US Mobile Market Update 2017

5G Industry Transition – We have worked on every single G transition. Now that we are moving into the 5G cycle, we are heavily involved with players across the ecosystem and around the globe from very advanced markets to just emerging. We have penned 7 research papers on 5G already, many of them industry firsts, and have several in the works for the coming months and years based on what we are learning from our work on the ground. Chetan Sharma Consulting will be providing more regular updates on our views on the technology, the shifts, the opportunities, and the players starting with MWC next week.

Highlights of the US Mobile Market Q4 2017

  • The US wireless market had a mixed year in 2017. While the service revenue declined for the third straight year, growth in access revenues was encouraging. After dipping into the negative territory in the first quarter, mobile data growth accelerated in each of the remaining quarters in 2017.
  • T-Mobile continues to outshine its peers in net-adds and revenue growth performance. It captured 60% of the postpaid net-adds, and 77% of the phone net-adds.
  • The connected devices segments (non-phone) crossed the 100M milestone in 2017 becoming the second country to do so.
  • Smartphone penetration stood at 93%.
  • For the first time, there were more cars added than phones for the full year. AT&T dominates the connected car segment with 11 straight quarters of 1M or more connected car net-adds.
  • For the first time, connected vehicles was the biggest net-adds category for the year.
  • While the operators struggled to maintain growth, the overall wireless market grew 18% in 2017 thanks to the continued explosion on the 4th Wave by new digital players.
  • The 4th Wave ecosystem grew by 60% in revenues.
  • 2017 saw the sharpest declines in tablet net-adds with a whopping 86% drop. It had something to do with operators not pushing cellular tablets, but it might also indicate that consumers are not opting for cellular tablets and are probably going the tethering route. This might have implications to the 5G strategy for OEMs.
  • Net Income declined 11% while Capex and Opex jumped 17%.
  • The mobile data pricing dropped by 60% in 2017.
  • Verizon continued its steady march on the IoT/Telematics front. While the growth has slowed down, it is marching towards a $1B business in 2018.
  • Income/sub/mo declined again with Sprint experiencing the sharpest declines. On average, AT&T and Verizon took the bulk of the profits.
  • Except for T-Mobile, all operators saw declines in LTV though churn levels are still at historic lows.
  • Overall ARPU continues to decline partly because of the device mix which is now including IoT that tend to be low ARPU albeit highly profitable subscriptions. But, the main reason of the decline is competitive intensity.
  • The mobile data consumption continues to rise. US is third behind Finland and Korea in terms of GB consumed per sub/month and first amongst nations with more than 60M population.
  • The average data consumption in the US crossed 6 GB/mo by the end of 2017.
  • Overall, US is number one in total Zettabytes consumed on mobile networks ahead of India and China (India crossed China on the backs of phenomenal network performance by Reliance Jio).
  • Industry capex is expected to pick up pace in 2018 as all operators are gearing up for their 5G strategies in 2018-19.
  • On the back of connected devices, AT&T led the industry in net-adds.
  • The overall industry upgrade cycle is over 3 years now.
  • Apple extended its market cap past $900 Billion. The race for a trillion is really on. Amazon passed Microsoft. Will 2018 be the defining year for the trillion-dollar milestone?

Other topics covered in the research update:

  • The Race for the 5G icon
  • 5G – Known Knowns and Known Unknowns
  • Year in review, What’s in store for 2018?
  • Sigfox and the daemons of WiMax
  • T-Mo-Sprint affair ends, Should they try again?
  • Mobile Data Growth: What’s Next?
  • MAGAF’s dominance
  • Estimating 5G data demand
  • 5G as a platform
  • 5G Economics
  • The shifts in Net-adds
  • Should Governments Nationalize 5G Networks?
  • US Wireless Market Q4 2017 and 2017 Analysis
    • Service Revenues
    • ARPU
    • Subscribers
    • 4th Wave Progress
    • Connected Devices
    • Handsets

 

The Race to the 5G Icon

It is easy to get lost in the 5G noise these days. Unless you can read between the lines, the strategic dimensions and shifts might be hard to discern. In the US, with all LTE networks almost at par, there is not a whole lot of daylight between the operators at a high level (of course there are nuances worth fighting over). 5G is complicated but just like 4G, it is going to be a marketing battle before it becomes a technology battle. It is truly a race for the 5G icon on the smartphones. If you want to really understand what’s going on and what is likely to happen, just track the capex committed to the roadmap to the 5G icon. Ignore everything else. T-Mobile is arguably the best placed operator (currently) to win the bragging rights of the first round of that game. The main reason is that they are likely to be the first to deploy 5G on a low-band spectrum that can give them the coveted 5G icon on the smartphone. This may not necessarily mean 5G speeds in the early days but who is counting. Sprint is best placed with the prized mid-band spectrum to the tables on its three counterparts if it decides to go that way and can even out-flank T-Mobile, but it is a higher lift in terms of capex. Mid-band will give much higher bandwidths but will be plagued by known in-building issues. Verizon and AT&T are looking to win the near-term game with higher-band deployments which can provide unprecedented speeds and latency but will invariably have a hard time with coverage and scale. Players haven’t really shown all their cards yet so the path to 5G remains in flux. At the end of the day, 5G is a mobility play, that’s where the real-dollars are but it is a 10-year journey and there will be plenty of drama to keep us entertained.

5G – Known Knowns and Known Unknowns

In the words of the famous American philosopher, Donald Rumsfeld, there are known knowns, known unknowns, and unknown unknowns. Let’s keep the last category on the side for this discussion but overall, we know quite a bit about 5G to know what we know and what we don’t.

Known Knowns – The Standard, The timeline of the Standard, High-band performance, Japan-Korea-US leading the 5G game in the early innings, Europe behind, 5G platform will give birth to new services and applications, Performance KPIs of 5G, 5G will require new business models to be successful, 5G economics could be a challenge, US lacks mid bands and a strategy to make them available, FCC is behind China and Europe in having a mid-band 5G strategy, Mobility is seen critical to 5G scale.

Known Unknowns – Can high-band 5G scale? Will consumers pay more for 5G? Can operators make more money from 5G? Will 5G necessitate more infrastructure sharing? Will operator market shrink further? Will the regulatory structures changes? Will 5G economics force operators to look for different deployment models? Will China lap around US to gain 5G leadership? Will digital services on the 5G platform be dominated by incumbents? Will operators play a meaningful role in 5G digital services? Will 5G be an enterprise play? Will 5G equal or exceed the 4G growth curves? Security aspects of large scale deployments? Role of Fixed broadband and unlicensed spectrum in 5G Economics, National Infrastructure Plans?

Over time, it will be good to maintain the list to understand the progress. We will keep our finger on the pulse and update as necessary.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blogtwitter feeds, and future research. The next US Wireless Data Market update will be released in Apr 2018.

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