Apple/Google spat represents opening shot in high-stakes wireless data battle

EL SEGUNDO, USA: Apple Inc.’s recent move to reject Google Inc.’s Google Voice software from its App Store represents an initial skirmish in the escalating battle among wireless operators, cell phone makers, and content developers and aggregators over who will control revenue generated by applications and data services, according to iSuppli Corp.

Google Voice is a free Voice-Over-Internet-Protocol (VOIP) application that provides no-cost phone calls in the United States along with a range of services, including call screening, voice mail with transcriptions and Short Messaging Service (SMS).

With Apple not giving a reason for rejecting Google Voice, speculation has been rife that the company’s wireless operator for the iPhone—AT&T—demanded the application’s denial, fearing it could erode its service revenue from iPhone subscribers.

Apple’s move, and the news following afterward that Eric Schmidt—chief executive officer of Google—would resign from Apple’s board, reflect changing circumstances in the global wireless industry due the rise of data applications and services for the new generation of smart phones.

“The explosive growth in wireless data service revenues, mobile applications and smart-phone device unit shipments during the past two years is spurring a dramatic shift for the global cell phone industry,” said Dr. Jagdish Rebello, director and principal analyst with iSuppli.

“Companies including Apple, Google, Nokia, RIM and Microsoft are trying to muscle in on the wireless carriers for a share of the lucrative and growing mobile premium content, service and application pies. Regardless of who wins, this battle will alter the balance of power in the mobile value chain.”

Global revenue for wireless data services, excluding messaging, is projected to grow by 26.2 percent to reach $87.7 billion in 2009. This follows 57.1 percent growth in 2007 and a 60.3 percent expansion in 2008 for total data revenue among the world’s wireless carriers.

iSuppli is forecasting that total data revenues of carriers worldwide, excluding messaging, will grow to approximately $188 billion by 2013. In contrast, total revenues for all services offered by the world’s wireless carriers will remain roughly flat at approximately $866 billion in 2009.

Mobile applications, such as those on Apple’s App Store, are key to stimulating the data service revenue growth.

“Clearly, mobile data revenue is key to the continued health of wireless carriers and the cell phone value chain in the future,” Rebello said. “In this battle, ownership of customers and who can monetize data services and applications are up for grabs.”

Apple’s rejection of Google Voice is a dramatic illustration of this fight for data revenues.

“By introducing applications and services that allow customers to make calls and send text messages without paying the operators, wireless operators have no incentive to invest in network upgrades,” Rebello said.

“This is the reason why many carriers are pushing out the upgrades of their networks to 2010/2011, compared to 2009/2010 before. With billions of dollars in expected investments, the stakes are huge for the wireless carriers.”

The figure presents iSuppli’s forecast of global wireless data revenue excluding messaging revenue.

iSuppli: Global Wireless Operator Non-Messaging Data Revenue by Country (Millions of US Dollars)Source: iSuppli, Aug. 2009

Wireless carrier success strategies
To sustain the growth momentum in data revenues while maintaining their relations with other players in the value chain, wireless carriers must develop and implement carefully thought-out business models. Operators need to develop strategies that are built around four central tenets:

* Monetizing broadband access.
* Co-operating with the mobile value chain to develop and offer compelling applications and content.
* Offering revenue-generating services that take advantage of mobility.
* Leveraging mature billing capabilities and inherent customer trust to develop new applications that can take the industry to the next level.

Specifically, it’s critical for wireless service providers to implement new strategies and to develop business models optimized for each of the different revenue opportunities in mobile broadband access, content and applications marketing and value-added service offerings

“Failure to do so will result in contraction in data and total revenues, excessive subscriber churn and a slowdown in market development,” Rebello warned.

Monthly mobile data traffic to exceed 2008 total in 2014

NEW YORK, USA: In 2014, the volume of mobile data sent and received every month by users around the world will exceed by a significant amount the total data traffic for all of 2008, according to a new study from ABI Research.

“When people think of mobile data they think of BlackBerry and iPhone handsets,” says senior analyst Jeff Orr. “But the bulk of today’s traffic is generated by laptops with PC Card and USB modems.” While add-on cellular modems represented two-thirds of traffic in 2008, computers with embedded 3G/4G modems will lead in 2014 with more than 50% of the world’s mobile data traffic.

Other key findings from the study include:

* Global mobile data traffic surpassed 1.3 Exabytes transferred during 2008. By 2014, an average of 1.6 Exabytes will be sent and received monthly.
* Nearly 74 percent of the world’s mobile data traffic will be from Web and Internet access by 2014. By the same time, 26 percent will come from audio and video streaming. Peer-to-peer file sharing and VoIP contribution to overall mobile data traffic will be less than 1 percent.
* Video streaming will experience the fastest growth of any IP traffic type at a CAGR of 62 percent between 2008 and 2014.
* Western Europe accounted for nearly 31 percent of mobile data traffic in 2008, but the region will yield to Asia-Pacific, which will account for over 28 percent, by 2014.

“The launch of 4G services promises even more data capability -– full multimedia on a greater number of devices,” notes Orr.

“But it’s a more pragmatic approach than 3G’s: data-centric devices will be adopted first, rather than a large number of phones. As network coverage and service plans satisfy market expectations, a variety of specialized consumer electronics devices with the ability to connect anywhere will emerge.”

Asia Pacific drives global mobile revenue growth

UK: Ovum's latest Mobile forecasts to 2014 predict slower revenue growth for operators in the short term as the recession impacts.

However, connections continue to grow. The result will be downward pressure on ARPU, leading to an increasing need for network efficiency.

Global operator service revenues will breach $1 trillion and $290 billion in Asia-Pacific in 2011
Ovum previously predicted that global mobile services revenues would breach $1 trillion in 2010. Due to macro-economic conditions Ovum now expects this barrier to be broken in 2011.

The greatest impact of recessionary forces is seen in the short term. In Asia-Pacific, Ovum has revised its revenue growth forecasts for 2009 down to 8% from 10% in previously published figures. Yet, projected CAGR from 2008 to 2013 remains relatively stable at 6.6 percent.

“The recessionary impact on mobile in Asia, will be relatively muted, and led by China and India, mobile service revenue will continue to grow”, says Nathan Burley, Analyst at Ovum. “By 2014 Ovum expects total Asia-Pacific mobile operator service revenues to reach $326 billion.”

Voice will continue to be the largest revenue generator worldwide, accounting for 69% of revenues on a global basis and 66% in Asia-Pacific. As a result, voice will continue to be mobile’s ‘killer app’. Operators must not ignore this fact in the race for data revenues.

Emerging markets to continue their inexorable connections growth
By the end of 2014 Ovum forecasts 6.42 billion connections, up 59 percent from 2008, and a CAGR of 8 percent. Asia-Pacific will grow at 10 percent CAGR, with penetration reaching 78 percent, highlighting potential for further growth.

In developed markets (and some emerging markets), mobile penetration will well exceed 100%, but further growth will still be possible from multiple SIM ownership and through uptake of data-centric devices. As such, population penetration is ceasing to be a useful indicator.

China and India will dominate connections and will account for 30 percent of total worldwide connections by 2014. However, the countries’ penetration rates will be just 76 percent and 69 percent, respectively, by 2014. Massive population growth will continue to fuel mobile demand as new, unconnected users join the market.

The enormous growth in connections has financial implications for Asia-Pacific mobile operators as they are expected to grow by 80 percent from 2008 to 2014, while revenues grow by 40 percent. Furthermore, Asia-Pacific mobile outgoing minutes of usage are set to rise 155% between 2008 and 2014, but voice revenues will rise just 26 percent.

“Both comparisons highlight the influx of ever-lower ARPU customers from emerging markets and price erosion in mature markets, even for data services. Therefore, efficient networks, enabling competitive pricing, will be critical in both highly saturated mature markets and low-ARPU emerging markets”, explains Steven Hartley, Senior Analyst.

Indian mobile services market to reach $30 billion by 2013

MUMBAI, INDIA: Total mobile services revenue in India is projected to grow at a CAGR of 12.5 percent from 2009-2013 to exceed US$30 billion, according to Gartner Inc.

The India mobile subscriber base is set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 percent in the same period from 452 million in 2009. This growth is poised to continue through the forecast period, and India is expected to remain the world’s second largest wireless market after China in terms of mobile connections.

“The Indian mobile industry has now moved out of its hyper growth mode, but it will continue to grow at double-digit rates for next three years as operators focus on rural parts of the country,” said Madhusudan Gupta, senior research analyst at Gartner. “Growth will also be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets.”

Mobile market penetration is projected to increase from 38.7 percent in 2009 to 63. 5 percent in 2013. Gartner said this growth is primarily attributed to the operators increasing their focus on the rural market, local consumer durable and electronic companies entering the domestic mobile handset segment, and lower handset prices.

The Indian mobile connection market continues to be dominated by prepaid subscribers. Prepaid connections accounted for more than 93 percent of all mobile connections in 2008 and it is expected to grow to more than 96 percent of the connection base by 2013, surpassing 741 million versus 312 million in 2008. The postpaid subscriber base will exceed 29 million subscribers by 2013, grow at 2.5 percent from 23 million in 2008.

The churn rate in India is 53.2 percent in 2009, and despite a maturing market, the ratio is expected to increase to 59.6 percent in 2013.

Data revenues driving growth: Revenue from data services will significantly contribute to the overall growth of mobile services in India, with a CAGR of 16.8 percent from 2009 to 2013. Prepaid subscribers are expected to adopt data services faster than the post-paid segment.

The bulk of revenue will continue to come from voice services. However, with the increased growth in data services, the percentage of revenue coming from voice will reduce from 89 percent in 2008 to 86 percent in 2013.

Expected changes in the Indian telecom landscape: Gartner predicts a significant drop in ARPU as the bulk of new subscribers will come from rural areas that are dominated by prepaid subscribers. Also, voice tariffs will decline substantially in 2009 as new operators join the market.

Growth will be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets. However, the bulk of new connections will come from data cards and multi-SIM use. Voice usage will increase steadily, but data usage will grow more strongly with the increased consumption of value-added services.

Global mobile services revenue to grow at least 1.2pc annually through 2014

NEW YORK, USA: Unemployment has risen dramatically from just one year ago. The result is a recalibration of consumer purchasing and usage behaviors, which will affect all industries, including the normally recession-proof mobile services industry.

Yet despite current market uncertainties, a new ABI Research study shows that even under the worst recovery scenarios, mobile services revenues will continue to grow at nearly 1.2 percent through 2014, a 0.5 percent loss over pre-crisis conditions.

Dan Shey, Practice director, ABI Research, said: “A long economic recovery places pressures on mobile operators to compete on price, particularly with undifferentiated voice services. Mobile data services allow operators to counter that pressure. However each region is different. Operators should create strategies that lead customers to maintain ‘nice-to-have’ data services or encourage addition of more utilitarian ones.”

Economically, North America has been hit hardest. But mobile data services growth will exceed 8 percent through 2014 even in the worst recovery scenario and will shield mobile services revenues against growing voice pricing pressures.

While stimulus packages are helping power the Asia Pacific region through the financial crisis and limiting unemployment loss, regional operators derive a large portion of their data revenues from content downloads. These products would be the first casualties of an extended recession, particularly with APAC’s substantial prepay base. But operators can mitigate the impacts of the depressed conditions through appropriate messaging and offer management.

Shey added: “Mobile operators need to stress the utility of mobile services and pursue appropriate services personalization initiatives that allow customers to buy and use services in ways that best suit their needs. Business customers should also be a target segment as businesses consider mobile a way to lower costs and increase competitiveness.”

Combining survey data with regional economic and mobile demographic factors, ABI Research’s ”World Financial Crisis and the Mobile Services Market” provides a quantitative view of potential changes in the mobile services market based on three possible economic recovery scenarios. Forecast analysis is provided for changes in postpaid and prepaid subscriber adoption, voice usage and pricing, SMS usage and pricing, and mobile data revenues. Analysis is provided across seven different world regions.