Sales Improved Affordability And Performance Driving Sales

The global market for mobile telephone services is the largest and, arguably, the fastest-growing segment of the telecommunications industry. After the earliest analogue-based networks went live in the mid-1980s, it took almost a decade for mass-market adoption momentum to be achieved and, more than a decade later, that momentum seems far from spent. BMI’s databases recorded a total of 4.628bn mobile subscribers at the end of 2009, a figure we expect to almost double to 8.134bn by the end of 2014.

Those countries that became early adopters of the mobile phone appear–on the face of it–to be all but tapped-out in terms of growth opportunities, with operators looking to target an increasingly youthful market for organic subscriber additions while poaching customers from their rivals through aggressive pricing and elaborate product bundling initiatives. The recent emergence of the mobile applications (‘apps’) store has given a new lease of life to mature markets, allowing operators to tap into new and vibrant revenue streams based on an ever-broadening array of value-added content and services.

However, BMI’s forecasts underline the fact that significant organic growth opportunities remain unexploited in many of the world’s emerging markets, particularly where operators have traditionally been reluctant to step into rural, remote and economically deprived areas. To be sure, those operators that choose to do so will find it difficult to make profit on the same scale they have been used to seeing in more affluent markets. But their rewards for making these ostensibly risky investments will come from helping low-income users transform their social standing, impacting on their local economy and so drive future revenues.

The accompanying chart shows BMI’s forecasts for mobile subscriber growth over the next five years. It clearly demonstrates that Asia and Africa offer the greatest potential for expansion over the period in question, as many new networks begin to be rolled out across both continents.

It is, perhaps, unsurprising that Asia should show the steepest projected rate of growth, despite the fact that the region is largely better served by successful operators. There is a huge number of people that currently do not own a mobile phone simply due to the fact that owning a handset is often, in itself, beyond their means. Actively using basic and value-added services is even further beyond their means.

This is why handset manufacturers, such as Nokia, are striving to make their products as affordable as possible. Essentially, more affordable handsets means greater sales volumes (though not necessarily greater revenues from handset sales).

Getting those handsets into the hands of low-income consumers is one thing–encouraging them to spend what little income they have to spare on basic and value-added services is another. And, here, Nokia is also leading the way, by incorporating simple software-based services that give users access to essential life tools, such as weather, financial, location and education services germane to those users’ lifestyles and geographic locations.

Nokia is increasingly positioning itself as a service provider, allowing it to offset any losses it makes from selling ultra low-cost handsets by deriving revenues from access to its software-based information services. It partners with local content providers (banks, media, local government, etc) to obtain the content and services are delivered over local networks. This leaves operators in the uncomfortable situation of acting as mere ‘dumb pipes’ but does, at least, give them the opportunity to earn revenue from the traffic carried over their networks and maybe to entice users onto their premium value-added service platforms.

Nokia is having to change tactics in order to survive the onslaught of a host of new competitors. On the one hand, it is attempting to ramp-up the quality of its high-end devices, or smartphones, as these products increasingly appeal even to casual mobile phone users in developed markets. The appeal of mobile applications to improve the mobile internet experience is also a key selling point and Nokia has launched its Ovi-branded mobile store, to some degree of success.

On the other hand, though, Nokia is all too aware that operators’ efforts to tap the underserved low-income and rural consumer markets in Asia, Africa and Latin America needs the support of a low-cost device portfolio. The company is, therefore, actively championing some of the most affordable products on the market.

This reflects the sector’s polarisation into high-end and low-end products and, as such, Nokia should continue to do well in the years ahead, despite heightened competition in the smartphone market and growing dissatisfaction (from the technical community rather than the user community, it has to be said) with Nokia’s refusal to use an operating system other than its tried and trusted Symbian platform, a flirtation with the Meego OS for mobile computing notwithstanding.

Clearly, the market has changed enormously in the last three years, and Nokia cannot afford to rest on its laurels either in the smartphone arena or in the low-cost handsets field. Its principal challenge does from from the OS front, though, as this and the handset user interface (UI) are often the key elements that can persuade a consumer to take a particular handset.
Symbian–despite going open source and receiving a number of upgrades, not least of which will include the facility to make contactless transactions in the Symbian^4 platform–is showing its age and is often passed over in favour of the rather more glamorous Apple OS, found on its highly popular music player, iPod, and now on its iPhone and iPad wireless devices. A direct connection to the highly user friendly Apple application store (‘app store’) only serves to enhance the iPhone family’s attractiveness to anyone even remotely familiar with smartphones and computers.

But it is another open source OS that is stealing all the thunder at the moment. The Android OS has been developed by internet search giant Google and a host of handset vendors and its use on a rapidly-growing range of devices, coupled with a well-established app store of its own, has ensured that Android-powered devices are outselling iPhones at a spectacular rate. Floundering Motorola has found its salvation in Android, with a revamped smartphone portfolio behind its recent return to form and improved prospects for the spin-off its handset division in 2011. Samsung, LG Electronics and former white label device maker HTC have all done very well out of Android, too.

Buoyed by the popularity of smartphone OSs and application stores, Samsung and computer-maker Lenovo have developed platforms of their own, with Samsung’s Bada set to arrive in the second half of 2010 and Lenovo backing the Chinese OPhone system. And HTC’s success in transforming itself into a major original equipment manufacturer has prompted China’s telecoms equipment makers ZTE, Huawei and the GFive group onto the international stage with handsets of their own.
The times are changing, but perhaps not as fast as the handset sector.

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"Executive Summary 9
Emerging Markets Buoy Handset Sales
Improved Affordability And Performance Driving Sales
chart: Low Costs Key To Signing New Mobile Users 9
Global Mobile Subscriber Growth (‘000 Subscribers), 2005-2014
chart: Nokia Still King Of The Phones 10
Mobile Handset Market Shares By Vendor, Q210
Trends In The Handset Market 12
Broad Trends And Characteristics
Growing Affordability of Mobile Handsets 12
Continuing Growth Increasingly Driven By Replacement Demand 12
Increasing Demand For Differentiated Mobile 12
Handsets With More Functions And Personalised Features 12
Continual Evolution Of Wireless Network Technologies 12
chart: 2G Dominates Em erging Markets As 35G Takes Hold 13
Global Mobile Subscribers By Technology (‘000 Subscribers)
Highly Competitive Market 13
Trends In Average Selling Prices 14
Cost Remains King
It’s The (An)Droids We’re Looking For 14
chart: Declining Handset AS Ps Yet To Plateau 14
Annual Mobile Phone ASPs By Key Vendor, 2006-2009 (US$)
Table: Annual Mobile Phone AS Ps By Key Vendor, 2006-2009 (US$) 14
vendor: nokia, samsung, motorola, lg electronics, sony ericsson, rim, palm, htc,
qiao xing (cect)
chart: Low Cost Equals Greater Sales 15
Key Vendors’ Quarterly ASPs (US$), 2008-2010
Q210 Handset Market Analysis 16
Handset Growth Rallies BMI’s Above-Consensus Forecast
Nokia Still King For Now 16
chart: Nokia Still Fl ying High For Now 16
Leading Handset Vendors’ Market Shares (%), Q407-Q210
Chart: Nokia Still King Of The Phones 17
Mobile Handset Market Shares By Vendor, Q210
Handset Forecasts 18
Global Handset Market Forecasts, 2007-2014
Asia Is The Engine For Growth 18
chart: Asia Will Power Gl obal Handset Sales Growth 18
Global Handset Shipments By Major Market (‘000 Devices), 2006-2014
Table: TOTA L PHONE SHI PMENTS PER ANN UM (‘000)19
region: north america, latin America, caribbean, western europe, eastern europe, asia,
middle east, africa, total
4 Business Monitor International Ltd
BMI Global Handset Market: Key Trends & Opportunities, 2007-2014
Vendor Profile: Nokia 22
Leader Of The Pack
But Does ‘Open’ Symbian Cut The Smartphone Mustard? 22
chart: Sm arter Phones, Sm arter Consum ers 22
Smartphone Market Shares By Vendor, Q210
Table: Reported Qu arterly Financial Resul ts, 2009 vs 2010 (EURm n) 22
indicators: net sales, devices & services, navteq, nokia siemens networks, operating
profit, devices & services
Smarter, Slicker Competition Forces Nokia To Restructure 23
Smartphone Traction Continues To Elude Nokia 23
Android Marches In 24
Back To The Future 24
Vendor Profile: LG Electronics 26
The Great Pretender
One Eye On Nokia’s Smartphone Throne 26
chart: Fall ing On Sm artphone Comp etition 26
LG Electronics: Mobile Communications Division Financial Results (KRWbn)
chart: New Markets To Provide Growth Opp ortunities 26
Regional Shares of Handset Shipments* (%), Q210
BMI Key Mobile Market Forecasts 27
France 27
chart: France Indu stry Trends - Mobile Sector 27
2007-2014
Table: france - Historical Data & Forecasts 27
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
Russia 28
chart: Ru ssia Indu stry Trends - Mobile Sector 28
2007-2014
Table: Ru ssia - Historical Data & Forecasts, 2007-2014 28
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
United States 29
chart: USA Indu stry Trends - Mobile Sector 29
(2007-2014)
Table: United States - Historical Data And Forecasts 29
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
Brazil 30
chart: Brazil Indu stry Trends - Mobile Sector 30
(2007-2014)
Table: Brazil - Historical Data And Forecasts30
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
Business Monitor International Ltd 5
special report
Bahrain 31
chart: Bahrain Indu stry Trends - Mobile Sector 31
2007-2014
Table: Bahrain - Historical Data & Forecasts 2007-2014 31
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
Nigeria 31
chart:Nigeria - Mobile Sector32
2007-2014
Table: Nigeria - Historical Data & Forecasts, 2007-2014 32
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
China 33
chart: China Indu stry Trends - Mobile Sector 33
2007-2014
Table: China - Historical Data & Forecasts33
indicators: no of mobile phone subscribers (‘000), no of mobile phone subscribers/100
inhabitants, no of mobile phone subscribers/100 fixed-line subscribers, no of 3g phone
subscribers (‘000), 3g market as % entire mobile market
Table: China - AR PU — Historical Data & Forecasts (CNY ) 33
operator: china mobile, china unicom, china telecom, total, market average
chart: China AR PU 34
2007-2014
ARPU 34
BMI Key Mobile Market Forecasts 35
France 35
chart: France Mobile Market Growth 35
2007-2010
Remaining 3G Spectrum 35
Market Share 36
chart: France - A Comp arative Stud y Of Mobile Op erator Market Shares (%) 37
2007-2010
Mobile Virtual network Operators 37
Table: French Mobile Market, Q110 37
operator: orange, sfr, bouygues telecom, mvnos, total
chart: France 3G Su bscriber Growth 38
2007-2010 (‘000)
3G 38
4G/LTE 39
Russia 40
chart: Ru ssia Mobile Growth 40
Total Subscribers & Net Additions
Inactive SIMs 40
chart: Ru ssia Mobile Penetration (%) 41
Q110
Market Share 41
6 Business Monitor International Ltd
BMI Global Handset Market: Key Trends & Opportunities, 2007-2014
Table: Ru ssian Mobile Market, Q11042
operator: mts, megafon, vimpelcom, tele2, uralsvyazinform, sibirtelecom, smarts,
other, total
chart: Ru ssia - Comp arative Stud y Of Op erator 42
Market Shares (%) 2007-2010
New Frequency Auction 43
3G 43
CDMA & WiMAX 44
Will A New Licence Be Tendered? 45
Mobile TV 45
United States 46
chart: US Mobile Market Growth 46
(2007-2010)
chart: US Prepaid Versus Postpaid 47
(2007-2009)
Subscriber Numbers And Market Share 47
chart: US - A Comp arative Stud y Of Mobile Op erator Market Shares 47
(2008-2010)
Table: US Mobile Market, Regional Mobile Network Op erators 48
operator: verizon wireless, at&t mobility, sprint nextel, t-mobile, us cellular,
other (e), total(e)
Table: US Mobile Market, Q11048
operator: metropcs, leap wireless, cincinnati bell, n telos, southernlinc wireless,
alaska communications systems
Subscriber Mix 49
Table: US Mobile Network Op erator Su bscriber Mix Q110 49
operator: verizon wireless, at&t mobility, sprint nextel, t-mobile, us cellular, total
chart: US - Wireless Su bscriber Mix (‘000) 49
(Q110)
MVNOs 49
3G 50
4G: LTE And WiMAX 51
Harbinger Plots ‘Open’ LTE Network 51
Brazil 52
chart: Brazil Mobile Su bscribers And Penetration 52
(2007-2010)
chart: Brazil - Total Su bscribers by Technology 53
(2007-2010)
Competition To Increase 53
chart: Brazil - A Comp arative Stud y of Mobile Op erator Market Shares 53
(2007-2010)
Subscribers And Market Share 53
Table: Brazil Mobile Market, Q11054
operator: vivo, claro, tim brasil, oi, others*, total
Table: Brazil Mobile Net Add itions, Q409-Q11054
operator: vivo, claro, tim brasil, oi, others*, total
3G 55
Business Monitor International Ltd 7
special report
Table: Brazil 3G Su bscriptions By Technology55
operator: w-cdma, cdma2000, data terminals, total
Mobile Content 56
Table: BRAZI L–SE LECTE D RECENT CONTRACTS AWAR DED 56
period: feb-2010 - feb-2008
chart: Brazil - Proportion Of Su bscribers Using VAS 57
VAS Usage In Previous Three Months, December 2009 (%)
chart: Brazil - DATA /VAS as % of Service Revenues 57
(2007-2008)
VAS As A Proportion Of Revenues 57
Mobile Internet 57
Other VAS 58
Bahrain 58
chart: Bahrain Mobile Market Growth 58
2006-2009
Table: Bahrain Mobile Market, 200959
operator: batelco, zain (mtc), total
3G 59
Mobile Broadband 60
Mobile Content 61
Mobile TV 61
Mobile Banking 61
Nigeria 62
chart: Nigeria Mobile Market Growth (mn) 62
(2008-2010)
chart: Nigeria Mobile Market Shares (%) 63
(2008-2010)
Market Shares And Net Additions 63
Table: Nigeria Mobile Market, Q11063
operator: mtn, globacom (e), zain (formerly celtel), starcomms and other cdma operators,
emts (plus m-tel), total
Network Development And Strategy 64
3G 65
Mobile Content 66
China 66
Table: China Mobile Market, March 201067
operator: china mobile, china unicom, china telecom, total
Table: China Mobile Net Add itions, march 201067
operator: china mobile, china unicom, china telecom, total
3G 68
Table: China 3G Mobile Market, March 2010 68
operator: china mobile, china unicom, china telecom, total
China Mobile 69
China Unicom 69
China Telecom 70
Mobile Content 70
Table: China Mobile VAS Revenues (CNY bn)72
operator: china mobile, china unicom, china telecom
chart: China Mobile VAS Revenues 70
8 Business Monitor International Ltd
BMI Global Handset Market: Key Trends & Opportunities, 2007-2014
FY09e (%)
chart: China Unicom VAS Revenues 71
FY09e (%)
Mobile Broadband 71
Mobile TV 72
chart: Chinese Handset Market Share By Vendor 72
2009
Handset Market Share 72
Glossary of Terms 74"

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