Wireless Data Market

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Slide 1: US Wireless Data Market Q1 2007 Update Slide 2: US Wireless Market – Q1 2007 Update US wireless data market continues to grow at a steady pace offsetting any decline in voice revenues. Growth in both enterprise and consumer segments resulted in a $5B quarter for the industry (by comparison, in 2004, the total data revenues for the year were $4.6B). Given that approximately 60% of the revenues are from nonSMS applications and the subscriber penetration of data services is still low, we remain bullish on the US data market. However, as the subscriber penetration crossed 80% this month, the subscriber growth continues to slow down from its highs in 2005. • • • • • • US wireless data market got over the $5B mark in service revenues in any given quarter for the first time. Revenues jumped 12% from Q406 and over 68% from Q106 to approximately $5.5B for Q107. Overall ARPU remained at the same levels as Q106 and Q407, which speaks to the value of data revenues in the declining voice revenue market. While voice ARPU declined 6%, data ARPU rose 46%. The average ARPU in the US stands at $8.34 or almost 16% of the service revenues. The strongest growth was experienced by Verizon whose data revenues jumped 83% from Q106 to $1.6B. While Sprint still leads in absolute data ARPU numbers, Verizon is likely to take that mantle by Q307. Sprint with $9.25 was ahead of Verizon at $8.7, AT&T at $7.88, and TMobile at $7.5 in data ARPU The % contribution of data to service revenues jumped from 11% to 16% during the last year. Verizon leads with 17.4% with AT&T at 16%, Sprint with 15.7%, and TMobile at $14.4 close behind. US wireless data market continued its rapid growth in 2006. Wireless data service revenues jumped almost 84% to approximately $15.8B (from $8.6B in 2005). The service data revenues are likely to top $27B in 2007. In terms of netadds, the numbers declined 17% from Q406 to just over 5M new subs dropping the rate from 1.92subs/month in 2006 to 1.66 subs/month in 2007. Some of this is expected due to seasonal boost in Q4 however, the decline in netadds over the course of last 34 quarters is indicative of slowing market as discussed in our quarterly updates last year. With subscriber penetration crossing 80%, sub5M quarters will become the norm rather than the exception. Carriers will have to focus on increasing customer lifetime value and not rely solely on new subs to boost revenues. http://www.chetansharma.com 2 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 3: US Wireless Market – Q1 2007 Update • • • The overall subscriber penetration currently stands at approximately 80%. The top three carriers again surpassed $1B/quarter (in data revenues) mark with ease, in fact Verizon and AT&T crossed the $1.5B mark with $1.6B and $1.5B in data revenues respectively. Apart from Sprint, all remaining top four operators experienced doubledigit percentage growth. Verizon narrowed its distance from AT&T. Only 1.5M subscribers separate the two. In Q106, this number stood at 2.8M. Except for Q406, Verizon has added more new customers every quarter (AT&T took the honors last quarter) for past several quarters. Though industry is waiting with much anticipation the release of iPhone by AT&T, I mean, Apple, it is not going to have much impact on the Q2 numbers. Helio and Amp’D boasted $100 ARPU and 100K subscriber base but the burn rate and Cost of Customer Acquisition remains quite high. Though the overall penetration of messaging is around 40%, in terms of total number of messages in the network, US had another blockbuster quarter. Verizon with 22.75B, TMobile with 16B, and AT&T with 14.23B messages (SMS and Multimedia messaging) were the leaders. Notice TMobile’s performance with less than half the number of subscribers compared to its peers. Q1 also saw the introduction of MediaFLO from Verizon and Qualcomm with AT&T slated for a Q3 launch. The DVBH camp appears to be disoriented and still looking to move beyond trials to committed launches. Though potential of mobile video is there, we need to be reminded that the current penetration is 23% indicating a long road ahead. However, the user experience on MediaFLO is stellar and if business models fall in place, the future looks good. Verizon indicated over 100M in application downloads up over 36% from last quarter. With growth in datacard usage and other data apps, the revenue contribution from nonSMS apps is close to 60%. Even with many of the application below 25% penetration, these trends bode well for the US mobile data industry and the stability of ARPU in general. We expect the year to end at approximately $11 in data ARPU or 20% of the service revenues. Amongst other initiatives, AT&T’s banking effort and Visa’s NFC push are noteworthy. WiMAX has started to show on the radar screen though not so much in devices. Clearwire reported 258K , $32 ARPU, and $343 in customer acquisition costs. Sprint is planning to launch some UMPCs and data cards with its WiMAX push later this year. Despite these launches, position of WiMAX in western markets remains tenuous. http://www.chetansharma.com • • • • • • 3 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 4: US Wireless Market – Q1 2007 Update • • • As we move into Q2, while Motorola is recovering from ROKR, iPhone is the one to die for though RIM is ahead of the CURVE, and Helio’s OCEAN has set sail. Nokia’s N95, LG’s Prada, and Samsung’s Upstage are vying for attention. With iPhone announced, media rumor mill focused on gPhone. There was tremendous activity in the area of Mobile Advertising. There is a lot of confusion around what it means. All carriers are active in the space. Even TMobile is running trials. There is debate around how long the carrier influence on this segment will last. Though Nokia continues to struggle in the US market, it shipped over 91M handsets worldwide managing a 35.7% market share at the end of Q107. Motorola’s share dropped dramatically to 17.8% from 22.8% in Q406. Samsung seemed to have benefitted from the slump of its rival by upping its mark share by two points to 13.6%. Overall the handset vendors shipped over 250M handsets in Q107. In terms of investment, over $1.6B was invested in wireless related companies/startups in Q107. (Source: Rutberg) US wireless carriers maintained their strong showing visàvis their peers worldwide. Verizon, Cingular, and Sprint maintained their ranking # 4, 5, and 6 respectively, amongst the top 10 operators worldwide in terms of total wireless data revenue generated for Q107. US is the only country with 3 operators who generated $1.4B or more in data revenues in the quarter. For the third straight quarter TMO US outperformed its parent TMO Germany. Internet brands with Google and Yahoo in particular are pursuing an aggressive subscriber acquisition strategy. • • • • http://www.chetansharma.com 4 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 5: US Wireless Service Data Revenues http://www.chetansharma.com 5 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 6: US Wireless Carriers: Data ARPU Trends http://www.chetansharma.com 6 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 7: US Wireless Carriers: Data ARPU Trends http://www.chetansharma.com 7 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 8: US Wireless Carriers: Data ARPU Trends http://www.chetansharma.com 8 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 9: US Wireless Carriers: Data ARPU Trends http://www.chetansharma.com 9 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 10: US Wireless Carriers: Voice ARPU Trends http://www.chetansharma.com 10 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 11: US Wireless Carriers: Net Adds http://www.chetansharma.com 11 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 12: US Market: Carrier Market share (Q107) http://www.chetansharma.com 12 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 13: Top Carriers by Wireless Data Revenues http://www.chetansharma.com 13 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 14: Wireless Investments in Q107 http://www.chetansharma.com 14 © Chetan Sharma Consulting, All Rights Reserved May 2007 Slide 15: http://www.chetansharma.com http://www.chetansharma.com 15 © Chetan Sharma Consulting, All Rights Reserved May 2007