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Business analysis for telecoms professionals APRIL 2011

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news in brief competitive edge 5 Timeline A roundup of some of the Competition is back in the spotlight as operators try to tackle major stories reported in our daily news service mobile and Internet service growth and look to build scale www.totaltele.com

content strategies any telecoms markets and the telecoms landscape is chang- have opened up to much ing fast. As regulators mandate 8 Location-based Mgreater competition since greater access to (former) incum- services BT became the first national opera- bent networks—BT faces further operators are looking for tor to go down the path to reductions in wholesale pricing after new business models to privatisation some 26 years ago. new proposals from Ofcom—fresh make revenues from Today many mobile markets players are springing up to deliver location-based services. continue on that path, with new new services and in some cases Ian Kemp business and finance Editor licence awards a regular occurence bypass those networks altogether. 11 Competition in Total Telecom+ and virtual network operators Where once operators hoped to take receiving clearance from regulators a lead in location-based services, mobile markets to provide targeted services that now they are playing catch-up with A new report shows that give consumers greater choice than Internet and handset heavyweights regulation has had mixed results in terms of ever. Regulators are also going to and still trying to use their network boosting competition in work on tariffs, with the UK and assets to make revenues (p.8). mobile markets globally, France in March announcing further Regulators have largely shied just as the US is set for mobile termination cuts over the away from intefering with the further consolidation. next few years (see Timeline). Internet, although the debates over technology trends But despite increased choice and net neutrality and prioritisation of traffic are far from over. Regulation 15 Next-gen Internet Regulatory action will surely play a part in the next business models as well as generation of Internet services, but technologies will shape so too will improving technologies the next generation of has yielded mixed internet services, as and developing business models. traffic growth spirals. results globally Operators are concerned about sky- rocketing traffic on their networks network strategies improved pricing, regulatory action and how to fund infrastructure 19 WiMAX futures has yielded mixed results in terms needed to support it and maintain growth forecasts for of mobile competition globally as quality of service: our Technology wiMAX are still strong we highlight in our analysis on p.11. Trends this issue takes a look at this despite the uncertain Last month’s big news—the big subject and what operators such future of some operators proposed acquisition of T-Mobile as AT&T and Verizon are doing. and the march of LTE.

USA by AT&T—has once more Mobile operators, too, are grap- statistics raised the question of competition pling with data growth, and many as operators look for scale through are building LTE networks for their 22 Prime numbers consolidation and governments and next-generation services. But we record mobile subscriber regulators seek the best way to show that there is still life left in growth worldwide, mobile churn declines in Europe, ensure widespread next-generation that other 4G-pretender, WiMAX, and hosted IP services. mobile and broadband services. both as a complementary and Competition takes on many guises competitive technology. n

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A roundup of the major stories in telecoms in the past month, as reported in our daily news service www.totaltele.com

BUSINESS Regulators cut mobile rates Qualcomm bought the licences teliasonera, telenor and turkcell uk regulator ofcom will last year for $1.05 billion. are reported to be among seven AT&T moves for T-Mobile USA mandate mobile termination bidders for Polkomtel, which is At&t said it plans to acquire rate cuts of 80% over four years Telekom Austria bid in Serbia 24.39%-owned by Vodafone. t-Mobile usA for us$39 billion, starting from April. And french telekom Austria made a E950 creating a market leader with regulator Arcep plans to reduce million bid to buy 51% of fixed- Microsoft funds Nokia switch 129.2 million customers . the deal termination rates from July until line operator telekom srbija, but reports suggest Microsoft will raises questions about mobile the end of 2013, bringing them the government says the stake give nokia us$1 billion for competition in the us (see p.11). down to E0.008. is worth E1.4 billion. telekom marketing and development costs Austria owns the second-largest to migrate to the windows Phone Vodafone strengthens in India France Telecom buys into Iraq mobile operator in serbia, Vip. operating system. Vodafone will buy the 33% stake france telecom and logistics of its joint venture partner in company Agility together agreed Proposals for EU data privacy KPN shuts down mobile TV india, essar group, for $5 billion, to buy 44% of iraq’s third mobile the ec is proposing new kPn will shut down its dVb-h taking its holding to 75%. operator korek telecom. france regulation to provide greater mobile tV service in June. telecom’s 46% share of the privacy over personal data subscribers have fallen from Etisalat abandons Zain deal venture will give it a 20% indirect supplied by internet users. 40,000 to 20,000 after the service etisalat abandoned its deal to stake in the operator. was launched in 2008. acquire 46% of Zain for us$12 Telmex splits in two billion. Zain had earlier last NSN faces acquisition hurdle Mexican operator telmex will TI raises Argentina stake month accepted a bid from nokia siemens networks failed split into two companies, one telecom italia raised its stake in batelco and kingdom holding to gain approval from china’s of which will serve rural and telecom Argentina from 18.3% for its saudi Arabia operations, a antitrust regulators to acquire marginalised areas. telmex has a to 21.1% by purchasing a further condition of the etisalat deal. Motorola’s mobile network assets. roughly 80% share of fixed-line 10% of holding company sofora. subscribers in Mexico. EC action on telecoms taxes Qualcomm set to sell in India India set to cancel licences the european commission Qualcomm entered talks to sell Polkomtel sale extension india’s regulators issued notices has referred france and spain its 2.3-ghz broadband wireless the deadline for second-round to idea cellular and etisalat to the eu’s court of Justice for access spectrum in india to bids for Polish mobile operator in preparation to cancel their Book a table continuing to impose levies of bharti Airtel for us$1.2 billion. Polkomtel was extended to May. licences in regions where they 0.9% on operators’ revenues to have failed to roll out services, Visit www.asiacommsawards.com and complete the booking form help fund public tV services. Long-haul Ethernet prices on key routes, Q1 2011 and geared up to cancel more.

n Faste, eoMPLS n Faste, eoSdH Vimpelcom deal clearance London - New York City America Movil expansion russian mobile operator America Movil reached an Asia Communication Awards Hong Kong - Singapore Vimpelcom received approval agreement to buy digicel’s Celebrating the success of Asian telecoms, globally from shareholders and regulators Hong Kong - LA operations in el salvador and to proceed with its us$6 billion honduras and sell its Jamaican Hong Kong - London acquisition of wind telecom and operator to digicel. asia • communication • awards Raffles Hotel, Singapore• 22 June 2011 orascom assets. Frankfurt - Paris BT extends mobile agreement Miami - New York City Liberty’s German cable deal bt signed a five-year extension www.asiacommsawards.com liberty global agreed to buy $0 $5,000 $10,000 $15,000 $20,000 to its MVno agreement with Median Monthly Lease Price (US$) germany’s third largest cable Source: Telegeography Vodafone in the uk. operator, kabel bw, for E3.16 Telegeography research on long-haul ethernet services shows that ethernet over Organised by: Founding Partner: Asia ICT Partner: Sponsor: Event Partners: SdH/Sonet (eoSdH) services—which can provide value add such as guaranteed billion. liberty already owns the latency and restoration times, and specifi c routing and restoration paths—come Centurylink-Qwest approval second-largest german cable at a price. On key routes 100-Mbps ethernet over SdH (eoSdH) services cost an us regulator the fcc approved average of 50% more than ethernet over MPLS. company, unitymedia. centurylink’s purchase of Qwest

April 2011 www.totaltele.com 5 timeline

Communications for US$10.6 3G launches in India set to launch in the first half of billion a year after the deal was Vodafone Essar and Idea Cellular this year. Orange has invested first announced. became the latest operators to E33 million in the project. launch 3G services in India. Russian consolidation ahead According to reports the two Fibre launch in India All seven regional subsidiaries companies and Bharti Airtel are BSNL lanched India’s first fibre- controlled by Russian state-run close to signing an agreement to to-the-home services, in Jaipur. telecoms holding company share 3G networks in some areas. Svyazinvest filed applications people for liquidation ahead of their HSPA+ service launches New BT Openreach chief integration with Svyazinvest’s key Zain Jordan launched broadband Italian job subsidiary, Rostelecom. services on its HSPA+ network; BT appointed Olivia Garfield Telecom Italia is preparing a Cell C will launch in South Africa as the new chief executive of its reshuffle in April that will see NETWORKS in April; and China Unicom will Openreach division from 1 April, chief executive Franco Bern- abe (pictured) move to the role launch in 56 cities by May. replacing Steve Robertson who of executive chairman. Marco Biggest UK spectrum auction has led the unit for six years. Patuano will become the new UK regulator Ofcom said it Iraq mobile licence CEO, overseeing Italy, while will hold its largest ever mobile Iraq plans to auction a fourth South Africa CEO promotion TIM Brasil CEO Luca Luciani will head the company’s spectrum auction, in the 800- national mobile licence by the Nombulelo Moholi will become Latin American operations. MHz digital dividend and 2.6- end of this year and raise up to group CEO of South African Both will report to Bernabe, GHz frequencies, in the first US$2 billion. operator Telkom from 1 April, who will retain authority over quarter of 2012. Operators will be promoted from her current extraordinary operations, legal issues, regulatory and set caps for how much of the 250 China Mobile TD-LTE trial position of managing director. institutional relations. Bernabe MHz of spectrum they can buy. China Mobile selected Alcatel- has been the CEO of Telecom Lucent and Nokia Siemens Co-CEOs for Korean operator Italia since December 2007 Swedish spectrum auction Networks for its TD-LTE trial in SK Telecom appointed Ha Sung and has been credited for his strategy aimed at cutting Sweden’s auction of 800-MHz six cities. Min and So Jin Woo as joint the company’s debt while ‘digital dividend’ spectrum CEOs. Ha is also president of the strengthening its international raised a total of SEK 2.05 billion Dual-mode LTE network operator, while So will also be presence in Brazil and Argen- tina. But some shareholders (E233 million). HI3G Access, ZTE will provide equipment for president of its platform business. have criticised his strategy in TeliaSonera and Net4Mobility— Hi3G to build dual-mode LTE the domestic market, where the joint venture of Tele2 and TDD/FDD networks in Sweden YouView hires chairman the Italian operator faces Telenor—won 25-year licences. and Denmark. Kip Meek, non-executive growing competition and falling revenues in the mobile chairman of UK Internet TV segment. Last month Telecom Wholesale LTE in Russia LightSquared LTE customers venture YouView (formerly Italia signed a deal for Nokia Russian mobile WiMAX operator US wholesale LTE operator Project Canvas), resigned and is Siemens Networks to upgrade Yota announced an agreement LightSquared signed up Leap succeeded by Lord Alan Sugar. its mobile network in Italy and provide 7,000 LTE base with the country’s leading mobile Wireless and the MVNO arm of stations. New CEO Patuano operators to roll out a wholesale retailer Best Buy as customers. MTS appoints new head currently heads operations in LTE network by 2014. Russian mobile operator MTS Italy and will be expected to China Telecom buys network appointed Andrei Dubovskov as turn round operations there. Telecom Italia’s revenues for O2 sets German LTE launch China Telecom will buy the president and CEO, replacing 2010 rose 2.5% from the pre- O2 Germany said it will launch CDMA2000 network it leases Mikhail Shamolin. vious year to E27.6 billion, but LTE services at the start of July. from its parent company by the domestic revenues declined Deutsche Telekom, Vodafone end of next year, say reports. Ericsson fires and hires 7.4%. Net profit rose 98% to E3.12 billion after a stong and E-Plus are also trialling the Ericsson will cut 450 jobs in performance in Luciani’s Brazil technology in Germany. Turkcell expands into Germany Sweden, mainly in sales and division. But his appoint- Turkcell will launch mobile administration, but will also hire ment to head Latin American operations has been clouded Hong Kong spectrum services in Germany after signing 250 engineers to work on LTE by the news that he is under Hong Kong raised HK$1.952 a wholesale deal with Deutsche research and development. investigation by Milan pros- billion in an auction of 20 MHz Telekom last year. ecutors for alleged fraud, false of spectrum, with SmarTone and Shaw cuts jobs in Canada statements and regulatory obstruction pertaining to the Hutchison Telecom paying $875m Orange 3G in Kenya Shaw Communications will issue of more than two million and $1.08bn for 850-MHz and Orange has contracted ZTE to cut 500 jobs or about 4% of its false prepaid SIM cards. 900-MHz frequency respectively. roll out a 3G network in Kenya workforce in Canada.

6 www.totaltele.com April 2011

content strategies location - based services LOCAL KNOWLEDGE Operators are looking for new business models to make revenues from location-based services, having fallen behind Internet and handset companies. By Joanne Taaffe

urope’s mobile operators are still Consult. “The two biggest potential mobile LBS will grow to $12.7 billion struggling to make revenues from [wholesale] customers—[Facebook and worldwide by 2014, driven by smart- Elocation-based services (LBS) a Google]—have created their own way to phones, a surge in application storefront decade after some of them started to get location and bypass operators.” launches and new developments in hybrid develop their strategies. Now they face The agreement between Microsoft and positioning technologies (see chart). being marginalised by Internet and Nokia in February to develop smartphone Indeed, operators have not given up on handset companies unless they can find services promises to further intensify LBS, even if they have missed the oppor- new ways to harness their network and competition in the LBS space: Nokia in tunity for significant first-mover customer data assets. 2007 bought location data company advantage. “The game isn’t over, but the When Vodafone acquired mobile navi- Navteq for E5.7 million, and Microsoft low-hanging fruit has gone,” says Strand. gation company Wayfinder for 239 million for some years has used Navteq traffic As a result, many European operators kroner (E24 million) in December 2008, it and mapping data in its applications. have been moving to a business model of was betting that customers would pay for “Microsoft and Nokia can now [combine giving away location services such as location information services supported mapping and location assets to] offer a… mapping in order to hold on to customers by the mobile operator’s extensive network database of check-in spots with…maps and keep their brand in sight. “The whole data. But by March 2010, Vodafone had and free navigation to app builders such navigation on mobile phones [strategy] is pulled the plug on its acquisition, with as Facebook, Foursquare [and] Gowalla,” more of a churn stopper,” says Annette free services from big-hitters Google and said analysts from Clarion Consulting in Zimmermann, a principal research Nokia having obliterated the business a statement following the agreement. analyst at Gartner. case for premium mobile mapping. Certainly, the business opportunity is Yet operators desperately need to start Google showed that an Internet growing, with the valuation of online and increasing ARPUs from data services, as company with databases and computa- mobile coupons company Groupon illus- we showed in our analysis in Total tional power can bypass operators’ trating the perceived potential in the LBS Telecom Plus October. New Wireless networks to provide location informa- market. Groupon, which analysts esti- Intelligence research shows rising mobile tion, using a mix of GPS-enabled mate has 70 million users, reportedly has data revenues still are not compensating smartphones and crowd-sourcing. That held talks with banks about an initial for sharp declines in mobile voice reve- effectively could take operators out of the public offering that would value the nues in Europe. The research company business model when it comes to captur- company at up to US$25 billion; last says total mobile ARPU across the 27 ing location-based advertising spend, December it turned down a takeover bid European Union countries has fallen by potentially a key segment of LBS reve- of US$6 billion from Google. 20% over the past three years, from E25 in nues in future. Gartner estimates revenues from loca- 2007 to E20 in 2010 on average (see chart). “The problem is that operators have tion-based services worldwide will grow Mobile data ARPU doubled to just under been too slow to roll out services and have from US$2.5 billion in 2010 to US$2.9 E3 over the past three years, but still not been able to provide APIs,” says John billion this year (see table); further out, accounts for less than 15% of total ARPU. Strand, CEO of analyst company Strand Juniper forecasts total revenues from Some operators in Europe are stepping up their LBS strategies, but they are not Location-based services: building on social networks prepared to reveal revenues. Telefonica’s O2 Media in the UK employs over fifty January staff with a background in advertising, n Facebook built on its location-based service Places by launching Places Deals in Europe. The mobile retail service offers discounts and special deals according to media planning and data analytics. O2 customers’ locations. encourages customers to sign in to its March More service and register their prefer- n Mobile “check-in” social network Foursquare launched a new venue database—initially ences in order to receive offers and numbering 15 million venues—that can be incorporated into third-party applications for other location-based services. information from companies that include n Gowalla expanded its location-based mobile social networking application by launching L’Oréal and Starbucks. it on Android devices (it was previously available for Apple’s iPhone, Palm WebOS and Over 2 million O2 customers had signed RIM’s Blackberry). into More by March, according to the n Mobile social LBS company Loopt introduced what it calls a real-time element to its service, providing limited-time deals to users at specific locations. operator, but it will not give an indication of what revenues it expects to generate

8 www.totaltele.com April 2011 content strategies

Location-based services revenue forecast “they do have lots of information” about the customer, including their identity revenue in us$ (m) 2008 2009 2010 2011 2012 2013 2014 and billing details.

worldwide 1,938.0 2,334.6 2,546.2 2,916.5 3,819.5 5,467.7 8,263.5 with o2’s service customers sign in to Source: gartner receive alerts to their mobile phone regardless of which web page they may EU 27 mobile ARPU (euros) Total LBS and apps revenues ($m) be browsing. o2’s investment in More

$14,000 makes the operator well positioned to 25 n Africa & Middle east n Rest of Asia Pac capture both consumer interest and part- n Indian Sub Continent nerships, believes Zimmermann. 20 n Far east & China n eastern europe some analysts believe concerns over n Western europe privacy will push consumers towards 15 n South America n Blended operators, which already have built up n Voice n North America 10 n Non-voice (inc. messaging) trusted billing and service relationships n data with users. “there is the potential…that

5 i trust my operator more than a third party,” says thomas husson, a senior

0 $0 analyst at forrester research. france’s 2007 2008 2009 2010 2009 2014 online privacy watchdog last month fined Source: Wireless Intelligence Source: Juniper Research google E100,000 for unauthorised data collection via wireless networks through from the service. “i think [the question of but it hasn’t taken off. in the uk, trace a the company’s street View mapping revenue] is a one-dimensional view,” says Mobile charges upwards of 17 pence per service and location app latitude. shaun gregory, director of o2 Media. search for mobile tracking and location nevertheless, operators will face stiff “we look at it from [the point of view services, for example. competition from google, which already of]…revenue…the customer perspective but others agree with gregory that is a major force in online advertising and and…the brand.” o2 says its precise revenue generation is not the crucial location; and facebook, which can rely knowledge of both customer location and element just yet. Motti kushnir, chief on its social network customers to gener- identity—accrued from subscriber marketing officer at telmap, says ensur- ate recommendations. facebook says sign-up and network activity data—gives ing that customers use operator-branded more than 200 million active users now it an edge over internet companies when services justifies investment if it prevents access the application through their it comes to signing deals with retailers. telcos turning into a low-margin pipe. mobile devices; the company generated “facebook…think they know who you “in order to keep a 15% margin you need an estimated us$1.86 billion in advertis- are, but you could be anybody and they to keep a brand. if you’re a utility you ing revenues worldwide in 2010, according rely on you browsing at a particular time,” have a 3% margin,” says kushnir, whose to eMarketer. says gregory. company sells mapping services to opera- Another option for operators would be but in many instances operators are tors including Vodafone and orange. to package location as a service-enabling finding that there is little or no uptake by nevertheless, telmap is altering its product for third parties. “localisation customers of premium location-based business model away from simply charg- has gone from being a service to being an applications. Analysts, although they ing operators a monthly licence fee enabler,” says forrester’s husson. cannot give figures, say us operators have towards revenue-sharing agreements operators can no longer charge merely generated sizeable revenues from services based on premium services linked to for providing navigation, but instead that enable customers to track their chil- location. in israel, for example, telmap need to incorporate location into other dren and alert them to their safe arrival at provides a service with operator Pelephone services or provide it as a loss-leader. a destination. Verizon, for example, adver- communications that enables customers operators are also more likely to tises its family locator at $9.99 per month, to find parking spots in a city, explains succeed if they can combine scale and but does not publish subscriber numbers kushnir. typically, says strand, operators flexibility. “it’s the biggest [telcos] that or revenues for the service. can expect to secure a 30% share of reve- can differentiate long-term. the tier-two but european customers on the whole nues in such commercial agreements. operators will mostly outsource,” says are not ready to pay for such services. in addition, europe’s service providers husson. “companies [the size of] “it’s a question of mentality,” says are betting on future revenue growth Vodafone and orange need to be interop- Zimmermann at gartner. “it’s a service from advertising. “operators do have a erable and mix localisation with other that’s demanded in the us. several oper- chance to be successful in location-based insights such as billing…and have a multi- ators have tried it [in europe],” she says, advertising,” says gartner’s Zimmermann. screen and multi-platform approach.” n

April 2011 www.totaltele.com 9 Talk to us, and get th wi Breakfast Brwitheakfast involved today!

Have Breakfast with Total Telecom and join in a new series of mini conferences connecting buyers and sellers of telecom products and Breakfast services in a focused, cost-effective and engaged environment. with What we’re talking about in 2011:

The Content Battle - 19 May Recent discussions around a two-tier Internet have reawakened the Breakfaswitth debate about customer satisfaction, maximising the commercial opportunities of content and content delivery networks.

Mobile Traffic Offloading - 13 July Demand for smart devices and explosive growth in data usage are grinding mobile networks to a halt. The only choice is to offload traffic: Breakfast Total Telecom looks at the options. with mHealth Update - 14 September mHealthBrwi isth revolutionisingeakf healthcareas on tevery level - social, environmental, and economic. What are the opportunities for operators?

Global 100 Operators - 18 October In 2010 we predicted a shake up in the global operator rankings due to M&A activity. As the 2011 report comes to market, we examine whether these changes have materialised and look at the current drivers behind with the new rankings. Breakfast

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www.totaltele.com/breakfast business and finance mobile competition CONCENTRATION LEVELS In light of the proposed AT&T/T-Mobile deal a new report shows that regulation has had mixed results in terms of boosting competition in mobile markets. By Ian Kemp

he prospective acquisition of operator in the US with 129.2 million USA; Cingular Wireless—a joint venture T-Mobile USA by AT&T has once subscribers at the end of last year, between SBC and BellSouth—bought Tmore thrown into sharp relief the compared to 102.2 million for Verizon AT&T Wireless for $41 billion in 2004 question of competition in telecoms Wireless and 49.9 million for Sprint and was rebranded AT&T Mobility markets around the world, and in partic- Nextel. Should the deal go through the following the subsequent consolidation of ular in the fastest growing segments of top three operators would have 91% share SBC, BellSouth and AT&T; Sprint acquired mobile and broadband services. New of total connections, based on current Nextel for $35 billion in 2005; Verizon research shows that measures taken by figures (see table p.13). Wireless bought Alltel Wireless for $28.1 national regulators to boost competition AT&T/T-Mobile are playing the broad- billion in 2008; CenturyLink—then in mobile markets have produced mixed band card to try to persuade regulators, CenturyTel—acquired Embarq for $5.8 results globally, with North America in line with the government’s plans to billion in the same year; and in 2009 Sprint among the areas where market power deliver nationwide coverage. AT&T says Nextel bought Virgin Mobile USA for increasingly is dominated by just a few it will expand its future LTE network to $483 million. large players. cover 95% of the US population—294 But what impact has that had on compe- But increasingly the biggest operators million people, reaching an additional tition, and how has it affected the prices are railing against the view that scale 46.5 million beyond current stated operators charge for services? militates against competitiveness and plans—while both operators point out A new Wireless Intelligence report, fair consumer pricing in markets. They that T-Mobile USA does not have a clear Competition and concentration: The distri- cite the challenge from new wholesale path to delivering LTE alone. bution of market power in the global cellular operators which can also give smaller What the regulators must decide is how industry, uses the Herfindahl-Hirschman players a boost, as well as the ability of such scale, achievable by just a few opera- Index (HHI)—a measure of market largescale operators to extend broadband tors, could impact on consumers and concentration often used by regulators— services to regions that would otherwise competition in specific markets. The US to determine levels of competition in not be served. wireless industry has already gone national mobile markets and outlines AT&T already has said that regional through significant rounds of consolida- how regulatory initiatives and M&A carriers such as MetroPCS and Leap are tion in the past decade: Deutsche Telekom activity are shaping competitive land- taking share in key markets in the US, paid $50.7 billion for VoiceStream scapes. Wireless Intelligence divides while LightSquared and Clearwire are Wireless in 2000 to get a foothold in the markets into those which are concen- developing national wholesale LTE and US market and later rebranded as T-Mobile trated—when few mobile operators own WiMAX networks respectively. Analyst company Wireless Intelligence highlights The biggest operators are railing against the AT&T’s assertion that US retail mobile prices declined by 50% between 1999 and view that scale militates against competition 2009 despite widespread market consoli- Normalised HHI in the US: how market concentration is rising dation (see chart). If AT&T’s US$39 billion acquisition is 0.30 to go through, the FCC and Department of Justice (DoJ) are likely to require that it 0.25 divest significant portions of T-Mobile’s network and operations, say analysts, 0.20

pointing out that Verizon Wireless was 0.15 forced into similar concessions in order to buy Alltel in 2008. AT&T could be 0.10 mandated to divest assets where it would have excessive market concentration, and 0.05

give competitors access to infrastructure 0 such as spectrum and base stations. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Nevertheless, many expect approval to Source: Wireless Intelligence be given, creating the biggest mobile

April 2011 www.totaltele.com 11 business and finance

Competition and concentration: how mobile markets are faring worldwide pressure in the prepaid segment, the blended ARPU of dominant mobile oper- The Herfindahl-Hirschman Index (HHI) is calculated by taking the sum of the squares of ators in highly-concentrated markets operator market shares by connections, giving a normalised index between 0 and 1, says tends to be around 30% higher than that Wireless Intelligence. For example, if a market has three mobile operators with market shares of competing local operators.” of 40%, 30% and 30%, the HHI would be calculated as 0.40 squared + 0.30 squared + The average effective price per minute 0.30 squared, resulting in an index of 0.34. A market is classified as unconcentrated if it has an HHI lower than 0.1, moderately (EPPM)—average revenues per user concentrated between 0.1 and 0.18 and highly concentrated above 0.18. A decreasing HHI divided by minutes of use per user, per “indicates a reasonable disparity in market power among mobile operators and therefore month—worldwide has declined from intensifying competition”. US$0.25 in Q4 2000 to US$0.11 in Q3 2010 The US (HHI 0.18) is far from being one of the most concentrated markets: In the Americas half of all markets are classified as highly concentrated (with an HHI above 0.18), and in for concentrated markets, and from Africa that rises to more than two thirds of countries. Norway (where Telenor is dominant US$0.33 to US$ 0.13 over the same period with 58% of connections) is the most concentrated market in Western Europe (HHI 0.27); in fragmented markets. Overall, price Mexico (HHI 0.4) in the Americas (America Movil has 70% of connections); Iran (HHI 0.32) in competition is more intense in concen- the Middle East (MCI has 55% share); and Kenya (HHI 0.58) in Africa (where Safaricom has 80% share). Canada, where Bell and Rogers jointly controlled over two thirds (65%) of total trated markets where new entrants or local connections last year, has an HHI of 0.26. operators often rely on discounted pricing Western Europe and the Middle East come out as the most competitive cellular regions, strategies, says the analyst company. with the majority of markets fragmented. In Europe, Sweden, Norway, Denmark, Switzerland Sprint and LightSquared already have and Portugal are considered to be concentrated, all having had a dominant operator controlling the majority of total connections over the past decade. But over the past five formally objected to the AT&T/T-Mobile years all have shown a decrease in HHI indicating that market power is being redistributed deal, saying that it would dilute competi- and competition is increasing, in large part because of the introduction of MVNOs. tion. If it goes through LightSquared In China’s concentrated mobile market China Mobile’s share of connections is being eroded by both China Unicom and China Telecom, but Wireless Intelligence expects the could lose one of its biggest potential incumbent’s dominance to remain strong in the near term. China Mobile added 61.7 million customers: T-Mobile. But LightSquared mobile subscribers last year to reach 584 million at the end of 2010; China Telecom last year also last month announced deals with added 34.43 million mobile subscribers to reach 90.5 million. retailer BestBuy and operator Leap In future, consolidation in major mobile markets such as Russia and India could see a reduction in competition levels similar to the US. Russia has 12 operators but the market Wireless to use its network, and report- is dominated by three big players with 80% of connections—VimpelCom, MTS and edly is also in talks with Sprint Nextel MegaFon—and their market power could increase as they acquire smaller local players, and Time Warner Cable. leading to an increased HHI. “Similar levels of consolidation are expected in India over the In fact some analysts argue that smaller coming years. But…the fiercely competitive nature of the Indian mobile sector means market power would still remain fairly well distributed even if the number of players is reduced,” says value-focused operators could benefit Wireless Intelligence. from the AT&T/T-Mobile deal: consumer The analyst company acknowledges limitations with the HHI methodology, including the choice over tariffs could be as crucial as fact that it does not take into account the impacts of convergence; basing the index solely the number of operators in markets. on share of connections; the fact that some operators report active connections and others all registered SIM cards; and lack of correlation between changes in market share with “Not only will the FCC have to examine changes in price and supply elasticity. regional markets to see if the merged company would create too little competi- tion in certain areas, but they will have to the largest share of total connections— connections are jointly controlled by the take into consideration that T-Mobile and those which are fragmented, “when leading three mobile operators—AT&T, subscribers pay on average 6.4% less than there is no dominant player and a reason- Verizon and Sprint Nextel—compared to AT&T subscribers and are more heavily able disparity in market shares”. The 48% in 2000. weighted towards prepaid plans,” says index is calculated by taking the sum of Globally, the study also finds a correla- Pyramid Research analyst Emily Smith in the squares of operator market shares by tion between market concentration and a research note on the deal. But she says connections, with a higher HHI indicat- pricing levels, and while there is some in some markets other “value players” ing greater concentration and generally good news on pricing for consumers the could attract customers who do not want weaker competition (see box). effect on competitive operators should be to move to higher tariffs: “MetroPCS, Wireless Intelligence says over the past of concern to regulators. “The average Leap Wireless, Boost Mobile, and decade the US has moved from being a effective price per minute in highly MVNOs like TracFone could stand to fragmented to a concentrated cellular concentrated markets is slightly lower gain many of T-Mobile’s former subscrib- market dominated by a few operators, than in fragmented markets, suggesting ers over the next several years as T-Mobile with an increase in HHI due to M&A that price pressures for competing opera- is phased out.” activity indicating an overall decrease in tors are more intense in markets where a Individual US state attorneys already competition. At present—before the single operator is dominant,” it says (see are lining up to review the proposed deal, AT&T/T-Mobile deal—80% of total US chart). “In addition, despite strong price with the New York Attorney General

12 www.totaltele.com April 2011 Business and finance

leading the way in looking at the impact proceed with its us$6 billion acquisition elsewhere a spate of newly announced on consumers and pricing in different of wind telecom and orascom assets. deals (see timeline p.5)—mostly involv- areas of the state. the deal, now expected to be completed ing mobile assets—will now fall under currently, a new wave of attempted in the first half of this year, will create the scrutiny of regulators: liberty acquisitions and consolidation by opera- the world’s sixth largest operator with global’s proposed E3.16 billion purchase tors and vendors globally is being met over 173 million mobile subscribers . of kabel bw in germany, for example, with mixed responses by regulators but etisalat abandoned its deal to means it would own the second and third aiming to provide competition for acquire 46% of Zain for us$12 billion in largest cable companies in the country; consumers or, in some instances, citing part citing “extensive due diligence”, Philippines operator Pldt’s agreement the need to protect national interests. in complicated by the conditions of the deal: to acquire a controlling stake in rival the us, regulator the fcc last month Zain had earlier last month accepted a bid digitel would combine the country’s first gave final approval for centurylink to from batelco and kingdom holding for and third largest operators; and telekom buy Qwest communications for us$10.6 its saudi Arabia operations, a key condi- Austria, which is bidding to buy 51% of billion—the doJ and the federal trade tion of the purchase due to etisalat dominant fixed-line operator telekom commission cleared the deal as long ago owning a controlling stake in saudi’s srbija, already owns the second-largest as July 2010—to form the third-largest second-largest mobile operator Mobily. mobile operator in serbia, Vip . n telecoms company in the us behind At&t and Verizon. US mobile connections and market shares, Q4 2010 but in so doing the fcc said it had connections | market share “imposed protections against the risk of total cdma gsm wcdma lte iden wimaX harm to competition” and taken meas- at&t 95.5 31 - 59 88 - - - ures to ensure that the merged company t-mobile 33.7 11 - 40 12 - - - will “significantly expand its network and combined launch a major broadband adoption (pro forma) 129.2 42 - 99 100 - - - programme for low-income consumers”. verizon wireless 102.2 33 61 - - 52 - - Among measures stipulated by the fcc, sprint nextel 49.9 16 24 - - - 97 - the merged company must offer low- metropcs 8.2 3 5 - - 48 - - income households broadband starting at us cellular 6.1 2 4 - - - - - less than us$10 per month , as well as leap wireless 5.5 2 3 - - - - - services at speeds of at least 4 Mbps to 4 clearwire 4.1* 1 - - - - - 99 million additional homes and businesses. others 7.4 2 4 1 - - 3 1 nokia siemens networks has not had total 312.6 100 100 100 100 100 100 100 the same regulatory fortune in its * Mobile WiMAX only Source: Wireless Intelligence attempts to buy the wireless assets of Motorola. in March china’s antitrust A new wave of attempted acquisitions globally regulators failed to approve the proposed us$1.2 billion deal in the face of opposi- is being met with mixed responses by regulators tion from huawei, which has worked with Motorola for a decade and fears the trans- Effective price per minute, linear average, fragmented and concentrated markets

fer of its intellectual property. in turn, 0.30 n Fragmented huawei has faced opposition from us n Concentrated authorities citing security concerns to its 0.25 attempts to sign deals with operators in the country; in the past few years huawei 0.20 has also reportedly been stopped from buying 3com, assets of Motorola and, in 0.15 february, 3leaf systems. when it comes to mobile markets, 0.10 some particularly ambitious attempts to create powerful regional operators have 0.05 also met with mixed fortunes recently. 0 last month russian mobile operator 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Vimpelcom received approval from shareholders and some regulators to Source: Wireless Intelligence

April 2011 www.totaltele.com 13 World Communication Awards 2011...... new shores

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World Communication Awards For global communications providers 7 November 2011 2011 The London Hilton on Park Lane

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World Communication Awards 2011... NEXT-GENERATION INTERNET net gAINS Business models as well as technologies will shape the next generation of internet ...new shores services as operators strive to accommodate rapid traffi c growth.By roy rubenstein

perators are in danger of not says in one week it now delivers as much sioned by four european incumbents . being able to make the network data as it did in all of 2005. operators have long had joint peering oinvestments needed to accom- Mobile data traffic is growing far faster: agreements to carry each other’s traffic. modate iP traffic growth unless they 159% in 2010 alone, according to cisco’s but the rise of internet content providers capture a greater share of the wealth latest Vni global mobile data forecast, and their services—and in particular created by the internet. that is the although it still only represents 1%-3% of video-based services—that run across conclusion of a report by At kearney total iP traffic. “fixed traffic networks backbone networks are a key cause of which highlights a projected shortfall in are still the vast majority of iP traffic,” traffic growth. that is altering commer- the capital expenditure needed if says thomas barnet, senior manager of cial imperatives and has led to protracted european operators are to meet traffic service provider marketing and chief debates on net neutrality. growth without suffering network analyst for cisco’s Vni forecast. “Video, such as the bbc iPlayer in the performance degradation (see chart). cloud computing is another fast-grow- uk, is an example of a few-to-many the report also argues for commercial ing development with its own demands communications [service],” says colin changes to boost operators’ revenues to for network capacity. “you move the rand, a manager in At kearney’s tele- fund the required investment. such processing power from your Pc to coms practice. “this changes the developments, as well as new technolo- centralised resources accessed over a many-to-many [services] that used to be gies and regulation, together will shape network,” points out Jurgen wittkopp, the internet [model] and which favoured the next generation of internet services. expert in communications and electronic peering and the equal exchange of operators already are adopting a range systems at PA consulting group. “traffic traffic.” cisco estimates internet video of strategies to manage network previously generated internally will need made up almost 40% of consumer internet constraints. last month, for example, to go over the network in future.” traffic by the end of last year, not includ- Coming soon... At&t introduced data usage caps for its taken together, there is cause for ing video exchanged through peer-to-peer iPtV and broadband services. concern for operators in future. “going (P2P) file sharing. For more information email: [email protected] network planners remain confident from where we are to these forward-look- “we do see that misalignment in that new technologies and the move to ing traffic projections is where things traffic,” says cameron rejali, managing next-generation networks will suffice in start to get out of line and become unsus- director of products for bt wholesale. in For sponsorship opportunities call meeting future capacity demands. “At tainable,” says Mark Page, a partner in the past three years bt says it has seen Nick Carter +44 (0)207 608 7065 least for the next few years we are not At kearney’s telecoms practice, and one clearly identifiable traffic blips in the going to run into any performance or of the authors of the report A Viable months when Apple’s iPhone and the bbc congestion problem,” says barry bosik, Future Model for the Internet, commis- iPlayer were launched. www.worldcommsawards.com executive director, networking planning, at At&t. yet operators in the longer term ‘Taking forward-looking traffi c projections are concerned about how they will continue to fulfil users’ internet expecta- things start to become unsustainable’ tions without securing new revenues from those services. Capex to fund incremental capacity, fi xed Internet networks, Europe World Communication Awards According to cisco systems’ Visual For global communications providers n Additional capex required networking index (Vni) forecast, global n Capex trendline 7 November 2011 iP traffic will grow at a compound annual (E million) Cumulative 2011 E9.8 billion The London Hilton on Park Lane rate of 34% between 2009 and 2014, 263 2,352 2,661 3,013 1,484 } amounting to a fourfold increase over the period (see box p.16). Verizon says its traffic growth exceeds 50% yearly: “our iP traffic has grown fivefold over the last five years, and we expect it to grow 5,516 5,238 4,390 5,238 5,238 5,238 5,238 5,219 another fivefold in the next five years,” 5,238 says ihab tarazi, vice president of global 2006A 2007A 2008A 2009A 2010 2011 2012 2013 2014 Sponsors: Organised by: Using an average capex per PB/month from 2008-2009 and applying a 15% cost network planning at Verizon. And content improvement thereafter. Assuming 20% of total capex is for internet investment. delivery specialist Akamai technologies Source: Oppenheimer, AT Kearney

April 2011 www.totaltele.com 15 technology trends

Luigi Gambardella, executive board says AT&T’s Bosik, whose task is to ensure The operator also uses multicasting to chairman of ETNO—the European capital expenditure is largely fixed each minimise traffic on its IP backbone. Telecommunications Network Operators’ year while growing bandwidth to main- Using multicast technology, a simultane- Association—points to a “structural tain customers’ quality of experience. ous event—for example, a Webcast or disconnect” between the rapid increase Technological developments with broadcast video—need only be sent once in Internet traffic and operator revenues. equipment are an important aid. “Bigger from the origin server across the back- “This situation is exacerbated by the fact routers, larger DWDM systems, better bone and is then replicated at the network that Internet content providers have unit cost,” says Bosik. “This is certainly a edge near to customers. limited economic incentives to use the significant part in how we accomplish “Multicast traffic in the backbone in available bandwidth in an efficient way,” our goal of keeping our capex in check.” the past has not been sufficiently large to he says. According to Michael Howard, princi- warrant the investment,” says Bosik. “It As a result, they put more pressure on pal analyst, carrier and data centre doesn’t come for free.” operators’ networks. “What some networks, at Infonetics Research, such Verizon highlights its co-ordinated [content provider] players do [during equipment declines in price by 15% a networking strategy to meet growing congestion] is swamp the network,” says year. While that sounds impressive, new traffic demand. The operator has intro- Page at AT Kearney. “They send the same equipment runs for years alongside exist- duced the Partner Port programme, signal four times assuming that through ing platforms while the price declines which gives content providers 10-Gigabit Internet redundancy one of those will get don’t come close to matching the annual Ethernet services to interface directly to there faster while the [end] customer’s growth in IP traffic. Moreover, the capital its Internet backbone network—bypass- device will pick up that the other three intensity—the ratio of capex spending to ing the traditional backbone peering [streams] are redundant.” revenues—remains constant at between process. Other strategy elements include Internet content players can point to 11% and 13%, says Howard. the adoption of 100-Gigabit-per-second the fact that they have benefited opera- AT&T uses routing techniques to make (Gbps) lightpaths and more recently a tors’ revenues by providing content that better use of its existing network capac- 100-Gbps IP backbone; investing in LTE has grown broadband subscribers, says ity. For example, the operator currently for mobile and fibre-to-the-home Page. “But now there are fewer users to uses the Open Shortest Path First (OSPF) (FTTH) FiOS fixed broadband access sign up, and the volumes of traffic associ- protocol, which routes traffic on the IP technologies; and deploying content ated with that content are growing so fast network according to the shortest path delivery networks. you can’t put up prices in line with the available, leading to greater network effi- Verizon has deployed content delivery extra traffic coming through,” he says. ciency. Using techniques that involve the technology in the network core to Network planners confirm that dealing engineering of diverse MPLS tunnels, improve video delivery while optimising with traffic growth within allocated alternative paths can be taken to ease network capacity. This provides content budgets is a key challenge they face. “But congestion when it occurs and better use cacheing to enable such services as Flex there are multiple means to deal with the all the capacity available between the View, where content viewed at home can challenge of the growth of the Internet,” traffic source and destination. also be viewed on a handset, tablet or PC when on the move. ‘Content providers have limited economic Tarazi points out that cacheing equip- ment is deployed according to the services incentives to use bandwidth efficiently’ delivered. “For us the services we have launched are supplements to FiOS,” he Capex to fund incremental capacity, 3G/LTE mobile networks, Europe says. “FiOS is a cable TV service so does not use IP streaming to the home, but it n Additional capex required n Capex trendline does use IP for companion devices such Cumulative (E million) E21 billion as cell phones and watching content on 4,630 5,097 5,548 } 5,984 laptops when away from the home.” AT&T’s U-verse TV service is IP-based—using fibre-to-the-node and ADSL/VDSL technology—but Bosik stresses that its traffic is well defined. “We provide so many channels, we stream 12,574 12,627 10,759 12,034 12,456 12,891 13,343 13,810 13,345 them all the time, and as such it does not 2006A 2007A 2008A 2009A 2010 2011 2012 2013 2014 contribute to the large peaks in traffic,” Baseline capex 2012-2014 extrapolated using a 2006-2011 CAGR of 3.5% above historic levels. he says. “[U-verse traffic] is consistent, Source: Oppenheimer, AT Kearney we know exactly what it is, we’ve put in

16 www.totaltele.com April 2011 technology trends

Rocketing traffic: Cisco’s VNI forecasts the market [from] growing.” New networking technologies may Cisco Systems’ Visual Networking Index (VNI) forecast brings together analyst projections reduce the cost of transmitting a gigabit for Internet, broadband, video and mobile growth. Among the projections—from June last of data, but at the board level operators year—it says the internet will be four times larger in 2014 than it was in 2009. Global IP traffic grew 45% during 2009 to reach an annual run rate of 176 exabytes per yearor are being forced to think about overall 15 exabytes per month; in 2014, global IP traffic will reach 767 exabytes per year or 64 return on investment, says Page at AT exabytes per month, says Cisco. To put that in perspective, the average monthly traffic in Kearney. “That is not sustainable unless 2014 will be equivalent to 32 million people streaming the film Avatar in 3D, continuously for you can come up with additional revenue the entire month, it says. The Index estimates that global internet video traffic surpassed peer-to-peer (P2P) traffic sources; these [revenues] pay the bills and by the end of last year, making it the largest internet traffic type for the first time since 2000. provide an additional tool to manage P2P as a percentage of consumer Internet traffic will drop to 17% by 2014, down from 39% traffic,” he says. at the end of 2009. In contrast, internet video streaming and downloads will grow to nearly 60% of all consumer internet traffic in 2014, up from 40% at the end of last year. AT Kearney in its report sets out several Consumer internet traffic will represent 66% of all IP traffic by the end of 2014, followed ways operators can accrue greater reve- by consumer managed IP—TV and video on demand—which will represent 17% of traffic. nues, although it admits that none are Business internet will account for 8% and business managed IP services for 4%; the remainder likely to be a silver bullet. These include is made up of consumer mobile data (4%) and business mobile data (1%). Business IP traffic will grow at a CAGR of 21% and a factor of 2.6 from 2009 to 2014, reaching 8.1 exabytes per charging end users based on usage, and month, while business video conferencing will grow ten-fold over the forecast period. payment to operators that terminate the traffic—similar to voice charges. At the same time there are clear regulatory and the capacity for it and we’re done.” operators must charge for usage as well as competitive issues to be taken into Catering for traffic peaks is a key issue add intelligence to the network. “In the account with any new models, the report for operators in avoiding network conges- US it’s striking that the mobile plans are points out. tion. “With more and more video on the starting to charge for usage and fixed “If operators knew 20 years ago how network, the gap between peak-to-aver- broadband has to start charging for usage data traffic would evolve it would have age actually grows,” says Arielle Sumits, as well,” says Howard at Infonetics. been implemented, but [new termination manager of service provider marketing AT&T last month announced that from charges] is a difficult model to introduce and analyst for Cisco’s VNI forecast. May it will impose limits of 250 Gigabytes now,” says Page. The report also explores For AT&T, it is over-the-top video from of data per month for U-verse broadband possible models based on enhanced content providers that is unpredictable. and 150 GB for DSL broadband users; quality of service for which content As well as multicasting in the backbone customers exceeding this limit will be providers will pay operators. the operator uses video optimisation charged $10 per 50 GB. Verizon said it BT Wholesale, through its Wholesale techniques such as video pacing, which does not currently have plans to intro- Content Connect service, offers ISP caches content such as a YouTube clip just duce such charges. customers the ability to give content ahead of viewing and stops the download The introduction of tiered pricing for providers enhanced service delivery in when the user ends the session to avoid fixed networks in North America has return for additional payment. “From [an carrying the whole video clip. AT&T is already impacted traffic, according to end] user’s perspective this is the most on record as saying that content delivery operators, as has data capacity restric- logical model,” says Steve Haines, chief technology, which it is also embracing, is tions for mobile. “We found in mobile in operating officer at BT Wholesale. “The currently the only feasible approach to 2009 that the top 1% of users generated key would be: Would the content provider manage expected network traffic growth 30% of the traffic, and after data caps pay the network transport provider for cost-effectively. were instituted they generated 20% of the high-quality delivery?” But Rejali accepts “What we see is that more intelligent traffic,” says Cisco’s Barnet. that other models may prevail: “What ways of managing the traffic through But BT questions the feasibility of could happen is we never reach agree- things like [content] cacheing, and doing imposing limits and extra charges for ment and ISPs charge their end users it intelligently within the network, can intensive users; last month the operator more, and that may not work.” add significant amounts of capacity at said it would scrap its fair-usage policy on Page at AT Kearney is optimistic that relatively low cost compared to building higher-end fibre and ADSL packages, the revenue issues will be resolved, out transmission facilities,” says Bobby providing unlimited downloads for although he does expect problems with Blumofe, Akamai’s senior vice president premium customers. “It is very hard to traffic growth and a fairer distribution of of networks and operations. begin to charge a lot for the end user,” revenues to remain. Indeed, BT’s Rejali But industry observers disagree that says Rejali. “Ultimately you will have to says “the jury is out” on how to solve such networking developments and content invest competitively to [support the problems. “It is not obvious that any one delivery intelligence are sufficient to traffic], or even if you are successful in of these options necessarily will work and meet growing traffic demand; they say charging, what you are doing is stopping we do see the accident coming.” n

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Organised by: Founding Partner: Category Sponsor: network strategies the future of wimax MAXIMUM MOMENTUM WiMAX has taken a back seat to LTE recently, but growth forecasts are still strong despite the uncertain future of some operators. By Ingrid Lunden and Ian Kemp

s recently as 2008 WiMAX was big and estimates that will rise to more than of developed markets: they include news at Mobile World Congress in 30 million by 2015; iSuppli says 33.4 Inukshuk in Canada, South Korea’s KT, ABarcelona, with high-profile million by 2014. But specialist broadband Axtel (Mexico), UQ Communications announcements from vendors including wireless analyst company Senza Fili (Japan), Wateen Telecom (Pakistan) and Intel and Motorola. In a keynote speech at Consulting forecasts WiMAX subscrib- Packet One Networks in Malaysia. the same show a year earlier, former ers will number as many as 90 million The lack of large operators driving Vodafone CEO Arun Sarin had talked of globally by 2014 (see chart). developments can cause difficulties in the potential disruption from WiMAX, Monica Paolini, president of Senza Fili, terms of the equipment ecosystem and citing the need to avoid “the situation says the majority of those users will be the ability to build economies of scale. where LTE is still in the standards defini- for mobile rather than fixed WiMAX “With WiMAX we had to push equip- tion stage while WiMAX is in operation”. services: accessed from smartphones and ment vendors and end user device makers Fast forward to today, and LTE domi- other handheld devices, as well as laptops. to create the market,” Yota’s director of nates broadband wireless strategies: She says because WiMAX is now an estab- business development, Yegor Ivanov, told significantly, even the two leading lished technology and relatively easy to Total Telecom Plus when the Russian oper- WiMAX operators by subscribers— deploy, it represents an opportunity for ator lit up its first LTE network, in Kazan, Sprint-backed Clearwire in the US (see smaller operators to offer mobile broad- last October. “In the case of LTE we do box) and Yota in Russia—have not formally band to specific communities. “I would not need to make any additional effort; committed to the technology for the long not expect a major mobile operator to it’s an open market.” The operator had term. So where next for WiMAX? now announce a WiMAX investment, but around 600,000 WiMAX subscribers at At the start of the year there were 13 if you are a small operator in a rural the end of 2010—including in Central million WiMAX users globally across market or aiming to serve the SME/resi- and South America—but has said that it some 600 networks, according to research dential markets…[you would be] better could switch off services altogether company Maravedis. It says the top 50 off with WiMAX,” she says. within three years as its LTE networks operators accounted for 8.34 million of Indeed, Maravedis’ list of the leading come on stream. “We are still investing those subscribers, indicating a highly WiMAX operators by subscribers after in WiMAX where we already have it, but concentrated industry. Clearwire and Yota demonstrates that where we plan to deploy new networks In fact analyst figures for WiMAX they are smaller players in developing we want to move to LTE,” said Dennis subscriber forecasts vary considerably. countries or specific—often rural—areas Sverdlov, the CEO of Yota. TeleGeography says by the end of last year there were some 11 million subscrib- ‘With WiMAX we had to push equipment vendors ers worldwide, accounting for a roughly 2% share of all fixed broadband users, and device makers to create the market’ WiMAX/LTE subscriber growth WiMAX service revenue growth WiMAX subscribers by region

250 n LTE n WiMAX 25 n Western Europe n North America 100 n Western Europe n North America n Middle East / Africa n Latam n Middle East / Africa n Latam n Eastern Europe / Russia n Eastern Europe / Russia 200 20 n Asia Pacific 80 n Asia Pacific

150 15 60

100 10 40 Subscribers (millions) Subscribers (millions) 50 5 20 Service revenues (US$ billions) Service revenues

0 0 0 2009 2011 2013 2015 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Source: TeleGeography Source: Senza Fili Consulting Source: Senza Fili Consulting

April 2011 www.totaltele.com 19 network strategies

Clearwire: an uncertain future for the biggest WiMAX operator account for 65% of all WiMAX subscrib- ers today, but that will grow to 76% by Clearwire is by some distance the world’s biggest WiMAX operator. The company in its 2014 when Asia Pacific will account for latest results for full year 2010 says in total it had 1.1 million retail and 3.3 million wholesale 47% of users: “We expect WiMAX opera- subscribers. Clearwire says its aim is to double its total subscriber base this year, having tors to launch prepaid and/or lower-cost signed up 1.5 million users in the fourth quarter of last year, but its future strategy remains plans that are more affordable to reach uncertain. Founder Craig McCaw resigned from his position as chairman in January, and last month CEO Bill Morrow left suddenly. At the end of last year the company cut 15% of wider segments of the addressable market. its workforce—around 600 employees—and it is reportedly looking to sell some 20% of its As a result of these trends, we expect to wireless spectrum for around US$2 billion to fund its strategy. see ARPU erosion over time, with global Clearwire provides wholesale services to its investor partners Sprint—it holds a majority 54% stake in the company—and cable operators Time Warner and Comcast, but in March monthly ARPU declining from $28 to $22 the operator said it would also retain its retail operations. In the same month Clearwire over the period from 2009 to 2014.” Last signed another wholesale deal, with US retailer BestBuy for a “4G mobile broadband service September Clearwire launched a pay-as- for computing devices”. Clearwire’s consolidated ARPU was $16.07 in the fourth quarter, you-go wireless broadband service on its composed of retail ARPU of $45.10 and wholesale ARPU of $3.52. Clearwire has also carried out tests of LTE. Sprint, too, says it is evaluating LTE, but for WiMAX network in the US. now continues to forge ahead with its strategy to launch new WiMAX devices and expand its Yet proponents are still bullish about network. At the CTIA show in March Sprint announced two more devices, both made by HTC, their services. Bolger says Imagine’s taking the total number of WiMAX devices on its network to 22. service in Ireland has met with a “fantas- tic” response, picking up 25,000 users in Other operators have struggled to make most straightforward. French company its first five months. “We’ve got a demand a business case for large-scale WiMAX Sequans, which provides chips for the for 10,000 sign-ups a month,” he says, networks. In India, BSNL last year WiMAX devices made by HTC for both “but we can only satisfy about 40% of that received a government grant after stating Sprint and KDDI, in February announced with existing coverage.” that it needed more funding to build 4Sight, an upgrade initiative that includes Analysts including Paolini point out WiMAX networks in rural areas, and a dual-mode chip that works on both that Ireland is one of the few markets in reportedly has looked at infrastructure- WiMAX and LTE and allows for handoffs Western Europe where there is potentially sharing deals with other operators. And between the two. a big opportunity for WiMAX, because of Reliance Industries, which bought a “The same chipsets are there for a lack of broadband competition. Bolger nationwide broadband wireless access WiMAX and LTE. That means the price says Imagine, which got a headstart in its licence in India last year and had been will go down. I will be able to buy a single deployment by buying up the Irish assets expected to opt for widespread WiMAX solution from Huawei, for example, of Clearwire, is aiming to complete its rollout, confirmed that it would focus on running both LTE and WiMAX,” says rollout in the next 18 months. TD-LTE technology for its commercial Sean Bolger, the CEO of Irish WiMAX “If you forget all the past hype about service launches. operator Imagine. “WiMAX will get the WiMAX and focus just on the next five Despite such economic issues, WiMAX same benefit of scale and that will drive years, it actually has a bright future,” says is still a significant market in terms of down the price.” In support of WiMAX, TeleGeography analyst Pete Bell in the equipment revenues: “With the high he points out that the ecosystem, particu- company’s research on 4G subscriber volume of LTE news, people tend to over- larly for fixed WiMAX, is “fully developed growth. “You can expect to see WiMAX look the fact that the WiMAX equipment and deployed. You just don’t have the full achieving average annual growth in market…remains bigger than the LTE benefit of that in LTE yet.” excess of 30% over that period.” market, and continues to show healthy Infonetics says service providers includ- But that is put in perspective by the fore- growth,” says Richard Webb, directing ing Japan’s KDDI argue that LTE is not cast growth of LTE, with the GSA citing analyst for WiMAX, microwave and sufficient to address capacity issues, and 196 operators in 75 countries now investing mobile devices at Infonetics Research, in that they will adopt a broadband wireless in that technology. TeleGeography says a report. Infonetics says WiMAX equip- strategy that includes WiFi and WiMAX WiMAX subscribers “will very quickly be ment revenues jumped 85% in 2010 to as complementary technologies. But the dwarfed by those using LTE”—by a factor reach US$1.7 billion worldwide, and fore- analyst company backs up the assertion of more than seven to one in 2015. Even casts equipment and device revenues will that in large part its use will be restricted Senza Fili sounds a cautionary note: reach $3.4 billion in 2014. to smaller pockets of deployments in devel- “Operators plan to use LTE in [the 2.6-GHz] What’s more there are other potential oped markets. “WiMAX likely will become band, so WiMAX will be mostly confined economies of scale driven by synergies established as the solution of choice for to the 3.5-GHz band which is…not well between LTE and WiMAX. Paolini says niche applications, such as supporting the suited for mobility outside high-density the fact that both are built on a similar smart grid, public safety, private city-wide urban areas.” framework—they have an 80% technol- communications segments, as well as more While the future for WiMAX is not all ogy overlap and both have an all-IP basic broadband needs,” says Webb. bleak, Vodafone ex-CEO Sarin, it seems, core—means that operators can upgrade The bad news for operators is that those need not have been concerned about the from WiMAX to LTE at a later date, with niche segments could also result in lower long-term disruptive effect of the tech- the transition to the TDD variant the ARPU. Senza Fili says emerging markets nology after all. n

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EDITORIAL SERVICE DELIVERY PLATFORM RISE 4th Floor, Welken House, HP 10-11 Charterhouse Square, London EC1M 6EH Oracle Infonetics Research forecasts the worldwide service +44 (0)20 7608 7030; [email protected] delivery platform (SDP) market will reach US$5.2 billion NSN in 2015, for software and services combined, driven TOTAL TELECOM PLUS Other Ian Kemp [email protected] Alcatel - partly by the need for operators to support on-demand, Editor +44 (0)1626 835 703 Lucent real-time service requirements for cloud computing. Michelle Young [email protected] Art Editor Ericsson currently leads the way for SDP service Ericsson revenues and Oracle for software revenues, it says, while TOTAL TELECOM Mary Lennighan [email protected] Huawei Huawei leads the overall market (see chart). In a separate Editor +44 (0)20 7608 7069 report Infonetics says enterprise video conferencing and Nick Wood [email protected] telepresence system revenues grew 18% in 2010 to $2.2 Assistant Editor +44 (0)20 7608 7046 Tim Charters [email protected] billion worldwide, and will grow to $5.0 billion by 2015. Web Developer +44 (0)20 7608 7073

contributing editors Roy Rubenstein [email protected] Israel Ingrid Lunden [email protected] HOSTED IP SERVICES London Joanne Taaffe [email protected] A new report from Frost & US$54 billion France Sullivan shows that the hosted IP mobile entertainment service revenues world- Ken Wieland [email protected] telephony and unified communica- wide by 2015, up from $33 billion in 2010. London tions services market in Europe (Juniper Research) advertising accounted for revenues of E0.9 Head office, london Nick Carter [email protected] billion in 2010. The company Sales Director +44 (0)20 7608 7065 estimates that will reach E4.9 Gordon White [email protected] billion in 2016, and says the EUROPEAN MOBILE CHURN DECLINING Sales Manager +44 (0)20 7608 7041 economic slowdown and limited Analysys Mason says mobile operators in Europe and United States and Canada capital availability for investments the US can expect churn to continue to decline, largely KCS International as a result of stable pricing and longer contracts. Its T +1 717 397 7100 F +1 717 397 7800 has urged many enterprises to Karen C Smith-Kernc – East [email protected] consider alternative communica- Connected Consumer research, based on 6,000 Alan Kernc – West & Canada [email protected] respondents in Europe and the US, found that the tions delivery methods. Japan proportion of mobile handset subscribers planning to Hiroko Kujime [email protected] change operator has decreased from 14% in 2009 to Pacific Business T +81-3-3661-6138 F 9% last year. In fact the actual mobile churn rate in +81-3-3661-6139 RECORD MOBILE RISE developed markets was about 30% in 2009—more advertising production than twice the percentage of survey respondents who Please forward all advertising material directly to: The October to December [email protected] period last year marked the said they intended to churn that year—but Analysys Aleisha Bryant +44 (0) 7608 7042 Mason says the discrepancy is partly due to some biggest ever increase in marketing operators counting as churn instances of customers mobile subscribers worldwide Tally Judge [email protected] changing contracts but not provider. Marketing Manager +44 (0)20 7608 7076 for a quarter, a net increase of Ruth Clark [email protected] 196 million subscribers says Marketing Executive +44 (0)20 7608 7047 Q which best describes your mobile service plans in the next year? TeleGeography; the previous EVENTS record of just fewer than 190 Charles Georgiou [email protected] million was set in Q4 2007. 100% Project Manager +44 (0)20 7608 7071 Mobile users grew by almost subscription/customer services 690 million globally in 2010, 80% Aleisha Bryant [email protected] Customer Services Executive +44 (0) 7608 7042 to over 5.3 billion. India’s or subscribe free at: www.subscription.co.uk/totaltelecom mobile operators added 63 60% million subscribers in the MANA g e M E NT Rob Chambers [email protected] three-month period, with 40% Publisher +44 (0)20 7608 7077 Greg Hitchen [email protected]

China showing the second % of respondents Chief Executive Officer highest increase. While 20% mobile subscribers in India Total Telecom Events World Communication Awards grew by 42% in 2010, China’s 0% www.worldcommsawards.com mobile base grew by just 09 10 09 10 09 10 10 09 10 10 World Vendor Awards 14%—the biggest operator France Germany Poland Spain UK US www.worldvendorawards.com Total Telecom World China Mobile added 61.7 n No Change n Change contract; same provider n Change provider n Give up mobile www.totaltele.com/world million to reach 584 No data for Spain and US in 2009. Source: Analysys Mason million—and there is now Total Telecom Plus is published by just a 90 million gap between the two countries. The next highest ranked countries for subscriber growth were 116 million © 2011. All rights reserved. Brazil, Indonesia, the US, mobile payment users worldwide this Terrapinn Holdings Ltd registered office: Nigeria and Egypt. year, rising to 375 million in 2015. 4th Floor Welken House, 10-11 Charterhouse (In-Stat) Square, London EC1M 6EH

22 www.totaltele.com April 2011