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Global Wireless Data Market 2006 Update Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 2 http://www.chetansharma.com Global Wireless Data Market – 2006 Update In 2006, mobile data industry grew across every geography. From the true and trusted SMS messaging to new services such as Mobile TV, LBS, and others, different services helped in adding billions to the revenues generated for the year. Japan and Korea remain the envy of the global markets and the countries to study and learn from. The US market has been steadily making strong comeback and is soon going to become the biggest mobile data revenue generating market in the world. Chetan Sharma Consulting conducted its bi-annual study on the global mobile data industry. We took a look at wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and France to high-growth markets such as China, India, Brazil, and Russia. The study also took a detailed look at over 30 prominent operators. This note summarizes the findings from the research. 2006 was a great year for mobile data. Revenues from mobile data were up in all major regions and for all major carriers with data contributing double digit percentage to overall revenues in most cases. The overall subscriptions rose to approximately 2.7B and we should be crossing 3B by the end of 2007. The wireless industry is on its way to gain the quickest billion subscribers within the next 3 quarters. Japan led the way with almost $20B in annual mobile data revenues. US and China were next with $15.8B and $9.2B respectively. NTT DoCoMo became the first carrier to cross the $10B barrier for a given calendar year amassing $10.5B for 2006 in data revenues. The Japanese market was followed by China Mobile at $6.9B, KDDI at $6.6B, Verizon Wireless at $4.5B, and Cingular Wireless at $4.3B. They were followed by Sprint Nextel, SK Telecom, Softbank, O2 UK, and China Unicom to make up the top 10. A majority of countries we tracked got double digit growth in mobile data ARPU except for a handful of countries which registered a decline from EOY 2005. Some of the prominent ones being US (33%), Czech (40%), Brazil (32%), Netherlands (31%), UK (20%), and Japan (14%). Japan registered the largest dollar amount increase with $2.08 increase from 2005 levels. US and UK data ARPU levels grew by $1.72. In 2006, SMS’s vice like grip on data revenues loosened a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 30-40%. 2006 was a great year for mobile data. Revenues from mobile data were up in all major regions and for all major carriers with data contributing double digit percentage to overall revenues in most cases. The overall subscriptions rose to approximately 2.7B and we should be crossing 3B by the end of 2007. The wireless industry is on its way to gain the quickest billion subscribers within the next 3 quarters.
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 3 http://www.chetansharma.com Global Wireless Data Market – 2006 Update The top 10 carriers increased their revenue by 13% during the second half of 2006 to reach an aggregate amount of $46.8B for the year in data revenues. In terms of data ARPU, Japan continues to lead the pack with almost 30% of its revenues coming from data services amounting to almost $17 data ARPU. Ireland, Norway, Switzerland, UK and South Korea also registered significant data ARPU. US crossed the ($5, 10%) block, where $5 is the data ARPU and 10% represents the % share of overall ARPU. As of Dec 2006, US stood at ($7, 13%). For detailed US Wireless Market update, please see "US Wireless Data Market Update 2006" (For more details, please refer to the 9-box diagram in the ppt”; for 2005 comparative numbers, please refer to our paper from last year titled “Perspectives: Wireless Data ARPU”)US Wireless Data Market Update 2006pptPerspectives: Wireless Data ARPU NTT DoCoMo’s position at the top of the wireless data world has been challenged recently by several carriers esp. by its archrival KDDI which surged past DoCoMo and remained ahead pretty much for the entire year. Their data coordinates stand at ($17, 31%) and ($17, 30%) respectively. However, it is 3 UK that is inching towards ($20, 30%) mark with $26 in data ARPU contributing over 29% to its overall ARPU. 3 Italy with ($16, 35%) is also amongst the leaders. The biggest % contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with almost 50% (or $3) contribution coming from data services. Even though China reported approximately $9.2B in data revenues, and the % contribution is over 20%, data ARPU is around $2, confirming what we already know – it’s a volume game. For India data ARPU is just under $1. Approximately same for Brazil and Russia. Actually, in 2006 the overall wireless service revenue for US was two times the overall revenues of the four BRIC (Brazil, Russia, India, and China) countries combined. So, lessons are pretty clear as to which markets to approach for what products and services. In terms of overall ARPU, it has been a mixed picture compared to 2005. Of the 40 countries we looked at, it was an even split, with half of the countries registering increase in overall ARPU while the other half were at the same level or experienced decline in ARPU. US, China, and India all registered declines while Japan, Russia, Italy, UK, and Canada had an uptick in their ARPU numbers. All the carriers in the top 10 wireless carriers by wireless data revenues list exceeded $1B in data revenues for the second six months of 2006 and $2B for the year. Western Europe officially crossed the 100% wireless subscriber penetration mark (primarily due to multiple SIMs and double reporting) with several nations reporting up to 140% subscriber penetration. US crossed the 75% penetration mark. The top 10 carriers increased their revenue by 13% during the second half of 2006 to reach an aggregate amount of $46.8B for the year in data revenues.
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 4 http://www.chetansharma.com Global Wireless Data Market – 2006 Update China crossed the 400M subscriber market in 2006 and is on its way to cross the 500M mark this year. However, its growth rate was overtaken by India which is experiencing tremendous growth. Its net-adds approached 7M subs/month compared to 6M/month for China (though in March 07, monthly net-adds dipped below 4M probably due to the pressure from the government to prove the reported numbers). India crossed Japan and Russia to stand number 3 behind China and US and is going to get past US in terms of total number of subscribers by 2008. As expected, China Mobile is way ahead of the second ranked Vodafone w.r.t total number of subscribers. China Unicom, América Móvil, Telefonica, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next six largest telecom groups in the world. In terms of individual carriers, Cingular and Verizon now occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5. The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for some years to come. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress. Japan became the first nation to have more than 50% of its subscribers using 3G. DoCoMo and KDDI have 60% of their subscriber base using 3G devices. Korea is close second approaching 50% 3G penetration. 3G is starting to pick-up steam in both western Europe and North America per our discussion in the cover story article “3G: Hitting the Mass Market” published in Wireless World Magazine. US and Western Europe crossed the 10% mark for 3G penetration (Italy stayed ahead with over 25% of its subscriber using 3G phones). The difference between 2G/2.5G/2.7G and 3G is palpable, for example, for DoCoMo the difference FOMA (3G) and mova (2G) was approaching 200%.Wireless World Magazine China and India represent the biggest opportunities for Infrastructure providers. China has postponed its 3G decision for the umpteenth time and is having technical and political problems to get something in place before the 2008 Olympics. India is going through its 3G spectrum policy but unlike China is likely to resolve the issues in short order. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage. Carriers with nationwide 3G networks and good distribution of handsets are seeing uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) are also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. In terms of applications, messaging accounts for lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Mobile Games, IMS, LBS, Mobile advertising, and others have captured industry’s imagination. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain. China Mobile overtook Vodafone as the most valued telecom operator in the world which in turn was surpassed by AT&T though China Mobile is likely to get its title back within a few quarters.
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 5 http://www.chetansharma.com Wireless Data ARPU in different global markets (2006)
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 6 http://www.chetansharma.com Wireless Data ARPU of major global carriers (2006)
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 7 http://www.chetansharma.com % Penetration in Developed Wireless Markets Source: Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 8 http://www.chetansharma.com Data ARPU trends in Developed Wireless Markets (2001-6) Source: Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 9 http://www.chetansharma.com Top 3 nations: Wireless Data Revenues (2006) Source: Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 10 http://www.chetansharma.com Monthly Net Adds: India vs. China Source: Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 11 http://www.chetansharma.com Top Carriers by Wireless Data Revenues Source: Chetan Sharma Consulting
© Chetan Sharma Consulting, All Rights Reserved, 2007 April 2007 12 http://www.chetansharma.comhttp://www.chetansharma.com
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