The Mobile Economy 2013 The GSMA represents the interests of mobile operators A.T. KEARNEY is a global team of forward-thinking, worldwide. Spanning more than 220 countries, collaborative partners that delivers immediate, the GSMA unites nearly 800 of the world’s mobile meaningful results and long-term transformative operators with more than 230 companies in the advantage to clients. Since 1926, we have been broader mobile ecosystem , including handset makers, trusted advisors on CEO-agenda issues to the software companies, equipment providers and Internet world’s leading organisations across all major companies, as well as organisations in industry sectors industries and sectors. A.T. Kearney’s offices are such as financial services, healthcare, media, transport located in major business centres in 39 countries. and utilities. The GSMA also produces industry-leading The firm’s telecoms practice works with the senior events such as the Mobile World Congress and Mobile management teams of fixed line, mobile, cable and Asia Expo. satellite operators as well as vendors on their most important strategic and operational challenges. For more information, please visit the GSMA corporate website A.T. KEARNEY at www.gsma.com Lansdowne House, Berkeley Square London W1J 6ER or MOBILE WORLD LIVE, the online portal for the United Kingdom mobile communications industry, www.atkearney.com at www.mobileworldlive.com CONTENTS 1 EXECUTIVE SUMMARY 2 2 GLOBAL MARKET INTRODUCTION 8 2.1 Mobile Proliferation Around the World 9 2.2 Regional Differences in Growth 14 2.3 Data is the Driving Force of Growth 20 3 A VIBRANT AND EVOLVING INDUSTRY 29 3.1 Mobile Network Operators 30 3.1.1 Developing a Strong Value Proposition outside of Non-core Services and Products 30 3.1.2 Developing Collaboration Models with Other Ecosystem Players 40 3.1.3 Mobile Operators Co-operating to Develop Common Standards 43 3.2 Original Equipment Manufacturers 46 3.3 Infrastructure Development 47 3.4 Content 48 3.5 OS Platforms 49 4 THE MOBILE ECOSYSTEm’S SUBSTANTIAL SOCIO-ECONOMIC CONTRIBUTION 52 4.1 Mobile Operators Make a Significant Contribution to Global GDP 53 4.2 The Mobile Ecosystem Benefits the Global Economy 56 4.3 The Mobile Sector’s Contribution to Employment 60 4.4 The Mobile Sector’s Contribution to Public Funding 62 4.5 The Mobile Sector’s Contribution to Productivity Improvement 64 5 AN INDUSTRY SUPPORTING AND PROTECTING CITIZENS 68 5.1 Protecting and Empowering our Society 69 5.2 Delivering Trusted Services 74 5.3 Aiding Disaster Management 80 5.4 Protecting the Environment 82 6 GLOBAL ENABLERS TO SPUR FURTHER INVESTMENT AND GROWTH IN THE MOBILE INDUSTRY 86 6.1 Spectrum Measures to Grow the Mobile Industry 87 6.2 Avoiding Unnecessary Restrictions on Network Management 91 6.3 Enabling Effective Competition through Market Consolidation 92 6.4 Supporting Innovation with a Common Position on IPR 93 6.5 The Importance of Best Practice Taxation 93 7 GLOssARY 94 8 AppeNDIX – Definition of Regions 96 9 AppeNDIX – Report Methodology 97 THE MOBILE ECONOMY 2013 Executive Summary Almost half the population of the earth now uses mobile communications. A billion mobile subscribers were added in the last 4 years to leave the total standing at 3.2 billion. There are still many adults and young people who would appreciate the social and economic benefits of mobile technology but are unable to access it, highlighting a huge opportunity for future growth and a challenge to all players in the industry ecosystem to expand the scope of products and services to tap this demand. Given the strong growth trajectory and pace of innovation, we are confident that the next few years will see continued growth with a further 700 million subscribers expected to be added by 2017 and the 4 billion mark to be passed in 2018. TOTAL SUBSCRIBERS CAGR 2012-2017 Bn POPULATION 4.2% 1.1% CAGR 2012-2017 CAGR 2008-2012 3.829 3.940 3.705 OTHER COUNTRIES 8.3% 3.402 3.564 MIDDLE EAST 3.212 CIS 3.014 NORTH AMERICA 2.789 LATIN AMERICA 2.556 2.335 AFRICA EUROPE ASIA PACIFIC 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: GSMA Wireless Intelligence 2 THE MOBILE ECONOMY 2013 This growth is mirrored by strong mobile connections growth, to almost 7 billion connections in 2012, as many consumers have multiple devices or use multiple SIMs to access the best tariffs, while firms in many industry sectors roll out M2M applications to boost their own productivity and tap into new markets. Despite challenging economic headwinds in many regions, the market is expected to grow even more strongly on the dimension of connections over the next five years, with 3 billion additional connections expected to be added between 2012 and 2017, a growth rate of 7.6% p.a. TOTAL SIM-ENABLED CAGR 2012-2017 CONNECTIONS Bn, including M2M connections 7.6% CAGR 2008-2012 9.741 9.204 OTHER COUNTRIES 8.643 MIDDLE EAST 8.053 CIS 13.7% 7.424 NORTH AMERICA 6.176 6.766 LATIN AMERICA 5.474 AFRICA 4.705 4.050 EUROPE ASIA PACIFIC 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% 1% 2% 2% 3% 4% 6% 8% 10% 13% % M2M CONNECTIONS Source: A.T. Kearney, GSMA Wireless Intelligence, Machina Research 3 THE MOBILE ECONOMY 2013 Underpinning growth in the headline numbers is a diverse Connected living has become a reality for hundreds of millions of set of market conditions: people who cannot imagine life before the smartphone and the • Emerging markets are the major engines of mobile connection mobile broadband connection. and subscriber growth – in particular Asia Pacific will add nearly Consequently, mobile data continues to drive rapid traffic half of all new connections between now and 2017 (1.4 billion) growth for mobile operators with all regions showing impressive and will remain at just under 50% of both global connections and data volume growth rates as more and more people connect to the subscribers. Latin America and Africa combined will add the next internet via mobile. In emerging markets, growth will be driven 20%, representing 595 million new connections. by the increased penetration of smartphones, while in developed • Developed markets’ connection and subscriber growth is markets it will be driven by both greater smartphone adoption slowing, but M2M is set to grow – subscriber numbers are forecast and increased download speeds made possible by new technology to grow at just 1% p.a. between now and 2017 in Europe and North such as 4G. In fact total traffic volumes in 2012 alone exceed all the America due to market maturity. However, total connections previous years combined and globally data is projected to grow by will grow at 9% and 10% p.a. respectively – faster than in 66% p.a. through 2017 to 11.2 Exabytes per month – equivalent to emerging markets – due to strong M2M connections growth (1.2 more than 5 billion hours of HD video1. billion connected devices by 2017 according to GSMA Wireless The mobile internet is at the heart of a dynamic ecosystem of Intelligence). innovation reaching beyond operators. Device manufacturers, Mobile is a vibrant and evolving industry at the heart of including the operating system (OS) developers, are driving everyday life for a growing proportion of the world’s population. innovation through the race to differentiate themselves and Network operators are continuing to develop strong value make smartphones faster, lighter and more intuitive to use. propositions to deliver new and innovative services to users. As Network infrastructure vendors are responding to the demand technology continues to evolve, so the mobile ecosystem has built for efficiencies as they seek to support the network demands of new business models to deliver new services in communications tomorrow at lower price points. Content providers are harnessing and adjacent services. Mobile remains a vibrant and evolving new hardware and software innovations and the growth of industry constantly finding new ways to inter-connect the developer communities to deliver their own innovative services user’s world in spheres such as automotive, utilities, health and and products to the consumer over mobile access. education, and new ways to manage financial transactions. MNO REVENUES CAGR 2012-2017 US$ Bn CAGR 2008-2012 2.3% 4.2% 1,124 1,062 1,085 1,107 OTHER COUNTRIES 1,002 1,034 CIS 958 984 AFRICA 851 889 MIDDLE EAST LATIN AMERICA NORTH AMERICA EUROPE ASIA PACIFIC 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: A.T. Kearney, EIU, Gartner, GSMA Wireless Intelligence, IDC, Wireless Matrix 1. Based on one hour of HD video using 2GB of data. 4 THE MOBILE ECONOMY 2013 Given this dynamism, it is no surprise that the mobile industry risks and the whole mobile ecosystem is collaborating to makes a substantial economic contribution, with mobile reduce risks to users such as handset theft, mobile fraud and operators alone expected to contribute 1.4% to global GDP in 2012 breach of privacy. Mobile operators are also playing their and their revenues expected to grow at a robust 2.3% p.a. to reach part to work to reduce their impact on the environment US$1.1 trillion by 2017. When the rest of the mobile ecosystem is and have the potential to make a net positive impact on included, total revenues are forecast by A.T. Kearney to reach US$2 trillion in 2017, which represents an annual growth rate of 4.7%. greenhouse gas emissions – with the potential to enable In support of the growth in capacity and the level of innovation, emission savings in 2020 more than 11 times greater than the mobile ecosystem will increase its level of annual capital their own anticipated mobile network emissions.