Mobile Report Sr07

Mobile Market Status 2007
Insight into the opportunities and challenges facing the mobile industry in 2007 including:
> MVNO and wholesale operator business models > The di
erent issues a ecting developed and developing markets > Mass market 3G > The consolidation of the vendor network market > Mobile content services > User generated content > Declining handset shipments > Slowdown in growth of the handset market
www.informatm.com
MOBILE MARKET STATUS 2007
Foreword
Dear Colleague, Welcome to the Mobile Market Status 2007 report providing insight into the key challenges and opportunities facing the mobile market. The report contains a brief overview of the trends that have shaped the industry throughout 2006 and how we think this will evolve throughout 2007. Key questions answered by the report include: How can operators maintain revenues? And what developments can we expect to see in network technology, handset strategy and mobile content development? The report concludes with a chapter drawing on our annual Mobile Industry Outlook Survey, highlighting how the 1,800 industry professionals who responded to the survey think the market will evolve. Our goal at Informa Telecoms & Media is to extend our leading position as provider of business intelligence and marketing solutions to the global telecoms and media markets. All of our products from news, trend analysis and forecasting to industry data, face-to-face conferences, exhibitions and training courses are driven by our deep understanding of the markets we serve and our goal to help our clients make better business decisions. Our powerful research capability a team of 104 analysts, journalists and researchers in 14 countries, backed up by 45 account managers and customer services staff enables us to offer you trusted, independent and insightful information when you want it and in the format you require: online, in print, customised output or face-to-face conferences like this one. So, whether you want to network among the 50,000+ executives from 206 countries attending our events programme in 2007 or join the 20,000+ strategists and innovators who take some or all of our 200 research services, executive briefings, strategic reports and data services, please be assured that you will be tapping into a high-quality resource that decisionmakers at blue chip companies have trusted for more than 30 years. Thanks very much for your continued support, and I hope you enjoy reading this report. If you would like further information on any of our business intelligence services or you would like to find out more about them, please contact kathryn.bushnell@informa.com. If you have comments about our services, please contact any of our staff or get in touch with me directly. It is our customers who determine what products and services we provide to the market, so I am always happy to hear from you. Best Regards Ian Hemming CEO Informa Telecoms & Media Ian.hemming@informa.com
Mobile operator strategies

Emerging market operators are now more profitable in terms of EBITDA than are their counterparts in the developed world, which have high ARPUs but low margins. Developed markets are seeing more regulation and increased competition from MVNOs. Mobile TV has replaced 3G as next big thing, and fixed-mobile substitution is under threat from fixedmobile convergence. The times, they are a-changing, says Mark Newman. Much has been made of the potential for developing markets to leap-frog developed countries in their use of communications technology. The global deployment of GSM networks, and the resulting fall in the cost of cellular technology, has enabled them to do just that. Instead of embarking on the long, slow and costly process of building country-wide wireline networks, developing countries have been able to swiftly roll-out communications networks using satellite and wireless-access technology. But the last two to three years have shown that it is not only in technology that developing market operators have been learning from and overtaking their European and North American counterparts. They are also leading the way in mobile operator profitability and business models. Developing market operators are now more profitable based on the financial communitys preferred metric of earnings before interest, tax, depreciation and amortization (EBITDA) than operators in Europe, North America and developed Asia. The global EBITDA average of pure mobile operators is 40%. But while developed countries average 35%, the figure for developing countries is closer to 45%. And while the developingmarket EBITDA average has grown by one percentage point in the last year, the figure for developed markets has fallen by the same amount. The most-profitable developing markets are in Asia (48%) and the Middle East and Africa (47%). In the developed world, Europe leads the way (37%), followed by North America (34%) and Asia Pacific (32%). The outlook for developing-market operators is also more encouraging. They have developed strategies and business models enabling them to make healthy profits on low-margin customers. China (ARPU of US$9.60), India (US$9), Russia (US$7.45) and Pakistan (US$5.70) are the fastest-growing markets in the world. Operators run profitable businesses as a result of using low-cost, prepaid service plans, choosing not to subsidise handsets and reaping the benefits of low prices and intense competition among infrastructure vendors. ARPU levels are falling sharply in many developing markets (15% per year in India, for example, and 29% per year in Pakistan), but overall revenues are growing strongly because of the rate of increase in subscriber numbers. Operators in developed markets have developed very different business models. ARPU levels in Japan (US$57) and the US (US$53) are the highest in the world, but operators in both countries are struggling to retain profit levels. In most European, North American and developed Asian markets, ARPU levels are stagnating.
Figure 1.1 ARPU levels by region (2005-2007)

60 50 40 US$ 30 20 10 0
Africa/Middle East Asia Pacific Eastern Europe Latin America North America Western Europe
2005 2006 2007
Source: Informa Telecoms & Media; Global Mobile Forecasts to 2011
Even in Japan and South Korea the mobile content success stories of our day overall ARPU is either flat or in decline. Total service revenues continue to grow 3-5% in most developed markets because of the growth in the number of subscriptions, though in some markets the mobile sectors are actually contracting (Austria -3.3%, France -0.5%, Netherlands -2.3%, Portugal -0.6% and Switzerland -0.4%). Sustained cuts in mobile termination rates and impending European legislation on roaming mean that we could see total mobile service revenues decline in even more countries in the next 12 months. With the competitive scenario worsening as a result of competition from MVNOs most European markets have, or will soon have significant MVNO sectors and new 3G operators (3 is in several markets and Xfera launches in Spain in November 2006), mobile operators are having to both cut costs and develop new revenue streams to protect margins. Not so long ago, mobile operators believed mobile data services could unlock the door to new revenue streams. But the lukewarm customer response to 3G, and the failure of operators to demonstrate that 3G has brought real benefits over what could be achieved by 2.5G, means that they have had to expand their horizons. Mobile TV has displaced 3G as the next big thing, though operators continue to invest in 3.5G (HSDPA) and beyond (3GLTE). If it were not for the perceived threat of WiMAX and the real threat of Wi-Fi, it is questionable whether operators would be able to justify such investments. The other strategy that mobile operators are pursuing to develop new revenue streams is fixed-mobile convergence. In 2006, a frenzy of activity has surrounded FMC. But commercial launches of FMC have been relatively low-key. The UKs BT has generated the most interest with its Fusion service, but customer take-up has been relatively modest (35,000 customers). Meanwhile, France Telecom launched its Unique cellular/Wi-Fi FMC service in France in October and the UK in November, and Telecom Italia is readying its Unico service.
Fixed-mobile substitution has created less stir, but is having a far greater impact on the market. Two types of strategy exist for fixed-mobile substitution. The first is based on the concept of offering people cheaper mobile calls from home or the office than in a wide-area network. These home-zone services were first launched successfully in Germany by O2 (Genion) and Vodafone (Zuhause). Vodafone has now launched a similar service (Vodafone Casa) in Italy. The other fixed-mobile substitution approach is simply to cut the price of mobile calls to such a low level that people are prepared to substitute fixed calls for mobile calls. Cheap mobile calls have become synonymous with MVNOs, the business model based on the idea that people would rather have cheap mobile calls and old (or cheap) mobile phones than expensive mobile calls and expensive (but subsidized) phones. Dutch telco group KPN says it has identified fixed-mobile substitution outside of its home wireline market as its preferred growth strategy. Moving into 2007, Informa expects the telecoms industry as a whole to continue to focus on FMC. Ultimately, operators want to develop converged network strategies for converged services but, in the short term, the focus will be on discount strategies for people who take a bundle (mobile, fixed, broadband and pay TV) of services. Package bundles will represent good value-for-money for consumers. Informa also believes customers will find cheap mobile a far more compelling proposition than FMC services. The success of European MVNOs many of which are SIM-only providers has highlighted the absurdity of handset subsidies and their role in increasing churn levels. Churn averages 2.3% per month globally and has risen by half a percentage point in the last three years. In competitive markets, operators are caught in a trap of having to offer their customers heavily subsidised devices as soon as they are out of contract (one or two years) or risk losing them to a competitor. But the continued slide in ARPU levels means that operators are either going to have to bite the bullet and cut handset subsidies or exert more pressure on handset manufacturers to cut prices. Fortunately for operators, the ex-factory cost of 3G devices is falling sharply. This means that 3G subscriber-acquisition costs should fall in 2007. Next year, we can also expect to see more operators offering SIM-only services to compete with MVNOs, reduce costs and drive fixed-mobile substitution.
Key Themes for 2007

Mobile operator revenues
On average, the price of mobile-originated calls is falling 10% per year. The key drivers for this are competition between mobile operators, competition from and between MVNOs, and a narrowing of the gap between fixed and mobile prices as operators start to bundle minutes across fixed and mobile networks.
Operators face least pressure on price levels in mobile markets with fewer than five operators, where no MVNOs or convergence strategies have come into play. But in areas where mobile operators are coming under pressure from MVNOs with a strategy of competing heavily on price (discount MVNOS), prices are falling as much as 30% per year. Such was the case in Scandinavias markets two or three years ago, when MVNOs were getting established. Now the same scenario is playing out in Germany, which has become the epicentre of MVNO activity in Europe.
Fixed-mobile substitution counters price declines

Mobile traffic levels are growing as a direct result of price cuts and the shift towards bundled minutes and text price plans. Figure 1 shows the trend in outgoing minutes of use for an average subscriber (subscription) in different parts of the world.
Figure 1.2: Average outgoing minutes of use per subscriber
800 700 600 Minutes of users per month 500 400 300 200 100 0
1Q 0 2Q 0 0 3Q 0 0 4Q 0 0 1Q 0 0 2Q 1 0 3Q 1 0 4Q 1 0 1Q 1 0 2Q 2 0 3Q 2 0 4Q 2 0 1Q 2 0 2Q 3 0 3Q 3 0 4Q 3 0 1Q 4 0 2Q 4 0 3Q 4 0 4Q 4 0 1Q 5 0 2Q 5 05 3Q 0 4Q 5 05
Western Europe Eastern Europe North America Latin America Developed Asia Emerging Asia Global
Source: Informa Telecoms & Media
There is every reason to believe that the upswing in usage levels in 2004/2005 will be sustained for the next few years, as fixed-mobile substitution becomes one of the cornerstones of operator strategy. In many European markets, mobile still accounts for one-third, or less, of total voice traffic. However, we do not believe that the growth in traffic will be enough to counter the sharp reduction in price levels. Voice ARPU, therefore, is expected to decline steadily over the period. Many operators may also see a decline in overall voice revenues (despite the growth in the number of subscriptions). In the last quarter, we have already seen two of Europes largest mobile operators, T-Mobile and Orange, suffer a decline in revenues in their core markets.
Can content and TV compensate for the decline in voice?

Back in the pre-3G days, mobile operators believed that the emergence of mobile content services would enable them to grow ARPU from its levels at the time. Most now acknowledge that the main aim of launching new mobile services and applications is to slow the slide in ARPU from declining voice revenues. Japan (along with South Korea) is, arguably, the most-developed and successful mobile market in the world. But even in Japan, mobile content revenues (representing more than 25% of total revenues) are failing to stop the slide in overall ARPU levels. In the GSM world, mobile operators, vendors and handset manufacturers have invested a colossal amount of time, energy and money over the last decade in a bid to create new mobile content businesses. Between 5% (developing markets) and 20% (mature markets) of ARPU is generated from services other than voice, but more than 80% of this non-voice ARPU is derived from text (SMS) services. Operators have tended to see their long-term mobile data strategies moving away from SMS to new mobile entertainment and enterprise services.
The new buzzwords

Over the past 10 years, mobile operators have built their hopes of growing new mobile content businesses around a range of new technologies and applications. In the past 12 to 24 months, mobile operators have changed their thinking about how to develop and monetize mobile content. T-Mobile Internationals CEO, Rene Obermann, said recently that T-Mobile was looking at the area of user generated content. [Such content would be an area] where we could leverage, or basically mobilize, the trends which we can see on websites such as MySpace, YouTube or others, said Obermann, as well as datamanagement scenarios and consumer mobile email. We want to leverage existing behaviour. When it comes to mobile music and TV, I wouldnt consider them big revenue generators." Other operators have a much more bullish position on mobile TV, but even they are uncertain about how they will make money from such services. The industrys thinking is shifting from a subscription-based service to an advertising- and Google-based business model. In the future, a mobile business model could look much more like broadband and Internet economics, with the operator charging for access to the Internet and deriving advertising and click-based revenues.
Plotting the direction of the mobile industry

Fixed-mobile substitution, convergence, wireless broadband and IP are fundamentally changing the dynamics of the mobile industry. These trends will impact different markets at different times and to differing degrees.
Where fixed-line residential telephony is entrenched (Europe, North America and developed Asia), fixed-mobile convergence and substitution will take root more quickly and have a greater impact on the market. Likewise, markets with high broadband penetration will be quicker to see the impact of IP, and a more-open approach to providing access to the Internet, than countries where mobile telephony is the de facto communications medium. The only certainty about the mobile communications business is that mobile phone ownership in mid- to high-income countries is becoming a basic human need. And even in developing markets, governments are using mobile telephony as a key driver to develop their economies.
Mark Newman leads Informa Telecoms & Medias global research teams and activities. As part of this role, Mark is responsible for our thought leadership in the converging mobile, broadband and entertainment sectors. www.informatm.com/operatorstrategies
World Cellular Information Service

World Cellular Information Service (WCIS) is the industry standard research database for the wireless community. Thousands of industry executives rely on the granular five-year rolling forecasts of subscribers, handset sales and mobile penetration and the 20-year archive. www.wcisdata.com
Global Mobile Forecasts to 2011 Strategic Report

Fully revised and updated with six new chapters, Global Mobile Forecasts to 2011 gives a comprehensive and reliable guide to subscriber growth, enterprise and data usage and revenue growth, as well as important trends covering key developments in fixed-mobile convergence, fixed-mobile broadband and MVNO activity. www.informatm.com/globalforecasts
Global Mobile Roaming Strategic Report and Forecasts

Global Mobile Roaming examines the key issues surrounding the current roaming market and the likely future development, providing a unique blend of high-level market overviews, detailed profiles and case studies, plus unique market forecasts to 2011. www.informatm.com/gmroaming
GSM>3G World Series

The GSM>3G World Series is an annual calendar of multiple events that will keep you on the road to greater profitability. Located in regional hubs within fast-growing markets, the GSM>3G World Series delivers a 360-degree solution of brand positioning, business development opportunities and, critically, face-to-face touch points with the decision makers. Located in regional hubs of strategic importance, the GSM>3G World Series delivers a 360degree solution of brand positioning, market research and critically face-to-face touch points with the decision makers. www.gsm-3gworldseries.com
Africa
Cape Town, S.Africa 21-22 November 2007 www.gsm-3gworldseries.com/africa Nairobi, Kenya 16-17 May 2007 www.gsm-3gworldseries.com/ecafrica/ Dakar, Senegal 19-20 June 2007 www.gsm-3gworldseries.com/westafrica/
Asia
Mumbai, India 22-23 January 2007 www.gsm-3gworldseries.com/india Istanbul, Turkey 13-14 March 2007 www.gsm-3gworldseries.com/centralasia Hanoi, Vietnam 9-10 May 2007 www.ibc-asia.com/mobile-vietnam Dhaka, Bangladesh 10-11 July 2007 www.informatm.com/SAM
Central and Eastern Europe

Budapest, Hungary 25-26 September 2007 www.gsm-3gworldseries.com/cee Moscow, Russia 5-6 June 2007 www.gsm-3gworldseries.com/russia
Americas
Latin America March 2007 www.gsm-3gworldseries.com/latinamericas Mobile North America 6-7 December 2007 www.gsm-3gworldseries.com/americas
Middle East & Gulf

Dubai, UAE 10-11 September 2007 www.gsm-3gworldseries.com/meg
Mature mobile markets

The emergence of multi-SIM ownership has led to an understatement of ARPU figures, as it bases revenue figures on the number of subscriptions, not the actual number of subscribers, says Gavin Patterson. After several years of subscription growth of more than 50%, the annual growth rate of the global mobile market has been in decline since 2001. The total number of subscriptions is forecast to rise from 2.26 billion at end-2005 to 2.70 billion by end-2006, a 19.4% increase. During 2007, subscriptions will pass the 3 billion mark, at which point subscriptions will equal almost half the worlds population. But by 2008, subscription growth will have fallen to less than 10%. By 2011, when the number of subscriptions will have reached 3.88 billion, growth will have fallen to only 3.20% annually. With many of the worlds mobile markets reaching maturity, the addressable market of subscribers taking up mobile services for the first time is set to increase at an even slower rate than that of mobile subscriptions. The number of unique subscribers is forecast to pass 2 billion before end-2006, up 18.8% year on year. In the five years to end-2011, the number of unique subscribers is set to increase 42.2% to 2.98 billion. But by 2011, the annual growth rate for new subscribers will have fallen to just 3.03%. As a result, the global mobile subscription penetration rate is set to grow from 41.44% at end2006 to 56.35% at end-2011, while actual subscriber penetration will rise 32.16% to 42.26%.
Figure 2.1: Global subscribers vs. subscriptions (2006-2011)
Total subscriptions (000s) Total subscribers (000s) Ratio Total population (000s) Subscription penetration (%) Subscriber penetration (%)
2006 2,704,661 2,098,612 1.29 6,526,423 41.44 32.16
2007 3,078,445 2,381,058 1.29 6,601,065 46.64 36.07
2008 3,373,865 2,604,303 1.3 6,676,021 50.54 39.01
2009 3,600,901 2,774,553 1.3 6,751,263 53.34 41.10
2010 3,767,778 2,898,080 1.3 6,826,743 55.19 42.45
2011 3,889,742 2,985,957 1.3 6,902,447 56.35 43.26
In effect, this means that 22.41% of total subscriptions worldwide at end-2006 are a result of dual-SIM or multi-SIM ownership. By end-2011, the proportion will rise to 23.25% of total subscriptions. Put another way, up to 28.88% of unique subscribers at end-2006 will own more than one SIM, with the figure set to rise to 30.28% by end-2011. In a market with a high level of multiple-SIM ownership, the relevance of ARPU as a benchmarking metric to calculate spend per user is compromised. This is because ARPU in fact refers to average revenue per subscription and not average revenue per user. Therefore, ARPU becomes diluted as users split their mobile spend across several subscriptions.
For example, Informa Telecoms & Media forecasts 431 million mobile subscriptions in Western Europe at the end of 2006, but only 300 million actual subscribers. Based on these numbers, Informa is forecasting an average revenue per subscriber (real ARPU) of US$46, but an average revenue per subscription of only US$32. As such, the mobile industrys use of ARPU as an (incorrect) measure of how much their customers are spending on mobile communications has given an overly pessimistic view of the status of the market. A consensus has prevailed in the last two years that ARPU levels are falling, but this is misleading when you consider that it is measuring average revenue per subscription rather than per subscriber.
Western Europe
With ARPU expected to trend slightly upwards in 2007, it is safe to say double-digit revenue growth in Western Europe is a thing of the past. In fact, weve already begun to witness the first signs in some markets that revenues have stopped growing altogether. The German market, for example, saw total revenues fall for the first time in 2Q06, albeit by just 1% vs. the corresponding quarter of 2005. Investors, meanwhile, have become used to the high margins and strong cash flows generated at Europes largest operators. Although they realistically expect longer-term depression of profits, shareholder pressure to retain robust margins remains a strong force. We just need to remember how the share prices of giants such as Vodafone, Deutsche Telekom and France Telecom all plummeted on the back of profit warnings issued during 2006. What this means for operators, then, is that they must increasingly focus on trimming costs in order to stabilise their bottom lines. Expect to see operators looking across the board at ways to reduce both opex and capex. On the operational side, were likely to see more operators follow in the footsteps of Hutchison 3G UK and H3G Italia by outsourcing their network operation and management. As belts are tightened across the region, we should also anticipate further headcount reductions, such as those taking place at Vodafone, T-Mobile and TeliaSonera.
3G developments
3G is becoming increasingly popular among consumers, as evidenced by the fact that virtually all Western European mobile operators have launched their WCDMA networks. Three groups are now driving WCDMA uptake in Western Europe: Hutchison, Vodafone and Telecom Italia. These account for more than 60% of the 3G market at the end of 2006. Informa forecasts that mobile operators are well on track to exceed 55 million subscriptions by the end of 2006, more than 15% of the mobile population in Western Europe. Moreover, WCDMA net adds have outnumbered GSM net adds every quarter since 4Q05 and, by 2Q06, 3G represented 61.25% of total net adds in the region.
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We forecast that the 3G user base in Western Europe will more than double by the end of 2007, nearing 112 million. Perhaps the most significant driver behind the growth is the launch of HSDPA services. With 3.6Mbps speed commercially available in 2006, operators are ready to grab the light user segment of the residential and business broadband market.
North America
T-Mobile USA will spend US$2.66 billion on a nationwide WCDMA/HSDPA network expected to begin commercial rollout in mid-2007 and be largely complete by end-2008. It claims it has already completed 50% of its planned WCDMA equipment deployment in the New York area. T-Mobile was top bidder in the 2006 auction for Advanced Wireless Services spectrum in the 1.7GHz and 2.1GHz bands, offering US$4.2 billion for 120 licenses that it urgently needed before it could deploy 3G technology. Meanwhile, Cingular Wireless is rolling out WCDMA/HSDPA over its cellular and PCS spectrum, covering 52 major US markets in 3Q06. The operator says it will offer 3G service to the top 100 markets in 2007. Verizon Wireless became the first North American operator to commercially launch a high-speed wireless-broadband network when it introduced CDMA2000 1xEV-DO service in October 2003 to San Diego and Washington, DC. By mid-2006, its 1xEV-DO BroadbandAccess service was available to half of the US population, covering some 149 million POPs. Not to be outdone, Sprint Nextel intended to have its 1xEV-DO Power Vision network covering 190 million POPs by end-2006 and 220 million by 3Q07. Both Verizon and Sprint Nextel intend to roll out EV-DO Rev. A technology as it becomes available. The impact of WiMAX on the US market will largely depend on the services ultimately unveiled by Sprint Nextel and Craig McCaws Clearwire in the next couple of years. If they simply offer high-speed broadband services, they will have nothing more than me too offerings that compete with EV-DO and HSPA services offered by rival mobile operators. If, however, they develop truly converged fixed-mobile services, use WiMAX to bring other unique offerings to the marketplace or offer me too services at a considerable pricing discount (compared with rival services), they might be able to leave non-WiMAX operators in the dust.
Asia Pacific
NTT DoCoMos WCDMA subscriptions accounted for 80% of Japans total WCDMA sales at end-September 2006. DoCoMos total number of 3G subscriptions reached 29.1 million at the end of 3Q06, accounting for 55.8% of the operators user base. DoCoMo has maintained its leadership of the Japanese WCDMA market by constantly releasing new mobile devices to enrich its handset lineups. Since 2005, easy-to-use handsets
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with limited features have been released for seniors. The operator has also implemented various price plans, such as upgrading the Family Discounts plan and introducing flat-rate imode packet service and simple pricing across the board. In South Korea, the two largest operators SK Telecom and KTF have also opted for WCDMA/HSDPA in the 2.1GHz band to benefit from lower handset costs, the ability to offer global roaming and the higher data speeds of HSDPA to promote the use of mobile Internet service for heavy data users. Both SKT and KTF plan to bolster HSDPA investment while reducing investment in existing CDMA services, which will be utilized for voice and low/mid-speed-data service users. Despite massive hype from KT and heavy financial support from the government, the groundbreaking WiBro launch has been met with an extremely muted response by consumers. After finally launching commercial WiBro services in June 2006, KT and SKT attracted only a couple of hundred subs by end-September 2006. The lack of progress was attributed to the small network coverage area and the lack of WiBro-compatible devices. Nonetheless, even though most observers agree that WiBros fortunes will improve with greater coverage and availability of handsets, the technology faces a big challenge: competing directly against HSDPA launches by the major mobile operators. HSDPA is likely to have greater coverage and cheaper, more easily available handsets.
Gavin Patterson is Editorial Director of Informa Telecoms & Medias Strategies & Markets portfolio and has been closely following developments across the mobile industry since 1997. Gavin has built up a wealth of experience covering everything from the development of regional markets and operator strategies to the evolution of data networks and fixed-mobile convergence. www.informatm.com/mobilestrategies
MVNO Strategies Conference Series

The MVNO Strategies Conference Series is a collection of events addressing how MVNOs and alternative mobile brands can add value to the mobile market and how the model can evolve in the future. www.mvnovision.com
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Mobile Communications Research Service

Mobile Communications Europe fortnightly research service is the definitive source of strategic intelligence on Europes mobile operators and markets, bringing you exhaustive news analysis and strategic insight into the key trends across western and eastern Europe, with a special focus on operator strategies, regulation, tariffs, marketing, retail and distribution. Each issue includes: News and news analysis Detailed MVNO profiles Country profiles, including data and commentary on more than 40 eastern and western European markets, updated quarterly Quarterly statistics and commentary on pan-European subscription growth, market share, ARPU, prepaid and tariffs Key European market indicators, including regular charts and comment highlighting critical industry trends www.informatm.com/mce
Convergence World Series

Convergence World Series is a collection of events that will enable you to effectively plan, implement and market converged services in a competitive market place. www.convergencevision.com
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Developing mobile markets

With emerging markets continuing to show the potential for robust subscriber and revenue growth, it is no surprise that many operators are still looking to further expand their footprints. Here, Devine Kofiloto identifies the key growth markets and which groups are interested in which regions. Africa and the Middle East saw the highest subscriptions growth from 2Q05 to 2Q06, growing 66% and 65%, respectively (see Figure 3.1.). These two regions are forecast to lead the global growth rates over the next five years, with Africa recording the highest percentage. Africas number of mobile subscriptions is projected to increase 25% during 2007. The Middle Easts projected growth rate for 2007 is 24%.
Figure 3.1: Growth by region
1000 900 800 Subscriptions (mill) 700 600 500 400 300 200 100 Africa Americas Asia Pacific Europe Eastern Europe Middle East US/Canada Western 12% 11% 10% 0% 33% 30% 26% 20% 39% 56% 50% Growth 40% 62% 70% 60% Q2 2005 Q2 2006 %
Growth in these regions continues to be hindered by handsets prices, however. The GSM Associations emerging market handset initiative launched in 2005 and has led to the introduction of handsets retailing at US$30. But African operators have yet to benefit from the initiative. They are not usually involved in handset distribution, because of the prevalence of a strong informal handset market. High taxes and duties related to importing handsets which can be as high as 30% in countries such as Cameroon and DRC also tend to impact the final retail price, rendering these handsets expensive. Secondhand devices can be found retailing in most African markets for US$20-30, but for the majority of low-income customers, such price points are still high.
Middle East and Africa

The aggressive footprint expansion across Africa and the Middle East which was kicked off in 2005 by pan-regional players Vodacom, MTN, MTC, Etisalat and Orascom continued into 2006 with MTNs US$5.5 billion acquisition of Investcom. In one swoop, MTN gained a foothold in nine African and Middle East markets, including a licence in Afghanistan.
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Through acquisition, these emerging-market players have within a relatively short period stamped their footprint across the region. The major acquisitions within Africa were particularly distinct because they were all predominantly multi-market acquisitions. MTCs acquisition of Celtel in 2005 gave it immediate control of 13 markets, Etisalats 50% stake in Atlantique likewise gave it an automatic presence in seven African markets, and MTNs latest acquisition expanded its footprint to 10 markets. The appetite for further expansion is now seeing emerging-market players eyeing further growth opportunities in Eastern Europe and beyond. MTC, Orascom and Etisalat have so far shown interest in asset sales in Serbia (Mobi 63), Armenia (Armentel) and Greece (Stet Hellas). In the Middle East and Africa, they were largely competing among themselves. Beyond these regions, however, they are coming up against major Western European players that are also keen on new growth markets.
Central and Eastern Europe

The CEE region saw the third-highest growth in subscription numbers from 2Q05 to 2Q06, but overall growth appears to have plateaued even though many individual CEE countries have yet to reach peak growth. In 2005, the number of net additions in the CEE region was slightly less than 91 million, but Informa Telecoms & Media forecasts that the number of CEE net additions will fall to approximately 60 million in 2006. It will continue to fall in the coming years, potentially dropping to about 5 million by 2011.
Figure 3.2: CEE net additions 2000-2007
100 90 80 Net additions (millions) 70 60 50 40 30 20 10 0 2000
Other Russia, Poland & Ukraine
2001
2002
2003
2004
2005
2006 (F) 2007 (F)
Despite the fact that the leading markets in the CEE region are witnessing a slowdown in growth, some markets are still in very early stages of development. A few markets even have single-digit penetration. The countries in the CIS are, predominately, the most underdeveloped
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in the region. In 2Q06, slightly less than half the countries in the CEE region had penetration below 50%. Turkmenistan has the lowest penetration in the region: just 2.9% 2Q06. These low-penetration markets indicate that plenty of growth potential remains in the region. Going forward, however, positive net additions in the CIS countries will most likely be offset by a drop in the number of net additions in countries such as Russia and Poland.
China
In China, the total number of subscriptions hit the 411 million mark in 2Q06, with the number of GSM net additions during the quarter rising 2.3% year on year to 2.7 million. CDMA net additions remained weak at 911,000, which was 41.9% lower than in 2Q05. Mobile penetration grew 4.8% to reach 31.26% at the end of 2Q06 (excluding PHS subscriptions). In the next 12 to 18 months, wireless growth is projected to come predominantly from rural areas. More than 50% of China Mobiles net additions in 2Q06 were driven by the central provinces and rural areas, where the penetration rate is about 11.5%, much lower than the national average and urban centers, where penetration is about 80%. The issuing of 3G licences, anticipated since 2002, continues to dominate the agenda. The process has been continually postponed and now looks likely to be delayed into 1H07. The exact timing will depend on the results of TD-SCDMA trials. Since March 2006, China Mobile, China Telecom and China Netcom have deployed trial networks in Xiamen, Baoding, Qingdao, Beijing and Shanghai.
India
In the last 12 months, Indias increasing range of low-cost handset models has driven subscription take-up from more low-end subscribers. As a result, the number of subscriptions grew from 75 million at end-2005 to 116 million at 3Q06. A highly competitive market with five national and four regional operators, India remains under-penetrated, with mobile penetration at 11% in 3Q06. With average monthly net additions over the last nine months exceeding 4.5 million, it is slowly catching up with China, which has average monthly net additions of 5.7 million, the highest globally. The governments decision at end-2005 to increase the stake that foreign investors are allowed to own in Indian companies from 49% to 79% is already ringing the right bells with investors. In recent months, Maxis and Telekom Malaysia Malaysian operators with regional aspirations have each acquired stakes in Aircel and Spice Communication, with plans to expand their hitherto regional presence and acquire a pan-Indian footprint. Market consolidation is already advancing, with Hutchison acquiring BPL Cellular and Essar Spacetel in the early part of 2006. The move left the remaining two regional players
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government-owned MTNL and IDEA as likely targets for acquisition as the market further consolidates. The top four operators alone (Reliance, Bharti, BSNL and Hutchison) accounted for 64% of the total subscription base at end-2Q06.
Figure 3.3: Indian subs
140 120 Subscriptions (millions) 100 80 60 40 20
Sep 05
Dec 05
Mar 06
Jun 06
Sep 06
Latin America
Subscription numbers continue to grow in the Americas, a region dominated by two major investors: America Movil, with a total of 13 subsidiaries, and Telefonica, with a total of 14 subsidiaries in the region. These two investors recorded a total of 175.99 million subscribers as of June 2006, representing 65% of the total number of subscribers in the region. Subscription growth in the region is driven, in part, by declining call rates. In addition, smaller operators, such as Telemig Holdings, are aggressively increasing their market share through the introduction of micro-recharge top-up cards, attracting lower-income groups. With Telefonica alone accounting for 73% of the total 58 million CDMA subscriptions in the Latin American region in March 2006, the operator announced plans to migrate its networks to GSM. The move will have a significant impact on the total number of CDMA subscriptions in the region in the coming years. Devine Kofiloto manages Informa Telecoms & Medias wireless research team, covering developments in the wireless industry with a focus on regional market trends. He is frequently quoted regarding developments in the wireless market and he regularly represents Informa Telecoms & Media at international industry events. www.informatm.com/mobilemarkets
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GSM>3G World Series

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Global Mobile Research Service

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African Mobile Opportunities Management Report

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Middle East Mobile Opportunities Management Report

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Mobile networks and technology

Mobile networks are in the midst of major transformation, says Mike Roberts. Operators are racing ahead with HSDPA deployments, 1xEV-DO Revision A services are coming to market and Mobile WiMAX is on the horizon. Major updates to core networks are also in the offing as operators and vendors look to new solutions, such as IP Multimedia Subsystem and Service Delivery Platforms and new applications such as Mobile VoIP.
Future mobile broadband

The mobile broadband market has expanded dramatically in the last year, as WCDMA operators started supercharging their networks via HSDPA upgrades. While critics note that HSDPA upgrades have come sooner than expected because of the underperformance of WCDMA, backers would rather focus on the many advantages of HSDPA, which can deliver true broadband speeds of 1Mbps to end-users while reducing latency. Forty live HSDPA services were available worldwide in October 2006, less than a year after Cingular Wireless launched the first service in December 2005. Understandably, the rise of HSDPA has led major EV-DO operators to look to EV-DO Revision A, which boosts both downlink and uplink speeds. Sprint Nextel launched EV-DOrA services with a data card in October 2006 in San Diego (home of EV-DO kingpin Qualcomm), and KDDI plans to launch EV-DOrA with a handset in December. Informa Telecoms & Media expects the scale advantage of WCDMA to ensure that HSDPA will be the dominant mobile broadband technology through 2011, as detailed in the strategic report Future Mobile Broadband: HSPA, EV-DO, WiMAX & LTE. The report predicts that 65% of 3.5G subscribers in 2011 will be using HSDPA, (compared with 19% using both HSUPA and HSDPA and the remaining 16% on EV-DO Revision A and B), as detailed in Figure 4.1.
Figure 4.1: 3.5G mobile broadband subs by technology, 2011
EV-DO Rev. A 13% EV-DO Rev. B 3%
HSUPA 19% HSDPA 65%

Source: Informa Telecoms & Media report: Future Mobile Broadband
However, concern about the cumulative cost of royalty payments to holders of essential intellectual property rights (IPR) mean that a fair, reasonable and non-discriminatory IPR regime is becoming regarded as central to the success of current and future wireless broadband technologies. The newly-created Next Generation Mobile Networks (NGMN) operator lobby group says it believes IPR should be a significant factor in operators choice of technology for networks beyond HSPA and 1xEV-DO.
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IMS opportunities and challenges

IMS is now receiving interest from operators, infrastructure vendors, service providers and handset manufacturers. It is seen as the platform that can enable operators to shift from the traditional data pipe to value-added service provider in order to maintain a competitive edge, increase revenues, reduce operational costs and, primarily, protect existing investment. Although IMS trials are widespread, the transition to commercial IMS-based services is moving slowly, with service providers focusing on a small range of application-specific implementations in areas such as VoIP and enterprise services. Among recent announcements are that Swisscom has been trialling IMS and plans to launch two products based on the technology next year. The first will be a VoIP phone aimed at the consumer market, followed by a multi-mode handset that switches between VoIP, Wi-Fi and GSM networks. Danish operator TDC says its Alcatel-supplied IMS system will enable it to deliver advanced enterprise services, such as voice VPNs and virtual PBXs, as well as IPTV. As outlined in Informas strategic report IMS Opportunities and Challenges, operators will initially be using IMS to deliver a fairly focused range of services by 2011. The IMS-enabled services generating the most revenues in 2011 will be IPTV, VoIP and Push-to-Talk over Cellular (PoC), as highlighted in Figure 4.2.
Figure 4.2: IMS-enabled service revenues in 2011
Video sharing IM POC VoIP
IPTV
Source Informa Telecoms & Media report: IMS Opportunities & Challenges
Service delivery platforms

Although some in the industry are positioning SDP as an alternative to IMS, it makes more sense to view SDPs as complementary to full-blown IMS, enabling operators to deliver new services now. SDPs address many of the issues IMS does, aiming to integrate network assets that were previously isolated and standalone and co-ordinate their use in a horizontal architecture. Furthermore, IMS-compatible SDPs can ease the migration of products and services to IMS. But if operators are not convinced that IMS network efficiency will save them money within a reasonable timeframe, there is a chance that they will delay spending decisions and make do with interim solutions for longer than originally intended.
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The global market for SDPs is expected to see increased year-on year-growth over the next few years, but Informas Evolving Service Delivery Platforms report predicts that, from 2009, such growth will begin to slow down as investment in IMS starts to take precedence. For the period 2005-2011, Informa expects total global investment in SDPs to exceed US$2.5 billion.
Vendor consolidation
Nothing highlights the changed realities in the mobile industry more than the consolidation that took place among infrastructure vendors in 2006. At the beginning of the year, the mobile infrastructure vendor sector was comprised of eight major vendors. By end-October, that number had decreased to six. During 2006, wireless vendors spent US$38.72 billion on acquiring rivals or parts of their businesses. Nokia paid 20 billion (US$25.21 billion) to acquire the networks unit of Siemens (announced in June); Lucent spent US$13.4 billion on its merger with Alcatel (announced in March); and Alcatel paid Nortel US$320 million for its UMTS business (announced in September). With the trend of offering converged services gathering pace, typified by Vodafones June announcement that it intends to exploit fixed-line opportunities, the viability of a vendor selling mobile-only infrastructure is becoming increasingly untenable.
WiMAX
The WiMAX market got a massive boost in August, when Sprint Nextel announced plans to spend as much as US$3 billion in 2007/2008 to deploy a nationwide Mobile WiMAX service in the US, using its 2.5GHz spectrum. Sprint Nextel spent several years evaluating a range of technologies, including Flash-OFDM, TD-CDMA and 3G LTE, before picking WiMAX. Its decision is nothing but good news for the nascent WiMAX industry, as outlined in WiMAX, 3G LTE & EV-DOrC Market Outlook, a new strategic report from Informa Telecoms & Media. Of course, one reason Sprint Nextel chose WiMAX is because it almost certainly got a very good deal from its initial three vendors: Intel, Motorola and Samsung. Just a month before Sprint Nextel made its WiMAX announcement, US pre-WiMAX operator Clearwire announced that it had landed US$900 million in funding from Intel and Motorola to help it with the transition to mobile WiMAX. Motorola acquired pre-WiMAX vendor NextNet Wireless from Clearwire as part of the deal. But WiMAX also faces significant challenges, including a lack of spectrum in key markets such as Europe, and intense competition from existing fixed and mobile broadband platforms. In fact, one of the main challenges for WiMAX operators in developed markets is the wide availability of fixed broadband in those markets, resulting in low prices. In addition, mobile broadband via HSDPA or EV-DO is, or will soon be, available in many of the same markets.
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Finally, there is the new trend of municipal governments teaming with operators to deploy citywide outdoor Wi-Fi services. By 2011, 600 of these networks will be deployed in the US alone, according to Informas Municipal Wireless Broadband report. These three factors will make it challenging for WiMAX operators to gain significant traction in most developed markets in 2006-11, though individual markets such as the US may prove to be major exceptions.
Mobile VoIP
VoIP is well-established in the fixed market and wireless VoIP is starting to take off via the launch of fixed-mobile convergence services from BT, Orange, TeliaSonera, T-Mobile USA and other operators. Now operators and vendors are gauging how fast wireless VoIP services will take off, how long it will be before VoIP impacts mobile revenues and when mobile operators will respond by launching VoIP on cellular networks. One early response has come from E-Plus in Germany and Hutchinson 3G, which now bundle Skype VoIP services with their 3G data plans. On the other end of the spectrum, both T-Mobile UK and Vodafone in Germany have reserved the right to block VoIP services, such as Skype and Vonage, from running on their mobile access networks. However, as outlined in Mobile VoIP, a new strategic report by Informa Telecoms & Media, the growth of mobile VoIP soft solutions is snowballing. Currently, more than 15 companies have developed downloadable VoIP-software client solutions to enable mobile users to talk for free to other users using the same client. These companies also act as mobile virtual VoIP service providers, offering relatively cheap call services to any mobile or fixed line, a development which could have an obvious impact on existing mobile voice revenues.
Mike Roberts is Principal Analyst for Informa Telecoms & Medias reports, databases and research services covering telecoms infrastructure and technology. Mikes expertise includes WiMAX, WiFi, 3G evolution, wireless VoIP, IP multimedia subsystem and fixedmobile convergence. Mike has been tracking emerging wireless technologies since 2001 and is a regular speaker at key industry events. www.informatm.com/networksandinfrastructure
IMS Opportunities and Challenges Strategic Report and Forecasts

IMS Opportunities and Challenges will give you unparalleled support in identifying key market opportunities, assessing scope for successful partnerships and defining IMS implementation strategies. Includes key forecasts to 2011. www.informatm.com/imsreport
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Future Mobile Broadband: HSPA, EV-DO, WiMAX and LTE Strategic Report and Forecasts
Future Mobile Broadband: HSPA, EV-DO, WiMAX & LTE identifies strengths and weaknesses in the emerging mobile broadband ecosystem with comprehensive analysis of key value-chain segments, including technologies, standards and devices. The report also includes key forecasts to 2011. www.informatm.com/futuremobilebroadband
3G Wireless Broadband Analyst Research Service

3G Wireless Broadband Analyst fortnightly research service is the industrys only complete, global resource to address the full range of next-generation mobile and wireless broadband technologies and services. Every issue includes: In-depth research and analysis: regular, primary research from our editors and analysts Exclusive news: hard-hitting news that influences major players and markets Industry benchmark data: fully exportable primary data Multiple user access: online and PDF research delivered to users across your organisation www.informatm.com/3gwirelessbroadband
Municipal Wireless Broadband Management Report

Municipal Wireless Broadband provides data and analysis on the rise of citywide wireless networks based mainly on mesh Wi-Fi and WiMAX, as well as their impact on incumbent mobile and fixed operators. The report includes detailed market forecasts and analysis of key technologies, vendors, and operators, in addition to key case studies. www.informatm.com/municipalwireless
WiMAX World Conference Series

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IMS World Conference Series

Brings together operators, vendors, content providers and application developers from around the world to address the challenges facing the IMS community. www.imsvision.com
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Mobile content and applications

Mobile content and applications are propelling the mobile device beyond its staple services of voice and messaging, into a multimedia device capable of delivering a rich entertainment experience, says Nick Lane. And 2007 will be the year when the convergence of these separate industries comes to the fore. Network and handset functionality, capability and reliability are gradually coming together to help deliver content over a platform that is now being serenaded by media companies, broadcasters, Internet search engines and the advertising world, all intent on getting their share of the expanding wireless pie. According to forecasts from Informa Telecoms & Media, the mobile content and applications sectors will be worth US$31.32 billion in 2007, of which US$23.1 billion revenues will come from mobile entertainment (see Figure 5.1). And the three key pillars of mobile entertainment TV & video, music and games are creating the unprecedented hype within the industry.
Figure 5.1: Global mobile content and services revenues 2006-2011
10,000 9,000 8,000 7,000 US$ billion 6,000 5,000 4,000 3,000 2,000 1,000 0 Games (excl. Music Images Video embedded)
TV
Adult Gambling Browsing Infotainment
Mobile music
Mobile music has been the indisputable driver of the mobile entertainment market during 2006, a period which has seen the industrys reliance on ringtone revenues subside with the emergence of the full-track download. 3 UK is selling FTDs at a rate of 1.2 million per month, though even this figure trails the sales of music videos (1.25 million per month). The forefather of digital music downloads, the iPod, has educated the user about digital music-file storage and played a pivotal role in creating the sideloading phenomenon that allows users to transfer music to their mobiles from their PCs. This model has been embraced by O2 UK and Cingular Wireless in the US and is seen as a complementary service by the operators driving the over-the-air FTD strategy (3 and Japans KDDI, for example).
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Throughout 2007, cellcos and content providers will position the mobile device (with limited storage capability) to deliver musics short tail; i.e. the latest chart tracks or a consumers favourite tracks. For handsets, where storage will not be an issue, the mobile phone will increasingly resemble alternative music devices. Such phones will become more mainstream during 2007, from the likes of Nokia and Sony Ericsson.
Mobile games
If music set the mobile entertainment agenda in 2006, mobile games will get a similar push from the industry in 2007. The first half of 2006 served as a wake-up call for the mobile games market, which slowed during the back end of 2005 and early 2006 amid fears that the market was stagnating. Rather, the slowdown was the result of an immature market experiencing growing pains. One company expected to make a strong play in the mobile games sector is Nokia. The Finnish vendors deal with Electronic Arts should enable mobile consumers to easily access downloadable games through a variety of shopping mall stores, including a portfolio of EA games such as Tetris, The Sims, Doom and FIFA Street. Operators will also reassess their games strategy. In 2007, Vodafone will ensure that the mobile games purchase process becomes considerably easier by limiting the number of games publishers featured on live! In 2007, live! handsets will contain embedded games with only the preliminary stages/levels stored on the handset, prompting the consumer to download the latter stages of the game. Embedding a richer array of content on handsets will help drive, not only sales of games, but content revenue in general in 2007, and this strategy will become more prevalent throughout the year.
Mobile TV & video

While music and games, to a varying extent, have proved the revenue-generating ability of mobile entertainment, mobile TV (3G TV and mobile broadcast TV) and video have set the mobile content industry alight with the promise of untold revenues. Although the hype has been rather excessive (as one would expect), the convergence of mobile and media is creating an exciting consumer proposition. Twentieth Century Fox, HBO, Channel 4 and ESPN are but a few of the content providers lining up alongside broadcasters such as Sky, RHL and Canal+, partnering with mobile operators to deliver the home-viewing experience to the mobile. With deals being struck between the likes of Vodafone and Sky in the UK, for example, the revenue-share balance is beginning to tilt in favour of the content provider, as the power of the media or programme brand emerges.
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To a large extent, content is mirroring programmes available on traditional TV, and early signs indicate that consumers are prepared to pay a premium for mobile. Vodafone has more than 250,000 subscribers to its Sky Mobile TV service, of which 50% have opted to subscribe to all three packages for a monthly cost of 9.99 (US$18.94). In South Korea, more than 800,000 consumers have signed up for TU Medias satellite-DMB service at a cost of US$13 per month. While the ability to identify business models for mobile TV remains somewhat in the balance (particularly for mobile broadcast TV, given the additional handset and network-rollout costs), consumers appear to have already accepted the subscription-based model. Supplement the revenue with the potential to up-sell video-on-demand and the appeal of mobile advertising, and mobile TV could start to deliver on the early hype and promise. The first major operator to pursue such a model aggressively will be Verizon Wireless in 1Q07, with the launch of its service over MediaFLO. If successful, the subscription plus ad-funding model could set the precedent globally. In 2007, consumer take-up for mobile TV will extend beyond the early adopters. Given the personalised nature of the mobile device, those consumers will look to transform their mobile TVs into personalised TV, which enables them to control their viewing habits via timeshifting functionality to maximise their entertainment during mobile prime time (e.g. commuter hours and lunch).
The supporting cast

But cost of content will remain an issue. Mobile advertising looks to redress those concerns by offering the mobile entertainment industry the ability to subsidise content costs to the consumer. While advertising is ideally suited for mobile TV, it also holds tremendous opportunities for games and music, as well as the mobile Internet. The latter is happening with increasing regularity in the more-developed wireless nations. In the UK, off-portal revenues contribute more than 70% of total mobile content revenues. In the US, the figure is 25%. The UKs off-portal figure is expected to near 80% by end-2007, and the US can expect to experience a 10% growth in off-portal revenues also. As more brands look to own the consumer and go directly to the consumer, more content providers are looking to use their presence on-portal as a storefront for the latest content, with the intention of directing the user to their off-portal sites. In 2007, we will begin to see operator portals servicing the short-tail while the off-portal domain houses the long-tail content. This development means that consumers no longer rely solely on operator portals for content and that they are becoming more savvy about content search and discovery. The industry has yet to resolve the issue of whether an Internet search engine brand is required to drive mobile Internet search or whether a white-label search solution provider will suffice. But this is another area that will be addressed in 2007.
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Communities and user-generated content

The services that will continue to generate significant buzz within the industry in 2007 will be community and user-generated content. When considering the mobile channel, the obvious merit for an operator is the ability to increase customer retention by playing on the users need to relate to like-minded people in a mobile virtual world, sharing their interests at a time when traditional socialising is being eroded. MySpace gets all the press coverage, but its a neophyte compared with its South Korean counterpart. On the mobile side, for example, Cyworld has offered WAP sites since its launch. The service is operated by SK Communications, a unit of leading cellco SK Telecoms, and it boasts an impressive 18 million users and 90% penetration among teens and people in their twenties. 3 UK launched its Kink Community during the summer and already has more than 50,000 users making 350,000 postings and trading 80,000 MMS messages a day. 3 is very bullish on user-generated content, and its video-sharing channel See Me TV racked up 14 million downloads in its first year of operation. Also in Europe, Vodafone Germany, Austrias Mobilkom and Sunrise in Switzerland recently launched Mobile Streams FunkySexyCool youth community aimed at the 16- to 24-year-old demographic. The service provides chat, messaging and peer-recognition features, such as the opportunity to be voted funky, sexy or cool. FunkySexyCool launched in Australia on 3, Optus and Telstra and boasts more than 130,000 active profiles and 3,000 page views a month. Mobile Streams plans to bring the offering to both North America and South America. But you can be sure these carriers, and the others, will provide mobile social networking during the course of 2007.
Nick Lane manages Informa Telecoms & Medias portfolio of premium products in the mobile content and applications space. Nick has been following the mobile data industry on a daily basis since 2001, developing expertise that includes mobile data applications and services, mobile content, and the strategies and business models of mobile data players. In addition, he has attained a solid grounding in wireless technology, and 3G in particular. www.informatm.com/contentandapps
Mobile Entertainment Markets 2007 MEM07

Meet the leading mobile media in Monte Carlo in June 2007, as Mobile Entertainment Market 2007 the official event of the Mobile Entertainment Forum (MEF) hits the Mediterranean.
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The seventh annual MEM will be the industrys foremost gathering and deal-making centre, where content owners, mobile operators, aggregators and key players can build local and global connections that extend to new markets. See you in elegant Monte Carlo next summer! www.mem07.com
Mobile Media Research Service

Mobile Media is a fortnightly online research service delivering an intelligent mix of in-depth research and analysis, regular primary data and comment. Every issue includes: Company analysis of the companies that stand at the forefront of mobile data, in addition to scrutiny of those aiming to make a mark in the mobile content and services market, including: Reuters, 123 Multimedia, SK Telecom & Def Jam Mobile. Sector analysis scrutiny of the areas you need to understand in order to take advantage of mobile data opportunities. Recent analysis has included content-focused MVNOs, Mobile TV deployments and strategies and on-portal advertising. Regional analysis thorough coverage of the most advanced and trend-setting mobile data markets. We analyse aspects of North America and Asia in every update. www.informatm.com/mm
Mobile Entertainment Strategic Report and Forecasts

Mobile Entertainment clarifies the market, details key growth areas, provides case studies of successful services and enables readers to make informed decisions about mobile entertainment business strategy. The report offers an in-depth analysis of major player strategy, as well as full forecasts by market segment and region, to 2011. Report coverage includes: Games Music TV and Video Mobile Communities and User Generated Content Personalisation and images Gambling Adult content www.informatm.com/mentertainment
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Mobile Content Direct to Consumer Management Report

Mobile Content Direct to Consumer analyses how entertainment and media markets are better placing themselves to benefit from this evolving value chain, highlighting the mobile operator response to developments. Key coverage includes: Unique view of the d2c market affecting media and entertainment companies Case studies from Telefonica Moviles, Universal Music, EMI Music and many more Expert analysis on the evolving relationship between mobile operators and media and entertainment companies. Can they work together to exploit the potential revenue share available in this sector? www.informatm.com/d2c
Mobile TV World Summit Conference Series

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Handsets and devices

The drive for regional scale and growth is continuing to drive M&A activity in emerging markets. Here, Dave McQueen looks at margins and applications, the move towards open software, the key markets that continue to attract interest from major operators. The rate of overall worldwide mobile handset growth will slow dramatically from 2007, as saturation in developed markets will start to balance out the booming growth in emerging regions. Informa Telecoms & Media predicts the growth rate will fall from the double-digit growth experienced since 2002 to single digit growth from 2007 (see Figure 6.1). Despite slower growth, handsets sales are still forecast to pass the 1 billion mark in 2007. The important thing to note here is that sales will continue to grow, but not at the levels seen over the past three to four years. Global volume sales are not about to disappear but, rather, we will see a degree of levelling out in shipment numbers.
Figure 6.1: Worldwide total handset sales
Total handsets (million) 1,400 1,200 1,000 800 600 400 200 0 2005
2005 814.4
2006 942.7
2007 1,029.70
2008 1,104.60
2009 1,169.10
2010 1,218.50
2011 1,255.50
million
2006
2007
2008
2009
2010
2011
Vendors will struggle to sell as many handsets and sustain the same levels of profitability over the coming years. Growth in developing markets including India, China and Latin America is impressive, but these regions have yet to reach full saturation. With handset sales in the saturated developed markets much slower, and reliant on the replacement of old models, the net effect is a major slowdown in the overall rate of growth.
Margins are key

The emerging economies are experiencing large increases in subscriber numbers, driven by healthier economies and the availability of low-cost, entry-level handsets. They present a good opportunity to keep headline sales figures vigorous, but the issue then becomes one of
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margins. Devices sold in developing markets have tended to be low-end units, and so they retail at a low price. However, in more-developed regions with high penetration rates, growth is largely restricted to active replacement of technologically advanced handsets those with capabilities including digital cameras, MP3 playback, video and broadcast TV and will not sustain such major increases. Several handset manufacturers have consolidated recently, and Informa predicts a sustained period of mergers and acquisitions. Intense competition and a shortening handset-model lifespan are forcing many vendors and operators to drastically change their business models or risk dropping out of the market. Many vendors especially those in the over-serviced Chinese market will be swallowed up by dominant leading brands such as Nokia and Motorola, which are pulling away from the rest. Pressure will also come as a result of the very low profit margins gained by low-cost handsets sold in some developing territories. Questions about the ownership of essential IPRs continue, and it is time for a single, centralised body to take control of the IPRs issue. If one problem has dominated the handset industry for the past two years, it is trying to establish who owns what patents and which patents are essential to the operation of any given technology. At present, patent owners are called upon to provide IP that is considered essential on fair, reasonable and nondiscriminatory terms. But the requirement is causing problems even in definition. Progress in the global mobile handset market and continuing improvements in wireless networks is shifting the industry from mainly voice-centric devices to data-centric devices. Numerous features and capabilities ostensibly drive the handset market, notably replacement sales, but these features increasingly exploit the potential of next-generation data networks, including 3G services, wireless LAN and beyond. It can be argued that 3G services worldwide have blossomed because of the availability of good, well-featured handsets. Consequently, handsets currently being manufactured are incorporating a variety of features. Already, many features such as colour display, camera and Java applications are reaching maturity and now appear in a significant number of handset devices. But numerous other features are also starting to appear across all network technologies and handset ranges, and these are available from most vendors. The move to next-generation technology has meant that handsets are increasingly being manufactured to be compatible with, and make full use of, the capabilities and speed of the technology they will use.
Killer applications
The onset of multimedia messaging, in tandem with colour screens, has pushed the massmarket arrival of camera handsets in most markets worldwide, despite relatively low usage
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of the actual service itself. Moreover, video download and video streaming are proving popular in some markets, despite the fact that video-telephony and messaging were touted as true differentiators for 3G networks. Other advances in handset features have to do with music and media capabilities. Driven by the phenomenal and well-documented success of ringtone downloads, mobile music has led the way as a model for how a new breed of mobile entertainment services can provide significant new revenue streams and drive traffic for data services. However, operators are pinning their hopes on the potential for digital media broadcasting receivers on handsets. For a number of years now, the mobile TV industry has generated considerable interest from many sectors of the mobile and broadcast industries, including mobile operators, handset vendors, broadcasters and content providers. Informa predicts that handsets built with mobile-broadcast-receiver technologies will account for 10% of handset sales by 2011, about 120 million phones. An inflection point is expected to occur in 2009, as network rollout and device availability allow the market to reach a level of critical mass. But, ultimately, will anyone actually use a mobile TV service? And if so, at whom will the service be targeted? Some major issues underlie mobile TVs chances for success. How, when and for how long will content be consumed while on the move? Moreover, how much will users be willing to pay? But if current broadcast solutions and partnerships are indicative of what is in store for the mobile TV industry, it will undoubtedly achieve its potential, driving revenues through subscription-based services, on-demand content and interactive services.
Open software
Many of the opportunities presented by new services and sales to emerging markets will be boosted by a gradual and ongoing shift to open device software. While many vendors still rely on proprietary real-time operating systems (RTOS), the drawbacks of in-house software in terms of offering new applications and features on devices are starting to sway manufacturers towards open-source OSes, including Symbian, Microsoft, PalmSource and Linux. A great deal of attention in the mobile software market is also centred on providing standardised software platforms that can run any application and are not dependant on a minimum device-hardware specification. The desire to write an application once, and run it almost anywhere, is increasing carriers and vendors interest in over-the-air software update technologies that enable handsets to be remotely managed and updated, allowing the installation of new features and applications. At present, control of OTA updates lies in the operators hands, as they are the recipients of most of the benefits of OTA, including lower device-management costs and reduced reliance on customer-support call centres.
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For vendors, the benefits of open-source OSes are becoming clearer. While the technology may initially cost more to implement than an RTOS developed in-house, open OSes offer vendors a shorter time to market by reducing their development time. In addition, many vendors including Nokia, Motorola, and Samsung have built handset-reference-design platforms based on a single OS, meaning they can reuse the design in multiple-device models and simply tailor the features installed to suit the market at which a device is targeted. Open OSes should also benefit application developers, reducing the amount of product redesign and retesting they currently have to carry out. Noting that overall usage of open OSes has increased considerably over the past two years, Informa predicts a continuation of that growth in the coming years as the number of handsets powered by open OSes increases.
David McQueen focuses on mobile handset developments and vendor strategies worldwide. He has 12 years experience in telecoms research and consulting and has gained firsthand experience in the needs and requirements of handset markets. Before joining Informa Telecoms & Media, David was with the UKs Post Office Consulting Group, where he was responsible for providing competitor and market analysis on the communications market. www.informatm.com/handsetsanddevices
Future Mobile Handsets Strategic Report and Forecasts

Containing over 500 pages of independent market analysis, detailed forecasts to 2011 and expert strategic outlook, this leading industry report is an essential tool for successful strategic planning. Future Mobile Handsets will enable you to monitor current and future developments across global handset markets and make fully informed business decisions based on the most authoritative industry data available, including: Detailed market forecasts to 2011 In-depth trend analysis Exclusive feature set penetration forecasts Invaluable technology roadmaps Independent case studies Expert future outlook www.informatm.com/fmh
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Mobile Application Platforms and Operating Systems Strategic Report

This strategic report investigates the challenges facing the mobile terminal software industry and provides expert commentary on future industry outlook, ensuring you have the information needed to invest profitably going forward. MAPOS also includes key forecasts to 2011. www.informatm.com/mapos
Mobile Handset Analyst Research Service

Mobile Handset Analyst research service fortnightly covers the issues that will directly impact the handset space, regularly breaking significant handset-related developments ahead of the mainstream press. Every issue includes: In-depth research and analysis: regular, primary research from our editors and analysts Exclusive news: hard-hitting intelligence that affects major players and markets Complete research toolkit: search the full archive of analysis or download published research Industry benchmark data: fully exportable primary data www.informatm.com/mha
World Handset Forum Conference Series

World Handset Forum Europe, the flagship event of this global series, will run for the fifth time in 2007. With an established delegate base of important decision-makers in the handset community, this forum is the premier handsets event in Europe and has fully established itself as the industry meeting point. By tracking strategic and technical changes and following developments in the market, WHF Europe brings you the most relevant agenda and the hottest speakers. www.informatm.com/whf
SIM 2007 Conference Series

Brings together mobile operators, handset manufacturers, content providers, banks and vendors from across the SIM and Smart card value chain. It addresses how to improve service customisation and portability for users of mobile services in a secure and trusted environment. www.informatm.com/simvision
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Appendix
Q1: What region are you based in?
Africa Asia Pacific East Europe Middle East North America Latin America West Europe Equipment Vendors 18 80 22 31 39 14 162
450 400 350 300
Repondents
Handset Vendors 4 30 1 7 16 7 40
Mob Ops 58 115 49 52 22 15 165
Other 32 177 37 51 141 16 412

Equipment Vendors Handset Vendors Mob Opp Other
Total 112 402 109 141 218 52 779
%age 6 22 6 8 12 3 43
250 200 150 100 50 0

Africa Asia Pacific East Europe Middle East North America Latin America West Europe
Q2: How confident are you about the prospects for your business in 2007?
Equipment Vendors More confident than in 2006 239 Less confident than in 2006 34 About the same as 2006 93
700 600 500 Respondents 400 300 200 100 0 Equipment Vendors Handset Vendors Mob Opp Other
Handset Vendors 74 6 25
Mob Ops 262 60 153
Other 594 40 231

More confident than in 2006 Less confident that in 2006 About the same as 2006
Total 1169 140 502
%age 65 8 28
Q3: Do you expect ARPU in your region in 2007 to:

Equipment Vendors Increase 0-5% 117 Increase 6-10% 81 Remains at 2006 levels 88 Decrease 0-5% 71 Decrease 6-10% 9
350 300 250 200 150 100 50 0
increase 0-5% increase 6-10% remains at 2006 levels decrease 0-5% decrease 6-10%
Handset Vendors 34 40 19 11 1
Mob Ops 162 124 82 87 20
Other 296 301 151 100 13

Total 609 546 340 269 43
%age 34 30 19 15 2
Source: Informa Telecoms & Media; Mobile Industry Outlook 2007 Survey
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Q4: Which of the following technologies will be the most important in increasing mobile revenues in 2007?
2G 3G HSxPA/Rev A WiFi WiMAX Equipment Vendors 49 164 82 23 47
600 500 400 300 200 100 0 2G 3G HSxPA/Rev A WiFi WiMAX
Handset Vendors 15 57 13 10 9
Mob Ops 97 220 88 30 36
Other 84 490 106 120 65

Total 245 931 289 183 157
%age 14 52 16 10 9
Q5: Which of the following content services will create the most interest in 2007?
Email Mobile Games Mobile Music Mobile TV Equipment Vendors 75 28 96 164
400 350 300 250 200 150 100 50 0 Equipment Vendors Handset Vendors Mob Opp Other
Handset Vendors 23 2 36 43
Mob Ops 116 42 133 183
Other 194 81 242 349

Email Mobile Games Mobile Music Mobile TV
Total 408 153 507 739
%age 23 8 28 41
Q6: Who is best-placed to profit from convergence of fixed and mobile networks and services?
Integrated fixed and mobile operators Fixed-only operators Mobile Only Operators MVNOs, ISPs, broadband service providers Equipment Vendors 243 6 50 67 Handset Vendors 58 2 16 28 Mob Ops 337 13 55 69 Other 507 27 81 248 Total 1145 48 202 412 %age 63 3 11 23
600 500 400 300 200 100 0 Equipment Vendors Handset Vendors Mob Opp Other
Integrated fixed and mobile operators Fixed-only operators Mobile Only Operators MVNOs, ISPs, broadband service providers
Source: Informa Telecoms & Media; Mobile Industry Outlook 2007 Survey
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Informa Telecoms & Media is the leading provider of business intelligence and strategic marketing solutions to global telecoms and media markets. Driven by constant rst-hand contact with the industry our 90 analysts and researchers produce a range of intelligence services including news and analytical products, in-depth market reports and datasets focused to technology, strategy and content. Informa Telecoms & Media also organizes more than 125 annual events, attended by more than 70,000 executives. In addition to the GSM>3G World Series, our events cover subjects as diverse as xed and mobile operator strategy, technology, TV, mobile music and games.
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For further information on how we can meet your speci c needs, contact us:
Informa Telecoms & Media Informa House 37-41 Mortimer Street London, W1T 3JH UK Phone: +44 (0) 207 017 5000 Fax: +44 (0) 207 017 4668 Email: telecoms.enquiries@informa.com
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Mobile Market Status 2007

MOBILE MARKET STATUS 2007

MOBILE MARKET STATUS 2007

Mobile operator strategies

MOBILE MARKET STATUS 2007

Figure 1.1 ARPU levels by region (2005-2007)

2005 2006 2007

Source: Informa Telecoms & Media; Global Mobile Forecasts to 2011

MOBILE MARKET STATUS 2007

Key Themes for 2007

MOBILE MARKET STATUS 2007

Fixed-mobile substitution counters price declines

Source: Informa Telecoms & Media

MOBILE MARKET STATUS 2007

Can content and TV compensate for the decline in voice?

The new buzzwords

Plotting the direction of the mobile industry

MOBILE MARKET STATUS 2007

World Cellular Information Service

Global Mobile Forecasts to 2011 Strategic Report

Global Mobile Roaming Strategic Report and Forecasts

MOBILE MARKET STATUS 2007

GSM>3G World Series

Central and Eastern Europe

Middle East & Gulf

MOBILE MARKET STATUS 2007

Mature mobile markets

2006 2,704,661 2,098,612 1.29 6,526,423 41.44 32.16

2007 3,078,445 2,381,058 1.29 6,601,065 46.64 36.07

2008 3,373,865 2,604,303 1.3 6,676,021 50.54 39.01

2009 3,600,901 2,774,553 1.3 6,751,263 53.34 41.10

2010 3,767,778 2,898,080 1.3 6,826,743 55.19 42.45

2011 3,889,742 2,985,957 1.3 6,902,447 56.35 43.26

MOBILE MARKET STATUS 2007

MOBILE MARKET STATUS 2007

MOBILE MARKET STATUS 2007

MVNO Strategies Conference Series

MOBILE MARKET STATUS 2007

Mobile Communications Research Service

Convergence World Series

MOBILE MARKET STATUS 2007

Developing mobile markets

Source: Informa Telecoms & Media

Middle East and Africa

MOBILE MARKET STATUS 2007

Central and Eastern Europe

Other Russia, Poland & Ukraine

2006 (F) 2007 (F)

MOBILE MARKET STATUS 2007

MOBILE MARKET STATUS 2007

MOBILE MARKET STATUS 2007

GSM>3G World Series

Global Mobile Research Service

African Mobile Opportunities Management Report

Middle East Mobile Opportunities Management Report

Central and Eastern European Mobile Opportunities Management Report

MOBILE MARKET STATUS 2007

Mobile networks and technology

Future mobile broadband

HSUPA 19% HSDPA 65%

MOBILE MARKET STATUS 2007

IMS opportunities and challenges

Service delivery platforms