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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

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 , 5 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.

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.

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.

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:

Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device
Michael Libes, CTO, GroundTruth - Open Mobile Book
Henri Moissinac, Head of Mobile, Facebook - Open Mobile Book
Subba Rao, CEO, TataDoCoMo - Open Mobile Book
Saumil Gandhi, Product Manager, Microsoft - Open Mobile Book
Sarah Reedy, Senior Editor, Connected Planet - Open Mobile Book
Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless - 2010 Mobile Almanac
Pinney Colton, VP, GfK - 2010 Mobile Almanac
Tim Chang, Principal, Norwest Ventures - 2010 Mobile Almanac
Laura Marriott, President - 2010 Mobile Almanac
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

What will be the biggest stories of 2010?

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)

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)

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)

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)

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)

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)

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)

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?

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

What will be the impact of Google Phone?

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?

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?

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)

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

What will help mobile cloud computing gain traction in 2010?

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)

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)

Mobile Advertising and Mobile Payments share the top honors

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

LTE might have the momentum but WiMAX has the subscribers

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

No major impact from the operator channel

Which standards will gain traction?

No major impact from the standards

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

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

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

The Untapped Mobile Data Opportunity

US Mobile Data Market Update Q3 2009 November 9, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, European Wireless Market, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Networks, Partnership, Speaking Engagements, US Wireless Market, Unified Messaging, Usability, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

Download PPT | PDF

Executive Summary

The US wireless data market grew 5% Q/Q and 27% Y/Y to exceed $11.3B in mobile data service revenues and thus exceeded $10B for the third straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues and overall service revenues, the worst is over for the US mobile industry. The US market touched 25% penetration of smartphones in Q3 2009, a new milestone.

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 has stayed strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers. The US subscription penetration was approximately 91.3% at the end of Q3 2009.

As we mentioned in our last three research notes 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 two quarters along with better than expected Q1-3 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, the outlook for the Q4 2009 and 2010 remains bright and we are expecting the overall data revenues to now increase by over 30% compared to 2008 with a record-setting Q4.

Q3 2009 reported a 3.5% increase in GDP compared to the 1% decline in Q2 and 6.4% decline in Q1, thus marking the official (technical) end of the recession. 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. Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

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 though retreated from June is at a healthy 47.7.

What to expect in the coming months?

The high unemployment has slowed the growth in the data card segment but the smartphone consumers have more than picked up the slack. Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid accounts for almost 20% of their customer base compared to 17% from an year ago. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins. 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 elsewhere.

In fact, the churning in the last few quarters has distanced the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) by the biggest gap in the history of the industry. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.

The trend of the landline replacement by Mobile continued in Q3 2009, now reaching almost 25%. In the third quarter, messaging growth slowed down. The messaging volume was up only 4% and messaging revenues were up 3% QoQ. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper "Managing Growth and Profits in the Yottabyte Era." We will have more on this subject in the coming days (You can also read our RCR Wireless columns on the subject - Defining Mobile Broadband and Solutions for the Broadband World).

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 Q3 2009 US wireless data market is:

Service Revenues (Slides 11-12, 17, 19)

The US Wireless data service revenues grew 5% Q/Q to $11.3B in Q209. Compared to Q308, the data service revenues grew 27%.
Verizon and AT&T accounted for 80% of the increase in data revenues in Q3 2009.
The US mobile data service revenues crossed $10B for the third straight quarter and stays ahead of Japan and China by a distance.
AT&T experienced the most growth with over 6% increase Q/Q followed by Verizon and Sprint at 5%.
Verizon’s data revenues exceeded $4B/quarter only inches behind the global leader of over 10 years NTT DoCoMo.
AT&T and Verizon now account for 68% of the market data services revenues and 61.5% of the subscriber base.
The average industry percentage contribution of data to overall ARPU is now 28%. US market is likely to touch the 30% mark in 2009 though it might not quite eclipse it.
The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #3, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.

ARPU (Slides 13-15)

Overall ARPU decreased by $0.14. Average voice ARPU declined by $0.57 while the average data ARPU grew by $0.43 or 3%.
Verizon led in (blended) data ARPU with $15.59 followed by AT&T and Sprint. In terms of % contribution, Verizon exceeded 30% to become the first US operator to do so. It was followed closely by AT&T and Sprint respectively. T-Mobile also exceeded $10 in data ARPU for the first time.
AT&T experienced something unique - an increase in voice ARPU (for the first time in 10 quarters). The voice ARPU increased $.03 in Q3 2009.

Subscribers (Slides 16-18)

In Q309, the US market added approximately 2.7M new subscriptions down 1% from Q109.
The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q309, 67% of US subscribers were using some form of data services.
The messaging volumes in the US market now average almost 568 messages/subscriber/month or at the frequency of almost a message/hour/sub thus reaching close to the messaging leader Philippines.
In terms of net-adds, thanks to the boost from the iPhone, ATT again led in Q309 with 2M net-adds, edging its friendly rival Verizon which added 1.2M net subscriptions. Sprint lost 565K.
T-Mobile lost customers for the first time in its history. It lost 77K customers in the quarter.
The 3G penetration in the US stays at a healthy 43% in Q309. Verizon led the pack while T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.
The gap between the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) is at its maximum. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.

Applications and Services

Non-messaging services continue to grab 50-65% of the data revenues for the US carriers.
The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe became more prevalent in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 20% of the consumers have flat-rate data plans.
There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up.
The usage and data consumption trends are enabling carriers to accelerate their 4G plans and develop long-term business and technical strategies.

Handsets

Nokia sold 100M+ units in Q3 2009. Samsung again had a solid quarter with over 60M devices sold inching its market share to almost 21%. LG Electronics at 11%, Sony Ericsson at 4.9%, and Motorola at 4.7% rounded up the top 5.
The third quarter was again dominated by blockbuster launches of smartphones. Androids have been invading the industry en-masse and 2010 looks to be a terrific year for consumers and competition.
The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - usage billing, UMA, Femtocells, Hotspots, WiMAX, LTE, and others.

Policy and Regulations

· Q3 also marked the start of an intense FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. Google has played the game of Armadaian tactics with Kasparovian acumen. The impact of the codified principles (and the subsequent court battles) can have a significant impact on not only the US wireless industry but the global ecosystem as well.

Open

The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. In the midst of the appstores hoopla, Apple announced the passing of the 2 Billion download mark with increasing number of developers participating the ecosystem. The new functionality being released with 3.0 is taking the battle up a notch. The clear-cut business model of 30/70+ split is attractive to the long-tail of developers. While there is no dearth of applications, findability remains a challenge. Also, appstores are changing the monetization strategies for content and application developers.
The App vs. Mobile Web debate is getting intense. The evolution is pretty clear - for the applications that don’t require significant UI resources, it will be better to develop in for the browser, for intensive games, the native platform will be ahead of the browser advances. The location API access on the iPhone browser is breakthrough to have developers start thinking about the webapps. But, what does it do to the control points and the revenue models?

· While there has been much consternation around the word "Open," one is hard pressed to find a consistent definition what it might actually mean. One could provide access to one API and declare themselves an open heretic while others could end up opening up their business more than needed and yet be accused of being closed. Clearly, the degree to openness is in the eye of the recipient. There is no black and white, just shades of grey and that’s where the battles will be won and lost. In the end, it is all about "access" to the market and the "freedom" to earn profits. Rest is noise.

· It is worth debating as to what can be mandated to be open, do the rules apply just to the operators and OEMs, or we should extend the courtesy to software platforms, search indices, aggregated user profiles, billing engines, etc.

· It is also becoming obvious that we need to redefine the device categories. Featurephones are no longer dumb terminals, many empower the users with smartphone functionality. Devices like iPhone, Droid, Pre no longer fit the smartphone stereotype, they need a separate category for themselves - appphones, ddhmvcs (data devices that happen to make voice calls), platformdevices, mobilecomputers, geniusdevices, agilechips, astuteconceirge, you get the point.

Misc.

Not surprisingly, Venture capital market experienced a continued decline in 2009, with companies announcing $1.5B in financings vs. $3B for the same time period. (Source: Rutberg)
In a sign of convergence battles to come, T-Mobile’s @Home and various Femto cell initiatives are taking hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.
China crossed the 700M subscription mark in Q3. India crossed the 500M mark for telephone penetration (wireline + wireless) of which 472 are mobile subscriptions. In terms of net-adds, India has outpaced China for the last 16 months. The Indian market added almost 155M vs. 101M in China during the last four quarters. (more discussion on the international market in our global market update next year)

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 Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.

Watch out for our end of the year survey and commentary on global wireless markets and trends for 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.

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

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 15^th) 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:

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")
Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
Codify and enforce net-neutrality policies
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 20^th. 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.

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.

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:

John Donovan, CTO of AT&T opined on the growth in data consumption and how the company is tackling the upsurge in usage
Qualcomm released FLO TV service and devices but at $250 and $9/month, it, like Kindle seems to be stuck in the fidelity belly.
A number of local search services/apps are popping up: Geodelic, Aloqa, Decarta, etc. I built my first location app in 1996. 13 years hence, market seems to be coming around to the concept of LBS.
Number of mobile health companies were displaying their wares: Airstrip, Corventis, TotGuard, Sensiotec, and others. Lot of investment will flow into this sector in the coming days.
Companies like Openwave and Bytemobile talked about solutions for mobile data management.
Mobile Retail is picking up with NFC and now Nokia’s initiative of Global Retail Executive Council
More Androids are slated for release in 2010

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

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.

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).

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.

Global Wireless Data Market Update - 1H 2009 September 21, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 6 comments

Global Wireless Data Market Update - 1H 2009

Download: PPT | PDF

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding around 20M new subscriptions every month. China crossed the 700M subscriptions mark in July while India’s total went past 450 in Aug. Overall, the global subscriptions penetration is above 64%. During 2009, services revenues further tilted towards data services, increasing 21% from 2008 EOY.

The overall global mobile revenues (including equipment) for the year are expected to stay flat as the impact of recession was felt in many geographies in the first half of 2009. While countries like US, Japan, China, and India showed very little signs of pullback, most of Europe (except France) and the developing world are expected to experience a decline in overall service revenues in 2009. For the first time, mobile data contributes approximately quarter or 25% of the total global service revenues. Additionally, except for India, all major markets have their data contribution percentages above 10%.

For some leading operators, data is now contributing over 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 2009. US continues to lead Japan and China in total mobile data revenues by a healthy margin.

NTT DoCoMo continues to dominate the carrier ranking in terms of mobile data service revenues, however, Verizon Wireless which became #2 replacing China Mobile is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.

The velocity with which the smartphones are being introduced into the market, 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.

Though 4G as a standard hasn’t been defined yet, the discussions around LTE (and to some extent WiMAX) grew intense and started climbing the slippery slope of the hype curve. Many prominent operators have come out in support of LTE with Verizon being the most aggressive in launching their next generation network in 2010.

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 acutely felt by the operators. Amongst the operators we studied, only 3, SK Telecom, O2 UK, Telefonica, T-Mobile Germany and Austria, Vodafone Germany and Italy, KTF experienced increase in both the data ARPU and overall ARPU during 1H09 (and some of increase was due to the fluctuation in international currencies).
Looking at the data at a country level, almost all nations noted a decline in overall ARPU and majority in data ARPU. However, almost everywhere data for 1H09 improved over 2H08 indicating that the recession had a worse impact on the wireless sector last year compared to this year and in general the conditions in the telecom microcosm are improving globally.
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/MTN tie-ups are just the start of that process.

Service Revenues

US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $20.6B vs. $16B for Japan in 1H 2009. China with $8.6B was ranked number 3. US registered the highest growth amongst the top 3 with over 39% increase from EOY 2008 levels followed by Japan and China at 5%.
The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, India, Spain, and Brazil.
The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Korea, Spain, and Australia.
NTT DoCoMo continues to dominate the wireless data revenues rankings with almost $8B in data services revenue in 1H09. Almost 45% of its overall revenue now comes from data services. DoCoMo also crossed the 50M or 90% 3G mark in June.
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.
The top 10 global operator groups now account for over 63% of the global mobile data revenues.
Each of the top 5 carriers are expected to exceed $10B in yearly mobile data service revenues in 2009
Data revenues for the top 10 operators increased 10% from 2H 2008 and now account for almost 48% of the global mobile data revenues though their subscriber share is around 30%.
The biggest jump in data revenues was experienced by Verizon, AT&T and Softbank. DoCoMo suffered a 2% decline compared to 2H08.
Most of the operators in 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 $8.5B in data revenues for 1H09 and the percentage contribution from data services is around 28%, data ARPU is around $2.7. For India, data ARPU continues to stay around $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 $200B 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.

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 44%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, KTF, Telstra, and 3 Sweden exceeded 30% and many others are on the verge of crossing the 30% mark.
3 Australia reported the highest increase in data ARPU from 2008 with 31% growth. 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%. In terms of absolute dollar amount, NTT DoCoMo leads the pack with $25 data ARPU.
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 56% (or $3) contribution coming from the data services. Philippines is also the most active messaging nations where users average a message/hr round the clock though US txters have had the most acceleration in use.

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 been adopted by various vendors and operators worldwide.
The global mobile data traffic is expected to exceed an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that next year, the two territories experiencing the most growth - North America and Western Europe are going to exceed an Exabyte in mobile data traffic.
2010 will also mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.

Subscriptions

The global mobile market continues to grow at an explosive pace and is expected to go past 4.5B subscriptions in 2009 and is likely cross the 5B mark in 2010. The global mobile subscriptions now represent over 64% of human population on Earth.
China and India continued their red-hot growth in 1H09. Combined, they added 132M new subscriptions with India easily surpassing China in each of the last 12 months in terms of net-adds.
China crossed the 700M subscription mark in July while India’s total went past 450 in Aug. In total, China is still years ahead. In the meantime, US crossed the 90% subscriptions mark earlier this year.
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 at 264M. Telefonica, América Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.

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.
After falling below the 100M/quarter in Q1, Nokia rebounded to sell 103M units in Q2 09. Samsung also exceeded 50M with a strong second finish at 52M. LG finished a strong third with almost 30M in its bag and Motorola showed signs of strength by selling close to 15M units.
The second quarter was dominated by two blockbuster launches of iPhone 3GS and Palm Pre. While iPhone continued to attract new customers, Pre suffered from a less than adequate launch strategy. By lowering the 3G device price to $99, Apple set the new bar in smartphone pricing leaving the rivals scrambling for response. The release of a slew of Android handsets sets up the stage for fierce competition during the holiday season and into 2010.
China and India represent the biggest opportunities for the Infrastructure providers. China launched 3G across the three operators earlier this year. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts are coming from these two countries as they look to expand coverage into rural areas.
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 next year.

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 Nov 2009. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

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.

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.

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

Download PPT (1.9MB)

Download PDF (3.1MB)

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.

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

Service Revenues

US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $34B vs. $29B for Japan in 2008. China with $15.8B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2007 levels followed by Japan at 25% and China at 21%.
The top 10 nations by service revenues are: US, China, Japan, UK, France, Italy, India, Germany, Spain, and Russia.
The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Spain, Australia, and Korea.
NTT DoCoMo continues to dominate the wireless data revenues rankings with over $4B in data services revenue in Q408 and almost $15B for the year. Almost 42% of its overall revenue now comes from data services. DoCoMo also crossed the 90% 3G mark last month.
NTT DoCoMo was followed by China Mobile, Verizon, 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. It marked the first year for T-Mobile USA to be in the top 10 list as it went past SK Telecom. All the top 10 carriers exceeded $2B in data revenues for the year 2008.
The top 10 global operator groups now account for over 60% of the global mobile data revenues.
For the last couple of years, NTT DoCoMo has been the only carrier exceeding $10B in yearly mobile data revenues. In 2008, as expected it found company with China Mobile, Verizon Wireless, and ATT in the exclusive $10B club. KDDI missed out by a whisker.
Data revenues for the top 10 operators increased 27% from EOY 2007 and now account for almost 48% of the global mobile data revenues though their subscriber share is around 30%.
The biggest jump in data revenues was experienced by the US carriers – ATT and Verizon Wireless respectively. They were followed by China Mobile. (For a complete US Market Update, please see our Q208 research note).
NTT DoCoMo regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their data coordinates stand at ($27, 42%) and ($25, 38%) respectively.
Most of the operators in 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 ARPUs. Comparing the ARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATT experienced increase in both overall and data ARPU.
China reported approximately $16B in data revenues for 2008 and the percentage contribution is around 27%, data ARPU is around $2. For India, data ARPU continues to stay around $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 $180B in market cap. It is followed by Vodafone at around $98B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. The current recession has slashed their market caps by 20-30%.
In 2008, SMS’s vice like grip on data revenues continued 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 and exploring new technologies and social experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since the introduction of i-Mode almost 10 years ago. During the last 9 years, overall ARPU has declined 33% though data ARPU increased over 1800% and now accounts for almost 40% of DoCoMo’s service revenues. The voice ARPU has declined almost 60%. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends and technologies in these markets to get a sense of what’s coming.

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 42%. KDDI, 3 Australia, 3 Italy, 3 UK, O2 UK, Singtel, and 3 Sweden exceeded 30%.
ATT reported the highest increase in data ARPU from 2007 with 32% growth. Other notable percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.50. In terms of absolute dollar amount, NTT DoCoMo leads the pack with $27 data ARPU.
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 56% (or $3) contribution coming from the data services. Philippines is also one of the most active messaging nations where users average a message/hr round the clock.

Subscriptions

The global mobile markets continue to grow at an explosive pace touching 4B subscriptions by 2008 up 23% from EOY 2007 levels and will likely cross the 5B mark in 2010. Overall the global mobile subscriptions now represent over 60% of human population on Earth.
China and India continued their red-hot growth throughout 2008. Combined, they added 212.8M new subscriptions with India edging China by 15% for the first time in yearly net-adds.
Earlier this month, India also crossed the 400M subscriptions mark, only the second nation to do it after China. In total, China is still years ahead. In the meantime, US crossed the 90% subscriptions mark earlier this year.
In March, India edged past the US to become the number two wireless market (by subscriptions) in the world. In the last two years alone it has added almost 175M new subscriptions (in comparison China added 169M and the US market added 39M). For the past 7 months, India has been displaying Phelpsesque like flair in setting and beating its world record for 6 times, twice exceeding 15M/month net-add. For the last 7 months, the market has been exceeding 10M net-adds/month with Mar 09 being at a whopping 15.6M making it a record for monthly net-adds in a given country at anytime in the history of the industry or any industry for that matter (breaking its previous record set in Jan09).
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, Japan, and Pakistan.
China Mobile with 457M (as of Dec 08) remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone at 255M and Telefonica with 196M subscriptions. América Móvil, Telenor, China Unicom, T-Mobile, Orange, MTS, and Bharti Airtel are the next five largest telecom groups in the world.
As far as 3G is concerned, there were over 400M 3G users (72% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 90%+ penetration.

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 eclipsed 100M/quarter unit sale in each of the four quarters. It has sold over 468M handsets in 2008 (up 7.2% from 2007), more than the next three handset manufacturers combined. Nokia’s global market share stayed in the 38-41% range. Samsung at 15%, Motorola with 9%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. Despite the slowdown, the industry eclipsed 1B in handset sales in 2008 and will do so again in 2009.
China and India represent the biggest opportunities for the Infrastructure providers. China launched 3G across the three operators earlier this year. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts are coming from these two countries as they look to expand coverage into rural areas.
Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines. Many larger operators have laid out their plans for deploying LTE starting next year. Meanwhile, Clearwire has been rolling out its WiMAX network, one market at a time.
While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem. Apple launched its 3G iPhone and Android’s first device was introduced in the form of T-Mobile G1. Many more Android devices are slated to be released in 2009.

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

2009 Mobile Industry Predictions Survey

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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:

Akio Orii, CFO and VP, Toyota
Declan Carew, New Product Strategy Manager, Vodafone
Helen Keegan, Consultant, Beep Marketing
Rich Begert, CEO, Singlepoint, and
Russ McGuire, VP, Sprint Nextel
Jonathan Ebinger, General Partner, Blue Run Ventures

Congrats and Thank You.

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

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

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?

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?

“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?

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?

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?

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?

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?

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?

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

Will Mobile Open Source mitigate fragmentation?

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?

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?

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?

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

Will carriers start launching Apple/Android style appstores?

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

Will Microsoft make windows mobile free to OEMs?

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?

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?

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?

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

Global Wireless Data Market 1h 2008 Update Sept 2008 Chetan Sharma Consulting

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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.

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

The global mobile markets continue to grow at an explosive pace reaching 3.6B subscriptions by 1H08 up 9% from EOY 2007 levels and will likely cross the 4B mark by the end of 2008. Significant growth is coming from India and China with both countries registering on an average 9M net adds per month. India and China combined to add approximately 107M new subscriptions during the first six months of 2008. Overall, the world market is now over the 50% penetration mark.
US edged past Japan again as the most valuable mobile data market in service revenue with US adding $15.7B vs. $13.6B for Japan in 1H08 mobile data service revenues. China with $7.8B was ranked number 3. US registered the highest growth amongst the top 3 with over 18% increase from EOY 2007 levels followed by China at 9% and Japan at 7%. These top 3 markets account for just under 50% of the mobile global data service revenues.
NTT DoCoMo continues to dominate the wireless data service revenue rankings with over $6.8B in service data revenues for 1H08; however, Q/Q growth is declining. DoCoMo crossed 84% in 3G penetration and is expected to touch 90% by end of the year.
DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T, Sprint Nextel, China Unicom, Softbank, O2 UK, and T-Mobile USA to round up the top 10 operators by wireless data service revenues. It marks the first time, T-Mobile USA enters the top 10 list as it went past SK Telecom. All the top 10 carriers exceeded $1.5B in data revenues for the first half of 2008.
For the last couple of years, NTT DoCoMo has been the only carrier exceeding $10B in yearly mobile data revenues. In 2008, it is likely to be joined by China Mobile, KDDI, Verizon Wireless, and ATT in the exclusive 10B club.
Data revenues for the top 10 operators increased 10.3% from EOY 2007 and now account for almost 50% of the global mobile data revenues though their subscriber share is around 30%.
Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, and Softbank are approaching 40%. 3 UK, O2 UK, Singtel, and 3 Sweden exceeded 30%.
In March, India edged past the US to become the number two wireless market (by subscriptions) in the world. In last two years alone it has added almost 175M new subscriptions (in comparison China added 169M and the US market added 39M).
ATT reported the highest increase in data ARPU from 2Q07 with 32% growth. Other notable percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.65.
In terms of absolute dollar amount, NTT DoCoMo and 3 UK lead the pack with $22 data ARPU. Operators who reported overall ARPU above $60 were 3 UK, Singtel, Rogers, and 3 Sweden.
The biggest jump in data revenues was experienced by the US carriers, the top 3 being ATT, Verizon Wireless, and T-Mobile USA respectively. SK Telecom, Sprint and O2 UK experienced declines. (For a complete US Market Update, please see our Q208 research note).
In 1H 2008, SMS’s vice like grip on data revenues continued 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 regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their data coordinates stand at ($22, 39.5%) and ($20.3, 37%) respectively (please see slide 10 for reference).
Most of the operators in developed nations are contemplating future strategies to boost data revenues such that decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPUs. Comparing the ARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATT experienced increase in both overall and data ARPU.
NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets and exploring new technologies and social experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since the introduction of i-Mode almost 10 years ago (see slide on page 17). During the last 9 years, overall ARPU has declined 33% though data ARPU increased over 1800% and now accounts for almost 40% of DoCoMo’s service revenues. The voice ARPU has declined almost 60%. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends and technologies in these markets to get a sense of what’s coming.
The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 66% (or $3) contribution coming from the data services. Philippines is also one of the most active messaging nations where users average a message/hr round the clock.
Even though China reported approximately $7.8B in data revenues for 1H08 and the percentage contribution is over 27%, data ARPU is around $2.3. For India, data ARPU continues to stay below $1 for all major carriers with Reliance experiencing a 50c data ARPU during Q208.
China Mobile with 428M (as of Aug 08) remains the #1 carrier in terms of total number of subscrptions followed by Vodafone at 269M and China Unicom with 171M subscriptions. Telefonica, América Móvil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and Verizon Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5 (Verizon will overtake ATT after its Alltel acquisition goes through later this year). The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for many years to come.
China Mobile remains the most valuable telecom operator with over $200B in market cap. It is followed by Vodafone at around $125B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress.
As far as 3G is concerned, there were over 350M 3G users (69% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 80%+ penetration. 3G has picked-up steam in both western Europe and North America per our forecast in the 2005 cover story article “3G: Hitting the Mass Market” published in the Wireless World Magazine. Western Europe and US are at approx. 30% 3G penetration (Italy being the exception exceeding 40%).
China and India represent the biggest opportunities for the Infrastructure providers. China postponed its 3G decision again and couldn’t launch a network for the otherwise wildly successful 2008 Olympics. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage into rural areas.
Carriers with nationwide 3G networks and good distribution of handsets are seeing strong uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) is also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. For 4G, there is a strong momentum behind LTE, proponents of WiMAX are pushing the technology as a 4G candidate, and though it is starting to lose its time advantage, all eyes are on the imminent Clearwire launch.
In terms of applications, messaging accounts for the lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have also captured industry’s imagination. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than the other hot category - Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
1H 2008 saw the demise of the last standing next-generation MVNO in the US market - Helio, which got sold to Virgin Mobile at bargain basement prices. In Europe, Blyk continues to make good progress with its unique mobile advertising-based model. Asian market is also opening up for MVNOs.
Nokia eclipsed 100M/quarter unit sale in both the quarters thus far. It has sold over 237M handsets in 2008, more than the next three handset manufacturers combined. Nokia’s global market share edged past 41%. Samsung at 15%, Motorola with 9.5%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. For the year, the industry looks to again eclipse the 1 billion handset mark for 2008.
While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem. Apple launched its 3G iPhone while Android’s first device is slated to see the light of day next month courtesy of T-Mobile USA.
Apple launched its App-Store with iPhone 3G which has been quite successful though there is significant clutter to muddle through. The company is likely to announce soon that it eclipsed its 10M goal in Q308, a full quarter earlier than the stated target. These days, any new device that gets launched in the market is looked through the prism of iPhone.
In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed 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 (see slide 8). For a more detailed analysis, check out our research paper sponsored by The United Nations Foundation on “Mobile Services Evolution: 2008-2018.” It was presented at The Rockefeller Foundation Healthcare summit in Bellagio, Italy in July 08. (Note: The dichotomy between developed and developing nations is a very simplified concept that has been around for about 50 years. It is clear that a transformation in the distribution of wealth worldwide will change the picture in the next 10 years. Countries that are considered developing in today’s definition will become economic superpowers in 10 years and more dominant than some of the developed nations, even if they have not caught up then with some in terms of GDP per capita. However, for purely the purposes of comparison and illustration, we are using the existing definitions to discuss the shift in the mobile ecosystem).
Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile and Vodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia and Google are getting active in the space as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space and while it slowed down during 2008, it is likely to pick-up again in 2009 as consolidation looms.
Wireless Broadband continues to be a significant growth driver for the industry. We partnered with our good friend Vern Fotheringham - a true industry entrepreneur and who has been behind many of the industry firsts, to write an exhaustive treatment of the subject in our upcoming book - Wireless Broadband: Conflict and Convergence being jointly published by IEEE Press and John Wiley (see below). Details forthcoming.

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

Enterprise Mobility: Applications, Technologies and Strategies

IOS Press

Chapter Contribution

“Enterprise mobile product strategy using scenario planning”

SAMIMUNEER (SAP) and CHETANSHARMA

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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:

Enterprise mobility: Researching a new paradigm
The convergence of wireless, mobility, and the Internet and its relevance to enterprises
Business mobility: A changing ecosystem
A socio-technical perspective of mobile work
Designing productive spaces for mobile workers: Role insights from network analysis
Telecommuting and corporate culture: Implications for the mobile enterprise
User requirements of mobile technology: A summary of research results
Mobile interaction design: Integrating individual and organizational perspectives
A comparative anatomy of mobile enterprise applications: Towards a framework of software reuse
Protecting data on mobile devices: A taxonomy of security threats to mobile computing and review of applicable defenses
Enterprise mobility and support outsourcing: A research model and initial findings
Enterprise mobile product strategy using scenario planning
The strategic value of enterprise mobility: Case study insights
Exploring enterprise mobility: Lessons from the field

Your feedback is always welcome.

Thanks.

Chetan Sharma

2008 in review - revisiting annual predictions July 31, 2008

Posted by chetan in : 3G, AORTA, ARPU, Carriers, Intellectual Property, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, US Wireless Market, Unified Messaging, Wireless Value Chain, Worldwide Wireless Market , add a comment

At the turn of the year, we asked a number of industry insiders to opine on upcoming trends for 2008. Below is the summary of survey. Full results here.

Perhaps, it is time to revisit. Updated comments in italics.

1. Will Google introduce a Google Branded Phone in 2008?

Will it? Won�t it? 44.5% gave it a 75% or higher chance of happening while 40% thought it ain�t happening. GPhone is a temptation Google will find hard to resist though a lot will depend on how various initiatives and partnerships shape-up on the ground. In any case, expect another major announcement in the next 2-3 months.

Opinions were mixed. Given the problems with the ecosystem, delay in launch, and unclear business models, while the probability of GPhone launch has gone up, chances for a 2008 launch remain low. Google would want the ecosystem to give it a shot before deciding to compete with them.

2. Will Google play to win in the 700MHz Spectrum Auction?

Google has played the spectrum chess game effectively. Almost 50% respondents gave it a 75% or higher chance of Google winning the bid. Though expectations are high, Google is unlikely to play to win. Services business is not their cup of tea, they could still fund the Clearwire-Sprint deal but that investment can be spent differently to get better end-results, i.e. mobile ad revenue.

We didn’t believe that Google is playing the game to win, only wanted to be an irritant to his fellow brethren. As expected, they funded the Clearwire-Sprint deal.

3. Will Microsoft launch its own mobile phone?

Unless Google comes out with GPhone, Microsoft will stay content with its operator distribution strategy. 63% of respondents gave it less than a 25% chance of Microsoft releasing their own phone. If GPhone comes out and gets some traction, expect Microsoft to get its �fast follower� strategy into high gear.

I think Microsoft is taking a “wait and see” approach on this one and is likely to come out with something once GPhone is out. Remember Zune.

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

Only 9% thought it is a sure bet for 2008. True mobile commerce hasn�t really started in the western world. While there are significant movements, 2008 will just be a �lay the groundwork� year for mobile payments.

Even from “laying the ground work” point of view, we seem to be behind. Number of trials and activity though, expect to see some noticeable launches in first half of 2009.

5. Will WiMAX regroup from its setbacks?

Only 35% gave it a 75% or higher chance (of WiMAX resurrecting itself esp. in the US in 2008). A lot depends on how Mr. Hesse deals with Sprint�s WiMAX business. Indications are there will be a deal with Clearwire to off-load the risks via some external investment (Google?).

Well, Mr. Hesse dealt his hand and now all eyes are on Mr. McCaw - can he deliver?

6. Will Helio survive 2008?

Almost 70% respondents thought Helio won�t make it. Given the flameout of some of the prominent new-generation MVNOs, it is hard to see how Helio will see 2009. It will all come down to how persistent is SK Telecom. Earthlink doesn�t have the bank balance to keep funding this initiative.

Well, majority thought, Helio won’t be around and SKT realized it too and sold the unit to Virgin Mobile. At least, it didn’t have to file chapter 11.

7. Will Verizon truly open-up its garden for third-party visitations?

Only 5% thought it is a sure bet for 2008. Verizon�s open posturing was more to ward off any regulators and to improve its image. There is unlikely to be any meaningful progress on this front this year.

Hardly anyone thought that VZ is serious and not much has happened on that front just yet.

8. Will 2008 be the inflection year for Mobile Advertising?

42% gave Mobile Advertising a 75% or higher chance for rapid growth. Market will mature, more consolidation, some privacy gaffes but overall things are looking up for mobile advertising.

There is definitely growth in the Mobile Advertising segment. Inflection point is in the eyes of the beholder. I say, we will make pretty good progress this year but mobile ad spend will still be < 1% of the overall mix. Still lots of foundation work need to be done by the industry. Almost every serious carrier, advertiser, agency, middleware, online player is involved in mobile advertising and it is just a matter of time before things get sorted out.

9. Will Femto-Cells gain any significant momentum in 2008?

It will be an introduction and experimentation year, so no significant traction is expected. Over 52% thought Femto-Cells will be just a buzz word in 2008.

Well, Sprint launched Femto-Cells but it will be a while before they become pervasive.

10. Will Nokia be able to extract iPhone-style rev-share from carriers in 2008?

Less than 20% thought Nokia will be able to do an Apple when it comes to rev-share arrangements. For OEMs, going direct to the consumers was considered treachery to the sacrosanct relationship with the operators. Until Apple showed up with iPhone. Now, Nokia is putting its services strategy in motion and is building a direct relationship with the consumers worldwide and it has a good shot at pulling it off though it will be a long haul.

Given that Apple prudently reversed its business model, the chances of any other OEM extracting iPhone 1.0 type rev-share are going to almost zero.

11. Will Palm survive 2008?

Only 8% gave it a 100% chance of surviving 08 as an independent entity. It will be difficult for Palm to stay in a status-quo mode. They desperately need a hit device that can give them some breathing room. Given all the operational and strategic problems the company is having, a sale is likely.

Most thought (including yours truly) that Palm will have a difficult time surviving 08. However, with some of its recent launches have put some life back into the company and it might go on for a few more quarters. The problems and challenges are still quite stark.

12. Will iPhone truly open up?

Over 45% thought iPhone won�t open-up in any meaningful way. Apple has built-up one of the most profitable closed empires in the digital world. Are they about open things up? While the iPhone SDK is scheduled for early 08, don�t hold your breath on accessing the critical native APIs.

Apple’s Appstore is clearly an idea of the best open closed systems out there. If the closed garden is done well with open flowers can flourish. The system still closed but you can access a number of device APIs to make it worthwhile.

13. Will there be more unsubsidized devices introduced in the US market in 2008?

Almost 49% thought we are likely to see another unsubsidized device in the US market this year. Nokia is looking to go direct and some GSM handset manufacturers are likely to entertain the idea of testing the market with unsubsidized devices.

Given that Apple quickly reversed itself with iPhone 3G, we are unlikely to see unsubsidized devices for some time to come.

14. Will Mobile TV move the needle in 2008?

Almost 70% thought mobile TV won�t make much of a difference in 08.Though AT&T is slated to introduce MediaFLO to join Verizon in the Mobile TV services market, lack of devices and better pricing models will hinder wide adoption in 2008. However, downloadable video and VOD content will experience significant growth.

Mobile TV remains plagued with unreasonable business models and pricing plans. Until that is fixed, this will remain a niche hobby for most.

15. Will Android make a dent in handset shipments in 2008?

Only 15% gave it a more than 75% chance this year. It is going to take some time for Android plans to mature and materialize. Don�t see any material impact in 08.

We didn’t think Android will make progress in 08 beyond some minor launches. Even they seem uncertain and 08 is not their year.

We will do another survey towards the end of the year, look forward to your participation then. Thanks.

New Paper: Mobile Services Evolution 2008-2018 July 11, 2008

Posted by chetan in : 3G, AORTA, ARPU, BRIC, CTIA, Carriers, Intellectual Property, Japan Wireless Market, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Smart Phones, Speaking Engagements, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

Mobile Services Evolution 2008-2018

Bellagio, Italy. July 13 - Aug 1, 2008

This project has been made possible by the generous funding from THE UNITED
NATIONS FOUNDATION

ehealth_connection_cov

Download PDF

http://www.chetansharma.com/UNF-MobileServicesEvolution.htm

This weekend in Bellagio, Italy begins a 4 week long dialogue on the subject of eHealth. The Conference - Making the eHealth Connection: Global Partnerships, Local solutions is being organized by the eminent Rockefeller Foundation. It will bring in experts and organizations from around the world to discuss, share, develop, agree on solutions going forward. Each week deals with a different nuance of the eHealth framework. This will allow for an in-depth study and discussion. Full conference info here.

Week 3 deals with mHealth and Mobile Telemedicine being organized by The UN Foundation, Vodafone Group Foundation, and the Telemedicine Society of India. As part of this conference The Rockefeller Foundation and its partners have released a series of white papers on various subjects. I was asked by The UN Foundation to look into the potential Mobile Services Evolution going forward and how a platform could be developed that will enable a number of applications focused on enterprise, health, public safety and associated sub-segments. While it is difficult to predict with any precision what might happen 10 years from now, one can try to understand the evolution of technologies, business models and their interrelated ecosystems and see the impact on various vertical segments where we use technology to solve some basic problems. Most of the time, technology itself doesn’t cut it, it requires partnerships, collapsing of the bureaucracy, innovative funding means, and just the burning desire to make a difference that matter the most. I strongly believe in Mobile’s central role in a number of social and public services. Mobile Services Evolution 2008-2018 is a small effort to forward that discussion.

Abstract

Over the last 10 years, the progress made in the global mobile industry has been truly stunning. Mobile device ownership has gone from being a luxury item to necessity as the feverish rate of adoption has spread mobile technologies into every corner of the world. As we look into the next 10 years, it is certain that the mobile phone will be used for much more than just voice communications. There is an opportunity for private institutions and public enterprises to build a vision of cohesive mobile services platform that enables and engages the masses to both fundamentally enhance the quality of their daily existence as well as lead to new opportunities globally. This paper takes a look at the potential evolution of mobile technology and services over the course of the next 10 years and discusses an M-Services framework for building and deploying diverse mobile services. The paper also looks into the challenges of such an endeavor and steps that will be needed to achieve the vision.

Table of Content

Abstract	3
Introduction	4
Mobile device: The Remote control of our lives	5
Mobile Technology Evolution 2008-2018	7
Deployment and adoption of mobile technologies in the developing countries	9
Mobile Services Platform	10
What does it take to make it happen?	15
Conclusions and Recommendations	18

Download Complete Paper - PDF

Thanks to THE UNITED NATIONS FOUNDATION for making this work possible. I will be presenting the paper at the conference later this month.

Your feedback is always welcome.

Thanks

Chetan Sharma

MIT Technology Review: Why Helio didn’t connect? July 3, 2008

Posted by chetan in : MVNO, US Wireless Market , add a comment

Michael Fitzgerald interviewed me for this piece for MIT Technology Review. The discussion was around the selling off of Helio to Virgin Mobile USA.

Full article here.

Another MVNO bites the dust April 8, 2008

Posted by chetan in : MVNO , add a comment

from fiercewireless ..

Sonopia, the do-it-yourself MVNO venture enabling organizations, charities or individuals to launch branded mobile services through its online service, is reportedly winding down operations. Launched in April 2007 by Juha Christensen, the former head of Microsoft’s mobile division and a founder of Symbian, Sonopia promised each fledgling MVNO a selection of popular handsets, competitive calling plans, premium voice and data services and customized content, including social networking functionality–each sponsoring group received 5 percent of the revenue collected from its subscribers, with Sonopia sharing the remainder with network partners Verizon Wireless and Vodafone Group. Partners spanned from the National Parks Conservation Association to the American Medical Student Association to the Chicago Bandits of the National Pro Fastpitch Women’s Softball League.

The fundamental problem with all these recent failures is “scale.” While I commend these organizations for trying out something new and different, the “scale” equation is based on faith-based strategy and not something grounded in facts. Customer acquisition is much harder than it seems, especially, after you get through the first 70-80K. The other problem is that all these models are easily replicable, so there is no inherent advantage or barriers to entry. If they are successful, these models will copied over a weekend and then what .. Unless, one can line up a few billion in investment for the long haul, it is going to be tough. But, points to Juha for trying out a new business model. It did have some umph! but unfortunately no scale.

CTIA Wireless 2008 Roundup April 4, 2008

Posted by chetan in : 3G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Intellectual Property, International Trade, 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, Smart Phones, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

CTIA Wireless 2008 Roundup

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

The Sin City hosted CTIA Wireless 2008 earlier this week. On Wednesday morning, just before leaving for the convention center, I caught some portion of Ben Bernanke�s congressional testimony on the US economy woes. Few minutes later, strolling the show floor, talking to various companies, and hearing the keynotes, it seemed like I was on a different planet. Either someone failed to deliver the memo or the wireless industry is resilient enough to weather the turmoil in the financial and housing markets with some ease. The show was bigger with more attendees, the booths were returning to their glamorous heydays of the past, and the general buzz and energy at the show all seem to indicate the industry is going to do just fine and is primed for further growth. The general themes were around open network and access, user experience, and bandwidth.

This note summarizes our impressions from the show.

CTIA Wireless in Pictures

First let�s do the numbers: CTIA released their semi-annual statistics on the US market. In summary: For 2007, $23B in data revenues, 2 trillion in MOU, $139B in total service revenues, 48B txt messages/month. (We released our US Market and Global Market updates last month)

Keynotes: In terms of style, Sir Richard Branson stole the show with his pompous exuberance and pep talk (the talk of imaginary flight to Mars was hilarious; investors in Microgin and Viroo must be upset). For substance, Marco Boerries, President, Yahoo Mobile gave a nice compact overview of Yahoo initiatives and products in the market which are pretty darn good. (Marco wrote an opinion piece for our Mobile Advertising Book � �The future of Advertising is in the Consumers� Pockets�). Yahoo has sewn together a number of deals worldwide that gives them a potential reach of over 600M users.

Vodafone is one operator which has been quite vocal in stating its positions on future infrastructure roadmap and data opportunities. Arun Sarin is probably the only CEO of major global operator who has publicly stated that Mobile Advertising will constitute a significant portion of their revenues in the coming days (Arun�s point person on the initiative Richard Saggers also wrote an opinion piece for our book �Opportunities for Mobile Advertising.� Let me know if you are interested in reading these two opinion pieces).

Microsoft�s Robbie Bach had the tough task of following the Branson-fest. He announced the arrival of a full-blown browser (finally!) for windows mobile. Also, the new windows mobile device from Sony Ericsson (Xperia) looks pretty darn cool. FCC Chairman Martin announced the rejection of Skype petition on the carterphone principle (to Skype�s dismay, it was not an April fool�s joke). Clearly, the definition of �open� is in the eye of the beholder. It means different things to different people. It has also been clear from the various activities and keynotes that the industry is trying its utmost to remain a �Self-regulated� industry and stay away from the clutches of eager politicians.

Lowell McAdam, CEO of Verizon Wireless conducted a panel with CEOs from Alcatel-Lucent, Ericsson, and Nortel and probed them on the 4G migration path, trends in applications and services, and contrasts in adoption and introduction of new technology in various parts of the world. Final day was marked by what is now becoming a trend - keynotes from politicians. This time around Sen. Edwards and Sen. Thompson graced the podium.

Mobile Advertising: In talking with numerous players in the value chain from small developers to large operators to ad networks to media companies, the impression was that things have matured over the last six months. It was gratifying to hear that some companies are adopting strategies and recommendations we propose in our book. Still, some of the basic problems remain � majority of the inventory remain unsold indicating weak demand, CPM rates are still over-rated though they are starting to come down, and fragmentation continues to remain an issue.

The good news is that the size of the mobile campaign budgets are getting bigger with several seven figure RFPs floating around. While some companies are still trying to throw a lot at the wall in the hope that something sticks, others are maturing as companies and are more focused in their positioning and product roadmaps. Integration of various channels is starting to appear on the horizon and the integration with the publishers is becoming tighter. The issue of measurement and auditing standards remains a big issue and unfortunately not much progress to report. There are carrier initiatives and various industry bodies are taking the challenge to rally the ecosystem, but, frankly, consolidation of such efforts is necessary, we can�t afford yet another layer of fragmentation in an already complex ecosystem.

We were interviewed on Mobile Advertising prior to the show by several publications. Some of the articles were published this week to coincide with CTIA

Wireless Wave (CTIA) � Moving Targets: Mobile marketing reaches consumers on their terms by Lynn Thorne

BrandWeek � Mobile Marketing � Fantasy vs. Reality by Ken Hein

Wall Street Journal � Personalized promotions: Sending the right ads to your phone � Peggy Anne Salz

NFC: There were many more NFC-enabled devices on display this time and vendors were talking and demoing NFC and Biometrics based payment solutions. While there are handsets on the roadmap, this market is still very nascent in North America and Western Europe.

Inspiration: The inspiration for new and creative services still comes (at least for yours truly) from Japan (and Korea). I love spending time in DoCoMo�s booth for it gives a glimpse into what�s to come. No other company better understands the development of devices, services and applications that overlay on lifestyles than DoCoMo (e.g. a wellness handset that is a pedometer, heart rate monitor, body and bad breath monitor and yes, you can make voice calls too). They view wireless air-interfaces as nothing more than enablers to solutions that enhance daily lives. Various device manufacturers also displayed some really cool devices. The quality and diversity of handsets that have been introduced into the global markets over the last four quarters is just astonishing. The cycle of innovation and time-to-market keeps on accelerating.

Femto Cells: A number of players like Airwalk, Airvana, and others are bringing Femto cell solutions to the market and carriers are starting to pull this into their strategy as well and look forward to deployments beyond the trials.

4G: LTE vs. WiMAX (vs. UMB): Since the decision of Vodafone and Verizon to support LTE, UMB has been disappearing from the discussion. The 4G discussion is convulsing around LTE and WiMAX now (though Nortel did indicate its support TD-SCDMA as a 4G candidate). Without a doubt the operator community is rallying behind LTE and there might be an opportunity to finally converge to a single standard (haven�t we seen this movie before) but frankly, the advances in silicon to integrate multiple radios has made the standards debate less relevant. WiMAX has forced acceleration of LTE standardization process but is starting to lose its time (and cost) advantage. All eyes are on Sprint�s XOHM business rollouts in the coming days and months.

Accessories: I have never seen so many accessory and reseller outfits at a CTIA show. Business must be booming.

Best Booth: Thought there were several good layouts, LG and Samsung continue to impress with their creativity and �art of marketing.�

Developer and Publisher woes: Along with John Philips (Astraware) and Peter Baldwin (Cellmania), I helped facilitate a few developer session at the Mobile Jam Session organized by WIP. The issues of distribution, discovery, and monetization remain challenging for the small developers worldwide. Even with million user base, they are finding it difficult to monetize but we did discuss a number of success stories. The core elements of success that emerged from the discussion were: choosing the right market, embedding viral component into everything you throw out there, there is no room for mediocrity, and personalizing and customizing go a long way to get traction. An interesting tidbit: the number of page views for mobile MySpace app is a magnitude higher on off-deck vs. ondeck. Several of the companies are trying mobile advertising with varying degrees of success. After spending 4 hours with the developers, I sat on a carrier panel discussing mobile advertising. The contrast between the two worlds was so apparent. Clearly, more needs to be done to help both sides understand each other a bit better.

Green CTIA: There is a stronger emphasis on recycling and contributing to save the environment. The show itself is a big resource hog, so every bit helps.

Alternate Mobile Devices: The universe of alternate devices is expanding. Companies are buying wholesale data packages from the operators and integrating broadband chipsets into hardware to do digital signage (ICG), M2M (Sensorlogic), PND and much more. The definition of being �mobile� keeps on changing.

On Being �Open�: Obviously, given the recent activity around openness, getting a penny for each time the word was uttered by a speaker would have paid off for a lifetime of CTIA trips. While talk is cheap, demonstrable progress is being made by the likes Yahoo, Apple (btw, 3G iPhone is on its way), and AOL.

Another MVNO experiences turmoil: Movida - a Spanish focused MVNO which has garnered almost 300K subs filed for chapter 11.

Voice is becoming mainstream: With the product launches from Nuance, SpinVox, Vlingo, Jott, Yahoo, and many others, voice based navigation and its tighter integration with data services is becoming mainstream.

Where are the opportunities? Last week, I was moderating a panel with executives from AOL Mobile, T-Mobile, Motricity, and Formotus and the themes that emerged were around platform play, user experience, and productivity. At CTIA, in addition to these areas, there was a lot of discussion around social networking (though the market is being saturated with the MoSo noise). It is also clear that we are moving into the phase of �aggregation of fragmentation� with initiatives from Yahoo, AOL, and Google dominating the landscape.

Home Screen Effect: I have been talking about using the home screen for driving data usage for the last 8 years. I think we will see good innovation this year on that front starting with Yahoo�s One Platform. There are several other initiatives in the works where operators and OEMs will be deploying frameworks and technologies to bring information to a �click-less� idle screen environment.

Overall, no major news but industry stays vibrant, healthy, and exciting.

Your feedback is always welcome.

Chetan Sharma

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

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 data�s 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.

The worldwide markets continue to grow at an explosive pace reaching 3.3B subscriptions by Q407 up 20% from 2006 levels. Significant growth is coming from India and China with both countries registering close to 8-9M net adds per month. India recorded 8.8M net adds in Jan 08 while China added 9.4M in Feb 08. Overall, the world market is at almost 50% penetration.
US surpassed Japan as the most valuable mobile data market in service revenue with US adding $24.5B vs. $23.2B for Japan in 2007 mobile data service revenues. China with $12.5B was ranked number 3. US registered the highest growth amongst the top 3 with over 55% increase from 2006 levels followed by China at 37% and Japan at 18%. These top 3 markets account for over 50% of the global data service revenues.
NTT DoCoMo continues to dominate the wireless data service revenues rankings with over $12.13B in service data revenues for 2007 however Q/Q growth has dropped to single digits. DoCoMo crossed 80% in 3G penetration and is expected to touch 90% by end of the year.
DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T, Sprint Nextel, O2 UK, SK Telecom, Softbank, and China Unicom to round up the top 10 operators by wireless data service revenues. All the top 10 carriers exceeded $3B in data revenues for the year.
Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, 3 Italy, 3 UK, and O2 UK are topping 30%.
Both India and China added a whopping 85 million new subscriptions (most of them prepaid). This week India edges past US to become the number 2 wireless market (by subscriptions) in the world. In last two years alone it added almost 150 million new subscriptions (in comparison China added 155 million and the US market added 44 million).
Vodafone Italy reported the highest increase in data ARPU from 4Q06 with 76% growth. Other notable percentage increases in ARPU were from Rogers, AT&T, Verizon Wireless, Sprint, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.70.
In terms of absolute dollar amount, 3 UK leads the pack with $29 data ARPU (qualifying limit: 4 million subs). By comparison, the rest of the top 4 operators are below $22. In fact, 3 UK reported the highest ARPU recorded for the year at approximately $94 (in Q2). Other operators who reported overall ARPU above $60 were KDDI, NTT DoCoMo, Rogers, and 3 Sweden.
The biggest jump in data revenues was experienced by Verizon Wireless with over 68% increase from 2006 followed by AT&T with 63% jump and O2 UK making 49% gain.
In 2007, SMS�s vice like grip on data revenues continued 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%.
The top 10 operators increased their revenue by 32% during 2007 (from 2006) to reach almost $62 billion in data service revenues, thus accounting for almost half of the global data service revenues though they account for only 27% of the global subscription base.
NTT DoCoMo�s position at the top of the wireless data world has been challenged recently by several carriers esp. by its archrival KDDI. Their data coordinates stand at ($21.5, 35%) and ($21, 34%) respectively (please see PowerPoint for reference). Since the takeover from Vodafone, Softbank has been making significant strides in the market by taking the highest share of the net-adds in last 9 months.
The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers � Smart Communications and Globe Telecom with almost 55% (or $4) contribution coming from data services.
Even though China reported approximately $12.5B in data revenues for 2007 and the percentage contribution is over 23%, data ARPU is around $2.3. For India data ARPU dropped below $1 for all major carriers.
China Mobile with 369M (as of Dec 07, the numbers increased to 384M by Feb 08) remains the #1 carrier in terms of total number of subscribers followed by Vodafone at 252M and China Unicom with 160M subscriptions. Telefonica, Am�rica M�vil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and Verizon Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5. The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for many years to come. China Mobile also surpassed Vodafone in market cap which stands at $288B (vs. $164B for Vodafone). Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress.
As far as 3G is concerned, GSA reported 293 WCDMA commercial launches worldwide with over 270M 3G users (66% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 75-80% penetration. 3G has picked-up steam in both western Europe and North America per our forecast in the 2005 cover story article �3G: Hitting the Mass Market� published in the Wireless World Magazine. Western Europe and US are approximately at 25% 3G penetration (Italy being the exception reaching 40%).
China and India represent the biggest opportunities for Infrastructure providers. China has postponed its 3G decision for the umpteenth time and has been having technical and political problems to get something in place before the 2008 Olympics. India is going through its 3G spectrum policy but unlike China is likely to resolve the issues in short order. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage into rural areas. In India, regulators are considering inviting bids for the 3G spectrum from foreign entities as well.
Carriers with nationwide 3G networks and good distribution of handsets are seeing uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) are also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. In terms of 4G, there is a strong momentum behind LTE, UMB in its current incarnation is practically dead, and proponents of WiMAX are pushing the technology as a 4G candidate, though it is starting to lose its time advantage.
In terms of applications, messaging accounts for lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have captured industry�s imagination. 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.
2007 also saw the demise of some high-profile MVNOs like Amp�D. Helio continues to struggle while the newer ones like Sonopia and Blyk are testing the treacherous waters with different business models. Asian market is also opening up for MVNOs.
Nokia eclipsed 100M/quarter unit sale three times in 2007. It sold over 437M handsets in 2007, more than the next three handset manufacturers combined. Nokia�s global market share stood at 40.2%.
While the talk of �Open Access� and �Open Platform� consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon�s �Open Network� initiative elevated the consternation in the ecosystem.
Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile and Vodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia launched its ad service as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space. In a matter of weeks, several billion dollar transactions took place highlighting the intensity in preparing for the next battleground. The estimated market for mobile advertising in 2007 was approximately $2.3B with messaging, search, and browsing accounting for over 84% of the revenues.

Your feedback is always welcome.

Chetan Sharma

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

US Wireless Market Update - 4Q07 and 2007 March 10, 2008

Posted by chetan in : 3G, AORTA, BRIC, Carriers, Devices, European Wireless Market, India, Indian Wireless Market, 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, Smart Phones, Strategy, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

US Wireless Market Update - 4Q07 and 2007

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http://www.chetansharma.com/usmarketupdateq407.htm

The US wireless data market grew 55% in 2007 ending the year with $24.5 billion in data services revenues with 4Q yielding $6.9B. 2007 also saw significant industry milestones like: iPhone launch, US crossing 250 million subscriptions, 3G penetration in the US touching 25% subscriber base, consternation around 700 MHz spectrum auction, MediaFLO launch, Android launch, Nokia crossing 40% market share, WiMAX and Femto Cell trials, and much more. US almost equaled Japan in mobile data service revenues for the year (rounding error and currency fluctuation difference). With several significant launches coming up in 2008, US remains one of the most attractive wireless data markets.

The US Wireless data service revenues grew 7.8% Q/Q to $6.9B in Q407. For the year 2007, the US wireless data service revenues grew to $24.5B, up 55% from 2006.
Overall ARPU declined by $0.81and reversed the trend of overall ARPU uptick of the last two quarters. Average voice ARPU declined by almost $1.50 while average data ARPU inched up by $0.68 or 7%.
Sprint lead in data ARPU with $11.50 (or 19.83% of the revenues) closely followed by Verizon at $11.06. Verizon was ahead in terms of data as % ARPU with 21.3% of its ARPU coming from data services. AT&T with $10 (or 19.89%) and T-Mobile with $8.2 (or 16%) rounded up the top 4.
The strongest growth in 2007 came from Verizon and AT&T, with both of them tied at 64% YOY jump in data revenues. However, Verizon was ahead in dollar terms at $7.4B, accounting for almost 31% of the US industry data services revenue for the year. The top two were followed by T-Mobile at 56% and Sprint with 31% increase YOY.
The average industry % contribution of data to service revenues jumped to 19.34%.
In terms of net-adds, thanks to the Dobson acquisition and the iPhone sales, AT&T added 2.7M new subscribers followed by Verizon at 2M. The overall net-adds improved by 6.2M subs taking the total for the year to 20.8M, down slightly from 2006. Despite the 7% slowdown, there is plenty of growth left in the US wireless market.
In spite of AT&T�s prolific quarter, Verizon ended up with the highest net-adds for the year at 7.7M subs vs. AT&T�s 6.9M.
The top three US carriers again maintained their respective rankings amongst the top 10 global carriers in terms of data revenues. For the year, Verizon with $7.4B, AT&T with $6.9B, and Sprint with $5.2B in data services revenues stood at #4, 5, and 6 respectively with Verizon closing in on KDDI for the number 3 spot. AT&T became the second US operator after Verizon to be in the select group of five global operators who are now generating $2B or more in data revenues/quarter (the other three are NTT DoCoMo, China Mobile, and KDDI).
Non-messaging data revenues continue to be in the 50-60% (of the data revenues) range for the US carriers.
There was tremendous activity in the area of Mobile Advertising. Google is also laying out its tactical and strategic roadmap in hopes to dominate the space and while it succeeded in pushing FCC to change the 700 MHz auction rules, the future of Android alliance remains uncertain. It did however; help open the �open� debate in the industry. Meanwhile, Yahoo is busy creating some compelling applications and is stitching together carrier deals around the world.
Venture money continued to flow into the mobile sector with over $4.9B investment in 2007 (Source: Rutberg). Location Services, Mobile Personalization, Mobile Video, Mobile Search and Advertising, Semiconductor, Carrier infrastructure, Device design and development are hot areas.
iPhone helped AT&T find its voice. Since the introduction of iPhone in June 07, AT&T has reversed the multi-quarter trend of narrowing total subscriber difference with Verizon. Aided by the Dobson acquisition, the difference between the two companies stood at 4.4M subscribers in favor of AT&T (vs. 1.5M in Q107). iPhone also accounted for (higher) disproportionate mobile web usage exciting the ecosystem and media alike.
Nokia eclipsed 100M unit sale in Q407 for the third straight quarter. It sold over 437M handsets in 2007, more than the next three handset manufacturers combined. Nokia�s global market share stood at 40.2%. Quite impressive.
3G penetration in the US touched 25% in 2007, with Verizon leading the pack with over 53% 3G subscriber penetration. AT&T reported that 3G subs have over $20 in data ARPU accounting for 30% contribution to the overall ARPU from such subs. These trends are expected and the diffusion of mobile broadband will continue to create new opportunities and revenues for the ecosystem.
There was tremendous discussion around �openness.� Bowing to the industry pressure, FCC�s 700 MHz spectrum auction included clauses for opening up the network by the winner. Sprint made progress with its upcoming launch of XOHM. Verizon launched its Open initiative. Google�s Android was announced in Q407. Though devices are slated to hit the market in 08, its overall impact remains uncertain.

Global update

China and India added approximately 86M subscribers in 2007 dwarfing growth in other regions by a distance (China marginally edged out India to retain the top honors). Similar growth trends will continue into 2008. In fact, India will overtake US as the number two wireless market in the world (by total subscriptions) during the week of March 24th 2008.
NTT DoCoMo continues to dominate the wireless data revenues rankings with over $12B in data services revenue in 2007. 35% of its revenue now comes from data services. DoCoMo will also cross 80% in 3G penetration this month. China Unicom edged past SK Telecom to occupy the number 9 spot.
Most of the major carriers around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, and O2 UK are consistently topping 30%.

More details in our worldwide wireless data market update coming out later this month.

Your feedback is always welcome.

Chetan Sharma

Mobile Industry Predictions - 2008 January 1, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, European Wireless Market, Indian Wireless Market, Intellectual Property, 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 Usability, Privacy, Smart Phones, Speech Recognition, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 8 comments

I never think of future, it comes soon enough � Albert Einstein

First things first. Wish you a very happy and successful 2008.

Before we look at what�s to come, let�s do a quick wrap-up of the year that was.

2007 will clearly be remembered as �the year of iPhone.� While there were several other �events/trends of interest� through-out the year, nothing captured the imagination of the world like the iPhone. It was significant for another big reason � it had a profound impact on the business model and ecosystem dynamics. Q4 2007 was also significant for the deafening roar that resonated around �Openness�.

Steve Ballmer exclaimed mobile to be the next battleground while Eric Schmidt pondered why mobile phones are not free (subsidized by Google ads of course).

Google played its chess game effectively and though it is unlikely to play to win the 700 MHz auction or even if they do win would be able to do anything substantive in the short-term, they did, however, with Android and spectrum gambit, force some of the regulation-wary operators to take a stance on openness. Nokia is putting together a brilliant services strategy that looks to connect directly to the consumer. Competition and coopitition will have a different meaning going forward.

Things were looking positive for WiMAX until the end of the year when Clearwire was left standing on its own. It will look towards Google, Sprint, Motorola, and others to rescue its fate.

Mobile Advertising was hailed as a great savior of mobile content and mobile revenues in general. Blyk even launched an advertising-based MVNO. We made significant headway in energizing the 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.

In terms of actual dollars, mobile data market continued its steady growth with substantial shifts in revenue towards non-SMS data applications and services. Several operators are doing $2B/quarter+ in data revenues. Several subscription milestones throughout the year: 3B worldwide, 500M China, 250M US, 225M India. 3G continued to inch towards mass-market in western markets (20-25% penetration) while in Korea and Japan, it was getting hard to find people without 3G (70%+ penetration).

Among other events of significance: Cincinnati Bell and T-Mobile launched UMA devices, Motorola lost its Mojo, Amp�D and Disney Mobile shut down, MediaFLO launched, mCommerce initiatives took hold, China continued to delay 3G, WM got updated, Yahoo cemented some impressive operator deals as GYM got more active in mobile, UMPC fizzled, Mobile Web 2.0 got into the industry physce, LTE got embraced worldwide, M&A galored, IP scuffles continued, Muni projects went into coma, and DRM-adorned content became a thing of the past.

2008 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. This survey was a bit different in the sense that the movers and shakers (and folks from the companies discussed here) and industry insiders participated. We were able to glean some valuable insights from their choices and comments. Participants (n=196) were folks from across the mobile value chain and from around the world.

Many thanks to everyone who participated.

(click for larger image)

Three names were drawn for a copy of our upcoming book �Mobile Advertising� (co-authored with Joe Herzog and Victor Melfi, John Wiley & Sons, 432 pages, Feb 2008).

The winners are:

David Cushman, Director, Emap
Larry Shapiro, VP, Disney, and
Keith Kostuch, SVP, Alltel

Congrats and Thank you.

Now onto the survey analysis.

Figures above and below summarize the responses. We requested respondents to rate the probability of an event happening in 2008 on a scale 1 to 5. 1 being �Not a chance� to 5 being �100% probability� The figure above summarizes the overall probability of the event happening. The figure below provides the breakdown of responses.

1. Will Google introduce a Google Branded Phone in 2008?

2. Will Google play to win in the 700MHz Spectrum Auction?

3. Will Microsoft launch its own mobile phone?

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

5. Will WiMAX regroup from its setbacks?

6. Will Helio survive 2008?

7. Will Verizon truly open-up its garden for third-party visitations?

8. Will 2008 be the inflection year for Mobile Advertising?

42% gave Mobile Advertising a 75% or higher chance for rapid growth. Market will mature, more consolidation, some privacy gaffes but overall things are looking up for mobile advertising.

9. Will Femto-Cells gain any significant momentum in 2008?

It will be an introduction and experimentation year, so no significant traction is expected. Over 52% thought Femto-Cells will be just a buzz word in 2008.

10. Will Nokia be able to extract iPhone-style rev-share from carriers in 2008?

11. Will Palm survive 2008?

12. Will iPhone truly open up?

13. Will there be more unsubsidized devices introduced in the US market in 2008?

14. Will Mobile TV move the needle in 2008?

15. Will Android make a dent in handset shipments in 2008?

Only 15% gave it a more than 75% chance this year. It is going to take some time for Android plans to mature and materialize. Don�t see any material impact in 08.

Of course, 15 questions can�t cover the whole industry. As pointed out our respondents, there are a number of other issues and opportunities that will shape the ecosystem - Rise of Facebook as social networking OS for mobile (social networking as a whole starts to go mobile), LBS beyond navigation, Rev-share shuffles, Chinese OEM start to become prominent in the western world, China and India continue to dominate in net-adds, Mobile device security becomes a nightmare for corporate IT, Consumers wake up to mobile privacy snafus and risks, Will Android spread its tentacles beyond nicheosphere, 3G iPhone, Does China Olympics hold any surprises for the mobile industry? Launch of projection handsets, NFC handsets, IMS .. and much much more ..

All in all, consternation and debate will continue into 2008. We will analyze, dissect, and report as events unfold in the new year.

Look forward to the continuing dialogue and meeting with you in person.

Your feedback is always welcome.

Chetan Sharma

older posts »

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Always On Real-Time Access

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

2010 Mobile Industry Predictions Survey January 3, 2010

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

US Mobile Data Market Update Q3 2009 November 9, 2009

CTIA Wireless IT & Entertainment Roundup 2009 October 12, 2009

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

Global Wireless Data Market Update - 1H 2009 September 21, 2009

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

Global Wireless Data Market Update - 2008 April 28, 2009

Mobile Industry Predictions 2009 January 1, 2009

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

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

2008 in review - revisiting annual predictions July 31, 2008

New Paper: Mobile Services Evolution 2008-2018 July 11, 2008

MIT Technology Review: Why Helio didn’t connect? July 3, 2008

Another MVNO bites the dust April 8, 2008

CTIA Wireless 2008 Roundup April 4, 2008

Global Wireless Data Market Update 2007 March 27, 2008

US Wireless Market Update - 4Q07 and 2007 March 10, 2008

Mobile Industry Predictions - 2008 January 1, 2008

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