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The Next Wave in Wireless

Jan DawsonChief Telecoms Analyst

+1 973 457 5814 [email protected]

@janovum


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© Copyright Ovum. All rights reserved. Ovum is part of t he Datamonitor Group.2

Agenda

Introduction

The next wave of connections

Prepaid

M2M and emerging devices

Data, including 4G

Emerging markets

The next wave of competitors

The next wave of content and services

Q&A


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Introduction

The global wireless market is characterized by dramatic differencesbetween regions

Some are reaching saturation, with stagnating revenues and subscribernumbers

Others continue to grow rapidly, primarily in emerging markets in Africa,the Middle East, Latin America and Asia

However, all operators are seeking new revenue opportunities, andwondering where the next round of customers, connections and

revenues will come from

There’s no single answer, and of course there are also new threatsemerging at the same time


4/36© Copyright Ovum. All rights reserved. Ovum is part of t he Datamonitor Group.4

Global connections and revenues, 2008-2015

$0

$200

$400

$600

$800

$1,000

$1,200

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010 2011 2012 2013 2014 2015

Connections (millions)Revenues ($ billions)

CAGR:

Connections: 9.5%Revenues: 2.9%



Share of global connections, 2010 and 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2015

Middle East

North AmericaEastern Europe

Western Europe

South & Central America

Africa

Asia-Pacific



Share of global revenues, 2010 and 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2015

Eastern Europe

Middle East Africa


Western Europe

North America

Asia-Pacific


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THE NEXT WAVE OFCONNECTIONS



Where will the next wave of connections come from?

Emerging markets, where penetration is low and growth rates arestill high

Prepaid in some mature markets, capturing subscribers not

previously reachable

M2M in many markets, creating new addressable market where noneexisted previously

Tablets and other multimedia devices which are either new ornewly connected

Converting voice customers to voice and data customers



Growth rates, mobile connections, 2009-2010

0% 10% 20% 30% 40% 50% 60%

World

North AmericaSouth & Central America

Europe

Western Europe

Eastern Europe

Asia-Pacific

Middle East & Africa

Middle East

Africa



Growth rates, 2009-2015, Global and Regional

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014 2015

World

North America


Europe

Western Europe

Eastern Europe

Asia-Pacific

Middle East & AfricaMiddle East

Africa


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Prepaid a major source of future connections

In markets such as the US, where the focus has historically been onpostpaid, the need for good credit has limited the addressable market

However, prepaid opens up a new customer base which is rapidly

growing, especially for operators aggressively targeting this segment This includes specialists such as Tracfone, MetroPCS and Leap

But also sub-brands of postpaid operators, especially Sprint

But prepaid is no longer just the poor man’s wireless option – it holds

attraction for many customers with good credit too

We will increasingly see hybrid models mixing the best of postpaidand prepaid worlds


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Total US mobile connections, millions

11%

14%

19%

23%24% 25%

26%27%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

2008 2009 2010 2011 2012 2013 2014 2015

Prepaid

Postpaid

Penetration


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M2M – an idea whose time has finally come?

M2M – like many other technologies – is a concept which has beenbouncing around in the industry for many years

However, it does seem that its time has finally come, due to a variety

of factors: The widespread availability of 3G broadband networks

Strong interest and investment from operators

Specific use cases – often in vertical industries – with a business case

This is not to say it will take off overnight, as standardization is still amajor hurdle to deployment, but we will see growth in this area


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M2M numbers for a couple of US operators

-

1,000

2,000

3,000

4,000

5,0006,000

7,000

8,000

9,00010,000

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

AT&T

VerizonThe two companies do

not report data the same

way, so the relative size

and direction of the lines

is less significant thanthe absolute size


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Tablets are the emerging battleground in devices

Competition in smartphones is well established, but tablets are theemerging battleground in devices

Smartphone vendors (and some PC vendors) are entering the space

mostly with smartphone-based operating systems Apple reinvented the tablet space with the iPad running iOS

Early Android tablets used stretched versions of the smartphone OS, andnewer tablets are using a tablet-oriented version – Honeycomb

RIM and HP (Palm) have announced but not yet launched tablets based

on proprietary OSs – QNX and WebOS

Microsoft has yet to enter the market, partly because neither itssmartphone OS nor the PC version of Windows seems appropriate


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Tablet forecast, 2010-2015

0

50,000

100,000

150,000

200,000

250,000

2010 2011 2012 2013 2014 2015

Middle East & Africa

Asia-Pacific

of which Eastern Europe

of which Western Europe

EuropeSouth & Central America

North America


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Global connections and revenues, 2008-2015

$0

$200

$400

$600

$800

$1,000

$1,200

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010 2011 2012 2013 2014 2015

Connections (millions)

Revenues ($ billions)

CAGR:

Connections: 9.5%Revenues: 2.9%


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Global mobile service revenues, $ billions

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014 2015

Data

Voice


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United States service revenues, $ billions

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015

Data

Voice


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Data doesn’t have to mean 4G

Some operators around the world – including the US – are banking on4G as a source of data growth

However, it will be some time before 4G – mostly in the form of LTE – becomes a significant force in the overall market

In addition, it is not yet clear that LTE will provide a boost to revenues – many services are being sold at similar price points to 3G

As such, operators will have to figure out how to monetize the shift to

4G, and also how to make the rollout as cost effective as possible

Network sharing is a major strategy being adopted elsewhere to dealwith these challenges


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Global connections by technology, millions

0

1,000

2,000

3,000

4,000

5,000

2008 2009 2010 2011 2012 2013 2014 2015

1-2.5G

3-3.5G

LTE

WiMAX


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United States connections by technology, millions

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015

1-2.5G

3-3.5G

LTE

WiMAX


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Network sharing benefits


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THE NEXT WAVE OFCOMPETITORS


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The next wave of competitors

New competitors are entering the market in every segment

Operators:

New operators, often with new 4G licences – e.g. Clearwire and

Lightsquared in the US, Wind Mobile and Mobilicity in Canada Regional competitors are going national – notably Metro PCS and Leap

Wireless

Existing operators are acquiring MVNOs and/or launching sub-brands,with Sprint as the primary example

Handset vendors:

Chinese vendors Huawei, ZTE and others making an aggressive push inmid- to low-end smartphones using Android


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Players from adjacent markets

Players from traditionally separate markets are starting to enter thetelecoms market and compete with or displace operators

Apple and Google are taking powerful positionsin the platforms space, and becoming the brandsconsumers are loyal to

Google is also taking a prominent position in mobileadvertising, online services, identity, video and otherareas

Facebook is a player with a great deal of potential todisrupt the telecoms market in a variety of ways


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THE NEXT WAVE OFCONTENT AND SERVICES


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The next wave of content and services

As with the iPad, Apple reinvented an existing concept with “apps”

Smartphone apps have now become the default way to get content ofall kinds onto such devices – news, magazines, audio, video and soon

Even full-length movies with WB’s launch of the DarkKnight and Inception on iOS

The problem for operators is that they don’t controlthis channel

Some operators have launched flavors of Androidstores, while others are participating in WAC


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Apps in app stores (thousands), most recent numbers

0

50

100

150

200

250

300

350

400

iOS Android Ovi BlackBerry WP7


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But the major platforms are not the only players

Apple App Store. Launched July2008, 350,000 apps

Google Android Market. LaunchedOctober 2008, 150,000 apps

Palm App catalogue. LaunchedJun e 6, 2009. 4,062 apps

Blackberry App World. L aunched Apri l 2009, 20,000 apps

Windows Marketplace. LaunchedOct 2009, 9,000 apps

Samsung Apps. Launched Sept2009, 1250 apps

Sony Ericsson Play Now.Launched Aug 2009, 1,264 apps

LG app store. Launched July2009, 2,969 apps

Apple iPad store. Launched Apri l2010, 65,000 apps

Getjar. Launched Dec 2004,70,000 apps

Handster. Launched May 26, 2005,

6,500 apps

Mobango. Launched Dec 2004,35,000 apps. Acquired b y MaujMobile

Handango. Launched 2000 49,634apps. Acquired by Pocketgear

Pocketgear. Launched Jun 2008,140,000 apps

OpenMarket. Launched May2009, 500 apps

SlideME. Launched Apr il 2008,642 apps

Orange app store. Launched Dec2009, 10,000 apps

Telefonica mStore Launched Sept2009 1,000 apps

Vodafone 360. Launched Sep 2009,8,500 apps

China Mobile. Launched Augus t2009, 300 apps

Bharti Airtel App Central.

Launched Feb 2010, 71,000 apps

Verizon VCast App. LaunchedMarch 2010, 300 apps at launch

M1 AppStore. Launched May 2010,400 apps

China Unicom 3G WoStore.Launched November 2010,targeting 2 million users and 10million downl oads by the end of2010

http://blog.distimo.com/2010_02_vodafone-announces-availability-of-7000-apps/http://blog.distimo.com/2009_12_handster-app-store-for-wm-symbian-android-bb-and-java/http://images.google.co.uk/imgres?imgurl=http://images.intomobile.com/wp-content/uploads/2009/06/getjar-logo.png&imgrefurl=http://www.intomobile.com/2009/06/15/getjar-provides-virgin-mobiles-application-store-in-france.html&usg=__JZB4mqeBhNRVhTCmUivxvazhwv8=&h=124&w=356&sz=28&hl=en&start=2&tbnid=A2bkQDHfi-5cFM:&tbnh=42&tbnw=121&prev=/images?q=GetJar+logo&gbv=2&hl=en&sa=Ghttp://www.google.com/imgres?imgurl=http://komplettie.files.wordpress.com/2009/07/vodafone-logo.jpg&imgrefurl=http://komplettie.wordpress.com/2009/07/22/bt-hands-off-to-vodafone/&usg=__PqWhWleAR419hJg7OXwqpv4zi7U=&h=400&w=400&sz=41&hl=en&start=7&um=1&itbs=1&tbnid=Uw1_eQJTb7xAmM:&tbnh=124&tbnw=124&prev=/images?q=Vodafone&um=1&hl=en&sa=G&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.stockwatch.in/files/Bharti-Airtel-India.jpg&imgrefurl=http://www.stockwatch.in/airtel-significantly-drops-broadband-tariffs-22825&usg=__MGOyrJ9zCdRj6pvsWRl05u35l3Y=&h=419&w=414&sz=37&hl=en&start=17&um=1&itbs=1&tbnid=hoHWFcNBz91dCM:&tbnh=125&tbnw=124&prev=/images?q=bharti+airtel+logo&um=1&hl=en&tbs=isch:1http://www.google.com/imgres?imgurl=http://seojoblogs.com/wp-content/uploads/2009/12/Picture-1-296x300.png&imgrefurl=http://seojoblogs.com/tag/orange/&usg=__C4ymIpRKZmaDqR7ev-8AXgAw08k=&h=300&w=296&sz=75&hl=en&start=19&um=1&itbs=1&tbnid=tPs067Mmg0yxeM:&tbnh=116&tbnw=114&prev=/images?q=Orange+app+shop&um=1&hl=en&sa=G&tbs=isch:1http://images.google.co.uk/imgres?imgurl=http://hotline.ccsinsight.com/_images-article/ovi1_purple_CMYK.jpg&imgrefurl=http://hotline.ccsinsight.com/article/Nokia_announces_a_consumer_brand_Ovi_a_Music_Store_NGage_and_new_handsets&usg=__px4-l3rFX0YGgmalYXuanDsyjcs=&h=231&w=308&sz=43&hl=en&start=10&tbnid=0OTKEmBM1tqtYM:&tbnh=88&tbnw=117&prev=/images?q=Nokia+Ovi+store+logo&gbv=2&hl=en&sa=Ghttp://www.google.com/imgres?imgurl=http://www.ringtonesmash.com/wordpress/wp-content/uploads/2009/09/mobango.gif&imgrefurl=http://www.ringtonesmash.com/reviews/mobango/&usg=__ALTsV31A6eC5z0C6huPefKPTWSc=&h=114&w=109&sz=4&hl=en&start=2&itbs=1&tbnid=6FZ8Mj4Lw7Zo2M:&tbnh=87&tbnw=83&prev=/images?q=Mobango&hl=en&sa=G&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.blackberrycool.com/wp-content/uploads/2010/02/handango_pocketgear.jpg&imgrefurl=http://www.blackberrycool.com/2010/02/23/pocketgear-acquires-handango-to-become-largest-app-store/&usg=__ofZCWOiekk0B42WrKvXOBhy13m0=&h=230&w=371&sz=12&hl=en&start=14&itbs=1&tbnid=YAQ0YZxt84Y6jM:&tbnh=76&tbnw=122&prev=/images?q=Pocketgear&hl=en&sa=G&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.stormgrounds.com/media/Blackberry-App-World-Logo.jpg&imgrefurl=http://www.eazycheezy.net/2009/10/the-20-best-free-blackberry-apps-blackberry-app-world.html&usg=__yRd1WOhD6K3DIY7FM1wfgv95YLM=&h=480&w=360&sz=112&hl=en&start=9&itbs=1&tbnid=ZKLgyNNBKOZ-zM:&tbnh=129&tbnw=97&prev=/images?q=Blackberry+app+world&hl=en&sa=N&gbv=2&ndsp=20&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.gottabemobile.com/wp-content/uploads/android_market.jpg&imgrefurl=http://www.gottabemobile.com/2010/03/17/android-market-hits-30000-apps&usg=__izJAt5XYq3FDhufUzRcJgPbtQqU=&h=400&w=400&sz=41&hl=en&start=6&itbs=1&tbnid=f4PdIN3ITAkyYM:&tbnh=124&tbnw=124&prev=/images?q=Android+Market&hl=en&sa=G&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://apple-turkiye.com/haber/wp-content/uploads/apple-app-store.png&imgrefurl=http://apple-turkiye.com/haber/&usg=__IzR59UDWjoXP-HawwW2QjD7070M=&h=257&w=265&sz=73&hl=en&start=14&itbs=1&tbnid=GrTpxzOF8q0zWM:&tbnh=109&tbnw=112&prev=/images?q=Apple+app+store&hl=en&sa=G&gbv=2&tbs=isch:1


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Operators will be forced to innovate more quickly

Because others are taking leadership positions in content and servicedelivery to the mobile device, operators must innovate quickly

We are seeing promising strategies from operators to fosterinnovation in their businesses, to bring new products and services tomarket

We are seeing many examples of such innovative products andservices being launched around the world

We have begun tracking these in our mobile services innovation radarproduct, which Emeka leads


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Evidence from the Innovation Radar – H1 2010

Leadership Potential

Goodwill PotentialDefense Potential

Growth Potential

UniqueMe too

N

i c h e

M a s s M a r k e t

Italy: Telecom Italia’sLine@Medica Diabete service

Global: Vodafone’s securitysolution from F-Secure

USA: Verizon WirelessBackup Assistant

Norway: Telenor’s WiMP music service

Malaysia: Maxismobile jukebox

India: Reliance to offer cartoon comics

Nigeria: Starcomm’sStarTrack location service


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Conclusions

There is growth in the market, especially in emerging economies andin data

However, saturation is a real issue and future growth will be harder tocome by

New skillsets and business models are necessary to capture a shareof the emerging opportunities

New players are emerging or entering the market who threaten to

disrupt existing models and players

But there are also opportunities all around for those able to tap intothem. And we’re here to help!


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More on some of these topics later in the day

Application Stores – Eden Zoller – 12pm

Operator Innovation – Emeka Obiodu – 1pm

M2M and Emerging Devices – Mike Sapien – 2pm

Devices & Platforms – Jan Dawson – 3pm

Facebook, Google and other disruptors – Eden Zoller – 4pm

The Future of Prepaid – Emeka Obiodu – 5pm


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Thank you!

Jan DawsonChief Telecoms Analyst

+1 973 457 5814 [email protected]

@janovum


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North America service revenues, $ billions

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015

Data

Voice

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