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Mobile 2008
Markets Facts & & Trends Figures

Consulting & Research

Telecom Services & Mobile Trends 3G - 3.5G Economics

Mobile Equipment Dynamics Mobile Hot Topics

Introduction

Mobile 2008

ith total revenues estimated at 610 billion USD in 2006 and 678 billion USD in 2007, mobile services have generated the bulk of the increase in the telecom services market.

2007, against down 10% in 2006). market consolidation. IDATE forecasts the global mobile terminal market revenues for 2007 to reach 131 billion USD up from 117 billion in 2006, i.e. +1%, due to a decrease in the ASP driven by a strong market growth in the emerging markets and significant competition on high-end handsets. In this new edition of our Mobile yearbook, you will find valuable data on the central components of the mobile world, along with analyses from IDATEs experts and a comprehensive round-up of the highlights of the year gone by: 3G dynamics Innovation in bundles Femtocells timelines Podcasting roadmap Enterprise mobile offering Radio Spectrum issues Mobile TV incertitude

Growth in the mobile sector comes from enlargement of the subscriber base. Having passed the 2-billion mark in 2005, the number of mobile subscribers throughout the world reached 3.2 billion by the end of 2007.

Four main factors have marked recent developments in the mobile services market: the enlargement of subscriber bases in the developing economies, particularly in the major emerging markets but also in the industrialised countries, despite already high penetration rates the growing importance of data services, which now account for 18% of mobile revenues in Western Europe, 19% in the US and 32% in Japan At the same time, ARPU has continued to decline, but at a slower rate (down 8% in

Introduction

Mobile 2008

Introduction

Telecom Services & Mobile Trends

Mobile 2008

The growth in telecom services is still fuelled by mobile

Our estimates put total world revenue in 2006 at 1.2 billion USD, up 6.2% on the previous year. Growth in 2007 can be expected to be slightly lower at 6.0%. While the upswing in Internet services is offsetting the decline in telephony in the fixed sector, growth in the overall telecom services sector is largely accounted for by mobile services. It is also being strongly driven by the expansion of telecom services in developing countries, which we estimate at 14% in 2007 against 2.4% in industrialised countries. With total revenues estimated at 610 billion USD in 2006 and 678 billion USD in 2007, mobile services have generated the bulk of the increase in the telecom services market. In terms of value, by 2005 they had already exceeded fixed-line services. Estimated at 54% in 2007, their share of the telecom services market in general displays continuous growth.

Table 1. Key data on the world telecom services market

2006-2007 2006
Market value Annual growth rate Share of mobile services Share of developing countries Fixed lines Fixed penetration (% of population) Mobile subscribers Mobile penetration (% of population) Broadband subscribers Broadband penetration (% of population) 1 180 billion USD 6.2% 52.0% 30.0% 1.25 billion 20.0% 2.67 billion 42.6% 279 million 4.5%

2007
1 250 billion USD 6.0% 54.0% 32.0% 1.26 billion 20.0% 3.18 billion 50.2% 348 million 5.5%
Source: IDATE

Telecom Services & Mobile Trends

Mobile 2008

Figure 1. Subscriber bases around the globe

2003-2007, millions
Fixed lines 3 500 3 000 2 500 2 000 1 500
Source: IDATE Source: IDATE

Mobile subscribers

Broadband subscribers

1 000 500 0 2003 2004 2005 2006 2007

Figure 2. Telecom services market

2003-2007, annual growth rate of market (%)

USA 7 6 5 4 3 2 1 0 -1 -2 2003 2004

European Union

Japan

2005

2006

2007

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Mobile 2008

Growth in the mobile sector comes from enlargement of the subscriber base. Having passed the 2-billion mark in 2005, the number of mobile subscribers throughout the world reached 3.2 billion by the end of 2007. At the same time, ARPU has continued to decline, but at a slower rate (down 8% in 2007, against down 10% in 2006). Fixed telephony continues along the downward trend that started in 2002. In 2006, there was a decrease of 3.5% in value terms in the world market as a whole, resulting from a nominal effect (annual fall in average revenue per line of 5-7% since 2004) and a real effect (weak growth in the number of lines less than 1% in 2006 and

in 2007). The value of the market shrank further in 2006, with an estimated fall of 4.5%. Fixed telephonys share in terms of value of the total world market for telecom services fell from 48% in 2001 to 31% in 2006 and can be expected to fall still more in 2006 to 28%. As a driver of worldwide growth in telecom services, data and Internet access services are playing an increasingly important role. In 2006, they generated additional revenues of 19 billion USD in relation to 2005. The growth rate has been maintained in 2007. Their share of telecom services in general has enjoyed steady growth, increasing from 14% in 2001 to nearly 18% in 2006.

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Table 2. Subscriber bases - Industrialised countries vs. developing countries

2003-2007, million lines / subscribers
2003 FIXED LINES Industrialised countries Developing countries MOBILE SUBSCRIBERS Industrialised countries Developing countries BROADBAND SUBSCRIBERS Industrialised countries Developing countries 1 138 560 578 1 387 684 703 101 85 16 2004 1 195 550 644 1 705 751 954 155 120 35 2005 1 247 545 702 2 153 825 1 329 215 157 58 2006 1 253 531 722 2 670 894 1 775 279 193 86 2007 1 259 520 739 3 183 956 2 227 348 230 118
Source: IDATE Source: IDATE

Table 3. Telecom services deployment - Industrialised countries vs. developing countries

2003-2007, number of subscribers / lines per 100 inhabitants
2003 FIXED DENSITY Industrialised countries Developing countries MOBILE DENSITY Industrialised countries Developing countries BROADBAND DENSITY Industrialised countries Developing countries 18.8 58.4 11.4 22.9 71.3 13.8 1.7 8.9 0.3 2004 19.5 57.1 12.5 27.9 77.9 18.5 2.5 12.4 0.7 2005 20.2 56.2 13.5 34.8 85.1 25.5 3.5 16.2 1.1 2006 20.0 54.5 13.7 42.6 91.8 33.6 4.5 19.8 1.6 2007 19.9 53.1 13.8 50.2 97.7 41.6 5.5 23.5 2.2

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Mobile 2008

Trends by activity segment

Mobile services
General evolution of the market
The world market for mobile telecom services in 2006 amounted to 610 billion USD. Growth remained quasi-stable compared to the previous year, at 11.6%. It is expected to remain above 11% in 2007. Growth has been far stronger in the developing countries (26% in 2006) than in the industrialised regions (5.6% in 2006). Expressed in value terms, the former countries are now accounting for an ever-larger share of the world total (36% in 2006). Among industrialised countries, Western Europe has experienced a sharp decline in growth, which is expected to be under 2% in 2007 (down from 9% in 2004, 3% in 2006). This has resulted from market saturation and cuts in termination rates, partly offset by increase in mobile data revenues. The US mobile market, which is relatively less saturated, remains much more dynamic in terms of value growth (+10% in 2006 and 2007). Four main factors have marked recent developments in the mobile services market: the enlargement of subscriber bases in the developing economies, particularly in the major emerging markets but also in the industrialised countries, despite already high penetration rates the growing importance of data services, which now account for 18% of mobile revenues in Western Europe, 19% in the US and 32% in Japan the fall in ARPU in most countries, especially emerging markets market consolidation.

Subscriber base growth around the world

During the period 2002-2006; mobile subscriber bases expanded at an annual rate of 21-26%. The number of mobile subscribers passed the 2-billion mark during 2005 and the 3-billion mark during 2007. A large part of the increase in the subscriber base is fuelled by the developing countries. By the end of 2007, 70% of the worlds mo-

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bile subscribers will be found in a developing country, compared with 50% at year-end 2003. In 2006-2007, these countries generated nearly 90% of the net increase in the worldwide subscriber base. Particularly

strong growth is displayed by the major emerging economies of Asia (China, India, Indonesia, Pakistan), Latin America (Brazil, Colombia) Europe (Russia, Ukraine, Turkey) and Africa (South Africa, Algeria, Nigeria)

Figure 3. Regional mobile density

2003 / 2007, number of mobile subscribers per 100 inhabitants at year end
120 100 80 60 40 20 0 Western Europe Eastern Europe Advanced Asian economies North America Latin America Middle East Developing Asian Sub-Saharan & North Africa economies Africa
Source: IDATE Source: IDATE

2003

2007 (provisional)

Figure 4. Leading mobile markets

End 2007, million subscribers
China USA India Russia Brazil Japan Germany Italy UK Pakistan 0 100 200 300

2004 Net adds in 2005 Net adds in 2006 Net adds in 2007 (provisional) 400 500 600

Telecom Services & Mobile Trends

Mobile Equipment Dynamics

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Mobile 2008

Mobile Terminals
Market development in volume
IDATE expects the global mobile terminal market size for 2007 at 1 137 million units up from 987 million units in 2006, i.e. more than 15% growth. In the long term, the mobile terminal market is still forecasted at 1 430 million units in 2011, i.e. a CAGR of 8.42% from 2006. Even though IDATE increased its forecast for 2007, we expect mobile market to increase less rapidly in the next years due to a saturation of middle-class population in large emerging markets. and less than 150 billions in 2011, i.e. a CAGR of 8% from 2006. We decided to increase our market estimate for 2007 due to the positive signs of a more stabilized ASP during the period.

3G market
For 2007 IDATE forecasts the 3G market at 167 million units, i.e. 14.7% of the total mobile terminal market of the total mobile terminal market due to high 3G handset shipments by Samsung and Nokia. By 2011, the 3G market will account for 403.1 million units, i.e. 29.9% of the total market volume. IDATE decided to include 3.5G handsets (i.e. HSDPA mobile phones) in its market forecasts and estimates. 3.5G handsets sales became significant in Q3 2007 onwards and it will account for 11.5 million units in 2007, i.e. 1% of the total market.

Market development in value

IDATE forecasts the global mobile terminal market revenues for 2007 to reach 131 billion USD up from 117 billion in 2006, i.e. +1%, due to a decrease in the ASP driven by a strong market growth in the emerging markets and significant competition on high-end handsets. In the long term, the mobile terminal market is forecasted at USD 148 billions in 2010

Mobile terminal market shares

From Q12007 to Q3 2007, the largest vendor Nokia continued to grab market share in volume significantly thanks to yet outstand-

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Figure 5. Global Mobile Terminal Market

2004-2011, in million units
1 600 1 400 1 200 1 000 800 600
Source: IDATE

Figure 6. Global Mobile Terminal Market

2004-2011, in billion USD
160 140 120 100 80 60
Source: IDATE Source: IDATE

400 200 0 2004 2005 2006 2007 2008 2009 2010 2011

40 20 0 2004 2005 2006 2007 2008 2009 2010 2011

Figure 7. 3G* and 3.5G mobile terminal market forecasts

2002-2011, in million units and %
Million 500 units 450 400 350 300 250 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 15 10 5 0
* W-CDMA and CDMA EV-DO terminals

35 % 30 25 20

3G mobile terminals % of 3G on the total market 3.5G mobile terminals % of 3.5G on the total market

Mobile Equipment Dynamics

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Mobile 2008

ing quarterly performances. On a 3 quarters basis, Nokia controlled 38% of Market, Motorola 15% and Samsung 14%. SonyEricsson became the fourth vendor with 9% market share and LG 7%. In Q3 2007, Nokia reach its highest market share of its history with a 38.9% Market share. In an opposite way, Motorola kept on loosing market share. In Q3, it reached its historical lowest level at 13%. Samsung took
Figure 8. Global Mobile Terminal Market shares, in units
on Q1 to Q3 2007, %

advantage of Motorola slump and reinforced its #2 position on the market. Its market share gained strength at 14.8%. Sony Ericsson and LG maintained their position with respectively 9% and 7.6% market shares in Q3. Finally, other vendors market share has been staunched at 16.6%. The fact that Motorola and its former 20% market share lose its challenger position makes from Nokia the only ruler of the handset market. With a market share at 15%, Samsung the currently only credible challenger will have to massively invest in factories and abandon its high-end strategic position to compete with Nokia and double its shipments.

Others, 18

Nokia 38

The rise of ODM

ODM, especially, Taiwanese manufacturers are representing an increasing part of worldwide handset productions. Indeed, cooperation with handset original design manufacturers (ODMs) has become an integral part of the handset strategies of some big original equipment manufacturers (OEMs), such as Motorola and Sony Erics-

Sony Ericsson, 9 LG, 7

Source: IDATE

Samsung 14

Motorola 15

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Table 4. Mobile Terminal market, shares of region

2004-2010, %
2004 North America Asia Pacific Western Europe Latin America Eastern Europe Middle East & Africa TOTAL WORLDWIDE
(e) estimates; (f) forecasts

2005 15.9 41.1 16.9 7.6 11.2 7.2 100.0

2006 13.8 43.3 15.0 10.0 10.4 7.5 100.0

2007(e) 12.7 45.2 14.4 11.1 9.4 7.3 100.0

2008(f) 12.0 46.6 13.7 11.1 9.3 7.4 100.0

2009(f) 11.8 46.8 13.1 11.4 9.0 7.9 100.0

2010(f) 11.9 45.7 13.0 11.9 8.9

Source: IDATE

15.6 41.7 18.6 7.4 10.2 6.6 100.0

8.4 100.0

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Mobile 2008

son, especially in the low-end handset segment. In 2005, ODM shipments matched 12.5% of worldwide handsets production. This proportion is set to grow quickly and IDATE and most analysts forecast this proportion to rise to 24% in 2008 i.e. around 300 million units. By 2011, ODM shipments would rise to 36% of worldwide production. ODMs gain cost advantages through setting up plants in mainland China, and their leading role in supplying handset components is helping them further improve their cost structure and complete their supply chain. Motorola and Sony Ericsson were the most active in cooperating with Tai-

wanese ODMs; Nokia and Samsung were slow to move in this direction but, since 2005, they are deeply cooperating with ODM. ODM strategies are also popular in Japan, but shipments are still relatively low. There is also much less cooperation between Chinese mainland handset vendors and Taiwanese ODMs, primarily because of unstable demand and the low profit margins produced by intensive competition in the mainland Chinese market. However, cooperation between China and Taiwan is key in ODM ecosystem. Though most handset R&D activities are done in Taiwan, 55 to 65% of ODM mobile devices are manufactured in China.

Mobile Equipment Dynamics

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Figure 9. Worldwide handset repartition between ODM and OEM

2006-2011, million units
1 600 1 400 1 200 1 000 800 600
Source: IDATE

ODM manufactured shipments

400 200 0 2006 2007 2008 2009 2010 2011

OEM manufactured shipments

Mobile Equipment Dynamics

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Mobile 2008

Mobile Infrastructure
The mobile access infrastructure market includes cellular network access base stations (BTS for GSM/GPRS/EDGE and CDMA, and Nodes B for UMTS networks), associated equipments (BSC, GGSN, SGSN) as well as Public Network WLAN access base stations (hot-spots), based on WiFi, WiMax technologies. GPRS equipment, there were slowdown in the sector (3.9% between 2005 and 2006). Chinese equipment manufacturers, Huawei and ZTE, strengthened their penetration in the market with the strongest revenue growth of all major equipment vendors. In addition, restructuring undertaken since the beginning of 2006 profoundly shuffled the cards and the configuration of the sector. If Ericsson strengthened its leader position in 2006 in both GSM and WCDMA standards, cumulative market shares of Nokia and Siemens gave birth to a real challenger in both standards. The purchase of Nortels WCDMA operations by Alcatel-Lucent has allowed the company to remain in the 3G race, but has not settled the problem of critical mass as the merged entities barely reached 10% in the WCDMA market

Market trends
In the mobile access equipment market, overall GSM sales led the good evolution of the mobile market despite weaker deployments of WCDMA networks. Market also faced an intense consolidation inducing a fiercer competition between equipment providers. Despite the dynamic investment in mobile networks benefited mobile infrastructure suppliers caused by the intensifying competition in Africa, India, Latin America, and Russia and price erosion for GSM/EDGE/

Mobile Equipment Dynamics

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Table 5. Mobile infrastructure revenues of major equipment manufacturers worldwide

2005-2006, million USD
2005 Ericsson Nokia Siemens Alcatel-Lucent Nortel Motorola NEC Huawei ZTE Samsung Others TOTAL 15 074 11 955 9 070 4 796 4 187 2 722 1 902 1 079 839 2 199 53 822 2006 16 512 13 150 8 534 4 925 3 587 2 785 2 636 1 110 839 1 818 55 896 2006/2005 9.5% 10.0% -5.9% 2.7% -14.3% 2.3% 38.6%
Source: IDATE

Table 6. GSM market share of the equipment manufacturers

2005-2006, %
GSM Ericsson Nokia Siemens Alcatel-Lucent Nortel Motorola Huawei ZTE Others 2005 35 32 13 6 7 3 1 3 2006 36 33 12 6 5 4 1 3
Source: IDATE Source: IDATE

2.9% 0.0% -17.3% 3.9%

Table 8. CDMA 2000 and EV-DO market share of the equipment manufacturers Table 7. W-CDMA market share of the equipment manufacturers
2005-2006, %
WCDMA Ericsson NEC/Nokia Siemens Huawei Nortel Alcatel-Lucent Motorola Others 2005 38 41 2 5 4 3 7 2006 39 38 6
Source: IDATE

2005-2006, %
CDMA 2000 and EV-DO Alcatel-Lucent Nortel Motorola Huawei ZTE Samsung LG Others 2005 44 17 16 1 4 8 7 3 2006 45 17 15 6 5 5 4 3

6 4 2 5

Mobile Equipment Dynamics

3G - 3.5G Economics

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Mobile 2008

3G is up and running
Japan and to a lesser extent, South Korea are the most advanced when it comes to the spread of 3G. In these two countries, 3G (including both CDMA 2000 and WCDMA technologies) already represents 40% of mobile customers. The start-up of 3G in Western Europe has been relatively slow compared to expectations set in the early 2000s, with 45 million customers at the end of 2006, or only a little more than 10% of the entire mobile customer base. Italy is ahead in Europe (16.6 million 3G subscribers at the end of 2006), led by the new entrant, Hutchison, which banked on video services to differentiate itself. The United States is behind, primarily due to delays in allocating 3G spectrum. Overall ARPU continued to drop in 2006. The continued decline in voice ARPU has not been compensated for by an increase in data ARPU. Data ARPU represents more than 30% of overall ARPU in Japan, about 25% in

South Korea, between 15 and 30% in Western Europe and only 10 to 15% in the United States. Financial results for mobile operators (all services combined) are generally good for early entrants, who are showing EBITDA margins of 20 to 50%, while this number is generally between 15 and 40% for 3rd and 4th place entrants. However, the environment is far from stable.

in an environment undergoing radical transformation

With the arrival of 3.5G (HSDPA) , which nearly three fourths of the WCDMA network operators in the world (128 out of 174) had introduced by mid-2007, true mobile broadband finally appears to be available in large cities, with speeds greater than 1 Mbps downstream. In addition, the gradual implementation of HSUPA will increase upstream speeds starting this year. Though HSDPA in Korea is already based on mobile handsets suited for video telephony and VoD, the service is sold in Europe using PC cards, mainly targeting

3G - 3.5G Economics

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businesses. Rates are still relatively high compared to flat rate offers that consumers know from the fixed Internet. Operators have not yet opted to extend free riding on the Web, even though agreements between their own portals and the Internet giants, and UGC (User Generated Content) sites are becoming more frequent. However, the spread of convergent offers should strengthen the connection between fixed and mobile Internet business models.

Competition, stimulated by national regulatory policies especially with the widespread implementation of mobile number portability and by imposing rate controls (international roaming, call termination), has strengthened significantly in most advanced markets, also under pressure from new players, mobile virtual network operators (MVNO) and even new 2G, 3G and Wimax licence holders.

Figure 10. What are the long-term economics for 3 and 4G mobile operators?
2006-2012, million euros and euros

Million 4 000 euros 3 500 3 000 2 500 2 000 1 500 1 000

Gross Margin (million euros) Gross margin / subscriber / month (euros)

30 Euros 25 20 15 10 5

500 0 2006 2007 2008 2009 2010 2011 2012 0

3G - 3.5G Economics

Source: IDATE

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Mobile 2008

MNO pursuing optimisation

In this context, several directions can be seen: consolidation in national markets (such as T-Mobiles takeover of Orange in the Netherlands); strengthening of major operators in emerging markets (Vodafones takeover of Hutchison Essar in India); combining fixed and mobile customer management on common platforms; reductions in force, with recourse to outsourcing mobile networks and sharing infrastructure (towers, for example).

the changes in progress. In particular, 3.5G seems to pose two problems for operators: The first rests on management of the destabilisation that comes along with the emergence of broadband access. It is difficult to propose attractive offers for its usage without affecting rates for low speed services (SMS or ringtone downloads); operators need to find a way to segment the customer base and establish levels for flat rates that maximizes potential revenue without contributing to a decline in ARPU. On the other hand, mobile network operators need to reconsider their approach to walled gardens for multimedia offers on their portals, whose success and expansion have been very mixed. This reversal does not mean abandoning their portals but rather searching for balanced partnerships with Internet players, as well as negotiating balanced revenue sharing models. This is also naturally the time to try out new business models, including different types of advertising revenue streams. Too strong a hold on these partnerships closes the door to potential traffic growth

need to review their business models in depth

Optimisation of management parameters, control over technical choices and even the relatively strong growth in business markets are probably not enough to ensure operators continued results while facing

3G - 3.5G Economics

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that these sites represent, but could also lead to strategies that bypass major operators. Just look at the interest shown by Google in the upcoming bidding in the US for 700 MHz bandwidth, in order to have a portion of spectrum and apply the principle of openness to cellular networks.

as well as their strategies for services, partnerships and content

Though mobile TV seemed to be the operators main source of innovation over the last few years, difficulties selecting a standard and a business model have made opera-

Figure 11. Towards innovative services and ARPU growth

Multimedia ARPU / Blended ARPU (%)

40

3 IT KDDI 3 UK NTT Docomo O2 UK 3 AU SKT O2 GER KTF O2 IRL

FOMA DoCoMo

WIN KDDI

30

Advanced MNOs 3G data

Advanced MNO - European 3G-only players - European strongly advanced - Asian 2 and 3G Mid-advanced MNO

20
E- Plus Base Orange UK Orange NL KPN Orange FR SFR Optimus TEM AT&T/CW VW Less advanced MNO Proximus 3 Austria Orange CH 3 SE/DN

10

0 0 5 10 15

Multimedia ARPU (euros)

20

3G - 3.5G Economics

Source: IDATE

30

Mobile 2008

tors more sensitive to an opening on the Net. Mobile operators have not ignored the power the major Internet players have to attract traffic. Note the agreements in Europe, in particular among the pioneers, by T-Mobile with Google (WebnWalk) and Hutchisons 3 subsidiaries. Since then, there have been several agreements for access to MSNs instant messaging and, more recently, Vodafone and SFR created a new offer based on selecting from the major Web brands linked to their portals. Web 2.0 characteristics encourage usage, with personal mobile phones that are increasingly equipped with MP3 players, cameras and camcorders: access to blogs and music or video downloads access to UGC platforms. Mobile search and Location Based Services (LBS) and even mobile payment and NFC (Near Field) are other natural areas to connect the knowhow and brands of Internet players with operators controlling the changes required for operating in the mobile world. Even though i-Phone is currently offered by Apple in 2G mode, exclusive agreements with operators (O2, T-Mobile and

probably Orange) involve revenue sharing, which is unusual in the sector, as well as the inevitable opening on the Web. Finally, the growth in data revenue and services now associated with 3.5G cant disguise the issue of controlling voice ARPU. The growth in voice traffic may potentially be attacked by the rapid expansion of VoIP and fixed triple play offers. To a lesser degree, and despite operators clauses banning it, voice ARPU is also negatively impacted by downloading VoIP software onto smartphones. Nevertheless, operators have started to respond with: targeted unlimited offers, home zoning (which could be extended by femtocell architectures), and of course FMC offers, in particular for operators who dont have fixed infrastructure or who are in the process of building one (Vodafone in Europe).

Their subscriber marketing strategies are aimed at giving them market dominance
Maintaining market share and controlling emerging developments stem from strength-

3G - 3.5G Economics

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ening customer management systems (billing/coverage, CRM, help desk, etc.). Strategies based on handset range and subsidies and differentiating contracts based on contract duration and options are expected to survive. Note that subsidies were finally

reintroduced in Korea even though the regulatory authorities tried to eliminate them. The regulators search for effective competition must be defined by integrating the need for service innovation and encouraging investment in mobile Internet

Figure 12. MNO potential strategies in an evolving web-based environment

Evolving environment

Network deployments (3G, HSxPA,WiBro, WiMax) Convergence

Web 2.0 usage patterns

User generated content, communities Unlimited plans

Improving services

Mobile advertising, ad-funded content

MNO key moves Optimization, organization, network and technologies Innovative services and business model

Marketing

Mobile music continues to rise

Portal strategy

M&A, partnerships

Network sharing

Mobile TV business model is still uncertain

Portal space at premium

Customer retention
Source: IDATE

Network outsourcing

Mobile search, brand versus white label

Operator portal for spontaneous purchases

3G - 3.5G Economics

Mobile Hot Topics

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Mobile 2008

Innovation in bundles
Quadruple play, new services, pricing strategies
Bundles were originally a stack of services that allowed subscribers to enjoy discounts on the additional offers they signed up for, but the innovation we are seeing now is by no means reduced to a simple discount strategy, but rather based on combining different types of services or by associating value-added services with a flagship product. As the quadruple play becomes increasingly ubiquitous, any type of bundle can offer an innovative element, which will prove a decisive asset for operators. We have thus been able to pinpoint a number of best practices for implementing an innovative bundle, says Sophie PERNET- LUBRANO, the reports project manager. As we examine the offers being marketed by the leading players (from Europe, the US and Japan), we can see a number of trends emerging: this strategy one step further by adding mobile services to the mix. Having consolidated their market power by integrating their mobile subsidiary, incumbent carriers are the pioneers here and virtually all now offer a quadruple pay. Meanwhile, cablecos and ISPs are following suit, with cases in point that include Comcast in the US and Yahoo! BB in Japan. Alternative mobile operators, too, are joining the fray: in the UK, Vodafone offers both internet access and fixed VoIP. Beyond the quadruple play, and rather than seeking to add a fifth service, the best strategy lies in taking advantage of the opportunities opened up by technological convergence to offer users the triple play everywhere: in other words access to voice, internet and TV services in an easy and seamless fashion regardless of their location and of whether they are connected via fixed or mobile network.

Widespread shift to the quadruple play

After having expanded their offering to the triple play, telecom operators are taking

Convergent bundles
One of the major innovations introduced by bundles has been convergent access:

Mobile Hot Topics

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fixed-mobile convergence offers based on convergent devices appeared first in South Korea and the UK, then in 2006 in other countries around Europe, in the United States and Japan. Although these offers do present fixed operators with a risk of cannibalisation, they also create opportunities for savings on network operations, new service development and subscriber loyalty costs; fixed-mobile convergence offers such as unified voice messaging, fixed-mobile portals and fixed-mobile videophony already exist, but have not yet managed to seduce the public; On the other hand, convergent fixed-mobile IM and e-mail do boast considerable potential as extensions of fixed line offers. To be successful, operators will however need to either compete or cooperate with the top internet companies which currently enjoy control of these services; Convergence also concerns Web 2.0 services, as illustrated by recent agreements: Verizon Wireless/YouTube; Vodafone/MySpace; And, finally, the home network is another major field for future innovation in terms of combining access and content, and could prove key to securing customer loyalty

and their monetisation. Operators are having to contend with an ever-expanding field of rivals in this market, include CE suppliers (Philips, Sony), internet companies (Yahoo!), software companies (Microsoft) and even content providers.

Innovative bundles with pay-TV

In the pay-TV market, cablecos and satellite providers, whose core business area is pay-TV, have been developing rich and structured service lines for some time. Here again, the clarity of the offer is key to attracting new and fairly new subscribers, and to cross-selling. The association of PVR services is also key to securing customer loyalty. Pioneered by satellite operators in the United States, the market is being spurred by the growing number of digital TV homes, by consumer education and by the enhancement of PVR offers (e.g. intelligent recording functions, automatic programming based on analysis of past recordings). And, lastly, HDTV and interactive TV can also help differentiate a TV offer.

Innovative bundles with mobile

As part of the trend of offering ever-higher bitrates, mobile operators are enhancing

Mobile Hot Topics

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Mobile 2008

their basic offer (voice + text messaging) with innovative services: mobile TV, transaction services, search services and bundles dedicated to certain segments (e.g. game scores for sports fans, locating children with a phone via GPS, or user-friendly handsets for senior citizens).

free services. The latter are built on one of two business models: either a discount offered to subscribers on another service (e.g. the FreeBB offer marketed by BSkyB and Carphone Warehouse in the UK), or the service is financed by advertising

Price-centric bundles
The major asset for some bundles is price rather than service: high-volume offers touting the promise of unlimited use, fixed-mobile substitution offers geared to replacing the landline with a mobile when at home and

Line expansion
Without committing to a quadruple play, operators may also build innovative bundles by combining several services of a different nature: free installation (Orange France), roadside assistance (Verizon Wireless), credit cards (BSkyB UK).

Mobile Hot Topics

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Figure 13. Bundle positioning according to UseIT market segmentation

ICT Maturity

STRONG

Mobile Entertainment Convergent IM, email Naked DSL + mobile Fixed-mobile substitution (Home zone) Low-cost, unlimited calls plans

Young addict

VoIP, TVoIP, Quadruple play FMC Home Network E-Followers Mediacenter Family plans 3G mobile services

FTTH services FMC

Heavy adopters

PVR VOD TVHD Interactive TV Internet access Family plans, TVoIP, Triple play Flat rates

Coach potatoes WEAK

Dedicated mobile offer (such as Jitterburg)

Reluctant users

ICT Services budget 150 EUR/month

Mobile Hot Topics

Source: IDATE

Resistant users

PVR Services (EPG, one-touch recording) Internet access (mainly for e-mailing) Free installation

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Mobile 2008

Femtocells - investigation of a work in progress

Femtocell Timelines
IDATE expects to see the femtocell market developing rapidly over the following years. While a lack of agreed standards and outstanding technical issues will inhibit major rollouts in 2008, network integration issues are likely to be solved by 2009.Coupled with cost reductions this should lead to a ramp up in volumes in 2009/2010. IDATE believes 10 million UMTS femtocells will be shipped in 2010, rising to 18 million in 2011. Despite the uncertainty, commercial femtocell roll outs grow ever closer. Following RFQs (Request for Quotes) from major mobile operators, a number of femtocell contract awards are expected to be signed in 2007/2008, with the first major network trials likely to be held in early2008. Initial commercial deployments will be made in 2008, though wide-scale commercial roll outs will not take place until 2009. A very significant ramp-up is expected in 2010. Operators interested in the mass deployment of femtocells include AT&T, Telefnica O2 Group, SoftBank, Sprint, TMobile and Vodafone, with more names added to the list on a regular basis. From a vendor perspective, while femtocells were previously largely the preserve of specialist start-up companies such as ip.access, considerable interest is now being shown by most if not all of the major equipment vendors.
2008
Initial lab trials and vendor Evaluations, first (limited) commercial deployments

2009
First wide-scale roll outs - hundreds of thousands of units deployed

2010
Mass roll out phase millions of units deployed

Femtocell Drivers
As well as broad capex considerations, there are other factors acting to push mobile operators in the direction of femtocells. Not least of these is the calculation that femtocells will lead to churn reduction as the model allows for attractive home tariffs, such as cheap mobile voice calls and unlimited data packages. Once customers have been signed up, it is thought that the way will be clear for operators to tempt them to

Mobile Hot Topics

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39

Femtocell Definition
Essentially, femtocells are small, low-cost, low-capacity residential 2G (second generation) or 3G (third generation) base stations which enable users to communicate across any IP (Internet protocol) access network using - crucially - a standard mobile handset. In terms of appearance and price there are significant similarities to wireless routers or wifi access points. Architecturally, residential femtocells are connected via the customers broadband DSL (Digital Subscriber Line) or cable to the mobile network where a controller then aggregates the traffic. Using broadband as the backhaul, the femtocell is able to provide voice and data services in the same way as a regular base station, but with the benefits of a simple and cheap installation, low unit cost and scalable design. This far, most focus has been on UMTS (Universal Mobile Telecommunications System) 3G femtocells, though the technology can also be applied to CDMA- 2000 as well as 2G and WiMAX (Worldwide Interoperability for Microwave Access) standards. There is, however, a key reason why 3G femtocells have drawn most attention: to a greater extent than is the case with 2G, 3G does not work well in residential areas, which represents a significant factor in the poor levels of 3G take-up and usage to date. Femtocells, by adding coverage inside the building, are highly effective at overcoming cell shrinkage, whereby indoor mobile users lose power as the signal travels through the wall, with the result that capacity and coverage is consumed from the rest of the cell in a disproportionate way.

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40

Mobile 2008

try new offerings - such as Mobile TV and music downloads - with attractive prices, perhaps including flat rate or all you can eat data tariffs. The thinking is that once customers acquire a taste for 3G-based high-speed data services in the home they will then replicate this usage in the outdoor environment, finally providing a business case for macro network expenditure while increasing overall revenues. At the same time, mobile operators will be in a strong position to take call revenues from fixed-line operators. Indeed, the potential for femtocells to facilitate low-cost mobile calls in the home (quite possibly at fixed-line equivalent rates), means that mobile operators can very reasonably expect to see substitution of

fixed call revenue leading to higher levels of ARPU (Average Revenue Per User). The argument can be made also that despite the potential for significant disruption, operators who do not deploy femtocells could be placed at a disadvantage relative to their competitors in terms of network cost, breadth of services and end-user experience. Additionally, as the likelihood of mass femtocell deployments gathers pace, the issue of first mover advantage becomes compelling: the betting is that operators will be keen to have a femtocell offering at an early stage in order to avoid consumers being locked into competing services (unlike readily interchangeable wifi ac-cess points, the proprietary femtocell clearly helps to lock in customers).

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41

PROS
Low unit costs High customer appeal - standard mobile handsets Customer funded backhaul No installation costs Fixed voice substitution, higher ARPU Churn reduction Reduces pressure on macro network

CONS
Technology not yet fully proven Integration issues could be troublesome Appropriate standards not yet agreed Macro network architectural changes required Possible interference with other base stations Potential for media scare stories Competition from dual-mode technologies

Mobile Hot Topics

42

Mobile 2008

Podcasting
Podcasting is not entirely new in todays technology world; it is a new way of multimedia broadcasting on the web. By subscribing to this, consumers can automatically receive content through RSS feeds. To publish, broadcast and view/listen to podcasts requires: an on-line, or installed, application which allows people to record and create podcasts, to produce RSS feed files and then to store these files on websites; a podcast receiver (aggregator) on their PC, either integrated in their Internet browser or on-line. Podcasting gives consumers access to niche market content; to time-shifted, professional content; to technical quality and to mobility. Among the main trends and obstacles, we can insist on the following: With 25 million users worldwide, the audience is sizeable, but consumption levels are still relatively low. More and more aggregators are coming on stream, yet podcasting interfaces still need to become more user-friendly. Sales are subdued, due to the small and inadequately measured audience, and inappropriate advertising formats. Given the growth in personalized podcasting solutions which can download content in real time and the development of mobile Internet, podcasting should become a niche market for broadcasting non-premium content. The advertising market in Europe for podcasting is expected to grow to around EUR 300 million by 2012. According to IDATE forecasts for the next five years, podcasting will pass through three phases: Short term (1 to 2 years) Critical mass and generation of sales. Technical advances, the increase in number of aggregators and advertising regulations will lead to improved sales, mainly to the benefit of aggregators and media players.

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43

Podcasting Definition
Podcasting is not entirely new in todays technology world; it is a new way of multimedia broadcasting on the web. By subscribing to this, consumers can automatically receive content through RSS feeds. To publish, broadcast and view/listen to podcasts requires: an on-line, or installed, application which allows people to record and create podcasts, to produce RSS feed files and then to store these files on websites; a podcast receiver (aggregator) on their PC, either integrated in their Internet browser or on-line.

Figure 14. The podcasting roadmap

Environment
Efficient fixed streaming rival solutions for fixed access New tools for easier user-experience, ad placement

Strong control of media brand on content distribution

High-quality, low priced mobile access to premium content

Mainly focused on mobile

Mainly focused over the top

2007

2012

Mobile Hot Topics

Source: IDATE

Critical Mass & Monetization

Podcasting core moves

44

Mobile 2008

Medium term (3 to 4 years): refocusing on mobile solutions. Progress in managing content on PCs in real time will open the door to mobile podcast viewing. The first real wave of advertising on mobile devices will add much value to podcasting.

Long term (5 years): More options for broadcasting non-premium content. Content management in real time on mobile devices will limit the appeal of podcasting except for amateur/niche content, but this will not cover bandwidth costs.

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45

Figure 15. Podcasting cycle

Podcaster
Revise and improve content Request most recent podcasts

Idea / Script Artwork

Audio / video recording Subscribe to podcast through iTunes, Podcast directories or RSS syndication Track performance statistics Listen / watch on Computer / Dap or PMP Search XML file creation Download podcast to computer / MP3 player Submission to iTunes and Podcast directories
Source: IDATE according to OneupWeb

User

Audio / video editing

Publication to server

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Mobile 2008

Enterprise mobile offering

Enterprise mobile base: take-up still on the increase, with 3G handsets gradually nudging their way in, due mainly to operators voluntarily opting to subsidise such devices. The current mobile take-up rate per employee (around 25%) is likely to continue rising and by 2011, the enterprise mobile base in Western Europe should reach 60 million units, against an existing base of 50 million. The catalogues of business services marketed by operators are enhancing the rise of on site FMC offers (@office, UMA on WiFi/GSM handsets and integrated IPBX), solutions designed for prosumers (preferential rates in the evenings and at week-ends + entertainment) and push-email services, which form the flagship application for mobile broadband. Operator segmentation strategies shifting towards usage centric offer formats. Alongside traditional segmentation based on the size of company or mobile fleet, cellular operators are now aligning their offers to business subscribers by looking at usage profiles. More recent commercial launches are markedly targeting prosumers (whose private and professional use of the mobile its most responsive to evening/weekend flat rates and entertainment options), on-site users (offering a range of flat-rate FMC solut ions for on-site use), intensive data users (with rate plans offering higher and higher traffic volumes, usually unmetered), and occasional users (whom operators are trying to convert with asyou-go solutions, addressing the irregular consumption habits of this target). With falling voice ARPU, compounded by more fixed-mobile-IP convergence offers, data (mainly messaging) has become a growth outlet for the enterprise mobile market, although the pace is likely to slacken off. The market should thus grow from 30 billion EUR at end-2006 to 33 billion EUR in 2011.

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Table 9. Overview of tariffs for data solutions in the enterprise market

Traffic plans[1] Orange (FR) SFR (FR) Bouygues Telecom (FR) T-Mobile (DE) Vodafone (DE) TIM (IT) Telefnica Mviles (SP) Option donnes 5 to 300 MB for 5 to 65 EUR/month Option modem PDA 5 to 150 MB for 5 to 35 EUR/month Forfait donnes haut dbit 3 to 50 MB for 4 to 25 EUR/month Data 5/Data 30 5 and 30 MB for 4.20 or 8.40 EUR/month Vodafone Web connect 30 to 400 MB for 8.36 to 41.97 EUR/month Alice mobile 100/500 200 or 500 MB for 16.99 or 21.99 EUR/month Trfico 10 MB for 10EUR/month Navegacin y correo 200 MB for 15 EUR/month Vodafone (UK) T-Mobile (UK) O2 (UK) 3 (UK) Mobile Internet 10 to 2 000 MB (virtually unlimited) for 7.50 to 1 200 GBP/month 3G data Card 7 MB to 1000 MB (virtually unlimited) for 11 to 77 GBP/month O2 Data 5/Data 30 5 or 30 MB for 5 or 8 GBP/month O2 Data 1024 unlimited data for 45 GBP/month Business Data sense per-use data option: 1.8 GBP/MB Add Internet casual metered at 1.70 GBP/month
Source: IDATE

Flat-rate plans[2] Business EveryWhere flat rate for 54/58 EUR/month SFR accs distant 55/60 EUR/month Forfait Internet Mobile Universel 39/58 EUR/month Web and walk XL 37.81 EUR/month Vodafone Webconnect flat rate 41.97 EUR/month Alice mobile full 50 EUR/month Tarifa Plana 3.5G sin limites 58 EUR/month

Metered 2 EUR/MB Subscription: 12 EUR, then 1.50 EUR/MB Web and Walk starter Web session for Internet, without contract: 1.64 EUR/15 mins Data on business subs. of 9 EUR, then per-use at 1 EUR/MB Trfico pour uso option: 1 EUR/days use

Add Wireless Web 10 to 512 (virtually unlimited) for 2.13 to 38.30 GBP/month

[1] Equivalent time-based solutions are also included in most operator service catalogues and Wi-Fi connections can also be discounted from the rate plan. [2] Even though these flat-rate plans target the PC, they are provided here as a source of reference for a flat-rate mobile broadband solution.

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Mobile 2008

Radio spectrum
Demand for spectrum assets is increasing
Demand for spectrum assets is increasing An increasing number of players and technologies need access to radio spectrum: Several factors account for the increase in demand for available radio spectrum. The expansion of mobile voice and data services is leading to a strong growth in mobile network traffic, in particular in dense areas. Forecasts anticipate that future wireless services and expected bitrates will require more spectrum and larger bandwidth than those currently available. Sectors traditionally using radio spectrum are claiming more, and more suitable, spectrum, primarily in order to secure existing assets and also to get additional spectrum with a view to future needs. The multiplication of wireless technologies is adding some pressure on available spectrum. Indeed, new technologies can only be developed once the regulators give the go ahead and the frequency bands have been allocated. Finally, new telecom carriers and broadcast companies now entering the mobile services market are competing for.
Table 10. Approaches towards digital dividend in selected countries
France
Spectrum Dividend Pre-allocation of spectrum dividend n.a.

Japan
130 MHz

USA
108 MHz Public Safety WiMAX

UK
112 MHz Community PSME Local TV Innovative services
Source: IDATE

3 SD Digital Mobile channels telecom. Simulcast Digital of all local radio analogue TV channels

Digital Dividend Spectrum allocation mechanism Digital Dividend policy approach

To be determined TV oriented

To be determined Mobile oriented

Auction

Auction

Mobile oriented

Neutral

The regulatory framework is slowly evolving

The regulatory framework is slowly evolving, driven by new requirements of the telecom industry - But the tendency towards the harmonization of spectrum and higher prices remains steady:Spectrum prices differ widely from one sector to another and from one country to another. However, we believe that, on average, and in the long run, the price of spectrum assets will tend to rise. Several trends account for an increase in the spectrum price:

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49

increased competition for spectrum assets, increased capacity requirements for mobile networks regulatory changes that favour pricebased competition for spectrum (auctions procedures, techno / service neutral allocation), worldwide harmonization of frequency bands, future technological developments requiring wider radio channels, questioning of the free use of broadcast spectrum. It seems that the elements that will raise spectrum prices outweigh those driving

prices down. Forthcoming auctions in the UK, for the 2.6 GHz band in 2007, or in the US, for the 700 MHz band, will bring concrete answers to this question.

Battles raging for available spectrum assets

Finally, the report proposes an in-depth analysis regarding the main battlefields which are in the UHF band (digital dividend issue) and in bands allocated to mobile services where different technologies are competing.

Figure 16. One possible scenario for IMT advanced frequency bands around 2015-2020: operation in both current mobile bands and new bands

100 MHz

200

300

400
410 450

500

600

700

800
806

900

1GHz

IMT Advanced

IMT Advanced 1710 1785 1805

862 915 925 960 IMT A. IMT A. 1880 1900 1920 1980

1 GHz
2010 2025 2110 2170 2300 2500 2690

IMT Adv.

2 GHz 3 GHz 4 GHz

2 GHz 3 GHz
4200

IMT Advanced
3400

IMT Advanced
3600

IMT Advanced
4400 4900

4 GHz 5 GHz

IMT Advanced

IMT Advanced

5 GHz 6 GHz

Mobile Hot Topics

Source: IDATE

50

Mobile 2008

Mobile broadband in South Korea

2.4 million HSDPA subscribers in August 07
South Korea was long considered the temple of CDMA 2000, the family of standards set to rival WCDMA (which has been chosen for 3G UMTS in Europe). But things were turned on their head when, in spring 2006, KTF announced plans for a large-scale HSDPA rollout (an evolution of WCDMA, offering downstream rates of 1.8 Mbps and even as high as 3.6 Mbps) in Seoul and its surrounding area. HSDPA services, which are also marketed by SKT, are now available to 99% of the population and had close to 2.5 million subscribers by the end of August of this year. In July, KTF announced that 50% of its subscribers will have switched to HSDPA by the end of 2008 and 100% by 2012. At the same time, bitrates will have increased to 7.2 Mbps then to 14.4 Mbps also behind the deployment of WiBro, the home-grown version of mobile WiMAX. Bitrates currently reach 3 Mbps downstream and 1.2 Mbps upstream, but are expected to double by the end of the year. These speeds, combined with a marketing push by KT (which is being far more proactive than SKT) and attractive pricing (around 19,800 wons, or 15 EUR, for unlimited service), helped increase the base to more than 21,000 subscribers by June 2007. The goal for KT is to reach 200,000 subscribers by the end of the year and 3.1 million subscribers by 2010.

6.5 million mobile TV viewers, though questions still linger over the longterm viability of the two systems
The country is also a frontrunner in the mobile TV market. There are two mobile TV systems in South Korea: S-DMB, launched in May 2005 by SKT subsidiary, TuMedia, and T-DMB, introduced by terrestrial TV channels in December 2005. In May 2007, there were 1.1 and 5.3 million subscribers, respectively,

Rocky start for WiBro services

Not content to promote a mobile internet market (3.5G) based on these two standards, South Koreas top two operators are

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51

to these services a difference that can be explained chiefly by the fact that T-DMB is financed by advertising, whereas S-DMB carries a monthly subscription of 11 EUR. Another reason is that T-DMB offers the most popular programmes from the counTable 11. Growth of KTF and SKTs CDMA and HSDPA bases in 2007. Million
Dec-06 KTF CDMA 1x EV-DO HSDPA CDMA 1x EV-DO HSDPA 7.20 5.30 9.60 10.03 0.14 Jul-07 6.52 5.72 1.28 8.34 11.90 0.54

trys terrestrial channels, added to which a sizeable portion of T-DMB viewership exists thanks to TV screens (GPS) in cars, whereas S-DMB reception is only on a mobile device. Neither model, however, is guaranteed to become profitable.
Figure 17. HSPA subscribers in S. Korea
Jan-May 07, thousands
Source: Seoul Financial Times Source: MIC

SKT

Source: IDATE

1 400 1 200 1 000 800 600 400 200 0

* CDMA 1x does not include EV-DO subscribers

Jan.07

Feb

Mar

Apr

May

Figure 18. WiBro subscribers in S. Korea

Dec 06-Jun 07, thousands
21,7
Source: Seoul Financial Times

Figure 19. Mobile TV subs. in S. Korea

Jun 06-May 07, millions
6 5 4 3 2 1 0 Jun.06 Sep Dec Mar.07 Abr May SDMB TDMB

6,1 1,6 Dec.06 3,3

8,3

Mar.07

Apr

May

Jun

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Mobile 2008

The Italian Mobile TV Market

Lessons from the first commercial launch in Europe
The Italian Mobile TV market is still in its infancy, but it could represent a very interesting test bed to verify if, and under which conditions, this service can be successful in the digital convergence marketplace. In fact, both Mobile value-added services and Pay TV services are expected to develop in the near future in Italy. The way in which these two segments interact and collaborate (or not) in creating the converged Mobile TV market could serve as an example for communications operators in other countries which are interested in engaging in this arena. ally innovative and limited also, the pricing strategies developed by the three operators are quite complex, and the DVB-H signal is far from covering the country, in particular for an indoor consumption. But, the three MNOs involved in mobile TV are aware that this is only the first stage of the service roll-out and that they will soon have to engage the second stage, after having learnt from this first full year of activity. 2008 with its two main sports events (Beijing Olympic Games and Euro 2008) will give a major opportunity for mobile TV services to develop. Before then, MNOs will have to improve their current offer, notably in terms of mobile dedicated programmes. The technical investments have been huge in the first stage, but the stress should now be put on content and formats. Next year, Italy will be, more than never, the country to watch over carefully.

The market framework

With three commercial services launched in 2006, Italy is clearly a forerunner in terms of mobile TV in Europe. After an euphoric launching phase, enthusiasm on behalf of Italian customers seems to have slowed down in 2007. It is true that the choice of handsets is limited and their costs are quite prohibitive, the offer of mobile TV programmes is not re-

Market forecasts
Two scenarios Optimistic and Conservative are feasible. It is expected that

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53

Q3 2008 (or at least the period from June to August 2008) will represent a turning point in the Italian Mobile TV market, thanks to Euro 2008 and the Olympics Games. If this stimulus from Euro 2008 and the Olympics indeed opens the way to sustained service take-off, then the Optimistic version of the market scenario will prevail, underscored by monthly customer growth (additions) and increasing adoption rates (of active users). If not, then after the peak in Q3 2008, usage trends will return to their previous low levels of both net additions and usage ratios, and the Conservative scenario will prevail. The following figure summarises the expected trends in the Italian Mobile TV

market. It refers to the end-user spending on services and content, while the cost of terminals is not included. In these two scenarios, by the end of 2010, end-user spending would be approximately 951 million EUR in the optimistic view or 477 million EUR in the conservative one. Given the huge divergence between the two figures, the business opportunity represented by Euro 2008 and the Olympic Games must be exploited to the full. The positive effect of these two major sports events will at best be temporary, and can only be consolidated if the Mobile TV players are able to design an appropriate bouquet of TV content, including ad hoc created formats and personalised services
Figure 21. Trends in end-user spending by 2010. Million euros
1 000

Figure 20. Communications service revenue by segment (in 2006)

Source: IDATE based on Agcom data

7.8 EUR bn (+7.8%)

2.2 EUR bn (+29.7%)

3.7 EUR bn (+18.8%)

17.1 EUR bn (+5.5%)

800 600 400 200 0 YE2006 YE2007

Optimistic

Mobile TV

Conservative

YE2008

YE2009

YE2010

Mobile Hot Topics

Source: IDATE

TV

Pay TV

Mobile VAS

Mobile services

Annex Mobile Market Data

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Mobile 2008

France
1. Key general indicators
Source: IDATE Source: IDATE Source: IDATE Source: IDATE

Population Mobile subscribers Cellular penetration

million million %

(December 2006) (Start of July 2007) (Start of July 2007)

60.7 53.2 84.7

2. Key market indicators

ARPU 1 MoU 2 Prepaid 3G subscribers EUR minutes % million (December 2006) (December 2006) (December 2006) (Start of July 2006) 32.3 157 33 8.0

3. Mobile operators market share

Orange France SFR Bouygues Telecom % % % (Start of July 2007) (Start of July 2007) (Start of July 2007) 45 37 18

4. Mobile customers and penetration rate

MOBILE SERVICES Mobile subscribers Annual change Density
1 2

2003 thousand % % population 41 683 8.0 67.1

2004 44 500 6.8 71.4

2005 48 000 7.9 76.6

2006 51 501 7.3 82.1

2007 55 221 7.2 88.0

2008 57 357 3.9 92.0

2009 59 430 3.6 95.0

2010 61 377 3.3 98.0

2011 63 195 3.0 99.2

net service revenue per user outgoing call traffic per customer per month

Annex | Mobile Market Data

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57

Germany
1. Key general indicators
Population Mobile subscribers Cellular penetration million million % (December 2006) (Start of July 2007) (Start of July 2007) 82.4 91.9 111.4
Source: IDATE Source: IDATE Source: IDATE Source: IDATE

2. Key market indicators

ARPU 1 MoU 2 Prepaid 3G subscribers EUR minutes % million (December 2006) (December 2006) (December 2006) (Start of July 2007) 26.0 56.0 52 7.3

3. Mobile operators market share

T-Mobile Germany Vodafone Germany E-Plus O2 Germany % % % % (Start of July 2007) (Start of July 2007) (Start of July 2007) (Start of July 2007) 38 34 15 13

4. Mobile customers and penetration rate

MOBILE SERVICES Mobile subscribers Annual change Density
1 2

2003 thousand % % population 64 793 9.5 79

2004 71 314 10.1 87

2005 79 182 11.0 96

2006 85 398 7.9 104

2007 92 500 8.3 112

2008 94 936 2.6 115

2009 96 537 1.7 117

2010 97 469 1.0 118

2011 98 228 0.8 119

net service revenue per user outgoing call traffic per customer per month

Annex | Mobile Market Data

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Mobile 2008

Italy
1. Key general indicators
Population Mobile subscribers Cellular penetration million million % (December 2006) (Start of July 2007) (Start of July 2007) 58.1 85.7 129.6
Source: IDATE Source: IDATE Source: IDATE Source: IDATE

2. Key market indicators

ARPU 1 MoU 2 Prepaid 3G subscribers EUR minutes % million (December 2006) (December 2006) (December 2006) (Start of July 2007) 19.7 82 90 17.7

3. Mobile operators market share

TIM Vodafone Italy Wind 3 Italy % % % % (Start of July 2007) (Start of July 2007) (Start of July 2007) (Start of July 2007) 40 33 18 9

4. Mobile customers and penetration rate

MOBILE SERVICES Mobile subscribers Annual change Density
1 2

2003 thousand % % population 56 644 4.3 98

2004 62 661 10.6 108

2005 71 514 14.1 123

2006 80 515 12.6 139

2007 90 982 13.0 156

2008 93 033 2.3 160

2009 94 746 1.8 163

2010 95 850 1.2 165

2011 96 925 1.1 167

net service revenue per user outgoing call traffic per customer per month

Annex | Mobile Market Data

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Spain
1. Key general indicators
Source: IDATE Source: IDATE Source: IDATE Source: IDATE

Population Mobile subscribers Cellular penetration

million million %

(December 2006) (Start of July 2007) (Start of July 2007)

43.8 48.3 110.2

2. Key market indicators

ARPU 1 MoU 2 Prepaid 3G subscribers EUR minutes % million (December 2006) (December 2006) (December 2006) (Start of July 2007) 26.9 120.0 16.0 6.9

3. Mobile operators market share

Telefnica Moviles Spain Vodafone Spain Orange Espaa Yoigo % % % % (Start of July 2007) (Start of July 2007) (Start of July 2007) (Start of July 2007) 46 31 23 <1

4. Mobile customers and penetration rate

MOBILE SERVICES Mobile subscribers Annual change Density
1 2

2003 thousand % % population 37 505 11.9 90

2004 39 229 4.6 93

2005 43 114 9.9 100

2006 47 023 9.1 107

2007 49 508 5.3 113

2008 50 438 1.9 115

2009 51 358 1.8 117

2010 52 267 1.8 119

2011 53 161 1.7 121

net service revenue per user outgoing call traffic per customer per month

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Mobile 2008

United Kingdom
1. Key general indicators
Population Mobile subscribers Cellular penetration million million % (December 2006) (Start of July 2007) (Start of July 2007) 60.9 72.4 119.2
Source: IDATE Source: IDATE Source: IDATE Source: IDATE

2. Key market indicators

ARPU 1 MoU 2 Prepaid 3G subscribers EUR minutes % million (December 2006) (December 2006) (December 2006) (Start of July 2007) 28.8 90.0 66 10.5

3. Mobile operators market share

O2 UK Vodafone UK Orange UK T-Mobile UK 3 UK % % % % % (Start of July 2007) (Start of July 2007) (Start of July 2007) (Start of July 20076) (Start of July 2007) 25 25 21 23 6

4. Mobile customers and penetration rate

MOBILE SERVICES Mobile subscribers Annual change Density
1 2

2003 thousand % % population 54 494 7.1 91

2004 62 143 14.0 103

2005 68 754 10.6 114

2006 71 946 4.6 119

2007 72 800 1.2 120

2008 73 498 1.0 121

2009 74 130 0.9 121

2010 74 767 0.9 122

2011 75 348 0.8 123

net service revenue per user outgoing call traffic per customer per month

Annex | Mobile Market Data

ENTER
Enter is IE business schools Center for the Analysis of the Information Society and Telecommunications. It is the leading Spanish think tank on this field, providing information, analysis and forecasting from a digital convergence perspective. Enter has arrived at a unique positioning in Spain in relation to similar centers by offering the following distinguishing features: A multidisciplinary focus, encompassing technological, economic, social and regulatory aspects of the digital convergence process. Independence, combining private and public sector entities on its board. International outreach, developing a network with some of the most prestigious think tanks and research centers worldwide. A future-oriented approach, basing its analyses not only on the current context but also on future scenarios. Enters core activities include the dissemination of knowledge, preparation of reports, project development, organization of workshops and consulting services.
IT Economy Society

Electronics

Digital Lifestyle

Telecom

Technology Media

Regulation

Enter enjoys the support of the following companies and organisations: Abertis Accenture Alcatel-Lucent AETIC Orange Vodafone Intel IT Deusto Microsoft Red.es Telefnica

IDATE
Founded in 1977, IDATE is one of Europes foremost market analysis and consulting firms, whose mission is to provide assistance in strategic decision-making for its clients in the Telecom, Internet and Media industries. Consulting IDATE has established its credibility and independence in conducting consultancy and study assignments on behalf of its clients: Market research: techno-economic monitoring, modelling and forecasts, sector-specific analysis, surveys International benchmarking: positioning studies, competition analysis Strategic marketing: assistance in launching new services, business planning, partnership Public policies: public policy definition and assessment, socio-economic impact, project management, regulatory benchmarking Research IDATEs clients benefit from the knowledge and expertise of its teams of specialists, and from its ongoing investment in its Digiworld information and strategic monitoring system a veritable digital world observatory. Forum IDATE has also been instrumental in providing a forum for debate amongst the markets key players, notably thanks to the IDATE Foundation, the DigiWorld Summit and the Communications & Strategies economic journal.

IT Deusto
With an estimated turnover of 186 million Euro in 2007, IT Deusto is an independent Spanish ICT Consulting, Services and Outsorucing company. It provides services to the security, telecommunication, public sector, financial services, healthcare and other industries. Tecnobit-IT Deusto provides products, services and solutions in Avionics, Optronics, Command and Control and Simulation for the Defence Industry. IT Deusto has 14 local offices around Spain and delegations in Colombia, Brazil, Mexico, Portugal, UAE and USA. IT Deusto mission is to make profitable and affordable the technological evolution.
TOP Trend Solutions Broadband Outsourcing Mobility Partnership
Security Broadband Mobility Technological Grid Focus Outsourcing Open Source Digital Business Communications Intelligence

TOP Services Consulting Integration & Development Systems & Communication Services Management Management Training Business Systems Electronic Defense
Security

Open Source Security

Training Defense

Grid Business Intelligence Optronics Avionics

Consulting Business Systems

TOP Companies Marketing & Sales ROI Defense Telecom & Media Finance Health Care Utilities Governments TOP Vertical Markets Health Care

Integration & Development

SERVICES SECTORS

Services Management Systems & Communic. 3,000 people

Finance

Telecom Utilities ICT Admin. & Finance

H.R. Organization

Customer Service

Governments Systems & Comunications

Marketing Front Office Back Office Systems Organization TOP Business Area Solutions

In Mobility IT Deusto provides solutions for Banking, Distribution and Logistics, Healthcare, Government, Auditing, and other industries.

Mobile 2008

All data and information published in this report are taken from the following IDATE market reports: World Telecom Equipment Market (IDATE, Atlas Collection, 2007 edition)

Copyright 2008 By ENTER and IDATE Published by ENTER Maria de Molina, 6 - 1 28006 Madrid (Spain) www.enter.es Design, Edition & Layout: ideas4design Printed by: OMN Impresores All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of ENTER or IDATE. Legal Deposit: M-5424-2007 Printed in Spain

World Telecom Services Market (IDATE, Atlas Collection, 2007 edition) Mobile Terminal Monitoring (IDATE, Monitoring Collection, 2007 edition) Radio Spectrum - Key issues (IDATE, Analysis Collection, 2007 edition) Telecoms in Europe (IDATE, Analysis Collection, 2007 edition) 3.G-3.5G Economics? Early results and strategic options (IDATE, Analysis Collection, 2007 edition) Video Games on Mobile phones - challenges & outlook (IDATE, Focus Collection, 2007 edition) Podcasting - Development prospects and strategic implications (IDATE, Focus Collection, 2007 edition) Enterprise mobile offering (IDATE, Focus Collection, 2007 edition) Femtocells - Investigation of a work in progress (IDATE, Focus Collection, 2007 edition) Fixed-mobile convergence (FMC) - Trends and rollout strategies (IDATE, Focus Collection, 2007 edition) Mobile Broadband in South Korea - 3.5G and beyond (IDATE, Focus Collection, 2007 edition) The Italian Mobile TV Market - Lessons from the first commercial launch in Europe (IDATE, Focus Collection, 2008 edition) Contact: Marshall Shrago - tl : +33 467 144 488 - [email protected]

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