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2009 north-american-wireless-industry-survey
2009 north-american-wireless-industry-survey
2009 north-american-wireless-industry-survey
2009 north-american-wireless-industry-survey
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2009 north-american-wireless-industry-survey

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  • 1. Change is in the air* 2009 North American Wireless Industry Survey *connectedthinking
  • 2. Acknowledgments The PricewaterhouseCoopers 2009 North American Wireless Industry Survey was led by Pierre-Alain Sur, PwC’s U.S. wireless industry leader; Shara Slattery; and Ashley Wright and represents the efforts and ideas of many members of the firm’s Entertainment, Media and Communications Industry practice. The principal contributors were Brian Caisman, Seth Claus, Jamal Douglas, David Enquist, Michael Gibbs, Mariam Harutyunyan, Michelle Mahan, Steve Payette, Karen Plunkett, Michael Riordan, Dominic Wong, and Jacob Young. PwC especially thanks the companies that contributed topics and participated in the survey: AT&T Mobility, Leap Wireless, Metro PCS, Sprint Nextel, T-Mobile USA, U.S. Cellular, Verizon Wireless, Rogers Wireless, and TELUS Mobility. Their support of this project and their candid responses are much appreciated. Together we have created valuable insight into the operations of and the challenges faced by today’s wireless industry. About this survey The PricewaterhouseCoopers 2009 North American Wireless Industry Survey is an annual publication that covers the financial and operational reporting policies and practices of wireless telecommunications service providers. The 2009 survey comprises companies in the United States and Canada. The survey is conducted by PwC’s Entertainment, Media and Communications Industry practice, which prepares the survey questions, solicits company participation, and compiles and analyzes the survey results. The survey period covers year-end 2008 as well as certain information as of June 30, 2009. Companies participate voluntarily, and individual survey results are kept confidential by PwC. PwC has taken reasonable steps to ensure that the information contained in this publication accurately summarizes the survey responses received from the participating companies; however, PwC has not performed any procedures to verify the accuracy of the survey responses. The survey provides a summary of the participating companies’ financial and operational reporting policies and practices and does not purport to render accounting guidance or any other type of professional advice. Should such advice be required, readers should contact their local PricewaterhouseCoopers office. PwC’s worldwide office directory is accessible at www.pwc.com.
  • 3. Table of contents Executive summary 1 Participating company information 4 Company type and subscriber base 5 Annual service revenue 6 Employee base 6 Sales locations 8 Customer care 9 Licensed spectrum 14 Environmental sustainability 15 Revenue recognition 16 Service contracts and family plans 17 Termination fees and bad-debt expense 18 Prepaid 21 Data services 25 Mobile advertising 28 Wi-Fi data services 28 Customer retention 29 Sales incentives 30 Market development funds and rebates 32 Other revenue activities 33 Revenue assurance 34 Customer billings and payments 36 Handset insurance 40 All-inclusive packages 41 Performance measures 42 Customers/metrics 43 Subscriber costs 52 Data 56 Ring tones 57 Games 58 SMS and premium SMS 58 Phone/BlackBerry-based e-mail and Web access 58 Laptop cards 59 Internet access from handsets 59 Picture revenue 59 Network 60 Long-distance and interconnect expenses 62 Rate plans and billing 63 Property, plant, and equipment 66 Capital expenditure reporting 67 Technology usage 70 Capitalization policies 74 Capitalized labor 76 Site acquisition costs 78 Asset impairments and fair value 79 Business combinations 80 Asset tracking 82 Asset useful lives 85 Data network 102 Taxes and tax-useful lives 105 Colocation 109 Asset retirement obligations 110
  • 4. Executive summary We are pleased to publish the 13th annual PricewaterhouseCoopers Wireless Industry Survey. This survey is a continuation of the 11 years of the North American Survey and the 2008 Global Wireless Industry Survey. Based on the candid feedback of participating companies, the survey for 2009 focuses on North America only, and comparisons to the 2008 survey responses have been recast as necessary to reflect comparable results. Via the survey, PricewaterhouseCoopers continues to strive to help companies better understand 1) industry performance measures and their evolution over time 2) the policies and procedures utilized by responding companies, and 3) the comparability of financial statements within the industry. We also have the goals of addressing general financial accounting and reporting practices in the industry and of identifying emerging trends or issues related to technology and service offerings. The Wireless Industry Survey has become a resource for many wireless communication industry executives; it has evolved with the changing businesses and trends in the industry; and it is based on feedback received from participating companies. This Executive summary provides highlights of this year’s survey results. As in prior years, we hope you find this year’s survey informative, relevant, and thought provoking. The PricewaterhouseCoopers 2009 North American Wireless Industry Survey results reflect the participation of the seven largest U.S. wireless operators, plus the two largest Canadian wireless companies. Because of the breadth of coverage and participation,we believe the survey provides the most representative summary of industry accounting and reporting policies and practices available for North America. Compared with the 18 participating carriers that participated in the Wireless Industry Survey in the early 2000s, the decline in the number of participating carriers is consistent with consolidation in the industry. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 1
  • 5. We have highlighted throughout the survey the industry’s important changes and trends, including two very notable milestones for the wireless market in the United States and Canada. First, there was a dramatic advance in terms of technology evolution—specifically, the evolution of the smart phone. Second, mobile penetration reached a mass-market saturation level. It is the combination of those two events that triggered a significant transition in the industry’s competitive landscape. Where the battle once focused on customer experience, increasingly the emphasis is now shifting to price. We see this with both high- and low-end providers. Based on a new paradigm, we believe management must rethink a key component of its business strategy: the definition of a profitable customer and the resulting implications for its business model and cost structure. Following are a few highlights from this year’s results that cover 2008 year-end and certain 2009 metrics. Revenue and performance measures As the economy continued in a downturn throughout 2008 and into 2009, the communications industry experienced both a continuous shift toward wireless substitution and increases in prepaid plans. On average, prepaid minutes of use have increased more than 147% in the past four years, from 270 minutes in 2006 to 667 in the 2009 results. In addition, prepaid plans continue to represent a significant and growing portion of revenue: on average, 26.1% of total service revenue for all responding companies. Finally, during 2009 the historical postpaid carriers put greater focus on the prepaid segment. From an operational perspective, protecting the base by focusing on subscriber retention remained critical. As overall market penetration rates have slowed, retention costs continue to increase year over year. In such an environment, evaluations of customer profitability—to ensure that investments and retention provide adequate returns—become increasingly important and challenging. And the competition is fierce. 2 | Change is in the air
  • 6. Smart phones (mobile phones offering advanced capabilities with PC-like functionality) are becoming a larger part of companies’ sales and have significant higher average revenue per user than traditional wireless phones do. As of June 30, 2009, on average, 21% of all sales are smart phones, and an average of 12% of overall subscribers use smart phones. The average revenue per user for smart phones is $74 compared with total postpaid average revenue of $54. As companies continue to look for ways to reduce costs and also exert an impact on environmental issues, electronic payments or e-bills are becoming more significant. The average percentage of postpaid subscribers receiving paper invoices decreased from 81% in the 2008 Global Wireless Industry Survey to 72% in 2009, and the average percentage of subscribers that received electronic invoices increased from 6% in the 2008 Global Wireless Industry Survey to 14% in 2009. In addition, companies have increased their targeted e-bill penetration rates: the average rate for 2009 subscribers increased from 12% in the 2008 Global Wireless Industry Survey to 19% in the current year. Property, plant, and equipment Given continued demand for new products and services— especially in the area of data, the importance of service quality, and the nascent development toward fourth-generation (4G) technologies—companies have continued to invest despite the difficult economic environment. On average, capital expenditures as a percentage of service revenue were 21.5% in 2009 compared with 18% in the 2008 Global Wireless Industry Survey. Half of the responding companies indicated that more than 75% of cell sites use third-generation technology. Companies are also beginning to migrate to 4G technology, with one company already using it; two respondents expecting to begin utilizing it in 2010; and two more expecting to by 2011. Asset tracking continues to be an area in which companies spend time and resources. In the 2009 survey, 76% of respondents indicated they use automated tracking systems with bar code scanning. Compared with the 2008 Global Wireless Industry Survey—in which 75% of respondents had completed an inventory of network assets within the previous 12 months—only 57% of this year’s respondents completed an inventory within the past 12 months. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 3
  • 7. Participating company information The following pages provide the demographics and general corporate data and structure of the responding carriers. As Listing of companies applicable, any information related to the 2008 Global Wireless that participated in the 2009 Wireless Industry Survey has been updated to remove the impacts of the Industry Survey global carriers as presented in the prior-year’s survey. United States AT&T Mobility Leap Wireless MetroPCS The average customer care activity via Internet Sprint Nextel transactions is 9% for postpaid and 5% for T-Mobile USA U.S. Cellular prepaid subscribers. Verizon Wireless Canada Rogers Wireless TELUS Mobility 4 | Change is in the air
  • 8. Company type and subscriber base All of the companies surveyed reported that they were required to file interim and/or annual financial statements—either individually or through their parent companies— because they are listed on stock exchanges. In addition, all of the companies report financial statements or financial information externally on Web sites or via press releases. The following chart depicts the various stock exchanges on which the responding companies are listed. Stock exchange distribution 11% 22% Toronto Stock Exchange 67% New York Stock Exchange NASDAQ The majority of responding companies prepare their financial statements primarily under U.S. and Canadian generally accepted accounting principles (GAAP), with one respondent preparing financial statements under International Financial Reporting Standards (IFRS). The following chart shows the number of responding companies that prepare their financial statements according to the respective accounting principles. Accounting principle followed US GAAP 6 Canadian GAAP 2 IFRS 1 Number of respondents The following chart shows the responding companies’ reported subscribers as of June 30, 2009. Subscribers as of June 30, 2009 11% 22% 2.5 million – 5.0 million 22% 45% 5.1 million – 10.0 million 10.1 million – 50.0 million Greater than 50.0 million The industry continues to experience subscriber growth as more people substitute wireless devices for traditional wireline service. Wireless industry service revenue grew 6.3% in the United States and 10.1% in Canada, while the number of subscribers grew by 5.4% in the United States and 7.1% in Canada, according to Pyramid Research. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 5
  • 9. Participating company information Annual service revenue The following chart illustrates the responding companies’ service revenue reported as of December 31, 2008, which was the most recently ended fiscal year. The average service revenue was $29.4 billion for carriers with revenue greater than $5.0 billion and was $3.0 billion for carriers with revenue less than $5.0 billion. Annual service revenue 33% 45% $1.0 billion – $5.0 billion 22% $5.1 billion – $20.0 billion Greater than $20.0 billion Employee base Eighty-nine percent (89%) of the responding companies reported operating their companies on a centralized basis (whereby a single headquarters location performs the accounting/finance function for the entire organization) as opposed to a decentralized basis (whereby multiple business units or segments perform separate accounting or finance functions that are consolidated by a headquarters office). The following chart represents the number of full-time employees as of June 30, 2009, as reported by the responding companies. Full-time employees 22% 22% 1,000 – 5,000 employees 5,001 – 10,000 employees 22% 22% 10,001 – 20,000 employees 12% 20,001 – 50,000 employees Greater than 50,000 employees Carriers with revenue greater than $5.0 billion had more than 10,000 full-time employees and averaged 50,082 employees; carriers with revenue less than $5.0 billion had 10,000 or fewer full-time employees and averaged 5,844 employees. 6 | Change is in the air
  • 10. The following charts depict the number of full-time employees in each functional category as of June 30, 2009. The responding companies were split between carriers with revenue greater than $5.0 billion and carriers with revenue less than $5.0 billion. Average number of employees per functional position 2,224 Retail employees 18,041 1,935 Customer care 16,858 634 Network/engineering 5,676 661 Information technology 1,932 Average number of employees Carriers with revenue < $5.0 billion Carriers with revenue > $5.0 billion Average number of employees per functional accounting and finance position 19 Financial planning and analysis 141 12 Internal audit 81 17 Income and nonincome tax 75 13 Commission accounting 62 11 Inventory accounting 39 24 Revenue accounting 33 11 Property accounting 22 10 Payroll accounting 21 Average number of employees Carriers with revenue < $5.0 billion Carriers with revenue > $5.0 billion PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 7
  • 11. Participating company information Sales locations All but three of the responding companies reported using company-owned retail stores and kiosk locations to sell to and provide services for customers. The following chart depicts how many company-owned retail stores and kiosk locations were reported by the responding companies. Company-owned retail stores and kiosk locations 26% 37% 100 – 200 retail stores and kiosk locations 37% 201 – 450 retail stores and kiosk locations 1,000 – 2,500 retail stores and kiosk locations No responses were received in the less-than-100 and 451–999 categories. The average number of company-owned retail stores and kiosk locations increased over the prior year from 1,430 to 1,500 for carriers with revenue greater than $5.0 billion. Carriers with revenue less than $5.0 billion experienced a jump from 189 to 274 in the current year. The following charts depict the number of reseller retail stores (third-party companies) and branded franchise locations that sell each carrier’s services. Reseller retail stores 25% 25% 13% Less than 1,500 reseller retail stores 4,001 – 4,500 reseller retail stores 37% 5,001 – 7,500 reseller retail stores Greater than 25,000 reseller retail stores No responses were received in the 1,501–4,000, 4,501–5,000, and 7,501–25,000 categories. The average number of reseller retail stores (third-party companies) that sell services for carriers with revenue greater than $5.0 billion is 71,628, up from 53,034 as reported in the 2008 Global Wireless Industry Survey. For carriers with revenue less than $5.0 billion, the number of reseller stores rose to 2,983 from 2,301 in 2008. 8 | Change is in the air
  • 12. Branded franchise locations 12% 25% 25% Less than 1,000 branded franchise locations 1,001 – 2,000 branded franchise locations 38% 3,501 – 4,000 branded franchise locations 7,001 – 7,500 branded franchise locations No responses were received in the 2,001–3,500 and 4,001–7,000 categories. Branded franchise locations represent a branded store that is independently owned by a third party. The average number of branded franchise locations that sell services for carriers with revenue greater than $5.0 billion is 3,898, compared with 2,782 in the 2008 Global Wireless Industry Survey. For carriers with revenue less than $5.0 billion, that number is up to 1,322, compared with 535 in the 2008 Global Wireless Industry Survey. Customer care The following charts depict the responding carriers’ percentages of customer care activity provided for postpaid and prepaid subscribers, categorized by the source. Customer care activity via Internet transactions (postpaid) 20% 40% No customer care activity via Internet 40% 1% – 10% of customer care activity via Internet 11% – 20% of customer care activity via Internet No responses were received in the 21%–100% category. Customer care activity via Internet transactions (prepaid) 13% 25% 62% No customer care activity via Internet 1% – 10% of customer care activity via Internet 11% – 20% of customer care activity via Internet No responses were received in the 21%–100% category. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 9
  • 13. Participating company information The average customer care activity via Internet transactions is 9% for postpaid subscribers and 5% for prepaid subscribers. No significant variances existed between carriers with revenue greater than $5.0 billion and carriers with revenue less than $5.0 billion related to Internet transactions. In the 2008 Global Wireless Industry Survey, the average percentage of all customer care activity (postpaid and prepaid) performed via Internet transactions was 23% by carriers with revenue greater than $5.0 billion and 8% for carriers with revenue less than $5.0 billion. Customer care activity via interactive voice response (IVR) (postpaid) 40% 40% 1% – 10% of customer care activity via IVR 20% 11% – 25% of customer care activity via IVR 51% – 75% of customer care activity via IVR No responses were received in the 26%–50% and 76%–100% categories. Customer care activity via interactive voice response (IVR) (prepaid) 13% 25% 25% 11% – 25% of customer care activity via IVR 26% – 50% of customer care activity via IVR 37% 51% – 75% of customer care activity via IVR 76% – 100% of customer care activity via IVR No responses were received in the 1%–10% category. Customer care activity via live customer service representative (postpaid) 40% 40% 26% – 50% of customer care activity via live rep 20% 51% – 75% of customer care activity via live rep 76% – 100% of customer care activity via live rep No responses were received in the 1%–25% category. 10 | Change is in the air
  • 14. Customer care activity via live customer service representative (prepaid) 37% 37% 1% – 25% of customer care activity via live rep 26% 26% – 50% of customer care activity via live rep 51% – 75% of customer care activity via live rep No responses were received in the 76%–100% category. The average customer care activity via interactive voice recognition (IVR) is 29% for postpaid customers and 55% for prepaid customers. Live customer service via a customer service representative is utilized 62% of the time for postpaid subscribers and 37% for prepaid subscribers. In addition, prepaid customers utilize their handsets to complete 3% of customer care activity. Responding companies indicated that on average, calls are transferred only once before an issue or inquiry gets resolved. Carriers with revenue greater than $5.0 billion completed 26% of customer service via IVR for postpaid and 66% for prepaid subscribers. Live customer service averaged 66% for postpaid and 30% for prepaid for carriers with revenue greater than $5.0 billion. Carriers with revenue less than $5.0 billion completed 34% of customer service via IVR for postpaid and 44% for prepaid subscribers. Live customer service averaged 56% for postpaid and 34% for prepaid subscribers for carriers with revenue less than $5.0 billion. In the 2008 Global Wireless Industry Survey, live customer service via a customer service representative was utilized the most, at 55%, and carriers with revenue greater than $5.0 billion used IVR for 25% of all customer care activity and used live customer service representatives approximately 50% of the time. Carriers with revenue less than $5.0 billion in the 2008 Global Wireless Industry Survey had more live interaction (60% of all transactions) for customer care activity and completed 29% of all transactions through IVR. The following chart shows the types of activities available to subscribers over the Internet. Available Internet activities Equipment purchases 100% Customer payments 100% Billing inquiries, excluding 86% customer payments Technical issues related 71% to device service Personal information changes 71% Changes to service plans 71% Percentage of respondents Chart sums to greater than 100% because multiple responses were allowed. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 11
  • 15. Participating company information We asked companies to indicate the level of customer care activities that are outsourced to third parties. All of the responding companies outsource at least a portion of their customer care call volume. We noted that carriers were generally inclined to outsource more of their prepaid call volume than their postpaid call volume. All of the responding companies outsource some percentage of postpaid, and 67% of the companies outsource all of their customer care activity for prepaid. In the 2008 Global Wireless Industry Survey, 15% of the responding companies outsourced all of their customer care call volume, while an additional 15% did not outsource any of their customer care call volume. The remaining 70% of the responding carriers outsourced a portion of their customer care call volume. The following charts depict the percentage of outsourced call volume for both postpaid and prepaid subscribers. Outsourced customer care activity (postpaid) 40% 40% 0% – 25% outsourced 20% 26% – 49% outsourced 50% – 75% outsourced No responses were received in the 76%–100% category. Outsourced customer care activity (prepaid) 25% 75% 75% – 99% outsourced 100% outsourced No responses were received in the 0%–74% category. 12 | Change is in the air
  • 16. There continues to be interest in the outsourcing of customer care activity to international locations. In the 2008 Global Wireless Industry Survey, responding companies indicated that in total (prepaid and postpaid), an average of 37% of customer care activity was outsourced internationally. The following chart shows the percentage of outsourced volume that is handled domestically (primary country of operation) versus internationally. Domestic versus international outsourcing Postpaid average 81% 19% Prepaid average 40% 60% Percentage of respondents Domestic International Outsourced locations for postpaid customer care activities include Guatemala, India, Mexico, Panama, and the Philippines. In addition to the postpaid locations, prepaid customer care activity is also outsourced to the Dominican Republic, Nicaragua, and South Africa. The following chart depicts the number of respondents that outsource a portion of their primary accounting functions. For those functions that are outsourced, the average percentage of the responding company’s activity that is outsourced is indicated. Outsourced accounting functions Rebate processing 8 89% 1 Inventory management 7 75% 2 Sales and use taxes 6 48% 2 Remittance processing 6 46% 2 Income taxes 6 36% 2 Accounts receivable 6 35% 4 Payroll processing 4 38% 3 Information technology 4 27% 5 Property taxes 3 53% 5 Accounts payable 3 37% 6 Internal audit 1 40% 7 Payment processing 1 8% Number of respondents No outsourcing Function outsourced PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 13
  • 17. Participating company information Licensed spectrum The responding companies own and use licenses primarily in the cellular (~850 megahertz [MHz]) and personal communications services (PCS) (~1.9 gigahertz [GHz]) categories to provide service. A large number of responding companies also own advanced wireless services (AWS) spectrum. The following chart shows the number of companies that own and use each of the reported license types. Licensed spectrum 9 PCS (~1.9 GHz) 9 8 AWS (1,700 MHz) 3 7 AWS (2,100 MHz) 2 6 Cellular (~850 MHz) 6 Federal Communications 4 Commission Cellular (~700 MHz) 1 Web log-in service communication 2 services (~2.3 GHz) Specialized mobile radio 2 services (~800/900 MHz) 2 1 Non-US wireless licenses 1 Number of respondents Own Use Chart sums to greater than the number of responding carriers because multiple responses were allowed. In addition, broadband wireless spectrum (2.5 GHz and 3.5 GHz) is owned and used by one carrier, and certain AWS spectrum (1,700 MHz and 2,100 MHz) is owned by one carrier each but not used by any carriers. 14 | Change is in the air
  • 18. Environmental sustainability Given the growth in environmental responsibility by individual companies and the increase in environmental concerns by consumers, we asked companies about their environmental responsibility programs. Seventy-five percent (75%) of the responding companies indicated that the responsibility for environmental performance rests with a C-level executive. One company assigned responsibility to a functional organization, and one had no one specifically assigned. The surveyed companies were asked several questions related to their views on environmental practices. The companies were asked to respond on a scale of 1 to 5, with 1 being “Strongly agree” and 5 being “Strongly disagree.” The following chart represents the average response received for each question in 2009, compared with the 2008 Global Wireless Industry Survey. Environmental views Green efforts are more of a fad than they are an enduring 3.9 transformation for our company and our industry 4.4 Our industry has a moral responsibility to help consumers change their own behaviors 2.2 (through editorial, effective programming, and advertising) 2.6 Investors and stakeholders will increasingly reward companies with above-average 2.2 performance on sustainability issues 2.5 These initiatives make a positive contribution to the 1.4 workplace, employee morale, recruitment, and retention 1.8 We can achieve cost savings by implementing 1.4 sound environmental practices 1.8 We must demonstrate progress on our environmental 1.7 records to continue to attract and retain subscribers 2.1 These efforts are valuable to our brand, 1.6 to who we are as a company, and to our subscribers 2.0 The adoption of environmentally friendly practices 1.3 can drive stronger corporate performance 1.8 Average response 1. Strongly agree 4. Disagree 2008 average 2. Agree 5. Strongly disagree 2009 average 3. Neutral Sixty-three percent (63%) of the responding companies reported their performance on environmental or social issues to the public through either triple-bottom-line reporting or another discretionary report, such as a corporate responsibility report. Another 29% of the respondents indicated that they plan to report environmental performance in the future. All of the responding companies reported supporting existing programs to recycle mobile phones/accessories and reduce their environmental impact. The programs include in-store collection, donating proceeds to local charities, planting trees, and customer account credits. Eighty-eight percent (88%) of the respondents reported monitoring their carbon footprints to determine ways of reducing environmental impact. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 15
  • 19. Revenue recognition The following pages cover wireless company practices in the area of revenue recognition. On average prepaid minutes of use have increased more than 147% in the past four years. 16 | Change is in the air
  • 20. Service contracts and family plans Of the responding companies, 78% indicated they have postpaid service contracts with their subscribers. Of the nine total respondents, six offer one-year contracts, six offer two-year contracts, and three offer three-year contracts. The following chart illustrates the responding companies’ terms of postpaid service contracts and the approximate percentage of subscribers on each contract term. Percentage of subscriber base by contract term 2% Carrier E 10% 60% 28% 1% Carrier D 9% 76% 14% Carrier C 11% 72% 17% 1% 1% Carrier B 77% 21% 3% 1% 1% Carrier A 79% 16% Percentage of subscribers One year Out of contract Two years Other Three years Responses in the other category include primarily month to month. An increasing number of companies are offering family plans to their customers. Seventy-eight percent (78%) of the responding companies offer family plans to their postpaid subscribers, while only 33% offer family plans to prepaid subscribers. The following chart shows the percentage of postpaid subscribers who are enrolled in family plans compared with the 2008 Global Wireless Industry Survey. Percentage of postpaid subscribers on family plans Greater than 75% 17% 44% 51% – 75% 33% 12% 26% – 50% 17% 44% Less than 25% 33% Percentage of respondents 2008 2009 No responses were received in the greater-than-75% category in 2008. Of the responding companies that offer family plans, 29% indicated that family plans average two subscribers per plan, compared with 45% in the 2008 Global Wireless Industry Survey; 71% indicated that family plans average three subscribers per plan compared with 45% in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 17
  • 21. Revenue recognition The following chart illustrates the average postpaid monthly revenue per user for subscribers enrolled in family plans. Compared with the 2008 Global Wireless Industry Survey, monthly revenue per user for family plan subscribers appears to be decreasing. Sixty-six percent (66%) of respondents said average revenue per family plan subscriber ranged from $41 to $50. In the 2008 Global Wireless Industry Survey, 62% cited a higher average revenue range for family plans, from $51 to $60. Average monthly family plan subscriber revenue 17% 17% $21 — $40 $41 — $50 66% $51 — $60 In order to add subscribers to family plans, many of the respondent companies charge for each additional subscriber enrolled. Seventy-one percent (71%) of the respondents charge $10 or less per additional subscriber on family plans; the remaining 29% charge $10.01 to $20.00. Termination fees and bad-debt expense The following chart illustrates how responding companies charge contract termination fees and how strictly the companies bill and enforce the collection of contract termination fees or early-disconnect fees. Compared with the 2008 Global Wireless Industry Survey there has been a slight increase in the number of carriers that charge termination fees or early-disconnect fees. Contract termination or early-disconnect fees 2008 77% 23% 2009 86% 14% Percentage of subscribers Charge somewhat (most early-termination fees are billed, and most have to pay except in certain situations, e.g., close to the end of the contract term, waived for high-value subscribers) Charge rarely or not at all Five companies responded that contract termination fees or early-disconnect fees are prorated over the lives of contracts. Among them, the five companies use several different methods to determine prorated amounts. Some prorate on a straight-line basis, while others prorate per month down to a minimum fee. 18 | Change is in the air
  • 22. We also asked the responding companies to comment on their success in collecting contract termination fees or early-disconnect fees. As indicated in the following charts, the collection rates on such fees vary drastically depending on whether the customer has voluntarily terminated service or whether service has been involuntarily terminated by the company. Eighty percent (80%) of the 2009 responding companies are collecting approximately 50% or more of contract termination fees related to voluntary terminations, which is an approximately 40% increase compared with the 2008 Global Wireless Industry Survey. Collection rates: Voluntary termination fees 10% Greater than 75% 8% 40% 30% 51% – 75% 33% 40% 30% 26% – 50% 18% 20% 10% – 25% 33% 20% 10% Less than 10% 8% Percentage of respondents 2007 2008 2009 Collection rates: Involuntary termination fees 51% – 75% 8% 20% 26% – 50% 17% 20% 10% – 25% 42% 50% 60% Less than 10% 33% 50% Percentage of respondents 2007 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 19
  • 23. Revenue recognition Compared with the 2008 Global Wireless Industry Survey, collection rates related to involuntary termination fees have decreased significantly. The decrease in collection rates correlates with the economic challenges faced in late 2008 and 2009. The following charts illustrate the responding companies’ average charges for voluntary and involuntary early-termination fees for postpaid subscribers. Average charges for voluntary early-termination fees Greater than $125 20% $101 – $125 20% $75 – $100 40% Less than $75 20% Percentage of respondents Average charges for involuntary early-termination fees $301 – $400 20% $201 – $300 20% $101 – $200 60% Percentage of respondents The responding companies use several different methods to record revenue related to termination fees. The results are consistent with the 2008 Global Wireless Industry Survey. The following chart illustrates what percentage of companies uses each type of method identified. Revenue recognition of early contract termination or early-disconnect fees Record as revenue only the portion of the billed 17% termination fee that is expected to be collected, and record any additional bad-debt expense against this amount; represents net reporting of revenue Record 100% of billed termination fee as service 17% revenue, and record bad-debt expense (through the company's allowance method); represents 66% gross reporting of revenue Recognize no revenue until amount billed is collected (no bad-debt expense is ever recorded); represents reporting revenue on a cash basis 20 | Change is in the air
  • 24. The following chart illustrates bad-debt expense related to postpaid receivables as a percentage of total postpaid revenues. The average of responses was 1.8%, which is consistent with 2008 Global Wireless Industry Survey responses. Postpaid bad-debt expense 10% 3.01% – 4.00% 20% 2.51% – 3.00% 10% 2.01% – 2.50% 40% 20% 1.51% – 2.00% 40% 10% 1.01% – 1.50% 20% 30% 1.00% or less Percentage of respondents 2008 2009 Prepaid All of the responding companies offer customers the opportunity to pay for service in advance. The following chart illustrates the percentage of the responding companies’ total subscribers who are prepaid subscribers. Percentage of prepaid subscribers 1 100% 2 1 80% – 90% 6 11% – 25% 3 5 10% or less 4 Number of respondents 2008 2009 No responses were received in the 26%–79% category. For companies with revenue greater than $5.0 billion, the average response of the percentage of prepaid subscribers as a percentage of total subscribers was 11% compared with 12% in the 2008 Global Wireless Industry Survey. For companies with revenue less than $5.0 billion, the average response of the percentage of prepaid subscribers as a percentage of total subscribers was 56% compared with 36% in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 21
  • 25. Revenue recognition The average prepaid subscriber life for responding companies is 18 months. The following chart represents the average prepaid subscriber life for the current year compared with the 2008 Global Wireless Industry Survey. Average prepaid subscriber life 7 10 – 15 months 5 2 16 – 20 months 1 1 21 – 25 months 26 – 30 months 1 3 31 – 35 months 1 Number of respondents 2008 2009 No responses were received in the less-than-10-months category. For companies with revenue greater than $5.0 billion, the average prepaid subscriber life was 17 months in 2009 compared with 18 months in the 2008 Global Wireless Industry Survey. For companies with revenue less than $5.0 billion, the average prepaid subscriber life was 19 months compared with 20 months in the 2008 Global Wireless Industry Survey. The following chart illustrates the average expiration periods for cards that have been activated for the responding companies. Expiration periods 11% 26% 63% 1- to 2-month expiration 3- to 4-month expiration 12-month expiration No responses were received in the 5- to 11-month category. Of the responding companies, 43% have expiration periods for cards if they have not been activated. 22 | Change is in the air
  • 26. The following chart illustrates the average monthly minutes of use (MOU) per prepaid subscriber for the responding companies. Average monthly MOU per prepaid subscriber 18% Less than 100 minutes 11% 64% 100 – 500 minutes 45% 18% 501 – 1,000 minutes 11% 1,001 – 1,500 minutes 22% Greater than 1,500 minutes 11% Percentage of respondents 2008 2009 Companies with revenue greater than $5.0 billion reported an average prepaid MOU of 537 minutes compared with 362 minutes in the 2008 Global Wireless Industry Survey, and companies with revenue less than $5.0 billion reported average prepaid MOU of 830 minutes compared with 350 minutes in the 2008 Global Wireless Industry Survey. The overall MOU for prepaid has increased 147% in four years. Average prepaid MOU trend 667 356 320 270 2006 2007 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 23
  • 27. Revenue recognition Of the responding companies, 56% offer unlimited voice prepaid plans. Of those companies, 64% of their prepaid customers participate in the unlimited voice plans, and the average monthly MOU is 1,181. The following chart illustrates the average fee charged for an unlimited voice prepaid plan. Average fee for an unlimited voice prepaid plan $50.01 – $55.00 40% $40.01 – $45.00 40% $36.00 – $40.00 20% Percentage of respondents No responses were received in the $45.01–$50.00 category. The following chart represents prepaid revenues as a percentage of total revenues for the responding companies. The average prepaid revenue as a percentage of total revenues for companies with revenue greater than $5.0 billion is 5.3% compared with 11.7% in the 2008 Global Wireless Industry Survey; for companies with revenue less than $5.0 billion, prepaid revenue increased to 52.3% from 36.1% in the 2008 Wireless Industry Survey. Prepaid revenue as a percentage of total revenues 2 91% – 100% 2 3 6% – 10% 3 8 5% or less 4 Number of respondents 2008 2009 No responses were received in the 11%–90% category. 24 | Change is in the air
  • 28. Data services Data services continues to be an area of focus, as most of the responding companies are seeking opportunities to grow revenue. The following charts illustrates the percentage of responding companies’ total service revenues—excluding short message services (SMS)/text—generated by data services, compared with the 2008 Global Wireless Industry Survey for postpaid and prepaid. Percentage of service revenues generated by postpaid data services 20.1% – 25.0% 1 15.1% – 20.0% 1 3 10.1% – 15.0% 4 6 5.1% – 10.0% 1 0.0% – 5.0% 1 Number of respondents 2008 2009 Percentage of service revenues generated by prepaid data services 4 5.1% – 10.0% 4 6 0.0% – 5.0% 3 Number of respondents 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 25
  • 29. Revenue recognition The following chart indicates the monthly contribution of data services, excluding SMS/text to total, prepaid, and postpaid average revenue per user (ARPU). Compared with the 2008 Global Wireless Industry Survey responses, the contribution of data services—excluding SMS/text—to ARPU has increased. Current-year responses included five carriers that indicated that data services—excluding SMS/text—have contributed more than $8 to ARPU compared with $0 in the 2008 Global Wireless Industry Survey. Data services’—excluding SMS/text’s—effect on ARPU 56% Greater than $8.00 25% 56% 11% $6.01 – $8.00 11% 22% $4.01 – $6.00 11% 11% $0.01 – $2.00 75% 22% Percentage of respondents Total ARPU per user Prepaid ARPU per user Postpaid ARPU per user No responses were received in the $2.01–$4.00 category. The responding companies reported that approximately 60% of their postpaid subscribers use SMS/text, while 55% of their prepaid customers use SMS/text. 26 | Change is in the air
  • 30. The following chart illustrates the percentage of responding companies’ total data service revenues generated by SMS/text services. Overall, SMS/text services are becoming a greater percentage of total service revenues. In the current year, two respondents indicated that SMS/text services constituted 10% to 15% of postpaid revenues compared with 0% in the 2008 Global Wireless Industry Survey. Percentage of service revenues generated by postpaid and prepaid data services 1 Greater than 15.0% 3 10.1% – 15.0% 2 1 5.1% – 10.0% 4 1 0.0% – 5.0% 1 Number of respondents Prepaid Postpaid The following chart indicates the monthly contribution of SMS/text services to total, prepaid, and postpaid ARPU. SMS/text’s effect on ARPU 14% $5.01 – $7.50 17% 57% $2.51 – $5.00 50% 66% 29% $0.00 – $2.50 50% 17% Percentage of respondents Monthly ARPU per SMS/text user Monthly prepaid ARPU per SMS/text user Monthly postpaid ARPU per SMS/text user Of the responding companies, 56% indicated they charge for incoming calls and text messaging. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 27
  • 31. Revenue recognition All of the respondents’ subscribers can access third-party content that the company does not source through their handsets (e.g., through a short-code SMS/text, m-sites, or a premium rate). The following chart illustrates how the respondents account for the revenue share payment made to the third-party content provider. Third-party content 22% 33% 12% Reduction of revenue Cost of service 33% Operating expense other than cost of service Other Mobile advertising We asked the responding companies whether they include any nonsubscriber revenue in calculating average revenue per user (e.g., roaming revenue, wholesale revenue, and advertising revenue). Eighty-eight percent (88%) of the responding companies include other nonsubscriber revenues in their ARPU, which is consistent with the 2008 Global Wireless Industry Survey of 85%. Eighty-six percent (86%) of those carriers reported that they include roaming revenues. Of the responding companies, 75% record revenue related to mobile advertising. Sixty-seven percent (67%) of the respondents indicated they recognize the revenue by using the gross method; the remaining 33% indicated they use the net method. Wi-Fi data services Wi-Fi hot spots and wireless broadband access cards are common in today’s marketplace. Of the responding companies, 44% offer Wi-Fi hot spots in public locations such as airports, coffee houses, hotels, and offices compared with 62% in the 2008 Global Wireless Industry Survey. One hundred percent (100%) of the companies that offer hot-spot services and pay the hot-spot location a portion of the fee billed to the customer said they account for those fees as operating expenses. Of the responding companies, 89% provide wireless broadband access through personal computer cards, which is consistent with the 92% in the 2008 Global Wireless Industry Survey. 28 | Change is in the air
  • 32. Customer retention Companies continue to focus on retaining current customers because overall market penetration rates have slowed. Accordingly, retention-related activities have increased in recent years. The following chart illustrates the percentage that retention-related costs increased for the responding companies. All responding companies expense retention costs. Increase in subscriber-retention-related costs 10% Greater than 50% 29% 10% 31% – 40% 30% 21% – 30% 43% 30% 11% – 20% 14% 20% 0% – 10% 14% Percentage of respondents 2006 – 2007 2007 – 2008 No responses were received in the 41%–50% category and no responses were received in the 31%–40% category in 2007–2008. Subsidies offered on handset upgrades to retain current customers can be a significant component of customer retention costs. The range of subsidy costs per handset upgrade reported by the responding companies is presented in the following chart. Average handset subsidy for customer retention 8% Greater than $250 8% $176 – $200 24% 19% $151 – $175 24% 19% $126 – $150 24% 8% $76 – $100 19% $51 – $75 14% 19% Less than $50 14% Percentage of respondents 2008 2009 No responses were received in the $101–$125 category and no responses were received in the $76–$100 or greater-than-$250 categories in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 29
  • 33. Revenue recognition Sales incentives Many of the responding companies offer significant subsidies on handsets to attract new customers. The following chart represents the range of average handset subsidies the respondents offer to all new customers, as compared with the 2008 Global Wireless Industry Survey. Average new customer handset subsidy 8% Greater than $200 8% $176 – $200 25% 17% $126 – $150 17% $101 – $125 50% 8% $76 – $100 25% 17% $51 – $75 25% Less than $50 Percentage of respondents 2008 2009 No responses were received in the $151–$175 category. In addition, no responses were received in the less-than-$50, $51–$75, $126–$150 and greater-than-$250 categories in 2009. 30 | Change is in the air
  • 34. The following charts illustrate when companies allow subsidies to existing customers for a new handset under both one- and two-year contracts. Postpaid customer eligibility to receive retention subsidy for new handset (one-year contract) 17% 17% 17% One month before contract expiration Two months before contract expiration 32% Three months before contract expiration 17% Only upon expiration of current contract Other (dependent on rate plan and tenure) Postpaid customer eligibility to receive retention subsidy for new handset (two-year contract) 29% 29% Two months before contract expiration 13% Six months before contract expiration 29% Twelve months before contract expiration Other (dependent on rate plan and tenure) We also asked the responding companies to comment on how they account for demonstration unit handsets, personal digital assistants, and smart phones that are available in retail stores as floor models. The following chart shows how the costs are recorded. Accounting for demonstration unit handsets (floor models) 11% 22% Cost of goods sold 67% Marketing/sales expense General and administrative PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 31
  • 35. Revenue recognition Market development funds and rebates Of the responding companies that receive marketing development funds from their vendors, 78% classify these receipts as contra-expense. The following chart illustrates the incentives and services offered as customer subsidies by the respondents. New customer incentives and services offered Instant rebate (cash based) 9 Free goods (accessories, etc.) 8 Mail-in or Internet-based rebate (cash based) 8 Waive activation fees 7 Free services 6 (free minutes of service) Other 4 In-store gifts 3 Number of respondents Chart sums to greater than the number of responding companies because multiple responses were allowed. Many companies use mail-in rebates as a way of attracting new customers to buy their handsets. Of the responding companies, 88% offer mail-in rebates to their postpaid customers, while 56% offer mail-in rebates to their prepaid customers. Of the companies that offer mail-in rebates, all indicated that they use a third-party provider to process mail-in-rebate programs. Rebate requirements vary widely among the responding companies; however, most respondents require that customers return the receipt, rebate redemption form, and UPC code. Other companies require a packing slip and a copy of the customer’s bill. The following graph illustrates the dollar value of instant rebates offered. Dollar value of instant rebates offered Greater than $100 5 $76 – $100 6 $51 – $75 6 $30 – $50 8 Less than $30 6 Number of respondents Chart sums to greater than the number of responding companies because multiple responses were allowed. 32 | Change is in the air
  • 36. Seventy-eight percent (78%) of the responding companies team with their handset and accessory vendors to provide rebates for subscribers, whereby the manufacturer reimburses the carriers. Of the responding companies, 86% recognize a liability under the program when the related revenue is recognized. The following graph shows the responding companies’ average historical redemption rates for all mail-in-rebate programs for all subscribers. Average historical redemption rate for all mail-in-rebate programs 17% 17% 17% 21% – 30% redemption 41% – 50% redemption 51% 51% – 60% redemption 61% – 70% redemption No responses were received in the less-than-21%, 31%–40% or 71%–100% categories. Other revenue activities Sixty-seven percent (67%) of the responding companies are currently or expect to be eligible for the status of Eligible Telecommunications Carrier (ETC) this year, which is consistent with the 2008 Global Wireless Industry Survey. Of those respondents that currently receive or expect to receive ETC status this year, 83% expect the amount to be less than 1% of service revenues, with the other 17% expecting the amount to be less than 5% of service revenue. Of the companies with revenue greater than $5.0 billion, 80% receive ETC revenue compared with 63% in the 2008 Global Wireless Industry Survey. Of the companies with revenue of less than $5.0 billion, 50% receive ETC revenue, which is an increase from 37% in the 2008 Global Wireless Industry Survey. The following chart illustrates how the responding companies classify costs related to directory assistance (e.g., 411 calls) on the income statement. Classification of directory services 11% 11% Cost of services 78% Cost of revenues Network costs PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 33
  • 37. Revenue recognition Revenue assurance The revenue assurance function plays an important role in ensuring adequate internal controls over financial reporting and minimizing revenue leakage. In fact, each of the nine respondents currently has a dedicated revenue assurance function. The following graph shows the dedicated number of revenue assurance individuals. Dedicated number of revenue assurance individuals 2 Greater than 200 2 1 101 – 200 1 3 41 – 100 2 3 16 – 40 1 4 1 – 15 3 Number of respondents 2008 2009 The following graph shows the number of dedicated revenue assurance individuals per $1.0 billion in total revenue. Dedicated number of revenue assurance individuals per $1.0 billion 1 Greater than 11 2 7 6 – 10 3 4 1–5 2 Number of respondents 2008 2009 34 | Change is in the air
  • 38. Primary responsibility for the revenue assurance function varies across the responding companies. The following chart shows the primary departments that oversee revenue assurance functions. Responsibility for revenue assurance 12% 33% 12% Corporate finance Revenue assurance and fraud/risk management 43% Accounting and customer care Accounting department Eighty-eight percent (88%) of respondents indicated that more than 80% of annualized revenue is subject to revenue assurance programs, compared with 69% in the 2008 Global Wireless Industry Survey. The following graph illustrates the revenue assurance and fraud management opportunities reported by the responding companies. Revenue assurance/fraud management opportunities Unbilled roaming charges 9 Improper accounting or tracking 8 of rollover minutes Incorrect rates 8 Unbilled text messages (SMS) 7 Unbilled access charges for content 7 Unbilled international calls 6 Issues with shared or 6 family plan minutes Incorrect billing of taxes 6 Active telephone numbers at the switch that do not exist in billing 6 Usage not being captured 6 at the network Unbilled wireless Web 5 monthly charges Usage being lost or not corrected between the switch and the bill 5 Unbilled per-minute charges after a 5 customer exceeds the contract amount Incorrect billing of surcharges 4 Incorrect decrementing 1 Number of respondents Chart sums to greater than the number of responding companies because multiple responses were allowed. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 35
  • 39. Revenue recognition When asked which components of the revenue process represent the greatest areas for revenue and margin leakage, the respondents identified the following in order of importance: financials, network reliability, fraud, and roaming and carrier settlement. Forty-three percent (43%) of respondents utilize an internally developed revenue assurance platform or tool, compared with 28%, which use a purchased platform or tool. The remaining respondents use a combination of internally developed and purchased platforms or tools. Customer billings and payments Practice varies among carriers as to whether certain charges can be included in a new subscriber’s first billing cycle. Of the responding companies, 78% allow equipment purchases, and 89% allow activation fees to be included in a subscriber’s first billing cycle. The average number of billing cycles per month varies by respondent. The following chart illustrates the distribution of billing cycles per month. Average number of billing cycles per month 12% 50% 38% Less than 15 cycles 15 – 20 cycles Greater than 20 cycles Practices vary from carrier to carrier as to whether postpaid subscribers are billed in advance or in arrears. The following charts illustrate the range of percentages of postpaid customers billed in arrears versus in advance for the responding companies. Customers billed in arrears 12% 50% 38% Less than 10% 10% – 20% Greater than 90% No responses were received in the 21%–90% category. The average percentage of customers who are billed in arrears is 18% compared with 21% in the 2008 Global Wireless Industry Survey. 36 | Change is in the air
  • 40. Customers billed in advance 12% 50% 38% Less than 10% 80% – 90% 91% – 100% No responses were received in the 11%–79% category. The average percentage of customers who are billed in advance is 82% compared with 79% in the 2008 Global Wireless Industry Survey. We asked the responding companies to indicate the percentage of customer payments that they received through each payment channel for both postpaid and prepaid customers. The results are depicted in the following charts, including the average of all responding companies. Postpaid customer payment channel Average 7 2 24 4 9 4 16 8 5 22 5 2 10 Carrier G 21 2 3 60 9 3 2 Carrier F 10 8 2 3 5 18 2 52 1 Carrier E 11 4 17 9 13 8 7 16 14 Carrier D 3 4 24 6 5 2 13 5 26 7 5 1 Carrier C 22 4 31 20 4 6 2 7 3 1 1 1 Carrier B 2 33 5 13 2 16 5 2 6 7 6 1 Carrier A 3 33 5 8 3 4 9 17 8 9 Percentage of customer payments In-store payments Automatically charged to credit card (preauthorized) Agent/reseller locations Charged to credit card (customer Lockbox/direct mail/bank initiated monthly) Retail kiosks Automatically charged to debit card (preauthorized) Telephone: Interactive voice response (IVR) Charged to debit card (customer initiated monthly) Telephone: Customer care/call center Internet payments (non-IVR based) Initiated via handset menu Automatically deducted from bank account (e.g., ACH, online banking) Other* *Other includes PC banking, sales central, and pay by phone. In the 2008 Global Wireless Industry Survey, about a third of respondents (30%) said greater than 60% of their payments were received via a lockbox, a bank, or direct mail, while the majority of respondents (60%) reported receiving more than 30% of their payments through those methods. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 37
  • 41. Revenue recognition In comparison, the 2009 survey shows that no respondents reported receiving more than 60% of their payments through a lockbox, a bank, or direct mail, and less than half of respondents (43%) receive more than 30% of their payments via those methods. Meanwhile, respondents said 16% of postpaid payments are now being deducted automatically from bank accounts, up from 11% in 2008. Prepaid customer payment channel 1 11 Average 9 45 2 25 2 10 22 1 Carrier G 16 46 4 9 10 2 3 7 2 1 Carrier F 10 62 21 4 2 1 Carrier E 3 80 16 1 Carrier D 47 3 48 1 1 Carrier C 60 28 2 4 4 Carrier B 30 60 7 3 Carrier A 5 10 2 63 222 12 2 Percentage of customer payments In-store payments Automatically charged to credit card (preauthorized) Agent/reseller locations Charged to credit card (customer Lockbox/direct mail/bank initiated monthly) Retail kiosks Internet payments Telephone: Interactive voice Initiated via handset menu response (IVR) Other* Telephone: Customer care/call center (non-IVR based) *Other includes one bill interface, and pay by phone. In the 2008 Global Wireless Industry Survey, 40% of respondents received greater than 45% of their payments through agent/reseller locations, while 20% of respondents received greater than 80% through agent/reseller locations. In 2009, a much higher number (72%) reported that they received greater than 45% of their payments through agent/reseller locations; however, no respondents received greater than 80% of their payments that way. 38 | Change is in the air
  • 42. Compared with the 2008 Global Wireless Industry Survey, an average of 45% of prepaid payments are made through agent/reseller locations—an increase of 31%. The following graphs show the sources of payments by percentage for both postpaid and prepaid subscribers and compared with the average of all responding companies. Methods of postpaid customer payments Average 37 5 29 12 17 1 Carrier F 79 17 3 Carrier E 66 4 26 4 Carrier D 8 52 40 Carrier C 25 13 30 7 25 Carrier B 36 7 23 9 25 Carrier A 8 6 25 9 52 Percentage of customer payments Check (including e-check, electronic banking, and home banking) Cash Credit card (preauthorized and onetime use) Debit card (PIN activated or PIN-less) ACH/ARC/wires In the 2008 Global Wireless Industry Survey, 70% of respondents received greater than 30% of postpaid payments via check. In 2009, that number dropped to 50%. Compared with the 2008 Global Wireless Industry Survey, responding carriers received more postpaid payments via credit card, which increased from 21% to 29%, and via debit card, which increased from 4% to 12%. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 39
  • 43. Revenue recognition Methods of prepaid customer payments 1 Average 36 40 3 20 Carrier F 5 69 26 1 Carrier E 68 31 Carrier D 60 40 1 Carrier C 99 1 Carrier B 80 7 12 Carrier A 18 3 79 Percentage of customer payments Check (including e-check, electronic banking, and home banking) Cash Credit card (preauthorized and onetime use) Debit card (PIN activated or PIN-less) Other In 2009, 50% of respondents received greater than 65% of their payments via cash, up slightly from 44% in 2008. In 2009, 30% of respondents received at least half of their payments via credit card compared with 33% in 2008. There was no significant change in the overall averages year over year for prepaid. Handset insurance Eighty-six percent (86%) of respondents offer handset protection programs to postpaid subscribers. This program can be either self-insured by the provider or provided through a third party. Of the respondents that offer a handset replacement program, 83% use a third-party provider; the remaining 17% are self-insured. Eighty-three percent (83%) of the responding companies that offer handset replacement programs bill subscribers based on a fixed monthly amount; the remaining 17% bill subscribers a onetime fee. Thirty-three percent (33%) of respondents offer handset protection to prepaid subscribers. Of those offering handset protection programs to prepaid subscribers, all use a third-party provider for the service and charge $4.95 to $5.95 monthly. 40 | Change is in the air
  • 44. All-inclusive packages The responding companies were asked whether they offer all-inclusive packages to subscribers. Seventy-eight percent (78%) of the responding companies said they do, compared with 67% in the 2008 Global Wireless Industry Survey. Of those companies, half indicated that less than 2% of their subscribers participate in the plans they offer, and 67% charge at least $99 a month. The following graph illustrates the services the respondents include in their all-inclusive packages. Services offered in all-inclusive package Voice 100% Pictures 67% Text/SMS to in-system customers 67% Internet 67% Roaming 50% Long distance 50% Text/SMS to any number 50% E-mail 50% Web surfing 50% Video 33% GPS navigation 33% Music 17% Percentage of respondents Chart sums to greater than 100% because multiple responses were allowed. In addition, responding companies also include such items as incoming text/SMS, call waiting, caller ID, international texts, video messaging, directory assistance, DirectConnect, and voice mail. In the 2008 Global Wireless Industry Survey, 33% of respondents offered other features in their all-inclusive packages, compared with 86% this year. In addition, 57% of respondents offered pictures in their all-inclusive packages in 2009, while only 44% of respondents offered those services in their all-inclusive packages in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 41
  • 45. Performance measures The following pages cover performance measures for evaluating results. The average percentage of subscribers receiving paper invoices decreased from 81% to 72% in 2009, and the average percentage of subscribers receiving electronic invoices increased from 6% in 2008 to 14% in 2009. 42 | Change is in the air
  • 46. Customers/metrics The following chart depicts the average lengths of the responding companies’ relationships with postpaid customers. Average length of customer relationship (postpaid) 40% Greater than 80 months 67% 30% 61 – 80 months 30% 40 – 60 months 33% Percentage of respondents 2008 2009 The average length of customer relationships was approximately 64 months in 2009 compared with 70 months in the 2008 Global Wireless Industry Survey. For companies with revenue greater than $5.0 billion, the average customer relationship was 66 months in 2009 compared with 73 months as reported in the 2008 Global Wireless Industry Survey. We asked companies how they define minutes of use (MOU). Fifty-six percent (56%) of respondents define MOU as billed minutes (whether included as part of a plan or as additional nonpackaged minutes); 44% of the respondents define MOU as minutes per the switch regardless of whether those minutes are ultimately billed to the customer. According to the responding companies, the average percentages of MOU that were billed as excess (i.e., over plan) minutes were 3%. That’s compared with 7% in the 2008 Global Wireless Industry Survey and 6% in 2007. Average monthly minutes of use per postpaid subscriber 801 744 670 MOU 2007 2008 2009 Year Average MOU The average monthly MOU for all responding carriers was 670 minutes in 2009, compared with 801 in the 2008 Global Wireless Industry Survey and 744 in 2007. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 43
  • 47. Performance measures Average monthly minutes of use per postpaid subscriber 17% 17% Less than 500 MOU 33% 33% 500 – 700 MOU 701 – 900 MOU Greater than 900 MOU Sixty-seven percent (67%) of the responding companies report postpaid churn externally, and 44% of the responding companies report prepaid churn externally. One hundred percent (100%) of respondents with revenue greater than $5.0 billion report postpaid churn compared with 25% of respondents with revenue less than $5.0 billion. The responding carriers indicated that an average of 31% of all churn is a result of involuntary disconnects (company-induced disconnects or termination of service), compared with 33% in the 2008 Global Wireless Industry Survey. We asked the companies how postpaid churn is calculated. • Eighty-six percent (86%) of respondents use net deactivations for the numerator. • Eighty-six percent (86%) of respondents use average subscribers for the denominator of the churn. • Fourteen percent (14%) of respondents use beginning subscribers for the period in the denominator. For the companies using net deactivations for the numerator, 22% consider deactivations within 30 days of subscriber activations, while another 22% consider deactivations within the first seven days of subscriber activations. Remaining responses differ widely. For prepaid churn, 100% of responding companies reported using net deactivations for the numerator of the calculation. For the denominator of the prepaid churn calculation, 86% of the respondents use average subscribers, and 14% use beginning subscribers. Eighty-nine percent (89%) of respondents track information regarding postpaid customers and prepaid customers separately. Seventy-one percent (71%) of respondents report postpaid churn rates of 2% or less, compared with 90% in the 2008 Global Wireless Industry Survey. For prepaid churn, 38% of respondents report 5% or less, compared with 50% in the 2008 Global Wireless Industry Survey. 44 | Change is in the air
  • 48. The following chart depicts the average revenue per user (ARPU) for postpaid and prepaid customers. Average revenue per user (ARPU) for postpaid and prepaid customers $59 2007 $24 $60 2008 $28 $54 2009 $31 Average revenue per user Postpaid ARPU Prepaid ARPU For responding companies that track information separately, the following charts compare churn rates and ARPU for postpaid and prepaid subscribers. Churn for postpaid subscribers 25% Greater than 2.0% 10% 29% 25% 1.6% – 2.0% 30% 14% 33% 1.0% – 1.5% 50% 57% 17% Less than 1.0% 10% Percentage of respondents 2007 2008 2009 There were no responses in the less-than-1.0% category in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 45
  • 49. Performance measures Churn for prepaid subscribers 7% Greater than 7.0% 25% 24% 43% 5.1% – 7.0% 25% 38% 21% 3.0% – 5.0% 42% 38% 29% Less than 3.0% 8% Percentage of respondents 2007 2008 2009 There were no responses in the less-than-3.0% category in 2009. ARPU for postpaid subscribers 40% Greater than $60.00 17% 50% $51.00 – $60.00 83% 10% Less than $50.00 Percentage of respondents 2008 2009 There were no responses in the less-than-$50 category in 2009. ARPU for prepaid subscribers 17% Greater than $40.00 25% 25% $30.00 – $40.00 25% 33% $20.01 – $29.99 38% 25% Less than $20.00 12% Percentage of respondents 2008 2009 46 | Change is in the air
  • 50. We asked companies what percentage of their postpaid subscriber revenue is related to access versus usage. Seventy-four percent (74%) of the respondents’ revenue is due to access. We also asked companies what percentage of their total service revenue was a result of roaming. The average of all respondents was 3% in the current year and 4% in the 2008 Global Wireless Industry Survey. For all responding carriers with revenue greater than $5.0 billion, the average was 4%; for all responding carriers with revenue less than $5.0 billion, the average was 2%. Fifty-six percent (56%) of respondents reported that they track business/enterprise and individual/consumer subscribers separately for internal reporting purposes. Eighty percent (80%) of carriers with revenue greater than $5.0 billion track business/ enterprise and individual/consumer subscribers separately, while only 25% of carriers with revenue less than $5.0 billion track this information. For carriers that do track separately for internal reporting purposes, responding companies indicated that an average of 75% of their subscribers are individuals, while 25% are business. The ARPU for individuals is $52, while the ARPU for businesses is $63. The churn rates for individuals and businesses are 2% and 1%, respectively. We asked companies what percentage of total minutes is represented by long-distance usage. Responses averaged 11%. The following charts show long-distance revenue as a percentage of service revenue and feature revenue as a percentage of service revenue. Long-distance revenue as a percentage of service revenue Carriers with revenue 5% < $5.0 billion 6% 4% All respondents 5% Carriers with revenue 3% > $5.0 billion 3% 2008 2009 Feature revenue as a percentage of service revenue Carriers with revenue 11% < $5.0 billion 13% 8% All respondents 9% Carriers with revenue 4% > $5.0 billion 3% 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 47
  • 51. Performance measures We asked companies their percentages of bad-debt expense and operating expense to total services revenue. One and a half percent (1.5%) was the average bad-debt expense in 2009 compared with 2% in the 2008 Global Wireless Industry Survey and 2.1% in the 2007 Wireless Industry Survey. Bad-debt expense as a percentage of service revenue Carriers with revenue 1.3% < $5.0 billion 1.1% 1.9% All respondents 1.5% Carriers with revenue 2.6% > $5.0 billion 1.8% 2008 2009 The following chart shows operating expense as a percentage of service revenue for 2008 and 2009. Operating expense as a percentage of service revenue Carriers with revenue 61% < $5.0 billion 66% 57% All respondents 63% Carriers with revenue 49% > $5.0 billion 60% 2008 2009 The following chart shows sales and marketing expense as a percentage of service revenue for 2009. 2009 sales and marketing expense as a percentage of service revenue Carriers with revenue 20% < $5.0 billion All respondents 17% Carriers with revenue 15% > $5.0 billion 48 | Change is in the air
  • 52. The following chart shows the EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of the responding companies as a percentage of service revenue. EBITDA margin as a percentage of service revenue Carriers with revenue 38% > $5.0 billion 37% 41% All respondents 34% Carriers with revenue 44% < $5.0 billion 30% 2008 2009 We asked companies how long they wait before discontinuing service if a prepaid customer fails to replenish an account when the balance is $0 and when the subscriber has not had activity in the account. Companies’ responses are illustrated in the following two charts. Time to discontinue service 11% 22% 11% 30 – 45 days 46 – 60 days 56% 61 – 90 days 91 – 120 days Time to disconnect prepaid customers with no activity 11% 34% 11% 30 – 45 days 46 – 60 days 22% 61 – 90 days 22% 91 – 120 days Other* *Other includes 121 days to 6 months. Further, we asked companies how they account for any remaining balance on an account when a prepaid customer is disconnected. All of the responding companies said the customer forfeits the balance and that revenue is recognized. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 49
  • 53. Performance measures Carriers use various sales channels to acquire subscribers (postpaid and prepaid) and to allow prepaid subscribers to replenish service. We asked companies to indicate the percentages of their postpaid subscribers and prepaid subscribers that they acquire through each different sales channel. Their responses are illustrated in the following three charts. Postpaid subscriber activation channels 48% Dealers, resellers, and agents 34% 29% Retail stores 34% 11% Kiosks 4% 5% Other 3% 4% Direct sales 11% 2% Telesales/telemarketing 8% 1% Internet 3% Call centers 3% Percentage of respondents Carriers with revenue < $5.0 billion Carriers with revenue > $5.0 billion There were no responses in the call-centers category from carriers with revenue less than $5.0 billion. The allocation of different sales channels for all respondents to acquire postpaid customers in the current year is consistent with responses received in the 2008 Global Wireless Industry Survey. 50 | Change is in the air
  • 54. Prepaid subscriber activation channels: Carriers with revenue > $5.0 billion Dealers, resellers, 59% and agents 64% 37% Retail stores 23% Kiosks 6% 3% Call centers 5% 1% Internet 2% Percentage of respondents 2008 2009 There were no responses in the kiosks category in 2008. Prepaid subscriber activation channels: Carriers with revenue < $5.0 billion Dealers, resellers, 49% and agents 65% 45% Retail stores 26% 4% Kiosks 6% Telesales/ 1% telemarketing 1% Direct sales 1% Other 2% Percentage of respondents 2008 2009 There were no responses in the telesales/telemarketing category in 2009 or in the other category in 2008. The allocation of different sales channels for all respondents to acquire prepaid customers in the current year has shifted away from retail stores and toward dealers, resellers, and agents and toward greater use of kiosks than in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 51
  • 55. Performance measures Subscriber costs The average operating expense per subscriber in the current year is $174. For carriers with revenue greater than $5.0 billion, the average operating expense per subscriber is $249 and for carriers with revenue less than $5.0 billion, is $99. Companies were asked to indicate the costs that they include in the numerator of their calculation of cost per gross addition when used as a performance measure. The following chart shows the elements used in the numerator for the calculation for 2009 and in the 2008 Global Wireless Industry Survey. Components that make up total cash cost per gross addition 92% Gross equipment cost of sales 89% 92% Advertising 89% 85% Equipment revenues 89% 85% Sales commissions—activation 78% 77% Direct-sales-force salaries 78% 69% Agent rebates 78% 69% Dealer volume-sales bonuses 78% 54% Retail store facility costs 78% 69% Subscriber rebates 67% Direct-sales-force general 54% and administrative costs 67% 38% Training costs 56% 46% Cooperative marketing 44% 38% Postactivation commissions 44% New product 23% development costs 33% 15% Credit check expense 22% 15% Direct subscriber retention 22% 8% Activation fees 22% 15% Airtime promotions 11% 8% Customer care 11% Percentage of respondents 2008 2009 Chart sums to greater than 100% because multiple responses were allowed. 52 | Change is in the air
  • 56. Seventy-one percent (71%) of responding companies expense customer acquisition costs related to postpaid subscribers, while the remaining 29% either: • Expense acquisition costs net of U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition, deferral amount; or • Expense all costs as incurred except for certain commissions that are matched and recognized with deferred activation fee revenue. All responding carriers expense customer retention costs for postpaid subscribers. The carriers were also asked which media they used for advertising their service. The following chart shows the average response by source of advertising. The results for 2009 are consistent with the results of the 2008 Global Wireless Industry Survey. Advertising media Television 32% Billboards 14% Newspaper 14% Radio 13% Other* 7% Internet 7% Advertising agency fees 4% Other print media 4% Sponsorship 3% Magazine 1% Event sponsorship 1% Percentage of respondents *Other includes entertainment/production, cinema, co-op, general promo, and product development. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 53
  • 57. Performance measures Advertising media split between carriers with revenue greater than $5.0 billion and carriers with revenue less than $5.0 billion are depicted in the following chart. Advertising media: Carriers > $5.0 billion and Carriers < $5.0 billion 34% Television 30% 15% Billboards 12% 7% Newspaper 24% 19% Radio 2% 9% Other* 4% 4% Internet 14% 3% Advertising agency fees 7% 6% Other print media 1% 2% Sponsorship 4% Magazine 2% 1% Event sponsorship Percentage of respondents Carriers < $5.0 billion Carriers > $5.0 billion *Other includes entertainment/production, cinema, co-op, general promo, and product development. There were no responses in the magazine category for carriers with revenue less than $5.0 billion or in the event-sponsorship category for carriers with revenue greater than $5.0 billion. We asked companies to provide percentages of commission expense for each sales channel in the current year. The following chart shows the results. Commission expense by channel 4% 12% 26% National retail sales channels Agent sales channels 58% Direct retail sales channels Direct enterprise sales channels There was a 12% decrease in the average commission expense for agent sales channels and a 14% increase in the average commission expense for national retail sales channels from the 2008 Global Wireless Industry Survey. 54 | Change is in the air
  • 58. Sixty-three percent (63%) of the responding carriers’ commission payments are typically structured to pay in full at the point of acquisition or retention of the subscriber. The remainder reported that they pay in installments, through handset subsidies, or 45 days after acquisition. Fifty percent (50%) of the survey respondents record an accrual for potential chargebacks (reduction to commission expense resulting from potential deactivations). One hundred percent (100%) of those respondents record an accrual based on average chargeback and clawback percentages. Seventy-five percent (75%) of the survey respondents pay recurring residual commission fees over the lives of activated subscribers. Of the respondents that pay a residual commission expense, 100% pay it to agent sales channels, and 67% pay it to national retail sales channels. Eighty-seven percent (87%) of the respondents recognize the residual commission fee paid to agents when earned. Only one carrier pays residual commission expense for direct retail sales, and this expense is recognized when earned. Forty-four percent (44%) of the respondents pay residual commissions on prepaid plans when a customer replenishes or tops up an account. Sixty percent (60%) of companies with revenue greater than $5.0 billion pay residual commissions on prepaid plans when a customer tops up an account. Only 25% of companies with revenues less than $5.0 billion pay commissions on prepaid plans. Companies were asked to indicate how they treat sales of handsets if their company uses resellers and/or indirect agents. Treatment of postpaid handset sales 17% 33% Handsets are sold at suggested retail price less a discount Handsets are sold separately at cost plus a markup 50% Handsets are sold separately at cost less incentive payments for point-of-sale discounts Treatment of prepaid handset sales 25% 25% Handsets are sold at suggested retail price less a discount Handsets are sold separately at 13% cost less a percent discount 37% All handsets are direct (sourced) from the manufacturer Other* *Other includes two carriers whose pricing structures vary depending on the sale venue. Thirty-three percent (33%) of the responding companies pay commissions to resellers for sales of handsets in addition to the activation of subscribers, compared with 22% in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 55
  • 59. Performance measures Data Eighty-eight percent (88%) of the responding companies offer data services to postpaid customers, while all responding companies offer data services to prepaid customers. The responding companies offer multiple types of data services to customers. Short-message service (SMS) continues to be the data revenue stream that generates the majority of data revenue. The following chart depicts the percentage of total revenue generated from each type of data service identified, as related to postpaid data services. Postpaid data revenue 38% SMS 33% Phone or BlackBerry-based 21% e-mail and Web access 23% 10% Laptop cards 11% 12% Other* 10% 5% Data bundles 8% Internet access 3% from handset 6% 3% Pictures 2% 2% Games—downloading 2% 2% Premium SMS 2% 3% Ring tones 1% 1% Location-based services 1% Premium services 1% Percentage of respondents 2008 2009 *Other includes mobile computing, roaming data, paging, and outroam. There were no respondents in the premium-services category in 2008. 56 | Change is in the air
  • 60. The following chart depicts the percentage of total revenue generated for each type of data service identified, as related to prepaid data services. The allocation of prepaid revenue for each revenue source is consistent with the 2008 Global Wireless Industry Survey results. Prepaid data revenue 54% SMS 55% Internet access 8% from handset 12% 1% Games—usage 9% 8% Ring tones 8% 10% Data bundles 4% 4% Other 3% 2% Ring-back tones 2% 5% Games—downloading 2% 5% Premium SMS 1% Screen savers/wallpaper 1% Video/music downloads 1% 2% Pictures 1% Phone or BlackBerry-based 1% e-mail and Web access 1% Percentage of respondents 2008 2009 There were no respondents in the screen-savers/wallpaper and video/music-downloads categories in 2008. The following explanations and charts illustrate how the responding companies bill various data revenue streams. Ring tones Eighty-four percent (84%) of the responding companies bill their customers per download or charge; 16% bill a fixed monthly fee plus variable fees per usage. In the 2008 Global Wireless Industry Survey, 64% of respondents billed their customers per download or charge, and 27% billed a monthly fixed fee plus variable fees per usage. All responding companies recognize ringtones revenue gross on the income statement in the current year, while 80% of responding companies recognized ringtones gross in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 57
  • 61. Performance measures Games Fifty percent (50%) of the responding companies bill their customers per download/ usage charge, 33% bill a fixed monthly fee plus variable fees per usage, and 17% bill based on usage. In the 2008 Global Wireless Industry Survey, 64% billed their customers per download/usage charge, and 18% billed a fixed monthly fee plus variable fees based on usage. All responding companies recognize game downloading revenue gross on the income statement in the current year, while 80% of responding companies recognized game downloading revenue gross in the 2008 Global Wireless Industry Survey. SMS and premium SMS All of the respondents reported that they recognize SMS revenue gross on the income statement, compared with 75% of respondents in the 2008 Global Wireless Industry Survey. The following charts illustrate how SMS and premium SMS are billed to customers. Billing of SMS revenues Fixed monthly fee plus 55% variable fees per usage 80% 9% Fixed monthly fee 20% 27% Other 9% Per download/usage Percentage of respondents 2008 2009 There were no respondents in the other and per-download/usage categories in 2009. Billing of premium SMS revenues Per download 55% or use charge 67% Fixed monthly fee plus 18% variable fees per usage 33% 18% Other Variable fees 9% based on usage Percentage of respondents 2008 2009 There were no respondents in the other and variable-fees-based-on-usage categories in 2009. Phone/BlackBerry-based e-mail and Web access Sixty percent (60%) of respondents bill their customers a fixed monthly fee plus a variable fee based on usage, and 40% of respondents bill a fixed monthly fee related to phone/BlackBerry-based e-mail. In the 2008 Global Wireless Industry Survey, 70% of respondents billed a fixed monthly fee plus a variable fee based on usage, and 20% of respondents billed a fixed monthly fee for phone/BlackBerry-based e-mail. 58 | Change is in the air
  • 62. Laptop cards The majority (80%) of survey respondents bill their customers a fixed monthly fee plus a variable fee based on usage for laptop cards, compared with 64% in the 2008 Global Wireless Industry Survey. Meanwhile, 17% of current responders said they bill a fixed monthly fee, compared with 27% in the 2008 Global Wireless Industry Survey. Internet access from handsets All of the survey respondents recognize Internet access from handset revenue gross on the income statement, compared with 67% of the 2008 Global Wireless Industry Survey respondents. The following chart shows the method of billing of Internet access from handsets in 2009 and 2008. Billing of Internet access from handset revenue Fixed monthly fee plus 50% variable fees per usage 80% 20% Fixed monthly fee 20% 20% Combination 10% Per download/use charge Percentage of respondents 2008 2009 There were no respondents in the combination and per-download/use-charge categories in 2009. Picture revenue The following chart depicts picture revenue billing in 2009 and 2008. Billing of picture revenue Fixed monthly fee plus 40% variable fees per usage 67% Per download 20% or use charge 17% 20% Fixed monthly fee 17% 20% Other Percentage of respondents 2008 2009 There were no respondents in the other category in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 59
  • 63. Performance measures Network The average network cost per voice minute was $.022 in 2009 compared with $.038 in the 2008 Global Wireless Industry Survey. The average cost per voice user was $14.17 in 2009, compared with $18.16 in the 2008 Global Wireless Industry Survey. We asked companies which costs are included in the network/system expense. The responses are depicted in the following chart. Costs included in network/system costs Maintenance and utility costs 100% Interconnect/backhaul costs 100% Roaming costs 100% Rent expense 88% Long-distance costs 86% Cost of data 75% Engineer salary cost 75% Utilities 71% Switch support 71% Subscriber usage 71% Other salary costs 57% Employee benefits 57% Access circuits 50% Data content 50% Directory assistance 50% Government fees 50% Tower site rental 43% Universal Service Fund 20% Customer care 14% Billing costs 14% Percentage of respondents Chart sums to greater than 100% because multiple responses were allowed. 60 | Change is in the air
  • 64. We asked companies what percentages of each component make up total network/ system costs. Their average responses are illustrated in the following chart. Components of network costs Rent expense 15% Interconnect/backhaul costs 13% Roaming costs 12% Maintenance and utility costs 10% Government fees 8% Engineer salary cost 8% Subscriber usage 6% Tower site rental 5% Long-distance costs 4% Other 3% Cost of data 3% Data content 2% Utilities 2% Customer care 2% Billing costs 2% Switch support 1% Employee benefits 1% Universal Service Fund 1% Other salary costs 1% Directory assistance 1% Percentage of respondents We asked companies what percentages of their cell sites they lease rather than own. Responding companies lease an average of 92% of their cell sites, compared with 77% of respondents in the 2008 Global Wireless Industry Survey. Eighty-nine percent (89%) of the responding companies said they lease 80% or more of their total cell sites, compared with 60% of respondents in the 2008 Global Wireless Industry Survey. Seventy-eight percent (78%) of the responding companies indicated they use circuit inventory tracking systems to account for system expenses, compared with 82% of respondents in the 2008 Global Wireless Industry Survey. Of those companies, 29% use Excel to track circuit inventory, compared with 50% in the 2008 Global Wireless Industry Survey. Forty-three percent (43%) of respondents use internally developed tracking systems, compared with 8% in the 2008 Global Wireless Industry Survey. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 61
  • 65. Performance measures Long-distance and interconnect expenses Eighty-nine percent (89%) of the respondents perform bill verification for long-distance and interconnect expenses, compared with 100% of respondents in the 2008 Global Wireless Industry Survey. All of those companies perform bill verification internally; in 2008, 83% of respondents performed bill verification internally and 8% used a combination of internal resources and a third party for bill verification. The following chart depicts which internal group performs respondents’ bill verification. Internal department that performs bill verification 13% 13% 61% 13% Finance Transmission Other Engineering Sixty-seven percent (67%) of the responding companies reported that they recognized reciprocal compensation for calls terminating on incumbent local exchange carrier (ILEC) networks—with no reciprocal compensation agreements in place—compared with 50% in the 2008 Global Wireless Industry Survey. The following chart illustrates how in 2009 and 2008 these companies accounted for terminating expenses when there is no reciprocal compensation agreement in place. Accounting for calls terminated on ILEC networks No accrual recorded until ILEC notifies the company of its 50% desire to establish a reciprocal 33% compensation agreement 20% Other* 33% Record an accrual based on an estimate of the minutes 20% terminated and an estimated 22% settlement rate 10% Bill and keep 22% Percentage of respondents 2008 2009 *Within other, respondents dispute invoices but accrue a portion based on historical dispute settlements or accrue based on the average of the last three bill periods. 62 | Change is in the air
  • 66. Rate plans and billing We asked companies to identify the method through which their postpaid subscribers receive their monthly invoices. The responses are shown in the following chart. The average percentage of subscribers receiving paper invoices decreased from 81% in the 2008 Global Wireless Industry Survey to 72% in 2009, and the average percentage of subscribers receiving electronic invoices increased from 6% in 2008 to 14% in 2009. Monthly invoice delivery method 2% 12% 14% Paper bill 72% Electronic bill (e-bill) Both a paper bill and an e-bill No invoice is received The following charts indicate the varying numbers of rate plans the responding companies currently offer to postpaid customers and to prepaid customers. Seventy-five percent (75%) of respondents said their companies are focused on reducing the number of rate plans offered. Number of rate plans offered to postpaid customers 60% Less than 100 plans 40% 30% 101 – 500 plans 40% 10% Greater than 500 plans 20% Percentage of respondents 2008 2009 Number of rate plans offered to prepaid customers 70% Less than 10 plans 67% 10% 10 – 29 plans 20% Greater than 30 plans 33% Percentage of respondents 2008 2009 There were no respondents in the 10–29-plans category in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 63
  • 67. Performance measures Compared with the number of plans currently offered (as shown in the previous chart), four carriers each indicated they have more than 1,000 postpaid plans maintained in their billing systems, and three carriers each indicated they have more than 30 prepaid plans active in their billing systems. We asked companies the number of postpaid rate plans they currently offer to individuals/consumers. The following chart illustrates their responses. Number of postpaid rate plans offered to individuals/consumers Greater than 100 17% 10 – 100 50% Less than 10 33% Percentage of respondents We asked companies how many different rate plans are currently maintained and in use in their billing systems for postpaid customers and prepaid customers. Carriers maintain an average of 5,580 postpaid plans and 62 prepaid plans. Rate plans maintained and in use in billing systems for postpaid customers 14% Greater than 10,000 29% 5,000 – 10,000 50% 57% Less than 5,000 50% Percentage of respondents 2008 2009 There were no respondents in the greater-than-10,000 category in 2009. Rate plans maintained and in use in billing systems for prepaid customers 12% Greater than 200 25% 101 – 200 33% 25% 20 – 100 17% 38% Less than 20 50% Percentage of respondents 2008 2009 There were no respondents in the greater-than-200 category in 2009. We also asked companies how many different rate plans are currently maintained and in use in their billing systems for business/enterprise and individual/consumer subscribers. The average response for business/enterprise subscribers was 2,129, and the average response for individual/consumer subscribers was 2,258. For carriers with revenue less than $5.0 billion, the average numbers of rate plans for business/enterprise subscribers and individual/consumer subscribers were 819 and 1,491, respectively. We also asked companies what their companies’ targeted e-bill penetration rates are for 2009, 2010, and 2011. The average rate for 2009 increased from 12% in the 2008 Global Wireless Industry Survey to 19% in the current year. 64 | Change is in the air
  • 68. Targeted e-bill penetration rate 2011 23% 2010 18% 2009 19% The following charts illustrate the carriers’ smart phone sales and ARPU as of June 30, 2009. Smart phone sales as a percentage of total phone sales Carriers with revenue 35% > $5.0 billion Average of all 21% respondents Carriers with revenue 4% < $5.0 billion Smart phone subscribers as a percentage of total subscribers Average revenue 19% > $5.0 billion Average 12% Average revenue 2% < $5.0 billion Average revenue per user (ARPU) for smart phone users Average revenue $85 > $5.0 billion Average $74 Average revenue $62 < $5.0 billion We also asked companies what percentages of cell/mobile site rentals are located in various locations. The following chart gives the results. Location of cell/mobile site rentals % of cell/mobile site rentals 72% colocated on towers 37% % of cell/mobile site rentals 15% used solely by carrier 24% % of cell/mobile site rentals 11% colocated/in building 18% % of cell/mobile site rentals 2% colocated on other carriers’ towers 21% Percentage of respondents 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 65
  • 69. Property, plant, and equipment The following pages cover wireless-company practices in the area of property, plant, and equipment. A shift from third-generation (3G) technology to to fourth-generation (4G) technology is on the rise despite the difficult economic environment. It is expected that five carriers will be utilizing this technology by 2011. 66 | Change is in the air
  • 70. Capital expenditure reporting We asked companies to report their capital expenditures as a percentage of service revenue, of gross fixed assets, and of net fixed assets for the fiscal year ended December 31, 2008. The results were compared with the 2008 Global Wireless Industry Survey and are illustrated in the following three charts for the different categories of responding companies. Capital expenditures as a percentage of service revenue Carriers with revenue 21.4% < $5.0 billion 30.6% 18.0% All respondents 21.5% Carriers with revenue 14.6% > $5.0 billion 14.2% 2008 2009 Capital expenditures as a percentage of gross fixed assets Carriers with revenue 16.5% < $5.0 billion 20.1% 13.8% All respondents 15.9% Carriers with revenue 11.1% > $5.0 billion 12.6% 2008 2009 Capital expenditures as a percentage of net fixed assets Carriers with revenue 42.4% < $5.0 billion 31.0% 32.7% All respondents 27.4% Carriers with revenue 23.0% > $5.0 billion 24.6% 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 67
  • 71. Property, plant, and equipment The following charts show the responding companies’ depreciation expense as a percentage of service revenue and gross fixed assets for fiscal year 2008 for the different categories of responding companies compared with responses in the 2008 Global Wireless Industry Survey. Depreciation expense as a percentage of service revenue Carriers with revenue 14.2% < $5.0 billion 13.1% 14.0% All respondents 12.8% Carriers with revenue 13.9% > $5.0 billion 12.6% 2008 2009 Depreciation expense as a percentage of gross fixed assets Carriers with revenue 10.2% < $5.0 billion 9.0% 10.1% All respondents 10.1% Carriers with revenue 10.0% > $5.0 billion 11.0% 2008 2009 The next two charts illustrate capital expenditures per average market population (POP) and per average subscriber for the different categories of responding companies, compared with responses in the 2008 Global Wireless Industry Survey. Capital expenditures per average POP Carriers with revenue $12.18 < $5.0 billion $9.97 $15.24 All respondents $14.54 Carriers with revenue $18.29 > $5.0 billion $18.20 2008 2009 68 | Change is in the air
  • 72. Capital expenditures per average subscriber Carriers with revenue $119.99 < $5.0 billion $160.64 $108.46 All respondents $120.51 Carriers with revenue $96.94 > $5.0 billion $88.40 2008 2009 Companies were asked their depreciation expense per average POP and per average subscriber for fiscal year 2008. The results, compared with the 2008 Global Wireless Industry Survey, for the different categories of responding companies are shown in the following two charts. Depreciation expense per average POP Carriers with revenue $8.20 < $5.0 billion $6.88 $12.35 All respondents $11.72 Carriers with revenue $16.49 > $5.0 billion $15.60 2008 2009 Depreciation expense per average subscriber Carriers with revenue $84.00 < $5.0 billion $63.59 $90.02 All respondents $71.37 Carriers with revenue $96.05 > $5.0 billion $77.60 2008 2009 PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 69
  • 73. Property, plant, and equipment Technology usage Companies were asked what percentages of cell sites and subscriber base are covered by third-generation (3G) technology. Percentage of cell sites utilizing 3G technology 4 Number of respondents 3 270 1 0% – 50% 51% – 75% 76% – 100% Percentage of subscriber base covered by 3G technology 3 Number of respondents 2 1 1 60% – 70% 71% – 80% 81% – 90% 91% – 100% No responses were received in the 0%-59% category. 70 | Change is in the air
  • 74. The following chart provides the responding companies’ average cost per cell site of implementing 3G technology. Average cost per cell site of implementing 3G technology 20% 40% 20% Less than $100,000 $100,000 – $149,999 $200,000 – $249,999 20% $250,000 – $299,999 There were no respondents in the $150,000–$199,999 category. In addition, fourth-generation (4G) technology is currently used by only one responding company. However, two respondents expect to begin utilizing 4G technology in calendar year 2010 and two more expect to in calendar year 2011. Consistent with the 2008 Global Wireless Industry Survey, capital expenditures are reported on an accrual basis by all of the responding companies. However, one-third of the respondents in 2009 also reported providing a reconciliation to cash basis for capital expenditures. Companies were asked whether their methods of externally reporting capital expenditures were consistent with the capital expenditures reported on their statements of cash flows. Eighty-eight percent (88%) of the respondents indicated their methods of externally reporting capital expenditures were consistent with capital expenditures reported on their statements of cash flows, and 12% reported making adjustments that removed accruals from capital expenditures reported on their statements of cash flows. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 71
  • 75. Property, plant, and equipment The following chart illustrates the percentage of respondents that include the following expenditures in their externally reported capital expenditures compared with the 2008 Global Wireless Industry Survey. Types of capital expenditures Purchase of nonnetwork 100% property, equipment, or land 100% Purchase of network-related 100% property or equipment 100% Capitalized internal-use 100% software 100% 100% Leasehold improvement 100% Capitalized labor and 92% overhead costs 89% 58% Purchases of software licenses 89% Site selection costs 67% 8% Capitalized interest 56% Purchases of licenses (spectrum) and related licensing (spectrum) 50% costs, including license 44% (spectrum) clearing costs Prepayments or deposits made 25% for any property or equipment 33% 33% Other* Acquisitions of 33% companies/markets 22% 8% Rental expense 11% Percentage of respondents 2008 2009 *Other includes perpetual license software and progress payments. Chart sums to greater than 100% because multiple responses were allowed. Site selection costs were not included as an option in 2008. 72 | Change is in the air
  • 76. Companies were asked whether they consider the hardware and software components of network equipment separately. Eighty-eight percent (88%) of the respondents consider hardware and software components separately. The following chart illustrates which software costs the responding companies classify separately from property, plant, and equipment. Software classified separately from property, plant, and equipment Switch software 78% Network software 67% Billing and mediation device software 56% Network management systems 44% Percentage of respondents Chart sums to greater than 100% because multiple responses were allowed. We asked companies to identify the externally reported balance sheet line item on which they record capitalized internal-use software. Seventy-eight percent (78%) of the respondents include capitalized internal-use software as property, plant, and equipment, and 11% record it as an intangible asset subject to amortization or other long-term assets. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 73
  • 77. Property, plant, and equipment Capitalization policies The following chart illustrates the types of costs associated with fixed assets that responding companies capitalize, compared with responses in the 2008 Global Wireless Industry Survey. Types of capital expenditures Freight and 100% handling 100% External 100% labor 100% Installation 100% costs 100% Legal/permitting 100% fees 100% Sales 100% taxes 100% Internal labor 92% and related costs 89% Site selection 78% Overhead 67% costs 67% Interest expense on property, 58% plant, and equipment 67% Interest expense on wireless 50% licenses (spectrum) 56% Rigging 25% activity 44% Utilities during 42% construction period 33% Telco charges during 33% construction period 33% Rent during 17% construction period 22% Property taxes during 8% construction period 11% 8% Other* Percentage of respondents 2008 2009 *Other includes network maintenance, and site selection costs were not included as an option in 2008. Chart sums to greater than 100% because multiple responses were allowed. 74 | Change is in the air
  • 78. The following chart depicts the responding companies’ de minimis levels for the capitalization of property, plant, and equipment. Minimum capitalization thresholds for property, plant, and equipment 1 $2,001 – $3,000 1 1 $1,001 – $2,000 2 4 $501 – $1,000 4 2 $0 – $500 3 No minimum capitalization 1 threshold for network 1 Number of respondents 2008 2009 Companies were asked whether or not they capitalize interest on wireless licenses or fixed assets. Fifty-five percent (55%) of the responding companies indicated that they capitalize interest on wireless licenses. Seventy-eight percent (78%) of the respondents capitalize interest on fixed assets. All of the responding companies indicated that they had debt/borrowings that incur a material amount of interest expense, and 78% indicated that they are actively building out new markets. Of the respondents that said they capitalize interest on wireless licenses, 60% indicated that they record the capitalized interest to fixed assets on the balance sheet. The other 40% record the capitalized interest to wireless licenses on the balance sheet. Companies were asked whether they receive rebates from their equipment vendors based on a specified level of fixed-asset purchases or other commitments. All of the respondents indicated that they receive those types of rebates from equipment vendors. Fifty-six percent (56%) reduce the cost basis of equipment at the time of purchase based on an estimate of the rebates to be received, and 44% reduce the cost basis only at the time the rebate has been earned (i.e., specified level of purchases has been met). We asked companies whether they received any type of liquidating damages from equipment vendors for instances related to equipment failure, service downtime, customer service delays, repair delays, and the like. Forty-four percent (44%) of the respondents indicated that they received liquidating damages from equipment vendors for those types of events: • 50% of those companies reduce the cost basis of the equipment for the amounts to be received. • 25% record the amounts received as a reduction of expense. • 25% use a combination of the methods. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 75
  • 79. Property, plant, and equipment Capitalized labor All of the responding companies determine or quantify their internal capitalized labor amounts by utilizing an indirect method, compared with 27% in the 2008 Global Wireless Industry Survey that reported utilizing direct costs (based on a direct allocation of salaries). The following chart depicts the frequency of cost studies that are used for determining the internal capitalized labor cost. Annual cost studies are most common in the current year and are consistent with 50% in the 2008 Global Wireless Industry Survey. Frequency of cost studies 14% 14% 58% Annually 14% Biannually Quarterly Monthly 76 | Change is in the air
  • 80. The following chart illustrates the types of expenses that the responding companies include in their internal capitalized labor costs. Types of internal capitalized costs 100% Engineer salaries 100% 91% Benefits and taxes 100% 64% Lodging and hotel 75% 55% Meals and entertainment 75% 55% Vehicle expenses 63% 55% Administrative salaries 50% 36% Office supplies 38% 27% Executive management salaries 13% 27% Cellular phone usage 13% 18% Telephone usage 13% 18% Utility expenses 13% 9% Equipment rental 13% 27% Training 9% Office rent 9% Sales and marketing Percentage of respondents 2008 2009 Chart sums to greater than 100% because multiple responses were allowed. No responses were received for training, office rent or sales and marketing categories in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 77
  • 81. Property, plant, and equipment Site acquisition costs Responding companies account in different manners for site acquisition costs associated with unsuccessful candidates within a search ring. The results are split evenly, with three carriers each either (1) expensing the costs immediately to cost of services, (2) capitalizing costs of unsuccessful candidates within a search ring and depreciating over the life of other site acquisition costs, or (3) capitalizing/ deferring costs and expense at a later date if the site is determined to be unsuccessful. The following two charts illustrate how the responding companies account for and classify construction-in-progress abandonment costs related to soft assets (such as site acquisition costs) and tangible assets (such as radios, switch hardware, and software). Tangible assets 12% 22% 33% Cost of service (cost of revenue) Classified as a component of depreciation expense 33% Transfer to another site where the asset can be used Classified on a separate line item Soft assets 33% 34% Cost of service (cost of revenue) 33% Classified as a component of depreciation expense Classified on a separate line item 78 | Change is in the air
  • 82. Asset impairments and fair value Seventy-eight percent (78%) of the respondents indicated that they exclude asset impairment charges from their EBITDA (earnings before interest, taxes, depreciation, and amortization) calculations. The following chart indicates how respondents define the lowest level of cash flows for purposes of asset impairment testing under applicable accounting standards. The results are consistent with the results of the 2008 Global Wireless Industry Survey. Lowest level of cash flows 22% 11% 67% At the enterprise level At a regional level At a reporting-unit/segment level Eighty-nine percent (89%) of the responding companies indicated that their definition of the lowest level of cash flows/cash-generating units under applicable accounting standards is consistent with their operating segments, while 11% indicated that the level is generally at or lower than the operating-segment level. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 79
  • 83. Property, plant, and equipment Business combinations Of the respondents that perform a fair value analysis related to business combinations and in accordance with applicable accounting standards to allocate purchase price: • 26% indicated that the analysis is performed internally. • 37% indicated that they use the assistance of a third party. • 37% use a combination of internal and third-party resources. Fifty-six percent (56%) of the respondents indicated that they completed a business combination within the past three years. The following chart depicts the types of valuation methodologies the respondents use in determining fair values related to business combinations and purchase price allocations. Valuation methodologies for business combinations and purchase price allocations 55% Business enterprise value 44% 55% Greenfield income approach 44% 45% Cost approach 33% Income approach 36% (relief-from-royalty method) 33% Market approach 18% (purchase price allocation) 22% 27% Excess-earnings method 22% Market approach 27% (license resales) 22% 9% Discounted cash flow 22% Market approach 27% (auctions) 11% Market approach 18% (guideline company) 11% Percentage of respondents 2008 2009 Chart sums to greater than 100% because multiple responses were allowed. Of the respondents that perform fair value analyses for valuations related to annual impairment testing for goodwill and indefinite-lived intangible assets: • 33% indicated that the analysis is performed internally. • 45% indicated that they use the assistance of a third party. • 22% use a combination of internal and third-party resources. 80 | Change is in the air
  • 84. The following chart depicts the types of valuation methodologies that respondents use for determining fair values related to annual impairment testing for goodwill and indefinite-lived intangible assets. Types of valuation methodologies 73% Greenfield income approach 44% 64% 73% Business enterprise value 44% 27% Cost approach 33% Income approach 27% (relief-from-royalty method) 33% Market approach 9% (purchase price allocation) 22% 18% Excess-earnings method 22% Market approach 36% (license resales) 22% Discounted cash flow 22% Market approach 36% (auctions) 11% Market approach 9% (guideline company) 11% Percentage of respondents 2008 2009 Chart sums to greater than 100% because multiple responses were allowed. No responses were received in the discounted-cash-flow category in 2008. The discount rates used by the responding companies in their 2008 annual impairment analyses ranged from 8% to 11.5%. The responding companies indicated that no changes in the valuation methodologies for annual impairment testing are expected, due to the changes in the fair value accounting standards that are effective for U.S. GAAP in 2009. The following chart identifies the financial statement line item on which the responding companies record a resulting gain or loss upon the sale of a long-lived asset or group of assets. The results are consistent with the 2008 Global Wireless Industry Survey. Recording gain/loss from sale of long-lived assets 11% As a separate line item within operating income If material, as a separate line item within operating income. 22% 45% If not material, netted against individual operating expense line item Included in other income Mass asset accounting and gains and losses or 22% normal retirements and disposals are recorded into accumulated depreciation PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 81
  • 85. Property, plant, and equipment Fifty-six percent (56%) of the responding companies had completed a nonmonetary license exchange compared with 33% in the 2008 Global Wireless Industry Survey. Eighty percent (80%) of those responding companies that had nonmonetary license exchanges recorded the transactions at fair value in the current year. All of the responding companies indicated that they had either recorded an impairment of fixed assets or accelerated depreciation on a category or group of assets in the past 12 months. Seventy-eight percent (78%) of the respondents said the primary reason was due to technological updates that rendered the equipment obsolete and 22% indicated that the changes were due to changes in business strategy. Asset tracking The following chart illustrates how the respondents track the movement of their network fixed assets. Tracking network of fixed assets An automated fixed-asset 58% system that uses a bar-code-scanning system 67% 17% Other manual processes 11% Physical counts are conducted that are reconciled to the fixed-asset system 11% Fixed-asset movements 8% are input based on transfer tags that are entered manually 11% A fixed-asset system with movements entered in real 17% time into the system (manual) Percentage of respondents 2008 2009 Companies were asked which fixed-asset tracking systems they use. The fixed-asset tracking systems the respondents use include CATS/Fulcrum (cellular asset tracking system), SAP, GAMMA, Lawson, Oracle, and EMPAC/Infowave. Of the respondents that use bar-coding systems: • 78% indicated that the system also tracks spare parts. • 67% indicated that their system is integrated or interfaced directly with the fixed-asset subledger. • One-third reported that over 75% of their assets are included in their bar-coding systems. • One-third each reported that either less than 25% of the assets are included or 26% to 50% are included in their bar-coding systems. 82 | Change is in the air
  • 86. Companies were asked whether they have performed an inventory of their network assets. Compared with the results of the 2008 Global Wireless Industry Survey, there has been an increase in the number of respondents that have completed an inventory of network assets, from 66% to 78%. The results are presented in the following chart. Completion of network asset inventory 11% 11% 78% Yes, inventory completed No, but we plan to perform one within the next 1–2 years No, and we have no plans to perform one The companies that completed an inventory (78%) were asked when they had performed the inventory. Compared with the 2008 Global Wireless Industry Survey, in which 75% of the respondents had completed the inventory within the previous 12 months, only 57% of this year’s respondents completed the inventory within the past 12 months. Timing of inventory of network assets 14% 29% 57% Inventory completed within the past 12 months Inventory completed within the past 1–2 years Inventory completed over 5 years ago PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 83
  • 87. Property, plant, and equipment The responding companies indicated whether the inventory process for network assets was a result of physical counts or cycle counts for each type of item counted. Nature of inventory procedures 5 Number of responding companies 4 3 3 2 2 2 2 1 Cell sites Switches Depots Warehouses Vendor warehouses Physical counts Cycle counts There were no responses on cycle counts for the depots category. In addition, responding companies indicated that cell sites, switches, depots, and vendor warehouses were typically counted only once a year, while warehouses typically were counted more than once a year. Eighty-six percent (86%) of the respondents indicated that they reconcile their physical or cycle counts to their fixed-asset ledger via specific identification of each asset. Sixty-seven percent (67%) of the responding companies indicated that they are able to reconcile their operational fixed-asset records to the asset records in the fixed-asset register for accounting purposes. 84 | Change is in the air
  • 88. Asset useful lives The following chart depicts the respondents’ fixed-asset components that are tracked and depreciated separately within the respondents’ fixed-asset systems. Compared with the 2008 Global Wireless Industry Survey, no significant changes were noted, except that channel cards and cabling were separately tracked by 82% and 50%, respectively, in the prior year. Separately tracked and depreciated fixed-asset components Switch—hardware 100% Switch—software 100% Channel cards 100% Radios (RF)—hardware 86% Towers/base stations 86% Test equipment 86% Leasehold improvements 86% Microwave equipment 86% Antenna 71% Radios (RF)—software 71% Power equipment 71% Shelters/buildings 71% Data network 71% Cabling 71% Capitalized interest property, plant, and equipment 71% Voice mail equipment 57% Land improvement—owned land 57% Land improvement—leased land 57% Capitalized interest 29% wireless licenses Percentage of respondents Chart sums to greater than 100% because multiple responses were allowed. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 85
  • 89. Property, plant, and equipment The following charts illustrate the depreciation lives for the fixed-asset components that are tracked and depreciated separately. The charts are separated into the depreciation lives for 2.5G and 3.0G for each fixed-asset component and are compared with the 2008 Global Wireless Industry Survey results. Radios (RF) and related equipment—hardware Radios (RF) and related equipment—hardware 2.5G 1 10 Number of years 3 8 4 4 7 2 1 6.5 1 Number of respondents 2008 (average useful life = 7.6 years) 2009 (average useful life = 7.5 years) There were no respondents in the 10-years category in 2009. Radios (RF) and related equipment—hardware 3.0G 1 10 1 Number of years 2 8 3 3 7 2 1 5 1 Number of respondents 2008 (average useful life = 7.4 years) 2009 (average useful life = 7.6 years) 86 | Change is in the air
  • 90. Radios (RF) and related equipment—software Radios (RF) and related equipment—software 2.5G 1 10 2 Number of years 8 3 2 7 1 5 1 2 3 2 Number of respondents 2008 (average useful life = 6.4 years) 2009 (average useful life = 5.8 years) There were no respondents in the 10-years and 7-years categories in 2009. Radios (RF) and related equipment—software 3.0G 1 10 1 2 Number of years 8 3 1 7 1 5 1 1 3 1 Number of respondents 2008 (average useful life = 6.8 years) 2009 (average useful life = 7.0 years) There were no respondents in the 7-years category in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 87
  • 91. Property, plant, and equipment Switch—hardware Switch—hardware 2.5G Number of years 4 8 4 7 5 3 Number of respondents 2008 (average useful life = 7.4 years) 2009 (average useful life = 7.6 years) Switch—hardware 3.0G 2 Number of years 10 1 3 8 2 3 7 5 Number of respondents 2008 (average useful life = 7.8 years) 2009 (average useful life = 8.1 years) 88 | Change is in the air
  • 92. Switch—software Switch—software 2.5G 1 8 2 2 Number of years 7 1 1 5 1 4 3 3 1 1 Number of respondents 2008 (average useful life = 4.4 years) 2009 (average useful life = 5.3 years) There were no respondents in the 1-year category in 2009. Switch—software 3.0G 1 10 2 1 8 2 Number of years 1 7 1 1 5 1 3 3 2 1 1 Number of respondents 2008 (average useful life = 5.0 years) 2009 (average useful life = 6.8 years) There were no respondents in the 1-year category in 2009. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 89
  • 93. Property, plant, and equipment Antenna Antenna 2.5G 2 8 1 Number of years 3 7 2 5 1 2 4 2 Number of respondents 2008 (average useful life = 7.5 years) 2009 (average useful life = 5.8 years) There were no respondents in the 5-years category in 2008. Antenna 3.0G 1 15 10 1 Number of years 2 8 1 2 7 2 1 5 2 2 4 2 Number of respondents 2008 (average useful life = 7.3 years) 2009 (average useful life = 6.3 years) There were no respondents in the 15-years category in 2009 or the 10-years category in 2008. 90 | Change is in the air
  • 94. Cabling Cabling 2.5G 1 18 1 Number of years 2 15 1 2 8 2 2 7 2 Number of respondents 2008 (average useful life = 11.1 years) 2009 (average useful life = 10.5 years) Cabling 3.0G 18 1 Number of years 1 15 1 2 8 2 2 7 2 Number of respondents 2008 (average useful life = 9.0 years) 2009 (average useful life = 9.2 years) There were no respondents in the 18-years category in 2008. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 91
  • 95. Property, plant, and equipment Microwave equipment Microwave equipment 2.5G 1 15 1 1 10 Number of years 2 8 3 2 7 2 1 6 1 1 2 Number of respondents 2008 (average useful life = 7.9 years) 2009 (average useful life = 8.4 years) There were no respondents in the 10-years or 2-years categories in 2009. Microwave equipment 3.0G 1 15 1 1 Number of years 10 1 2 8 3 2 7 3 1 2 Number of respondents 2008 (average useful life = 8.1 years) 2009 (average useful life = 8.8 years) There were no respondents in the 2-years category in 2009. 92 | Change is in the air
  • 96. Shelters/buildings Shelters/buildings 2.5G 1 39 1 21 4 Number of years 20 3 2 15 2 1 14 12 1 1 10 1 Number of respondents 2008 (average useful life = 19.4 years) 2009 (average useful life = 16.0 years) There were no respondents in the 39-years, 21-years, or 14-years categories in 2009 or in the 12-years category in 2008. Shelters/buildings 3.0G 1 21 2 20 2 Number of years 2 15 2 1 14 12 1 1 10 2 Number of respondents 2008 (average useful life = 16.4 years) 2009 (average useful life = 14.6 years) There were no respondents in the 21-years or 14-years categories in 2009 or in the 12-years category in 2008. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 93
  • 97. Property, plant, and equipment Towers/base stations Tower/base stations 2.5G 1 30 1 25 1 1 Number of years 20 1 1 16 5 15 5 1 10 7 1 Number of respondents 2008 (average useful life = 17.6 years) 2009 (average useful life = 15.9 years) There were no respondents in the 30-years, 16-years, or 10-years categories in 2009 or in the 7-years category in 2008. Tower/base stations 3.0G 1 25 1 1 20 1 Number of years 1 16 5 15 5 1 10 1 7 1 Number of respondents 2008 (average useful life = 16.2 years) 2009 (average useful life = 15.2 years) There were no respondents in the 16-years category in 2009 or in the 7-years category in 2008. 94 | Change is in the air
  • 98. Test equipment Test equipment 2.5G 1 7 Number of years 5 5 5 2 3 2 Number of respondents 2008 (average useful life = 4.8 years) 2009 (average useful life = 4.4 years) There were no respondents in the 7-years category in 2009. Test equipment 3.0G 1 7 1 Number of years 4 5 4 2 3 3 Number of respondents 2008 (average useful life = 4.7 years) 2009 (average useful life = 4.5 years) PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 95
  • 99. Property, plant, and equipment Land improvements—leased land Land improvements—leased land 2.5G 1 20 1 Number of years 1 15 1 12 1 5 1 Number of respondents 2008 (average useful life = 13.0 years) 2009 (average useful life = 12.5 years) There were no respondents in the 15-years or 12-years categories in 2009. Land improvements—leased land 3.0G Number of years 15 1 1 12 1 5 1 Number of respondents 2008 (average useful life = 10.7 years) 2009 (average useful life = 10.0 years) There were no respondents in the 12-years category in 2009 or in the 15-years category in 2008. 96 | Change is in the air
  • 100. Land improvements—owned land Land improvements—owned land 2.5G 25 1 Number of years 2 20 2 2 15 1 1 12 Number of respondents 2008 (average useful life = 16.4 years) 2009 (average useful life = 20.0 years) There were no respondents in the 12-years category in 2009 or in the 25-years category in 2008. Land improvements—owned land 3.0G 25 1 Number of years 1 20 1 1 15 1 1 12 Number of respondents 2008 (average useful life = 15.7 years) 2009 (average useful life = 20.0 years) There were no respondents in the 12-years category in 2009 or in the 25-years category in 2008. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 97
  • 101. Property, plant, and equipment Leasehold improvements Leasehold improvements 2.5G Number of years 1 10 1 5 5 3 Number of respondents 2008 (average useful life = 5.8 years) 2009 (average useful life = 6.3 years) Leasehold improvements 3.0G Number of years 2 10 2 3 5 3 Number of respondents 2008 (average useful life = 7.0 years) 2009 (average useful life = 7.0 years) 98 | Change is in the air
  • 102. Channel cards Channel cards 2.5G 2 8 3 Number of years 2 7 1 1 6.5 1 2 5 Number of respondents 2008 (average useful life = 6.6 years) 2009 (average useful life = 7.5 years) There were no respondents in the 5-years category in 2009. Channel cards 3.0G 10 1 2 Number of years 8 3 2 7 2 3 5 4 1 Number of respondents 2008 (average useful life = 6.4 years) 2009 (average useful life = 7.4 years) There were no respondents in the 5-years category in 2009 or in the 10-years or 4-years categories in 2008. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 99
  • 103. Property, plant, and equipment Power equipment Power equipment 2.5G 1 11 1 Number of years 2 10 1 2 8 1 2 7 1 Number of respondents 2008 (average useful life = 8.7 years) 2009 (average useful life = 8.3 years) There were no respondents in the 11-years category in 2009. Power equipment 3.0G 1 11 Number of years 1 10 1 2 8 1 2 7 2 Number of respondents 2008 (average useful life = 8.5 years) 2009 (average useful life = 8.0 years) There were no respondents in the 11-years category in 2009. 100 | Change is in the air
  • 104. Voice mail equipment Voice mail equipment 2.5G 2 Number of years 8 2 2 7 2 3 5 1 Number of respondents 2008 (average useful life = 6.4 years) 2009 (average useful life = 7.0 years) Voice mail equipment 3.0G 10 1 Number of years 2 8 2 2 7 2 2 5 1 Number of respondents 2008 (average useful life = 6.7 years) 2009 (average useful life = 7.5 years) There were no respondents in the 10-years category in 2008. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 101
  • 105. Property, plant, and equipment Data network Data network 2.5G 2 Number of years 8 2 2 7 2 3 5 1 2008 (average useful life = 6.3 years) 2009 (average useful life = 7.0 years) Data network 3.0G 10 1 2 Number of years 8 2 2 7 2 3 5 1 4 1 Number of respondents 2008 (average useful life = 6.4 years) 2009 (average useful life = 7.0 years) There were no respondents in the 10-years or 4-years categories in 2008. 102 | Change is in the air
  • 106. For those responding companies that currently have 4.0G assets, the average depreciation-life-by-asset components are presented in the following chart. Fixed-asset component Average life: 4.0G Radios (RF) and related equipment—hardware 5.8 Radios (RF) and related equipment—software 5.5 Switch—hardware 5.5 Switch—software 3.0 Antenna 4.0 Cabling 12.0 Microwave equipment 7.0 Shelters or buildings 20.0 Towers or base stations 15.0 Test equipment 5.0 Land improvements—leased land 12.5 Land improvements—owned land 20.0 Leasehold improvements 5.0 Channel cards 7.3 Power equipment 9.0 Companies were asked whether they changed any of their fixed-asset useful lives during the past year. Only 22% of respondents indicated that they had; that’s compared with 50% in the 2008 Global Wireless Industry Survey. All of the current respondents that indicated that they had had changes in their fixed-asset useful lives during the past year said the changes generally increased depreciation expense. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 103
  • 107. Property, plant, and equipment The following chart illustrates the last time the respondents performed full studies of their fixed-asset useful lives. Most-recent fixed-asset useful-life study 11% 22% 56% Within the past 12 months Between 1 and 2 years ago 11% More than 4 years ago Study of lives has not been performed There were no respondents in the between-2-and-4-years-ago category in 2009. Companies were asked when they plan to perform their next study of asset lives, and the following chart illustrates the responses compared with the 2008 Global Wireless Industry Survey. The majority (78%) of the responding companies indicated that when analyses of asset lives are conducted, they’re completed using internal resources. Next planned fixed-asset useful-life study 25% No plans to perform a study 11% 8% Within the next 1–2 years 11% 8% Within the next 12 months 33% 59% Within the next 6 months 45% Percentage of respondents 2008 2009 104 | Change is in the air
  • 108. Taxes and tax-useful lives The following charts represent for tax purposes the useful lives of the fixed-asset components utilized by the respondents. Radio (RF) and related equipment—hardware (tax average useful life = 6.2 years) Number of years 10 1 8 1 7 2 5 6 Number of respondents Radio (RF) and related equipment—software (tax average useful life = 4.6 years) Number of years 12 1 7 1 3 6 Number of respondents Switch—hardware (tax average useful life = 9.8 years) Number of years 46 1 7 1 5 7 Number of respondents Switch—software (tax average useful life = 4.7 years) Number of years 12 1 7 1 5 1 3 6 Number of respondents PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 105
  • 109. Property, plant, and equipment Antenna (tax average useful life = 7.4 years) Number of years 15 1 10 1 8 1 7 2 5 4 Number of respondents Cabling (tax average useful life = 12.4 years) Number of years 42 1 15 2 7 1 5 4 Number of respondents Microwave equipment (tax average useful life = 6.9 years) Number of years 15 1 8 1 7 1 5 5 Number of respondents Shelters/buildings (tax average useful life = 17.7 years) Number of years 20 1 15 5 7 1 5 2 1 1 Number of respondents 106 | Change is in the air
  • 110. Towers/base stations (tax average useful life = 11.1 years) Number of years 15 5 8 1 7 1 5 2 Number of respondents Test equipment (tax average useful life = 5.8 years) Number of years 8 1 7 3 5 4 3 1 Number of respondents Land improvements—leased land (tax average useful life = 13.0 years) Number of years 15 4 13 1 5 1 Number of respondents Land improvements—owned land (tax average useful life = 13.7 years) Number of years 17 1 15 4 5 1 Number of respondents PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 107
  • 111. Property, plant, and equipment Leasehold improvements (tax average useful life = 25.4 years) Number of years 39 4 15 4 13 1 Number of respondents Channel cards (tax average useful life = 5.4 years) Number of years 8 1 5 6 Number of respondents Power equipment (tax average useful life = 11.4 years) Number of years 46 1 10 2 5 5 Number of respondents Voice mail equipment (average tax useful life = 5.0 years) Number of years 5 7 Number of respondents Data network (tax average useful life = 5.0 years) Number of years 5 6 Number of respondents Companies were asked whether or not they have integrated fixed-asset systems that link book basis and tax basis calculations for recording additions, disposals, transfers, etc. Sixty-seven percent (67%) of the respondents indicated that they have integrated fixed-asset systems. The remaining 33% of the respondents that do not have integrated fixed-asset systems said they utilize two fixed-asset systems. Companies were asked when they last reconciled their fixed-asset tax basis and book basis differences. All responding companies indicated that they have performed such reconciliations within the past 12 months, and of those companies, 38% perform reconciliations regularly (at least semiannually). 108 | Change is in the air
  • 112. Colocation The following chart depicts the percentages of the respondents’ total cell sites that generate colocation receipts. Colocation receipts 11% 11% 78% Less than 25% 25% – 50% No colocation The following chart depicts where the respondents record colocation receipts on their income statements. The results shown in the chart are consistent with the 2008 Global Wireless Industry Survey. Classification of colocation receipts on income statement 11% 11% 45% Revenue Reduction of cost of service 33% Reduction of an operating expense other than direct cost of service No colocation receipts For those responding companies that record colocation receipts on the revenue financial statement line item, 75% indicated that these amounts are recorded in other revenue. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 109
  • 113. Property, plant, and equipment Companies were asked to identify the percentage of assets that are colocated on third-party sites. The results are presented in the following chart. Percentage of assets colocated on third-party sites 38% 38% Percentage of respondents 24% Less than 25% 50% – 60% Greater than 90% Eighty-six percent (86%) of the responding companies indicated that they record colocation costs on the income statement in cost of services/sales, and 14% indicated that they record the cost in rent expense. Asset retirement obligations The following chart depicts the percentage of responding companies that have asset retirement obligations (AROs) associated with the following types of long-lived assets. Compared with the 2008 Global Wireless Industry Survey, more responding companies have recorded an ARO associated with mobile telephone switching offices (MTSOs). Long-lived assets with asset retirement obligations 83% Cell sites 89% 67% MTSOs 89% 50% General and administrative 56% 50% Retail sales facilities 56% 25% Data centers 44% 16% Network operating center 22% Percentage of respondents 2008 2009 Chart sums to greater than 100% because multiple responses were allowed. 110 | Change is in the air
  • 114. Responding companies were asked to indicate the locations of their cell sites. The results are presented in the following chart, as compared with the 2008 Global Wireless Industry Survey. Type of cell site utilized 50% 50% 40% 34% 30% 28% 20% 16% 16% 15% 10% 8% 6% 6% 3% 3% 4% 4% 4% 2% 1% 0% Colocated cell sites Towers on leased land Rooftops Monopoles Towers on owned land Utility towers Non-tower-in building Other Tunnels 2008 2009 There were no responses in the other category in 2009 and tunnels category in 2008. The following chart summarizes the costs included in the respective ARO calculations, as reported by the respondents that indicate they record an ARO. All of the companies reported that they include costs to dismantle and recondition sites; in the 2008 Global Wireless Industry Survey, 83% reported that they included dismantling costs and 92% reported that they included reconditioning costs. Cost included within ARO calculation Recondition site 100% Dismantle assets 100% Demolish site 67% Move assets off-site 56% Redeploy assets 11% Percentage of respondents Chart sums to more than 100% because multiple responses were allowed. PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 111
  • 115. Property, plant, and equipment Of the responding companies, 67% indicated that lessors have required the performance of remediation or restoration activities for cell site leases that have been terminated. During 2008, responding companies completed remediation activities associated with MTSOs, cell towers (located on rooftops, colocated and utility towers), general and administrative, and retail facilities. The survey asked companies whether they factored the probability of lessor enforcement into the calculation of their ARO liability. Sixty-seven percent (67%) of the respondents factor the probability of lessor enforcement into the calculation of their ARO liability. Responding companies continue to be split on the classification of ARO accretion expense in the income statement. Sixty-two percent (62%) record ARO expense as an operating expense line item other than depreciation expense, and 38% record the expense within depreciation and amortization. Of those companies that record accretion expense on an operating expense line item other than depreciation and amortization: • 40% record it as cost of services or equivalent cost line item. • 40% record it in selling, general, and administrative. • 20% record it as a separate line item in the financial statements. 112 | Change is in the air
  • 116. The following chart indicates which items on the statement of cash flows respondents use for reporting accretion expense. The results are consistent with the 2008 Global Wireless Industry Survey. Reporting of accretion expense on statement of cash flows 13% As part of the changes in accruals/payables/provisions 13% to reconcile net income to operating cash flow 50% “Other, net” as an adjustment to reconcile net income to operating cash flow Separately as an adjustment to reconcile net income 24% to operating cash flow Combined with depreciation and amortization expense as an adjustment to reconcile net income to operating cash flow The following chart illustrates the responding companies’ various methods of identifying, calculating, and tracking AROs. Sampling continues to be the most common methodology among responding companies, which is consistent with 50% in the 2008 Global Wireless Industry Survey. Method of identifying, calculating, and tracking AROs 11% 11% My company uses a sampling method to identify, calculate, and track AROs 45% My company identifies, calculates, and tracks AROs for each individual asset My company uses a portfolio approach of 33% stratifying asset types My company uses a location-specific method of average cost assumptions and probabilities Consistent with the 2008 Global Wireless Industry Survey, more than 50% of the respondents update AROs on an annual basis. The following chart depicts the frequency with which the responding companies update their ARO analyses. Frequency of update of ARO analysis 11% 56% 33% Annually Quarterly Monthly PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 113
  • 117. About PricewaterhouseCoopers PricewaterhouseCoopers’ Entertainment, Media and Communications industry practice delivers a complete range of professional services to telecom, cable, satellite, Internet, media, and entertainment service providers across the globe. The group provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. Drawing on our accumulated experience, we anticipate and meet the challenges of global regulatory change, and help our clients deal with the impact of industry convergence. We continue to add measurable value to our client relationships through our leadership and innovation, which are evident in our evolving services and products. With thousands of practitioners around the world, we are always close at hand to provide industry specialist expertise and resources. Contact information For more information about this publication or to inquire about participating in a future survey, please contact: Pierre-Alain Sur Christ Economos US Wireless Industry Leader Entertainment, Media and PricewaterhouseCoopers Communications Tax Leader 900 South Shackleford Road, Suite 505 PricewaterhouseCoopers Little Rock, AR 72211 300 Madison Avenue 501 907 8085 New York, NY 10017 pierre-alain.sur@us.pwc.com 646 471 0612 christ.h.economos@us.pwc.com Kenneth J. Sharkey Entertainment, Media and Deborah Bothun Communications Leader Entertainment, Media and PricewaterhouseCoopers Communications Advisory Leader 300 Madison Avenue PricewaterhouseCoopers New York, NY 10017 350 South Grand Avenue 646 471 5114 Los Angeles, CA kenneth.j.sharkey@us.pwc.com 212 217 3302 deborah.k.bothun@us.pwc.com Robert W. Conklin Entertainment, Media and Communications Assurance Leader PricewaterhouseCoopers 300 Madison Avenue New York, NY 10017 646 471 5858 robert.conklin@us.pwc.com To request additional copies of this publication, contact Shara Slattery by e-mail at shara.slattery@us.pwc.com 114 | Change is in the air
  • 118. Of further interest Customer profitability Most organizations today assess business performance using revenue or broad based profitability metrics. Yet this approach may be causing organizations to miss valuable opportunities to make their business more profitable. A closer look at individual customers can help transform an organization’s bottom line. Customer profitability analysis goes well beyond customer segmentation which measures the profitability of groups of customers based on geography or product mix—but looks at an individual customer and how they are contributing to the bottom line based on the products they own, subscriptions, customer service history, and other factors. To download this publication, visit the publications page once at www.pwc.com/us/em Global entertainment and media outlook: 2009–2013 Created by top minds from PricewaterhouseCoopers’ Entertainment, Media and Communications (EMC) practice, in conjunction with economic forecasting firm Wilkofsky Gruen Associates, the tenth edition of the Outlook provides in-depth global analyses and five-year growth projections for 12 industry segments. The Outlook includes an overview of the global entertainment and media market as well as in-depth coverage of the market in North America, Europe, the Middle East, Asia/Pacific, and Latin America.. All orders can be placed through PwC’s Outlook Web site at www.pwc.com/outlook Communications review PwC’s quarterly journal for telecom, cable, satellite and Internet executives that showcases some of the best global practices and leading-edge thinking regarding management and financial issues in the communications industry. To view or download the pdf file, please visit www.pwc.com/communicationsreview CommunicationsDirect News It’s a news source. It’s a research tool. It’s free. Subscribe today to start receiving daily or weekly updates on the latest news and information specifically covering the global telecom, cable, satellite and Internet industries. Customized at your request by sector and region, CommunicationsDirect News provides you with updates selected from more than a dozen news sources. For research needs, utilize the site to search for content on more than 40 industry sites. See it for yourself, visit www.communicationsdirectnews.com PricewaterhouseCoopers 2009 North American Wireless Industry Survey | 115
  • 119. pwc.com © 2010 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US). This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. PricewaterhouseCoopers has taken all reasonable steps to ensure that information contained herein has been obtained from reliable sources and that this publication is accurate and authoritative in all respects. However, it is not intended to give legal, tax, accounting, or other professional advice. If such advice or other expert assistance is required, the services of a competent professional should be sought. BS-10-0289-A.0210.DvL

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