The global telecommunications services market grew 4.2% in 2008 to $1,365 billion, representing a significant slowdown from previous years. Mobile services accounted for over half of the market at $742 billion but growth slowed to 8% as average revenue per user declined. Fixed line telephony continued declining rapidly, losing 5% of value. Growth in industrialized countries hit a record low, averaging under 1% as traditional services declined and new services did not fully offset the losses. The broadband market grew strongly at 20% but still has considerable room for expansion globally.

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3. Telecom Mobile
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Mobile Trends Dynamics
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5. Introduction

6. 4 Mobile 2009
T
he world telecom services mar- and singlehandedly deliver all of the sec-
ket is estimated at 1,365 billion tor’s growth. But the annual growth rate
USD in 2008 – a 4.2% increase has dropped from more than 12% in 2007
over the year before – and is ex- to 8% in 2008. The mobile customer base
pected to be worth over 1,416 worldwide grew by another 17% in 2008,
billion USD in 2009.
but is offset by a steady decline in average
revenue per user (ARPU) which dropped to
After having increased by an average 6%
17.50 USD a month in 2008. Meanwhile,
annually over the past three years, i.e. from
fixed network services are stagnating.
2005 to 2007, the globe’s telecommunica-
The revenue generated by data services
tions services market suffered a downswing
in 2008, with growth dropping to 4.2% – whose growth is being spurred chiefly
– generating a total turnover estimated at by broadband access – rose by 20 billion
1,365 billion USD. The structural pressures USD in 2008, while fixed telephony revenue
that have been weighing on the sector for dropped by as much, even if the impact on
several years now (decline of the fixed voice the base is still limited: the number of fixed
market, advanced mobile markets reaching phone lines shrunk by just over 10 million
maturity, etc.) are being compounded by the
during the year, i.e. by just under 1%. The
first effects of the global economic crisis and
number of broadband connections grew by
the worsening financial climate.
close to 20% to 415 million at the end of
2008: with an average density of 6.4 broad-
band connections per 100 inhabitants, this
Mobile services growth decreases
by 4 points and the decline of fixed market still has considerable room to grow,
telephony becomes more acute
especially in emerging economies. In more
advanced markets, broadband density is
With a total turnover estimated at 742.2 bil-
lion USD in 2008, mobile services account over 30%, i.e. between 70% and 80% of
for 54% of the telecom services market households are already equipped.
INTRODUCTION

7. 5
Mobile 2009
Growth hits a record low economies is expected to drop once again,
in industrialised countries due to the global economic strain.
Accounting for two thirds of the market’s In this new edition of our Mobile yearbook,
you will find valuable data on the central
value, industrialised countries still dominate
components of the mobile world, along with
the globe’s telecom services market by a
analyses from IDATE’s experts and a com-
sizeable margin. But growth in those coun-
prehensive round-up of the highlights of the
tries, which has been moderate since the
year gone by:
start of the decade, dropped substantially
• Mobile Broadband dynamics
in 2008 – going from 4% in 2007 to 1.4%
in North America and from 1.9% to 0.8% in • Mobile pricing Innovation
the European Union. The decline was similar
• NFC timelines
in Asia’s industrialised nations, due in large
• Mobile Handset Dynamics
part to the -2.7% loss reported in Japan.
The demand for new services (VoIP, IPTV, • Mobile Churn Management
IM, mobile multimedia…) in these countries
• Radio Spectrum issues
is only just offsetting the losses in value be-
• Mobile TV Solutions
ing posted by traditional services. In 2009,
• New Communication trends
growth in both industrialised and developing
In your diary Digiworld Summit 2009 17-18-19 November 2009
INTRODUCTION

9. Telecom
Services &
Mobile Trends

10. 8 Mobile 2009
Sizeable drop in telecom services sector growth in 2008
The value of the world telecom services With a total turnover estimated at 687.5 bil-
market increased by 4.2% in 2008 lion USD in 2007 and 742.2 billion USD in
2008, mobile services nevertheless contin-
After a rebound that began in 2005, the tel- ue to account for all the growth in the tel-
ecom services market’s growth rate suffered ecom services market, and have exceeded
a significant drop in 2008. Totalling 1,365 fixed line services in value since 2003. Their
billion USD, annual growth is estimated at weight in the total equation continues to rise:
4.2%: the lowest level for the global mar- since 2006 mobile services have accounted
ket since 2002, just after the dotcom bub- for more than half of telecom services con-
solidated turnover worldwide – a proportion
ble burst. While the financial crisis – which
estimated at 54% in 2008. The mobile mar-
has been deepening since autumn 2008 – is
ket’s growth is sustained by the increase
naturally aggravating the current situation,
of the subscriber base, which grew by an-
the dropping growth rate is due above all
other 17% in 2008. At the same time, aver-
to structural pressures weighing on the glo-
age revenue per user (ARPU) has been drop-
bal telecommunications market, including
ping steadily, totalling 17.50 USD a month
the fact that a number of markets that have
in 2008, albeit with extreme variations from
long sustained the sector are reaching matu-
region to region.
rity (especially mobile markets in advanced
countries), the impact of substituted and/or Fixed telephony continues its decline which
demonetised applications, competitive and/ began in 2002, and at an ever increasing
or regulatory pressure… pace. In 2008, the market lost another 5%
of its total value worldwide, due to both a
In fixed markets, the Internet’s ongoing nominal effect (a decrease of between 4%
growth is only just offsetting the inexorable and 7% in the average revenue per line
decline of landline telephony, while growth in since 2004) and a real effect (slow decline
the mobile services market was four points in the number of lines since 2006). In terms
below what it was in 2007. of value, fixed telephony’s contribution to
TELECOM SERVICES & MOBILE TRENDS

11. 9
Mobile 2009
the global telecommunications services The market for data transmission services in
the business segment is growing very slight-
market has gone from 48% in 2001 to 27%
ly, with near zero growth in Western Europe,
in 2008.
and even decreasing in some cases (-0.5%
The data and Internet access services mar- in North America in 2008). It is the Internet
kets are playing an increasingly large part in market, and especially broadband that is
the telecom services market’s growth world- enjoying the only remarkable growth tra-
wide. In 2008, they generated 20 billion jectory. There are an estimated 415 million
USD more in revenue than the year before, broadband connections around the globe at
for a total turnover of 256 billion USD. Their the end of 2008, or 67.5 million more sub-
weight in the equation is increasing steadily, scribers than the year before – an increase
going from 15% of telecom services revenue equivalent to what was reported in 2007.
in 2001 to close to 19% in 2008, but their The global base has doubled in three years.
contribution to overall growth is only just off- At the end of 2008, broadband connections
setting the losses being reported in fixed te- accounted for close to three quarters of all
the world’s Internet connections.
lephony services revenue.
Table 1: Worldwide - Telecom services market
2005-2009
2005 2006 2007 2008 2009F
(Million USD)
Fixed telephony 421 837 405 827 386 447 366 394 349 467
Mobile services 546 365 612 379 687 490 742 241 790 464
Source: IDATE
Data and Internet 196 066 215 634 236 235 256 130 276 890
TOTAL 1 164 268 1 233 840 1 310 171 1 364 765 1 416 821
Annual Growth Rate 5.7% 6.0% 6.2% 4.2% 3.8%
TELECOM SERVICES & MOBILE TRENDS

12. 10 Mobile 2009
Growth hits a record low in • the decline of fixed telephony, which is
industrialised countries picking up speed in Europe even though
it is still less marked thank in North Amer-
From a geographical standpoint, growth tra-
ica (-5.7% for the EU and -7.3% for North
jectories continue to vary a great deal, be-
America in 2008).
tween mature regions and countries where
• mobile services which have enjoyed a
growth is now virtually nil, and emerging re-
steadier growth path in North America,
gions and countries which continue to report
growing at double the rate of the European
a combined growth rate of just over 10% –
market: close to +11% in 2006 and 2007,
although there are still considerable dispari-
then +5.2% in 2008 for North America; just
ties inside each block.
under +5% in 2006 and 2007, then +2.7%
Growth in North America, for instance, has in 2008 for the European Union).
been higher that in the European Union
Growth plummeted in industrialised coun-
over the past three years (+4% vs. +1.9%
tries in Asia in 2002, going from 10% to 2%,
in 2007, +1.4% vs. +0.8% in 2008), while
and remained low but above zero in the years
Japan stands out for having suffered nega-
that followed, before tumbling into the nega-
tive growth for two years in a row, first mod-
tives in 2008 due in large part to a dramatic
erate in 2007 (-0.2%) and more severe in
decline in the Japanese market.
2008.
Accounting for two thirds of the market’s
(-2.7%).The gap between the two sides of
value, industrialised countries still domi-
the Atlantic shrunk in the first half of the
nate the globe’s telecom services market
decade: in 2001, growth in the European
by a sizeable margin. But growth in those
Union was 10 points higher than in North
countries, which has been moderate since
America but, since 2005, the EU has been
the start of the decade, dropped substan-
reporting lower growth rates than Canada
tially in 2008 – going from 4% in 2007 to
and the US. This is due to a combination of
two things: 1.4% in North America and from 1.9% to
TELECOM SERVICES & MOBILE TRENDS

13. 11
Mobile 2009
0.8% in the European Union. The decline ised and developing economies is expect-
was similar in Asia’s industrialised nations, ed to drop once again, due to the global
due in large part to the -2.7% loss report- economic strain.
ed in Japan. The demand for new services
Our estimates put total world revenue in
(VoIP, IPTV, IM, mobile multimedia…) in
2006 at 1.2 billion USD, up 6.2% on the pre-
these countries is only just offsetting the
vious year. Growth in 2007 can be expected
losses in value being posted by traditional
services. In 2009, growth in both industrial- to be slightly lower at 6.0%.
Table 2: Worldwide - Telecom services markets by region
2007-2008
Market value Annual growth rate
(million USD) (%)
2007 2008F 2007 2008F
North America 332 797 337 389 3.9 1.4
Europe 439 800 448 606 3.7 2.0
Source: IDATE
Asia-Pacific 341 560 357 167 5.7 4.6
Latin America 115 770 127 355 13.7 10.0
Africa & Middle East 80 244 94 248 23.7 17.5
TELECOM SERVICES & MOBILE TRENDS

14. 12 Mobile 2009
Trends by activity segment
Mobile services services are stagnating. The revenue gen-
erated by data services – whose growth is
being spurred chiefly by broadband access
Mobile services growth decreases by 4
– rose by 20 billion USD in 2008, while fixed
points and the decline of fixed telephony be-
telephony revenue dropped by as much,
comes more acute
even if the impact on the base is still limited:
With a total turnover estimated at 742.2 bil- the number of fixed phone lines shrunk by
lion USD in 2008, mobile services account just over 10 million during the year, i.e. by
for 54% of the telecom services market just under 1%.
and singlehandedly deliver all of the sec-
The number of broadband connections grew
tor’s growth. But the annual growth rate has
by close to 20% to 415 million at the end of
dropped from more than 12% in 2007 to 8%
2008: with an average density of 6.4 broad-
in 2008.
band connections per 100 inhabitants, this
The mobile customer base worldwide grew market still has considerable room to grow,
by another 17% in 2008, but is offset by especially in emerging economies. In more
a steady decline in average revenue per advanced markets, broadband density is
user (ARPU) which dropped to 17.50 USD over 30%, i.e. between 70% and 80% of
households are already equipped ▄
a month in 2008. Meanwhile, fixed network
TELECOM SERVICES & MOBILE TRENDS

15. 13
Mobile 2009
Table 3: Worldwide - Mobile customers
2005-2008
Mobile customers Mobile penetration
(thousands) (% of population)
2005 2006 2007 2008F 2005 2006 2007 2008F
North America 224 771 251 529 277 045 294 024 68.4 75.9 82.8 87.1
Europe 691 704 801 825 889 219 938 139 73.1 90.4 100.8 106.0
Asia-Pacific 820 009 1 058 100 1 363 013 1 686 496 22.8 29.1 37.0 45.3
Source: IDATE
Latin America 232 042 296 117 362 393 425 571 43.1 54.4 65.8 76.3
Africa & Middle East 188 185 271 662 379 907 475 141 18.9 26.7 36.6 44.8
TOTAL 2 156 711 2 679 233 271 578 3 819 371 27.6 34.3 41.3 46.5
TELECOM SERVICES & MOBILE TRENDS

17. Mobile
Equipment
Dynamics

18. 16 Mobile 2009
Mobile Terminals
Amidst the global economic crisis, the glo- • Second parameter is to be seen in the sec-
ond half sales of 2008. In the first half of
bal mobile phone market is facing difficult
2008, handset sales were on the same trend
times and growth that were double digits
as previous years with year on year sales
from 2002, are now experimenting the neg-
between 13% to 15%. As of 3rd quarter of
ative impact of this economic turmoil. With
2008, sales were down to 7.7% confirming
a volume growth stated at 15% in 2007,
the economic impact of the global crisis;
mobile phone sales should continue to be and in the fourth quarter, sales were down
on the growth in 2008, but at a far lesser by 10% YoY. Historically the third quarter
extent. IDATE states that volumes have has been a ramp-up time for manufactur-
progressed by 5% in 2008 reaching 1200 ers to ship phones in preparation for the
units sold over the year, a forecast reevalu- holiday season and growth have generally
been on a 15% to 30% progression year
ated to the downside after a negative fourth
on year. With these low 3rd and 4th quarter
quarter. If these numbers appear positive
sales figures, market should prepare for low
taking into account the global crisis and the
1st half in 2009 with a inevitable contraction
impact it has on the IT and consumer elec-
in mature markets.
tronics industry, 2008 was a turning point in
the mobile phone industry. Starting in the second half of 2008, the eco-
nomic slow down should continue in 2009 and
• First, the mobile phone market has been
increase its impact on mobile phone sales. For
historically one of the fastest growing
2009 perspective, after IDATE first stated that
markets with double digits growth per
mobile phone market growth should remain
year, since the Internet ‘Bubble burst’ of
positive between 1 to 4%, market warnings
2001 and its economic downturn. The
by major handset manufacturers and chipset
fact that this year market growth may be suppliers, indicated that this year will remain
limited to 5% is a sign of general slow extremely tough for every players of the mo-
down of the industry as consumers are bile value chain. Sales should therefore be on
either differing their handset replacement the downturn reaching 1130 to 1140 units, a 5
or first purchase. to 6% decrease in volume.
MOBILE EQUIPMENT DYNAMICS

19. 17
Mobile 2009
Table 4: Mobile Handsets Market Breakdown by Region
2005-2009
2005 2006 2007 2008 2009F
Million EUR
Asia-Pacific 43 678 44 946 46 582 47 144 48 395
China 11 860 12 587 14 104 15 515 17 552
India 3 123 5 472 6 582 8 990 11 164
Japan 12 769 12 313 11 645 11 496 11 038
Other countries 15 926 14 574 14 252 11 143 8 641
North America 22 276 22 537 22 604 22 725 23 169
USA 20 681 20 857 20 863 20 962 21 308
Canada 1 595 1 680 1 742 1 762 1 862
Western Europe 22 886 23 465 24 053 24 269 24 518
France 3 167 3 256 3 375 3 422 3 463
Germany 3 792 3 890 3 966 4 033 4 078
Italy 3 307 3 322 3 373 3 416 3 444
Spain 2 820 2 929 3 025 3 058 3 095
UK 4 688 4 833 4 963 4 944 4 925
Source: IDATE
Other countries 5 113 5 236 5 352 5 396 5 513
Central and Eastern Europe 7 918 8 039 8 516 8 849 9 163
Russia 5 198 5 050 5 249 5 410 5 561
Figure 1. Worldwide handset shipments Figure 2. World handset providers
2006-2011, million units 2008, market share in %
1 400
Other, 19.7
1 200 Nokia, 39
(HTG, Apple, RIM,...)
1 000
800 Sony Ericsson
8.1
600
Source: IDATE
Source: IDATE
400
LG, 8.4
200
0 Motorola, 8.4 Samsung, 16.4
2007
2006 2008 2009E 2010E 2011E
MOBILE EQUIPMENT DYNAMICS

20. 18 Mobile 2009
Mobile Access
In the mobile access equipment market, over- With the investment reduced from mobile car-
all GSM sales led the good evolution of the riers, the mobile market had seen difficulties
mobile market despite weaker deployments in 2007 and had created a more considerable/
of WCDMA networks. Market also faced an intensive competition between suppliers.
intense consolidation inducing a fiercer com-
This segment had been the most impacted
petition between equipment providers. The
market with the emergence of Nokia Sie-
mobile access infrastructure market includes
mens Networks as a second and Alcatel-Lu-
cellular network access base stations (BTS for
cent at the third place but finally the com-
GSM/GPRS/EDGE and CDMA, and Nodes B
panies were not aggressive face to Ericsson
for UMTS networks), associated equipments
which continued to grab market share. The
(BSC, GGSN, SGSN) as well as Public Net-
fear for the Swedish company could come
work WLAN access base stations (hot-spots),
from the Chinese manufacturers. Indeed,
based on WiFi, WiMax technologies.
Huawei and ZTE had displayed the most im-
Despite the dynamic investment in mobile portant growth rates in the industry thanks to
networks benefited mobile infrastructure sup- their success in emerging countries, where
pliers caused by the intensifying competition investment remained robust and their ability
in Africa, India, Latin America, and Russia and to come compete in the developed countries
price erosion for GSM/EDGE/GPRS equip- as in Western Europe where they won sev-
eral contracts ▄
ment, there were slowdown in the sector.
MOBILE EQUIPMENT DYNAMICS

21. 19
Mobile 2009
Table 5: Mobile Access Equipment Market Breakdown by Region
2005-2009
2005 2006 2007 2008 2009F
Million EUR
Asia-Pacific 6 513 6 550 7 459 8 377 9 267
China 2 318 2 450 3 108 3 715 4 095
India 317 571 986 1 538 2 037
Japan 2 299 2 429 2 227 2 095 2 013
Other countries 1 579 1 101 1 138 1 028 1 121
North America 5 992 6 359 4 685 4 890 4 755
USA 5 655 6 007 4 283 4 247 4 129
Canada 336 353 402 644 626
Western Europe 4 942 4 658 4 554 4 664 4 772
France 778 807 759 805 828
Germany 501 496 461 436 434
Italy 763 710 646 630 616
Spain 587 671 643 682 713
UK 1 240 845 851 889 929
Source: IDATE
Other countries 1 074 1 129 1 195 1 222 1 252
Central and Eastern Europe 1 591 1 472 1 585 1 631 1 693
Russia 856 728 815 838 870
Table 6: Mobile Access Equipment Market Breakdown by Region
2008, %
Fixed Infrastructure Providers Global Market Share
Rank
1 Ericsson 31
2 Nokia Siemens Networks 22
3 Alcatel Lucent 14
4 Nortel 7
Source: IDATE
5 Huawei 7
6 Motorola 6
7 NEC 5
MOBILE EQUIPMENT DYNAMICS

23. Mobile
Broadband

24. 22 Mobile 2009
Impact on the telecom industry
Telecommunications equipment Mobile operators are depending on
suppliers and operators see in mobile mobile broadband to stabilise ARPU
broadband the growth driver that is
indispensable for their expansion.
Voice/SMS services now represent between
But implementing data services on
mobile networks pose a series of both 90% and 70% of revenue for mobile opera-
technical and economic problems tors in mature markets. In this environment,
for players in the ecosystem
the primary short term financial risk for op-
erators is the drop in voice and SMS reve-
• The telecommunications industry is faced nue. Mobile operators see in data services
with mobile broadband’s rapid expansion. a growth driver that is indispensible for their
• In a highly competitive environment, equip- expansion. And we are actually seeing a
ment suppliers must develop innovative veritable take-off in mobile data services. 3G
solutions to meet operators’ requirements. infrastructure has reached significant cover-
Among the competing technologies, LTE age levels, and the number of 3G subscrib-
is consolidating its strong position. ers is growing rapidly.
• Operators are facing both technical and
There are two types of mobile data services,
economic challenges. They are depending
the first coming from fixed Internet (messag-
on data services to stabilise their ARPU.
ing and Internet access services, for exam-
But the explosion in traffic and the associ-
ple), the second being more specific to the
ated rising costs threaten quality of service
mobile ecosystem (services based on ge-
and financial stability. Courses of action
olocalisation, m-payment, enhanced mobile
are gradually appearing: improved tech-
nologies, access to more radio spectrum, communications services, etc.).
network densification, operational cost re-
The adoption of data applications is mostly
ductions, etc. But none of the planned so-
driven by services taken from the fixed In-
lutions will be able to provide a definitive
ternet.
response by itself.
MOBILE BROADBAND

25. 23
Mobile 2009
Operators profit from the success of these user connecting using a telephone type ter-
minal.
offers among users to increase the revenue
share generated by data services, but with-
In fact, operators who have developed mo-
out risking cannibalising their voice and SMS
bile Internet access offers note that:
revenue. They are notably expanding mobile
broadband subscription offers at increas- • Mobile data traffic is increasing rapidly,
ingly more attractive data rates. even more so when mobile Internet ac-
cess services for lap tops are expanded.
But these services have a significant impact
• Traffic generated from computers repre-
on networks in terms of capacity needs, as
sents most of the mobile data traffic when
well as on the economic conditions of these
attractive offers are available.
operators’ offers.
• The traffic profile generated by computers
much larger than that generated by mobile
Explosion in capacity needs and data traffic telephones or smartphones.
Operators’ revenue from data services is Equipment suppliers and operators expect
growing rapidly. But the growth in capac- sustained and consistent growth in mobile
ity needs and data traffic are even stronger. data traffic in the years to come.
There are several reasons for this:
• Increase in the number of mobile sub-
Resolving mobile broadband’s
scribers, technical-economic equation
• Increase in the share of 3G subscribers,
The increase in data service revenue gener-
• Specific impact of mobile Internet access ated by new mobile access services does
services for lap top computers. not compensate for the very large increase
in traffic noted by operators on their net-
Operators must provision an average of 40 works.
kbps downstream in peak times for a user
who connects using his lap top computer on One of the operators’ greatest require-
an HSDPA network, but only 0.3 kbps for a ments is to reduce CAPEX and OPEX net-
MOBILE BROADBAND

26. 24 Mobile 2009
work costs. Operators increasingly prefer • The LTE profile evaluated was not the
an overall approach consisting of reducing most efficient of these expected.
the cost of data transported (cost of an Mb
• Savings in terms of OPEX are not available
transported).
yet for LTE network deployments and were
IDATE has created a model for the specific not included in our model at this stage.
case of an operator that already has a GSM
• The model does not include deployment
network, deploying 3G in 2004 and LTE
associated with LTE networks and LTE
starting in 2012 (in high density areas).
femtocells.
The largest cost elements are shown in the
table below. It takes into account invest- The model for deploying HSPA and LTE net-
ment costs and operational costs associ- works developed by IDATE highlighted the
ated with the core network, the information limits in terms of capacity available on HSPA
system and the radio access portion (in- networks by 2013. The problems with availa-
cluding the costs of radio spectrum usage
ble capacity will appear in densely populated
licences).
urban areas and, by 2014 in suburban areas.
Faced with these limits, operators could de-
Improvements in technological performance
grade the quality of their services (restricting
Economic conditions will improve as tech- available capacity, reducing speeds, etc.) or
nology moves towards LTE. Nevertheless,
continue with their deployments.
the improvement seems less significant that
the operators expected, within the NGMN
The schedule for deploying LTE will definitely
Alliance, for example.
depend on the availability of radio spectrum
and the operators’ technical economic trade
The relatively conservative hypotheses in our
model may explain this perception: offs, notably between HSPA and LTE.
MOBILE BROADBAND

27. 25
Mobile 2009
More spectrum for greater capacity: Two phenomena will oppose an increase in
a limited medium term solution the number of access points held by opera-
tors: the public and local authorities not ac-
The schedule for spectrum allocation and
cepting having the operators’ access points
frequency distribution will be decisive, es-
and antennae nearby. This reduces the op-
pecially in Europe and Asia. Too long of a portunities for new installations.
delay could harm the expansion of the mo-
bile broadband ecosystem, slowing both the In addition, the costs of access points and
technology standardisation process and op- their management have had a tendency to
erators’ decisions on new investments. increase over the last few years and heavily
impact mobile operators’ economic condi-
Nevertheless, access to new frequency tions.
bands will quickly reach its limits. Even
though circumstances differ, by 2012-2015,
most of the frequencies for mobile broad- Femtocells and convergence between
fixed and mobile networks
band services will be allocated in the major
markets. In addition, refarming GSM bands,
The femtocell solution lets mobile opera-
and over the longer term, 3G bands, is prov-
tors play with two major cost areas: back-
ing to be difficult.
haul and energy. Actually, traffic backhaul
is provided by the user’s DSL line, and the
user pays for the energy. In addition, from
Network densification
a perspective of growing capacity needs,
Traditionally, network densification was both in the amount of radio access as well as
the operators’ preferred solution to han- backhaul, this solution significantly reduces
dling increased traffic. This movement to the amount of traffic load on the operators’
increase the number of masts can be pur- mobile network. This provides an inexpen-
sued in densely populated areas, where the sive solution to the operators’ problems with
constraints on capacity are the strongest indoor coverage for data services, as well as
for access technologies such as HSPA and core network and radio access network ca-
LTE. pacity problems.
MOBILE BROADBAND

28. 26 Mobile 2009
Integrated operators, that have both mobile is about to become the preferred industry
and fixed broadband networks, will benefit standard for the nextgeneration of access
the most from femtocell solutions. They can technologies.
generate significant economies of scale by
The operators’ role appears to us to be cen-
sharing core networks and backhaul for fixed
tral in these choices, due to the importance
and mobile broadband users.
of services in the entire mobile ecosystem
and by the driving effect of operators’ in-
Equipment suppliers must meet vestments in the equipment market.
operators’ expectations
In terms of ecosystem, LTE is overtaking
Operators expect to weigh in on the techno-
WiMAX. The LTE ecosystem is more diversi-
logical choices that are made by equipment
fied, and there are more players.
suppliers for developing mobile broadband
access solutions. The major operators’ ini- Above all, several leading global equipment
tiative within the NGMN Alliance is an indica- suppliers and operators have announced
tor of this strategy. In addition to cost reduc-
that they will prefer LTE for their major mar-
tions, discussed above, equipment suppliers
kets over other standards. This is notably
must meet operators’ expectations in terms
the case will all major European operators
of performance, equipment availability – es-
as well as AT&T, Verizon Wireless and NTT
pecially terminals – and policies for manag-
DoCoMo.
ing intellectual property.
Recently, the NGMN Alliance included LTE
technology as the solution for the next
3GPP/LTE ecosystem dominates
generation mobile broadband access net-
work. LTE is the first technology to be rec-
Compared to mobile WiMAX and TD SCDMA
ognised ▄
developed by the Chinese, it seems that LTE
MOBILE BROADBAND

29. 27
Mobile 2009
Figure 3. 3G subscribers Figure 4. Deployment schedule and
population coverage in Western Europe
End 2007, % (subscriber base: 242 million)
HSPA, HSUPA and LTE
Rest of the World, 4.9
Asia HSDPA
North America 47.6
17.7 HSUPA
Source: IDATE
Source: IDATE
LTE
2005 2008 2011 2014 2017 2020
Europe
0-50% population 50-80% population 80-95+% population
29.8
Figure 5. The LTE Ecosystem
Telecom operators. LTE as preferred technological path
Network Equipment and Terminal Manufacturers
EUROPE / MIDDLE EAST
• Vodafone
• Alcatel-Lucent: Standard / Trials / Inter-op tests_partnership with NEC
• Telefónica
• NSN: Standard / Trials / Inter-op tests
• Deutsche Telekom / T-Mobile
• Nokia: Terminal
• France Télécom / Orange
• Sony Ericsson: Terminal
• Telecom Italia
• ST Microelectronics: Chipset
• Orascom
• NXP: Semiconductor
• AT&T
• Nortel Networks: Network
• Verizon Wireless: Trials
• Motorola: Network
US / CANADA
• Rogers Telecom
• Qualcomm: Chipset
• KT and SK Telecom
• Huawei: Standard / Trials / Inter-op tests
• Docomo (acceleration of LTE standarisation and market launch)
• ZTE: Network
• Softbank
Source: IDATE
• NEC: Network
ASIA
• Chinese operators: interested by UMTS / LTE technological path_depend on
• LGE Electronics: Trials / Terminal
industry restructuring and spectrum licenses allocation
• Samsung: Chipset / Terminal • China Mobile: Trials TDD LTE / FDD LTE
• Indian operators: interested by UMTS / LTE technological path_depend on
spectrum licenses allocation
MOBILE BROADBAND

31. Mobile
Hot Topics

32. 30 Mobile 2009
Mobile Pricing Innovation
There is a flurry of innovations in the pric- operators also offer to charge by duration.
ing strategies of the mobile phone market, in Pricing units vary, Japan having a distinc-
particular the pricing schemes for the three tive unit of 128 bytes called ‘packets’.
most commonly used services: voice calls,
• Subscribers also have the choice between
SMS and data transmission.
post-paid and prepaid subscriptions; the
former involves a contract where payment
is made according to the amount used
Innovation, a way to survive
each month, and the latter involves pur-
The mobile market today is fast approaching chasing credits in advance.
saturation and, in such a competitive market,
pricing plays an important yet delicate role.
Players have first to attract – or indeed keep Inclusive bundles, rollovers and top-ups
– customers on their own network, whilst at
• This concept has become very much
the same time encourage them to increase
standard in the mobile market; with flex-
their spending.
ible money bundles in Japan, and fixed
service bundles elsewhere. Some opera-
Basics of a mobile subscription tors in other countries also offer the flex-
ible money bundles tariff, notably 3 in the
• Charges for voice calls can vary according
UK. Their packages combine the simplic-
to the duration, distance or destination of
ity of service bundles and the flexibility of
the call to name a few; but today, the ten-
money bundles; they are set at 1 minute =
dency is towards charging for duration only.
1 SMS.
Pricing units range from linear charges such
as per second or per minute, to charging a • Some operators offer to rollover unused
full minute prior to a per second charge. inclusive bundles to the next month or be-
yond to avoid underspending. Conversely,
• For data transmission, the standard is to
charge by traffic volume, although some some operators offer hybrid subscriptions,
MOBILE HOT TOPICS

33. 31
Mobile 2009
where top-ups are required after the bun- usage restrictions, where the use of certain
applications or services is not allowed.
dles are used up, to avoid overspending.
• Tariffs for unlimited Internet from mobile
handsets are often priced higher than
Watch an ad, and call for free
those for use on mobile PCs; the opera-
tors see them as having higher risks of
Business models centred on advertising exist
cannibalisation of other services.
in the mobile market too. Subscribers can use
a certain amount of the network without pay- • Tariffs for unlimited Internet on the mobile
ing operators anything; in return, they watch PC is seeing a shift of targets from the
advertisements on their mobile. Blyk, in the business to the consumer sector. Most
UK, is a leading operator in this field, enjoying operators now offer USB modems which
considerable success and planning to expand are much more user-friendly than the tra-
into other countries in the near future. ditional data card modems.
Unlimited offers have limits
Handset subsidies, or discounts
• Until recently, ‘unlimited’ voice calls pack-
• With iPhone, Apple originally introduced
ages came with restrictions such as spe-
a model which did not allow for handset
cific times or destinations only. But 2008
subsidies, but has reverted to the tradi-
saw a wave of offers without any such re-
tional model for the new 3G iPhones.
strictions being introduced, notably in the
• In Japan, subscribers have the option
USA and Germany.
of choosing between receiving handset
• Similar limits apply to unlimited SMS tar-
subsidies or receiving a discount on the
iffs, but again some operators do offer
monthly invoice.
such tariffs without the restrictions, nota-
bly in France, the UK and USA.
• Unlimited offers for data transmission have Three tariff structures
differing types of restrictions: a fair use pol-
IDATE has identified three main patterns in
icy, where subscribers are often asked not
to go over a certain prefixed amount; and how operators structure their tariffs:
MOBILE HOT TOPICS

34. 32 Mobile 2009
• Package: where the tariff comes in a understand tariffs which can be subscribed
to without the complications.
ready-made package;
• Service bundling: these offers bundle to-
• Pick ‘n’ mix: where subscribers choose in-
gether two or more of fixed line telephony,
dividual tariffs and add them up;
broadband Internet access, TV and mobile
• Adding discounts: where upon subscrip-
telephony, all in one value-for-money tar-
tion to a basic tariff, various discounts can
iff.
be added to increase the value.
• Fixed-mobile convergence: in addition
The adding discounts structure is very much to the mobile network, a convergent mo-
a Japanese culture; other countries see an bile phone gives the additional benefits of
even split between package and pick ‘n’ mix. broadband access from the home via WiFi
technology.
• Home zones: subscribers are given both a
Fine-tuning the tariffs
landline and a mobile number. Calls from
inside the home zone are discounted, and
With growing market saturation and com-
subscribers can be called on the landline
petition, operators are having to tweak their
number on the mobile when inside the
rates to meet subscriber demands. This calls
home zone.
for clear strategies, with clear target seg-
mentation, built around:
• Multi-branding: a strategy used to reach The price of pricing
the niche markets by creating multiple
brands concentrating solely on those spe- IDATE has positioned each of the pricing
cific niche markets. strategies relative to their segmentation,
based on market scale and usage levels.
• Simplicity: going against the general per-
ception that mobile tariffs are too compli- • As a whole, the mobile market is see-
cated, operators offer just a few, easy-to- ing plenty of innovative pricing although,
MOBILE HOT TOPICS

35. 33
Mobile 2009
within any one country, operators gener- Nowadays, online tools in most coun-
ally offer similar tariffs. They would do well tries compare all tariffs and calculate the
to look beyond the borders to garner new cheapest one. Business models are even
ideas for innovation. evolving around such tools. It seems as
if innovative pricing has wrapped such a
• These innovations have contributed to a
blanket of fog over the clarity of the tariffs
fragmentation of operator tariffs. With less
that subscribers can no longer be interest-
clarity now for the ‘average’ subscriber
ed in their variety. A real case of not seeing
about their relative values, is there a risk
of consumer backlash against operators? the wood for the trees?
Figure 6. Positioning of mobile innovative pricing strategies
Market Scale
Inclusive bundles
Large / general market
Multi
branding
Home zones
Service
Small / niche markets bundling Unlimited
Simplicity
Advertisement tariffs
funded calls
Source: IDATE
Fixed-mobile
convergence
Subscriber
Usage level
Entry level users Power users
MOBILE HOT TOPICS

36. 34 Mobile 2009
Near Field Communications
A revolution in the mobile handset market? transmitter but also represent a real op-
portunity to diversify their business.
The introduction of NFC chipsets within
• Established in 2004 by a group of major
mobile phone could revolutionize how con-
players of the wireless ecosystem (Philips,
sumers interact with their environment and
Sony, Nokia), the NFC technology is a
transform handsets from a voice device to
short range (~20 cm) point to point wire-
a personal assistant. If the NFC technology less connectivity technology. The fact that
is already in use in Asia, especially Japan NFC is based on RFID standards gives a
for mobile wallet application, NFC is slowly compatibility of NFC with existing RFID
ramping up in North America and Europe applications such as transport ticketing,
with major trials on payment and ticketing identification control,…
services taking place on these continents.
A slow but promising market
Emergence of NFC among
• NFC is a very recent technology and as a
wireless connectivity solutions
new technology, it needs an infrastructure
• For handset players, the growing portion of to work, so the global process of adaptation
has been slow. There has been non-stand-
wireless connectivity modules embedded
ard payment and ticketing schemes in pub-
in handsets constitutes the first step to
lic use in Asia, but in North America and
enter the wireless ecosystem of opportu-
Europe the services have more or less only
nities. Today as more data transit through
been used in different piloting schemes. It
mobile phones, development of wireless
is essential to the adoption and growth of
ecosystems from WLAN to WPAN where
NFC technology that all NFC-enabled de-
information is transmitted thanks to short
vices interoperate seamlessly.
range technologies (Bluetooth, UWB, Zig-
bee, NFC) could greatly impact the historic • The NFC-embedded mobile handsets
use of operators network as primary data market is emerging and in 2007, ship-
MOBILE HOT TOPICS

37. 35
Mobile 2009
ments reached 32 millions units, i.e. a today, the fact that more than 130 com-
panies are members of the NFC Forum,
3% penetration. However, following the
in addition to the industry acceptance of
several NFC projects led by European
the NFC standard by GSMA and ETSI, is
and American carriers, the drop of NFC
giving a strong push forward the general
chipset cost and the increasing number of
adoption of NFC.
NFC-enabled handset, the trend of adop-
tion of NFC within handsets should be on • The NFC Forum and the GSMA are active-
the rise from 2010, with a generalization ly pursuing their effort of standardization.
of the technology from 2012. By 2012, For example, the GSMA launched the Pay-
penetration should reach around 14% of Buy-Mobile initiative, introducing require-
handsets with North America and Western ments that will help handset manufactur-
Europe being heavily equipped with NFC ers develop NFC-enabled phones that are
technology. compatible with operators’ planned mo-
bile NFC services.
• Today, Sony and DoCoMo with Felica are
among the main players on the NFC mar-
ket as they were pioneers in this domain.
NFC Applications
However NXP has a strong position on this
market of NFC and RFID solutions, with • For now, only the Payment and Ticketing
more than 2 billion ICs shipped to date. applications have been gaining traction
A great portion of contactless SmartCards in the mobile ecosystem, with major tri-
schemes worldwide use NXP MIFARE als being performed worldwide by mobile
technology for electronic ticketing in pub- operators. However numerous other ap-
lic transport (London, Seattle, Sao Paolo plications can be performed thanks to the
and cities in China). NFC technology such as Smart Posters,
where NFC is used to ‘unlock’ another
service, such as opening another com-
A Need for standardization
munication link for data transfer.
• Standardization has been for now one of • Peer to peer applications are also gaining
the main hurdle to overcome in the de- traction, as the NFC chipset can be used
velopment of NFC technology. However as a set up technology to enable com-
MOBILE HOT TOPICS

38. 36 Mobile 2009
munication between two devices in faster ever these operators need to co-operate
way than current technologies such as with banking institutions, whose exper-
Bluetooth. As NFC can be paired with tise is to handle the payment processes
Bluetooth to initiate the connection be- and issues and already have a large base
tween devices, the association of the two of customers.
technologies could give a major boost to
the NFC chipset integration within hand- Which future to NFC?
set.
• The growth of NFC usage has been hin-
dered by the familiar chicken and the egg
The question of the Business Models
problem: since there are no NFC-based
services, consumers do not demand
• The main barrier to the integration of NFC
NFC-equipped phones and the manufac-
technology within mobile phones is the
turers do not offer them and thus there is
lack of a global business model embrac-
no incentive for infrastructure providers to
ing the views of mobile operators, banks
use NFC.
and other players in the mobile value
chain. Players have hitherto been devel- • The business model is the critical ele-
oping their best interest model to imple- ment in the evolution of NFC: all partners
ment mobile commerce services. must have some interest (or necessity)
in adopting the new technology before
• In this growing NFC market, financial in-
it can become established. In this sense
stitutions and mobile operators need each
the NFC adoption will be more a business
to buy a viable ecosystem as they control
model question than it is a technical, user
the major part of the value chain. Without
acceptance or security issue.
the interest of the operator, the availabil-
ity of NFC-enabled mobile phones would • Although the proliferation of NFC technol-
be low as operators, in most countries, ogy will come slower than was initially ex-
provide the handset to the en user. How- pected, this does not mean that it will not
MOBILE HOT TOPICS

39. 37
Mobile 2009
have a deep penetration in the market in 1998 to recent years) to win acceptance,
the longer term. This can be compared to first from the manufacturers of digital de-
Bluetooth, which took several years (from vices and later from the users.
Figure 7. NFC Handset Market Forecast
14.1%
% NFC
8.3%
5.4%
4.5%
3.8%
2.8%
1 490
1 430
1 390
1 300
1 210
1 138
Total handsets
Source: IDATE
210
120 NFC handsets
75
58
46
32
2007 2008 2009 2010 2011 2012
MOBILE HOT TOPICS

40. 38 Mobile 2009
Churn Management
The Colour of Money network in a given month and is expressed
as a percentage of a company’s average
Retaining customers is one of the most criti-
subscriber base for the period.
cal challenges in the maturing mobile tele-
• A 2% churn rate translates into around
communications service industry. Customer
a quarter of a mobile operator’s custom-
churn adversely affects mobile telecom oper-
er base churning off the network in the
ators because they stand to lose a great deal
in price premium, decreasing profits levels course of the year.
and a possible loss of referrals from continu-
• When mobile operators think about churn
ing service customers. Figuring how to deal
it is usually the voluntary kind that comes
with churn is turning out to be the key to the
to mind. Deliberate churn is the most im-
survival of telecoms organizations.Podcast-
portant part of churn when customers de-
ing gives consumers access to niche market
cide to leave his/her mobile operator.
content; to time-shifted, professional con-
tent; to technical quality and to mobility.
Lead to comparison limits and costs
Varying definitions of churn
• When considering post-paid churn, the
deactivation date, i.e. the date that a cus-
• Companies employ varying definitions of
tomer is disconnected from the network,
churn and also have widely differing poli-
is equal to the churn date. In the case of
cies to determine when to cut off inactive
subscribers and to remove them from their prepaid churn however, the deactivation
reported subscriber base. In essence, op- date does not necessarily have to match
erators have different ways of defining the churn date. This can be made clearer
subscribers. by the different states a prepaid customer
can be in (normal use, no credit, recharge
• The churn rate measures the number of
only, and deactivation).
subscribers that are disconnected from a
MOBILE HOT TOPICS

41. 39
Mobile 2009
• Comparing churn rates between operators • Emerging Asian countries show the highest
and countries where habits and culture are churn rates on a worldwide basis. Across
different is also tricky. Asia, churn rates vary tremendously.
• Churn levels in advanced Europe or North
• Basically, low/good rates may hide prob-
America are higher than in developed Asia.
lems because losses of revenues depend
NTT DoCoMo in Japan, which has a cus-
on customer values that have just been
tomer base that is almost entirely post-
lost.
paid, maintains the best churn rate in the
• Churn has a different impact whether the
industry, with less than 1% of its custom-
value segment from which the subscriber
ers switching to a competitor’s network
belongs to is of high or of low value.
each month.
• A 1% churn reduction has more impact
• Rates analysis shows a certain number
(and is much more difficult to obtain) when
of ‘rules’. Countries where competition is
the overall churn is lower.
fierce face higher churn rates. Challengers
• Marketing budget for subscriber loyalty with low brand power show higher churn
should be allocated taking into account rates. Post-paid churn rates are always
subscriber value segmentation. Gain and lower than blended churn rates. As within
loss strongly depend on the customer life- a given MNO significant discrepancies in
churn performance between subsidiaries,
time value or CLV.
local excellence is key.
Analysis show significant churn
performance discrepancies And helps define the nature of churn
On a worldwide basis, churn rates are in- • Churn is pervasive. The churn is part of
creasing mainly due to higher competition the entire wireless industry. Statistics from
in national markets. Increase in global churn around the world all issue the same mes-
rates is driven by inflating churn rates in sage about churn. Even in emerging mar-
emerging regions especially emerging Asia kets where the market is buoyant, mobile
and Latin America. operators have already experienced churn
MOBILE HOT TOPICS

42. 40 Mobile 2009
but do not care because subscriber acqui- duce churn and costs. High cost of cus-
tomer acquisition and customer education
sition is still easy.
require companies to make large upfront
• Churn is inevitable. The telecommunica-
investments in customers. Churn leads
tion industry has a built-in product obso-
to higher subscriber acquisition or reten-
lescence cycle that guarantees that churn
tion costs (SAC/SRC) and — invariably —
is going to be a continuous problem. Churn
cheaper products and services to try and
could then be considered as an opportu-
beat off rivals’ offers.
nity to evolve.
• Churn is expansive. The biggest conse-
quence of churn is, of course, the loss of Churn drivers
revenue assuming that the average cus-
• Deregulation imposed by regulators is
tomer brings in anywhere from 5 EUR to 80
increasing the rate at which competitors
EUR per month. Despite their best efforts to
enter into the market place. Introduced
prevent churn, the company will lose some
in most industrialised countries, the obli-
of its customers to the competition sooner
gation of number portability is one of the
or later and try to win them back by running
regulatory elements enabling competition
reacquisition strategies. These campaigns
within the market to grow.
might be successful but entail costs. Cus-
tomer retention costs are also increasing. • Consumers take dozen of factors into ac-
In addition, when churn starts, one of the count when they churn in a never-ending
first thing a mobile operator does, is to in- combination of complex mental and emo-
crease its advertising to have more media tional calculations. Customers receive nu-
face time than the competitor. merous incentives to switch and encoun-
ter numerous disincentives to stay. Cus-
• Churn is manageable but often at the ex-
tomer surveys that report the top churn
pense of inflating subscriber retention
reasons (price, quality…) only provide a
costs. In the context of falling ARPU, mo-
bile operators face the challenge to re- rough summary if those churn decisions.
MOBILE HOT TOPICS

43. 41
Mobile 2009
customer churn management capabili-
Churn management approaches
ties.
Basically, three fundamental strategic ap-
Most operators in advanced markets have
proaches are possible for a mobile opera-
come to this approach.
tor to maintain when it comes to issues to
churn. All of them are legitimate with their
own strengths and weaknesses, and can be
The key is to better know the customer
effective in their own way. The objective is
to make the optimum investment to reduce • Predictive campaigns attempt to identify
the risk of customer churn, especially in the which customers are able to switch and
short term.
when and the reasons why. The CRM ap-
• The most commonly effected strategy, es- proach helps the service provider to re-
pecially during the early phases of churn duce customer churn by anticipating and
problems, is for the company to ignore addressing customer issues and increas-
the loss of customers and try harder to ing customer satisfaction. Effective busi-
acquire new customers as replacements. ness processes enabled by technology
Emerging Asian countries currently show can help reveal customer behavior pat-
this type of strategy. terns and aid in assessing the profitabil-
ity of various customer segments, what
• The second most common strategy pur-
sued by companies that are loosing cus- is important to them, and how the carrier
tomers is to try to steal customers from can build loyalty within the most valued
their competitors to make up from the customer sets. The outcome of applying
losses. data warehousing, mining, and visualiza-
tion tools is a set of models that supports
• Eventually, most firms come to realize
predictions of those customers most likely
that their acquisition efforts alone are not
to churn and, possibly, when and why.
enough to truly address churn issues. As
These models help identify intervention
companies mature and as their analyti-
strategies that can reduce churn among
cal and operational capabilities become
more sophisticated, they begin to build particular customer segments.
MOBILE HOT TOPICS

44. 42 Mobile 2009
• Rewarding customers who are loyal seems stimulate customer development, give the
an obvious way to reduce churn. Based on customer the feeling he is unique, make
the market segmentation, different loyalty the customer loyal to the mobile operator,
programs have to be made to respond to use the program as a reference tool for
the needs and the criteria of those particu- customer acquisition. But depending on
lar markets. Independent of the segment, the segment and sub-segment, the value
the sub-segment addressed, the loyalty of the customer and his particular needs,
programs mainly have the same main ob- the characteristics of the program should
jectives: reduce churn, increase the emo- be different: the beneficiary is different, so
tional link with customers and increase should be the reward (fun, money base,
their satisfaction, better know the cus- dedicated serving…) and the communica-
tomers and better respond to their needs tion (marketing oriented, informative…).
Figure 8. Levels of churn prevention initiatives
FFICE
FRONT O
Loyalty
base)
. to entire
o com Program
OPEX / CAPEX
OFFICE (n
Proactive
BACK
ns
Campaig
Reactive
ns
Campaig
isation
nd Optim
iciency a gement’
Eff
r Service rience Mana
Custome r Expe
e
‘Custom
Source: IDATE
Impact on churn
MOBILE HOT TOPICS

45. 43
Mobile 2009
Figure 9. Resultant incremental CLV with different hypotheses of churn reduction
and ARPU levels
Subscriber
ARPU (in €)
100
126€ 265€ 419€ 592€ 786€
40
50€ 106€ 168€ 237€ 315€
40€
19€
15
63€ 89€ 116€
20% 19% 18% 17% 16% 15% 14%
+3.2 months
From 20% to 19%
+6.7 months
From 20% to 18%
+10.6 months
From 20% to 17% Churn Rate Reduction
+15 months
From 20% to 16%
+20 months
From 20% to 15%
Source: IDATE
ARPU = 15 ARPU = 40 ARPU = 100 Gross Profit Margin: 40%, Inflation Rate: 2%
MOBILE HOT TOPICS