The US wireless data market grew 5% Q/Q and 24% Y/Y to exceed
$11.8B in mobile data service revenues and thus exceeded $10B
for each of the four quarters in 2009. For the calendar year
2009, the overall mobile data revenues for the US market grew
29% ending at $44 billion for the year (1% shy of our
$44.5 billion estimate).
For the calendar year 2010, we expect a 20% increase in mobile
data service revenues accounting for over $53 billion in service
revenues.
Verizon Wireless edged past China Mobile to become the second
biggest mobile data operator by revenues.
The US subscription penetration was approximately 92% at the end
of 2009. If we take out the demographics of 5 yrs and younger,
the mobile penetration is 99%.
The messaging volume increased 7% from last quarter catapulting
US as the number one texting nation by messages/user/month going
past the long-time leader Philippines.
For the first time in the history of the US wireless industry,
the data traffic exceeded voice traffic for the full calendar
year. With almost 400 terabytes of data traffic, it exceeded
voice traffic by a significant margin. We expect that the ratio
between the two traffic sources is going to double in 2010.
Apple continued its iTunes juggernaut and if measured by billing
relationships (of course not all accounts are mobile) Apple is
now the 10th largest mobile operator in the world.
Q4 2009 reported a 5.9% increase in GDP compared to the 3.5%
increase in Q3 when the recession technically ended. While the
overall economy is sputtering towards growth, wireless industry
in the US remains vibrant as is evident by the increase in
revenues and net-adds which jumped more than 5 million for the
first time in 2 years.
What to expect in the coming months?
Christmas quarter generally yields best results of the year.
Though the US mobile industry came out pretty unscathed from the
recession, it will benefit from the improving economy. As such
we expect the US mobile data service revenues to gain 20% to
reach $53 billion in 2010. Mobile data will continue to be the
engine of growth for the ecosystem providing at least 33% of the
overall service revenues by the end of 2010.
The furious cycle of device releases is accelerating and one
wonders if the longevity of each device is starting to shrink as
even the hit devices like Droid and Nexus One are not allowed
enough room to fully capitalize on their initial momentum. The
app economy has been expanding as well. Part strategic, part
hysteria, everyone is jumping into the pool to tap into the app
river to pull in some revenues or use it more strategically to
sell more devices, services, or advertising. (Stay tuned for
more research on the subject in the coming days)
Microsoft is attempting a comeback with its 7 series devices
though the delay in handset release as well as the lack of
backward compatibility gives enough time for competitors to plan
their moves. We are glad to see the industry going past the “PC
like icons” for mobile phones (something we have advocating for
more than 10 years, most recently in our paper “The
Untapped Mobile Data Opportunity.”
This will enhance user experience and help in extracting true
value out of the mobile devices.
From the various announcements this year, we can expect an
action packed 2010. However, it will be also an year of
shakeouts with several key M&A transactions that will winnow
down the competitive landscape in many segments.
Q1 2010 will also be important from the regulatory point of view
with the national broadband plan being unveiled later this
month. With the looming spectrum shortage, regulatory bodies can
have a significant impact on the competitiveness of a nation.
For example, in India, regulators haven’t been able to get their
acts together for the past 3-4 years and its citizens continue
to suffer from 2G. Similarly, many countries in South America
have imposed unnecessary spectrum caps. The industry and
regulators need to work hand-in-hand to make progress beyond
speeches and paperwork.
To start planning for 4G, 5G, and beyond, US should think about
rolling a 50 year broadband plan. While more spectrum is always
helpful, will we have all the spectrum we need in 2050? or do we
need to invent new technologies and business models that use
spectrum more wisely? This topic will keep the industry occupied
for some time to come. (Former FCC Chairman, Kevin Martin
will be headlining our
Mobile Breakfast Series
event on March 10th to discuss the Spectrum Crises).
2010 will also be the year of network expansion with HSPA+,
WiMAX, and LTE all coming into play in the US. As we had
anticipated last year, the mobile data traffic kept on growing
disproportional to the revenues. At the end of 2009, the US
mobile data traffic was almost 400 petabytes, up 193% from 2008.
To truly tackle the problem head-on, industry will need to adopt
a multi-pronged strategy to manage their traffic more
effectively. We discussed mobile data traffic in much more
detail in our popular paper "Managing
Growth and Profits in the Yottabyte Era."
We will be issuing an update later this quarter so stay tuned.
It is also good to see the mobile industry expanding into
vertical segments like Health and Retail. More discussion to
come on these topics.
We will be keeping a very close eye on the micro- and
macro-trends and reporting on the market on a regular basis in
various private and public settings.
Against this backdrop, the analysis of the Q4 2009 and 2009 US
wireless data market is:
Service Revenues (Slides 8, 17)
-
The US Wireless data service revenues grew 5% Q/Q to $11.8B
in Q409. Compared to Q408, the data service revenues grew
24%.
-
Verizon and AT&T accounted for 88% of the increase in data
revenues in Q4 2009.
-
The US mobile data service revenues crossed $10B for all the
four quarters and stays ahead of Japan and China by a
distance.
-
AT&T experienced the most growth with over 7% increase Q/Q
followed by Verizon at 5%.
-
Verizon's data revenues exceeded $4B for the second straight
quarter and is only inches behind the global leader of over
10 years NTT DoCoMo.
-
AT&T and Verizon now account for 69% of the market data
services revenues and 62% of the subscription base.
-
The average industry percentage contribution of data to
overall ARPU is now 29%. US market is likely to pass the 30%
mark in Q1 2010.
-
Verizon edged past China Mobile to become the second biggest
mobile data operator by revenue behind NTT DoCoMo. The top
four US carriers are now a permanent fixture in the top 10
global operators by mobile data service revenues occupying
#2, #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 9-12)
-
Overall ARPU decreased by $0.45. Average voice ARPU declined
by $0.98 while the average data ARPU grew by $0.53 or 4%.
-
Verizon led in (blended) data ARPU with $16.24 followed by
AT&T and Sprint. In terms of % contribution, all the top
three operators exceeded the 30% mark (Verizon became the
first operator to do so last quarter). T-Mobile ended the
year with 22.2% of its revenue coming from data services.
Subscribers (Slides 13-15)
-
In Q409, in terms of net-adds, the US market reversed the
trend of the last 8 quarters and increased net-adds by 85%
Q/Q to add approximately 5.1M new subscriptions.
-
The messaging volumes in the US market now average almost
592 messages/subscriber/month thus becoming the number one
texting nation going past Philippines.
-
In terms of net-adds, thanks to the boost from the iPhone,
AT&T led for the third straight quarter with 2.7M net-adds,
edging its friendly rival Verizon which added 2.1M net
subscriptions.
-
T-Mobile and Sprint improved their net-adds from last
quarter though it was primarily from the prepaid segment.
Applications and Services
-
Non-messaging services continue to grab 60-65% of the data
revenues for the US carriers.
-
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
esp. in mobile advertising with the acquisitions of Admob
and Quattro Wireless.
-
The usage and data consumption trends are enabling carriers
to accelerate their 3.5G/4G plans and develop long-term
business and technical strategies.
Handsets
-
Nokia sold 129M+ units in Q4 2009 including 21M smartphones.
Samsung again had a solid quarter with over 69M devices sold
maintaining its market share at 21%. LG Electronics at 10%,
Sony Ericsson at 4%, and Motorola at 4% rounded up the top
5.
-
The constant drumbeat of new devices continued with Droid,
Nexus One, and the fabled iPad.
-
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.
Policy and Regulations
-
Q4 was also notable for the 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. The
US broadband plan is scheduled to be unveiled later this
month and can set the tone of innovation and regulation in
the coming years.
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. The number of
non-operator appstores jumped 375% in 2009. In the midst of
the appstores hoopla, Apple announced the passing of the 3
Billion download mark with increasing number of developers
participating the ecosystem.
Data Traffic (Slide 16)
·
For the first time in the history of the US wireless industry,
the data traffic exceeded voice traffic for the whole calendar
year. With almost 400 terabytes of data traffic, it exceeded
voice traffic by a significant margin. We expect that the ratio
between the two traffic sources is going to double in 2010.
Misc.
-
India continues to be the hottest market on the planet in
terms of net-adds with (again) a world record-setting month
in Jan 2010 with 19.9 million net adds. To give you a
perspective, this is almost 1.5 times the number of
subscribers US added in the whole year. It is like adding a
Canadian wireless market every month. For the year 2009,
India added 177 million subs vs. 106 million for China.
Making money on the net-adds is a different proposition all
together (more discussion on the international market in our
global market update later this month)
-
Willcom, the small Japanese carrier that started the
flat-rate unlimited phenomenon filed for bankruptcy last
month.
-
Softbank of Japan looks set to be the first major operator
(outside of Philippines) with more revenues coming from data
services than voice.
We will be keeping a close eye on the trends in the wireless
data sector in our blog, twitter
feeds, future
research reports,
and articles.
The next US Wireless Data Market update will be released in May
2010. The next Global Wireless Data Market update will be issued
in March 2010.
Your feedback is always welcome.
Should you have any questions about navigating or understanding
the economic and competitive icebergs, please feel free to drop
us a line.
Thanks.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are
our clients.
