Save the Date: Mobile
Future Forward 2011 - Sept 15 2011
Forward is a gathering of some of the most influential
minds in the mobile industry. The experts and visionaries from
around the world will discuss and debate the future of mobile
the 2010 Event Summary.
In proud partnership
Millennial Media, Openwave
, Real Networks,
Mobile Data Market Update Q4 2010 and 2010
The US wireless data market grew 5% Q/Q and 23% Y/Y to reach
$14.8B in mobile data service revenues in Q4 2010. The final
tally for the 2010 year was $55B and we expect this to increase
by 22% to $67B in 2011.
The US mobile subscriptions officially crossed the 100%
penetration mark in Q4 2010.
Of all the segments, the connected device category registered
the highest growth at 55% while the postpaid subscriptions grew
by only 3% for the calendar year. Connected devices (including
tablets, M2M, telematics, eReaders, etc.) now account for 7% of
A significant shift
2010 marked the milestone of the start of a new computing and
communications era. For the first time in the US, the
smartphones shipments exceeded the traditional computer segments
(that consists of desktops, notebooks and netbooks). In 2011,
the smartphone segment along with the connected devices (tablets
and eReaders) will not only exceed the computer segment in unit
shipment but more importantly in the overall revenues as well.
Of course, these categories are merging and the lines are
blurring but it is good to take stock of the transition which
will create new ecosystems and decimate the old ones over the
course of this decade.
The evolution of connected devices
The connected devices category is the fastest growing segment of
the market and while the ARPUs are low, due to higher margins
this segment will prove to be the most profitable in the coming
years. By the end of 2011, connected devices will be commanding
double digit market share. However, not all sub-segments are
going to be successful in the operator channel until
multi-device data pricing plans are introduced. Most of the
tablets and eReaders can work well with only WiFi most of the
times. Monthly data plans make sense for enterprise users but
not for consumers who might use these devices occasionally. As
such tablets will be more successful in direct and traditional
Operators who start to bundle multiple devices by single data
plans and data buckets are going to see a better yield in this
category (We will be discussing the connected devices
universe in our upcoming
Mobile Breakfast Series
event in April).
Similarly, OEMs who rely on the operators for sell-through of
tablets/eReaders will see low volumes vs. players who have more
diverse distribution channels (Apple and HP). We do expect
multi-device or family data plans to start being introduced in
the US market in 2011.
As we had mentioned in our
iPad (and other tablets) are making Netbooks irrelevant. In
fact, tablets are starting to eat into the laptop category as
well. As expected, the device has been a hit with many
enterprises with mobile workers. Many enterprises are giving out
iPads to their workforce instead of laptops or Netbooks.
At CES 2011, hundreds of tablets were introduced. While the
total number of releases was noteworthy, we expect iPad to
dominate the space in 2011 as competitors will find it hard to
compete across all dimensions - price, performance, ecosystem,
distribution, and brand power.
Mobile Data Consumption
Mobile data consumption continued to grow across all networks
increasing 2-5 times on major US networks. Many of the
superphones introduced in 2H10 are clocking 1-1.5GB/mo average.
The average data consumption in the US at the end of 2010 was
350 MB/mo. Thus, while the data revenues for the year increased
23%, the mobile data traffic grew 132%.
The significant rise in the smartphones sales and usage in the
US market (over 50% devices sold in the US in 2010 were
smartphones almost twice the global average) means that by the
end of 2011, in the US, the smartphones will consume more data
than the data cards for the first time. We also expect US to
become the number 1 nation in mobile data consumption this year
edging out Sweden. A detailed treatment of the subject can be
found in our "Managing
Growth and Profits in the Yottabyte Era"
paper. Another research update on the topic will be released
The center of gravity has shifted back to the US
As I mentioned in
Time magazine interview
earlier this month, there is no question that the center of
gravity of the mobile market has shifted back to the US. The
Nokia-Microsoft announcement was a wake-up call to many in the
industry who were in denial. The innovation is happening all
around the world and in many areas other countries are years
ahead. The markets are growing faster in India, China, and
elsewhere. However, the coordinates of whatís next have clearly
changed in the last three years. The software innovation and the
next generation network launches in the US are laying the
foundation of a solid mobile decade.
US is also the most dominant market in terms of revenue
generation for the industry. While the US represents less than
6% of the subscription base, it accounts for over 21% of the
data revenues with Verizon Wireless becoming the number one
mobile data operator in 2010 edging past the decade long leader
NTT DoCoMo. AT&T also went past China Mobile to gain its current
number three ranking. By the end of 2013, the US market will
account for 25% of the global mobile data services revenues (We
will have a detailed analysis of the global markets in our
upcoming research note in march).
Nokiaís market problem can be summed up thusly - ďWhile Nokia
sold 10 times more devices than Apple in 2010, its market cap is
1/10th that of Apple.Ē It has been clear for some time that
things had to change at Nokia.
Weeks leading up to the Mobile World Congress were rampant with
curiosity of who will Nokia marry to continue its next phase of
device journey. The multi-billion dollar offering from Microsoft
proved too hard to resist for Nokia. This news completely
dominated the MWC chatter and the topic comes up invariably in
many conversations since then. One has to give points to Nokia
for decisiveness and for moving quickly under the pressure.
It is also indisputable that the deal is a significant win for
Microsoft who has been looking to come back into the game.
However, impact on Nokia remains uncertain. While there were
risks with Android, going with Win7 is not an assured path to
resurrection either. It all comes down to execution. Can the
troops be rallied to produce a slew of competitive devices
quickly that consumers and operators will find attractive?
Microsoft understands developers better than most and the two
companies can bring in tremendous scale and complementary
toolsets to attack the market. Nokia has significant talent and
itís a proud company but jumping into the shark-infested cold
waters miles away from the shore will require all the stamina,
good weather, and skill it can muster to make landfall before
MeeGo is likely to go back into Intelís camp and might look
interesting to the likes of LG, Samsung and even Motorola though
creating a new ecosystem is a tall order. Never a dull moment in
the industry, is there?
Impact of iPhone on AT&T
It finally happened. The Verizon iPhone has kept the media busy
for the last 3.5 years. It was quite an anticlimactic moment
when the device finally came to the 2nd operator in the US. It
was inevitable that one of the longest exclusive relationship in
the wireless world will come to an end. The iPhone
singlehandedly turned around AT&T relative to Verizon in the
net-adds race. For 10 quarters leading up to Q2 2007, AT&T was
adding less net-adds compared to Verizon, in fact the cumulative
net-add loss was 3.7 million subs on an average of 374,000 subs
per quarter. As soon as the iPhone was launched in Q2 2007, AT&T
started adding more net-adds compared to Verizon with the 14
quarter cumulative net-add difference close to 6 million subs on
an average of 426,000 subs per quarter.
What to expect in the coming months?
Kids of the now generation are growing with connected
electronics that is fundamentally altering the behaviors and
expectations of interaction, communication, consumption, and
Android and iOS are completely dominating the developer and
ecosystem mindshare and the race to become a viable 3rd option
is on. Operators would love to see another competitive force
emerge in the market.
All this has setup an absolutely fascinating 2011 in the
communication/computing industry. Convergence is everywhere and
is leading to a fundamental reset of the value chains and
ecosystems. We are going to be discussing the ins and outs of
how the industry is going to evolve in the next decade in our
Sept 15th mobile thought leadership summit Ė Mobile
Future Forward which
is bringing exceptional industry thought-leaders, inventors, and
doers to brainstorm, discuss, and debate whatís next. More
details to come.
US is also leading the way in smartphone sales. In Q4 2010, 48%
of the devices sold in the US were smartphones compared to 25%
globally. The fast pace of device introduction has catapulted
the agile players like Samsung and HTC to the forefront while
others like LG and Sony Ericsson have lost ground. By singularly
focusing on Android, Motorola did quite well in 2010 but 2011 is
going to be challenging.
The pace of product introduction is accelerating with each
quarter. Devices of all shapes and sizes are coming into the
market literally every week. Players are having to re-evaluate
their businesses and long-term strategies. There are several
players whose future is at stake. The competition has grown
fierce and companies are finding it hard to take ideas from R&D
to products in market in a short amount of time.
While 2010 started quite active on the regulatory front as the
national broadband plan was unveiled in March little substantive
progress has been made w.r.t. the spectrum, net-neutrality, and
other broadband related issues. The matter has swiftly moved to
courts where it will take months before anything useful comes
Operators are starting to diversify more aggressively than in
the past. AT&Tís mobile enterprise business is a leading
indicator of this trend. Their focus by verticals has yielded
new revenue streams and positioning them to become a one-stop
shop for devices, access, and services in the enterprise market.
As usual, 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 2010 and 2010 US
wireless data market is:
The US Wireless data service revenues grew 5% Q/Q and 23%
Y/Y to $14.8B in Q410. The mobile data revenues for the US
market reached $55B in 2010.
Verizon, AT&T, Sprint had a good mobile data quarter
accounting for 86% of the increase in data revenues in Q4
T-Mobileís 3G/4G drive is starting to pay off. While the
postpaid net-adds were still in the red, its data growth is
starting to match with its peers. The 24% smartphone base
For the calendar year 2010, AT&T and Verizon accounted for
69% of the market data services revenues and 64% of the
Verizon Wireless edged past NTT DoCoMo and AT&T went past
China Mobile to become #1 and #3 respectively in operators
by mobile data revenues in 2010. Sprint and T-Mobile
maintained their #6 and #8 rank in the top 10 mobile data
operators list for 2010.
The Overall ARPU decreased by $0.58. Average voice ARPU
declined by $0.90 while the average data ARPU grew by $0.32
or 2% Q/Q.
The average industry percentage contribution of data to
overall ARPU was 34% in Q410.
Verizon led in data ARPU with $18.79 followed by AT&T and
Sprint. In terms of % contribution, all the top three
operators exceeded the 30% mark. T-Mobile ended the quarter
with approximately 28% of its revenue coming from data
We expect data revenues to exceed voice revenues in the US
market by Q2 2013.
Sprint made a nice comeback in 2010 reversing the 11 quarter
negative net-adds trend by adding three straight positive
net-add quarters. Sprint extended its streak of positive
net-adds to three quarters by adding over a million subs for
the first time since Q1 2006.
T-Mobile however continues to be sandwiched between the top
three and the next three and is having a hard time adding
postpaid subscribers. For the year, the operator ended the year
390K subscribers (postpaid) below the 2009 levels. Itís churn
rate is almost 60% higher than the average of its top
competitors and the cost of postpaid churn was over half a
billion dollars in 2010. However, the increased smartphone
penetration, quick HSPA+ deployment, backhaul upgrades, and a
clever marketing campaign is helping on the mobile data front.
Applications and Services
While the percentage share of the data revenues is declining
for messaging, the revenue growth stays strong with almost
$17B in messaging revenues.
In 2010, there was a significant shift that took place in
terms of app revenues. There was more revenues generated
(globally) from off-deck than on-deck for the first time and
while the on-deck revenues are in billions, the decline
trend looks irreversible. In the US, this shift will occur
The usage and data consumption trends are enabling carriers
to accelerate their 3.5G/4G plans and develop long-term
business and technical strategies.
The market is finally starting to see activity in the mobile
commerce and payment services as well as in various industry
verticals like healthcare, retail, and education. Much more
to come in 2011.
Nokia sold 123.7M units in Q4 2010 accounting for 31% of the
market share. Samsung continues to be one of the most agile
players in the device business shipping a whopping 80.7M for
a 20% share of the market. Apple again edged past RIM to be
in the top 5 along with the new entrant ZTE which broke into
the top 5 for the first time.
we noted in our previous updates, the data traffic is now
significantly more than the voice traffic. By end of 2010, the
average US consumer was consuming approximately 350 MB/mo up
132% in 12 months. The good news is that there are several
solutions available and are being invented that will help manage
the data growth starting with the tiered pricing plans.
Q4 10 also saw significant activity in the 4G space with Verizon
launching its LTE network and after the ITU flip-flop, the HSPA+
deployments of T-Mobile and AT&T Wireless along with Sprintís
WiMAX made US the epicenter of 4G growth for the next few years.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless
data sector in our blog, twitter
The next US Wireless Data Market update will be released in May
2011. The next Global Wireless Data Market update will be issued
in Mar 2011.
Disclaimer: Some of the companies mentioned in this paper are