Mobile Idate 2009


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IDATE provides regular analyses of the world mobile markets' main trends - networks, terminals and services. On the occasion of the Mobile World Congress in Barcelona (16-19 February 2009), IDATE and ENTER have teamed up to publish the third edition of the special white paper: Mobile 2009: Markets & Trends taken from several IDATE market reports.

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Mobile Idate 2009

  1. 1. Sponsored by Mobile 2009 Markets Facts & & Trends Figures Consulting & Research
  2. 2. Telecom Mobile Services & Equipment Mobile Trends Dynamics Mobile Mobile Broadband Hot Topics
  3. 3. Introduction
  4. 4. 4 Mobile 2009 T he world telecom services mar- and singlehandedly deliver all of the sec- ket is estimated at 1,365 billion tor’s growth. But the annual growth rate USD in 2008 – a 4.2% increase has dropped from more than 12% in 2007 over the year before – and is ex- to 8% in 2008. The mobile customer base pected to be worth over 1,416 worldwide grew by another 17% in 2008, billion USD in 2009. but is offset by a steady decline in average revenue per user (ARPU) which dropped to After having increased by an average 6% 17.50 USD a month in 2008. Meanwhile, annually over the past three years, i.e. from fixed network services are stagnating. 2005 to 2007, the globe’s telecommunica- The revenue generated by data services tions services market suffered a downswing in 2008, with growth dropping to 4.2% – whose growth is being spurred chiefly – generating a total turnover estimated at by broadband access – rose by 20 billion 1,365 billion USD. The structural pressures USD in 2008, while fixed telephony revenue that have been weighing on the sector for dropped by as much, even if the impact on several years now (decline of the fixed voice the base is still limited: the number of fixed market, advanced mobile markets reaching phone lines shrunk by just over 10 million maturity, etc.) are being compounded by the during the year, i.e. by just under 1%. The first effects of the global economic crisis and number of broadband connections grew by the worsening financial climate. close to 20% to 415 million at the end of 2008: with an average density of 6.4 broad- band connections per 100 inhabitants, this Mobile services growth decreases by 4 points and the decline of fixed market still has considerable room to grow, telephony becomes more acute especially in emerging economies. In more advanced markets, broadband density is With a total turnover estimated at 742.2 bil- lion USD in 2008, mobile services account over 30%, i.e. between 70% and 80% of for 54% of the telecom services market households are already equipped. INTRODUCTION
  5. 5. 5 Mobile 2009 Growth hits a record low economies is expected to drop once again, in industrialised countries due to the global economic strain. Accounting for two thirds of the market’s In this new edition of our Mobile yearbook, you will find valuable data on the central value, industrialised countries still dominate components of the mobile world, along with the globe’s telecom services market by a analyses from IDATE’s experts and a com- sizeable margin. But growth in those coun- prehensive round-up of the highlights of the tries, which has been moderate since the year gone by: start of the decade, dropped substantially • Mobile Broadband dynamics in 2008 – going from 4% in 2007 to 1.4% in North America and from 1.9% to 0.8% in • Mobile pricing Innovation the European Union. The decline was similar • NFC timelines in Asia’s industrialised nations, due in large • Mobile Handset Dynamics part to the -2.7% loss reported in Japan. The demand for new services (VoIP, IPTV, • Mobile Churn Management IM, mobile multimedia…) in these countries • Radio Spectrum issues is only just offsetting the losses in value be- • Mobile TV Solutions ing posted by traditional services. In 2009, • New Communication trends growth in both industrialised and developing In your diary Digiworld Summit 2009 17-18-19 November 2009 INTRODUCTION
  6. 6. Telecom Services & Mobile Trends
  7. 7. 8 Mobile 2009 Sizeable drop in telecom services sector growth in 2008 The value of the world telecom services With a total turnover estimated at 687.5 bil- market increased by 4.2% in 2008 lion USD in 2007 and 742.2 billion USD in 2008, mobile services nevertheless contin- After a rebound that began in 2005, the tel- ue to account for all the growth in the tel- ecom services market’s growth rate suffered ecom services market, and have exceeded a significant drop in 2008. Totalling 1,365 fixed line services in value since 2003. Their billion USD, annual growth is estimated at weight in the total equation continues to rise: 4.2%: the lowest level for the global mar- since 2006 mobile services have accounted ket since 2002, just after the dotcom bub- for more than half of telecom services con- solidated turnover worldwide – a proportion ble burst. While the financial crisis – which estimated at 54% in 2008. The mobile mar- has been deepening since autumn 2008 – is ket’s growth is sustained by the increase naturally aggravating the current situation, of the subscriber base, which grew by an- the dropping growth rate is due above all other 17% in 2008. At the same time, aver- to structural pressures weighing on the glo- age revenue per user (ARPU) has been drop- bal telecommunications market, including ping steadily, totalling 17.50 USD a month the fact that a number of markets that have in 2008, albeit with extreme variations from long sustained the sector are reaching matu- region to region. rity (especially mobile markets in advanced countries), the impact of substituted and/or Fixed telephony continues its decline which demonetised applications, competitive and/ began in 2002, and at an ever increasing or regulatory pressure… pace. In 2008, the market lost another 5% of its total value worldwide, due to both a In fixed markets, the Internet’s ongoing nominal effect (a decrease of between 4% growth is only just offsetting the inexorable and 7% in the average revenue per line decline of landline telephony, while growth in since 2004) and a real effect (slow decline the mobile services market was four points in the number of lines since 2006). In terms below what it was in 2007. of value, fixed telephony’s contribution to TELECOM SERVICES & MOBILE TRENDS
  8. 8. 9 Mobile 2009 the global telecommunications services The market for data transmission services in the business segment is growing very slight- market has gone from 48% in 2001 to 27% ly, with near zero growth in Western Europe, in 2008. and even decreasing in some cases (-0.5% The data and Internet access services mar- in North America in 2008). It is the Internet kets are playing an increasingly large part in market, and especially broadband that is the telecom services market’s growth world- enjoying the only remarkable growth tra- wide. In 2008, they generated 20 billion jectory. There are an estimated 415 million USD more in revenue than the year before, broadband connections around the globe at for a total turnover of 256 billion USD. Their the end of 2008, or 67.5 million more sub- weight in the equation is increasing steadily, scribers than the year before – an increase going from 15% of telecom services revenue equivalent to what was reported in 2007. in 2001 to close to 19% in 2008, but their The global base has doubled in three years. contribution to overall growth is only just off- At the end of 2008, broadband connections setting the losses being reported in fixed te- accounted for close to three quarters of all the world’s Internet connections. lephony services revenue. Table 1: Worldwide - Telecom services market 2005-2009 2005 2006 2007 2008 2009F (Million USD) Fixed telephony 421 837 405 827 386 447 366 394 349 467 Mobile services 546 365 612 379 687 490 742 241 790 464 Source: IDATE Data and Internet 196 066 215 634 236 235 256 130 276 890 TOTAL 1 164 268 1 233 840 1 310 171 1 364 765 1 416 821 Annual Growth Rate 5.7% 6.0% 6.2% 4.2% 3.8% TELECOM SERVICES & MOBILE TRENDS
  9. 9. 10 Mobile 2009 Growth hits a record low in • the decline of fixed telephony, which is industrialised countries picking up speed in Europe even though it is still less marked thank in North Amer- From a geographical standpoint, growth tra- ica (-5.7% for the EU and -7.3% for North jectories continue to vary a great deal, be- America in 2008). tween mature regions and countries where • mobile services which have enjoyed a growth is now virtually nil, and emerging re- steadier growth path in North America, gions and countries which continue to report growing at double the rate of the European a combined growth rate of just over 10% – market: close to +11% in 2006 and 2007, although there are still considerable dispari- then +5.2% in 2008 for North America; just ties inside each block. under +5% in 2006 and 2007, then +2.7% Growth in North America, for instance, has in 2008 for the European Union). been higher that in the European Union Growth plummeted in industrialised coun- over the past three years (+4% vs. +1.9% tries in Asia in 2002, going from 10% to 2%, in 2007, +1.4% vs. +0.8% in 2008), while and remained low but above zero in the years Japan stands out for having suffered nega- that followed, before tumbling into the nega- tive growth for two years in a row, first mod- tives in 2008 due in large part to a dramatic erate in 2007 (-0.2%) and more severe in decline in the Japanese market. 2008. Accounting for two thirds of the market’s (-2.7%).The gap between the two sides of value, industrialised countries still domi- the Atlantic shrunk in the first half of the nate the globe’s telecom services market decade: in 2001, growth in the European by a sizeable margin. But growth in those Union was 10 points higher than in North countries, which has been moderate since America but, since 2005, the EU has been the start of the decade, dropped substan- reporting lower growth rates than Canada tially in 2008 – going from 4% in 2007 to and the US. This is due to a combination of two things: 1.4% in North America and from 1.9% to TELECOM SERVICES & MOBILE TRENDS
  10. 10. 11 Mobile 2009 0.8% in the European Union. The decline ised and developing economies is expect- was similar in Asia’s industrialised nations, ed to drop once again, due to the global due in large part to the -2.7% loss report- economic strain. ed in Japan. The demand for new services Our estimates put total world revenue in (VoIP, IPTV, IM, mobile multimedia…) in 2006 at 1.2 billion USD, up 6.2% on the pre- these countries is only just offsetting the vious year. Growth in 2007 can be expected losses in value being posted by traditional services. In 2009, growth in both industrial- to be slightly lower at 6.0%. Table 2: Worldwide - Telecom services markets by region 2007-2008 Market value Annual growth rate (million USD) (%) 2007 2008F 2007 2008F North America 332 797 337 389 3.9 1.4 Europe 439 800 448 606 3.7 2.0 Source: IDATE Asia-Pacific 341 560 357 167 5.7 4.6 Latin America 115 770 127 355 13.7 10.0 Africa & Middle East 80 244 94 248 23.7 17.5 TELECOM SERVICES & MOBILE TRENDS
  11. 11. 12 Mobile 2009 Trends by activity segment Mobile services services are stagnating. The revenue gen- erated by data services – whose growth is being spurred chiefly by broadband access Mobile services growth decreases by 4 – rose by 20 billion USD in 2008, while fixed points and the decline of fixed telephony be- telephony revenue dropped by as much, comes more acute even if the impact on the base is still limited: With a total turnover estimated at 742.2 bil- the number of fixed phone lines shrunk by lion USD in 2008, mobile services account just over 10 million during the year, i.e. by for 54% of the telecom services market just under 1%. and singlehandedly deliver all of the sec- The number of broadband connections grew tor’s growth. But the annual growth rate has by close to 20% to 415 million at the end of dropped from more than 12% in 2007 to 8% 2008: with an average density of 6.4 broad- in 2008. band connections per 100 inhabitants, this The mobile customer base worldwide grew market still has considerable room to grow, by another 17% in 2008, but is offset by especially in emerging economies. In more a steady decline in average revenue per advanced markets, broadband density is user (ARPU) which dropped to 17.50 USD over 30%, i.e. between 70% and 80% of households are already equipped ▄ a month in 2008. Meanwhile, fixed network TELECOM SERVICES & MOBILE TRENDS
  12. 12. 13 Mobile 2009 Table 3: Worldwide - Mobile customers 2005-2008 Mobile customers Mobile penetration (thousands) (% of population) 2005 2006 2007 2008F 2005 2006 2007 2008F North America 224 771 251 529 277 045 294 024 68.4 75.9 82.8 87.1 Europe 691 704 801 825 889 219 938 139 73.1 90.4 100.8 106.0 Asia-Pacific 820 009 1 058 100 1 363 013 1 686 496 22.8 29.1 37.0 45.3 Source: IDATE Latin America 232 042 296 117 362 393 425 571 43.1 54.4 65.8 76.3 Africa & Middle East 188 185 271 662 379 907 475 141 18.9 26.7 36.6 44.8 TOTAL 2 156 711 2 679 233 271 578 3 819 371 27.6 34.3 41.3 46.5 TELECOM SERVICES & MOBILE TRENDS
  13. 13. Mobile Equipment Dynamics
  14. 14. 16 Mobile 2009 Mobile Terminals Amidst the global economic crisis, the glo- • Second parameter is to be seen in the sec- ond half sales of 2008. In the first half of bal mobile phone market is facing difficult 2008, handset sales were on the same trend times and growth that were double digits as previous years with year on year sales from 2002, are now experimenting the neg- between 13% to 15%. As of 3rd quarter of ative impact of this economic turmoil. With 2008, sales were down to 7.7% confirming a volume growth stated at 15% in 2007, the economic impact of the global crisis; mobile phone sales should continue to be and in the fourth quarter, sales were down on the growth in 2008, but at a far lesser by 10% YoY. Historically the third quarter extent. IDATE states that volumes have has been a ramp-up time for manufactur- progressed by 5% in 2008 reaching 1200 ers to ship phones in preparation for the units sold over the year, a forecast reevalu- holiday season and growth have generally been on a 15% to 30% progression year ated to the downside after a negative fourth on year. With these low 3rd and 4th quarter quarter. If these numbers appear positive sales figures, market should prepare for low taking into account the global crisis and the 1st half in 2009 with a inevitable contraction impact it has on the IT and consumer elec- in mature markets. tronics industry, 2008 was a turning point in the mobile phone industry. Starting in the second half of 2008, the eco- nomic slow down should continue in 2009 and • First, the mobile phone market has been increase its impact on mobile phone sales. For historically one of the fastest growing 2009 perspective, after IDATE first stated that markets with double digits growth per mobile phone market growth should remain year, since the Internet ‘Bubble burst’ of positive between 1 to 4%, market warnings 2001 and its economic downturn. The by major handset manufacturers and chipset fact that this year market growth may be suppliers, indicated that this year will remain limited to 5% is a sign of general slow extremely tough for every players of the mo- down of the industry as consumers are bile value chain. Sales should therefore be on either differing their handset replacement the downturn reaching 1130 to 1140 units, a 5 or first purchase. to 6% decrease in volume. MOBILE EQUIPMENT DYNAMICS
  15. 15. 17 Mobile 2009 Table 4: Mobile Handsets Market Breakdown by Region 2005-2009 2005 2006 2007 2008 2009F Million EUR Asia-Pacific 43 678 44 946 46 582 47 144 48 395 China 11 860 12 587 14 104 15 515 17 552 India 3 123 5 472 6 582 8 990 11 164 Japan 12 769 12 313 11 645 11 496 11 038 Other countries 15 926 14 574 14 252 11 143 8 641 North America 22 276 22 537 22 604 22 725 23 169 USA 20 681 20 857 20 863 20 962 21 308 Canada 1 595 1 680 1 742 1 762 1 862 Western Europe 22 886 23 465 24 053 24 269 24 518 France 3 167 3 256 3 375 3 422 3 463 Germany 3 792 3 890 3 966 4 033 4 078 Italy 3 307 3 322 3 373 3 416 3 444 Spain 2 820 2 929 3 025 3 058 3 095 UK 4 688 4 833 4 963 4 944 4 925 Source: IDATE Other countries 5 113 5 236 5 352 5 396 5 513 Central and Eastern Europe 7 918 8 039 8 516 8 849 9 163 Russia 5 198 5 050 5 249 5 410 5 561 Figure 1. Worldwide handset shipments Figure 2. World handset providers 2006-2011, million units 2008, market share in % 1 400 Other, 19.7 1 200 Nokia, 39 (HTG, Apple, RIM,...) 1 000 800 Sony Ericsson 8.1 600 Source: IDATE Source: IDATE 400 LG, 8.4 200 0 Motorola, 8.4 Samsung, 16.4 2007 2006 2008 2009E 2010E 2011E MOBILE EQUIPMENT DYNAMICS
  16. 16. 18 Mobile 2009 Mobile Access In the mobile access equipment market, over- With the investment reduced from mobile car- all GSM sales led the good evolution of the riers, the mobile market had seen difficulties mobile market despite weaker deployments in 2007 and had created a more considerable/ of WCDMA networks. Market also faced an intensive competition between suppliers. intense consolidation inducing a fiercer com- This segment had been the most impacted petition between equipment providers. The market with the emergence of Nokia Sie- mobile access infrastructure market includes mens Networks as a second and Alcatel-Lu- cellular network access base stations (BTS for cent at the third place but finally the com- GSM/GPRS/EDGE and CDMA, and Nodes B panies were not aggressive face to Ericsson for UMTS networks), associated equipments which continued to grab market share. The (BSC, GGSN, SGSN) as well as Public Net- fear for the Swedish company could come work WLAN access base stations (hot-spots), from the Chinese manufacturers. Indeed, based on WiFi, WiMax technologies. Huawei and ZTE had displayed the most im- Despite the dynamic investment in mobile portant growth rates in the industry thanks to networks benefited mobile infrastructure sup- their success in emerging countries, where pliers caused by the intensifying competition investment remained robust and their ability in Africa, India, Latin America, and Russia and to come compete in the developed countries price erosion for GSM/EDGE/GPRS equip- as in Western Europe where they won sev- eral contracts ▄ ment, there were slowdown in the sector. MOBILE EQUIPMENT DYNAMICS
  17. 17. 19 Mobile 2009 Table 5: Mobile Access Equipment Market Breakdown by Region 2005-2009 2005 2006 2007 2008 2009F Million EUR Asia-Pacific 6 513 6 550 7 459 8 377 9 267 China 2 318 2 450 3 108 3 715 4 095 India 317 571 986 1 538 2 037 Japan 2 299 2 429 2 227 2 095 2 013 Other countries 1 579 1 101 1 138 1 028 1 121 North America 5 992 6 359 4 685 4 890 4 755 USA 5 655 6 007 4 283 4 247 4 129 Canada 336 353 402 644 626 Western Europe 4 942 4 658 4 554 4 664 4 772 France 778 807 759 805 828 Germany 501 496 461 436 434 Italy 763 710 646 630 616 Spain 587 671 643 682 713 UK 1 240 845 851 889 929 Source: IDATE Other countries 1 074 1 129 1 195 1 222 1 252 Central and Eastern Europe 1 591 1 472 1 585 1 631 1 693 Russia 856 728 815 838 870 Table 6: Mobile Access Equipment Market Breakdown by Region 2008, % Fixed Infrastructure Providers Global Market Share Rank 1 Ericsson 31 2 Nokia Siemens Networks 22 3 Alcatel Lucent 14 4 Nortel 7 Source: IDATE 5 Huawei 7 6 Motorola 6 7 NEC 5 MOBILE EQUIPMENT DYNAMICS
  18. 18. Mobile Broadband
  19. 19. 22 Mobile 2009 Impact on the telecom industry Telecommunications equipment Mobile operators are depending on suppliers and operators see in mobile mobile broadband to stabilise ARPU broadband the growth driver that is indispensable for their expansion. Voice/SMS services now represent between But implementing data services on mobile networks pose a series of both 90% and 70% of revenue for mobile opera- technical and economic problems tors in mature markets. In this environment, for players in the ecosystem the primary short term financial risk for op- erators is the drop in voice and SMS reve- • The telecommunications industry is faced nue. Mobile operators see in data services with mobile broadband’s rapid expansion. a growth driver that is indispensible for their • In a highly competitive environment, equip- expansion. And we are actually seeing a ment suppliers must develop innovative veritable take-off in mobile data services. 3G solutions to meet operators’ requirements. infrastructure has reached significant cover- Among the competing technologies, LTE age levels, and the number of 3G subscrib- is consolidating its strong position. ers is growing rapidly. • Operators are facing both technical and There are two types of mobile data services, economic challenges. They are depending the first coming from fixed Internet (messag- on data services to stabilise their ARPU. ing and Internet access services, for exam- But the explosion in traffic and the associ- ple), the second being more specific to the ated rising costs threaten quality of service mobile ecosystem (services based on ge- and financial stability. Courses of action olocalisation, m-payment, enhanced mobile are gradually appearing: improved tech- nologies, access to more radio spectrum, communications services, etc.). network densification, operational cost re- The adoption of data applications is mostly ductions, etc. But none of the planned so- driven by services taken from the fixed In- lutions will be able to provide a definitive ternet. response by itself. MOBILE BROADBAND
  20. 20. 23 Mobile 2009 Operators profit from the success of these user connecting using a telephone type ter- minal. offers among users to increase the revenue share generated by data services, but with- In fact, operators who have developed mo- out risking cannibalising their voice and SMS bile Internet access offers note that: revenue. They are notably expanding mobile broadband subscription offers at increas- • Mobile data traffic is increasing rapidly, ingly more attractive data rates. even more so when mobile Internet ac- cess services for lap tops are expanded. But these services have a significant impact • Traffic generated from computers repre- on networks in terms of capacity needs, as sents most of the mobile data traffic when well as on the economic conditions of these attractive offers are available. operators’ offers. • The traffic profile generated by computers much larger than that generated by mobile Explosion in capacity needs and data traffic telephones or smartphones. Operators’ revenue from data services is Equipment suppliers and operators expect growing rapidly. But the growth in capac- sustained and consistent growth in mobile ity needs and data traffic are even stronger. data traffic in the years to come. There are several reasons for this: • Increase in the number of mobile sub- Resolving mobile broadband’s scribers, technical-economic equation • Increase in the share of 3G subscribers, The increase in data service revenue gener- • Specific impact of mobile Internet access ated by new mobile access services does services for lap top computers. not compensate for the very large increase in traffic noted by operators on their net- Operators must provision an average of 40 works. kbps downstream in peak times for a user who connects using his lap top computer on One of the operators’ greatest require- an HSDPA network, but only 0.3 kbps for a ments is to reduce CAPEX and OPEX net- MOBILE BROADBAND
  21. 21. 24 Mobile 2009 work costs. Operators increasingly prefer • The LTE profile evaluated was not the an overall approach consisting of reducing most efficient of these expected. the cost of data transported (cost of an Mb • Savings in terms of OPEX are not available transported). yet for LTE network deployments and were IDATE has created a model for the specific not included in our model at this stage. case of an operator that already has a GSM • The model does not include deployment network, deploying 3G in 2004 and LTE associated with LTE networks and LTE starting in 2012 (in high density areas). femtocells. The largest cost elements are shown in the table below. It takes into account invest- The model for deploying HSPA and LTE net- ment costs and operational costs associ- works developed by IDATE highlighted the ated with the core network, the information limits in terms of capacity available on HSPA system and the radio access portion (in- networks by 2013. The problems with availa- cluding the costs of radio spectrum usage ble capacity will appear in densely populated licences). urban areas and, by 2014 in suburban areas. Faced with these limits, operators could de- Improvements in technological performance grade the quality of their services (restricting Economic conditions will improve as tech- available capacity, reducing speeds, etc.) or nology moves towards LTE. Nevertheless, continue with their deployments. the improvement seems less significant that the operators expected, within the NGMN The schedule for deploying LTE will definitely Alliance, for example. depend on the availability of radio spectrum and the operators’ technical economic trade The relatively conservative hypotheses in our model may explain this perception: offs, notably between HSPA and LTE. MOBILE BROADBAND
  22. 22. 25 Mobile 2009 More spectrum for greater capacity: Two phenomena will oppose an increase in a limited medium term solution the number of access points held by opera- tors: the public and local authorities not ac- The schedule for spectrum allocation and cepting having the operators’ access points frequency distribution will be decisive, es- and antennae nearby. This reduces the op- pecially in Europe and Asia. Too long of a portunities for new installations. delay could harm the expansion of the mo- bile broadband ecosystem, slowing both the In addition, the costs of access points and technology standardisation process and op- their management have had a tendency to erators’ decisions on new investments. increase over the last few years and heavily impact mobile operators’ economic condi- Nevertheless, access to new frequency tions. bands will quickly reach its limits. Even though circumstances differ, by 2012-2015, most of the frequencies for mobile broad- Femtocells and convergence between fixed and mobile networks band services will be allocated in the major markets. In addition, refarming GSM bands, The femtocell solution lets mobile opera- and over the longer term, 3G bands, is prov- tors play with two major cost areas: back- ing to be difficult. haul and energy. Actually, traffic backhaul is provided by the user’s DSL line, and the user pays for the energy. In addition, from Network densification a perspective of growing capacity needs, Traditionally, network densification was both in the amount of radio access as well as the operators’ preferred solution to han- backhaul, this solution significantly reduces dling increased traffic. This movement to the amount of traffic load on the operators’ increase the number of masts can be pur- mobile network. This provides an inexpen- sued in densely populated areas, where the sive solution to the operators’ problems with constraints on capacity are the strongest indoor coverage for data services, as well as for access technologies such as HSPA and core network and radio access network ca- LTE. pacity problems. MOBILE BROADBAND
  23. 23. 26 Mobile 2009 Integrated operators, that have both mobile is about to become the preferred industry and fixed broadband networks, will benefit standard for the nextgeneration of access the most from femtocell solutions. They can technologies. generate significant economies of scale by The operators’ role appears to us to be cen- sharing core networks and backhaul for fixed tral in these choices, due to the importance and mobile broadband users. of services in the entire mobile ecosystem and by the driving effect of operators’ in- Equipment suppliers must meet vestments in the equipment market. operators’ expectations In terms of ecosystem, LTE is overtaking Operators expect to weigh in on the techno- WiMAX. The LTE ecosystem is more diversi- logical choices that are made by equipment fied, and there are more players. suppliers for developing mobile broadband access solutions. The major operators’ ini- Above all, several leading global equipment tiative within the NGMN Alliance is an indica- suppliers and operators have announced tor of this strategy. In addition to cost reduc- that they will prefer LTE for their major mar- tions, discussed above, equipment suppliers kets over other standards. This is notably must meet operators’ expectations in terms the case will all major European operators of performance, equipment availability – es- as well as AT&T, Verizon Wireless and NTT pecially terminals – and policies for manag- DoCoMo. ing intellectual property. Recently, the NGMN Alliance included LTE technology as the solution for the next 3GPP/LTE ecosystem dominates generation mobile broadband access net- work. LTE is the first technology to be rec- Compared to mobile WiMAX and TD SCDMA ognised ▄ developed by the Chinese, it seems that LTE MOBILE BROADBAND
  24. 24. 27 Mobile 2009 Figure 3. 3G subscribers Figure 4. Deployment schedule and population coverage in Western Europe End 2007, % (subscriber base: 242 million) HSPA, HSUPA and LTE Rest of the World, 4.9 Asia HSDPA North America 47.6 17.7 HSUPA Source: IDATE Source: IDATE LTE 2005 2008 2011 2014 2017 2020 Europe 0-50% population 50-80% population 80-95+% population 29.8 Figure 5. The LTE Ecosystem Telecom operators. LTE as preferred technological path Network Equipment and Terminal Manufacturers EUROPE / MIDDLE EAST • Vodafone • Alcatel-Lucent: Standard / Trials / Inter-op tests_partnership with NEC • Telefónica • NSN: Standard / Trials / Inter-op tests • Deutsche Telekom / T-Mobile • Nokia: Terminal • France Télécom / Orange • Sony Ericsson: Terminal • Telecom Italia • ST Microelectronics: Chipset • Orascom • NXP: Semiconductor • AT&T • Nortel Networks: Network • Verizon Wireless: Trials • Motorola: Network US / CANADA • Rogers Telecom • Qualcomm: Chipset • KT and SK Telecom • Huawei: Standard / Trials / Inter-op tests • Docomo (acceleration of LTE standarisation and market launch) • ZTE: Network • Softbank Source: IDATE • NEC: Network ASIA • Chinese operators: interested by UMTS / LTE technological path_depend on • LGE Electronics: Trials / Terminal industry restructuring and spectrum licenses allocation • Samsung: Chipset / Terminal • China Mobile: Trials TDD LTE / FDD LTE • Indian operators: interested by UMTS / LTE technological path_depend on spectrum licenses allocation MOBILE BROADBAND
  25. 25. Mobile Hot Topics
  26. 26. 30 Mobile 2009 Mobile Pricing Innovation There is a flurry of innovations in the pric- operators also offer to charge by duration. ing strategies of the mobile phone market, in Pricing units vary, Japan having a distinc- particular the pricing schemes for the three tive unit of 128 bytes called ‘packets’. most commonly used services: voice calls, • Subscribers also have the choice between SMS and data transmission. post-paid and prepaid subscriptions; the former involves a contract where payment is made according to the amount used Innovation, a way to survive each month, and the latter involves pur- The mobile market today is fast approaching chasing credits in advance. saturation and, in such a competitive market, pricing plays an important yet delicate role. Players have first to attract – or indeed keep Inclusive bundles, rollovers and top-ups – customers on their own network, whilst at • This concept has become very much the same time encourage them to increase standard in the mobile market; with flex- their spending. ible money bundles in Japan, and fixed service bundles elsewhere. Some opera- Basics of a mobile subscription tors in other countries also offer the flex- ible money bundles tariff, notably 3 in the • Charges for voice calls can vary according UK. Their packages combine the simplic- to the duration, distance or destination of ity of service bundles and the flexibility of the call to name a few; but today, the ten- money bundles; they are set at 1 minute = dency is towards charging for duration only. 1 SMS. Pricing units range from linear charges such as per second or per minute, to charging a • Some operators offer to rollover unused full minute prior to a per second charge. inclusive bundles to the next month or be- yond to avoid underspending. Conversely, • For data transmission, the standard is to charge by traffic volume, although some some operators offer hybrid subscriptions, MOBILE HOT TOPICS
  27. 27. 31 Mobile 2009 where top-ups are required after the bun- usage restrictions, where the use of certain applications or services is not allowed. dles are used up, to avoid overspending. • Tariffs for unlimited Internet from mobile handsets are often priced higher than Watch an ad, and call for free those for use on mobile PCs; the opera- tors see them as having higher risks of Business models centred on advertising exist cannibalisation of other services. in the mobile market too. Subscribers can use a certain amount of the network without pay- • Tariffs for unlimited Internet on the mobile ing operators anything; in return, they watch PC is seeing a shift of targets from the advertisements on their mobile. Blyk, in the business to the consumer sector. Most UK, is a leading operator in this field, enjoying operators now offer USB modems which considerable success and planning to expand are much more user-friendly than the tra- into other countries in the near future. ditional data card modems. Unlimited offers have limits Handset subsidies, or discounts • Until recently, ‘unlimited’ voice calls pack- • With iPhone, Apple originally introduced ages came with restrictions such as spe- a model which did not allow for handset cific times or destinations only. But 2008 subsidies, but has reverted to the tradi- saw a wave of offers without any such re- tional model for the new 3G iPhones. strictions being introduced, notably in the • In Japan, subscribers have the option USA and Germany. of choosing between receiving handset • Similar limits apply to unlimited SMS tar- subsidies or receiving a discount on the iffs, but again some operators do offer monthly invoice. such tariffs without the restrictions, nota- bly in France, the UK and USA. • Unlimited offers for data transmission have Three tariff structures differing types of restrictions: a fair use pol- IDATE has identified three main patterns in icy, where subscribers are often asked not to go over a certain prefixed amount; and how operators structure their tariffs: MOBILE HOT TOPICS
  28. 28. 32 Mobile 2009 • Package: where the tariff comes in a understand tariffs which can be subscribed to without the complications. ready-made package; • Service bundling: these offers bundle to- • Pick ‘n’ mix: where subscribers choose in- gether two or more of fixed line telephony, dividual tariffs and add them up; broadband Internet access, TV and mobile • Adding discounts: where upon subscrip- telephony, all in one value-for-money tar- tion to a basic tariff, various discounts can iff. be added to increase the value. • Fixed-mobile convergence: in addition The adding discounts structure is very much to the mobile network, a convergent mo- a Japanese culture; other countries see an bile phone gives the additional benefits of even split between package and pick ‘n’ mix. broadband access from the home via WiFi technology. • Home zones: subscribers are given both a Fine-tuning the tariffs landline and a mobile number. Calls from inside the home zone are discounted, and With growing market saturation and com- subscribers can be called on the landline petition, operators are having to tweak their number on the mobile when inside the rates to meet subscriber demands. This calls home zone. for clear strategies, with clear target seg- mentation, built around: • Multi-branding: a strategy used to reach The price of pricing the niche markets by creating multiple brands concentrating solely on those spe- IDATE has positioned each of the pricing cific niche markets. strategies relative to their segmentation, based on market scale and usage levels. • Simplicity: going against the general per- ception that mobile tariffs are too compli- • As a whole, the mobile market is see- cated, operators offer just a few, easy-to- ing plenty of innovative pricing although, MOBILE HOT TOPICS
  29. 29. 33 Mobile 2009 within any one country, operators gener- Nowadays, online tools in most coun- ally offer similar tariffs. They would do well tries compare all tariffs and calculate the to look beyond the borders to garner new cheapest one. Business models are even ideas for innovation. evolving around such tools. It seems as if innovative pricing has wrapped such a • These innovations have contributed to a blanket of fog over the clarity of the tariffs fragmentation of operator tariffs. With less that subscribers can no longer be interest- clarity now for the ‘average’ subscriber ed in their variety. A real case of not seeing about their relative values, is there a risk of consumer backlash against operators? the wood for the trees? Figure 6. Positioning of mobile innovative pricing strategies Market Scale Inclusive bundles Large / general market Multi branding Home zones Service Small / niche markets bundling Unlimited Simplicity Advertisement tariffs funded calls Source: IDATE Fixed-mobile convergence Subscriber Usage level Entry level users Power users MOBILE HOT TOPICS
  30. 30. 34 Mobile 2009 Near Field Communications A revolution in the mobile handset market? transmitter but also represent a real op- portunity to diversify their business. The introduction of NFC chipsets within • Established in 2004 by a group of major mobile phone could revolutionize how con- players of the wireless ecosystem (Philips, sumers interact with their environment and Sony, Nokia), the NFC technology is a transform handsets from a voice device to short range (~20 cm) point to point wire- a personal assistant. If the NFC technology less connectivity technology. The fact that is already in use in Asia, especially Japan NFC is based on RFID standards gives a for mobile wallet application, NFC is slowly compatibility of NFC with existing RFID ramping up in North America and Europe applications such as transport ticketing, with major trials on payment and ticketing identification control,… services taking place on these continents. A slow but promising market Emergence of NFC among • NFC is a very recent technology and as a wireless connectivity solutions new technology, it needs an infrastructure • For handset players, the growing portion of to work, so the global process of adaptation has been slow. There has been non-stand- wireless connectivity modules embedded ard payment and ticketing schemes in pub- in handsets constitutes the first step to lic use in Asia, but in North America and enter the wireless ecosystem of opportu- Europe the services have more or less only nities. Today as more data transit through been used in different piloting schemes. It mobile phones, development of wireless is essential to the adoption and growth of ecosystems from WLAN to WPAN where NFC technology that all NFC-enabled de- information is transmitted thanks to short vices interoperate seamlessly. range technologies (Bluetooth, UWB, Zig- bee, NFC) could greatly impact the historic • The NFC-embedded mobile handsets use of operators network as primary data market is emerging and in 2007, ship- MOBILE HOT TOPICS
  31. 31. 35 Mobile 2009 ments reached 32 millions units, i.e. a today, the fact that more than 130 com- panies are members of the NFC Forum, 3% penetration. However, following the in addition to the industry acceptance of several NFC projects led by European the NFC standard by GSMA and ETSI, is and American carriers, the drop of NFC giving a strong push forward the general chipset cost and the increasing number of adoption of NFC. NFC-enabled handset, the trend of adop- tion of NFC within handsets should be on • The NFC Forum and the GSMA are active- the rise from 2010, with a generalization ly pursuing their effort of standardization. of the technology from 2012. By 2012, For example, the GSMA launched the Pay- penetration should reach around 14% of Buy-Mobile initiative, introducing require- handsets with North America and Western ments that will help handset manufactur- Europe being heavily equipped with NFC ers develop NFC-enabled phones that are technology. compatible with operators’ planned mo- bile NFC services. • Today, Sony and DoCoMo with Felica are among the main players on the NFC mar- ket as they were pioneers in this domain. NFC Applications However NXP has a strong position on this market of NFC and RFID solutions, with • For now, only the Payment and Ticketing more than 2 billion ICs shipped to date. applications have been gaining traction A great portion of contactless SmartCards in the mobile ecosystem, with major tri- schemes worldwide use NXP MIFARE als being performed worldwide by mobile technology for electronic ticketing in pub- operators. However numerous other ap- lic transport (London, Seattle, Sao Paolo plications can be performed thanks to the and cities in China). NFC technology such as Smart Posters, where NFC is used to ‘unlock’ another service, such as opening another com- A Need for standardization munication link for data transfer. • Standardization has been for now one of • Peer to peer applications are also gaining the main hurdle to overcome in the de- traction, as the NFC chipset can be used velopment of NFC technology. However as a set up technology to enable com- MOBILE HOT TOPICS
  32. 32. 36 Mobile 2009 munication between two devices in faster ever these operators need to co-operate way than current technologies such as with banking institutions, whose exper- Bluetooth. As NFC can be paired with tise is to handle the payment processes Bluetooth to initiate the connection be- and issues and already have a large base tween devices, the association of the two of customers. technologies could give a major boost to the NFC chipset integration within hand- Which future to NFC? set. • The growth of NFC usage has been hin- dered by the familiar chicken and the egg The question of the Business Models problem: since there are no NFC-based services, consumers do not demand • The main barrier to the integration of NFC NFC-equipped phones and the manufac- technology within mobile phones is the turers do not offer them and thus there is lack of a global business model embrac- no incentive for infrastructure providers to ing the views of mobile operators, banks use NFC. and other players in the mobile value chain. Players have hitherto been devel- • The business model is the critical ele- oping their best interest model to imple- ment in the evolution of NFC: all partners ment mobile commerce services. must have some interest (or necessity) in adopting the new technology before • In this growing NFC market, financial in- it can become established. In this sense stitutions and mobile operators need each the NFC adoption will be more a business to buy a viable ecosystem as they control model question than it is a technical, user the major part of the value chain. Without acceptance or security issue. the interest of the operator, the availabil- ity of NFC-enabled mobile phones would • Although the proliferation of NFC technol- be low as operators, in most countries, ogy will come slower than was initially ex- provide the handset to the en user. How- pected, this does not mean that it will not MOBILE HOT TOPICS
  33. 33. 37 Mobile 2009 have a deep penetration in the market in 1998 to recent years) to win acceptance, the longer term. This can be compared to first from the manufacturers of digital de- Bluetooth, which took several years (from vices and later from the users. Figure 7. NFC Handset Market Forecast 14.1% % NFC 8.3% 5.4% 4.5% 3.8% 2.8% 1 490 1 430 1 390 1 300 1 210 1 138 Total handsets Source: IDATE 210 120 NFC handsets 75 58 46 32 2007 2008 2009 2010 2011 2012 MOBILE HOT TOPICS
  34. 34. 38 Mobile 2009 Churn Management The Colour of Money network in a given month and is expressed as a percentage of a company’s average Retaining customers is one of the most criti- subscriber base for the period. cal challenges in the maturing mobile tele- • A 2% churn rate translates into around communications service industry. Customer a quarter of a mobile operator’s custom- churn adversely affects mobile telecom oper- er base churning off the network in the ators because they stand to lose a great deal in price premium, decreasing profits levels course of the year. and a possible loss of referrals from continu- • When mobile operators think about churn ing service customers. Figuring how to deal it is usually the voluntary kind that comes with churn is turning out to be the key to the to mind. Deliberate churn is the most im- survival of telecoms organizations.Podcast- portant part of churn when customers de- ing gives consumers access to niche market cide to leave his/her mobile operator. content; to time-shifted, professional con- tent; to technical quality and to mobility. Lead to comparison limits and costs Varying definitions of churn • When considering post-paid churn, the deactivation date, i.e. the date that a cus- • Companies employ varying definitions of tomer is disconnected from the network, churn and also have widely differing poli- is equal to the churn date. In the case of cies to determine when to cut off inactive subscribers and to remove them from their prepaid churn however, the deactivation reported subscriber base. In essence, op- date does not necessarily have to match erators have different ways of defining the churn date. This can be made clearer subscribers. by the different states a prepaid customer can be in (normal use, no credit, recharge • The churn rate measures the number of only, and deactivation). subscribers that are disconnected from a MOBILE HOT TOPICS
  35. 35. 39 Mobile 2009 • Comparing churn rates between operators • Emerging Asian countries show the highest and countries where habits and culture are churn rates on a worldwide basis. Across different is also tricky. Asia, churn rates vary tremendously. • Churn levels in advanced Europe or North • Basically, low/good rates may hide prob- America are higher than in developed Asia. lems because losses of revenues depend NTT DoCoMo in Japan, which has a cus- on customer values that have just been tomer base that is almost entirely post- lost. paid, maintains the best churn rate in the • Churn has a different impact whether the industry, with less than 1% of its custom- value segment from which the subscriber ers switching to a competitor’s network belongs to is of high or of low value. each month. • A 1% churn reduction has more impact • Rates analysis shows a certain number (and is much more difficult to obtain) when of ‘rules’. Countries where competition is the overall churn is lower. fierce face higher churn rates. Challengers • Marketing budget for subscriber loyalty with low brand power show higher churn should be allocated taking into account rates. Post-paid churn rates are always subscriber value segmentation. Gain and lower than blended churn rates. As within loss strongly depend on the customer life- a given MNO significant discrepancies in churn performance between subsidiaries, time value or CLV. local excellence is key. Analysis show significant churn performance discrepancies And helps define the nature of churn On a worldwide basis, churn rates are in- • Churn is pervasive. The churn is part of creasing mainly due to higher competition the entire wireless industry. Statistics from in national markets. Increase in global churn around the world all issue the same mes- rates is driven by inflating churn rates in sage about churn. Even in emerging mar- emerging regions especially emerging Asia kets where the market is buoyant, mobile and Latin America. operators have already experienced churn MOBILE HOT TOPICS
  36. 36. 40 Mobile 2009 but do not care because subscriber acqui- duce churn and costs. High cost of cus- tomer acquisition and customer education sition is still easy. require companies to make large upfront • Churn is inevitable. The telecommunica- investments in customers. Churn leads tion industry has a built-in product obso- to higher subscriber acquisition or reten- lescence cycle that guarantees that churn tion costs (SAC/SRC) and — invariably — is going to be a continuous problem. Churn cheaper products and services to try and could then be considered as an opportu- beat off rivals’ offers. nity to evolve. • Churn is expansive. The biggest conse- quence of churn is, of course, the loss of Churn drivers revenue assuming that the average cus- • Deregulation imposed by regulators is tomer brings in anywhere from 5 EUR to 80 increasing the rate at which competitors EUR per month. Despite their best efforts to enter into the market place. Introduced prevent churn, the company will lose some in most industrialised countries, the obli- of its customers to the competition sooner gation of number portability is one of the or later and try to win them back by running regulatory elements enabling competition reacquisition strategies. These campaigns within the market to grow. might be successful but entail costs. Cus- tomer retention costs are also increasing. • Consumers take dozen of factors into ac- In addition, when churn starts, one of the count when they churn in a never-ending first thing a mobile operator does, is to in- combination of complex mental and emo- crease its advertising to have more media tional calculations. Customers receive nu- face time than the competitor. merous incentives to switch and encoun- ter numerous disincentives to stay. Cus- • Churn is manageable but often at the ex- tomer surveys that report the top churn pense of inflating subscriber retention reasons (price, quality…) only provide a costs. In the context of falling ARPU, mo- bile operators face the challenge to re- rough summary if those churn decisions. MOBILE HOT TOPICS
  37. 37. 41 Mobile 2009 customer churn management capabili- Churn management approaches ties. Basically, three fundamental strategic ap- Most operators in advanced markets have proaches are possible for a mobile opera- come to this approach. tor to maintain when it comes to issues to churn. All of them are legitimate with their own strengths and weaknesses, and can be The key is to better know the customer effective in their own way. The objective is to make the optimum investment to reduce • Predictive campaigns attempt to identify the risk of customer churn, especially in the which customers are able to switch and short term. when and the reasons why. The CRM ap- • The most commonly effected strategy, es- proach helps the service provider to re- pecially during the early phases of churn duce customer churn by anticipating and problems, is for the company to ignore addressing customer issues and increas- the loss of customers and try harder to ing customer satisfaction. Effective busi- acquire new customers as replacements. ness processes enabled by technology Emerging Asian countries currently show can help reveal customer behavior pat- this type of strategy. terns and aid in assessing the profitabil- ity of various customer segments, what • The second most common strategy pur- sued by companies that are loosing cus- is important to them, and how the carrier tomers is to try to steal customers from can build loyalty within the most valued their competitors to make up from the customer sets. The outcome of applying losses. data warehousing, mining, and visualiza- tion tools is a set of models that supports • Eventually, most firms come to realize predictions of those customers most likely that their acquisition efforts alone are not to churn and, possibly, when and why. enough to truly address churn issues. As These models help identify intervention companies mature and as their analyti- strategies that can reduce churn among cal and operational capabilities become more sophisticated, they begin to build particular customer segments. MOBILE HOT TOPICS
  38. 38. 42 Mobile 2009 • Rewarding customers who are loyal seems stimulate customer development, give the an obvious way to reduce churn. Based on customer the feeling he is unique, make the market segmentation, different loyalty the customer loyal to the mobile operator, programs have to be made to respond to use the program as a reference tool for the needs and the criteria of those particu- customer acquisition. But depending on lar markets. Independent of the segment, the segment and sub-segment, the value the sub-segment addressed, the loyalty of the customer and his particular needs, programs mainly have the same main ob- the characteristics of the program should jectives: reduce churn, increase the emo- be different: the beneficiary is different, so tional link with customers and increase should be the reward (fun, money base, their satisfaction, better know the cus- dedicated serving…) and the communica- tomers and better respond to their needs tion (marketing oriented, informative…). Figure 8. Levels of churn prevention initiatives FFICE FRONT O Loyalty base) . to entire o com Program OPEX / CAPEX OFFICE (n Proactive BACK ns Campaig Reactive ns Campaig isation nd Optim iciency a gement’ Eff r Service rience Mana Custome r Expe e ‘Custom Source: IDATE Impact on churn MOBILE HOT TOPICS
  39. 39. 43 Mobile 2009 Figure 9. Resultant incremental CLV with different hypotheses of churn reduction and ARPU levels Subscriber ARPU (in €) 100 126€ 265€ 419€ 592€ 786€ 40 50€ 106€ 168€ 237€ 315€ 40€ 19€ 15 63€ 89€ 116€ 20% 19% 18% 17% 16% 15% 14% +3.2 months From 20% to 19% +6.7 months From 20% to 18% +10.6 months From 20% to 17% Churn Rate Reduction +15 months From 20% to 16% +20 months From 20% to 15% Source: IDATE ARPU = 15 ARPU = 40 ARPU = 100 Gross Profit Margin: 40%, Inflation Rate: 2% MOBILE HOT TOPICS