We have been analyzing the data from the previous recessions to see how much correlation exists with the mobile industry data. Below is the high-level analysis. This will be part of our US Wireless Data Industry Update 4Q08 and 2008 coming out next week.

The current recession is not the first one that the US wireless industry has faced but it is quite different. The first one came in 1990 and lasted for 1 year and the second came amidst the dot-com bubble and terrorist attacks in 2001 and lasted for 2 years. Historically and logically, GDP and consumer spend is closely correlated. When the economy contracts, so does the consumer spending. A look into the income elasticity of demand indicates a change in consumer mobile services demand as a result of drop or change in consumer income. Different patterns of consumer demand emerge in different countries depending on the state of the industry during the specific downturn.

If we compared the US GDP data to the revenues and subscriber data, there is some correlation but state of the industry was quite different around that time. The % change in mobile services revenues and subscriptions went down with the drop in GDP in both instances and recovered as the GDP pulled back after the recession. During the first recession, mobile was a niche service. By 2001, mobile has become a mass-market phenomenon but data services market was largely non-existent. By 2008, the US mobile market had matured with high-degree of subscriber penetration and mobile data had become a healthy and vibrant industry.

1990-1991 The % GDP change (GDP compared to previous year) dropped from 5.8% in 1990 to 3.3% in 1991. The mobile service revenues % change dropped from 36% to 26% over the same time period, the subscriber % growth dropped from 51% to 43%. Subscriber penetration at the end of 1990 was around 3%. Given the smaller base, the drop in mobile numbers can be partially attributed to the fact that as the % penetration grows the % change numbers come down anyway. However, in 1992, when % GDP jumped to 5.7%, the % change in mobile services revenues and total subscribers jumped to 46% and 37% respectively, thus quickly reversing the downward trend.

2001-2003 The % GDP change dropped from 5.9% in 2000 to 3.2%. Over the same period, % change in mobile services revenues dropped from 31% to 24% and % change in total subscribers dropped from 27% to 17%. However, as you would see in slide X, these numbers have been slowly dropping regardless of the recession as the subscriber and revenue base grew. The subscriber penetration in 2000 was 39%.

2008- The % GDP change dropped from 4.8% in 2007 to 2.3% in 2008 with 4Q 2008 reported a drop by 6.2% QoQ in one of the sharpest declines in last quarter century. The nature of this recession is quite different as well. While the previous recessions were limited to certain segments of the overall economy, the current recession has touched every single sector with a vengeance. The subscriber penetration at the end of 2008 was 89%.

So, what can we expect in the next few months. Tune in to our quarterly report next week to read some our 2c.