CCI State of the Mobile Nation Q3 2012

Size Matters (Scale Doesn’t Hurt)
November 8th, 2012

About
the
Cote
Collabora-ve

ABOUT
CCI
WIRELESS
AND
OUR
WORK

The
Cote
Collabora9ve
is
a
provider
of
strategy,
market
intelligence,
and
advisory
services
to
the
wireless
and
financial
industries.
Since

our
incep9on
we
have
worked
with
24
carriers
worldwide,
11
device
manufacturers,
and
two
of
the
largest
search
engines.
Our
financial

analysis
for
the
wireless
industry
is
used
on
a
monthly
basis
by
ins9tu9ons
that
cumula9vely
control

a
significant
por9on
of
the
re9rement

plans
in
the
United
States.

Our
key
differen9ator
is
that
the
individuals
working
on
your
project
each
have
more
than
5
years
of
wireless
opera&ng
experience,
and

our
founder
oversees
all
projects.
Some
projects
we
have
completed
over
the
last
7
years
include:

•  Valua9on
for
the
assets
of
Skype
prior
to
acquisi9on

•  Prelaunch
distribu9on
strategy
for
the
iPhone

•  Intellectual
property
porVolio
evalua9on
for
Nokia

About
Michael
Cote
CCI
Wireless
Projects

Michael
has
spent
22
years
in
the
communica9ons
and
Our
financial
analysis
on
the
mobile
industry
has
been
cited
by

technology
industry,
with
direct
experience
in
land-‐line
publica9ons
including,
The
Wall
Street
Journal,
Bloomberg,
Cnet,

telecommunica9ons,
Internet
service
providers,
and
wireless
The
Street.com,
and
others.

communica9ons.

Mr.
Cote
has
over
thirteen
years
of
sales,
marke9ng,

and
management
experience.
He
also
has
experience
managing
a
budget

of
more
than
$500
million,
leading
an
organiza9on
of
more
than
1000
Our
work
is
differen9ated
by
our
insights,
experience,
and

employees,
and
was
responsible
for
the
crea9on
of
more
than
$1.2
contacts
in
the
wireless
industry.

billion
in
annual
revenue
with
a
gross
margin
of
52%.
His
list
of

accomplishments
in
the
wireless
industry
includes:

•  Awarded
2005
J.D.
Power
&
Associates
"Highest
Business
Wireless

Customer
Sa9sfac9on"

•  Awarded
2003
"Best
Sales
Team
–
North
America"
by
Donald
Trump

and
Forbes
Magazine

•  #1
Worldwide
in
Blackberry
sales
for
six
consecu9ve
quarters

•  Signed
Master
Service
Level
Agreements
with
650
of
the
Fortune

1000

•  Achieved
“Top
5%”
ranking
in
the
GLG
TMT
Network
for
7
years

running

US Mobile Subscribers (In Millions)

350

300

250

Verizon
200 AT&T
Sprint
T-Mobile
150
Metro PCS
Leap Wireless
100 Clearwire

50

0
Q1-08

Q2-08

Q3-08

Q4-08

Q1-09

Q2-09

Q3-09

Q4-09

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q3-11

Q4-11

Q1-12

Q2-12
Source: Carrier filings , CCI Research

Reported US Carrier Metrics

US Carrier CPGA Verizon ARPA
$150.00
$640.00
$145.00
$580.00
$520.00 $140.00
$460.00 T-Mobile
$400.00 $135.00 Verizon
Metro PCS ARPA
$340.00
Leap Wireless $130.00
$280.00
Clearwire
$220.00 $125.00
$160.00
$120.00
$100.00
Q4-10 Q4-11
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12

US Carrier CCPU US Carrier ARPU
$66.00
$29.00
$64.00
$27.75
$26.50 $62.00
Verizon Verizon
$25.25 $60.00
$24.00 AT&T
T-Mobile $58.00
$22.75
$21.50 Metro PCS $56.00 Sprint
$20.25 $54.00 T-Mobile
$19.00 Leap Wireless
$52.00
$17.75
$16.50 $50.00
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12

Smartphone Penetration

80.00%

70.00%

60.00%

50.00% Verizon
AT&T

40.00% Sprint
T-Mobile
Metro PCS
30.00%
Leap Wireless

20.00%

10.00%

0.00%
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12

Source: Carrier Filings

US Carrier iPhone Sales (in millions)

7.60

4.70
4.30 4.30
AT&T
3.70 Verizon
3.20 3.10 Sprint

2.70 2.70

2.00
1.80
1.50 1.50 1.50

3Q11 4Q11 1Q12 2Q12 3Q12

Source: Carrier filings , CCI Research

Carrier Subsidy Mitigation

•  Discontinued unlimited data plans
•  Grandfathered unlimited data plans ineligible for subsidized upgrades
•  $30 Equipment Upgrade Fee

•  Discontinued unlimited data plans
•  Grandfathered unlimited data plans ineligible for subsidized upgrades
•  $36 Equipment upgrade fee

•  $10 Premium Data surcharge

•  Maintains Lower Handset ASPs

US Gross Wireless Activations by Channel

2008 2011 2014 estimate
1.0% 1.0% 1.0% 1.0%
1.0% 2.0% 1.0% 3.0%
1.0% 1.0% 1.0%
3.0% 2.0% 3.0% 3.0%
5.0% 3.0%
4.0%

6.0%
5.0% 9.0%
41.0% 39.0%
10.0%
13.0% 10.0%

63.0% 10.0%

27.0% 30.0%

Tele-Sales Other
Wholesale I-dealers (Amazon,Wirefly,etc)
B2B Independent dealers
On-line Premium dealers and Exclusive dealers
National retailers (Apple, Best Buy, RSH,etc) Carrier store

Source: CCI Research

Total Tablets Vendors & OS, Shipments and Market Share
Q3 2012 (Units in millions)

Q3 2012 Q3 2011
Q3 2012 Q3 2011
Vendors Market Market YoY Growth
Shipments Shipments
Share Share
Apple 14.0 50.4% 11.1 59.7% 26.1%
Samsung 5.1 18.4% 1.2 6.5% 325.0%
Amazon.com 2.5 9.0% - - -
Asus 2.4 8.6% 0.7 3.8% 242.9%
Lenovo 0.4 1.4% 0.2 1.1% 100.0%
Others 3.3 12.2% 5.4 28.9% -38.9%
Grand Total 27.8 100.0% 18.6 100.0% 49.5%

Q3 2012 Q3 2011
Q3 2012 Q3 2011
Operating System Market Market
Shipments Shipments
Share Share
iOS 14.0 56.7% 11.1 64.5%
Android 10.2 41.3% 5.0 29.2%
Microsoft 0.4 1.6% 0.4 2.3%
Others 0.1 0.4% 0.7 4.1%
Grand Total 24.7 100.0% 17.2 100.0%

Source: IDC, Strategy Analytics, CCI Research

Small Tablets

iPad Mini Nexus 7 Kindle Fire HD Kindle Fire B&N Nook HD

Price Starts at $329 Stars at $199 Starts at $199 $159 Starts at $199

Screen Size 7.9 inches 7 inches 7 inches 7 inches 7 inches

Resolution 1024x768 1280x800 1280x800 1024x600 1440x900

Ram 1024MB 1024MB 512MB, 1GB

Storage 16GB, 32GB, 64GB 16GB, 32GB 16GB, 32GB 8GB 8GB, 16GB

Operating System iOS 6 Android 4.1 Jellybean Kindle Fire Kindle Fire Custom Android 2.3
(Custom Android 4.0.3) (Custom Android 4.0.3)

Processor Dual-core Apple A5 NVIDIA Tegra 3 TI OMAP 4470 TI OMAP 4470 TI OMAP 4430 Dual-core

Ports Lightning Micro USB HDMI Out, Micro USB HDMI Out, Micro USB Micro SD, Micro USB

Camera 5MP rear camera, 1.2MP 1.2MP Front-facing Front-facing HD camera Front-facing HD camera n/a
Front-facing camera camera with custom Skype app with custom Skype app

Battery life 10 hrs 10 hrs 11 hrs 11 hrs 10.5 hrs

Cellular Data 4G/LTE ($429) Unlock ($299) n/a n/a n/a
AT&T, Verizon, Sprint AT&T

Wi-Fi 802.1 1a/b/g/n Wi-Fi 802.1 1b/g/n Dual Antennas and MIMO Dual Antennas and MIMO 802.11 b/g/n
(802.1 1n 2.4Ghz and
5Ghz)

Colors Black & Slate or Black Black Black White or Black
White & Silver

Weight 10.88 ounces 11.84 ounces 14.6 ounces 14.6 ounces 11.1 ounces

Bluetooth Yes Yes Yes Yes n/a

Phablets

Galaxy Note II Galaxy Note Zeta SH-O2E Intuition VS950 K860 J Butterfly

Manufacturer Samsung Samsung Sharp LG Lenovo HTC

Operating Android OS 4.1.1 Android OS 2.3.5 Android OS 4.0.4 Android OS 4.0.4 Android OS 4.0.4 Android OS 4.1
(Jelly Bean) (Gingerbread) (Ice Cream Sandwich) (Ice Cream Sandwich) (Ice Cream Sandwich) (Jelly Bean)
System

Processor 1.6 Ghz 1.4 Ghz 1.5 Ghz 1.5 Ghz 1.4 Ghz 1.5 Ghz
Quad-core Dual-core Quad-core Dual-core Quad-core Quad-core
Exynos Exynos Snapdragon S4 Exynos Snapdragon S4
4412 APQ8064 APQ8064

Connectivity 4G LTE 4G LTE 4G LTE 4G LTE 4G LTE 4G LTE

Dimensions 5.94 x 3.17 x 0.37 5.78 x 3.27 x 0.38 5.31 x 2.68 x 0.39 5.50 x 3.56 x 0.33 5.65 x 2.93 x .38 5.63 x 2.8 x 0.36

Display/ Super AMOLED 16M Super AMOLE IGZO TFT HD-IPS LCD 1280 x 720p HD Super LCD 3
colors 16M colors 720 x 1280 pixels 16M colors 203 PPI 440 PPI
resolution 720 x 1280 pixels 800 x 1280 pixels 4.9 inches 768 x 1024 pixels 5.0 inches 5 inches
5.5 inches 5.3 inches 5.0 inches

RAM 2 GB 1 GB 2 GB 1 GB 1 GB 2 GB

Storage 16/32/64 GB 16/32 GB 32 GB 32 GB 8 GB 16 GB
capacity
Rear/ Front 8 MP 3264 x 2448 8 MP 3264 x 2448 16 MP 8 MP 3264 X 2448 8 MP 8 MP
1.9 MP 2.0 MP 1.2 MP 1.3.MP 2.0 MP 2.1 MP
Camera
Battery Li-Ion 3100 mAh Li-Ion 2500 mAh Li-Ion 2320 mAh Li-Polymer 2080 mAh Li-Ion 2250 mAh 2,020 mAh
35 hrs 26 hrs

Total Smartphone OS, Shipments and Market Share
Q2 2012 (Units in Millions)

Q3 2012 Q3 2011
Q3 2012 Q3 2011 Year-over-Year
Operating System Market Market
Shipments Shipments Change
Share Share
Android 136.0 75.0% 71.0 57.5% 91.5%

iOS 26.9 14.9% 17.1 13.8% 57.3%

BlackBerry 7.7 4.3% 11.8 9.5% -34.7%

Symbian 4.1 2.3% 18.1 14.6% -77.3%

Windows Phone 7/ 3.6 2.0% 1.5 1.2% 140.0%
Windows Mobile
Linux 2.8 1.5% 4.1 3.3% -31.7%

Others 0.0 0.0% 0.1 0.1% -100.0%

Grand Total 181.0 100.0% 123.7 100.0% 46.4%

Source: IDC

Mobile Commerce will continue to Grow

56%Chinese
Smartphone users expect
making purchases on their
Smartphone more often in
the next 12 months

31% US Smartphone
users expect making
purchases on their
Smartphone more often in
the next 12 months
Source: Google, Ipsos, OTX

Have You Ever Purchased on a Smartphone?

60

50

40

30

20

10

0

Smartphone owners

Source: Google May 2012

Barriers to Mobile Commerce Still Exist
Prefer to use a PC/laptop
60%

Doesn't feel secure
49%

Too complicated
32%

Payment is too complex
20%

Credit card payment unavailable
10%

Too expensive
9%

Never heard of these services
3%

other
1%

Source: Google May 2012

Mobile Commerce Growth
2010 $3 Billion

2011 $6 Billion Popularity contest
2012 $10 Billion
Top 15 retailers ranked by total July 2012 unique mobile visitors
in millions, with the percentage of total smartphone owners
2013 $14 Billion reached

Amazon sites 49.6 46.6%
2014 $19 Billion
eBay 32.6 30.6%

2015 $25 Billion Apple 17.7 16.6%

Wal-Mart 16.3 15.3%
2016 $31 Billion
Target 10.0 9.4%
Source: Forrester Research Mobile Commerce Forecast, 2011 to 2016 (US)
Note: eCommerce includes mobile media and content, retail, travel, coupons/ deals, and services. Best Buy 7.2 6.7%
Does not include mobile ringtones, mobile gaming, or mobile video
Ticketmaster 5.7 5.3%
In $billions CVS 4.5 4.2%
$23.8
The Home Depot 4.4 4.1%

Blockbuster 4.0 3.8%
$17.5 Barnes & Noble 3.8 3.6%

Walgreens 3.7 3.5%

$11.7 Limited Brands 3.3 3.1%

Lowes 3.2 3.0%
$7.4
$10.7 Etsy 3.2 3.0%
$4.4
Source: comScore
$2.4
$1.2
$3.2
$2.1
2009 2010 2011 2012 2013 2014 2015

ABI Research Coda Research CCI Research

Source: Coda Research Consultancy, ABI Research & CCI Research

What consumers do on their smartphones

While shopping is not consumers’ favorite activity on their smartphones,
15 million say they make a purchase via mobile phone at least weekly

Access content/information 99.5

Access the internet 63.1
Consumers
Check e-mail 62.1 conducting
each activity at
least weekly,
Use a social network 51.4
in millions

Listen to music 49.2

Play games 46.0

Download and use apps 41.7

Make purchases 15.0

Read a book 15.0

Source: Online Publishers Association/ Frank N. Magid Associates survey
in March 2012 of 2,540 online consumers

Mobile Commerce Growth
Mobile Sales Growth Market

$8,807,588,066
Retail (346 cos)
$4,758,589,454

$3,040,197,872
Travel (45 cos)
$1,161,943,070 2012 mobile sales
2011 mobile sales
$288,078,862
Ticket (9 cos)
$106,322,058

$12,135,864,801
Total (400 cos)
$6,026,854,582

The Mobile Commerce 400 Top 10

$4,000,000,000
1. Amazon.com Inc
$2,000,000,000
$1,167,250,000
2. Apple Inc
$933,800,000
$750,000,000
3. Marriot International Inc
$330,000,000
$700,000,000 2012 mobile sales
4. Orbitz LLC
$175,000,000 2011 mobile sales
$350,000,000
5. QVC U.S
$211,000,000
$293,760,000
6. Wal-Mart Stores Inc
$127,660,926
$286,200,000
7. Hilton Worldwide
$100,000,000
$232,620,000
8. easyJet
0
9. InterContiental Hotels & $210,000,000
Resort $120,000,000
$204,163,766
10. Expedia Inc
$99,529,836

Source: 2013 Internet Retailer Mobile Commerce Top 400

Mobile Success Varies Category

Share of mobile retail sales by product category vs comparable e-commerce shares

63.00%
Mass merchant
41.10%

17.00% % of mobile commerce retail sales
Computer/electronics
16.00% % of online retail sales
As a percent of total m-commerce sales,
by market segment
11.20%
Apparel/accessories
12.30%
2.3%
0.86%
Food/drug
2.31%
25.1%
0.75%
Hardware/home
improvement 2.42%
Retail
Travel
1.22%
Office supplies Ticket
4.09%

72.6%

Source: 2013 Internet Retailer Mobile Commerce Top 400

How Mobile Consumers Shop

Where shoppers shop on their mobile device
(Consumers could select more than one response)
Home 64%

Work 39%

In line 38%

Store 37%

commuting 24%

Restaurant 20%

What mobile consumers are doing on The types of apps shoppers use
retailers sites and apps (Consumers could select more than one response)
(Consumers could select more than one response)
Looking for store information 57% Retailer specific apps 60%
Comparing prices 49% Bar code scaning 46%
Reviewing product descriptions 39% Coupon 40%
Buying items 38% Store locator 25%
Looking for coupon codes 35% List organizer 21%
Researching whether an item is 35% Loyalty card organizer 18%
Reviewing the status of an 33% Comparison shopping 17%
Checking shipping information 31%
Local shopping 15%

Source: Kantar Media

Mobile Commerce Retailer Survey
What is your primary business? What are your annual mobile commerce What percent of your annual mobile sales
sales, including all mobile sites and apps, are generated by tablets?
Web-only 46.8% including tablets?
Less than 1% 23.7%
Retail chain 19.0%
Less than $25,000 34.5%
1% to 2% 13.2%
Consumer brand manufacturer 17.7%
$25,001 to $50,000 6.3%
3% to 5% 14.5%
Catalog 16.5%
$50,001 to $100,000 6.3%
6% to 10% 15.8%
$100,001 to $250,000 6.3%
How important is mobile commerce to the 11% to 20% 9.2%
future of your internet business? $250,001 to $500,000 10.1%
21% to 30% 6.6%
Very important 58.8% $500,001 to $750,000 8.9%
31% to 50% 5.3%
Somewhat important 37.5% 750,001 to $1 million 5.1%
More than 50% 13.2%
Not important 3.8% $1 million to $5 million 8.9%

$ 5.1million to $10 million 2.5%
What percentage of your total online sales
Which of the following do you operate? $10.1 million to $50 million 7.6% will mobile, including smartphones and
(Choose only one answer) tablets, account for this year?
More than $50 million 2.5%
M-commerce site 34.6% Less than 1% 18.4%

Smartphone app 3.7% 1% to 2% 13.2%
How fast are your mobile sales growing in
Tablet app 0.0% 2012 compared with 2011? 3% to 4% 14.5%

All of the above 16.0% 0% - 10% 26.3% 5% to 7% 18.4%

Site and smartphone app 9.9% 11% - 25% 17.5% 8% to 10% 11.8%

Site and tablet app 2.5% 26% - 50% 17.5% 11% to 20% 18.4%

Smartphone and tablet app, but no 3.7% 51% - 100% 15.0% More than 20% 5.3%
m-commerce site
101% - 200% 7.5%
None of the above, am not yet in 29.6%
More than 200% 6.3%
m-commerce
Flat 8.8%

Declining 1.3%

Source: Internet Retailer, 37 web-only merchants, 15 chain retailers, 14 consumer brand manufacturers and 13 catalog/ call center companies conducted in August 2012

How many unique visitors does your mobile What percent of shoppers who come to your Do you plan to increase your spending on
commerce site attract each month mobile commerce site and/or through your mobile commerce technology this year?
(including smartphones, tablets and other mobile app make a purchase?
Yes 68.8%
mobile devices)?
Less than 1% 37.8%
No 31.3%
Less than 10,000 28.6%
1% to 2% 33.8%
10,001 to 25,000 13.0%
3% to 4% 10.8%
By how much will you increase mobile
25,001 to 50,000 14.3%
5% to 6% 8.1% technology spending?
50,001 to 75,000 5.2%
7% to 8% 1.4% 1% to 5% 16.4%
75,001 to 100,000 5.2%
9% to 10% 2.7% 6% to 10% 21.8%
100,001 to 500,000 9.1%
More than 10% 5.4% 10% to 20% 27.3%
More than 500,000 5.2%
20% to 50% 14.5%
More than 1 million 5.2%
What is the size of your mobile commerce 50% to 100% 10.9%
Do not operate an m-commerce site 14.3% technology budget for this year?
More than 100% 9.1%
Less than $25,000 53.9%
What is the size of your average mobile $25,001 to $50,000 10.5%
commerce order? If you offer one or more mobile apps, which
$50,001 to $100,000 9.2% phones do they work on? (Choose all that
Less than $25 19.2% apply)
$100,001 to $250,000 9.2%
$25 to $50 16.7% iPhone 50.0%
$250,001 to $500,000 9.2%
$51 to $75 17.9% Android 3.7%
$500,001 to $750,000 2.6%
$76 to $100 19.2% Blackberry 8.5%
750,001 to $1 million 2.6%
$101 to $500 24.4% Windows Phone 7.3%
More than $1 million 2.6%
More than $500 2.6% Other 32.9%

Don’t offer any mobile apps 39.0%


If you have a mobile site, which features and Did you build your mobile site in-house or How hard is to find, hire and retain mobile
functions does your mobile commerce site use a vendor? commerce employees?
currently offer? (Choose all that apply)
Vendor 40.0% Very difficult 22.2%
Alternate images 25.6%
In-house 32.5% Difficult 51.4%
Bar code scanning 12.2%
Don’t have a mobile site 27.5% Not difficult at all 26.4%
Click-to-call 30.5%

Contact us form 37.8%
If you used a vendor, why did you choose to How do consumers utilize your mobile
Featured products 12.2% outsource mobile commerce technology commerce site and apps?
implementation? (Choose all that applies)
Customers reviews 53.7%
Lacked expertise in-house 31.7% Make a purchase 58.5%
GPS 51.2%
Technology is too complex and 14.6% Research products and compare prices 61.0%
Mapping 9.8% constantly changing to do in-house
Check store locations and hours 26.8%
Multiple (rotating) hero shots 13.4% Cheaper to outsource 12.2%
Check out daily deals 22.0%
Product images 11.0% Not convinced mobile commerce is a 0.0%
long-term business strategy so Access and change personal account 14.6%
Shopping cart 28.0%
outsourcing minimized impact on information
Slide bar of products 37.8% internal staff
Other 17.1%
Site search 41.5%
Do you have full-time staff dedicated to
Store locator 39.0% What is the annual sales range of your
mobile commerce?
online retail (web and mobile combined)
Zoom 17.1%
Yes 18.8% business?
Don’t offer a mobile site 34.1%
No 81.3% Less than $1 million 30.3%

$1.1 million to $5 million 17.1%

If so how many? $5.1 million to $10 million 17.1%

1 26.7% $10.1 million to $25 million 7.9%

2 13.3% $25.1 million to $50 million 6.6%

3 6.7% More than $50 million 21.1%

4 or more 53.3%


Q17. Which of the following smartphones do you expect your most technically savvy friend to purchase next?
OEM Count %
0
100
200
300
400
500
600
700
800
900

HTC 45 3.26% HTC

Motorola 67 4.86% Motorola

Pantech 4 0.29% Pantech

Nokia 122 8.84% Nokia

Blackberry 66 4.78% Blackberry

Apple 644 46.67% Apple

Samsung 239 17.32% Samsung

Sony 9 0.65% Sony

LG 73 5.29% LG

Kyocera 14 1.01% Kyocera

ZTE 34 2.46% ZTE

Pantech
Huawei
0
28
0.00%
2.03%
Pantech

Huawei
October 2012
Other 35 2.54% Other

Total Surveyed 1380

OEM Count % 0
100
200
300
400
500
600
700
800
900

HTC 55 3.81%
HTC

Motorola 51 3.54%
Motorola

Pantech 7 0.49%
Pantech

Nokia 84 5.83%
Nokia

Blackberry 79 5.48%
Blackberry

Apple 846 58.67% Apple

Samsung 180 12.48% Samsung

Sony 6 0.42% Sony

LG 42 2.91% LG

Kyocera 6 0.42% Kyocera

ZTE 17 1.18% ZTE

Pantech 5 0.35% Pantech

Huawei
Other
23
41
1.60%
2.84%
Huawei

Other

June 2012
Total Surveyed 1442

Source: CCI Research Monthly Consumer Smartphone Panel

CCI State of the Mobile Nation Q3 2012

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