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Wireless Intelligence
Global cellular market trends and insightQ4 2012
December 2012
wirelessintelligence.com • [email protected] • twitter.com/wi
2
wirelessintelligence.com
55+63+69+75+80+84+87+90GlobalHigh-speed networks now account for more than 25% of connections• WorldcellularconnectionsinQ32012reached6.40billion;inQ42012we
estimatethequarterclosedat6.54billion• Connectionsinthedevelopingworldpassedthe5billionmarkinQ3and
nowcomprisealmostfourfifths(78.9%)oftheglobaltotal• 3G/4Gtechnologiesnowmakeupmorethanaquarterofglobal
connections
First LTE Advanced network goes live in Russia• Therewere50networklaunchesduringQ42012,ofwhich32wereLTE• (includingoneLTEAdvanced),fiveDC-HSPA+,nineHSPA+,oneHSDPA
andthreeWiMAX• Therearenow134liveLTEnetworksworldwide,includingsevenTD-
LTE,threeLTEwithVoLTE,oneAXGPandYota’s(Scartel)LTEAdvancednetworkinRussia
Rapidly increasing mobile data use helping to drive economic growth• Ericssonestimatesthattotalsmartphonesubscriptionswillreach1.1billion
bytheendof2012,andexpectsthemtogrowto3.3billionin2018• Accordingtothevendor,globalmonthlymobiledatatrafficdoubled
betweenQ32011andQ32012toreacharound900PB,andisexpectedtogrowwithaCAGRofaround50%from2012to2018,a12-foldincrease
• ResearchproducedbytheGSMA,DeloitteandCiscoindicatesthatdoublingofmobiledatauseleadstoanincreaseof0.5ppinacountry’sGDPpercapitagrowthrate
• Ericssonobservedthatattheendof2012,theaveragemobilePCusesaround3GBofdatapermonth,comparedto450MBpermonthforasmartphone
• ThevendorsaysthatWCDMA/HSPAnowcoversmorethan50%oftheworld’spopulation,upfrom45%in2011,andthatby2017anestimated85%ofpeoplewillhavetheopportunitytoaccesstheinternetusingWCDMA/HSPA
Quarterly forecast accuracy • Ourestimatesarereplacedduringthequarterbytheactualresults
reportedbytheoperatorandregulatorycommunity• Thedeltabetweenourestimatesatthebeginningofthequarterandthe
actualresultsforQ32012stoodatjust-0.35%
47+54+60+65+71+75+79+829 120%
8100%
7
80%6
2009 2010 2011 2012 2013 2014 2015 2016
60%5
40%
4
20%
3
2
1
0 0%
Con
nect
ions
(bill
ion)
Market penetration
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family) Other
9+69+19+1+2+c7+52+30+7+4+c2012
69%
52%
30%
7%4% 7%9%
19%
1% 2%
2016
3
wirelessintelligence.com
38+44+51+57+63+67+71+73Africa
Q3 2011 Q2 2012 Q3 2012
Connections(million)
Total 614.4 686.4 713.1
Contract 24.0 27.9 28.9
Prepaid 590.5 658.8 684.5
CDMA(Family) 17.2 15.4 14.9
GSM 555.8 610.2 630.3
WCDMA(Family) 41.4 60.7 67.8
Netadditions(million)
Total 29.6 21.6 26.7
Contract 0.9 1.7 1.0
Prepaid 29.0 20.2 25.7
Growthrate,quarterly
Total 5.1% 3.3% 3.9%
Contract 3.7% 6.3% 3.7%
Prepaid 5.2% 3.2% 3.9%
Growthrate,annual
Total 19.1% 17.4% 16.1%
Contract 17.7% 20.6% 20.6%
Prepaid 19.2% 17.3% 15.9%
Marketpenetration 58.5% 64.2% 66.4%
ARPU $8.16 $7.64 $7.49
31+37+43+49+56+61+65+691,250
1,500
1,000
750
2009 2010 2011 2012 2013 2014 2015 2016
500
250
0
Con
nect
ions
(mill
ion)
Market penetration
120%
100%
80%
60%
40%
20%
0%
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family) Other
2+88+10+0+0+c1+70+28+1+0+c2012 2016
70%88%
10%
28%
1% 1%2%
4
wirelessintelligence.comAfricaLTE close to commercialisation in South Africa
South African operators’ LTE plans accelerate• VodacomSouthAfrica’sLTEnetworkwasofficiallyswitchedon;duringthe
quarteritexpandedcoveragefrom70tomorethan500basestations• MTNSouthAfricaannouncedthecommercialrolloutofitsLTEnetwork,
withover1,600basestationsalreadyupgraded• 8taandNeotelarecurrentlyconductingLTEtrials;bothareplanningto
launchacommercialofferingnextyear• CellChasalsostartedLTEtrials,howeveritwillnotlaunchacommercial
serviceuntilthe“governmentfinalisesitspositiononanationalwholesaleLTEnetwork”
A tough quarter for governments and regulators• EgyptiantelecomsentrepreneurNaguibSawirishaslauncheda$5billion
legalclaimagainsttheAlgeriangovernmentforactingunlawfullyinitsdealingswithDjezzy
• TheawardofthethirdSenegalesemobilelicencetoExpressoisunderinvestigationtoascertainwhethertherewereirregularitiesintheprocess
• NetherlandBritishCompany(NBC)successfullychallengedtheawardof3GlicencesintheDemocraticRepublicofCongotomobileoperatorsAirtel(BhartiAirtel),Tigo(Millicom),VodacomandAfricell(Lintel)
• TheKenyanregulator(CCK)istobedisbandedandreplacedbyaregulatorthatisfreeofgovernmentandcommercialinfluenceaspartoftheIndependentCommunicationsCommissionofKenyaBill2011
Countering the use of fake handsets• UCC,theUgandanregulatororderedthecountry’smobilenetworkstostart
blockingcounterfeitmobilephonesfrom30thNovember• TheKenyanGovernment’sdirectivetoban‘fake’mobilehandsetstook
effectatmidnighton30thSeptember,beginningwiththedisconnectionofaround845,000counterfeithandsetsfromthenetworksofSafaricom,Airtel(BhartiAirtel),yu(EssarTelecom),andOrange(TelkomKenya)
Insight: Foreign investment in Africa rising, further opportunities in the pipeline
Whiletheirtwolargestcompetitors,MTNandVodacom,ploughaheadwiththeirLTE rolloutplans, rumourscontinue tocirculatearound the futureof the twosmallerSouthAfricanmobileoperators8ta(Telkom)andCellC(OgerTelecom).Bharti Airtel is said to be interested in acquiring eithermobile operator. Thiswould further boost the group’s African presence following its acquisition ofZain’sAfricanassets,andwouldpotentiallyprovidefundsforamoreaggressiveLTErolloutfortheoperatorconcerned.
However, within South Africa the messages appear mixed. In October, thegovernmentturneddownKT’s(SouthKorea)offertobuya20%stakeinTelkom,whileoutgoingCEONombuleloMoholihasrejectedthepossibilityofanytie–upbetweenCellCand8ta,statingthattheTelkomBoardwasnotlookingatanykindofdeal.
Despitethisreluctance,CommunicationsMinisterDinaPulehashintedthatarevised strategy for Telkom could include possible partners in terms of bothfixedlineandmobileoperations.Shehaspresentedanumberofoptionsaimedathelpingtoturnthegrouparound,withthegovernment’srecommendationstobemadeattheANC’sconferenceinlateDecember.
AsidefromSouthAfrica,anumberofdealspointtoaninflowofforeigninvestmentinAfrica’stelecomssector.InOctoberViettelGrouppurchaseda65%stakeinEGOTELTanzania–whichisthoughttobelaunchinga3Gnetworksoon-aspartofaplantoinvestupto$338millioninthecountry.Furthermore,NovembersawinvestmentfirmCapcomspend$210millionona90.5%shareinamergedNigerianentity,comprisingMTSFirstCommunication’sspectrumlicenceaswellasStarcommsandMulti-Links’CDMAbusiness.
In October, Vimpelcom announced its intention to dispose of several of itsbusinessesinAfrica(andAsia)aspartofarationalisationofitsglobalbusiness.Initial reports indicate that its sub-Saharan African units in Burundi and theCentralAfricanRepublicaswell as itsZimbabweanbusinesswillbesold. Inaddition, December saw Vimpelcom reach an agreement with the Algeriangovernmenttoacquirea51%stakeinDjezzy.
5
wirelessintelligence.com
59+64+70+74+78+81+83+85Americas
Q3 2011 Q2 2012 Q3 2012
Connections(million)
Total 975.6 1032.5 1044.4
Contract 392.2 408.2 413.0
Prepaid 583.4 624.3 631.3
CDMA(Family) 205.9 201.4 196.5
GSM 569.7 560.6 557.2
WCDMA(Family) 167.3 227.7 242.4
Netadditions(million)
Total 25.5 13.6 11.9
Contract 9.0 4.2 4.8
Prepaid 16.5 9.4 7.0
Growthrate,quarterly
Total 2.7% 1.3% 1.2%
Contract 2.4% 1.1% 1.2%
Prepaid 2.9% 1.5% 1.1%
Growthrate,annual
Total 11.4% 8.7% 7.1%
Contract 11.4% 6.5% 5.3%
Prepaid 11.4% 10.1% 8.2%
Marketpenetration 103.1% 108.3% 109.2%
ARPU $27.53 $26.97 $27.33
*Note:datatableincludesNorthernAmerica,butthisisdiscussedseparatelyonslides11–12
55+60+67+71+75+79+82+85150%
1,250
1,500
1,000
120%
750
2009 2010 2011 2012 2013 2014 2015 2016
90%
500
60%
25030%
0 0%
Con
nect
ions
(mill
ion)
Market penetration
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family) Other
19+53+25+2+1+c13+36+39+11+1+c2012 2016
13%
36%
19%
53%
25%
11%
1%1%2%
6
wirelessintelligence.comAmericasStill room for growth with almost half of Latin Americans unconnected
América Móvil driving connections growth from Mexico down to Argentina• InQ32012,147operatorswitnessedpositivequarterlynetadditions
totalling11.0millionconnections,while9operatorsrecordedlossesof658,000intotal
• ThelargestgainwasrecordedbyClaro(AméricaMóvil)inArgentinawith1.4millionnetadditions,followedbyVivo(Telefónica)inBrazilandTelcel(AméricaMóvil)inMexicowith1.1millioneach
• Weexpectslightlyhighergrowthof2.2%or14.7millionnetadditionsinQ4,whenMexicowillpassthe100millionconnectionsmark
Central and South America show high levels of multiple-SIM use• Ourresearchindicatesthatwhiletherewere671millionconnectionsinthe
region(excludingNorthAmerica)inQ32012,only91.8%or616millionofthesewereactive
• Whileconnectionspenetrationcurrentlystandsat111.0%,uniquesubscriberpenetrationisjust51.6%or312millionsubscribers
• ThisisduetomobilesubscribersinSouthandCentralAmericahavinganestimated2.00SIMcardseachonaverage,comparedto1.56intheCaribbean
More high-speed mobile broadband networks emerging across the region• Movistar’s(Telefónica)LTEnetworkwentliveinMexicoinOctober• AméricaMóvil’sTelcelbrandalsolauncheditsLTEnetworkinaninitialnine
MexciancitiesinNovember,offeringsixLTE-compatiblehandsets,whilethegroup’sClarooperationinPuertoRicoalsodebutedthetechnology
• InQ4HSPA+networkswentliveinColombia,TrinidadandTobagoandBritishVirginIslandsviaMovistar(Telefónica),bmobile(TSTT)andDigicelrespectively
Smartphone revolution spreads across Brazil and beyond• SmartphonepenetrationatTIM(Brazil)doubledyear-on-year,from19.5%
inQ32011to39%inQ32012• MeanwhilerivalVivo(Telefónica)reportedthat78%ofnewcontract
customersinQ3optedforsmartphones,comparedto55%ayearago• InPanama,MasMovilreportedsmartphonepenetrationof26%inQ3
2012
Insight: Oi in pole position as Brazilian operators firm up LTE rollout plans
Followingonfromthe2.5GHzspectrumauctionthattookplace inJune,thepastthreemonthshasseenallfourmajoroperatorsinBrazilsetouttheirLTEplans. With the country set to host the world’s two largest sporting eventswithin thenext four years– the footballWorldCup in2014and theOlympicandParalympicGamesin2016–andgiventhecoverageproblemsthatsomemobileusersinBrazilhavefacedinrecenttimes,thereisadditionalpressureontheoperatorstoprovidesufficientcapacity forhigh-speedmobilebroadbandusagebymillionsofBrazilians and tourists alike.RegulatorAnatel has set adeadlineforcommerciallaunchofLTEinanumberofcitiesbyApril2013,aheadoftheConfederationsCup–apreludetotheWorldCup–takingplaceinJune.
Fourth-largestoperatorOi lookssettobefirstwithLTEservices,promisingacommerciallaunchinRiodeJaneirobeforetheendof2012.Oi,whichhasbeenconductingLTE trials in thecity sinceOctober, hasselectedEricsson,NokiaSiemensNetworks (NSN)andAlcatelLucentasvendorsandplanstoextendthenetworktocover50%of thepopulation insevencitiesbytheApril2013target.Third-placedClaro(AméricaMóvil)isalsoconductinganLTEtrialinSaoPaulo,havingalreadyundertakentrialsinthreeothercities,andlookssetforacommercial launch insixcitiesaheadof thedeadline.Ericssonhasbeen theequipmentsupplierineachofthosetrials.
Meanwhile,market-leaderVivohasselectedEricssontoinstall2,700LTEbasestations,principally in theNorthandmid-Westof thecountry,andHuawei toinstallafurther2,000,mainlyinSouthandNortheastBrazil.EricssonandHuaweiwillalsoactasvendorsforTIM,alongsideNSN.Withtheonlyhalftheamountofspectruminthe2.5GHzbandasVivo,TIMisalsolookingtolaunchLTEinthelonger-range450MHzbandtoimprovecoverageinruralareasofthecountry.
DespiteOihavingtheearlymoveradvantage,weexpectitslargerrivalstohavecaughtupintermsofabsoluteLTEconnectionsbytheendof2014,althoughthetechnologywillstillbeinitsinfancyatthattime,accountingforlessthan1%oftotalconnections.However,weexpectthisproportiontoincreaseto8.7%or31.1millionconnectionsby2017,splitbroadlyequallyacrossthefouroperators.
7
wirelessintelligence.com
48+58+66+72+78+82+86+89Asia
Q3 2011 Q2 2012 Q3 2012
Connections(million)
Total 3,264.8 3,540.4 3,583.1
Contract 554.8 602.3 619.5
Prepaid 2,709.9 2,938.0 2,963.8
CDMA(Family) 308.1 325.2 315.0
GSM 2,545.3 2,663.7 2,670.3
WCDMA(Family) 356.5 460.3 488.9
Netadditions(million)
Total 102.2 90.4 42.7
Contract 16.7 16.4 17.2
Prepaid 85.5 73.9 25.8
Growthrate,quarterly
Total 3.2% 2.6% 1.2%
Contract 3.1% 2.8% 2.9%
Prepaid 3.3% 2.6% 0.9%
Growthrate,annual
Total 17.5% 12.0% 9.8%
Contract 12.7% 11.9% 11.7%
Prepaid 18.5% 12.0% 9.4%
Marketpenetration 77.4% 83.3% 84.1%
ARPU $9.79 $9.33 $9.39
48+58+67+74+80+86+91+954,000
5,000
3,000
2,000
2009 2010 2011 2012 2013 2014 2015 2016
1,000
0
Con
nect
ions
(mill
ion)
Market penetration
120%
100%
80%
60%
40%
20%
0%
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family)TD-SCDMA Other
9+74+14+2+1+0+c8+57+23+6+6+0+c2012 2016
57%74%
9%14%
8%6%6%
23%
1%2%
8
wirelessintelligence.comAsiaData services in Asia offsetting ARPU declines
Rapid 2G to 3G/4G technology migration• AsofQ42012,20%ofmobileconnectionsinAsiaarerunningon3G
networks,anadoptionratealmostonparwiththeglobalaverageof24%• WesternAsiaaveragesthehighest3Gadoptionintheregionwith36%
ofitsconnectionbaseon3G,comparedto30%inEasternAsia,21%inSouth-EasternAsia,andonly6%onaverageinCentralandSouthernAsia
• Meanwhile,LTEcontributes2%ofconnectionsinEasternAsiainQ42012drivenbydemandinSouthKorea(28%ofconnections),Japan(7%),Hong-Kong(1%)andTaiwan(0.1%)
• Sixteenoperatorshavelaunched(FDD)LTEnetworksinAsiabetweenJanuaryandNovember2012,comparedtoonly2TD-LTEnetworks
Data services help to stabilise ARPU trends• Sincethelaunchof3GservicesinIndiatwoyearsago,blendedARPUhas
graduallystabilisedataround$2.50bymid-year,offsettingthedecliningtrendobservedsince2006
• AlsoinIndia,dataARPUatBhartiAirtelincreasedfrom$0.72to$0.79betweenQ2andQ32012,whileitincreasedfrom$0.86to$0.91atIdeaCellularoverthesameperiod
• SimilartrendshavebeenrecordedinthePhilippinesandIndonesiawhereblendedARPUisstabilisingataround$4
• InMalaysia,dataARPUincreasedonaverageby$0.30betweenQ32011andQ32012atCelcom(Axiata),DiGiandMaxis,whorecordeddataARPUat$4.02,$2.18and$5.07respectivelyinQ32012
• SimilartrendshavebeenobservedinThailandasAIS,DTAC(Telenor)andTrueMove(TrueCorporation)recordedanaverage$0.40increaseindataARPUbetweenQ32011andQ32012,thethreeoperatorsreportingdataARPUof$1.13,$1.06and$0.9respectivelyinQ32012
• MeanwhileinTurkey,TurkcellandVodafoneaveragedayearly$0.35increaseindataARPUinQ32012toreacharound$1.50onaverage,whileAvea(TurkTelekom)recordeda$0.85increaseindataARPUoverthesameperiodto$2.20
Insight: Smartphone adoption accelerates in China
In December, Apple announced that ChinaUnicom andChina Telecom soldover2millioniPhone5handsetsinthefirstthreedaysofavailability.Thetwooperators are aggressively launching new smartphones in order to competewithmarket-leaderChinaMobile,whichisyettolaunchaversionofthelatestAppledevicecompatiblewithitsTD-SCDMAnetwork.Interestingly,accordingto Chinese web services company Baidu, 16.1% of smartphones in Chinaearlierthisyear(Q12012)werecounterfeitmodels,while26.2%hadcomefromunbrandedvendors.
ChinaUnicomexpectstosell140million3Gphonesnextyear,companyofficialshavesaid.Theoperatorclaimsalmost50%ofChina’s3Gmarket,havingsoldover70million3GphonesasofearlyDecember2012.Overall,around190million3GmobiledeviceswillbesoldthisyearinChina,up73%year-on-year.ChinaUnicom iscurrentlyexpanding its3Gnetwork to improveruralandsuburban3Gcoveragetoaround78%ofpopulationintheseareasfromitscurrent39%,whilstalsostrengtheningcapacityinurbanareas.
ChinaTelecomreportedthatsmartphonesaccountedfor30millionconnectionsas of June this year, with smartphone penetration (as a percentage of 3Gsubscriptions) greater than 60% in the first half of 2012. The operator hasadopteda3Gsmartphonedrivenstrategywithapriorityplacedonaffordablesmartphonespricedataround$160.ChinaTelecomfurtherstatedthatitsfocushas largely been on “cultivating customer habit in data usage” through thelaunch of compelling devices such as the iPhone, alongwith an increase inspecialtystoresandcustomerassistanceonapplications.
AsdemandforsmartphonesanddatadevicesacceleratesinChina,operatorsareseeingsubstantialincreasesindatatraffic.ChinaUnicomreportedthattheaveragemonthlydatatrafficper3Ghandsetuserwas138MBbyJune2012,comparedto111MBatChinaTelecom.Meanwhile,ChinaMobile’sdatatrafficincreasedby188%year-on-yearinQ32012,includingamajorboostinitsWi-Fitraffic.Theoperator’smobileWi-Firevenuessurgedby139%between1H11and1H12,whileearlierthisyear(Q12012)itwasreportedthat61%ofitsentiremobiledatatrafficwascarriedoverWi-Fi(84PB/quarter).
9
wirelessintelligence.com
86+87+90+92+94+97+98+100Europe
Q3 2011 Q2 2012 Q3 2012
Connections(million)
Total 988.0 1002.5 1010.8
Contract 365.4 383.9 389.6
Prepaid 621.1 617.0 619.8
CDMA(Family) 6.6 7.4 7.8
GSM 667.3 628.3 618.9
WCDMA(Family) 313.1 364.9 381.6
Netadditions(million)
Total 12.4 4.9 8.3
Contract 6.8 5.8 5.7
Prepaid 5.7 -1.1 2.8
Growthrate,quarterly
Total 1.3% 0.5% 0.8%
Contract 1.9% 1.6% 1.5%
Prepaid 0.9% -0.2% 0.5%
Growthrate,annual
Total 3.1% 2.8% 2.3%
Contract 6.0% 7.1% 6.7%
Prepaid 1.4% 0.3% -0.2%
Marketpenetration 133.1% 134.9% 136.0%
ARPU $22.11 $18.83 $18.45
64+64+67+68+70+72+73+75150%
1,250
1,500
1,000
120%
750
2009 2010 2011 2012 2013 2014 2015 2016
90%
500
60%
25030%
0 0%
Con
nect
ions
(mill
ion)
Market penetration
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family) Other
1+59+39+1+0+c1+37+51+11+0+c2012 201637%
59%
39%
51%
11%
1%1%1%
10
wirelessintelligence.comEuropeEurope accounts for almost half of all global LTE networks
8.3m net additions in Q3 due to strong growth in South and East• DuringQ32012connectionsgrewby0.8%to1.01billion,equivalentto
136%populationpenetration–thehighestacrossallregions• 158operatorswitnessedpositivequarterlynetadditionstotalling12.9
millionconnections,while25operatorslostacumulative4.6millionconnections
• Russiasawthelargestcustomergainswithatotalof2.4millionnetadditions;MTS(Sistema)added1.1millionconnections,MegaFon744,000,Tele2710,000,Rostelecom595,000andBeeline(VimpelCom)442,000thankstopromotionaloffers,retailpresenceexpansionandmobilebroadbandgrowth
LTE is gaining ground across Europe with 57 LTE networks in place • BetweenOctoberandDecember2012,19operatorslaunchedLTE
networksin13countries,includingFrance,ItalyandtheUK• InQ32012,therewere2.4millionLTEconnections;Russia,Germanyand
Swedentogetheraccountedfor73%oftheregion’sLTEconnections
Smartphone adoption displays no signs of slowdown • Vodafone’ssmartphonepenetrationacrossitsEuropeanfootprintwas31%
inQ3,upfrom22%lastyear,whileTelefónica’sreached33%inQ3(25%Q32011)
• Ofcomreportedthat58%oftheUKpopulationownsasmartphone;asofQ3VodafoneUKboastedthecountry’shighestsmartphonepenetrationat50%,followedbyO2(Telefónica)with44%,andEE(FT/DT)at38%
• InSpain,Movistar(Telefónica)andVodafoneeachhad7.1millioninstalledsmartphones,translatinginto34%and44%penetrationrespectively
• GermanoperatorsstilllagbehindtheirWesternEuropeancounterpartsintermsofsmartphonepenetration,withO2andVodafonereporting24%and28%respectively
• AnumberofEasternEuropeanoperatorsreportedhealthyquarterlysmartphonevolumegrowth:O2CzechRepublicshoweda10%increaseinitsinstalledbasetoreach29%penetration,T-MobileHungarywasup7%toreach25%,OrangePolandincreased12%to19%penetrationandMTSRussiawasup8%to18%
Insight: 3 Austria gets green light for Orange acquisition
InFebruary2012,3(Hutchison)announcedthatithadreachedanagreementtobuyOrangeAustriafromitsowners–private-equityfirmMidEuropaPartners(65%ownership)andFranceTelecom(35%)-forEUR1.3billion.InDecember2012,theEuropeanCommissionfinallyapprovedtheacquisition.
Following extensive negotiations with the EC, 3 has committed to give upspectrumtoanynewentrantthatshouldemergeinAustria,andallocate30%of thenewcompany’scapacity towholesaleaccess for 16MVNOsover thenexttenyears.TheoperatorhasalreadyinkedanMVNOagreementwithcableoperatorUPCAustria,whichwillcomeintoeffectafterthetakeover.3AustriahasalsosignedadealwithA1tosellupto64basestationsand2x13.2MHzofpairedfrequencies-aswellasintellectualpropertyrightstoOrange’spreviousbrand,One,anditsyouth-focusedprepaidbrand,Yesss!-forEUR390million.Thissub-dealhasreceivedthegoaheadfromregulatorTKKandtheAustrianCartelCourt.
Thetransactionwouldmergethird-placedOrangeandfourth-placed3tocreateapowerfulnumberthreebehindA1andsecond-placedT-Mobile.BasedonQ3data,thedealwouldcreateacombinedentitywith3.8millionconnectionsanda29%marketshare,howeverthedisposalofYesss!(around700,000connections)willresult in3.1millionmobileconnectionsanda23%marketshare.Ontheotherhand,theYesss!takeoverstrengthensA1’sposition,increasingitsshareofconnectionsfrom40%to46%.
TheAustrianmarketisnotonlysaturated(160%populationpenetration)butalsowelladvanced,with3Gconnectionsaccountingfor60%oftotal,andthreeoutoffouroperatorshavingdeployedLTEnetworks(Orangebeingtheexception).3’saggressivecustomeracquisitionstrategy- fuelledby itscompetitivedataoffers-helpedtomaintainmarketshareandincreasedatarevenueto49%ofitsARPU.3claims that thisdealwill allow it tohastenLTEdeployment,andcompetebetterwithothermarketplayers.
Thedeal,ifitgoesthrough,couldsetaprecedentforsimilartakeoversacrossEurope,bringinginanewwaveofM&Aactivity.
11
wirelessintelligence.com
76+81+87+89+92+94+95+96Northern America
Q3 2011 Q2 2012 Q3 2012
Connections(million)
Total 359.6 371.7 373.2
Contract 273.9 277.5 278.4
Prepaid 85.7 94.2 94.9
CDMA(Family) 189.3 188.9 184.9
GSM 54.8 40.9 38.2
WCDMA(Family) 94.6 111.7 114.4
Netadditions(million)
Total 7.4 2.1 1.5
Contract 3.7 0.7 0.8
Prepaid 3.8 1.5 0.7
Growthrate,quarterly
Total 2.1% 0.6% 0.4%
Contract 1.4% 0.2% 0.3%
Prepaid 4.6% 1.6% 0.7%
Growthrate,annual
Total 8.9% 5.5% 3.8%
Contract 8.5% 2.7% 1.7%
Prepaid 10.5% 14.9% 10.6%
Marketpenetration 103.2% 106.0% 106.2%
ARPU $49.13 $48.98 $49.72
63+68+73+76+78+80+82+84500
400
300
2009 2010 2011 2012 2013 2014 2015 2016
200
100
0
Con
nect
ions
(mill
ion)
Market penetration
120%
100%
80%
60%
40%
20%
0%
Technology split
CDMA (Family) GSM WCDMA (Family) LTE (Family) Other
51+12+30+6+1+c39+8+27+26+0+c2012 201630%
6%
26%
39%
8%27%
51%
12%
1%
12
wirelessintelligence.comNorthern AmericaData boom continues thanks to growing LTE coverage and device sales
LTE coverage expands rapidly as Verizon’s deployment almost complete• AT&TexpandeditsLTEcoverageto160millionpeopleinDecember,and
planstoincreasethisto250millionbyend-2013and300millionby2014• Verizon’sLTEnetworknowcovers250millionpeople,andtheoperator
expectstocompleterolloutbymid-2013,sixmonthsearlierthanplanned• InCanada,RogersWirelessreportedthatitsLTEnetworkcovered60%of
thepopulationattheendofQ32012
Operators reporting big data increases on the back of LTE• Verizonannouncedthat35%ofitsoveralldatatraffictravelledoverits
LTEnetworkattheendofQ32012,andtheoperatorexpectsthatinafewmonths’timethemajorityofitstrafficwillbetransmittedoverLTE
• MetroPCSreportedthatsubscriberstoitsunlimiteddataplansusebetween2GBand2.5GBpermonthonitscellularnetwork
• SincelaunchingLTEinJuly2011,RogersWireless(Canada)hasseenan80%increaseindatausage,andexpectstraffictogrowsix-foldby2016
4G smartphones gain popularity while T-Mobile cuts device subsidies• SmartphonepenetrationatVerizonincreasedfrom39%inQ32011to55%
inQ32012;theoperatorsold4.5millionLTEdevicesduringQ32012• Sprint(SprintNextel)revealedinOctoberthatithadsold1millionLTE
smartphonespriortothelaunchoftheiPhone5• USCellularreportedthathalfofthesmartphonesitsoldinQ3were4G• T-Mobile(DeutscheTelekom)confirmedthatitwilleliminatealldevice
subsidiesduring2013–fromthenoncustomerswillhavetopaythefulldevicecostupfront,purchasebyinstalmentsorsupplytheirowndevices
Shared data plans exceed operators’ expectations• AT&Tgained2millionsubscriptionstoits‘MobileShare’dataplanswithin
fiveweeksoflaunch,withmorethanathirdoptingfor10GBorlargerplans• Verizonreportedthat13%ofitscustomerbaseareonits‘Share
Everything’dataplans,usinganaverageofmorethan2.6devicespercontract
• Onasimilarbasis,Verizonnowreportsanaveragerevenueperaccount(ARPA)metric,whichwasup6.5%year-on-yearinQ3to$145.42
Insight: Sprint, T-Mobile eye up further spectrum as US market consolidates
October 2012 saw themost significant amount ofmerger activity in the USmobile industry for several years, with the announcement of T-Mobile USAandMetroPCS’mergerquickly followedbySprint’sagreement tobemajorityacquired by Japanese operator SoftBank. The T-Mobile/MetroPCS deal willconsolidate the former’s position as the country’s number four player with12.2%oftotalconnections(onapro-formabasis).Whilethemergerwillgivethecombinedoperationastrongpositioninthevalueendofthemarketwith20.8%ofthecountry’sprepaidconnections,theresultingsynergiesshouldalsoallowittocompetemoresuccessfullywithAT&TandmarketleaderVerizononLTE.
Thiscanbeachievedthroughcombiningtheoperators’AWSspectruminthe1700/2100MHzbands(inwhichMetroPCSalreadyprovidesLTEfor1.1millioncustomers), an action which T-Mobile CEO John Legere claimed would “…increaseourcontiguousspectrum forLTEby40%”.Specifically, in2013 thenewentitywouldbegintomoveMetroPCScustomersoffthatoperator’sCDMAnetworkandontoT-Mobile’snewLTEnetwork in theAWSspectrum,aswellasitsre-farmed1900MHzHSPA+network.Around60%ofMetroPCS’CDMAcustomersareexpectedtobemigratedovertotheT-Mobilenetworkswithinayear,andthenetworkislikelytobeshutdownandthespectrumre-farmedin2015-bywhichtimetheLTEdeploymentacrossthecombinedAWSspectrumshouldbecomplete.
Meanwhile, Sprint has secured funding to continue its network upgradeprogrammethroughSoftBank’s$20.1billioninvestment,ofwhich$8billionwillbenewcapital.TheoperatorhassetaboutsecuringnewspectrumforitsownLTEdeployment,agreeingadealwithUSCellular(TDS)topurchasespectrumand connections in the Midwest and entering into talks with Gamma (DishNetwork)overfurtherspectrumholdings.However,Sprint’sbiggestmovehasbeentoagreea$2.2billiondealtobuythe48.3%itdoesnotalreadyownofWiMAXoperatorClearwire,whichholdsasmuchas150MHzofspectruminthe2.5GHzband.
Whilebothmergersremainsubjecttoregulators,approvaliswidelyexpectedtobegrantedearlynextyeargiventhatbothdealswillputtherespectiveoperatorsinastrongerpositiontocompetewiththetoptwoplayersinthemarket.
wirelessintelligence.comWireless Intelligence
Joss Gillet Senior Analyst
Calum DewarLead Analyst
Sylwia KechicheAnalyst
Mark GilesAnalyst
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