Annual report covering: GSM, CDMA, 3G (analyses, technical issues, standards, market data), fixed-mobile substitution, Bluetooth, MVNO. Also contains industry analyses, issues and strategies, government policies, spectrum developments.
Detailed chapters on:
The future of voice
Global overview and analysis
Trends and Developments
Marketing and Business Strategies
Revenues, ARPU and forecasts
Mobile operations of telcos are progressively overtaking fixed line operations. This is largely due to fixed-line operators not having introduced significant new products, services or cost-saving technologies in the same way that mobile operators have. However, despite retaining their role as cash cows for incumbent operators, fixed and mobile voice services are progressively being overtaken by broadband. Increasingly, operators will need to take a holistic view of the market, necessitating a total review of their business models.
While high growth rates have been maintained globally until the present time, there is a massive shift taking place away from growth in developed markets to growth in the new emerging markets such as India, China, Africa and Latin America. By 2005, global growth stood at around 20%. Based on 2 billion subscribers, this is a massive development, and growth could lead to 5 billion subscribers over the next 15 to 25 years.
As more participants enter the mobile market, competition is increasing, with a subsequent decrease in prices and increase in services offered. To maintain the high growth of the mobile market, and counter falling prices, mobile carriers have started to offer services previously the domain of the fixed operators, and the fixed operators have had to respond.
In developed markets, mobile call charges are falling by 15%-20% per annum. While several countries in this market still see high growth in new mobile subscribers, they also see their overall revenue flattening because of the drop in call charges, as well as the fact that new subscribers are, in general, low-usage customers. As would be expected, markets with strong competition have seen a considerable drop in mobile call charges in developed markets through significant price competition around capped price plans. The others have retained declining but relatively high ARPUs. Since 2002, the low priced countries in this market have seen a levelling out of the mobile charges as they approach fixed call charges. These countries are stimulating further growth by developing mobile value added services.
In the new emerging markets, services are available for as low as $5 a month and call charges as low as 1 cent or even less per minute, with handsets available for $30 and 2nd hand ones even lower. It is easy to understand why the emerging market is seeing a mobile explosion.
Prepaid mobile services have rapidly increased their share of the total mobile market and are virtually the only option in emerging markets.
The future of MVNO remains uncertain, they are providers of mobile services independently from the operator that is supplying the network. With more competition and new services, operators will have to consider better MVNO deals in order to grow the market.
2G based services will remain predominantly voice driven, with a few enhanced services (SMS), and is unlikely to be widely accepted for data applications. For users who are only interested in voice, 2G is seen as quite adequate. For those who want mobile data services, 3G is, at least by the operators, seen as the answer, and some companies have paid enormous sums of money to obtain spectrum to allow them to capture this market. Having paid enormous prices for 3G spectrum, companies are now looking for business opportunities to recoup at least some of the money that they have invested.
Despite the high prices paid for 3G spectrum, and the initial enthusiasm by the operators, the future of 3G is not as bright as originally thought. Its major problem is its unsuitability for carrying mobile data, the major hope for its future. Wireless broadband technologies such as WiMAX, which are designed for mobile data, are going to compete head-on with 3G for that space. Only in Japan, where 3G has now been around for close to five years, are we seeing some good penetration - around 30%. Italy follows with just over 10% penetration, and the other country worth mentioning is the UK, which has just over 5% 3G penetration.
The most visible of all companies in the 3G market is Hutchison with its 3 service. It has launched these services in several countries with optimistic subscriber targets, but to date these have not been met. In its attempts to win subscribers, it has attacked the high end of the market, taking share from the existing 2G and 2½G operators. This is already leading to price retaliation by the existing operators and, if Hutchison’s efforts are successful, could lead to an all-out price war.
Despite promising growth, CDMA use is well below the early expectations. The US was slow to switch from analogue to digital services. In Asia, growth is slow except for Korea, although China is starting to show interest. For a while during the late 1990s, there was growing international interest in the upgrade of Digital AMPS known in the US as TDMA. There have been developments in CDMA to help bridge the gap to 3G, including cdmaOne and the various forms of CDMA2000, and their relative merits compared with the GSM technologies are discussed.
By late 2005, GSM allowed 1.6 billion mobile users to roam to more than 200 countries via over 750 networks making and receiving calls on one handset and with one global number. The technology now accounts for more than 77% of the world’s digital mobile phones. This market share is expected to grow even more with 3G systems, as more than 85% are expected to be 3G GSM/WCDMA (UMTS).
A low power short range radio technology is Bluetooth, which combines hardware, software and interoperability capabilities into a global standard that eliminates wires and cables between both stationary and mobile devices, facilitating data and voice communications between devices such as mobile phones and PCs. An attempt to combine it with UWB to create a better platform failed in 2006 when the parties could not agree on standards.
Before 1990, it was only possible to use the UHF band and below, thereby limiting the speed of information transfer. Since then, governments have released more of the high frequency spectra, thereby allowing major advances in technology and service.
The latest trend is to develop more innovative and flexible spectrum management plans which would open up competition and allow for a whole new range of applications and providers.
The value of the telecommunications equipment market overall has declined considerably. Because of revolutionary new technologies and lower consumer prices due to competition, some equipment suppliers had to severely reduce their production facilities and/or outsource production to countries with lower labour costs. The mobile market has also been affected, but to a lesser extent.
The simple mobile phone that only made telephone calls is now a museum piece. As vendors fight for market share, and more bandwidth becomes available, mobile phones are incorporating a variety of new functions such as still and movie cameras, advanced messaging, access to the Internet etc. Sales of handsets slowed markedly following the industry downturn in 2001, but started to recover in early 2004, with rapid growth during the year, aided by the development of new equipment such as camera phones. The trend here is that the mobile and wireless broadband market will be driven by new devices that will be pushed onto the market by the vendors. Mobile operators will see their leading position here to drive this market severely curtailed. Nokia retains it dominant market share, with Samsung showing the fastest growth rate. It is expected that the IT and CE industries are going to take a more prominent role in the market of new wireless broadband devices.
Mobile Satellite Services
Since 2001, the satellite industry showed little or no growth, and growth is not expected to return in the near future. Despite the original optimism and huge cash injections, MSS has not yet succeeded in establishing itself as a competitive market segment. Iridium went into bankruptcy pending restructure within a year of launching its service and Globalstar, another major international player, suffered the same fate. During the past few years, many of the surviving operations were acquired by Teledesic which, in turn, has been mothballed. In 2005, some signs of returning life emerged.