Strategies for Driving Mobile Data and Broadband Adoption

© 2010, Portio Research. All Rights Reserved

1
Strategies for Driving Mobile Data and Broadband Adoption

Portio Research Limited.
Published June 2010 by Portio Research...
Strategies for Driving Mobile Data and Broadband Adoption

Contents
Introduction ............................................
Strategies for Driving Mobile Data and Broadband Adoption

Overview .........................................................
Strategies for Driving Mobile Data and Broadband Adoption

List of Figures
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure ...
Strategies for Driving Mobile Data and Broadband Adoption

Figure 52: 3G Subscribers as a Percentage of Total Subscriber B...
Strategies for Driving Mobile Data and Broadband Adoption

List of Tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Tab...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 1
Introduction

8

© 2010, Portio Research. All Rights ...
Strategies for Driving Mobile Data and Broadband Adoption

Introduction
Mobile handsets have become an intrinsic part of u...
Strategies for Driving Mobile Data and Broadband Adoption

Figure 1: Comparison on the basis of Mobile Broadband Parameter...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 2
Worldwide Mobile Market

© 2010, Portio Research. All...
Strategies for Driving Mobile Data and Broadband Adoption

Worldwide Mobile Market
The worldwide mobile market continues t...
Strategies for Driving Mobile Data and Broadband Adoption

Asia Pacific possesses the largest mobile subscriber base world...
Strategies for Driving Mobile Data and Broadband Adoption

The worldwide mobile subscriber base is forecast to grow at a C...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 3
Worldwide Data Services Market

© 2010, Portio Resear...
Strategies for Driving Mobile Data and Broadband Adoption

Worldwide Data Services Market
‘Strategies for Dr iving M obile...
Strategies for Driving Mobile Data and Broadband Adoption

Figure 6: Factors Behind a Successful Data Service

Expand
Perc...
Strategies for Driving Mobile Data and Broadband Adoption

Launch Timing
Correctly planning the right time to launch a dat...
Strategies for Driving Mobile Data and Broadband Adoption

Strategies for Creating End-User Demand for Mobile Data Service...
Strategies for Driving Mobile Data and Broadband Adoption

Data Services
Figure 7: Data Services Covered in Our Reports ‘S...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 4
Worldwide Mobile Messaging

© 2010, Portio Research. ...
Strategies for Driving Mobile Data and Broadband Adoption

Worldwide Mobile Messaging
Worldwide Mobile Messaging
Mobile me...
Strategies for Driving Mobile Data and Broadband Adoption

Dominance of SMS
The m obile m essaging segment comprises four ...
Strategies for Driving Mobile Data and Broadband Adoption

Figure 11: Comparison of Mobile Messaging Services

SMS

Simpli...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 5
Mobile Messaging – Strategy Case Studies

© 2010, Por...
Strategies for Driving Mobile Data and Broadband Adoption

Mobile Messaging – Strategy Case Studies
Case Studies
Telkomsel...
Strategies for Driving Mobile Data and Broadband Adoption

The figure below highlights the quarterly growth in Telkomsel’s...
Strategies for Driving Mobile Data and Broadband Adoption

Strategies
Attractive Tariffs and Promotional Plans
To maintain...
Strategies for Driving Mobile Data and Broadband Adoption

Regular Upgrades of SMS Services and SMS Platform
Telkomsel has...
Strategies for Driving Mobile Data and Broadband Adoption

The t able below highlights t he f actors which enabl ed the op...
Strategies for Driving Mobile Data and Broadband Adoption

China Mobile
Mobile Subscribers: 522.3 million (End-2009)
Marke...
Strategies for Driving Mobile Data and Broadband Adoption

MMS Traffic per User and Revenue Growth
With Chi na Mobile’s M ...
Strategies for Driving Mobile Data and Broadband Adoption

Strategies
Triggering the Uptake of MMS Services
•

•

Challeng...
Strategies for Driving Mobile Data and Broadband Adoption

M-News Paying Subscribers
(In Million)

Figure 19: M-News Payin...
Strategies for Driving Mobile Data and Broadband Adoption

The t able be low hi ghlights t he factors that enabled the ope...
Strategies for Driving Mobile Data and Broadband Adoption

SoftBank Japan
Mobile Subscribers: 21.7 million (End-2009)
Mark...
Strategies for Driving Mobile Data and Broadband Adoption

With the highest 3G penetration among subscribers, SoftBank has...
Strategies for Driving Mobile Data and Broadband Adoption

Figure 22: Mobile Internet Subscribers – SoftBank (In Million, ...
Strategies for Driving Mobile Data and Broadband Adoption

Strategies
Innovative Pricing Plans for Target Groups
SoftBank ...
Strategies for Driving Mobile Data and Broadband Adoption

Wide Range of Handsets and Ease of Purchase
SoftBank focuses on...
Strategies for Driving Mobile Data and Broadband Adoption

The table below highlights the factors which enabled the operat...
Strategies for Driving Mobile Data and Broadband Adoption

Conclusion
Mobile messaging services are the most popular mobil...
Strategies for Driving Mobile Data and Broadband Adoption

The table below discusses these factors in brief.
Table 5: Fact...
Strategies for Driving Mobile Data and Broadband Adoption

Chapter 6
Mobile Broadband – Introduction and
Basics

44

© 201...
Strategies for Driving Mobile Data and Broadband Adoption

Mobile Broadband – Introduction and Basics
Mobile broadband all...
Strategies for Driving Mobile Data and Broadband Adoption

Evolution of Mobile Broadband – GSM
Mobile broadband using GSM ...
Strategies for Driving Mobile Data and Broadband Adoption

•

As of F ebruary 2010, 41 co mmercial oper ators l aunched HS...
Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd
Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd
Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd
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Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd
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Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd

  1. 1. Strategies for Driving Mobile Data and Broadband Adoption © 2010, Portio Research. All Rights Reserved 1
  2. 2. Strategies for Driving Mobile Data and Broadband Adoption Portio Research Limited. Published June 2010 by Portio Research Limited © Copyright 2010. www.portioresearch.com info@portioresearch.com Disclaimer and Legal Notices Disclaimer Every care has been t aken i n t he pr eparation of t his study to ensure t hat the i nformation contained herein is accurate, factual and correct to the best of our knowledge, at time of publishing. All opinions, suppositions, estimates and recommendations included in this document are solely the opinions of the authors unless otherwise stated. Portio Research Limited accepts no liability for any loss or damage or unforeseen consequential loss or damage arising from the use of the information contained within this document. The opinions, suppositions, estimates and recommendations within this document cannot be guar anteed, and r eaders use t his information at their own r isk. T he i nformation published i n t his document i s su bject to c hange w ithout notice at any t ime, and P ortio R esearch L imited acce pts no liability or obligation to inform the reader of such changes. Portio Research Limited do not promote or endorse any specific companies or products, the views and opinions w e ex press in this document ar e w holly our ow n assessments, an d i ndependent f rom an y external i nterest or influence. M any terms and phrases and t rade names used i n this document are proprietary and P ortio R esearch Li mited recognises and ackn owledges that all trademarks are copyright, b elonging to their r espective o wners. Where p ossible, t his d ocument acco rds such terms and phrases and trade names to their respective owners. All Rights Reserved. No part of this document can be copied, shared, redistributed, transmitted, displayed in the public domain, stored or displayed on any internal or external company or private network or electronic retrieval system, nor reprinted, republished or reconstituted in any way without the express written permission of the publisher. Forwarding of this electronic document without the correct legal licence is theft. It’s unethical, immoral and against the law. If you have any questions about the legal licence conditions under which this document has been distributed, please contact Portio Research on info@portioresearch.com If you did not buy this document and a co lleague or associate has sent it to you, do no t assume you are l egally entitled t o r ead i t, i t i s your responsibility to ensure yo u have t he correct l egal l icence t o read this document. 2 © 2010, Portio Research. All Rights Reserved
  3. 3. Strategies for Driving Mobile Data and Broadband Adoption Contents Introduction ......................................................................................................................... 9 Worldwide Mobile Market ................................................................................................. 12 Worldwide Data Services Market...................................................................................... 16 Strategies for Driving Data ARPU ................................................................................................. 16 Strategies for Creating End-User Demand for Mobile Data Services .............................................. 19 Data Services .............................................................................................................................. 20 Worldwide Mobile Messaging........................................................................................... 22 Worldwide Mobile Messaging ....................................................................................................... 22 Dominance of SMS ...................................................................................................................... 23 Mobile Messaging – Strategy Case Studies..................................................................... 26 Case Studies ............................................................................................................................... 26 Telkomsel Indonesia .................................................................................................................. 26 China Mobile ............................................................................................................................. 31 SoftBank Japan ......................................................................................................................... 36 Conclusion ................................................................................................................................... 42 Mobile Broadband – Introduction and Basics ................................................................. 45 Evolution of Mobile Broadband – GSM.......................................................................................... 46 UMTS (Universal Mobile Telecommunications System)............................................................... 46 HSPA (High Speed Packet Access) ........................................................................................... 46 HSPA+ (High-Speed Packet Access Plus/ Evolved HSPA) ......................................................... 46 LTE (Long Term Evolution) ........................................................................................................ 47 LTE Advanced (Long Term Evolution Advanced) ........................................................................ 47 EDGE (Enhanced Data Rates for GSM Evolution) ...................................................................... 48 EDGE Evolution or EDGE II ....................................................................................................... 48 Evolution of Mobile Broadband – CDMA ....................................................................................... 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision 0 ............................................................ 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision A ............................................................ 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision B ............................................................ 50 Evolution of Mobile Broadband – WiMAX ...................................................................................... 52 WiMAX (Worldwide Interoperability for Microwave Access) ......................................................... 52 Drivers and Inhibitors – Mobile Broadband .................................................................................... 53 Drivers ...................................................................................................................................... 53 Inhibitors ................................................................................................................................... 54 Mobile Broadband – Hardware ..................................................................................................... 55 USB Modems ............................................................................................................................ 55 Internal Modems........................................................................................................................ 55 PC Cards .................................................................................................................................. 56 Regional Versions – Mobile Networks ........................................................................................... 57 Mobile Broadband – State of the Markets ........................................................................ 59 Market Size.................................................................................................................................. 59 Mobile Broadband User Base..................................................................................................... 59 Mobile Broadband Revenue ....................................................................................................... 63 Regional Trends........................................................................................................................... 66 Europe ...................................................................................................................................... 66 Asia Pacific ............................................................................................................................... 68 North America ........................................................................................................................... 70 Latin America ............................................................................................................................ 72 Africa and Middle East ............................................................................................................... 74 Mobile Broadband – Strategy Case Studies .................................................................... 77 Case Studies ............................................................................................................................... 77 Vodafone UK ............................................................................................................................. 77 NTT DOCOMO Japan................................................................................................................ 82 Verizon Wireless US .................................................................................................................. 90 Orange UK ................................................................................................................................ 94 Key Parameters for the Uptake of Mobile Broadband .................................................................... 97 Mobile Applications – Introduction and Market Size ....................................................... 99 © 2010, Portio Research. All Rights Reserved 3
  4. 4. Strategies for Driving Mobile Data and Broadband Adoption Overview ..................................................................................................................................... 99 Value Chain and Ecosystem ....................................................................................................... 100 Mobile Application Stores......................................................................................................... 102 Business Model and Revenue Sharing........................................................................................ 103 App-centric Model.................................................................................................................... 104 Operator-centric Model ............................................................................................................ 106 Market Size................................................................................................................................ 108 Mobile Applications User Base ................................................................................................. 108 Mobile Applications Revenue ................................................................................................... 111 Mobile Applications – Strategy Case Studies ................................................................ 115 Apple App Store ......................................................................................................................... 115 Business Model ....................................................................................................................... 116 Key Developments .................................................................................................................. 116 Vodafone 360 ............................................................................................................................ 117 Business Model ....................................................................................................................... 119 Key Developments .................................................................................................................. 119 GetJar ....................................................................................................................................... 120 Business Model ....................................................................................................................... 120 Key Partnerships ..................................................................................................................... 121 Downloads .............................................................................................................................. 121 Conclusion ................................................................................................................................. 123 App Stores .............................................................................................................................. 123 Conclusion ...................................................................................................................... 127 Current Scenario ........................................................................................................................ 127 The Big Question ....................................................................................................................... 129 Investment in Mobile Broadband Networks ............................................................................... 130 Growing Demand for Data Services ......................................................................................... 130 Coping with High Data Use ...................................................................................................... 132 AT&T – A Lesson To Be Learnt ................................................................................................ 132 Possible Answers and the Way Forward ..................................................................................... 134 Augmenting Networks .............................................................................................................. 134 Getting the Pricing Models Right .............................................................................................. 135 Future Outlook......................................................................................................................... 137 Appendices ..................................................................................................................... 139 Glossary.................................................................................................................................. 140 Portio Research Classifications ................................................................................................ 153 Companies Mentioned in this Report ........................................................................................ 154 About the Authors .................................................................................................................... 157 Also available from Portio Research Limited................................................................................ 158 4 © 2010, Portio Research. All Rights Reserved
  5. 5. Strategies for Driving Mobile Data and Broadband Adoption List of Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Figure 45: Figure 46: Figure 47: Figure 48: Figure 49: Figure 50: Figure 51: Comparison on the basis of Mobile Broadband Parameters – Regional .......................... 10 Mobile Subscribers – Worldwide (In Million, 2009 – 2014F) ........................................... 12 Worldwide Subscriber Base – Regional Contribution (In Percent, 2009) ......................... 13 Worldwide Subscriber Base – Regional Contribution (In Percent, 2014F) ....................... 13 Mobile Subscriber Base Growth by Region (In Percent, 2009 – 2014F) .......................... 14 Factors Behind a Successful Data Service .................................................................... 17 Data Services Covered in Our Reports ‘Strategies for Creating End-User Demand for Mobile Data Services’, ‘Strategies for Driving Data ARPU’ and ‘Strategies for Driving Mobile Data and Broadband Adoption’.......................................................................... 20 SMS and MMS Traffic – Worldwide (In Billion, 2009) ..................................................... 22 Mobile E-mail and Mobile IM Users – Worldwide (In Million, 2009) ................................. 22 Revenue of Mobile Messaging Services (In USD Billion, 2009) ...................................... 23 Comparison of Mobile Messaging Services ................................................................... 24 SMS Traffic – Telkomsel and Excelcomindo (In Billion, 2007 – 2009) ............................. 26 SMS Traffic – Telkomsel (In Billion, Q1 2009 – Q4 2009)............................................... 27 SMS Revenue – Telkomsel (In USD Million, Q1 2009 – Q3 2009) .................................. 27 SMS Tariffs and Promotional Plans – Telkomsel ........................................................... 28 MMS Users – China Mobile (In Million, End 2007 – End 2009) ....................................... 31 MMS Traffic per Active User per Year – China Mobile (2007 – 2009) ............................. 32 MMS Revenue – China Mobile (In USD Million, 2007 – 2009) ........................................ 32 M-News Paying Subscribers – China Mobile (In Million, End 2006 – End 2009) .............. 34 Number of S! Information Channel Applications – SoftBank (January 2010 – April 2010) 36 3G Subscribers as a Percentage of Total Subscriber Base – Japan (In Percent, Q2 2009 – Q4 2009) ..................................................................................................................... 37 Mobile Internet Subscribers – SoftBank (In Million, Q2 2009 – Q4 2009) ....................... 38 Data ARPU – SoftBank (In USD, Q2 2009 – Q4 2009).................................................. 38 Revenue CAGR of Mobile Messaging Services (In Percent, 2009 – 2014F) ................... 42 UMTS Evolution – Data Transfer Rates......................................................................... 47 LTE Evolution – Data Transfer Rates ............................................................................ 48 EDGE Evolution – Data Transfer Rates......................................................................... 49 CDMA2000 Evolution – Data Transfer Rates ................................................................. 51 Drivers of Mobile Broadband......................................................................................... 53 Inhibitors of Mobile Broadband ..................................................................................... 54 USB Modems/ Dongles ................................................................................................ 55 PC and Express Cards ................................................................................................. 57 Mobile Broadband User Base – Worldwide (In Million, 2009 – 2014F) ............................ 59 Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2009)............. 60 Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2014F)......... 61 Mobile Broadband User Base Growth by Region (In Percent, 2009 – 2014F) ................. 61 Mobile Broadband Users as a Percentage of Total Mobile Subscribers – Regional (In Percent, 2009 & 2014F) ............................................................................................... 62 Mobile Broadband Revenue – Worldwide (In USD Billion, 2009 – 2014F)....................... 63 Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2009) ........ 64 Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2014F) .... 64 Mobile Broadband Revenue Growth by Region (In Percent, 2009 – 2014F).................... 65 Technology Forecast — Europe (In Million, End 2009 – End 2014F) .............................. 66 Regional Trends — Europe .......................................................................................... 67 Technology Forecast — Asia Pacific (In Million, End 2009 – End 2014F) ....................... 68 Regional Trends — Asia Pacific .................................................................................... 69 Technology Forecast — North America (In Million, End 2009 – End 2014F) ................... 70 Regional Trends — North America................................................................................ 71 Technology Forecast — Latin America (In Million, End 2009 – End 2014F) .................... 72 Regional Trends — Latin America................................................................................. 73 Technology Forecast —Africa and Middle East (In Million, End 2009 – End 2014F) ........ 74 Regional Trends — Africa and Middle East ................................................................... 75 © 2010, Portio Research. All Rights Reserved 5
  6. 6. Strategies for Driving Mobile Data and Broadband Adoption Figure 52: 3G Subscribers as a Percentage of Total Subscriber Base – The UK (In Percent, December 2009) .......................................................................................................... 78 Figure 53: Increase in 3G Subscribers Percentage – The UK (In Percentage Points, Q1 2009 – Q4 2009) .......................................................................................................................... 78 Figure 54: FOMA Subscribers and Percentage of FOMA Subscribers in Total Subscriber Base – NTT DOCOMO (Q2 2009 – Q4 2009) .................................................................................. 82 Figure 55: Packet ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) ...................................... 83 Figure 56: i-mode ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) ...................................... 84 Figure 57: Subscribers – Bee TV (In Million, Q2 2009 – Q4 2009) .................................................. 85 Figure 58: Subscribers – i-concier (In Million, Q2 2009 – Q4 2009)................................................. 85 Figure 59: Number of Content Sites – NTT DOCOMO (Q2 2009 – Q4 2009) .................................. 86 Figure 60: Subscribers – Pake-hodai (In Million, Q2 2009 – Q4 2009) ............................................ 86 Figure 61: PC Data Communication Devices Sold – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) .. ............................................................................................................................... 87 Figure 62: PC Data Communications Flat Rate and Use Based Data Plan Subscriptions – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) ................................................................... 87 Figure 63: Data ARPU – The US (In USD, Q1 2009 – Q4 2009) ..................................................... 90 Figure 64: Monthly Data Plans for Mobile Subscribers – Verizon Wireless (March 2010) ................. 92 Figure 65: MNOs’ Absolute and Percentage Growth in 3G Subscriber Base – The UK (2009) ......... 94 Figure 66: 3G Dongle Subscribers and Percentage of 3G Dongle Subscribers in Total 3G Subscriber Base – Orange UK (Q2 2009 – Q4 2009) ..................................................................... 95 Figure 67: Basic Value Chain of the Mobile Applications Market ................................................... 101 Figure 68: App-centric Business Model ....................................................................................... 104 Figure 69: Operator-centric Business Model ................................................................................ 106 Figure 70: Revenue Sharing in the Case of an Operator-centric Business Model .......................... 107 Figure 71: Mobile Applications User Base – Worldwide (In Million, 2009 – 2014F) ........................ 108 Figure 72: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2009) ......... 109 Figure 73: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2014F) ..... 110 Figure 74: Mobile Applications User Base Growth by Region (In Percent, 2009 – 2014F).............. 110 Figure 75: Mobile Applications Revenue – Worldwide (In USD Billion, 2009 – 2014F) ................... 111 Figure 76: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2009) .... 112 Figure 77: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2014F) 112 Figure 78: Mobile Applications Revenue Growth by Region (In Percent, 2009 – 2014F) ................ 113 Figure 79: Apple’s App Store – Total Application Downloads........................................................ 115 Figure 80: Break-out of Available Applications by Category – Apple App Store (In Percent, April 2010) ............................................................................................................................. 116 Figure 81: Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – Worldwide (In Percent, 2009 – 2014F) ........................................................................................ 128 Figure 82: Revenue CAGR of Mobile Data Services – Worldwide (In Percent, 2009–2014F) ......... 129 Figure 83: Mobile Broadband CAPEX and Revenues by Region (In USD Billion, 2010F)............... 130 Figure 84: Average Monthly Data Use for USB Dongles, Feature Phones and Smartphones – Worldwide (In GB, 2009) ............................................................................................ 131 Figure 85: Average Worldwide Selling Price of Nokia Handsets and Apple’s iPhone (In USD, 2007 – 2009) ........................................................................................................................ 135 Figure 86: Average Cost per MB of Mobile Data Services – North America (In USD, 2007 – 2009) 136 6 © 2010, Portio Research. All Rights Reserved
  7. 7. Strategies for Driving Mobile Data and Broadband Adoption List of Tables Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Mobile Subscribers – Regional (In Million, 2009 – 2014F) .............................................. 12 Success Factors – Telkomsel Indonesia ....................................................................... 30 Success Factors – China Mobile ................................................................................... 35 Success Factors – SoftBank Japan............................................................................... 41 Factors Affecting the Uptake of Mobile Messaging Services .......................................... 43 Number of Network Providers with High Speed Network Deployments – Regional (March 2010) .......................................................................................................................... 45 Examples of Partnerships between Mobile Operators and Laptop Manufacturers ........... 56 Regional Versions – Mobile Networks ........................................................................... 57 Mobile Broadband User Base – Regional (In Million, 2009 – 2014F) .............................. 60 Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – Regional (In Percent, 2009 – 2014F) ............................................................................................... 62 Mobile Broadband Revenue – Regional (In USD Billion, 2009 – 2014F) ......................... 63 Success Factors – Vodafone UK .................................................................................. 81 Success Factors – NTT DOCOMO Japan ..................................................................... 89 MNOs’ Key Performance Indicators – The US (2009) .................................................... 90 Success Factors – Verizon Wireless US ....................................................................... 93 Success Factors – Orange UK...................................................................................... 96 Strategies to Push Mobile Broadband Uptake................................................................ 97 Major Application Stores ............................................................................................. 103 Mobile Applications User Base – Regional (In Million, 2009 – 2014F)........................... 109 Mobile Applications Revenue – Regional (In USD Million, 2009 – 2014F) ..................... 111 Top 20 Applications on GetJar and Total Downloads, as of November 2009 ................ 122 Key Success Factors for Application Stores ................................................................ 125 Mobile Applications and Data Transfer Rate Requirements.......................................... 131 Strategies to Cope with the Increasing Demand Data Services place on Networks ....... 134 Prices of iPhone Models offered by AT&T ................................................................... 136 © 2010, Portio Research. All Rights Reserved 7
  8. 8. Strategies for Driving Mobile Data and Broadband Adoption Chapter 1 Introduction 8 © 2010, Portio Research. All Rights Reserved
  9. 9. Strategies for Driving Mobile Data and Broadband Adoption Introduction Mobile handsets have become an intrinsic part of users’ lives worldwide. For many, it is the only way to co mmunicate w ith f amily and f riends, and n ot o nly are these users today completely dependent on t heir mobile handsets f or communication, they also r ely on them for several other purposes that are equally important in their daily lives. Mobile handsets are now used for purposes previously associated with only PCs. Users are, for example, accessing the Internet on t heir hand sets, buyi ng tickets f or events and t ravel, and finding routes to their favourite destinations through maps. With the changing requirements of mobile subscribers, operators worldwide need to innovate and take proactive initiatives in order to retain subscriber interest in their services. Mobile broadband i s one s uch dynamic area where a num ber of changes are taking pl ace; millions of mobile applications are being developed worldwide and low-cost smartphones are being introduced by mobile network operators (MNOs). MNOs worldwide have taken several i nitiatives to cater to the i ncreasing uptake of mobile broadband services, i ncluding the deployment of advanced and high-speed mobile networks. Mobile broadband services are al ready popular i n advanced m obile markets and operators in em erging markets ar e al so m aking e fforts t o pen etrate t hese services. O perators ar e offering a variety of attractive price plans, ranging from ‘pay as you go’ to ‘flat-rate unlimited use’ pl ans, to provide freedom of choice to their subscribers to select a dat a pl an that best suits their requirements. Apart from pricing, operators are trying to attract more users to their mobile broadband services with a range of high quality hardware offerings, including laptops and dongles manufactured by leading manufacturers worldwide. In order to deliver these advanced offerings, operators are upgrading their mobile networks, including their core networks. Currently, more than 300 MNOs worldwide have deployed CDMA 2000 net works, which i ncludes both CDMA2000 1 X and 1x EV-DO. 1 The num ber of operators worldwide with hi gh s peed packe t acce ss (HSPA) depl oyments i s also abo ve 300. 2 Some of the major MNOs in advanced markets, such as the US and Japan, have already run trials on LTE or 4G networks; and many MNOs worldwide have expressed plans to depl oy LTE net works i n t heir r espective markets by end-2013. W ith such infrastructure deployments scheduled, the future for mobile broadband services looks promising. MNOs w orldwide hav e t o constantly make e fforts t o en sure t hat t heir mobile br oadband packages ar e b etter i n e very sense. T he four most im portant parameters that M NOs worldwide should focus on in order to make their mobile broadband offerings more attractive are listed below: • Network • Pricing • Content • Devices The figure on the next page compares the performance of regions worldwide on the basis of these parameters. 1 2 Source: CDMA Development Group (CDG) Source: 3G Americas © 2010, Portio Research. All Rights Reserved 9 Mobile broadband services are already popular in advanced mobile markets and operators in emerging markets are also making efforts to penetrate these services.
  10. 10. Strategies for Driving Mobile Data and Broadband Adoption Figure 1: Comparison on the basis of Mobile Broadband Parameters – Regional Devices Network 5 4 3 2 1 0 3 Pricing Content North America Europe Asia Pacific Latin America Africa and Middle East Source: Portio Research Ltd. North America leads other regions worldwide in terms of advanced mobile network deployments and i nnovative co ntent o fferings. V erizon and A T&T ar e all s et t o launch 4G networks i n 20 11, f or which t rials ar e cu rrently running. When it co mes t o m obile co ntent, Apple’s App Store is the clear leader among application stores. Europe al so s cores hi gh on t his net work parameter, at tributable primarily to t he advanced Western European markets – as many countries in Eastern Europe are still developing their networks. In t erms o f de vices and pr icing of se rvices, A sia P acific i s the l eading regional m arket. In some co untries, such a s Chi na an d I ndia, MNOs are f looding the market w ith low-cost smartphones ca pable of per forming any function and r unning any application. Whereas in markets such a s Ja pan and S outh K orea, MNOs are offering some of t he most adv anced handsets t hat al low subscribers to get t he b est user experience f rom mobile appl ications. MNOs in Asia Pacific are known to offer mobile services at prices well below the worldwide average, as they recognise that pricing is probably the most important factor influencing the decision of the r egion’s m obile subscribers. For t his reason, MNOs i n Asia P acific are especially careful when pricing their offerings. 3 Note: The value of each axis ranges between 0 and 5, with 0 denoting the worst performer and 5 denoting the best performer for the respective parameter. For instance, a score of 5 for pricing does not imply that the region has the highest prices, but rather it is offering services at low prices keeping the subscribers’ price sensitivity in perspective. 10 © 2010, Portio Research. All Rights Reserved MNOs in Asia Pacific are known to offer mobile services at prices well below the worldwide average, as they recognise that pricing is probably the most important factor influencing the decision of the region’s mobile subscribers.
  11. 11. Strategies for Driving Mobile Data and Broadband Adoption Chapter 2 Worldwide Mobile Market © 2010, Portio Research. All Rights Reserved 11
  12. 12. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Mobile Market The worldwide mobile market continues to grow at an exponential rate. In 2009, even as the world eco nomy was cl ouded by uncertainty owing t o t he do wnturn, t he worldwide m obile subscriber base saw a year-on-year increase of approximately 15 percent. Looking forward, the worldwide m obile s ubscriber bas e i s f orecast to grow at a C ompound Annual G rowth Rate ( CAGR) of 6. 7 per cent bet ween 2009 and 2014 , and reach 6. 3 billi on subscribers by end-2014. Figure 2: Mobile Subscribers – Worldwide (In Million, 2009 – 2014F) 7,000 Mobile Subscribers (In Million) 6,000 5,000 4,570.6 5,045.8 5,440.6 6,065.1 5,777.9 6,310.8 4,000 3,000 2,000 1,000 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted The figure below highlights the growth of the regional mobile subscriber bases from 2009 to 2014. Table 1: Mobile Subscribers – Regional (In Million, 2009 – 2014F) 4 Mobile Subscribers (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 1,051.6 1,097.0 1,131.9 1,159.9 1,181.8 1,198.1 Asia Pacific 2,106.7 2,388.0 2,627.3 2,834.2 3,010.6 3,158.8 North America 311.3 327.5 342.0 354.9 366.3 376.4 Latin America 486.4 530.3 569.2 604.6 636.4 666.4 Africa and Middle East 614.5 703.1 770.1 824.3 869.9 911.0 Total 4,570.6 5,045.8 5,440.6 5,777.9 6,065.1 6,310.8 Source: Portio Research Ltd. 4 Note: Sum of regional numbers may not equal total due to rounding off errors. 12 © 2010, Portio Research. All Rights Reserved The worldwide mobile subscriber base is forecast to grow at a CAGR of 6.7 percent between 2009 and 2014.
  13. 13. Strategies for Driving Mobile Data and Broadband Adoption Asia Pacific possesses the largest mobile subscriber base worldwide. In 2009, this regional subscriber base co nstituted 46. 1 per cent of t he worldwide m obile subscriber base; Europe placed second with a 23 percent contribution. The figure below shows the regional share in the worldwide mobile subscriber base in 2009. Figure 3: Worldwide Subscriber Base – Regional Contribution (In Percent, 2009) 5 46.1% 6.8% 10.6% 13.4% 23.0% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. Asia P acific will co ntinue t o dominate t he worldwide m obile industry in t erms of subscriber base in the coming years, and will strengthen its position further with over 50 percent of the worldwide mobile subscriber base residing in the region by end-2014. Europe is expected to lose some of its share, with its contribution dropping to 19 percent by end-2014. The figure below highlights the regional share in the worldwide mobile subscriber base in 2014. Figure 4: Worldwide Subscriber Base – Regional Contribution (In Percent, 2014F) 6 50.1% 6.0% 10.6% 14.4% 19.0% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. F – Forecasted 5, 6 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 13
  14. 14. Strategies for Driving Mobile Data and Broadband Adoption The worldwide mobile subscriber base is forecast to grow at a CAGR of 6.7 percent between 2009 and 2014. During this period, Asia Pacific will lead regions worldwide in terms of subscriber growth with a CAGR of 8.4 percent, albeit with Africa and Middle East in close pursuit, w hile E urope is ant icipated t o w itness t he l owest gr owth r ate w ith a CA GR o f 2. 6 percent. Figure 5: Mobile Subscriber Base Growth by Region (In Percent, 2009 – 2014F) 8.4 CAGR (In Percent) 9 CAGR Worldwide = 6.7 % CAGR 6.7% 8.2 6.5 6 3.9 2.6 3 0 Asia Pacific Europe North America Latin America Africa and Middle East Region Source: Portio Research Ltd. F – Forecasted 14 © 2010, Portio Research. All Rights Reserved
  15. 15. Strategies for Driving Mobile Data and Broadband Adoption Chapter 3 Worldwide Data Services Market © 2010, Portio Research. All Rights Reserved 15
  16. 16. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Data Services Market ‘Strategies for Dr iving M obile Dat a and B roadband A doption’ i s t he l atest edi tion in Portio Research’s series of reports covering the worldwide mobile data services market. It follows earlier anal ysis i n Portio’s ‘Strategies f or Driving Data ARPU’ (published in 2008) and ‘S trategies f or Cr eating E nd-User Dem and f or M obile Dat a S ervices’ (published in 2006), which both covered the popular data services of their time, and the strategies adopted by MNOs worldwide. The section bel ow briefly discusses the ev olution of m obile data services and the ef fective strategies adopted by MNOs to popularise their data offerings. Strategies for Driving Data ARPU The ‘Strategies f or Dr iving Dat a A RPU’ report anal ysed m obile oper ators’ shift i n focus towards data services, mainly due t o decl ining revenues from voice services. This r eport focussed on summarising successful data strategies adopted by mobile network operators, and covered the following types of services: • Messaging services  SMS  Mobile e-mail  Mobile IM • Non-messaging mobile services  Mobile music  Mobile games  Mobile TV and video  Mobile user generated content  Mobile commerce  Mobile portals Furthermore, t he r eport i ncluded i nformation on i nnovative dat a s ervices adopt ed by emerging nations such as India, Egypt, China, South Africa and Kenya. This r eport s ummarised various f actors t hat enabl e MNOs to l aunch and dr ive s uccessful data services. Let us look at the highlights of these factors. 16 © 2010, Portio Research. All Rights Reserved
  17. 17. Strategies for Driving Mobile Data and Broadband Adoption Figure 6: Factors Behind a Successful Data Service Expand Perceived Value Continuing Updgrades Business Model Factors Behind a Successful Data Service Minimize 'Clicks to Access' Choosing the Right Data Service Launch Timing Source: Portio Research Ltd. Expand Perceived Value The r eport hi ghlighted t he im portance of implementing a s ervice t hat adds v alue t o subscribers, rather t han being just an addi tion/upgrade t o t he exi sting ar ray of s ervices. Furthermore, it is equally important to price the service while keeping in mind the target audience. The service price is a co mbination o f t he following factors – understanding t he target audi ence and t heir pr eferences, t he value t hat t he new service w ill deliv er t o the audience, and a cost that falls within the spending power of the target audience. Striking the right balance between these factors can make a new data service successful. A good ex ample o f de livering value t o s ubscribers i s V odafone E gypt’s M inicall s ervice. Minicall is an audi o m essaging service t hat all ows subscribers t o r ecord sh ort voice messages and send them as SMS to any network. Minimise ‘Clicks to Access’ For mass adoption of a data service, the operator should ensure that the usability of such a service is simple and t he service is easy to acce ss. A subscriber m ay lose i nterest if they have to go through several links/buttons to access the service. Though it is understandable that not all services can be provided at the single click of a button, the operator should ensure that the portal that hosts the data service is accessible and easy to use. 3 I talia launched new han dsets al ong with the l aunch of its mobile T V s ervices. T hese handsets came with a TV button that gave subscribers easy access to mobile TV. Choose the Right Data Service An oper ator should not onl y understand t he subscriber’s need for a dat a service, it should also under stand t he r esources required to im plement s uch a s ervice. Each dat a s ervice requires a different degr ee of r esources; an oper ator should keep a watchful eye over t he feasibility of i ntroducing a s ervice, eas e of upgr ading it, and t he ca pital and manpower required. © 2010, Portio Research. All Rights Reserved 17 An operator should not only understand the subscriber’s need for a data service, it should also understand the resources required to implement such a service.
  18. 18. Strategies for Driving Mobile Data and Broadband Adoption Launch Timing Correctly planning the right time to launch a data service plays a very important part in helping subscribers to easily relate to the service. Correctly planning the right time to launch a data service Among the notable success stories highlighting the importance of effective launch timing is plays a very important part in NTT DOCOMO’s l aunch of m obile e-mail services in Ja pan, since Ja panese subscribers helping subscribers to easily were m ore i nclined to write lengthy messages, as opp osed to the general trend of sending relate to the service. SMS. Similarly, 3 Italia launched its mobile TV services during the 2006 football World Cup (which Italy went on to win). These two services garnered success with increased user base for the services, and subsequently increased data ARPU. Creating the Right Business Model For a data service to be a commercial s uccess, an appropriate business model must be identified. Even if a data service achieves high adoption rates, the operator may not gain the maximum benefit if the business model is not right. As data services involve other players in the value chain, it is important for the operator to have control over this value chain to garner success from the services. NTT DOCOMO’s DCMX (Mobile Credit Card) service was lauded for its successful business model. N TT DO COMO acq uired a s take i n Sumitomo Mitsui Car ds, a co mpany with experience i n del ivering cr edit ca rd s ervices. T his par tnership was cr ucial for cr eating a successful business model for the DCMX data service. Be Ready with Upgrades The success of a dat a service is qui ckly outlived by new i nnovative services; its lifecycle is short due to the high number of innovations in the mobile industry. Hence, operators should offer regular upgrades to the portfolio of services provided. The pr ogression f rom monophonic r ingtones t o pol yphonic ringtones t o ca ller r ing back tones, and f inally, to f ull track music downloads demonstrates the i mportance of upgr ades within existing services. 18 © 2010, Portio Research. All Rights Reserved The success of a data service is quickly outlived by new innovative services; its lifecycle is short due to the high number of innovations in the mobile industry.
  19. 19. Strategies for Driving Mobile Data and Broadband Adoption Strategies for Creating End-User Demand for Mobile Data Services Our ‘S trategies for Cr eating E nd-User Dem and f or M obile Dat a S ervices’ r eport was released in 2006. As voice services were getting commoditised in the developed nations and operators were forced to adopt new data services, this report analysed the strategies adopted by operators for different mobile services. This report acted as a ‘best practice’ case hi story that co uld be f ollowed by mobile ope rators. S ome o f t he im portant recommendations made by the report are as follows: Choice and Flexibility A dat a s ervice w ill be s uccessful if it offers several options. T hese opt ions can be with respect t o t he a vailability of t he co ntent and t he hands ets, and al so h ow t he co ntent i s stored in the handset after its purchase. Segmentation Segmenting the data service according to the target audience is a key factor in the success of the service. A data service, even if it is good, may not achieve success if it is not targeted at the right audience. Low-Cost Services and Transparent Pricing A data service should be priced according to the affordability of the target audience. Additionally, a service should be cross-subsidised; for example, to drive the use of SMS, the operator can increase voice tariffs and simultaneously reduce SMS prices. High-Value Proposition A subscriber will use a data service only if they can realise the value in using such a service. The value offered by the service should be per ceived as greater than the cost of using the service. Focus on Brand Subscribers feel more confident in using the services of a known brand. Hence, branding is a key aspect that drives the uptake of a s ervice. Operators should create partnerships with leading brands to provide data services. Innovation Innovative s ervices al ways ca tch subscribers’ attention. A n i nnovative s ervice s hould be supplemented with devices that can support it. Simplicity and Ease of Use Operators and handset vendors should pay attention to the user-interface of a data service. A great data service that is not easy to use may not garner success. SMS is an apt example in this case, as the service is easy to use. Handsets Handset vendors should work in coordination with mobile operators to launch handsets that are ca pable o f s upporting i nnovative s ervices l aunched by operators. Handsets should be simple to use and offer several choices in terms of features and prices to match subscribers’ expectations. © 2010, Portio Research. All Rights Reserved 19 A subscriber will use a data service only if they can realise the value in using such a service. The value offered by the service should be perceived as greater than the cost of using the service.
  20. 20. Strategies for Driving Mobile Data and Broadband Adoption Data Services Figure 7: Data Services Covered in Our Reports ‘Strategies for Creating End-User Demand for Mobile Data Services’, ‘Strategies for Driving Data ARPU’ and ‘Strategies for Driving Mobile Data and Broadband Adoption’ Messaging Services • • • • SMS MMS E-Mail IM As indicated i n ou r e arlier r eports (‘Strategies for C reating End-User D emand f or M obile D ata Services’ and ‘ Strategies for D riving D ata A RPU’), S MS co ntinues to be t he m aster of al l messaging services. R evenue generated by SMS services currently equates to much more t han the consolidated revenues of the other messaging services and this trend is expected to continue. Emerging Broadband Services • • • Social Networking Audio and Video Downloads/ Streaming Online Gaming The evolution of mobile communication from simple voice and SMS to advanced data services and beyond has now led to the introduction of mobile broadband services. These services have started to achieve great popularity and penetration across most markets. Social networking has achieved immense worldwide popularity. Social networks allow subscribers to co nnect w ith f riends and al so upl oad p ictures/videos. A s m obile br oadband a llows access to social networks through mobiles, it was an immediate success. The key drivers for mobile social networking are ease of using the service, ability to access the service anytime and anywhere, and the availability of mobile applications to send and receive messages or upload pictures/ videos. In the near future, social networking is expected to be a major driver for mobile broadband. Audio downloads became popular when mobile handsets with audio playback capabilities were introduced i n t he market; t he sa me l ogic applied t o video dow nloads. F urthermore, w ith the increasing popularity of streaming websites, mobile audio/video streams are also on the rise. Another popular mobile broadband service is online gaming, which has achieved popularity due to the availability of high-end handsets. Online gaming is more popular among the youth generation, supported by the availability of free and ad-funded games. • Other Services • Services with limited popularity  Mobile TV  Video Calling Popular services from the past  Ringtones Mobile TV has yet not achieved the universal popularity it was expected to attain. Countries such as France and Italy, that have a particularly high inclination towards sports, have adopted Mobile TV quickly and have contributed to the success of such services in these nations. However, similar success has not been replicated in developing nations, mainly due to the high cost of services. Video calling services have also seen limited adoption, mainly due to the high cost of the services, but also because video calling requires 3G enabled handsets, which limits service use to high-end smartphones only. Ringtones slowly drowned under the evolution of mobile handsets and full track downloads. When a handset is capable of playing MP3 songs and the same can be used as a ringtone, the use of ringtones markedly declines. Source: Portio Research Ltd. 20 © 2010, Portio Research. All Rights Reserved
  21. 21. Strategies for Driving Mobile Data and Broadband Adoption Chapter 4 Worldwide Mobile Messaging © 2010, Portio Research. All Rights Reserved 21
  22. 22. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Mobile Messaging Worldwide Mobile Messaging Mobile messaging services ar e t he m ost widely used m obile dat a services worldwide, and operators worldwide hav e been u sing these services to shore u p revenues i n recent years as v oice m argins have declined. SMS i s the m ost popular m obile m essaging service, and accounts for the largest contribution to MNOs’ data revenues. MMS has typically performed well in advanced markets, but has struggled in emerging markets. Mobile e-mail and mobile instant m essaging (IM) are f aring well i n developed mobile m arkets, and they are seeing uptake in developing countries as well. The figure below compares the worldwide SMS and MMS traffic for 2009. Figure 8: SMS and MMS Traffic – Worldwide (In Billion, 2009) 6,000 5,449.3 Traffic (In Billion) 5,000 4,000 3,000 2,000 1,000 119.4 0 SMS MMS Service Source: Portio Research Ltd. The figure below compares the number of mobile e-mail and mobile IM users worldwide for 2009. Figure 9: Mobile E-mail and Mobile IM Users – Worldwide (In Million, 2009) 350 330.5 Users (In Million) 300 250 191.1 200 150 100 50 0 Mobile E -mail Mobile I M Service Source: Portio Research Ltd. 22 © 2010, Portio Research. All Rights Reserved Mobile e-mail and mobile instant messaging (IM) are faring well in developed mobile markets, and they are seeing uptake in developing countries as well.
  23. 23. Strategies for Driving Mobile Data and Broadband Adoption Dominance of SMS The m obile m essaging segment comprises four services—SMS, MM S, mobile e -mail and mobile I M. S MS r ules t he mobile messaging world beca use of its ubi quity in all mobile markets worldwide and its use by nearly every mobile s ubscriber w orldwide. The f igure below compares revenue generated by each mobile messaging service in 2009. Figure 10: Revenue of Mobile Messaging Services (In USD Billion, 2009) 120 102.3 Revenue (In USD Billion) 100 80 60 40 26.7 17.3 20 4.3 0 SMS MMS Mobile E -Mail Mobile I M Service Source: Portio Research Ltd. The figure c learly highlights t he dominance o f SMS; i t a lone gener ated over double the collective revenues for the other three services in 2009. The primary factors behind the popularity of SMS are: • Simplicity • Ease of use • Low cost • Compatibility with all handsets MMS, mobile e-mail and mobile IM services cannot be availed on simple handsets, and instead demand a certain set of handset capabilities. In addition, subscribers are required to possess greater technical kn ow-how t o use these services w hereas using S MS i s more straight forward. The figure be low co mpares t he f our mobile messaging s ervices on t he bas is of t he aforementioned parameters. © 2010, Portio Research. All Rights Reserved 23 MMS, mobile e-mail and mobile IM services cannot be availed on simple handsets, and instead demand a certain set of handset capabilities.
  24. 24. Strategies for Driving Mobile Data and Broadband Adoption Figure 11: Comparison of Mobile Messaging Services SMS Simplicity MMS Ease of Use Mobile E-mail Cost Mobile IM Handset Compatibility Source: Portio Research Ltd. 24 © 2010, Portio Research. All Rights Reserved
  25. 25. Strategies for Driving Mobile Data and Broadband Adoption Chapter 5 Mobile Messaging – Strategy Case Studies © 2010, Portio Research. All Rights Reserved 25
  26. 26. Strategies for Driving Mobile Data and Broadband Adoption Mobile Messaging – Strategy Case Studies Case Studies Telkomsel Indonesia Mobile Subscribers: 81.6 million (End-2009) Market Share: 49.0 percent (End-2009) Monthly ARPU: USD 4.8 (2009) SMS Traffic: 26.9 billion (Q4 2009) About the Operator Telkomsel is t he l argest m obile net work operator i n I ndonesia with cl ose t o 50 per cent market share at end-2009. Rationale for Selecting the Operator The oper ator has l aunched several i nnovative services i n t he m arket t hat have spurred i ts data revenue, and in 2009 the MNO’s non-voice revenue was 29 percent of its total operating r evenue. S MS has l ed t he gr owth o f da ta s ervices i n Indonesia, w ith T elkomsel subscribers ge nerating t he hi ghest S MS t raffic in t he co untry. T he figure bel ow co mpares the annual SMS traffic for the two leading MNOs in Indonesia. Figure 12: SMS Traffic – Telkomsel and Excelcomindo (In Billion, 2007 – 2009) 7 120 100.4 SMS Traffic (In Billion) 100 78.0 80 60 63.6 49.5 40 20 12.6 17.8 0 2007 2008 2009 Year Telkomsel Excelcomindo Source: Portio Research Ltd. All oper ators i n Indonesia are t rying t o dif ferentiate their SMS o fferings w ith ch eap and attractive pr ice pl ans, and T elkomsel i s no ex ception. Ho wever, T elkomsel i s not onl y focussing on service pricing, but is also making efforts to increase the quality and appeal of its SMS o fferings; this i s done by ensuring regular S MS pl atform upgr ades and launching innovative s ervices s uch a s SMS Me , Web 2 SMS, SMS G IFT, SM S Pro , SM S2.0 a nd Facebook SMS. Furthermore, w ith t he i ncreasing use of S MS, i t i s al so m aking e fforts t o maintain network quality. Additionally, the MNO is promoting SMS by offering services that use SMS as the access platform. 7 Note: For Telkomsel, only chargeable SMS are shown in the Figure. 26 © 2010, Portio Research. All Rights Reserved With the increasing use of SMS, Telkomsel is also making efforts to maintain network quality.
  27. 27. Strategies for Driving Mobile Data and Broadband Adoption The figure below highlights the quarterly growth in Telkomsel’s SMS traffic. Figure 13: SMS Traffic – Telkomsel (In Billion, Q1 2009 – Q4 2009) 8 28 SMS Traffic (In Billion) 26.7 26.9 Q3 2009 Q4 2009 26 24 23.9 22.9 22 20 Q1 2009 Q2 2009 Quarter Source: Portio Research Ltd. In 2009, SMS r evenue constituted 74 per cent of Telkomsel’s d ata revenue. T he average price o f an S MS has reduced ov er t he ye ars, but the s urge i n S MS t raffic has of fset t his decline, and this has enabled the operator to increase SMS revenue with each succeeding quarter of 2009. The figure below depicts the growth in Telkomsel’s SMS revenue in 2009. Figure 14: SMS Revenue – Telkomsel (In USD Million, Q1 2009 – Q3 2009) SMS Revenue (In USD Million) 300 279.9 280 282.5 Q3 2009 Q4 2009 260 236.6 240 220 206.1 200 Q1 2009 Q2 2009 Quarter Source: Portio Research Ltd. In 2009, T elkomsel’s S MS r evenue w itnessed a 23 per cent year-on-year growth. S MS revenue generated in Q4 2009 grew by 37 percent in comparison with Q1 2009 revenue. 8 Note: These are only chargeable SMS. © 2010, Portio Research. All Rights Reserved 27
  28. 28. Strategies for Driving Mobile Data and Broadband Adoption Strategies Attractive Tariffs and Promotional Plans To maintain subscriber i nterest i n its SMS s ervices, t he oper ator f requently introduces promotional pl ans and t ariffs; this results in increased use of s ervices. The figure below highlights some of the plans launched by Telkomsel. Figure 15: SMS Tariffs and Promotional Plans – Telkomsel Jan 2009 ‘Free 300 SMS’ was launched and offered 300 free SMS to Kartu subscribers between 00.00-19.00 hours after they registered for the service by paying a registration fee of USD 0.2 (IDR 2,000) Mar 2009 ‘100 Get 100’ was introduced and allowed Telkomsel subscribers to send 100 free SMS after sending 100 chargeable SMS Apr 2009 ‘simPATI SMS Package’ was introduced offering cheaper SMS prices for simPATI users with two different packages: ‘Regular’ and ‘Gift’ May 2009 ‘SMS Mania’ was launched and offered a daily package of 50 SMS for USD 0.1 (IDR 1,000) to all Telkomsel numbers between 00.00-19.00 hours Jul 2009 ‘SMS Fun 2,000’ was launched and offered other content with SMS, such as celebrity gossip, fashion and horoscopes Jul 2009 A new SMS tariff for Kartu was introduced that allowed users to send SMS to any network for a fixed price, as against variable prices for on-net and off-net SMS Oct 2009 A cheaper SMS plan was introduced that allowed subscribers to send 500 SMS for USD 0.1 (IDR 1,000) Feb 2010 SMS pack ‘Kartu As’ was launched that offered free 1,000 daily SMS to Telkomsel subscribers USD 0.1 (IDR 1,000) after sending SMS worth USD 0.1 (IDR 1,000) Source: Company Website 28 © 2010, Portio Research. All Rights Reserved
  29. 29. Strategies for Driving Mobile Data and Broadband Adoption Regular Upgrades of SMS Services and SMS Platform Telkomsel has transformed i ts SMS offerings f rom being a simple t ext-based service to an advanced service with features such as div ert, auto reply, bl ack li st and white list. S ome of their innovative SMS services are listed below: • SMS Me • Web 2 SMS • SMS GIFT • SMS Pro • SMS2.0 • Facebook SMS These efforts are aimed at making Telkomsel’s SMS services more personalised and attractive. The oper ator is not only upgrading its SMS services r egularly, but is also of fering services through t he m ost adv anced m essaging platforms. For example, i n Ju ne 2009, Telkomsel upgraded its SMS platform with Acision’s Text Suite, to enable users to enjoy additional features su ch a s bl ocking uns olicited S MS (or S MS s pam), aut omatic replies, message forwarding and automatic copy messages. Improving Network Quality and Capacity With i ncreasing s ubscriber numbers and d ata t raffic, m obile net works worldwide require frequent upgrades. Without such upgrades, networks will succumb to the increasing strain, affecting the quality of services. Keeping this in mind, Telkomsel has invested hugely in network expansion. In Q1 2009, it increased its base transceiver station (BTS) number by 28 percent and overall network capacity by 39 percent. In 2008, the operator added 6,014 new BTS that allowed it to carry 30 percent higher SMS traffic on the day of Lebaran (a religious festival), compared with its capacity in 2007. 9 Using SMS as a Platform for Other Services Telkomsel has i ntroduced several services t hat u se S MS as t he access platform. W ith the increasing upt ake o f t hese s ervices, SMS us e i s gai ning new hei ghts i n t he co untry. Telkomsel is offering mobile banking services through three platforms—SMS, single banking and IVR (Interactive Voice Response)—with SMS bei ng the most popul ar platform used by subscribers. In 2008, Telkomsel started its mobile advertisement services. This allows content providers to push and adv ertise t heir pr oducts t hrough S MS, along with ot her co ntent such as ne ws and information. 9 Source: Company Reports © 2010, Portio Research. All Rights Reserved 29 Telkomsel is not only upgrading its SMS services regularly, but is also offering services through the most advanced messaging platforms.
  30. 30. Strategies for Driving Mobile Data and Broadband Adoption The t able below highlights t he f actors which enabl ed the operator to generate high SMS traffic. Table 2: Success Factors – Telkomsel Indonesia Factor Strategy Attractive Tariffs and Promotional Plans Telkomsel regularly introduces attractive SMS plans that offer cheap or free SMS. Different plans target subscribers with different use needs. Regular Service and Platform Upgrades Telkomsel has introduced several innovative SMS-based services, such as SMS Facebook. SMS Facebook is gaining rapid popularity among users and is driving SMS use further. Apart from interesting services, Telkomsel has increased the appeal of its SMS offerings with the introduction of features such as divert, auto reply, black list, white list, etc. Improving Network Quality and Capacity Telkomsel is focusing on network quality in order to continue delivering high quality services to its subscribers despite increased SMS traffic. It is also investing to strengthen network capacity. SMS as a Platform for Other Services Telkomsel is providing additional services that use SMS as an access platform, and these services are witnessing increasing demand in the local market. Source: Portio Research Ltd. 30 © 2010, Portio Research. All Rights Reserved
  31. 31. Strategies for Driving Mobile Data and Broadband Adoption China Mobile Mobile Subscribers: 522.3 million (End-2009) Market Share: 72.4 percent (End-2009) Monthly ARPU: USD 11.0 (Q4 2009) MMS Users: 147.5 million (End-2009) About the Operator China M obile is t he largest M NO worldwide i n terms of subscriber base, with 522. 3 million subscribers at end-2009; the subscriber base grew nearly 14.2 percent during 2009. Rationale for Selecting the Operator Messaging services, such as SMS, MMS, mobile e-mail and mobile IM, have been the key focus of operators to generate data revenues. China Mobile’s continuous efforts to promote messaging se rvices, es pecially MMS, r equire a s pecial mention. M MS has per formed exceptionally well in t he Ch inese m arket, compared with i ts per formance in other m arkets where it has been a distant second to SMS. While many other markets are struggling to increase MMS uptake, China Mobile’s MMS user ba se ha s shown a double-digit growth rate during 2007–2009. During 2007–2009, the number o f China M obile’s MMS users increased at a CA GR of near ly 27.5 per cent, with year-on-year growth of MMS users standing at 15.1 percent in 2009. Figure 16: MMS Users – China Mobile (In Million, End 2007 – End 2009) 147.5 160 128.2 MMS Users (In Million) 140 120 100 90.8 80 60 40 20 0 2007 2008 2009 Year Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 31 While many other markets are struggling to increase MMS uptake, China Mobile’s MMS user base has shown a double-digit growth rate during 2007–2009.
  32. 32. Strategies for Driving Mobile Data and Broadband Adoption MMS Traffic per User and Revenue Growth With Chi na Mobile’s M MS us er base growing at a steady pace and t he M NO’s efforts t o encourage MMS use, there has been a significant increase in MMS traffic per user and the revenue generated by this service. The f igure bel ow depi cts t he M MS t raffic per ac tive user p er ye ar f or Chi na M obile dur ing 2007–2009. Figure 17: MMS Traffic per Active User per Year – China Mobile (2007 – 2009) MMS Traffic per Active User per Year 350 290.1 300 250 200 255.7 198.2 150 100 50 0 2007 2008 2009 Year Source: Portio Research Ltd. MMS revenue grew at a CAGR of 53.3 percent between 2007 an d 2009. The f igure bel ow depicts the growth in MMS revenue of China Mobile during 2007, 2008 and 2009. Figure 18: MMS Revenue – China Mobile (In USD Million, 2007 – 2009) 484.7 500 MMS Revenue (In USD Million) 414.1 400 300 200 206.3 100 0 2007 2008 2009 Year Source: Portio Research Ltd. 32 © 2010, Portio Research. All Rights Reserved
  33. 33. Strategies for Driving Mobile Data and Broadband Adoption Strategies Triggering the Uptake of MMS Services • • Challenge: The ear ly uptake o f M MS by subscribers i s co nstrained by the fact t hat creating and edi ting m ultimedia co ntent i s far more complicated t han w riting t ext messages. This hampers growth in P2P MMS traffic. China Mobile’s Strategy: China M obile s timulated MMS adopt ion by pushing A 2P MMS and ot her M MS-based i nnovative services. A 2P M MS-based s ervices—M-News, entertainment and gr eeting M MS a vailable on the Monternet Web portal mobile— provide addi tional im petus t o t ap t he pot ential of MMS. Dur ing 2007, A 2P M MS t raffic accounted for more t han 70 per cent of China M obile’s total MMS traffic; the r emaining percentage was P2P MMS traffic. 10 MMS traffic is still dominated by A2P MMS, with the continued success of the M-News and Monternet services. The use of A2P MMS in turns increase P2P MMS through the message forward facility. Subscribers simply forward t he M MS, without needing t o be co ncerned about creating the MMS, as it is generated by the application. Once subscribers are familiar with MMS services, us ers ca n cr eate t heir own M MS co ntent, and t his in t urn i ncreases t he popularity of the service among them. Innovative Offerings • M-News: This i s a m obile new spaper service that allows users t o r eceive information including breaking news alerts and weather reports through MMS (on their MMScapable hands ets). Chi na M obile pr ovides the M-News se rvice in co llaboration w ith media organisations, including China Daily (a national English newspaper) and other local news sources. The news alert MMS includes ten pages of headline news, weather information and photos. The alerts are provided twice a day at a monthly charge of RMB 5 (USD 0.7), and the service is exempt from data charges. Salient Features:  High cu stomisability allowing t he provision o f co ntent i n a nu mber o f ca tegories including news al erts and information in ar eas such as m usic, movies, lif e, s ports and finance  Option to forward M-News MMS to other users  Opportunity for subscribers to share their opinions with editors and other readers  Increased revenue opportunity for MNOs without the need to own any content  Easy to subscribe/unsubscribe to the service as subscribers merely need to send a text message for initiating/discontinuing the subscription Impact: The M-News service was received well by subscribers, and it became a major factor i n the growth of MMS traffic in Chi na. It was n ominated as a star service for the operator i n t he ye ar of its launch ( 2006), and the M MS t raffic per m onth in China has increased by more than seven times between 2006 and 2009. The paying subscriber base for the M-News service during 2006–2009 is depicted in the figure below. The number of M-News subscribers increased at a CAGR of nearly 107.5 percent between 2006 and 2009. 10 Source: http://wwwen.zte.com.cn/endata/magazine/ztetechnologies/2007year/no4/articles/200704/t20070423_161773.html © 2010, Portio Research. All Rights Reserved 33 The early uptake of MMS by subscribers is constrained by the fact that creating and editing multimedia content is far more complicated than writing text messages.
  34. 34. Strategies for Driving Mobile Data and Broadband Adoption M-News Paying Subscribers (In Million) Figure 19: M-News Paying Subscribers – China Mobile (In Million, End 2006 – End 2009) 49.1 50 41.5 40 30 23.6 20 10 5.5 0 2006 2007 2008 2009 Year Source: Portio Research Ltd. • Monternet: Monternet i s a s et of dat a of ferings ba sed on the mobile I nternet platform provided by China Mobile. The service allows subscribers to use different content categories on the Monternet Web portal; subscribers can use their handsets (feature phones or smartphones) or ‘Go with E’ cards with their laptops to access the Monternet Web portal for sending and receiving MMS. Leveraging Events for MMS Promotion • Green Box Environmental Protection Plan—517 Special Event: In May 2007, China Mobile celebrated the World Telecommunication and Information Society Day, and invited i ts s ubscribers t o participate i n t he G reen O lympics. T he e vent enco uraged subscribers to throw their old phones into green boxes. The initiative attracted many celebrities, and the mobile operator organised an MMS photo shooting event – ‘Good Shape f or t he O lympics’ – to spread t he m essage of it s co mmitment t owards the environment. • Olympics 2008: China Mobile released an MMS containing the ‘2008 Olympics Mascot’ on the Monternet Web portal, and the company allowed its subscribers to download and send the MMS through their handsets and laptops. The promotion of the Olympics was the first of its kind in China, and was successful in pushing MMS services further into the market. 34 © 2010, Portio Research. All Rights Reserved
  35. 35. Strategies for Driving Mobile Data and Broadband Adoption The t able be low hi ghlights t he factors that enabled the oper ator t o gener ate high MMS traffic. Table 3: Success Factors – China Mobile Factor Triggering the Uptake of MMS Services Innovative Offerings Leveraging Events for MMS Promotion Strategy China Mobile stimulated MMS traffic by pushing A2P MMS. A2P MMS received by subscribers then helped in increasing P2P MMS via the message forward facility, thereby stimulating the growth of P2P MMS. M-News and Monternet services provided ready-to-use MMS content to subscribers. Thus, they boosted MMS traffic significantly since they did not require users to create MMS, which is a major bottleneck in the uptake of MMS services. China Mobile used major national and international events to promote MMS services among the masses. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 35
  36. 36. Strategies for Driving Mobile Data and Broadband Adoption SoftBank Japan Mobile Subscribers: 21.7 million (End-2009) Market Share: 19.4 percent (End-2009) Monthly ARPU: 21.5 USD (Q4 2009) 3G Subscribers as a Percentage of Customer Base: 96.4 percent (End-2009) About the Operator SoftBank is the third largest mobile operator in Japan, but the first operator in Japan to migrate its entire subscriber base to a 3G network. Rationale for Selecting SoftBank SoftBank has introduced a pack combining Web access and e-mail access. Considering the high I nternet us e by Japanese su bscribers and by combining e -mail wi th Web ac cess, SoftBank has paved the way for increased e-mail use by its subscribers. Subscribers using this pack can send and r eceive e-mails on the network for free, and to other networks at a minimal cost. The operator has introduced services that increase the presence and familiarity of mobile email among its subscribers. In January 2008, it l aunched S! Information Channel , a s ervice that deliv ers i nformation t o s ubscribers via e -mail. T he s ervice had near ly 2 million registered u sers as of April 2009, and continues to gr ow i n popul arity and add subscribers and applications at a steady pace. The figure below highlights the increasing number of applications on the S! Information Channel. Figure 20: Number of S! Information Channel Applications – SoftBank (January 2010 – April 2010) 21,700 Number of Applications 21,600 21,500 21,400 21,300 21,587 21,618 Mar-10 21,200 Apr-10 21,100 21,000 20,900 21,086 21,171 20,800 Jan-10 Feb-10 Month Source: Portio Research Ltd. 36 © 2010, Portio Research. All Rights Reserved SoftBank has introduced services that increase the presence and familiarity of mobile e-mail among its subscribers.
  37. 37. Strategies for Driving Mobile Data and Broadband Adoption With the highest 3G penetration among subscribers, SoftBank has a solid f oundation for increasing i ts dat a A RPU. M oreover, a fter the decommissioning of its 2G net works by 31 March 2010, S oftBank is t he only network with 100 per cent 3G s ubscription. The figure below highlights the 3G penetration of SoftBank and its competitors in 2009: Figure 21: 3G Subscribers as a Percentage of Total Subscriber Base – Japan (In Percent, Q2 11 2009 – Q4 2009) 3G Percentage (In Percent) 120 80 81.2 77.8 75.2 93.9 96.4 92.9 94.9 91.6 92.8 100 60 40 20 0 Q2 2009 Q3 2009 Q4 2009 Period KDDI NTT DOCOMO Softbank Source: Portio Research Ltd. SoftBank introduced e -mail facilities for i ts s ubscribers t hrough a service ca lled S ! Mail. Though S! Mail was marketed and perceived as an MMS service, it offered traditional push e-mail s ervices to it s s ubscribers. S ! M ail s ubscribers ca n enclose pi ctures, voice c lips, videos, et c., while sending e -mails, and the s ervice permits users to se nd e-mails onl y by keying i n the r ecipient’s m obile nu mber. A ny subscriber using the S ! B asic data p lan w ill have access to e-mail, along with 3G and other Internet services including e-mail. SoftBank, after t he ch ange i n management from V odafone K .K., launched 3G services for the third time i n Japan i n 2005. This m ove garnered more success than the earlier two 3G service launches by Vodafone K .K. ( before acq uisition by SoftBank). Though late i n introducing 3G , mobile I nternet and e -mail s ervices, S oftBank has s een a significant increase in the adoption of its new services. The adoption of mobile e-mail by SoftBank subscribers has been steadily increasing; one of the m ain factors i s t he s ales of i Phones. S oftBank, pr esently the onl y operator t o o ffer iPhones in Ja pan, ex perienced a steady increase in i Phone s ales and dat a services including mobile e-mail. The following ch art depi cts t he i ncrease i n I nternet ado ption by SoftBank subscribers. 11 Note: SoftBank’s financial year starts on 1 April, hence Q4 for the operator implies the quarter ending on 31 March. However, in this report we have taken Q4 to mean the quarter ending on 31 December. © 2010, Portio Research. All Rights Reserved 37 The adoption of mobile e-mail by SoftBank subscribers has been steadily increasing; one of the main factors is the sales of iPhones.
  38. 38. Strategies for Driving Mobile Data and Broadband Adoption Figure 22: Mobile Internet Subscribers – SoftBank (In Million, Q2 2009 – Q4 2009) Mobile Internet Subscribers (In Million) 17 16.9 16.8 16.6 16 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. Innovative data plans, 3G and mobile Internet adoption, and the subsequent use of web services led to a continual increase of data ARPU. The figure below showcases the increase in data ARPU for the last three quarters of 2009. Figure 23: Data ARPU – SoftBank (In USD, Q2 2009 – Q4 2009) 24 Data ARPU (In USD) 23 22 21 20 22.9 21.3 19 18 19.3 17 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. 38 © 2010, Portio Research. All Rights Reserved
  39. 39. Strategies for Driving Mobile Data and Broadband Adoption Strategies Innovative Pricing Plans for Target Groups SoftBank launched innovative data price plans/offers for both enterprise and individual subscribers. Packages announced by SoftBank were a mix of voice and data services and, in a few cases, the company offered discounts of up to 80 percent. SoftBank’s strategy was to target specific groups, such as students and family members. The following are the types of pl ans and packa gers that enabled the high upt ake o f mobile I nternet and s ubsequently mobile e-mail use: • S! Basic: This pack enables subscribers to access S! Mail, along with several other services such as web access, PC Site Browser use (including PC mail) and PC Site Direct t ransmissions. A ll t hese s ervices ar e o ffered for a flat fee o f US D 3. 3 ( JPY 315) per month • White Plan: This plan, when clubbed with the S! Basic package, offers subscribers access to unlimited e-mails within the network and a minimal charge for e-mails sent/received from outside the network • Unlimited Packet Discount: This is an add-on package offering unlimited Web and e-mail access. The package cost ranges from USD 10.8 to USD 46.2 (JPY 1,029 to JPY 4,410) • Unlimited Packet Discount S: A plan similar to the one abov e; however, the cost of the package ranges from USD 4.1 to USD 46.2 (JPY 390 to JPY 4,410) • Monthly Discounts: A new subscriber, while purchasing a handse t f rom SoftBank and subscribing to a new connection for both voice and data services, can avail the S! Basic, Unlimited Packet Discount and Voice Call Fees for a charge of merely USD 0.2 (JPY 16) Automated Services to Increase E-Mail Use SoftBank introduced s everal p lans t o pr omote e -mail us e. M ost o f t hese s ervices w ere focussed on se nding aut omated e -mails t o its s ubscribers and , hence, increasing e -mail adoption. Innovative e-mail services offered by SoftBank are mentioned below. • Idokoro-mail: This i s a mobile appli cation installed on hand sets that i s used by children; it sends automatic e-mails to parents once the child reaches a destination. Also, in an emergency, a pre-defined key triggers an alarm, places a call and sends an e-mail to the parents with the location information. • Simple Select Video: This service, launched in April 2009, allows users to receive e-mails with video content. A wide variety of content such as sports, entertainment and news is available t hrough t his s ervice. Registered s ubscribers receive new videos through e-mails that can be watched at their convenience. • Easy Access Music: This music co ntent service w as launched i n June 2009. Its users receive e-mails w ith an update on m usic information, popul ar songs, m usic rankings, et c. Subscribers ca n also view i mages on t he e -mail or c lick on li nks, allowing them t o p lay or dow nload s ongs. A s t his i nformation is s tored i n e -mails, the s ubscriber ca n acce ss music information and pl ay or do wnload s ongs at t heir convenience. Focus on Corporate Users SoftBank’s focus has be en o n increasing its co rporate mobile s ubscribers. S oftBank Telecom (the fixed-line business) and SoftBank Mobile consolidated their efforts to accelerate growth in this segment. As a result, SoftBank Telecom achieved sales of 250,000 mobile handsets in the corporate sector in 2008. As co rporate s ubscribers use e-mails and web s ervices to a gr eat e xtent, a s ignificant increase in data ARPU was experienced. Notable corporate mobile subscriber deals in 2009 included: • Pfizer Japan purchased 3,000 X05HT handsets for its medical representatives • PriceWaterhouseCoopers Consultants purchased approximately 2,000 iPhone 3G handsets for their consultants © 2010, Portio Research. All Rights Reserved 39 SoftBank Telecom achieved sales of 250,000 mobile handsets in the corporate sector in 2008.
  40. 40. Strategies for Driving Mobile Data and Broadband Adoption Wide Range of Handsets and Ease of Purchase SoftBank focuses on selling s tylish and hi gh-end h andsets t o i ncrease t he a ppeal and uptake of its dat a services, i ncluding mobile e -mail. All hi gh-end dat a-centric handsets ar e sold w ith dat a pl ans t o hel p i ncrease e -mail and Internet us e. Additionally, So ftBank introduced 24-month i nstalment plans, along w ith t wo-year co ntracts. T his r educed t he burden f or s ubscribers to r egularly extend t he co ntract, and it ensured r etention for t wo years. In addi tion, a new s ubscriber pur chasing a ne w han dset in t he 24-ment i nstalment deal receives s ubsidised m onthly rentals for us ing bot h voice and dat a s ervices. T he operator offered discounts of up to 80 percent on voice and data plans for 24 months. SoftBank is presently the exclusive distributor of iPhone in Japan. Also, iPhone was one of the key contributors to Q3 2009 sales and the increase in data ARPU for SoftBank. The M NO introduced s everal innovative plans to increase i Phone adoption. In Dece mber 2009, the “iPhone for all of SoftBank” plan was introduced to offer 32 GB iPhones for free to subscribers willing t o s ign up a two-year co ntract with S oftBank. A s imilar pl an w as also announced i n early 2009 called “iPhone for Everybody Campaign”, wherein any subscriber signing up for the two-year data plan received an 8 GB iPhone for free. Highest 3G Adoption in Japan SoftBank, though at number three in Japan in terms of total mobile subscriber base, places first with r espect t o 3G adopt ion. The ke y focus f or S oftBank is t o im prove dat a A RPU through i ts 3G s ervices, w hich i ncludes hi gh-speed Internet br owsing, e -mail and ot her services. Furthermore, SoftBank also upgraded its 3G network infrastructure to provide highservice quality to subscribers. Also, as SoftBank announced the cl osure of its 2G networks, existing 2G subscribers hav e been shifted t o 3G net works. He nce, a s of A pril 20 10, S oftBank was the onl y national operator with 100 percent 3G adoption. This fact is further expected to boost the use of data services, such as e-mail and web access. 40 © 2010, Portio Research. All Rights Reserved As of April 2010, SoftBank was the only national operator with 100 percent 3G adoption.
  41. 41. Strategies for Driving Mobile Data and Broadband Adoption The table below highlights the factors which enabled the operator to increase the uptake of mobile e-mail. Table 4: Success Factors – SoftBank Japan Factor Strategy Innovative Price Plans for Target Groups Introduction of innovative plans targeting particular groups of people – both individual and enterprise customers. Some of these plans offered discounts of up to 80 percent. Automated Services to Increase E-Mail Use Introduction of a new service which sends automated e-mails to subscribers, with information on latest events, location information of mobiles used by children, video files, links to music downloads, etc. Focus on Corporate Users SoftBank, realising the heavy e-mail use by corporate users, focused on attracting more corporate subscribers and achieved significant success through this strategy. In 2008, Softbank sold 250,000 handsets to the corporate sector. Wide Range of Handsets and Ease of Purchase SoftBank achieved popularity in Japan for its stylish high-end handset portfolio. The MNO is currently the exclusive distributor of the iPhone in Japan. SoftBank also focused on attracting new subscribers by introducing two year monthly instalment schemes. Highest 3G Adoption in Japan SoftBank has achieved the highest penetration with respect to 3G subscribers. 3G subscribers will drive higher data use and a subsequent increase in e-mail use. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 41
  42. 42. Strategies for Driving Mobile Data and Broadband Adoption Conclusion Mobile messaging services are the most popular mobile services after voice, and messaging services gener ated m ore t han US D 150 billion in revenues worldwide i n 2009 . F or ye ars now, m obile messaging se rvices hav e enabl ed oper ators worldwide t o sustain t heir A RPU and acq uire new s ubscribers. A s shown ear lier, SMS dominates the m obile m essaging world and greatly outperforms MMS, m obile e -mail and m obile I M – even as a co llective. MMS is often wrongly considered a failure, with confusion borne from over-enthusiastic prelaunch pr edictions t hat i t w as the su ccessor t o SMS . I n r eality MMS has s een s ignificant, impressive growth, and recorded annual revenue of USD 26.7 billion in 2009; worldwide MMS revenue is projected to hit USD 51.2 billion by end-2014. Although S MS w ill co ntinue t o do minate t he mobile messaging ar ena f or s ome years t o come, ot her s ervices s uch a s m obile e -mail and m obile I M ar e ca tching up fast. S ome experts even believe that mobile e-mail will supplant SMS in the future; however, this seems unrealistic in the foreseeable future. SMS i s well established with hi gh penetration levels i n the majority of markets worldwide, whereas mobile e-mail and m obile I M ar e s till in t he growth p hase and are hence expected t o witness higher-than-current growth r ates i n the future. T he figure bel ow co mpares t he CA GR of r evenues t o be gener ated by mobile messaging services between 2009 and 2014. Figure 24: Revenue CAGR of Mobile Messaging Services (In Percent, 2009 – 2014F) 33.3 35 CAGR (In Percent) 30 25 18.1 20 13.9 15 10 5 3.9 0 SMS MMS Mobile E -mail Mobile I M Service Source: Portio Research Ltd. F – Forecasted Operators worldwide have realised the importance of mobile messaging services, especially SMS, in the wake of falling ARPU. They are making conscious efforts to increase the appeal of their messaging solutions t hrough i nnovation i n t erms o f co ntent o ffered and s ervice pricing. To ach ieve t he intended popul arity of t heir messaging se rvices, oper ators have primarily focussed on the following areas: • Prices • Promotions and marketing • Quality of the service • Identifying the target segment for each service 42 © 2010, Portio Research. All Rights Reserved MMS recorded annual revenue of USD 26.7 billion in 2009; worldwide MMS revenue is projected to hit USD 51.2 billion by end-2014.
  43. 43. Strategies for Driving Mobile Data and Broadband Adoption The table below discusses these factors in brief. Table 5: Factors Affecting the Uptake of Mobile Messaging Services Factor Strategy • • Pricing • • Promotions and Marketing • • • Quality of Service • • • Identifying Target Segment • Offering flat rate data plans with unlimited service access Providing free SMS and other services on festivals or other occasions to increase the uptake of services Offering discounts and different price plans to suit the needs of users with different requirements Promoting other services that use mobile messaging as a platform, for example mobile banking, video downloads through e-mail etc. Penetrating the service through A2P mode (especially for MMS) in order to increase users’ familiarity with the service Using mobile messaging services at a large scale to share information with masses during local and global events Regularly upgrading wireless networks to offer better user experience for services that demand high speed and more bandwidth Launching innovative services to increase the appeal of mobile messaging services Offering advanced handsets that provide rich user experiences and ease of use for mobile messaging services Identifying the target segment for each mobile messaging service, for example youth or students for SMS and business users for mobile email Introducing plans and offers that suit the needs of these target segments and encouraging them to use the service at a larger scale, for example free or discounted SMS during nights or weekends and flat rate e-mail plans for enterprise users Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 43
  44. 44. Strategies for Driving Mobile Data and Broadband Adoption Chapter 6 Mobile Broadband – Introduction and Basics 44 © 2010, Portio Research. All Rights Reserved
  45. 45. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband – Introduction and Basics Mobile broadband allows subscribers to access high-speed Internet on the move. In this report, we consider all services with data transfer speeds of more than 256 Kbps as mobile broadband services. Three devices that enable mobile broadband access are: • Mobile handsets • Modems (USB Modems, often known as Dongles, and Embedded modems) • PC Cards Mobile data plans offered by operators al ong with any of the above mentioned devices will allow s ubscribers t o acce ss high-speed I nternet. S ubscribers’ d emand for comparatively simpler services like Internet browsing and e-mail access has now evolved to them seeking out advanced s ervices s uch as v ideo s treaming and mobile T V, w hich r equire high-speed data transfer rates and extensive coverage. This has led to several developments in the mobile br oadband s pace. Cur rently, mobile oper ators, t elecom as sociations and ot her players in the mobile broadband ecosystem are working towards achieving data transfer speeds of up to 1 Gbps, with a key focus on the quality of service. Mobile operators, telecom associations and other players in the mobile broadband ecosystem are working towards achieving data transfer speeds of up to 1 Gbps, with a key focus on the quality of service. The table below highlights the number of operators who have deployed high-speed networks worldwide. Table 6: Number of Network Providers with High Speed Network Deployments – Regional (March 2010) Number of Network Providers Network Asia Pacific Europe North America Latin America Africa and Middle East Worldwide HSDPA/HSUPA 55 143 8 52 67 325 CDMA2000 1xEV-DO Rel. 0 23 39 10 26 17 115 CDMA2000 1xEV-DO Rev. A 17 24 7 20 15 83 UMTS 63 153 8 53 69 346 Source: 3G Americas and CDG Broadly speaking, there are two types of networks providing mobile broadband—one bei ng a m obile phone net work that provides both v oice and dat a services ( for example UM TS, HSPA), and the other provides only data services (for example WiMAX). Mobile oper ators ar e al so wor king t owards enha ncing the subscriber ex perience on t hese advanced networks. Operators are taking key initiatives such as introducing innovative data plans, upgrading technology infrastructure to offer improved data transfer rates and exploring new technologies. This section covers these technologies and operator strategies in detail. © 2010, Portio Research. All Rights Reserved 45
  46. 46. Strategies for Driving Mobile Data and Broadband Adoption Evolution of Mobile Broadband – GSM Mobile broadband using GSM technologies (data rates of more than 256 K bps) have been constantly evolving since 1999 with the introduction of UMTS/W-CDMA technology. UMTSenabled handsets have been able to achieve peak transfer rates of up to 384 Kbps. Currently, 3GPP (3rd Generation Partnership Project, an association responsible for developing globally acceptable mobile standards) is working on a 4G technology called LTE Advanced, which is expected to achieve peak transfer rates of 1 Gbps. Key GSM Technologies UMTS (Universal Mobile Telecommunications System) • • • • • UMTS is one of t he 3G mobile t elecommunications t echnologies, specified by 3GPP UMTS builds on t he GSM technology, and most UMTS handsets also s upport GSM, allowing dual-mode operation UMTS is t he first 3G mobile technology in G SM achieving br oadband speeds, with transfer rates reaching 384 Kbps UMTS enables the use of voice and high-speed data multimedia services such as music, mobile TV, video and web browsing The first co mmercial launch of U MTS s ervices w as i n Ja pan i n 2001 by NTT DOCOMO. The service is called FOMA (Freedom of Mobile Multimedia Access). HSPA (High Speed Packet Access) • • • • HSPA is an umbrella term for a set of technologies that define the evolution of UMTS HSPA includes the following technologies:  High Speed Downlink Packet Access (HSDPA): HSDPA is an enhancement to the UMTS network that enables high downlink data transfer s peeds of up to 7. 2 Mbps. T hese rates ar e ach ieved t hrough Adaptive M odulation and Codi ng, F ast P acket S cheduling and Hyb rid Automatic Repeat request (HARQ) techniques.  High Speed Uplink Packet Access (HSUPA): HSUPA i s an enhancement to the UMTS network that enables high uplink speeds while enhancing downlink transfer rates. It increases the data rate up to 5.8 Mbps for upl oading and 14. 4 Mbps for downloading. HSDPA uses the E nhanced De dicated Channel ( E-DCH) t o opt imise upl ink performance. Through these continuous enhancements, current HSPA networks can achieve data transfer rates of 14.4 Mbps on downlink and 5.8 Mbps on uplink As of February 2010, 315 commercial operators were present across 133 countries. Of t he oper ational HS PA net works, m ore t han 79 percent can achieve dat a t ransfer r ates of 3. 6 M bps or hi gher, and m ore t han 53 per cent can achieve data rates of 7.2 Mbps or higher. 12 HSPA+ (High-Speed Packet Access Plus/ Evolved HSPA) • • • 12 HSPA+, w hich is an upgrade t o t he cu rrent HS PA network, provides enhance d throughput speeds with higher performance and spectral efficiency It is more efficient in handling advanced services such as Push-to-Talk over Cellular (PoC), music and videos, V oice o ver I nternet P rotocol ( VoIP) and ot her s uch multimedia applications Enhancements, such as Multiple I nput/Multiple O utput (MIMO) ca pability, Continuous P acket Connect ivity (CPC) and Hi gher O rder M odulations, enable HSPA+ networks to achieve data transfer rates of up t o 42 Mbps o n downlink and 11.5 Mbps on uplink Source: Global Mobile Suppliers Association 46 © 2010, Portio Research. All Rights Reserved The first commercial launch of UMTS services was in Japan in 2001 by NTT DOCOMO.
  47. 47. Strategies for Driving Mobile Data and Broadband Adoption • As of F ebruary 2010, 41 co mmercial oper ators l aunched HS PA+ net works acr oss 26 countries Figure 25: UMTS Evolution – Data Transfer Rates HSPA • DL: 3.6 Mbps • UL: 384 Kbps • DL: 7.2 Mbps • UL: 1.4 Mbps 2006 HSPA+/ Evolution • DL: 14.4 Mbps • UL: 5.76 Mbps 2007 2008 • DL: 42.0 Mbps • UL: 11.5 Mbps 2009 Note: DL: Downlink UL: Uplink Source: Global Mobile Suppliers Association LTE (Long Term Evolution) • • • • LTE, t he latest e volution i n HS PA net works, i s des igned t o i ncrease ef ficiency, capacity and data transfer rates. It is considered as a pre-4G technology while LTE Advanced is a 4G technology under development. It i s backw ard co mpatible w ith G SM and HS PA net works. I t use s a t echnology similar to HSPA+, with the application of Orthogonal Frequency Division Multiple Access ( OFDMA) in dow nlink and Single Car rier FDMA in t he up link enhanc ing spectral efficiency and increasing data transfer rates. LTE can achieve data transfer speeds of up to 100 Mbps on downlink and up to 50 Mbps on uplink. CDMA operators can al so depl oy LTE technology, with m ajor players such as NTT DOCOMO and V erizon Wireless working on depl oying LTE on t heir commercial networks According to the Global Mobile Suppliers Association, 59 operators worldwide have committed t o depl oy LTE, o f w hich 22 w ill be oper ational by end-2010 and the remaining networks will be ready by 2012 LTE Advanced (Long Term Evolution Advanced) • • • LTE Advanced is currently in the development phase and will be 3GPP’s candidate for 4G technologies defined by the International Telecommunication Union (ITU). The specifications for LTE Advanced are expected to be finalised by 2011. LTE A dvanced w ill incorporate new t echnical ad vancements s uch as Hi gh-Order MIMO (4x4 and beyond MIMO), the ability to use non-contiguous frequency ranges (alleviating frequency range i ssues), t he incorporation of F emtocells us ing SelfOrganising Network techniques, self back-hauling base station, etc. The data transfer rates of LTE Advanced is expected to reach up to 1 Gbps © 2010, Portio Research. All Rights Reserved 47 59 operators worldwide have committed to deploy LTE, of which 22 will be operational by end-2010 and the remaining networks will be ready by 2012.

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