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State of the Global Mobile Industry Annual Assessment - 2012

Research. Technology. Strategy. Intellectual Property. Thought Leadership Summits.


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Table of Contents
Global Mobile State of the Union - 2012 Mobile Impacts Everything Mobile Subscriber and Revenue Growth Global Markets Data Growth Devices Changing Landscape Mobile VAS and OTT Mobile Data Traffic Growth and Solutions Intellectual Property Global Markets Competitive Dynamics 2012 Expectations

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Global Mobile State of the Union 2012


1. 2. 3. 4. 5. 6. Total Global Mobile Revenues to hit $1.5 Trillion in 2012, over 2% of Global GDP
Top 10 operators control 42% of the global data mobile revenues The number of mobile operators with > $1 Billion in yearly data revenues will touch 50 in 2012 Non-messaging data now owns 53% of the global mobile data revenues However, the wealth is not divided evenly. Asias share has tripled at the expense of Europe whose profit share has declined by 50%. China exceeds 1 Billion, India 950 Million. Subscriber growth is in Asia, Revenue growth is in Asia+North America US represents only 6% of the subscriptions but 21% of the global service revenues, 26% of the data revenues, and 27% of the global CAPEX 70% of the device sales in the US are now smartphones. Device Replacement cycle is shrinking

Mobile Services Revenue exceeded $1 Trillion for the first time in 2011 Total Global Mobile Data Revenues went past $300 Billion in 2011 Mobile Operator Profits have more than doubled over the last 10 years Total Global Subscriptions to exceed 7 Billion in early 2013 China and India represent 27% of subscriptions but only 12% of the global service revenues

7. 8.

Mobile Devices are now exceeding traditional computers in unit sales + revenue

Samsung and Apple now account for 50% of the smartphone unit share and 90% of the profit share
Difficult environment for other OEMs esp. when ZTE and Huawei are coming strong from the bottom. It will be difficult for pure play device OEMs to survive long-term

9.

Tablets (iPads) has created a new computing paradigm that is having a significant impact on commerce, content consumption, and developer investments
Apple will continue to dominate the segment and iOS will be the leading OS for the segment. Amazon, ZTE, Huawei, to chip away at the sub-$200 tier

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Global Mobile State of the Union 2012 contd


10. Mobile Broadband (4G) is being deployed at a faster rate than previous generations, first time data is leading the charge
Over 1.5 Billion broadband connections by 2012 The decline is directly proportional to the increase in smartphone penetration by region Regulators will have to be more prudent and proactive about managing competitiveness and growth Many countries are facing spectrum exhaust in the next 2-3 years (in certain markets) Signaling traffic is growing faster than the data traffic on broadband networks Operators will have to quickly adapt their strategies to stay relevant in this segment Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few The 5 Platform Amigos Apple, Google, Amazon, Microsoft, and Facebook dominate though the first two have the real power OTT Share of the Global Mobile Revenues increased to 4%

11. Global Mobile Apps revenue has completely (and irreversibly) tilted to off-deck
12. All major markets are consolidating with the top 3 players at 85% of the market 13. Mobile data traffic 2x YOY in most markets. Mobile Data will be 95% of the global mobile traffic by 2015

14. Mobile Signaling takes up 2x the resources as Mobile Data Traffic


15. Connected device segment is growing at the fastest pace in the western markets 16. Several multi-billion dollar opportunity segments are emerging

17. Mobile Ecosystem has become very dynamic and unpredictable


18. Mobile Operator Revenue is under pressure from OTT Players

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Global Mobile State of the Union 2012 contd


19. OTT players forcing operators to up their game
Operators are partnering, launching their own OTT apps, increasing tariffs to manage the margins 21% of all patents granted in US are mobile related. Top 20 control 1/3rd of the overall mobile patent pool

20. Intellectual Property has become a key component of long-term product strategy 21. Mobile Patent Rankings: US IBM, Microsoft, Nokia. Europe Alcatel-Lucent, Nokia, Samsung. Overall Nokia, Samsung, Alcatel-Lucent
OEMs Nokia, Samsung, Sony. Service Providers AT&T, NTT DoCoMo, Sprint

22. In 3-5 years, with few exceptions, if a company is not doing majority of its digital business on mobile, it is going to be irrelevant
Majority (by a good margin) of the consumer interactions with brands will be on mobile In the US, mobile revenues were > all Ecommerce And > Music, ISP, Hollywood, and Cable revenues combined Data will drive majority of the network growth, Contextual data will drive majority of the VAS growth The value chains will keep disrupting every 12-18 months by the new players and business models. Several verticals are already getting redefined e.g. retail, health, education, etc.

23. Mobile has become the single most important digital channel for engaging consumers and it shows 24. We have entered the mobile 3.0 era where data is all that matters and it disrupts the value chains 25. There will be more changes in the next 10 years than in the previous 100

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Key Industry Micro-Milestones


Apple captures 70% of mobile device profits defies gravity, obliterates competition Apple mobile appstore downloads exceed 25 Billion, 100 Million on Mac redefines distribution/ecosystem Samsung ends Nokias 14 year reign as the device king brutal execution Android 300M activations Juggernaut Paypal does $7B in mobile transaction volume Square does $5B in commerce transaction volume Google > $5B in mobile revenues Microsoft revenues from Android > Windows Mobile Pandoras 70% usage is on mobile, Twitters 60% of the usage is on mobile heading towards a mobile-dominant world Facebook Instagram Acquisition $1B Mobile only acquisition to beef up mobile strategy Angry Birds approaches a billion downloads ESPN does 3.1 billion minutes on mobile in 3/12 Mobile is where the action is Skype traffic over 150 billion minutes OTT pressure

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Key Industry Micro-Milestones contd


KPN messaging volumes decline 15% YOY OTT pressure Mobile Security threats grow 7x in last two years, Android threats up 3000% Mobile IS IT Cisco BYOD ratio 70% (up 52% in 2011) - BYOD is creating new opportunities for vendors US data traffic over 130 quadrillion bytes/month in 2011 Data traffic 2X YOY, welcome to the yottabyte era Fandango sells quarter of its ticket on mobile commerce is happening Expedia does > $1B in mobile commerce see above Microsoft Nokia Multi-Billion partnership It takes two to tango Lightsquared fails Keep your friends close, enemies closer Google Motorola $12.5B IP becomes key to strategy Nortel Patent acquisition $4.5B IP becomes key to strategy AT&T/T-Mobile Failure DOJ/FCC put down the gavel 40% of Kenyas GDP comes from mobile money impact of mobile is pervasive Millennial Media IPO at $2B first public market validation of the mobile advertising space HP gives up on Palm Competition forces Corporate Schizophrenia

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MOBILE IMPACTS EVERYTHING

Mobile Apps and Services


Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce. The day is not far when mobile commerce will dominate all digital commerce.
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Mobile is the single most pervasive technology ever invented

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Mobile impacts all Maslow levels

% of Average Spend

Self

15%

35% Safety

50% Physiological

Source: US Department of Commerce

Mobile is now 50% of the household IT budget

Context the most valuable currency in mobile


Demographics/Explicit Profile Interests/Implicit Profile Sensor data Purchasing, Payments User Intent Communications Location Browsing, Watching, Previewing, Flipping

Trusted Concierge
Search (Local, Online, Media)

Presence Physiological parameters Calendar Knowledge (about User) DRIVES Transactions (from User)

User Experience

Address Book Gifting Social Community

Intellectual Community

Trusted Advisor

Advertising

M2M

Pricing

Preferences Security/Authorization Devices in the vicinity

3 Party Sources
rd

Big Opportunities in becoming the trusted Concierge/Advisor to the individual user


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MOBILE SUBSCRIBER AND REVENUE GROWTH

The Big Picture


The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.5 Trillion in 2012 with mobile data representing 28% of the mix. Mobile data services revenue stood at 33%. Global Mobile Data revenues eclipsed $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%. By the end of 2011, the global subscriptions exceeded 6 Billion. The first 1 billion took over 20 years and this last one took only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. China became the first country to eclipse the 1 billion mark in March 2012. India is likely to arrive at the milestone by early 2013. Smartphones are driving tremendous growth around the globe. Amongst the major markets, US leads with 69% sales. The global figure stands at approximately 32%. Some operators expect 9095% of their device sales to be smartphones in 2012. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012. China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant Korea, UK, Italy, Germany have dropped off or slipped in rankings. The number of mobile operators with more than $1B in data revenues will increase to 50 in 2012. This number was only at 13 in 2005.

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Global Mobile Market Snapshot 2011


Global Mobile Market Snapshot 2012
Global Subscriptions

Global Smartphone Users

Global Data Users

Global SMS Users

Global Mobile Broadband Users

Each dude represents approximately 113 million humans on planet Earth


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Chetan Sharma Consulting, 2012

Global Mobile Technology Evolution

First time, data is leading the charge

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Global Mobile Industry continues to grow at a healthy pace

Non Operator OTT Revenues at 4% Voice will fall below 50% in 2012 Messaging revenues still growing but flattening growth Access revenues are growing quicker than any other operator segment

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Mobile is over 2% of Global GDP

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Operators around the world are benefiting from mobile data

50 operators with > $1B in data revs

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Global Mobile Industry Growth

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Top 10 global mobile data operators US, Japan, China Dominate

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Global Mobile Leaders - 2012

Rank

By Subs

By Total Revenue

By Data Revenue

1
2 3 4 5 6 7 8

China
India US Russia Brazil Indonesia Japan Pakistan

US
China Japan Brazil France Russia UK Germany

US
Japan China France UK Korea Italy Germany

9
10

Germany
Mexico

Italy
India

Australia
Brazil

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Global Mobile Leaders - 2012

Rank

By Sub Penetration

By ARPU

By Data Usage

1
2 3 4 5 6 7 8

Hong Kong
Finland Portugal Austria Singapore Sweden Denmark Greece

Japan
Canada Switzerland US Norway Australia France Netherlands

Sweden
Finland Hong Kong US Denmark Canada Australia New Zealand

9
10

Germany
Switzerland

Singapore
Israel

Austria
Belgium

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Biggest Telecom Groups

Rank

By Subs

By Data Revenue

By NM Data Revenue

1
2 3 4 5 6 7 8

China Mobile
Vodafone Telefonica Bharti Airtel America Movil Orange China Unicom Vimplecom

Verizon Wireless
NTT DoCoMo AT&T Mobility China Mobile Vodafone Sprint Nextel KDDI Telefonica

AT&T Mobility
NTT DoCoMo Verizon Wireless China Mobile Vodafone Sprint Nextel KDDI Telefonica

9
10

TeliaSonera
Reliance

Softbank
T-Mobile

T-Mobile
Softbank

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US at the epicenter of mobile growth

2% net-adds, 6% total subs but 21% of service revenues, 26% of data revenues, and 27% of global CAPEX Networks: LTE/HSPA+ - Most broadband customers Smartphones: Over 70% of the devices sold (more than twice the global average) Applications: Billions of downloads (#1) Pricing: Per Bit, Per Minute, Per Message lowest in developed world

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US Mobile is the most dominant digital channel

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Race to a Billion China won

Corruption drags down growth

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China+India in Mobile

China+India account for 37% of the global population

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China regains momentum & the lead

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GLOBAL MARKETS: DATA GROWTH

US, Japan lead in revenues; China, India in subscriptions


Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. Country average is now at 60%. Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any other nation due to the size of the market. While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $2.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.

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Mobile Internet 3.0 Data as growth engine


Mobile Internet - Leading Global Operators (2011)
$40

3.0
Softbank Japan NTT DoCoMo
$30

KDDI

Mobile Data ARPU (USD)

2.0
Vodafone Italy
$20

Telstra Rogers 3 Australia Verizon

Sprint 3 Sweden AT&T Singtel O2 Germany

1.0
SFR

$10

$0%

T-Mobile US T-Mobile Netherlands Bouygues SK Telecom O2 UK KT T-Mobile Austria 3 UK Vodafone UK Telefonica TIM Vodafone Spain 3 Italy T-Mobile UKT-Mobile Germany Vodafone Germany Orange UK China Mobile Turkcell China Unicom SMART Vodafone India AIS Bharti Reliance
15% 30% 45% 60%

Mobile Data as % of Total ARPU

Source: http://chetansharma.com/Mobile_Internet_3.htm
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Chetan Sharma Consulting, 2012

Orange France

All major markets experiencing data growth Japan, Australia, US leading

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Operators seek new sources of revenue

ARPU

New Service Revenue Messaging

Revenue in Billions

Direction of Revenue Growth

Access

Operators can generate new revenue streams by focusing on the long-tail of VAS Verticals
Chetan Sharma Consulting, 2012

Voice

Cloud - Enterprise

Cloud - Consumer

Mobile Advertising

Today
Transportation

Tomorrow

Messaging

Voice

Access

Service and Application Areas

Source: http://chetansharma.com/Mobile_Internet_3.htm

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Energy & Smart Grid

Hospitality

Wellness

Payments

Industrial

Health

DEVICES: CHANGING LANDSCAPE

Devices Apple, Android Dominate


Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but cant do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue. Apple and Samsung are strong on the top. Huawei and ZTE are coming up strong from the bottom. The middle tier players will have a tough time going forward. It will be difficult for pureplay device OEMs to survive long-term. Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokias valuation has been cut into half. Nokias release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones (Lumia). While the market hasnt shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-forgrabs 3rd spot in the ecosystem. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry. Majority of the tablet use is in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. However, of the users who use cellular, the churn is low. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher (e.g. Rogers, Vodafone Spain) but will still be dominated by WiFi overall.

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Mobile Devices are dominating the Computing Ecosystem

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US leading in smartphone sales

US accounts for roughly 40% of the smartphone sales worldwide

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Smartphones driving data growth

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Samsung reaches the top of the hill in market share, Nokia struggling

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Apple and Samsung control 50% of the unit smartphone sales. Nokias share decimated.

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Connected devices come in all shapes and sizes


High Data Cards/Embedded Tablets Video Cameras Automotive Cameras eReaders Picture Frames Low
Number of Units in Market

Superphones
Data Consumption

Smartphones

High

Digital Signage/Kiosks Security Sensors Health Monitors Copiers, Scanners, Printers Wellness Devices Home Sensors Asset Tracking Energy Meters Vending Grid Sensors

Low

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Chetan Sharma Consulting, 2011

Feature Phones

AT&T Connected Devices Growth

Postpaid growth is slowing down in western markets, Connected device segment growing fastest

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US Tablet Launches in 2011

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US Tablet Market

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Competing with iPad

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Platform players 5 Amigos of mobile


Strengths Apple Step ahead of the competition. Vertical Integration, Brand loyalty, Dev revenues, Commerce, Distribution Broad adoption. Broad Support. Open dev platform. Ambitious Weaknesses Pressure on the operator margins

Google

Fragmentation. Dev revenues. Lack of clear device strategy. Regulatory microscope

Amazon

Deep understanding of the user, Content, Commerce, Distribution, Margin master


Bank balance, Operators want a 3rd ecosystem ~ 1 B users, 500 M mobile

New to the device arms race, Lack of OS


Late to mobile party, Lack of mobile execution Lack of coherent mobile strategy, Lack of OS

Microsoft Facebook

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Apple dominates the platform ecosystem


Apple

The overall market is basically iOS and Android. Apple marketcap > Microsoft + Google + Facebook or Amazon

Marketcap

Microsoft

Google

Amazon

Facebook

Users

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Chetan Sharma Consulting, 2012

VAS AND OTT

The Big Picture


The traditional operator revenue streams of
Voice declining and under threat from VoIP Messaging flattening/declining and under threat from IP messaging Access rising but margins are shrinking fast VAS declining in proportion to the growth of smartphones

Operators are fighting back with


Voice launching their own VoIP apps e.g. Bobsled from T-Mobile, partnering with VoIP players e.g. Skype integration, charging for VoIP apps e.g. TeliaSonera 6/month Messaging launching their own IP messaging apps e.g. Huddle from AT&T, partnering with IP messaging players e.g. Whatsapp partnership Access Tiering VAS launch their own VAS apps and industry vertical apps and services
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Smartphones are enabling Offdeck to dominate app revenue

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Some operators are starting to see the decline in messaging revenues


Some operators in Europe are also seeing declines in messaging revenue

Total SMS Volumes still increasing but revenue in decline

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SMS Growth US takes over Philippines

Philippines SMS volumes/sub declining precipitously due to the rise in IP messaging


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Mobile Advertising: All verticals participating

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Promising Segments. Leading Companies


Advertising Google, Millennial Media Payments/Commerce Paypal, Square, Google, Amazon Gaming Microsoft, Rovio Enterprise AT&T, Salesforce M2M Vodafone, AT&T, Ericsson Identity Facebook, Google, Twitter Cloud Amazon, Microsoft, Google, Salesforce Wellness/Health Qualcomm, Fitbit, Mobisante
Sampling Only
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MOBILE DATA TRAFFIC GROWTH

Mobile Data Traffic Growth

In most western markets, data traffic is doubling YOY Sweden, Finland, Hong Kong, and US make the top 4 in terms of MB consumed per capita A Multi-pronged approach is needed to have a sustainable strategy long term

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Only a holistic strategy to deal with data tsunami can help the operators long-term
As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially. To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution wont be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins. The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.

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Wireless seeing unprecedented growth (US)

US Mobile Data Traffic is doubling every year

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Margin preservation key to all operator strategies

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Managing data margins will be top priority for all operators

ra ffi cE qu ili br iu m

50%

Philippines Japan

40%

Data as % of Services Revenues

Re v

en ue -T

Australia Indonesia US New Zealand Hong Kong Singapore Germany Netherlands Italy Sweden Switzerland France Portugal Canada Denmark Korea Finland Spain Russia South Africa UK

China 30%

20%

Mexico

Malaysia

Brazil 10% India Argentina

20%

Source: Managing Growth and Profits in the Yottabyte Era 2nd Edition http://chetansharma.com/yottabyteera2.htm
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40% 60% Data as % of Overall Network Traffic

80%

100%

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Chetan Sharma Consulting, 2011

Management of Data Requires Multiple Strategies


Radio Access Network Mobile Backhaul Core Network

Copper

2G

Core Network
Microwave

3G

Fiber

RNC

SGSN

GGSN

4G

Optimization

Offloading Traffic

Offloading Traffic

WiFi/FemtoCell
Compression/Optimization of Data Traffic Policy Management

Compression/Optimization

Source: Managing Growth and Profits in the Yottabyte Era 2nd Edition http://chetansharma.com/yottabyteera2.htm
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Internet Services

Light Networks

INTELLECTUAL PROPERTY WILL REMAIN KEY TO LONG-TERM PRODUCT AND COMPETITIVE STRATEGY SUCCESS

IP is critical to long-term product strategy


The IP tussles are playing out as expected Players with strong IP portfolios will be able to command better negotiating positions, new revenue streams, competitive positioning over the long-term On average mobile companies file patents 1.7 times more in the US vs. Europe Mobile Patent Leaders in US: IBM, Microsoft, Nokia Mobile Patent Leaders in Europe: Alcatel-Lucent, Nokia, Samsung Mobile Patent Leaders in Infrastructure: Samsung, Alcatel-Lucent, Ericsson Mobile Patent Leaders in Devices: Nokia, Samsung, Sony Mobile Patent Leaders in Service Providers: AT&T, NTT DoCoMo, Sprint Top 20 control 1/3rd of the total mobile communications patent pool
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Patent Power Rankings Mobile Communications Related Issued Patents 1995-2012

Rank

US

Europe

US+Europe

1
2 3 4 5 6 7 8

IBM
Microsoft Nokia Samsung Ericsson Sony Motorola Intel

Alcatel-Lucent
Nokia Samsung Sony Ericsson RIM NEC NTT DoCoMo

Nokia
Samsung Alcatel-Lucent Ericsson Microsoft IBM Sony NEC

9
10

Alcatel-Lucent
Qualcomm

Siemens
Qualcomm

Motorola
Qualcomm

Based on an estimation of Mobile Communications Related Patents that have been granted by The USPTO and the EPO. This assessment doesnt take a look at the quality or the value of the patents
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Patent Power Rankings Mobile Communications Related Issued Patents 1995-2012

Rank

OEM/Software

Infrastructure

Service Provider

1
2 3 4 5 6 7 8

Nokia
Samsung Sony NEC Motorola RIM Siemens LG

Samsung
Alcatel-Lucent Ericsson NEC Motorola Qualcomm Siemens LG

AT&T
NTT DoCoMo Sprint British Telecom Verizon T-Mobile Swisscom Telecom Italia

9
10

Fujitsu
Hitachi

Fujitsu
HP

SK Telecom
TeliaSonera

Based on an estimation of Mobile Communications Related Patents that have been granted by The USPTO and the EPO. This assessment doesnt take a look at the quality or the value of the patents
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US outpaces Europe in mobile patents

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Nokia, Samsung, and ALU The big 3

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Mobile Patent Portfolio of leading mobile players


Mobile Patent Portfolio of Leading Players
100%
Amazon Google Panasonic HTC ZTE RIM Juniper Huawei 90% Lenovo Adobe Apple SAP EMC Telecom Italia SK Telecom 80% LG Kyocera Sprint Cisco Verizon Broadcom Ricoh Qualcomm NTT DoCoMo Intel 70% Dell T-Mobile AT&T TeliaSonera Fujitsu 60% Asustek Interdigital Orange Siemens 50% Hitachi HP British Telecom Philips Swisscom 40% NEC 30% Motorola

Samsung Microsoft Sony IBM

% of Patents Issued 2007-12

Ericsson
Alcatel-Lucent

Nokia

20%
Openwave

Oracle

10%
0%

Chetan Sharma Consulting, 2012


0 2000 4000 6000 8000 10000 12000

Number of Patents Issued 1995-2012

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IBM, MS lead in US. Nokia, Samsung in Europe

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Integration of IP with product strategy is essential for competitiveness in mobile


NUMERIC ANALYSIS

SUBJECTIVE ANALYSIS

f()

Patent Portfolio Quotient (PPQ)

Improve your PPQ by tight integration with product strategy

PATENT PROGRAM ANALYSIS

R&D, Other Sources

Ideation

Licensing

IP Analysis

IP competitive and risk assessment

IP Protection Process

IP Management

IP driven Product Development Cycle

Source: What is your Patent Portfolio Quotient? http://chetansharma.com/patentportfolioquotient.htm


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Chetan Sharma Consulting, 2011

Market Requirements

Product Requirements

Design and Development

Public Disclosure

GLOBAL MARKETS COMPETITIVE DYNAMICS

Changing Ecosystem Dynamics


It is very clear that the ecosystem dynamics can change very quickly, one just cant take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumers pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&Ts business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsofts enterprise business, so on and so forth. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.

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Competitive Dynamics
The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesnt matter if the market is defined by controlled regulation like in China, Korea, and Japan or if it is open market driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market. Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a top 3 operator market. Indias brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets. The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldnt have more than 50% of the market share and the number three player shouldnt have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer. Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define communications and computing as we know it.

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Competitive Landscape in Major Markets

Source: Competition and Evolution of Mobile Markets. http://chetansharma.com/mobilecompetition.htm

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Global Mobile Competitive Index

Source: Competition and Evolution of Mobile Markets. http://chetansharma.com/mobilecompetition.htm


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Eventually all markets consolidate to top 3

Source: Competition and Evolution of Mobile Markets. http://chetansharma.com/mobilecompetition.htm


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WHAT TO EXPECT IN 2H 2012

What to expect in 2H 2012


More Tiering, faster pace of change of plans. More options, family data plans Cost reduction is as important as revenue generation. More players will align their value-chains and cost structures Facebook IPO is probably going to be the single biggest event in the technology industry in the next few months. Radios will start connecting the digital world with the physical world with significant disruption opportunity Mobile Payment Networks will remain intact for the near future as the ecosystem largely focuses on building value on top of the existing exchange platforms The intersection of Social, Location, Identity, and Gaming is creating new opportunities With connectivity becoming pervasive, mobile will fundamentally start to alter the legacy infrastructure retail, health, education, energy, computing, travel, entertainment Significant tablet adoption in the enterprise directly impacting the traditional computer manufacturers Both HTML5 and Apps will continue to grow, the relevancy to any given application will depend on the reach and economics requirements. HTML5 is not going to replace Apps. Mobile data growth will double again in 2012. Significant opportunities in managing and understanding of mobile data growth Regulators will need to evolve to keep up with the trend to keep their nation globally competitive More IP scuffles before licensing settlements Consolidation of weaker players, more global M&A Significant progress in emerging areas like mHealth, mPayments will come from the developing world while the western countries get mired in regulatory and legacy mess Several players face challenging times ahead and 2012 will be critical in their turn around sojourn.

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MOBILE FUTURE FORWARD


MOBILES THOUGHT-LEADERSHIP SUMMIT 09.10.12 SEATTLE
WWW.MOBILEFUTUREFORWARD.COM

Discussions to inform your strategy


Is 4G a Game Changer? Innovation at the Edges Mobile Payments and Commerce Disruption is in the air Mobile Data Services from the Prism of the CIOs Solving the 50 year Spectrum Crunch Managing the Network Growth Opportunities in the Emerging Markets The Universe of Connected Devices Analytics - How to Collect, Manage, and Use Data? Multi-modal Interactions - How Consumers Adapt? At the Intersection of Social, Mobile, Commerce, Content Battle for the Home playing in the n-screen world What do Developers Want? A Smarter Planet - The Role of Mobile in Enhancing Lifestyles and in Making Everyday Decisions Drivers for New Sources of Revenue Role of Regulations - Spectrum, Privacy, Net-Neutrality Mobile Cloud Computing Monetizing the network From 3 Screens to Multi-screens Mobile Universe in 2020
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Mobile Executive Summit

Sept 10th, 2012 Seattle Ever wondered what the future of mobile looks like?
Join us for an extraordinary day of executive mobile brainstorming

Contact info@mobilefutureforward.com for sponsorship and speaking opportunities www.mobilefutureforward.com

Mobile Breakfast Series


June 7th Seattle Mobile Operators and OTT Panel Discussion with AT&T June 22nd Atlanta Connected Devices Fireside Chat with David Christopher, CMO, AT&T Mobility Panel Discussion with CNN and Synchronoss June 29th London Mobile Operators and OTT Panel Discussion with Telefonica, Orange, Rebtel, Horizons Venture

Excellent Speakers. Invaluable Insights. Peerless Networking.

Contact info@mobilebreakfastseries.com for sponsorship and speaking opportunities

www.mobilebreakfastseries.com

We look forward to hearing from you

Chetan Sharma chetan@chetansharma.com TW: @chetansharma http://www.chetansharma.com

Mobile Future Forward info@mobilefutureforward.com TW: @mfutureforward http://www.mobilefutureforward.com

Research. Technology. Strategy. Intellectual Property. Thought Leadership Summits.

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