Mobile
Future Forward 2011 - Sept 12 2011
Come Explore -
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Mobile Future
Forward is a unique 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
industry. Check out
the speakers/agenda - exceptional visionaries, extraordinary
insights.
Registration
(limited seats available, summer saver expires 8/19)
In proud partnership
with: Qualcomm, AT&T Interactive,
Synchronoss
Technologies,
Millennial Media, Openwave, Real Networks,
OpenMarket,
Ericsson
Inquiries:
info@mobilefutureforward.com
US Wireless Market
Update Q2 2011
http://www.chetansharma.com/usmarketupdateq22011.htm
Download PDF (32 pages, 2 MB)
Summary
If Confucius was alive today, he would have said, “We live in
interesting times.” 2011 is proving to be the blockbuster
deal year. After Microsoft/Nokia, AT&T/T-Mobile,
Microsoft/Skype, Google made the $4*π billion play for Motorola
and raised the stakes in the mobile ecosystem warfare. The
ecosystem has entered into a phase that Sun Tzu and Chanakya
would have loved to operate in.
In other news, the US wireless data market grew 5% Q/Q and 22%
Y/Y to reach $16.2B in mobile data service revenues in Q2 2011
and is on course to increase Y/Y by 22% to $67B in 2011.
US unseated Philippines as the king of TXT messaging with almost
664 messages/sub/month. Philippines is seeing a sharp decline in
per user messaging thanks to Facebook and app messaging.
Apple overtook Nokia as the dominant smartphone OEM though
Samsung is right behind and is likely to overtake Apple later
this year. However, Apple will continue to dominate profit share
for the foreseeable future.
Smartphones continued to be sold at a brisk pace accounting for
55% of the devices sold in Q2 2011. Operators are averaging 70%
of their postpaid sales as smartphones with Android dominating
though iPhone leads in mindshare. The featurephone as a device
species is on the verge of extinction. By Christmas, 90% of the
US postpaid device sales could be smartphones.
Platform Moves
I am a Platform, therefore I am. Everything and everyone wants
to be a platform that developers can build upon. The big 4 –
Apple, Google, Facebook, and Amazon are having good success with
frequent upgrades and rollouts. Consumers gravitate towards
ecOSystems and the richness of the product offerings not
specific OSes. OS is just a means to an end. However, the more
developers you get excited about the platform, the more the
ecosystem thrives and it becomes a virtuous circle. Companies
left without the dancing partners need to ensure that they are
not the one left standing when the music stops.
While a lot of attention has been focused on Apple and Google
skirmishes, Amazon has been quietly tinkering with some
interesting products – advertising enabled Kindle, the upcoming
tablets and handsets, Android based appstores, mobile payments,
distribution giant, cloud, and so on and so forth. Facebook with
its nearly 800M friends can unleash several “billion dollar”
features that can shake up different mobile microcosms.
In the meantime, Microsoft is trying to find a way to get back
into the mobile market. Microsoft’s Xbox franchise gives it
something unique and compelling. Their success might depend on
how well they are able to integrate and tell a compelling story
to the consumers. The upcoming Christmas quarter will be a
critical test. RIM and HP don’t have much of an ecosystem to
matter in the larger scheme of things. They can be successful in
their own ways but attaining a leadership position remains
significantly challenging.
AT&T/T-Mobile merger
AT&T’s proposed merger of T-Mobile continued to keep the
regulators busy for the quarter. Earlier this year, we published
a first of its kind in-depth study on competition in mobile
markets -
“Competition and the Evolution of Mobile Markets - A Study of
Competition in Global Mobile Markets”.
The
paper presents analysis and an in-depth analytical framework to
study the competitive landscape in the global mobile markets.
Our research shows that an effective equilibrium point for the
top three market share in a given country to be around
46%:29%:18% respectively. We expect that once all is said and
done, we will end up in the vicinity of this equation.
Patent Warfare
On the eve of Android launch, I mentioned to one of the
journalist to watch for some IP fireworks in about 3 years. For
those of us who have been deeply involved in the mobile IP
space, the IP events of 2011 have been largely predictable
though the valuations have gone through the roof.
Over the last 15 years, I have seen patents and IP in the mobile
space from all angles from authoring patents to testifying in
ITC cases and pretty much everything in between. In the last six
months, patents have become an essential tool for competitive
strategy in the mobile device space. See our analysis on the
major players with the number of granted patents in Europe and
US (slide 13).
To paraphrase the oracle of Omaha, “Only when the litigation
tide comes in do you discover who’s been swimming without
protection.”
(Obviously, we need serious patent reforms but that is a
discussion for another day)
Mobile is changing the way we spend
It is very clear that mobile will be at the center of human
evolution for years to come. Mobile collapses time and distance
and as such impacts every facet of our lives. While we have come
to know the mobile phone as a communications device, their role
in our daily lives has been expanding. From checking emails,
paying for tickets, sending money transfers, taking pictures of
your kids, watching soccer World Cup live, checking commodity
pricing, to emergency response to mHealth (mobile Health),
mobile devices have become an essential tool to help us navigate
our day.
Mobile also plays a key role in how we go about the most basic
transaction in a given day that keeps the economy humming –
spend. We discussed this and more in the paper
“How Mobile Will Change The Way We Spend”
that was released earlier this month.
What to expect in the coming months?
All this has setup an absolutely fascinating rest of the year in
the communication/computing industry. Convergence is everywhere
and is leading to a fundamental reset of the value chains and
ecosystems. We are likely to see a few more blockbuster marriage
proposals before the year is out.
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
12th mobile thought leadership summit – Mobile
Future Forward which
is bringing exceptional industry thought-leaders, inventors, and
doers to brainstorm, discuss, and debate what’s next.
Hope you can join us.
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 Q2 2011 US wireless
data market is:
Service Revenues
-
The US Wireless data service revenues grew 5% Q/Q and 22%
Y/Y to $16.2B in Q2 2011. The mobile data services revenues
for the US market are on track to reach $67B in 2011.
-
Verizon and AT&T had a good mobile data quarter accounting
for 77% of the increase in data revenues in Q2 2011.
-
For the quarter, AT&T and Verizon accounted for 69% of the
market data services revenues and 62% of the subscription
base.
-
Verizon maintained its #1 ranking just edging past NTT
DoCoMo who came in at number two with $5.77B in data
revenues for the quarter. AT&T maintained its #3 position
with $5.4B in data revenues. Sprint and T-Mobile maintained
their #6 and #8 rank in the top 10 mobile data operators
list for Q2 2011. The proposed merger of AT&T and T-Mobile
will make AT&T #1 by a distance and place 20% of the global
mobile data revenues in the hands of the top two US
operators. AT&T and Verizon will become the #1 and #2
players respectively.
ARPU
-
The Overall ARPU increased by $0.41. Average voice ARPU
declined by $0.48 while the average data ARPU grew by $0.89
or 5% Q/Q.
-
The average industry percentage contribution of data to
overall ARPU was 36.3% in Q2 2011 and is likely to touch 40%
by year’s end. Verizon is likely to be the first to eclipse
the 40% mark with AT&T a close second. (NTT DoCoMo became
the second major operator to go past the 50% mark this
quarter (if we don’t include Philippines) and Japan as a
market follows Philippines in going past the 50% mark).
-
Verizon and Sprint were neck-and-neck in data ARPU followed
by AT&T. In terms of % contribution, all the top three
operators exceeded the 35% mark. T-Mobile ended the quarter
with almost 30% of its revenue coming from the data
services.
-
We expect data revenues to exceed voice revenues in the US
market in early 2013.
Subscribers
-
Helped by the growth in connected devices, the overall
net-adds increased by 4.4M with Verizon accounting for
almost 50% of the growth.
-
For the seventh straight quarter, AT&T reported more
net-adds from connected devices than postpaid subs. AT&T now
accounts for 43% of connected devices in the US (w/ cellular
subscription of some sort).
-
Overall, AT&T has 43% of the connected device share of the
market. The connected device segment growth slowed down to
3% Q/Q but is still up 37% Y/Y.
-
Sprint continued on its comeback trail by adding more than a
million subscriptions for the third straight quarter, first
time it has done it since Q2 2005.
-
T-Mobile however continues to be sandwiched between the top
three and the next three and hasn't been able to add
postpaid subs for five straight quarters. The net-adds
declined for third straight quarter.
Applications and Services
-
US unseated Philippines as the king of TXT messaging with
almost 664 messages/sub/month compared to Philippines which
is seeing a sharp decline in per user messaging due to IP
messaging. Some of the European operators are also
experiencing the pain of declining SMS usage.
-
While the percentage share of the data revenues is declining
for messaging, the revenue growth stays strong with almost
$5B in revenues.
-
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.
-
Q2 2011 also saw tremendous activity in the mobile commerce
and payments space with lot of announcements from the
operators, Internet players, and startups as well as the
retailers and the ecommerce players. All are vying for a
piece of the mobile wallet. Much more to come in the next 12
months.
Handsets
-
Smartphones continued to be sold at a brisk pace accounting
for 55% of the devices sold in Q2 2011. Operators are
averaging 70% of their postpaid sales as smartphones with
Android dominating though iPhone leads in mindshare.
-
For a first time in recent memory, Nokia sold less than 100M
devices in a quarter and its marketshare shrank to 22% from
a once dominant position of almost 40%.
-
Apple unseated Nokia as the king of the smartphone hill but
Samsung is right behind and is likely to overtake Apple
later this year.
-
35% of all smartphones being sold globally are being sold in
the US.
-
Last quarter, smartphones sales exceeded the 50% mark. The %
share jumped to 55% in Q2 2011. Smartphones now account for
80% revenue of all phones sold in the US.
-
In the vertical vs. horizontal platform battle, the
ecosystem is shifting towards horizontal domination in the
near-term (units sold) while a majority of the profits
reside in the vertical column.
-
85% of the tablets use WiFi only (some have inactivated
cellular chipset) meaning the operator channel is not a
necessary distribution channel. Operators who start to
bundle multiple devices by single data plans and data
buckets are going to see a better yield in this category.
-
While the definition of 4G stays muddled, Sprint added 1.7M
WiMax subs and Verizon incremented their LTE count by 1.2M.
Mobile Data Growth
-
The mobile data consumption continues unabated. We expect
per MB usage in the US to reach 675 MB by the end of 2011
just behind Sweden which is likely to end up at 760 MB.
-
While the spectrum debate rages on, in addition to the
network and backhaul upgrades, policy management and data
offload have emerged as top two solutions that operators
deploying around the world. Signaling management solutions
like Diameter routing are also getting good traction.
However, a long-term video solution is still elusive. As we
have been saying in our Yottabyte series of research papers,
a comprehensive solution strategy is needed to effectively
manage margins/bit.
-
We will have the 3rd edition of our
“Managing Growth and Profits in the Yottabyte Era”
research out later this year. We will also be discussing
this subject in great detail at our Mobile Future Forward
summit with some of the most influential voices in the
space.
Global Update
-
Race to a billion - India went past 850M in Q2 2011 subs and
China went past 900M. By mid 2012 both India and China will
have more than a billion subscriptions.
-
China Mobile crossed the 600M subscription mark however its
3G introduction has had a tepid response thus and its 4G
strategy remains in flux.
-
For more details, please see our
Global Mobile Wireless Market Update
released in July 2011.
Mobile Future Forward
We will be discussing the global mobile ecosystem – the
challenges and the opportunities at our annual mobile
thought-leadership summit – Mobile
Future Forward -
brought to you in partnership with our terrific partners –
Qualcomm, Millennial Media, Real Networks, AT&T Interactive,
Synchronoss Technologies, OpenMarket, Ericsson, and Openwave.
Hope to see you in Seattle on Sept 12th.
Some of the distinguished guests include:
Abhi
Ingle, VP,
AT&T; Biju
Nair, Chief Strategy Officer, Synchronoss
Technologies; Bob Borchers, Partner, Opus Capital; Bobby
Morrison, President – PNW, Verizon Wireless; Braxton Woodham,
Head of Product Development, AVOS; Danny Bowman, President,
Sprint; David Messenger, EVP, Head of Online/Mobile, American
Express; Gibu Thomas, SVP – Mobile Walmart; Erik Moremo, SVP,
FOX; Glenn Lurie, President, Emerging Devices, Resale &
Partnerships, AT&T Mobility; Hank Skorny, CSO, Real Networks;
Jana Messerschmidt, Sr. Director, Twitter; Jay Emmet, GM,
OpenMarket; Jason MacKenzie, President, Global Sales and
Marketing, HTC; Jerry Batt, CIO, PulteGroup; Ken Denman, CEO,
Openwave; Ken Wirth, President, Alcatel-Lucent Wireless; Kris
Rinne, SVP - Networks/Architecture, AT&T; Mark Rolston, Chief
Creative Officer, Frog Design; Manoj Leelanivas, EVP & GM,
Juniper Networks; Michael Wolf, VP, GigaOM; Mikael Back, VP –
Products, Ericsson; Naoki Aoyagi, CEO, GREE USA; Paul Palmieri,
CEO, Millennial Media; Rob Glaser, Partner, Accel; Sanjiv Ahuja,
CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf,
EVP/Group President, Qualcomm; Suja Chandrasekaran, CIO,
Timberland; Will Hsu, CPO, AT&T Interactive.
More information at
http://www.mobilefutureforward.com
Your feedback is always welcome.
Thanks.
Chetan Sharma
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 Nov
2011. The next Global Wireless Data Market update will be issued
in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are
our clients.
