the power of real-time metrics in hand, advertisers can scientifically design, measure, and alter their campaigns and deploy strategies for one-to-one relationship building with customers.

Mobile is having a significant impact on local advertising. The attributes of immediacy, location, always-on connectivity, user profile and segmentation, and the viral nature of the medium make mobile the best channel for local advertisers to engage potential customers.

Download full paper.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this paper are our clients.

Announcing Mobile Future Forward Executive Summit June 14, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Speaking Engagements, Speech Recognition, Strategy, US Wireless Market, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

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You have seen some hints of the project that we have been working on for sometime. We are proud to announce “Mobile Future Forward” Executive summit to be held in Seattle on Sept 8th, 2010.

Registration is Open Now. Early Bird expires June 30th 2010.

MFF is a gathering of some of the most brilliant minds in the mobile industry. The goal is to look at how mobile is likely to evolve over the course of this decade. We couldn’t have done this without the tremendous support of our excellent sponsors who are paving the way in their respective segments.

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The speaker list includes the who’s who of the mobile industry:

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Glenn Lurie, President, AT&T

Subba Rao, CEO, TataDoCoMo,

Mike Sievert, Chief Commercial Officer, Clearwire

Louis Gump, VP Mobile, CNN,

Paul Palmieri, Founder and CEO, Millennial Media

Dr. Sailesh Chutani, CEO, Mobisante

Abhi Ingle, VP, AT&T Wireless

Ken Denman, CEO, Openwave

Amir Mashkoori, CEO, Kovio

Stephen David, Former CIO, Proctor & Gamble

Dr. Genevieve Bell, Intel Fellow, User Experience, Intel

Hank Skorny, SVP, Real Networks

Jon Stross, VP & GM - Babycenter, Johnson & Johnson

Dr. Suzanne Sysko, Chief Medical Officer, WellDoc

Dr. Boris Nikolic, Sr. Program Officer, Bill & Melinda Gates Foundation

Krishna Vedati, SVP & GM - Mobile, AT&T Interactive

Christopher Dean, Chief Strategy Officer, Skype

Russ McGuire, VP, Sprint Nextel

Jack Kennedy, EVP, News Corp

David Weiden, General Partner, Khosla Ventures

Anand Chandrasekhar, SVP and GM, Intel

Chamath Palihapitiya, VP Growth/Mobile, Facebook

Rob Glaser, Chairman, Real Networks

Wim Sweldens, President – Wireless Division, Alcatel Lucent

Takayuki Hoshuyama, CEO, D2 Communications

Neville Ray, SVP, T-Mobile

Bob Azzi, SVP—Networks, Sprint Nextel

Mario Queiroz, VP—Android, Google

Matt Bross, Global CTO, Huawei

We will be covering the following topics in detail:

You can read more about what you can expect at the executive summit in the following whitepaper.

Mobile Future Forward Paper

I hope to see you there.

Chetan Sharma

Chief Curator

Mobile Future Forward

New Research Paper: Managing Growth and Profits in the Yottabyte Era 2nd Edition June 2, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, Carnival of Mobilists, Carriers, Devices, European Wireless Market, Federal, Indian Wireless Market, Japan Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Patent Strategies, Smart Phones, Speaking Engagements, US Wireless Market, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

 

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Managing Growth and Profits in the Yottabyte Era

The year 2010 will be remembered for many milestones. One of them clearly will be the significant migration from voice to data services and revenues. In Q1 2010, the number three operator in Japan - Softbank Mobile reported 55% of its service revenues coming from data thus becoming the first major operator to have more revenues from data services than from voice. Over the course of the rest of the year, other operators like NTT DoCoMo will take this data leap as well.

US, the nation with the most mobile data service revenues went past $14 Billion in quarterly mobile data revenues and is expected to go past the $50 Billion mark for the year in 2010. The subscription penetration in the US is well over 94% and the mobile data usage is on the rise.

While the rate of new subscription addition has slowed down, the pace of innovation is going very strong. Just like Japan, other major economies will slowly transition from a voice-centric universe to the one where voice is just another application on the all-IP network. Operators will make significant transition from voice to data, from making calls to getting lost in applications and from voice communications to multimedia communications. Helped by the ever expanding wireless broadband networks, and release of hit devices every week, and the consumer’s insatiable appetite for information and content has brought us to the surge of a data tsunami that will shake the industry to its core.

With everything moving to digital, information repositories across the web are almost doubling every day moving rapidly to the yottabyte (YB) era. The information, the desire and the capability to consume oodles of data is increasing exponentially. As a result the traffic – both wireline and wireless is also increasing at a predictably fast rate.

In 2009, the global yearly mobile data traffic reached a new milestone – 1 Exabyte (EB) or 1 Million Terabytes (TB). In the US, the data traffic is growing so fast that we are likely to exceed the 1 EB barrier in 2010. By 2016-17, the global yearly mobile data traffic is likely to exceed 1 Zettabyte (ZB) or 1000 Exabytes. How does the industry go about managing such growth in a profitable manner when the cost of supporting such traffic will increase exponentially? Will the move to LTE offer some respite?

This paper is the second edition of the “Managing Profits and Growth in the Yottabyte Era” research paper. It discusses the research and analysis done by Chetan Sharma Consulting on the growth of mobile data traffic in over 45 countries (with a detailed look at the US market) and how the ecosystem can apply some strategies to manage growth and profits.

We have built detailed models to estimate the rise of mobile data network traffic and to understand as to how the margin per bit can be maintained. Over the course of the last year, we have worked with several global players in the ecosystem to deploy effective strategies and solutions. This paper also draws from this experience on the ground.

Download Paper

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this paper are our clients.

Global Mobile Data Market Update 2009 March 31, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Storage, Strategy, US Wireless Market, Unified Messaging, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

Download PPT (2.6 MB)

Download PDF (3.6 MB)

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (combined) are adding almost 30M new subscriptions every month. Amongst the two, India is outpacing China 2:1. China touched 750M subscriptions while India crossed 525M by the end of 2009. With 4.6B subscriptions, the global subscriptions penetration was above 68%.

The global mobile data revenues reached $220B and mobile data now contributes 26% of the overall global mobile service revenues.

As expected, the overall global mobile revenues stayed pretty flat for the year at around $1.1 trillion as many regions were hit by the recession and the competition pushed the ARPU lower for many operators. While the countries like US, Japan, China, and India showed very little signs of pullback, most of Europe and the developing world experienced a decline in overall service revenues in 2009. All the major markets have their data contribution percentages above 10% now.

For some of the leading operators, data is now contributing almost 50% of the overall revenues. However, the increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. NTT DoCoMo continues to dominate the carrier ranking in terms of the mobile data service revenues, Verizon Wireless which became #2 replacing China Mobile and is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.

Though 4G as a standard hasn’t been defined yet, the discussions around LTE and WiMAX deployments grew intense. Telia Sonera became the first operator to commercially launch LTE. At CTIA, Sprint/HTC became the first players to launch a WiMAX smartphone and MetroPCS/Samsung took the honors for the LTE smartphone.

2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.

We are also entering the phase of global mega-mergers in telecom. Bharti Airtel of India just acquired Kuwait-based Zain Group to become the 5th largest telecom group in the world (at the end of 2009, it was #9). There are now 14 telecom groups with 100M or more subscriptions. While China Mobile’s ARPU is 1/5th of its western counterparts, it operates its business at higher margin, around 51%. There are a number of global players mainly in Europe and Asia who have mastered the art of running lean operations and if they have good bank balance they are going to go shopping in the days ahead.

From the revenue perspective, the $50 billion revenue club is more exclusive with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

As we sit at the cusp of the iPad era, there is a bigger transformation taking place and that is of the connected consumer electronic devices (CEDs). Few years from now, most popular CEDs will have connectivity. We are also approaching the start of phase where pricing of access will start to morph - we will see the introduction of family data plans (something we have been advocating for some time), ability to connect multiple devices to the same GB plan, more granular use plans (per session/day/week/mo/yr etc, roll-over GBs anyone?). As the number of connected devices/consumer increases, we will start worrying about Average Margin Per User (AMPU) or Average Margin Per Connection (AMPC) because ARPU won’t quite capture the dynamics of the industry.

Exciting times indeed.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.

This note summarizes the findings from the research with added insights from our work in various global markets.

Impact of Global Recession

  • Telecom in general fared better than other industries. In some regions, it hardly caused a tremor. However, in most nations, the impact was felt by the operators. Amongst the 40 major operators we studied, SK Telecom, 3 Australia, KTF, T-Mobile Netherlands, Rogers, Softbank Japan, Singtel, Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China Unicom, and Vodafone Germany experienced increase in both the data ARPU and the overall ARPU during 2009. Some of increase was due to the fluctuation in international currencies e.g. Korea.

  • Looking at the data at a country level, most nations noted a decline in overall ARPU. Only Venezuela, Pakistan, Argentina, Bangladesh, Australia, and Poland showed positive increase in ARPU since 2008.

  • Rule of Three is kicking in most markets with smaller players having to consider the M&A option to remain viable. T-Mobile/Orange, Bharti/Zain tie-ups are just the start of that process. We are likely to see many international mergers in 2010 and beyond as power in the mobile ecosystem self-adjusts.

  • 5 new players joined the 100M subscriptions club. The new members are: Bharti Airtel (India), MTN Group (South Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia). The top 9 telecom groups in the world are: China Mobile, Vodafone, Telefonica, America Movil, Telenor, T-Mobile, China Unicom, TeliaSonera, and Orange.

Service Revenues

  • US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $44.56B vs. $32.5B for Japan in 2009. China with $20.3B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2008 levels followed by Japan and China.
  • The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, Brazil, Spain, and India.
  • The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Australia, Spain, and Korea.
  • NTT DoCoMo continues to dominate the wireless data revenues rankings with over $16B in data services revenue in 2009. Almost 46% of its overall revenue now comes from data services. DoCoMo also crossed the 95% 3G mark.
  • NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues.
  • Each of the top 5 carriers exceeded $10B in yearly mobile data service revenues in 2009
  • Data revenues for the top 10 operators now account for almost 43% of the global mobile data revenues.
  • The biggest jump in data revenues was experienced by Verizon, Softbank, and AT&T. DoCoMo saw an 11% increase for the year.
  • Most of the operators in the developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPU.
  • China reported approximately $20.3B in data revenues for 2009 and the percentage contribution from data services is around 32%, data ARPU is around $3.2. For India, data ARPU continues to stay below $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
  • China Mobile remains the most valuable telecom operator with over $195B in market cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans.
  • In 2009, SMS’s vice like grip on data revenues continues to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
  • NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets. They are exploring new technologies and social experiments ahead of almost anybody else in the market. 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, technologies, and ecosystem dynamics in these markets to get a sense of what’s coming.

· From the revenue perspective, the $50 billion revenue club has limited membership with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

ARPU

  • Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, Telstra, and 3 Sweden exceeded 35% and many others are on the verge of crossing the 30% mark.
  • NTT DoCoMo reported the highest data ARPU for the year while Rogers took away the honors for the highest overall ARPU. Other notable percentage increases in ARPU were from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The Japanese operators saw a decline in ARPU by 3%.
  • 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 53% (or $2) contribution coming from the data services.
  • Softbank of Japan looks set to be the first major operator (outside of Philippines) with more revenues coming from data services than voice.

Mobile Data Traffic

  • We have been calling attention to the tremendous increase in mobile data traffic for some time. The discussion has hit mainstream and many operators are scrambling to nail-down their short-term and long-term strategies to manage the data traffic growth in their networks. See our paper on the subject "Managing growth and profits in the Yottabyte era." The recommendations discussed in the paper are slowly being adopted by various vendors and operators worldwide.
  • The global mobile data traffic exceeded an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that this year, the two territories experiencing the most growth - North America and Western Europe are both going to exceed an Exabyte in mobile data traffic.
  • 2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic.
  • For many of the superphone heavy operators, devices like iPhone and Android account for more than 50% of their total data traffic.
  • 2010 will mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.

For more mobile data traffic analysis, please stay tuned for the second edition of our Yottabyte research

Subscriptions

  • India continues to be the hottest market on the planet in terms of net-adds with (again) a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a perspective, this is almost 1.5 times  the number of subscribers US added in the whole year. It is like adding a Canadian wireless market every month. For the year 2009, India added 177 million subs vs. 106 million for China. Combined, one year of growth in these two market is equivalent to the size of the third largest market - the US, to date. Making money on the net-adds is a different proposition all together (more discussion on the international market in our global market update later this month)
  • Thanks to the explosive growth in the emerging markets, the global mobile market went past 4.6B in 2009 and is likely to cross the 5B mark in 2010. The global mobile subscriptions now represent over 68% of human population on planet earth.
  • China crossed the 700M subscription mark in July while India’s total went past 500 in Nov. In the meantime, US crossed the 90% subscriptions mark in 2009.
  • In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
  • The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Pakistan and Italy.
  • China Mobile became the first operator (and likely to be the only one for a very long time) to cross the 500M mark. It remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone. Telefonica, América Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.

Mobile Apps

· The total number of app downloads in 2009 reached 7 billion resulting in approximately $4.1B in revenues 12% of which was from mobile advertising.

· The number of non-carrier appstores jumped to 38 from 8 in the previous year.

· While Asia had the highest percentage of the download share, North America had the highest share of the apps revenue accounting for over 50% of the total revenue.

· The paid ASP in 2009 was approximately $1.9 and the advertising revenue generated from the free applications was approximately $0.09/user/app/year

For a more detailed analysis of the mobile apps market, please see our paper “Sizing the Global Mobile Apps Market”

Others

  • Messaging still accounts for the lion-share of data service 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 gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
  • Nokia dominated the year as usual but the revenue share is shrinking and so is the lucrative smartphone share. Apple, RIM, and Google are relentlessly attacking the top tier while Samsung, LG, and others giving a tough fight for the bottom tier. We see a new middle tier emerging that has the form factor of a featurephone and functionality of a smartphone. The smartphone category is getting further split into regular qwerty smartphones like Blackberry and the touch and full browser based superphones like the iPhone and Droid.
  • The year was dominated by several blockbuster device launches like the iPhone 3GS.
  • Next few years will be big for infrastructure providers as many countries both developed and developing get into upgrading their infrastructure.
  • Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed for bankruptcy last month.
  • In the US, the increase in messaging volume catapulted US as the number one texting nation by messages/user/month going past the long-time leader Philippines.
  • Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines, even though 4G hasn’t been fully defined yet and the current candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps). Many larger operators have laid out their plans for deploying LTE starting this year.
  • We are also seeing regulators playing an active role in making the markets competitive and attractive in the long-term.

· The velocity with which the smartphones are being introduced into the market esp. the western markets, one wonders if in five years, we will be using the moniker to describe devices and if the "dumbness" in the device market will be practically eliminated. Led by Apple’s Appstore success, significant investments are pouring into the appstore world. In parallel, the debate over apps vs. mobile web is intensifying. The implications of the transition will be significant on the ecosystem on many levels.

2010 will be a critical year on many fronts. As usual, 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 2010. The next Global Wireless Data Market update will be released in Sept 2010.

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

US Wireless Data Market Update: Q4 2009 and 2009 March 2, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, IP Strategy, Indian Wireless Market, Intellectual Property, International Trade, Location Based Services, Messaging, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Smart Phones, Strategy, US Wireless Market, Unified Messaging, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

US Wireless Data Market Update - Q4 2009 and 2009

Download PPT | PDF

http://www.chetansharma.com/usmarketupdate2009.htm

Executive Summary

The US wireless data market grew 5% Q/Q and 24% Y/Y to exceed $11.8B in mobile data service revenues and thus exceeded $10B for each of the four quarters in 2009. For the calendar year 2009, the overall mobile data revenues for the US market grew 29% ending at $44 billion for the year (1% shy of our $44.5 billion estimate). For the calendar year 2010, we expect a 20% increase in mobile data service revenues accounting for over $53 billion in service revenues.

Verizon Wireless edged past China Mobile to become the second biggest mobile data operator by revenues.

The US subscription penetration was approximately 92% at the end of 2009. If we take out the demographics of 5 yrs and younger, the mobile penetration is 99%.

The messaging volume increased 7% from last quarter catapulting US as the number one texting nation by messages/user/month going past the long-time leader Philippines.

For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the full calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Apple continued its iTunes juggernaut and if measured by billing relationships (of course not all accounts are mobile) Apple is  now the 10th largest mobile operator in the world.

Q4 2009 reported a 5.9% increase in GDP compared to the 3.5% increase in Q3 when the recession technically ended. While the overall economy is sputtering towards growth, wireless industry in the US remains vibrant as is evident by the increase in revenues and net-adds which jumped more than 5 million for the first time in 2 years.

What to expect in the coming months?

Christmas quarter generally yields best results of the year. Though the US mobile industry came out pretty unscathed from the recession, it will benefit from the improving economy. As such we expect the US mobile data service revenues to gain 20% to reach $53 billion in 2010. Mobile data will continue to be the engine of growth for the ecosystem providing at least 33% of the overall service revenues by the end of 2010.

The furious cycle of device releases is accelerating and one wonders if the longevity of each device is starting to shrink as even the hit devices like Droid and Nexus One are not allowed enough room to fully capitalize on their initial momentum. The app economy has been expanding as well. Part strategic, part hysteria, everyone is jumping into the pool to tap into the app river to pull in some revenues or use it more strategically to sell more devices, services, or advertising. (Stay tuned for more research on the subject in the coming days)

Microsoft is attempting a comeback with its 7 series devices though the delay in handset release as well as the lack of backward compatibility gives enough time for competitors to plan their moves. We are glad to see the industry going past the “PC like icons” for mobile phones (something we have advocating for more than 10 years, most recently in our paper “The Untapped Mobile Data Opportunity.” This will enhance user experience and help in extracting true value out of the mobile devices.

From the various announcements this year, we can expect an action packed 2010. However, it will be also an year of shakeouts with several key M&A transactions that will winnow down the competitive landscape in many segments.

Q1 2010 will also be important from the regulatory point of view with the national broadband plan being unveiled later this month. With the looming spectrum shortage, regulatory bodies can have a significant impact on the competitiveness of a nation. For example, in India, regulators haven’t been able to get their acts together for the past 3-4 years and its citizens continue to suffer from 2G. Similarly, many countries in South America have imposed unnecessary spectrum caps. The industry and regulators need to work hand-in-hand to make progress beyond speeches and paperwork.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (Former FCC Chairman, Kevin Martin will be headlining our Mobile Breakfast Series event on March 10th to discuss the Spectrum Crises).

2010 will also be the year of network expansion with HSPA+, WiMAX, and LTE all coming into play in the US. As we had anticipated last year, the mobile data traffic kept on growing disproportional to the revenues. At the end of 2009, the US mobile data traffic was almost 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, industry will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discussed mobile data traffic in much more detail in our popular paper "Managing Growth and Profits in the Yottabyte Era." We will be issuing an update later this quarter so stay tuned.

It is also good to see the mobile industry expanding into vertical segments like Health and Retail. More discussion to come on these topics.

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.

Against this backdrop, the analysis of the Q4 2009 and 2009 US wireless data market is:

Service Revenues (Slides 8, 17)

ARPU (Slides 9-12)

Subscribers (Slides 13-15)

Applications and Services

Handsets

Policy and Regulations

Open

Data Traffic (Slide 16)

· For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the whole calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Misc.

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 2010. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

New Whitepaper: Mobile VoIP – Approaching the Tipping Point February 17, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, India, Intellectual Property, Japan Wireless Market, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Patent Strategy, Privacy, Smart Phones, Speech Recognition, US Wireless Market, Unified Messaging, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

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http://www.chetansharma.com/mobilevoip.htm

Mobile VoIP - Approaching the Tipping Point

Sponsored by Skype

This paper is a collaboration with Ajit Jaokar (FutureText) in London

Over the course of the last decade, mobile devices have become the most ubiquitous consumer electronic devices ever invented. Even in the poorest of the nations, mobile phones have evolved from being a luxury to an indispensible necessity. The paradigm of communication itself has undergone a significant transformation from just voice to multimode interaction. The trend is also discernable in the revenue numbers from the advanced mobile markets where voice revenue per user have been declining over the course of the last decade while most of the growth is coming from mobile data services. Mobile data services have evolved significantly from simple text messaging to multimode communication involving text, VoIP (voice over IP), video, and other forms of messaging and social networking interactions.

As we head into the next decade, the competitive landscape is going to change from year to year and sometimes even quarter to quarter. For major service providers, competition is no longer just from an operator who provides voice and data services but any company that captures the communication value chain. It is no longer sufficient to rely on voice revenues but providers need to think communications in a much more holistic form. Once the transport layer becomes all-IP in a given network, voice is nothing but another application that will work and interact with other applications in tandem often in real-time. The fear of cannibalization are unwarranted as our research shows that by offering consumers comprehensive services, the lifetime value of customers can be increased, churn can be reduced, and the overall value proposition of the operator increases tremendously.

The forces of technology, business models, consumer expectations, regulatory regimes, competition, and collaboration will help define the communication landscape of the next  ten years. This paper will take a look at the evolution of the Internet, mobile broadband, and mobile communication and how consumer behavior and expectations have changed. Next, the emergence and the role of VoIP is discussed in further detail before we delve into the intricacies of communication economics to dispel some myths and layout the framework for how operators should approach the new communications world.

Given the embrace by major tier-one operators, we believe that mobile VoIP is on the verge of becoming an integral part of the communications framework. This acceptance represents a tipping point in the evolution of mobile VoIP. The ecosystem participants who embrace and collaborate to provide a holistic and comprehensive communication solutions stand to benefit the most.

Download Paper (pdf)

2010 Mobile Industry Predictions Survey January 3, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Storage, Strategy, US Wireless Market, Uncategorized, Unified Messaging, Usability, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 6 comments

2010 Mobile Industry Predictions Survey

http://www.chetansharma.com/MobilePredictions2010.htm

Mobile Predictions Survey (pdf)

Mobile Predictions Survey (ppt)

First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.

Before we dive into the survey results, let’s do a quick wrap-up of the year that was. Well, since we  just completed one heck of a mobile decade, let’s do a quick jog down the memory lane.

The Last Decade: 2000-2009

Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights.

decadeglobal

From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 - phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the i-mode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before.

China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone.

Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Apple’s iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo.

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Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIM’s demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively.

While Microsoft’s Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldn’t count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android.

While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, it’s relative share has started to come down especially in North America and Western Europe.

As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media  consumption to a new level. Data management is going to be big business in the 2010s.

Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.

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The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward.

Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade.

Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets.

The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)

Here is our “subjective” list of movers and shakers of the last decade

2000-2009

2010-2019

Operator of the Decade

NTT DoCoMo

DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years

DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel

OEM of the Decade

Nokia

Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead

RIM, Apple, Nokia, Samsung

Smartphone OEM of the Decade

Apple

Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem

This space will be very competitive with Apple still the gold standard to beat

Infrastructure Provider of the Decade

Ericsson

Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade

Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents

Nation that led in mobile data

Japan

This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed

US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player

Device of the decade

iPhone followed by Razr

iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times

The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize

The year 2009

Apple continued to dominate the headlines for the third straight year - whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Google’s tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare.

While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues.

India outpaced China in net-adds and crossed 500M though it is still quite behind China’s 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction.

US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators.

2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit.

The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan.

Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%.

All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of what’s to come.

On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more.

Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one.

As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring.

11 names were randomly drawn for 3 special prizes. The winners are:

  1. Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device

  2. Michael Libes, CTO, GroundTruth - Open Mobile Book

  3. Henri Moissinac, Head of Mobile, Facebook - Open Mobile Book

  4. Subba Rao, CEO, TataDoCoMo - Open Mobile Book

  5. Saumil Gandhi, Product Manager, Microsoft - Open Mobile Book

  6. Sarah Reedy, Senior Editor, Connected Planet - Open Mobile Book

  7. Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless - 2010 Mobile Almanac

  8. Pinney Colton, VP, GfK - 2010 Mobile Almanac

  9. Tim Chang, Principal, Norwest Ventures - 2010 Mobile Almanac

  10. Laura Marriott, President - 2010 Mobile Almanac

  11. Asha Vellaikal, Director, Orange - 2010 Mobile Almanac

Thanks to INQMobile and my friend Ajit Jaokar for contributing the prize gifts.

Despite conventional wisdom, what will not happen in 2010?

There were many. Sampling - Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells won’t gain traction, RCS will not happen, Google will not enter handset market directly, iPhone won’t lose steam, Android won’t bring coherence, NFC won’t take off, WiMAX won’t disappear, Nokia won’t bounce back, Palm won’t die, “Year of Mobile” noise won’t subside, carriers won’t be delegated as dumb-pipes.

It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc.

However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.

Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to the next decade and seeing many of you along the way.

We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome.

Be well, Do Cool Work, Stay in touch.

Thanks.

With warm wishes,

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

Now onto the 2010 Mobile Industry Predictions Survey Results

The panel comprised of movers and shakers from around the world

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What will be the biggest stories of 2010?

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Jan seems to be the Google Phone vs. Apple Tablet matchup. Our panel though voted for the continued growth in mobile data as the top story.

Have we recovered from the recession? (Please select one)

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Majority thought we are out of it though some might still feel the pinch

Who will be the most open player in the mobile ecosystem in 2010? (Please select one)

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Google has done a great job at maintaining its image as THE open leader

Will Android handset sales exceed iPhone’s in 2010? (Please select one)

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Despite Androids coming in droves, iPhone will still be the king of the hill

When will we see tiered pricing plans for smartphones in the US from tier 1 operators? (Please select one)

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There are indications that this might happen sooner rather than later

What will happen to the mobile prepaid subscriber base in the US? (Please select one)

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Prepaid made a strong comeback in 2009 and a good majority thought that the trend is likely to continue

By how much will the mobile advertising ad-spend increase in 2010? (Please select one)

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Mobile Advertising was the only advertising segment with positive growth last year so it is no surprise that folks expect it to more than double this year

What will be the impact of the FCC’s national broadband plan on the mobile industry in 2010? (Please select one)

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Not much is expected from the various rulings that might come this year with most expecting the courts to have the final word.

Who will be the mobile comeback story of 2010?

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Having bet its future on Android, Motorola was voted as the comeback kid of 2010

What will be the impact of Google Phone?

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It’s pretty clear, Google and Apple are duking it out for the developer mindshare. Google wins in either case.

Which areas will feel the most impact from FCC?

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Net neutrality is the area where they will have the most impact

Which solutions will gain the most traction for managing mobile data broadband consumption?

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While only a holistic approach can provide complete relief, tiered mobile data pricing might have the most impact

When will the carrier-branded appstores lose steam? (Please select one)

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Most expect carrier-branded appstores to be a thing of the past in 2010

What will help mobile cloud computing gain traction in 2010?

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Mobile cloud computing is gaining steam and the reason is storage and media

What will be the most successful non-mobile-phone category in 2010? (Please select one)

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Netbooks seem to be the strongest category followed by eReaders, Tablet, and M2M

What will be the breakthrough category in mobile in 2010? (Please select one)

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Mobile Advertising and Mobile Payments share the top honors

By the end of 2010, which will have more subscribers? (Please select one)

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LTE might have the momentum but WiMAX has the subscribers

How will Netbooks do through the operator channel? (Please select one)

survey20_10

No major impact from the operator channel

Which standards will gain traction?

survey21_10

No major impact from the standards

What mode of mobile payments will get any traction in North America and Western Europe in 2010?

survey22_10

The category will expand in different ways with more items being charged on the operator bill

New Whitepaper: The Untapped Mobile Data Opportunity December 16, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Smart Phones, Speech Recognition, Storage, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

UntappedMobile_s

http://www.chetansharma.com/untappedmobiledataopportunity.htm

The Untapped Mobile Data Opportunity

Sponsored by INQMobile

The last two years in the global mobile market have been truly sensational. Over 1 billion new subscriptions added, over 2 billion new devices sold, and over $300 billion in mobile data revenues. The number of new iconic devices each quarter is on the rise, the consumer engagement is at an all time high and the new startups and entrepreneurs are brimming with ideas and new products. Devices like the iPhone, Storm, Hero, INQ1, Mytouch, Cliq, Droid, N97 and others have captured the imagination of the media like never before. The smartphones or the integrated devices now account for approximately 9% of the global market. However, what’s often lost in the smartphone euphoria is the remaining 91% of the market and the significant opportunity of data-enabling these customers.

Operators who have focused on data services as their core service have benefited with high data Average Revenue Per User (ARPU). As we quickly transition into the hyper growth phase of mobile data services, players who are designing affordable devices and services with "mobile data" in mind are the ones who will benefit from a higher uptick in adoption and sustainable consumer loyalty. However, as operators have migrated from 2G to 3G, many have missed an opportunity to customize or introduce new services that take advantage of devices being mobile, interactive, and always available.

Traditionally, there has been a big gulf between the functionality of featurephones and the smartphones; however, there is an emerging category of devices that will provide the functionality of a smartphone for the price of a feature phone. Though the average selling price or the ASP of the smartphone has been dropping, the price is still high for a significant majority of the global subscriber base. Consumers who are looking for a sub $50 device still want to the access applications such as Facebook, Twitter, Google search, and make VoIP calls, etc.

In this paper, we will look at the opportunity to attract the 91% of the global user base into the mobile data ecosystem. We will quantify the opportunity, examine what this opportunity means to the mobile value chain specifically to the mobile operators and discuss the success factors to accelerate the migration of non-active data users into the data realm.

Download Paper (660 KB)

Roundup of second Mobile Breakfast Series event – Mobile Broadband December 6, 2009

Posted by chetan in : 3G, AORTA, ARPU, CTIA, Carriers, Indian Wireless Market, Infrastructure, Location Based Services, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Mobile TV, Mobile Users, Mobile Wallet, Networks, Speaking Engagements, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

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The second Mobile Breakfast Series Event was held at the picturesque Harbor Club in downtown Seattle on Dec 4th. The topic was “The Impact and Evolution of Mobile Broadband.” The lineup of speakers was awesome with who’s who of the mobile broadband world opining about the state of the industry, the opportunities, and challenges posed by the growth in mobile broadband:

Neville Ray, Senior Vice President of Engineering, T-Mobile USA

Hank Skorny, Senior Vice President, Media Cloud Computing and Services, Real Networks

Ken Denman, CEO, Openwave

Dow Draper, Vice President, Technology Partnerships, Clearwire

Charlie Martin, Wireless CTO, Huawei Technologies

Stacey Higginbotham, Senior Writer, GigaOM (moderator)

First of all, a big thanks to our generous sponsors: Motricity, Openwave, and Clearwire of supporting the event series. I am happy to report that Motricity has signed up to be the sponsor for the entire 2010 season. So, thanks Jennifer Moranz and Brendan Benzing. Thanks also to Ken Denman and Lupe Downing at Openwave, and Jeff Giard and Scott Richardson at Clearwire for their support. Thanks also to our esteemed panelists who have taken the time out of their busy schedules to be here with us this morning, esp. Ken, Charlie, and Stacey who had to hop on a plane to be at the event. Also, thanks to GigaOM and Moconews for being such terrific media sponsors.

As our operators continue to enhance the infrastructure both in the US as well as abroad, it is creating new opportunities and challenges for the industry. As you know, our friends at the FCC are also very consumed by the task of creating a National Broadband Policy and mobile is a key component of that proposal.

It was one of the best discussions on mobile broadband I have heard all year long. Panelists were really frank and insightful.

The salient points of the 90 minute discussions were:

Also, Tricia Duryee does a good summary of the discussion at Moconews

Our next event is looking to be another sellout affair with tech titan Rob Glaser, Founder, Chairman, and CEO of Real Networks headlining the event. Be sure to register early to avoid any sellout blues. Date: March 10, 2010.

Until then, a very happy new year to you and yours and have a terrific holiday season that helps you prepare for a successful 2010.

CTIA Wireless IT & Entertainment Roundup 2009 October 12, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Smart Phones, Speaking Engagements, US Wireless Market, Unified Messaging, Wireless Value Chain, Worldwide Wireless Market , 3 comments

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CTIA San Diego Roundup

San Diego is a casual town so this year’s CTIA fit nicely with an equally casual show, that felt more like a networking party sprinkled with some striking keynotes and engaging sessions. However, the biggest tremors were felt a day before the event started with Verizon getting in bed with Google and AT&T embracing VoIP with open arms. FCC’s curiosity into the wireless world has yielded more action in 3 months than many years combined before. I was drawn more to the policy debate and the implications to the wireless industry in the US and to the rest of the world. There was intense discussion on appstores and their place in the future, mobile advertising and its maturity, enhancing retail experience, accelerated growth in mobile health in recent times, and of course the tremendous growth in the US wireless data market but if you already knew that. This note summarizes the observations and opinions from the event, discussions, and briefings.

A friend of mine at the FCC invited me to the FCC Broadband Field Hearing occurring simultaneously with the CTIA at the University of San Diego. I am glad I went. The first panel was on the App Ecosystem with a diverse panel of industry verticals – rural, public safety, health care, environment, air quality, health care complimented by the discussion of the iPhone and its impact on the mobile industry. Chairman Julius Genachowski is to iPhone what President Obama was to Blackberry. He described his love for the apps with tender affection.

I am finding that the whole process of broadband planning to be quite interesting. The proceedings have been open and participatory, interest and feedback has been intense, and the principles have been clearly stated. This helped with a broader question that my CTO team for the FiREGlobal panel (to be held on Oct 15th) is addressing. We are tasked with a unique challenge of coming up with technology solutions for better civic discourse and our team consists of experts in the public and private enterprise to give a set of recommendations. We are currently under intense discussions and will unveil our suggestions on thursday. Stay Tuned.

Coming back to the FCC talk, Julius described four key principles:

  1. Most importantly he described the spectrum shortage as a looming crisis and that additional spectrum capacity is needed to handle the demand of data traffic from data cards and smartphones (something we have illustrated in detail in our paper - "Managing growth and profits in the Yottabyte era")
  2. Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
  3. Codify and enforce net-neutrality policies
  4. Operate more openly

While 1) and 2) have been discussed in the industry for some time, it is the mention of 3) and 4) that has changed industry in more ways than one. AT&T’s Ralph de la Vega took the stage after the Chairman and gave a spirited defense of the industry that requires no regulation. Frankly, the mere mention of the word "open" has had quite an impact on the industry in last 3 months. (I will be moderating two panels at the upcoming Open Mobile Summit on "What open means to apps providers" and "Apps in the cloud" in Nov, 2009)

Of course, as always, it is from the details that the devil flexes it muscles. How FCC will end up defining "open," "net neutrality," "network management" and other key items will determine the course of the industry. I wrote a piece that appeared in RCR Wireless “Defining Mobile Broadband” that outlined some of the same principles but from an operator strategy point of view suggested a much broader strategic imperative of building intelligent platform to survive long-term. The recommendations we made in our Yottabyte paper are being adopted and discussed much more openly since it was released in July. Due to significant interest, we will some follow-up research on the topic in the coming days, so stay tuned. I will be giving a ISACA luncheon keynote on the topic on Oct 20th. Of course, our Mobile Breakfast Series panel on mobile broadband will delve into the details of the broadband ecosystem on Dec 4th. Be sure to register.

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Each year our small community in Issaquah, WA celebrates a festival “Salmon Days.” As I was strolling around the hatchery, it helped me prepare for my talk on the Appstore ecosystem. The fish traveling upstream has several parallels to the developers trying to make in the 80,000 db appond. So, I focused my talk on how the ecosystem needs to come together urgently to build the fish ladder to give more developers a chance to make it to the next level to create a vibrant and sustainable ecosystem. While Microsoft’s mobile strategy is disarray right now, they are one of the few companies who understand the caring and feeding of the developer ecosystem (another one is Ebay). If the ecosystem focuses primarily on their profits and margins, the rich ecosystem might be at a risk of collapsing.

I discussed several factors that can help foster a healthier ecosystem starting with fish ladder. If you are interested in the presentation, please drop me a line. There was pretty good discussion from some experienced and successful developers. The emergence of appstore mania has been a double-edged sword. Developers are back in demand but their attention is finite and they are forced to allocate resources accordingly. I was also surprised to find out about the level of piracy and counterfeit goods in the appstore and how little is being done to protect legitimate developers. Some of the ladder factors I discussed were: greater revenue share, connection with investors, iTunes and carrier billing, location and presence, user profile and context, reports and analytics, $0 signup and certification, better search and discovery, social interaction and virality, flexible payment and billing models, better networks and devices, reduced fragmentation, more open APIs and marketing dollars. If you are interested, drop me a line and I will send you the ppt.

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I also had a chance to moderate a panel on Mobile Advertising and the current state of affairs. While mobile advertising is the only advertising sector that has shown growth this year, it is not breaking out to stand on its own. Large media companies are primarily looking mobile as a complimentary channel though they are clearly enamored by its potential. Lack of clear, uniform, auditable metrics is another issue though various industry bodies have been working together and some guidelines are expected to be released next quarter.

Overall, the show felt like a sponsored networking party with hardly any new announcements, the show floor was easier on the feet, the attendance was down again. However, the hallway conversations and running into friends and colleagues from the distant past is always priceless. The only newsworthy highlight for me was the emergence of mobile healthcare and mobile retail as separate categories at CTIA. There is clearly much potential and interest in these areas. We will have more on these topics in the coming months.

Some of the news worth items were:

It was great catching-up with friends and colleagues. Looking forward to the next one.

Roundup of the first Mobile Breakfast Series event September 29, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, Carriers, Enterprise Mobility, European Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Users, Privacy, Speech Recognition, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

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The views from the venue are stunning both at the crack of dawn and as the sun lit the valley

The first Mobile Breakfast Series Event was held at the beautiful Newcastle Golf Club on Sept 22nd with our elite panelists - Marianne Marck - SVP, BlueNile, Michael Mace, Principal, Rubicon Consulting, Mike Woodward, VP, AT&T, and Jim Hudak, VP & GM, INQMobile. Before I get into what was discussed, would like to thanks the founding sponsors - Openwave, Motricity, and Clearwire who stepped in right away to make the Mobile Breakfast Series possible. Also, Jeff Giard and Brendan Benzing helped shape the event along the way. Finally, thanks to the extended pacific northwest mobile community for such a tremendous response. Hope you guys keep coming back for more.

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The diversity and the experience on the panel was apparent. Mike Woodward has a long history with ATT and has been managing the broad device portfolio for the company. Michael Mace with Rubicon worked with Palm and Apple and is a veteran of the mobile industry cycles, Marianne Marck with BlueNile has seen the growth of mobile digital content like few have and brought in the perspective from the developer and content provider point of view. Finally, Jim Hudak has worked in a wide variety of roles and is now with INQMobile which won the best handset award in Barcelona. This gave us a good forum to explore the various aspects of our evolving industry (Moconews coverage here).

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The salient points of the 90 minute discussions were:

· The panel thought the big opportunities are in:

o Specialized devices, though there is little VC investment in the area, there is an opportunity to build something unique by verticals or segments

o Network Optimization and Management, given the tremendous growth in mobile data usage, more technologies are needed to effectively manage the growth

o Besides voice and data, location based services represent the biggest opportunity in mobile

o Empower Impulse buys, embed technology to make it simple for users to buy

o Taking advantage of the mobile browser economy. Companies like Skyfire are expanding the capabilities of the browser that enables better application reach and penetration

· ATT has experienced 5000% growth in mobile data usage in the last 12 quarters. And it is good for business but the future growth needs to be more effectively managed.

· Mobile data is clearly taking off but are there limits to this growth? Will everyone pay $50/month extra? It is probably not for everyone.

· LTE brings down cost of delivering the bits. If EDGE costs $1 to deliver one MB, then HSPA costs 13c and LTE is around 3c. There is significant motivation to move towards LTE.

· While the total number of apps downloaded have exceeded 2B, it is not clear if there are new companies emerging out of the app economy. Developers are still struggling to make ends meet and if we don’t cultivate the ecosystem, very few will be left at the end of the day

· For developers, browser provides the broadest reach but for some apps the richness of the feature/functionality is only available in client apps. Over the long run, browser platform is preferable and is likely to win out.

· Carrier billing is essential for the app economy to survive. Not everyone has iTunes interface for their appstores.

· Femtocells/WiFi play an important role in offloading traffic and providing consumers with better bandwidth and coverage options.

· 75% of ATT’s devices are converged devices. Significant uptick in the last few quarters. Data consumption has been growing as a result. ATT is investing $18B or so in upgrading the network as well.

· Mobile OS becomes less relevant over time.

· Cloud Computing is important for mobile to help with network management, storage, and user experience.

· Microsoft was a freakish event in history, something similar is not going to happen in the mobile space and the fragmentation is not going to go away any time soon.

· Developers like to get access to UI APIs that give them more control over the user experience. Access to location

· Mobile advertising promising but not there yet. Metrics and standards issues need to be worked out.

· TV is a passive experience, Online is less passive, and Mobile is interactive experience. We should be designing apps and services keeping that in mind.

· Handset has become a software business. Companies not having a concrete s/w strategy will be exposed

· We live in interesting times

If you liked the first event, you would love the next one.

The topic is Mobile Broadband and we are getting some of the top notch experts to discuss the very important evolution of the global mobile broadband markets. Date: Dec 4th.

Our good friend Om Malik has kindly consented to moderate the event. Current confirmed panelists are Scott Richardson, former Chief Strategy Officer and now Strategic Advisor at Clearwire and Ken Denman, CEO of Openwave. More panelists to be confirmed in the coming days. Registration is open at http://mobilebreakfastseries.com/

Finally, we would love to hear your feedback. Please help us shape the event and make it your own. How can we make it better? What topics would you like to see discussed? Which speakers would like to hear from? What venues work best for you, etc? Answers will help shape the future events so every bit of feedback is much appreciated. If you could please take a short survey and let us know what you thought of the event as well any guidance on future events, that will be great.

Thanks and see you on Dec 4th.

New WhitePaper: Managing Growth and Profits in the Yottabyte Era July 14, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, MVNO, Mergers and Acquisitions, Mobile Advertising, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Smart Phones, Speaking Engagements, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

Managing Growth and Profits in the Yottabyte Era

yottabyte_cover_s

Executive Summary

In Q1 2009, the US market exceeded $10B in quarterly mobile data service revenues for the first time. The subscription penetration in the US is well past 90% and the mobile data usage is on the rise. While the rate of new subscriptions has slowed, the pace of innovation is going very strong. It is quite apparent that the mobile industry is going through a significant transition from voice to data, from making calls to getting lost in applications and from voice communications to multimedia communications. Helped by the ever expanding wireless broadband networks, and release of hit devices every quarter, and consumer’s insatiable appetite for information and content has brought us to the surge of a data tsunami that will shake the industry to its core.

yb1

As everything moves to digital, information repositories across the web are almost doubling every day moving rapidly to the yottabyte (YB) era. The information and the desire and the capability to consume oodles of data is increasing exponentially. As a result the traffic – both Wireline and wireless is also increasing at a predictably fast rate.

In 2009, the global yearly mobile data traffic will reach a new milestone – 1 Exabyte(EB) or 1 Million Terabytes (TB).By 2016-17, the global yearly mobile data traffic is likely to exceed 1 Zettabyte (ZB) or 1000 Exabytes. By 2014, in the US alone, the total yearly mobile data traffic is likely to exceed 40 EB. How do you go about managing such growth in a profitable manner when the cost of supporting such traffic will increase exponentially despite the move to 4G? Will the move to LTE offer some respite?

This paper discusses the analysis done by Chetan Sharma Consulting on the growth of mobile data traffic in the US market and how the ecosystem can apply some strategies to manage growth and profits. We built detailed models to estimate the rise of mobile data network traffic and discuss some solutions to handle such growth in this paper.

Download Paper

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this paper are our clients.

US Wireless Data Market Update - Q1 2009 May 11, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Speaking Engagements, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

US Wireless Data Market Update - Q1 2009

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http://www.chetansharma.com/usmarketupdateq109.htm

Executive Summary

The US wireless data market grew 5% Q/Q and 32% from Q108 to reach $10B in mobile data service revenues. It marked the first time the US market has crossed the $10B milestone. Given the strong growth in data revenues shown by the top carriers and the increase in service revenues overall, it appears that at least for the time being that the worst is over for the mobile industry. In summary, the recession has been all but a tiny blip (from the service revenue perspective) in its growth trend and the US mobile market has weathered the downward spiral in economy better than its counterparts in other developing nations.

The US subscription penetration went passed 90%. While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven’t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending will stay strong in 2009 given the activity around 3G/4G deployments and trials. As expected, the data card subscriptions were hit the hardest and there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers.

As we mentioned in our last research note that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last couple of months along with better than expected Q1 2009 earnings from corporations, the mobile industry seems to be back on track. While the structural flaws in various industry segments remain, and the economy is a crisis away from the double dip, the outlook for the remainder of 2009 remains bright and we are expecting the overall data revenues to now increase by 24% compared to 2008.

US Wireless Industry in Recession - The light at the end of the tunnel might not be of the oncoming train

Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

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. Q1 2009 reported a 6.1% decline. On an yearly basis, the GDP is expected to change by 3.2% for 2009 and the service revenues are expected to  account for 1.13% of the US economy by year-end.

As mentioned in the previous report, while in the past, the recession hardly impacted the wireless industry, this time around; it is going to be more tied to the recession. In the past couple of months, the consumer sentiment has improved and the Q109 earnings have been better than expected. While there are still many structural flaws in the financial and housing industries and the unemployment is at a 25 year high of 8.9%, consumers are feeling better about the economy and their own prospects in it. Most companies are being optimistic but cautious.

So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index experienced a significant jump to 39 (relative scale of 100) from being at an all-time low of 25 in February.

Given that consumer sentiment is improving, it appears that US mobile data market is all but back from the recession. While some segments within the mobile industry might be suffering, there has been an increase in spending overall.

What to expect in the coming months?

We noted in our Q3 2008 note that we will get a better picture of the impact of the recession on the wireless industry in Q109 as it was the first full quarter after the seasonal holiday quarter. There are two micro trends that are clear. First, as expected, due to the high unemployment, the data card segment took a hit. It will recover in due course as more of the workforce comes back over in the next 18 months.

Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid constituted 61% of the net-adds in Q109 up from 57% in Q408 and 25% in Q108. It is not clear if the good times will bring back the prepaid subscribers to the postpaid realm or like the consumers who are canceling their landline connections and moving to mobile, these customers will get used to savings and the prepaid lifestyle.

It is quite likely that 50-60% of such consumers don’t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues someplace else (or maybe they can hire Oprah to send a tweet to her followers to upgrade to Postpaid. It will crash the system but increase the ARPU).

Rising unemployment continues to accelerate another trend - landline replacement by Mobile which reached almost 22% by Q109 (of course this benefits the mobile industry). This trend is irreversible and requires fresh thinking.

Messaging continues to grow. The messaging volume jumped 27% and messaging revenue was up 7% QoQ. The data access (excluding data card) including flat rate data plan subscriptions have also show significant strength lately. In addition to smartphones, we are also seeing increased mobile data activity amongst feature phone users.

The positive factors are helping negate the negative factors and given the strength of 3G and smartphone adoption, the increase in activity on the appstores front, and in general, a better awareness of mobile data services and applications amongst consumers, any decline due to the loss of data card revenue and postpaid transition to prepaid accounts has been taken care off. In particular, Verizon and AT&T have done really well. 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.

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 ARPU mix by the end of 2009 reaching over 30% of the service revenues.

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.

Coming back to the 2009 forecasts, we are raising our estimates for the mobile data service revenues to $42B for the year. 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.

Against this backdrop, the analysis of the Q109 US wireless data market is:

Service Revenues (Slides 11, 18)

ARPU (Slides 12-15)

Subscribers (Slides 16-17)

Applications and Services

Handsets

Misc.

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 US Wireless Data Market update will be released in Aug 2009. The next Global Wireless Data Market update will be issued in Sept 2009.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

Global Wireless Data Market Update - 2008 April 28, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, European Wireless Market, India, Indian Wireless Market, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Global Wireless Data Market Update - 2008

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http://www.chetansharma.com/globalmarketupdate2008.htm

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding over 20M new subscriptions every month. India crossed the 400M subscription mark this month while China whizzed past 650M in Q109. Overall, the global subscriptions penetration edged past 60%. During 2008, revenues further tilted towards data services, increasing 17% from 2007 EOY. The overall global mobile revenues (including equipment) for the year reached the 1 Trillion dollar landmark in 2008, with over $830 billion attributed to services revenues. Data revenues now account for over 20% of the global service revenues.

For some leading operators, data is now contributing close to 40% of the overall revenues. However increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated in 2008. The US market expanded its lead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months to come.

The success of Apple’s Appstore (1B downloads in 9M across 37M devices is not surprising but still impressive, look for another growth bump in July) led to appstore mania across the ecosystem with every major player in the ecosystem holding ambitions for Applesque success leading to healthy competition and hopefully more innovation. Google’s Android also kept the industry chatter on the high with a slew of new devices slated for 2009. The ease of use of applications developed for G1 on the new devices will define Android’s role in the ecosystem. If successful, it will decimate the weaker ones from the equation going forward.

WiMAX vs. LTE debate took over the EV-DO vs. WCDMA talk and while the majority of the industry is consolidating around LTE; open-platform advocates are watching the arrival of WiMAX with great interest. However, the down economy is delaying the establishment of Clearwire’s nationwide footprint.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.

This note summarizes the findings from the research with added insights from our work in various global markets.

Service Revenues

ARPU

Subscriptions

Others

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

Ps. We will have an update on the impact of recession on the mobile industry in our US Q109 update next month.

Mobile Industry Predictions 2009 January 1, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, Gaming, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Privacy, Speaking Engagements, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

Mobile Industry Predictions 2009

http://www.chetansharma.com/MobilePredictions2009.htm

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First things first. From all of us at Chetan Sharma Consulting, wish you and yours a very happy and prosperous 2009.

Before we get into what’s to come, let’s do a quick wrap-up of the year that was.

While 2007 was remembered as “the year of the iPhone,” in 2008, though iPhone and Appstore again dominated the headlines as “Touch” became the new black, iPhone shared the spotlight with Android and the resurgent RIM. The deafening roar of “Openness” that started to bubble up during Q407 permeated the ecosystem in 2008. Responding to the iPhone, OEMs raced to introduce Touch phones - Instinct, Armani, Storm, N2, Glimmer, Vu, G1, Diamond, Dare, N97, 5800, and others.

Apple reached its 10M goal a full quarter early and Gphone’s 1M number was impressive. The Clearwire deal was consummated though it meanders through the clouds of uncertainty. Blyk continued to defy expectations. We made significant headway in energizing the mobile advertising sub segment but the tough problems of privacy, education, control, fragmentation, and user experience remain. LBS picked up steam and mobility started to get into the alternate consumer device universe which with the help of Amazon kindle and PNDs have started a new chain of AORTA devices.

In terms of actual numbers, the mobile industry exceeded 1 Trillion USD in revenues for the first time with services revenue making up 80% of the mix and 20% being contributed by infrastructure, handsets, and misc. Several operators are now exceeding $2B/quarter in data revenues.

Several subscription milestones throughout the year: 50% penetration, almost 4B worldwide, 600M China, 300M India. India and China both added more than 100M subs in 2008. As expected, 3G crossed the inflection point in the western markets (30%+ penetration) while in Korea and Japan, it was getting hard to find people without 3G (85%+ penetration). Mobile web penetration is above 25% and is becoming quite significant.

Thanks to the iPhone, we seem to have settled on sub-$200 smartphones with race to $150 and $100 on the cards. Flat-rate data subscriptions went above 10% in the western markets. Over 20% of the global service revenues are not dependent on data while non-SMS revenues surged past 40%. With the advent of Femto and UMA, we might see a new front in the battle for the digital home, esp. as bundling and quad-play offers become common place and convergence starts to take different shapes, forms, and business models. Carriers are starting to worry about mobile data usage and looking for alternate strategies and business models. Chinese OEMs started to become more dominant and started to win some major accounts. Don’t be surprised by a major acquisition by them in 09.

Among other events of significance: Mobile TV continued to suffer from highpricendititis, Helio shut down, China and India delayed 3G, WM got updated as MS got behind, Yahoo cemented some impressive operator deals as GYM got more active in mobile, Microsoft entangled Yahoo in a mating dance, Mobile Open got into the industry physce, 700 MHz auction drama ensued, Beijing Olympics rocked, SMS handed the presidency to Obama, Whitespaces and FCC tangled, LTE dominated, UMB died, Admob exponentiated, M&A slowed, IP scuffles continued, over 1.2B new devices shipped, Nokia sold more than 100M devices in each quarter, Samsung surged, Motorola pondered, AT&T iJoyed, Vodafone said Namaste India, US edged past Japan in mobile data revenues, DoCoMo continued to dominate the mobile data revenues rankings, India edged past US in total mobile subscribers, Mobile Facebook spread, Twitter tweeped, Symbian went open source, Sequoia panicked, INQ launched, Economy tanked, WalMart started selling iPhone, Palm got a lifeline, Change was in the air.

We covered these is much detail in our regular industry research notes, books, whitepapers, blog posts, speeches, panels, and more. Look forward to continuing the conversation this year.

2009 will also be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that industry movers and shakers participate. Executives and insiders (n=200) from leading mobile companies across the value chain and around the world opined to help us see what 2009 might bring.

Six names were randomly drawn for one of our three books released in 2008 (Mobile Advertising, Enterprise Mobility and Wireless Broadband)

The winners are:

  1. Akio Orii, CFO and VP, Toyota

  2. Declan Carew, New Product Strategy Manager, Vodafone

  3. Helen Keegan, Consultant, Beep Marketing

  4. Rich Begert, CEO, Singlepoint, and

  5. Russ McGuire, VP, Sprint Nextel

  6. Jonathan Ebinger, General Partner, Blue Run Ventures

Congrats and Thank You.

Now onto the survey results.  The makeup of the respondents below:

survey1

survey2

Will we see a pull-back in mobile data spending globally/in the US?

survey3

The wireless data industry has been somewhat unharmed so far (though OEMs and Infrastructure providers are bearing the brunt of the economic storm). Flat rate pricing, smartphones, 3G networks, better UX are all helping in the continued surge of mobile data consumption and hence revenues. Most expect that though we might see some scaling back in mobile data spending, overall, the growth will continue. The global markets will be slightly better off than the US.

Will Android handset sales exceed iPhone’s in 2009?

survey4

The overwhelming majority thought that iPhone will continue to dominate Android in 2009 though 2010 could be a different story. Android has had a good start and if the number of handsets keep on increasing with more carriers carrying it in more countries, Android might not exceed but can come awfully close.

Mirror, Mirror on the wall, who will be the most open of them all?

survey6

“OPEN” was the biggest buzzword of 2008 though it means different things to different people. Almost everyone thinks, Google is likely to set the agenda on “open” for others to follow.

Will Apple launch new iPhone models in 2009?

survey5

The answer is yes but will they be just minor upgrades or shake-the-market new models. With Android, Nokia, and RIM breathing down its neck, Apple will need more than just upgrades to maintain the limelight.

Will Mobile Advertising see a rise in ad-spend in 2009?

survey7

There might be some slow down but mobile advertising ad-spend will keep on increasing. Targeting capability is increasing and CPMs are coming down making for a more efficient mobile channel for advertising. In our own work, we have seen brands fall into two camps: one who are scaling down on inefficient channels like print and radio and moving money into digital including mobile and the others who don’t have quite the appetite for mobile and want to keep investing in channels that they are most familiar with.

Will India and China launch nationwide 3G in 2009?

survey8

After many years of delay, the two powerhouses set to launch 3G in 2009. China with TD-SCDMA/WCDMA and India with WCDMA are set to doll out some of the largest contracts seen in the industry.

Will Mobile Payments get any traction in North America and Western Europe?

survey9

The plans for mobile payments launch will get pulled back a bit due to the economic crisis. Limited rollouts and trials to continue. Some progress will be made in international mobile remittances.

Will Microsoft launch its own mobile phone?

survey10

Will they, Won’t they? How can they not? The probability increased from last year for an Mphone coming to a store near you. But, with the boeingification of Microsoft, it is hard to get any decisions to the market quickly.

Will Clearwire meet the 1.3 million subscriber target in 2009?

survey13

The economic climate might force slow-down of expansion and thus the optimistic subscriber forecasts could be impacted.

Will Mobile Open Source mitigate fragmentation?

survey14

Not a clear cut answer. Depends on how other versions of Android phones do in the market and if the application development remains a challenge across the Android and Symbian family of devices.

Will cable companies make a major play in wireless in 2009?

survey15

Quad-Play is the name of the game. Cable companies have invested half-heartedly thus far. 2009 might be the year they move in aggressively.

Will Microsoft buy RIM?

survey11

RIM has become too big and powerful to be consumed by Microsoft easily but desperate times call for desperate measures.

Will Obama’s administration have a major impact on network neutrality and open networks debate?

survey16

Not a priority for now. No high expectations, just regular bureaucratic grind.

Will carriers start launching Apple/Android style appstores?

survey17

Opinions remain divided. I think most are tempted to build but will outsource the development.

Will Microsoft make windows mobile free to OEMs?

survey12

Android (and to some extent Symbian) has pushed Microsoft in a corner. Will it preempt the demise of its pricing strategy? Reduction in price might be the safest bet at this time.

Will the smartphone penetration hit the inflection point in the western markets?

survey18

We are getting to that inflection point. 2009 seems to be the year with major implications for the ecosystem.

Will UMA/Femtocells cement their place in the mobile ecosystem?

survey20

As 3G networks get burdened by data usage, carriers will look to making UMA and Femtocells as a critical piece of their network strategy

Will consumer privacy and data security rise to be one of the important issues of 2009?

survey19

Privacy? What Privacy? Another celebrity mishap might pull this issue to the front burner.

Despite conventional wisdom, what will not happen in 2009?

There were many. Sampling - Microsoft will not buy Yahoo. US Cellular will not be sold. Global economy will not recover in 2009. LTE won’t be commercially deployed. India and China will struggle to get substantial progress with 3G. Motorola will not breakup. Nortel will not disappear. 2009 won’t be the year of mobile advertising.

It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, OpenSocial, GF/FB Connect, Comes with Music, Mobile Widgets, Mobile 3.0, LTE, MIDs, Off-portal, Embedded Mobile, M2M, and others.

However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.

Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in “interesting times” with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to 2009 and seeing many of you along the way.

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

Global Wireless Data Market Update - 1H 2008 September 28, 2008

Posted by chetan in : 3G, 4G, AORTA, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Gaming, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, MVNO, Messaging, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Smart Phones, Speaking Engagements, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

 

Download PPT (1.9M)

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http://www.chetansharma.com/globalmarketupdate1H08.htm

Global Wireless Markets continued to grow rapidly especially in India and China where the carriers are adding over 9M new subscriptions every month. India crossed the 300M subscription mark in Aug while China whizzed past 600M in September. Overall, the global subscriptions penetration edged past 50%. During the 1H 2008, revenues further tilted towards data services. The overall global mobile revenues (including equipment) for the year are likely to reach the 1 Trillion dollar landmark later this year (enough to bailout an economy or two), with approximately $800 billion attributed to service revenues. Data revenues now account for almost 20% of the global service revenues.

For some leading operators, data is now contributing close to 40% of the revenues however increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated for 1H 2008. Japan remains the envy of the global markets and the nation to study and learn from w.r.t. new services and applications. The US market expanded its lead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months to come.

Buoyed by the global launch of iPhone, Apple is likely to eclipse the 10M goal in Q308. Its App-Store launch along with Android’s imminent arrival dominated the news. Other manufacturers also introduced challengers to iPhone, most notably, Instinct by Samsung on the Sprint network which has also been quite successful in getting users to engage in data services.

WiMAX vs. LTE debate took over the EV-DO vs. WCDMA chatter and while majority of the industry is consolidating around LTE; open-platform advocates are watching the arrival of WiMAX in the US with great interest. Google, Sprint, Motorola, TWC, Comcast and others put new life into the experiment called Clearwire.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.

This note summarizes the findings from the research with added insights from our work in various global markets.

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

New Book: Enterprise Mobility: Applications, Technologies and Strategies August 24, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Networks, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Strategy, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

IKSMCover-s

Enterprise Mobility: Applications, Technologies and Strategies

IOS Press

Chapter Contribution

“Enterprise mobile product strategy using scenario planning”

SAMIMUNEER (SAP) and CHETANSHARMA

Download Chapter (154 KB)

http://www.chetansharma.com/enterprise_mobility_scenario_planning.htm

Each year, we work on strategies and product plans for our clients around the world that end up touching millions of consumers worldwide and do behind-the-scenes research, due-diligence, and analysis work on several critical deals and transactions that move our industry forward. But, rarely do we talk or write about them, due to obvious reasons.

However, last year, I got an opportunity to briefly write about some of the strategy work. On the request of Dr. Basole at Georgia Tech, my colleague Sami Muneer (Sr. Director, Enabling Solutions at SAP – responsible for all things mobile) and I drew from some of the long-term strategy and product planning work we had done for SAP to put together a paper on “Enterprise mobile product strategy using scenario planning.” SAP is the leading global enterprise player and their view of the world is both comprehensive and long-term. It was a privilege to work with their global team on the project.

Our paper is being published as a chapter in the just released book “Enterprise Mobility: Applications, Technologies and Strategies” (IOS Press, Amsterdam. 272 pages, Editor R. Basole, 2008) as part of The Tennenbaum Institute Series on Enterprise Systems. The chapter is also being published in the special issue of peer-reviewed International Knowledge Systems Management (IKSM) journal published by Georgia Tech.

The book is a collection of 13 chapters from academics and practitioners in enterprise mobility. I often use scenario planning techniques when doing long-term strategic assessment and forecasting. In this chapter, we hope to provide a framework for scenario planning in mobile that can go across verticals, applications, and services.

You can download the chapter here.

IKSM is making available all the chapters online (for free) if you register for a free one year subscription.

For those interested in reading the paper copy can order the book here.

Book Introduction

As the number of enterprises using mobile ICT increases, it becomes imperative to have a more complete understanding of what value and impact enterprise mobility has, what drives and enables it, and in what ways it can and will transform the nature and practices of work, organizational cultures, business processes, supply chains, enterprises, and potentially entire markets. Enterprise mobility is therefore a topic of great interest to both scholars and practitioners. Enterprise Mobility: Researching a new paradigm aims to contribute to and extend both our theoretical and practical understanding of enterprise mobility by exploring the necessary strategic, technological, and economic considerations, adoption and implementation motivators and inhibitors, usage contexts, social implications, human-centered design issues, support requirements, and transformative impacts. The main objective is to discuss applications, technologies, strategies, theories, frameworks, contexts, case studies, and analyses that provide insights into the growing reality of enterprise mobility for scholars and practicing managers. This volume contains thirteen articles from leading scholars and practitioners and includes an examination of the changing nature of work, work practices, and the work environment; a discussion of critical enablers of enterprise mobility; authors exploring strategic considerations; and insightful case studies of enterprise mobility across multiple domains. Together, the articles explore enterprise mobility across the entire continuum.

Enterprise mobile product strategy using scenario planning

Author(s): Sami Muneer and Chetan Sharma

The Mobile industry is changing at a rapid pace and so is the behavior of enterprise workforce which uses mobile technologies. When planning for a long-term product roadmap, one has to consider a myriad of evolution trends and forecasts to determine the probable list of product functionality and their introduction timing in the lifecycle of the product. One has to look at the technology trends by market, the competitive landscape, and the mobile worker adoption trends. However, one can only come up with a prioritized list of capabilities by taking into context the company’s own core competencies, skill sets, and overall mission. This paper looks at how mobile product companies can use scenario-planning methodology to formulate their product strategy and roadmap.

The listing of the chapters is as follows:

Your feedback is always welcome.

Thanks.

Chetan Sharma

Global Wireless Data Market Update 2007 March 27, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, European Wireless Market, India, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Partnership, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 8 comments

Global Wireless Data Market Update 2007

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http://www.chetansharma.com/globalmarketupdate2007.htm

As you read this End of Year (EOY) 2007 Global Wireless Data Market update this week, somewhere in India, a new subscription will catapult India over the US as the number 2 global wireless market. 2007 was a banner year for global wireless data market. The global service revenues for the year touched $700 billion, the data service revenues were more than $120 billion, China signed its 500 millionth subscription, and both India (in feb 08) and the US crossed the 250 million subscription mark. 2007 continued to enhance mobile datas role in the operator ecosystem with approx 17% of the revenue is coming from data services.

For some leading operators, data is now contributing up to 35% of the revenues however increase in data ARPU is not completely offsetting the drop in voice ARPU. From the true and tested SMS messaging to new services such as Mobile TV, Enterprise apps, and others, different services helped in adding billions to the revenues generated for 2007. Japan and Korea remain the envy of the global markets and the countries to study and learn from w.r.t. new services and applications. The US market has been steadily making strong comeback and for the first time exceeded Japan in service revenue generated from mobile data.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India. This note summarizes the findings from the research.

Your feedback is always welcome.

Chetan Sharma

Disclosure: Some of the companies mentioned in this note are our clients.