Data Market Update - 1H 2008
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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.
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.
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
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
China Mobile with 428M (as of Aug 08) remains the #1 carrier in
terms of total number of subscriptions 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
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
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
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.
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.
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
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
- 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).
Your feedback is always welcome.
Disclaimer: Some of the companies mentioned in this note are our clients.
VERNFOTHERINGHAM and CHETANSHARMA
IEEE Press/John Wiley
"In this book, Vern and
Chetan have done a remarkable job in laying out every aspect of this
critically important and demanding topic. Read it from cover to cover,
enjoy it all, and be satisfied in knowing what every modern planner,
manager, and educated citizen should know about the world’s future"
From the foreword by
Mark Anderson CEO, Strategic
News Service and SNS Project Inkwell
“This is as comprehensive a book on Wireless Broadband as I have seen.
The authors of this book address the most important issues facing the
players in the wireless ecosystem in great detail and provide a very
- Steve Elfman, President, Sprint
“A comprehensive and insightful coverage of the complex factors
affecting the growth of the wireless broadband industry”
– Dr. Nitin J. Shah, Co-Founder of
the Personal Broadband Industry Association
“This book accurately captures both the historical and holistic
perspective on key market forces at work and their interactions that
will lead to fulfilling the broadband connectivity requirements of the
- Umesh Amin, President -
Wireless, Intellectual Ventures
"Vern and Chetan have
written an insightful book that takes a refreshing multi-dimensional
approach to the wireless broadband industry"
Dr. Hyun Oh Yoo, former CEO, SK Communications, CEO SKT
Holdings America Inc.
“This book is a great overview of the issues relating to our industry
and should be of significant value to readers who are curious about how
we got where we are, and the lessons we "should have" learned along the
way as an industry whose fate was and is tied so closely to the risk
- Bill Rouhana, former CEO and
Mobile Services Evolution
2008-2018. A Paper for the Rockefeller Foundation conference on
eHealth in Bellagio, Italy
MarketEdge w/ Larry
Advertising and Marketing
Interview with Ravi
Venkatesan, Chairman, Microsoft India
The NY Times
Apple Aims for the Masses
with a cheaper iPhone
The guessing game has begun
on the next iPhone
Open Source Android Phone Will Free the Wireless Web
Why Helio didn't connect?
Data Shows That 3G Still has
Room to Grow
More Proof that the Internet
Will Save Wireless Carriers
Is 3G Ready for the iPhone
Advertising: Supercharge your brand in the exploding wireless
market (John Wiley & Sons)
Inside the USPTO: A guide to
the patenting process
What is your Patent Portfolio Quotient (PPQ)?
an article? All articles can be found here.
3G Americas Analyst Forum,
Moderating a panel on
"Mobile Advertising" -
Giving a keynote address on
"Mobile Advertising: The Key Success Factors"
to a gathering of European Operators in Vienna, Austria
Giving a keynote address on
"Future of Wireless: Opportunities and
Challenges" at an exclusive event with
mobile executives (CXOs) from Finland, San Francisco
Giving a keynote address on
"Mobile Advertising: The Key Success Factors" to
a gathering of Asian Operators in Macau
Giving a talk on "Mobile
Advertising" at Oxford University, UK
Earlier this month, Chetan
moderated some engaging panels with leaders from the
ecosystem - discussing the future of mobile to carrier
strategies to grow mobile data to the Asian markets.
Videos available at links below courtesy of GigaOM and
Signals from the near future: The Mobile Guru Panel
The Carrier Panel - Strategies to keep Mobile Data
Convergence of Social Networking and Mobile applications
In addition, Chetan will be doing some
private briefings to carriers, content providers and enterprise
Technology: Conflict and Convergence (Book)
US Wireless Data Market: Q3
Mobile Industry 2009
Missed an update?
All research notes can be found here.
© Chetan Sharma Consulting
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