Global Wireless Data Market 2008 Update Chetan Sharma Consulting

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Global Wireless Data Market – 2008 Update Executive Summary The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding over 20M new subscriptions every month. India crossed the 400M subscription mark this month while China whizzed past 650M in Q109. Overall, the global subscriptions penetration edged past 60%. During 2008, revenues further tilted towards data services, increasing 17% from 2007 EOY. The overall global mobile revenues (including equipment) for the year reached the 1 Trillion dollar landmark in 2008, with over $830 billion attributed to services revenues. Data revenues now account for over 20% of the global service revenues. For some leading operators, data is now contributing close to 40% of the overall revenues. However increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated in The US market expanded its lead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months to come. The success of Apple’s Appstore (1B downloads in 9M across 37M devices is not surprising but still impressive, look for another growth bump in July) led to appstore mania across the ecosystem with every major player in the ecosystem holding ambitions for Applesque success leading to healthy competition and hopefully more innovation. Google’s Android also kept the industry chatter on the high with a slew of new devices slated for The ease of use of applications developed for G1 on the new devices will define Android’s role in the ecosystem. If successful, it will decimate the weaker ones from the equation going forward. WiMAX vs. LTE debate took over the EV-DO vs. WCDMA talk and while the majority of the industry is consolidating around LTE; open-platform advocates are watching the arrival of WiMAX with great interest. However, the down economy is delaying the establishment of Clearwire’s nationwide footprint. Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India. This note summarizes the findings from the research with added insights from our work in various global markets.

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Global Wireless Data Market – 2008 Update Service Revenues US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $34B vs. $29B for Japan in China with $15.8B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2007 levels followed by Japan at 25% and China at 21%. The top 10 nations by service revenues are: US, China, Japan, UK, France, Italy, India, Germany, Spain, and Russia. The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Spain, Australia, and Korea. NTT DoCoMo continues to dominate the wireless data revenues rankings with over $4B in data services revenue in Q408 and almost $15B for the year. Almost 42% of its overall revenue now comes from data services. DoCoMo also crossed the 90% 3G mark last month. NTT DoCoMo was followed by China Mobile, Verizon, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues. It marked the first year for T-Mobile USA to be in the top 10 list as it went past SK Telecom. All the top 10 carriers exceeded $2B in data revenues for the year The top 10 global operator groups now account for over 60% of the global mobile data revenues. For the last couple of years, NTT DoCoMo has been the only carrier exceeding $10B in yearly mobile data revenues. In 2008, as expected it found company with China Mobile, Verizon Wireless, and ATT in the exclusive $10B club. KDDI missed out by a whisker. Data revenues for the top 10 operators increased 27% from EOY 2007 and now account for almost 48% of the global mobile data revenues though their subscriber share is around 30%. The biggest jump in data revenues was experienced by the US carriers – ATT and Verizon Wireless respectively. They were followed by China Mobile. (For a complete US Market Update, please see our 2008 research note).For a complete US Market Update, please see our 2008 research note NTT DoCoMo regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their data coordinates stand at ($27, 42%) and ($25, 38%) respectively. Most of the operators in developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPUs. Comparing the ARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATT experienced increase in both overall and data ARPU. China reported approximately $16B in data revenues for 2008 and the percentage contribution is around 27%, data ARPU is around $2. For India, data ARPU continues to stay around $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market. China Mobile remains the most valuable telecom operator with over $180B in market cap. It is followed by Vodafone at around $98B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. The current recession has slashed their market caps by 20-30%.

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Global Wireless Data Market – 2008 Update In 2008, SMS’s vice like grip on data revenues continued to loosen 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 20-40%. NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets and exploring new technologies and social experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since the introduction of i- Mode almost 10 years ago. During the last 9 years, overall ARPU has declined 33% though data ARPU increased over 1800% and now accounts for almost 40% of DoCoMo’s service revenues. The voice ARPU has declined almost 60%. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends and technologies in these markets to get a sense of what’s coming. ARPU Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 42%. KDDI, 3 Australia, 3 Italy, 3 UK, O2 UK, Singtel, and 3 Sweden exceeded 30%. ATT reported the highest increase in data ARPU from 2007 with 32% growth. Other notable percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.50. In terms of absolute dollar amount, NTT DoCoMo leads the pack with $27 data ARPU. The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 56% (or $3) contribution coming from the data services. Philippines is also one of the most active messaging nations where users average a message/hr round the clock.

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Global Wireless Data Market – 2008 Update Subscriptions The global mobile markets continue to grow at an explosive pace touching 4B subscriptions by 2008 up 23% from EOY 2007 levels and will likely cross the 5B mark in Overall the global mobile subscriptions now represent over 60% of human population on Earth. China and India continued their red-hot growth throughout Combined, they added 212.8M new subscriptions with India edging China by 15% for the first time in yearly net-adds. Earlier this month, India also crossed the 400M subscriptions mark, only the second nation to do it after China. In total, China is still years ahead. In the meantime, US crossed the 90% subscriptions mark earlier this year. In March, India edged past the US to become the number two wireless market (by subscriptions) in the world. In the last two years alone it has added almost 175M new subscriptions (in comparison China added 169M and the US market added 39M). For the past 7 months, India has been displaying Phelpsesque like flair in setting and beating its world record for 6 times, twice exceeding 15M/month net-add. For the last 7 months, the market has been exceeding 10M net-adds/month with Mar 09 being at a whopping 15.6M making it a record for monthly net-adds in a given country at anytime in the history of the industry or any industry for that matter (breaking its previous record set in Jan09). In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Japan, and Pakistan. China Mobile with 457M (as of Dec 08) remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone at 255M and Telefonica with 196M subscriptions. América Móvil, Telenor, China Unicom, T-Mobile, Orange, MTS, and Bharti Airtel are the next five largest telecom groups in the world. As far as 3G is concerned, there were over 400M 3G users (72% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 90%+ penetration.

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Global Wireless Data Market – 2008 Update Others Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. 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. Nokia eclipsed 100M/quarter unit sale in each of the four quarters. It has sold over 468M handsets in 2008 (up 7.2% from 2007), more than the next three handset manufacturers combined. Nokia’s global market share stayed in the 38-41% range. Samsung at 15%, Motorola with 9%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. Despite the slowdown, the industry eclipsed 1B in handset sales in 2008 and will do so again in China and India represent the biggest opportunities for the Infrastructure providers. China launched 3G across the three operators earlier this year. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts are coming from these two countries as they look to expand coverage into rural areas. Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines. Many larger operators have laid out their plans for deploying LTE starting next year. Meanwhile, Clearwire has been rolling out its WiMAX network, one market at a time. While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem. Apple launched its 3G iPhone and Android’s first device was introduced in the form of T-Mobile G1. Many more Android devices are slated to be released in Your feedback is always welcome. Thanks. Chetan Sharma Disclaimer: Some of the companies mentioned in this note are our clients.clients Ps. We will have an update on the impact of recession on the mobile industry in our US Q109 update next month.

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Mobile Markets: The New World Order RankBy SubsBy Data RevenueBy Service Revenue 1ChinaUS 2IndiaJapanChina 3USChinaJapan 4RussiaUK 5BrazilItalyFrance 6IndonesiaGermanyItaly 7JapanFranceIndia 8GermanySpainGermany 9ItalyAustraliaSpain 10PakistanKoreaRussia Arrows indicate change in position from 2007

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Mobile Revenue Distribution

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Shifts in Mobile Ecosystem

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Wireless Data ARPU in different global markets (2008)

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Wireless Data ARPU of major global carriers (2008)

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Changes in ARPU ( )

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Top 3 nations: Wireless Data Service Revenues

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Monthly Net Adds: India vs. China

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Mobile subscriber growth in top 3 markets

© Chetan Sharma Consulting, All Rights Reserved, 2009 April Top Carriers by Wireless Data Revenues

© Chetan Sharma Consulting, All Rights Reserved, 2009 April G Subscriber Growth

© Chetan Sharma Consulting, All Rights Reserved, 2009 April NTT DoCoMo ARPU Trend

© Chetan Sharma Consulting, All Rights Reserved, 2009 April

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