Global LTE outlook: forecast, technology, devices and pricing strategies

Transcription

1 Webinar Global LTE outlook: forecast, technology, devices and pricing strategies 16 October 2013 Chris Nicoll and Ronan de Renesse

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4 4 Operators embracing LTE on a global scale LTE technology advances service options Device vendor impact on the LTE ecosystem LTE pricing strategies Key take-away points

5 LTE is spreading around the world, thanks to flexible spectrum utilisation, and mobile broadband services 5 There were more than 200 million LTE connections worldwide, accounting for just 3% of mobile connections, by the end of Total LTE connections will reach 1.5 billion by Emerging Asia Pacific is set to become the dominant world LTE market, with its 420 million connections accounting for 27% of LTE connections worldwide by Nordics 2.4% Australia 2.1% Japan 12.7% Germany 2.0% UAE 0.1% Saudi Arabia 0.4% Italy 0.2% Russia 1.0% Only 11% of that region s connections will have migrated to LTE, as so there will still be considerable untapped potential for further take-up of LTE in that region. South Korea 21.5% 2013 USA 57.6%

6 LTE is spreading around the world, thanks to flexible spectrum utilisation, and mobile broadband services 6 There were more than 200 million LTE connections worldwide, accounting for just 3% of mobile connections, by the end of Total LTE connections will reach 1.5 billion by Emerging Asia Pacific is set to become the dominant world LTE market, with its 420 million connections accounting for 27% of LTE connections worldwide by Only 11% of that region s connections will have migrated to LTE, as so there will still be considerable untapped potential for further take-up of LTE in that region. South Korea 5% France 5% Russia 5% Germany 5% India 5% UK 5% Brazil 4% 2018 USA 30% Japan 12% China 24%

7 LTE trials show progress in both emerging and developed regions LATAM 3% NA DVAP 3% 5% MENA 9% SSA 10% WE 20% CEE 26% EMAP 24% The largest number of LTE network trials are in Central and Eastern Europe (26), Emerging Asia Pacific (24) and Western Europe (20) regions. Trials in CEE and EMAP in particular are driven by the adoption of the technology by regional operators such as Bharti Airtel, China Mobile, Reliance Infotel and SoftBank. Infrastructure vendors including Huawei, Ericsson and NSN, Samsung and ZTE demonstrating network upgrade and transition options. 7 For further details see the Analysys Mason s Wireless networks tracker. Available at:

8 Today s FD-LTE deployments and planned networks will provide near-global coverage by Key FD-LTE planned network deployments or trials in progress FD-LTE operational network

9 LTE is the optimal technology to combine the multiple spectrum positions many operators hold 9 45% of operators worldwide hold more than one spectrum band. 42% holding two or more LTE bands. 2% 1% They are planning multi-spectrum LTE networks, pairing coverage spectrum with capacity spectrum. 9% TeliaSonera used 2.6GHz with laptop USB modems. It will add 800MHz as smartphone penetration increases. US networks launched in reverse AT&T and Verizon in the 800MHz band, but Verizon now holds AWS (1.7/2.1GHz) spectrum while AT&T also holds AWS as well as 2.3GHz spectrum. 16% 17% 55% Number of spectrum bands per operator:

10 10 LTE s spectrum fractionalisation: more myth than reality The market has focused on five bands for FD- LTE and four for TD-LTE. Devices are able to support about six bands, thus providing room to support both local bands as well as the more commonly used global bands. TD-LTE is rapidly appearing as an adjunct to FD-LTE networks using unpaired spectrum in the GHz range. Samsung s Galaxy S4 dual-mode LTE variants support both TD- and FD-LTE. FD LTE Number of networks Countries or regions (examples) South America, China, MENA Europe, South Korea, Australia, MENA Europe, Japan, South Korea, MENA Japan, USA, Australia AWS (1.7/2.1) 13 USA TD LTE Number of networks Dual TD-/FD-LTE networks

11 North America remains at odds with the rest of the world, and Africa is likely to join the APT700 plan The USA is the single-largest 700MHz market in the world, and is incompatible with most of the rest of the world, making it an LTE island. 11 Key APT700 Plan adopted APT700 Plan recommended NAM700 Plan adopted

12 Mobile devices (excluding M2M), billions Share of mobile devices Global LTE outlook: forecast, technology, devices and pricing strategies Nearly one-fifth of global mobile connections will be on LTE by _LTE_connx_worldwide: Mobile connections, LTE/others [Source: Analysys Mason, 2013] % 20% 15% 10% 5% In 2012, there were nearly 80 million LTE connections world-wide, just 1.3% of total mobile connections. LTE has been concentrated in a few key markets, notably the US, South Korea and Japan. We forecast that development of LTE connections will accelerate over the next six years, multiplying twenty-fold by 2018, to reach 1.6 Billion connections Handsets will be slower to migrate to LTE than mobile-broadband devices. In 2018 nearly 1/5 th of handsets will be on a 4G connection, but almost half of mobile broadband connections are on LTE as China, India and Africa begin to ramp up LTE deployments. 0 0% 4G sub-4g 4G share

13 LTE share of mobile connections (handsets and broadband) Global LTE outlook: forecast, technology, devices and pricing strategies 13 Early-launch regions will race ahead in LTE penetration South Korea is currently the most advanced market, with 53% of all connections expected to be on LTE by 2013 (well ahead of the next most advanced, USA, at 28%). By 2018, we expect that North America will be the most advanced, with 82% of total connections on LTE. In 2012, North America was already leading the way, with 13% of connections, a head-start which gives momentum to future development. There is a similar story in Developed Asia- Pacific, where an 10% share in 2012 is magnified to 69% in Western Europe had less than 1% share of connections on LTE in 2012, but this is still sufficient to push the further development strongly, reaching 54% in _LTE_share_connx_GEOG: Development of LTE share of total connections by region [Source: Analysys Mason, 2013] 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

14 LTE connections (millions) Global LTE outlook: forecast, technology, devices and pricing strategies but in absolute terms, we forecast Emerging Asia Pacific will be by far the biggest regional LTE market 14 Emerging Asia Pacific is set to become the dominant world mobile market, with its 420 million connections accounting for 27% of the world LTE connections by By contrast, the next most developed region, North America will have achieved its position by much higher penetration of a smaller overall market: its 330 million LTE connections in 2018 represent 82% penetration of a total market of 410 million connections. Interestingly, the EMAP LTE total will exceed the total number of mobile connections in North America in 2018! 3_By device _geog: Development of LTE devices by region, 2018 [Source: Analysys Mason, 2013] Handsets Mobile broadband

15 Share of total LTE connections Global LTE outlook: forecast, technology, devices and pricing strategies TD-LTE will remain specific to a few niche markets, and will account for 13% of total LTE connections by TD-LTE has been adopted in a minority of markets. In 2012 the key markets for TD-LTE were Russia, China and Saudi Arabia. In Russia, Yota MTS and Yota launched TD- LTE in May and September 2012 respectively. China Mobil is expected to launch TD-LTE in 2013 and China Unicom had just announced their intention to pursue TD-LTE in the short term. In Saudi Arabia, Mobily and STC both launched TD-LTE in September We expect that TD-LTE will remain significant in 2018 in the following regions: Emerging Asia-Pacific, Middle East and North Africa and Central and Eastern Europe. 7_TD-LTE share: TD-LTE share of total LTE connections, by region, 2012 and 2018 [Source: Analysys Mason, 2013] 90% 80% 70% 60% 50% 40% 30% 20% 10% % NBED Reference the LD-LTE report.

16 Mobile service revenue (USD billions) 4G share of service revenue Global LTE outlook: forecast, technology, devices and pricing strategies 4G will generate 52% of global telecoms revenue by 2018: 69% of MBB revenue, and 51% of handset revenue 16 By 2018, we expect that the 20% LTE share of worldwide total mobile connections will yield 52% of global revenue. In 2012, total mobile service revenue worldwide was just below USD 1000 billion, and at USD 49 billion LTE revenue only represented 5% of that value. By 2018 we forecast the global mobile revenue will have grown to USD 1100 billion, and that LTE s 52% share will be worth USD 569 billion. 9_Rev share Mobile service revenue by technology and device, world-wide, [Source: Analysys Mason, 2013] 1,200 1, % 70% 60% 50% 40% 30% 20% 10% 0 0% Handset - 4G Broadband - 4G handset total Handset - sub 4G Broadband - sub 4G broadband

17 17 Operators embracing LTE on a global scale LTE technology advances service options Device vendor impact on the LTE ecosystem LTE pricing strategies Key take-away points

18 The LTE-A Releases will change the way operators use and manage spectrum for mobile services 18 LTE-A core features: Carrier Aggregation HetNet SON Release 10 initial LTE-A release (available in 2013) CA, Improved network performance, HetNets Release 11 (available 2014) Gigabit download speeds and improved automated management functions Release 12 (available about 2015) Improved operations benefits and technology upgrades

19 150Mbps LTE service is here, and 300Mbps mobile broadband is within sight 19 SK Telecom and LG Uplus launched LTE-A CA services in SK Telecom: largest commercial launch initiated with 150Mbps speeds and about subscribers at September 2013 Telstra: trialled 900MHz and 1.8GHz in July 2013, but will use will use larger blocks of 700MHz and 1.8GHz spectrum to deliver 300Mbps download speeds for commercial launch in 2015 Philippines operator Smart Communications trials showing speeds of over 210Mbps. Country Operator Maximum download speeds (Mbps) Australia Telstra 300 (expected) Austria A1 Telekom Austria 580 (trial) China China Mobile 233 (TD-LTE) Japan DoCoMo 300 (expected) Philippines Smart 210 Portugal Optimus 300 Russia Yota 300 South Africa Telkom Mobile (8ta) 210 (TD-LTE) South Korea SK Telecom LG Uplus Turkey USA Turkcell AT&T, T-Mobile, Verizon 900 (lab) (expected)

20 VoLTE has limited market penetration in 2013, hampered by slow network deployments, and technical concerns 20 Date Event Feb 2011 Verizon Wireless completes first VoLTE Call Aug 2012 SK Telecom deploys first HD VoLTE service LG Uplus launches VoLTE service Aug 2012 MetroPCS (US) launches limited VoLTE service Oct 2012 Korea Telecom launches VoLTE Apr 2013 EE (UK) announces network upgrades to provide support for new services, including VoLTE May 2013 Mobily (Saudi Arabia) completes VoLTE trials Jul 2013 Bharti Airtel (India) requests permission to trial VoLTE 1Q 2014 O2 Germany to demo VoLTE 4Q 2014 China Mobile to launch VoLTE

21 21 Operators embracing LTE on a global scale LTE technology advances service options Device vendor impact on the LTE ecosystem LTE pricing strategies Key take-away points

22 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Number of LTE devices Global LTE outlook: forecast, technology, devices and pricing strategies Over 20 new LTE handset models and over 30 new mobile broadband devices enter the market every month 22 Number of LTE devices by type [Source: Global Mobile Supplier Association, 2013] Key drivers: The LTE device cycle: Handset vendors tend to release new flagship models every 12 months. New LTE markets: Countries such as France, Italy and the UK have launched LTE networks, creating demand for more devices in the 800MHz and 2600MHz bands There were 360 LTE handset models as opposed to 1679 HSDPA handset models in July Handsets = 33% of LTE device ecosystem Tablets Handsets MBB devices (router, dongle, module) Handsets = 44% of the HSDPA device ecosystem

23 Three vendors control more than half of the LTE handset ecosystem 23 LTE handset models by device vendor, July 2013 [Source: Global Mobile Supplier Association, 2013] LTE MBB device models by device vendor, July 2013 [Source: Global Mobile Supplier Association, 2013] 20% 23% 14% 4% 5% 51% 9% 8% 6% 18% 4% 6% 7% 11% 4% 4% 3% 3% Samsung LG HTC Pantech Motorola Sony Mobile ZTE Huawei Others Huawei ZTE AsiaTelco BandRich Netgear Netcomm NSN Yota Devices Others

24 FDD bands TDD bands Global LTE outlook: forecast, technology, devices and pricing strategies Fragmented LTE spectrum leads to variations in LTE handset availability across the world There are about 20 spectrum bands for which there are LTE handsets available US: fragmented handset market but offers the scale which vendors are looking for. 295 LTE handset models. Korea and Japan: high number of compatible LTE handset because of lead position in LTE deployment. Europe: catching up fast with 237 LTE handset models. The iphone 5C and the iphone 5S each have 5 different models covering all together 17 LTE bands. The iphone 5, released a year earlier, covered only 7 LTE bands with 3 different models. Number of LTE handset models by LTE spectrum band, July 2013 [Source: Global Mobile Supplier Association and Analysys Mason, 2013] 41 (2600MHz) 40 (2300MHz - China Mobile) 39 (1900MHz - China Mobile) 38 (2600MHz - China Mobile) 25 (1900MHz- Sprint) 21 (1500MHz - NTT) 20 (800MHz - EU) 19 (800MHZ - NTT) 18 (800MHz - KDDI) 17 (700MHz - AT&T) 13 (700MHz - Verizon) 12 (700MHz - US) 11 (1500MHz - KDDI) 8 (900MHz - KT, Softbank) 7 (2600MHz - EU) 5 (850MHz - Korea) 4 (1700MHZ - Canada, US) 3 (1800MHz - APAC, MEA, EU) 2 (1900MHz - US) 1 (2100MHz - Korea, Japan) Number of LTE handset models 24

25 Device vendors impact on LTE goes beyond spectrum compatibility 25 Samsung Galaxy S4 LTE-A [Source: Samsung, 2013] Sony Xperia Z1 [Source: Sony Mobile, 2013]

26 26 Operators embracing LTE on a global scale LTE technology advances service options Device vendor impact on the LTE ecosystem LTE pricing strategies Key take-away points

27 27 LTE smartphone pricing strategies are fragmented; indicating that operators are still experimenting LTE smartphone tariff marketing strategies of selected operators, by country, September 2013 [Source: Analysys Mason, 2013] Country Speed used to differentiate tariff tiers 4G only available on top-level tiers Unlimited voice and messaging services by default LTE-specific bundles of OTT content Multi-device shared data strategy Tethering strategy Australia Denmark France Germany Hong Kong Singapore Sweden UK USA Key: = no operators = minority of operators = 50% of operators = applicable to majority of operators = all operators. = Asia Pacific = Western Europe = North America

28 LTE operators in Western Europe start to use content and VAS to upsell 4G tariffs 28 Content and VAS bundled with 4G postpaid tariffs, selected operators, Western Europe [Source: Analysys Mason, 2013] Operator Content or VAS Main strategy 4G premium Telenor (DK) WIMP (music streaming service) Upsell top-level plans No Telia (DK) Spotify Premium or HBO for 12 months Upsell top-level plans No SFR (FR) Dropbox (2GB), SFR Wi-Fi, SFR TV Upsell 4G plans Yes Vodafone (IT) Rete Sicura, Parental Control Upsell top-level plans No EE (UK) EE Films (zero-rated video streaming or download until 31 December 2013), Wi-Fi on the London Underground, tethering and VoIP Differentiate from (3G) competitors No O2 (UK) O2 Tracks (access), O2 Games (zero-rated), Priority Sports (access) Upsell 4G plans Yes Vodafone (UK) Spotify Premium or Sky Sports Mobile TV, 5 Star Care (device protection and support), BT Wi-Fi access Upsell 4G plans Yes

29 Monthly fee (GBP) Total cost of ownership (TCO) Global LTE outlook: forecast, technology, devices and pricing strategies Case study: how competition drives LTE tariff changes in the UK 29 SIM-only smartphone 12-month deals [Source: Analysys Mason, 2013] 70 iphone 5s 16GB 24 months TCO [Source: Analysys Mason, 2013] Vodafone promotional offer EE price adjustment Monthly data usage (GB) EE Vodafone O2 3UK_ Monthly data usage (GB) Vodafone O2 3UK_500 3UK_1000 3UK_2000 EE (old) EE

30 Italy Singapore France UK Australia Germany Hong Kong USA Cost per gigabyte (USD) Monthly access charge (USD) Monthly data allowance (GB) Global LTE outlook: forecast, technology, devices and pricing strategies Operators are reducing the price difference between 3G and 4G mobile broadband services 30 Average cost per GB and monthly access charges for entrylevel 4G tariffs, 2Q 2013 [Source: Analysys Mason, 2013] Allowances and access charges, entry-level 4G tariffs, 2Q 2013 [Source: Analysys Mason, 2013] Tele2 (SE) TDC (DK) TIM (IT) and Vodafone (IT) Bouygues Telecom (FR) Telia (SE) Telenor (SE) EE (UK) 3 (DK) O2 (DE) Telia (DK) Telenor (DK) SFR (FR) T-Mobile (DE) Vodafone (GER) Orange (FR) Cost per gigabyte Access charge Monthly access charge (USD) No 3G/4G differentiation 3G/4G differentiation

31 12-month TCO (USD) Global LTE outlook: forecast, technology, devices and pricing strategies Multi-device ownership offers great opportunities for LTE but connectivity costs on tablets are too high 31 Smartphone respondents device ownership, by device type [Source: Analysys Mason, 2013] 1 Kindle Fire HDX total cost of ownership (TCO) with LTE on AT&T [Source: Analysys Mason, 2013] % 3% % 56% x2 x2.2 x3 x Tablet only Tablet and laptop Laptop only Neither 1 For further information see Analysys Mason s The Connected Consumer Survey 2013: Smartphones, mobile data access and monetisation 0 Shared 250MB 3GB 5GB Data allowance LTE service LTE device mark-up Kindle Fire HDX 7" 16GB (with offers)

32 <=1GB 2-5GB 10-20GB >20GB Smartphone respondents Smartphone respondents Global LTE outlook: forecast, technology, devices and pricing strategies 32 Mobile data value deflation: finding new ways to upsell Data allowance consumption by tier [Source: Analysys Mason, 2013] 1 100% Self-reported data usage, 4G vs non-4g, USA [Source: Analysys Mason, 2013] 1 50% 45% 80% 60% 40% 20% 40% 35% 30% 25% 20% 15% 10% 5% 0% 500MB 1GB 2GB 5GB Data allowance 0% Less than 50% % Overuse 4G Non-4G 1 For further information see Analysys Mason s The Connected Consumer Survey 2013: Smartphones, mobile data access and monetisation

33 33 Operators embracing LTE on a global scale LTE technology advances service options Device vendor impact on the LTE ecosystem LTE pricing strategies Key take-away points

34 34 Key take-away points LTE is fast-growing, but not yet dominant, in most markets LTE offers flexible deployment, technology and service options The LTE device market is maturing but is still vastly dominated by dongles and routers Operators continue to experiment with LTE pricing; content bundles and shared data plans are popular LTE will not be sufficient to solve mobile data monetisation challenges in the long-term

35 35 Contact details Chris Nicoll Principal Analyst Ronan de Renesse Principal Analyst Boston Tel: Fax: Cambridge Tel: +44 (0) Fax: +44 (0) Dubai Tel: +971 (0) Fax: +971 (0) Dublin Tel: +353 (0) Fax: +353 (0) Edinburgh Tel: +44 (0) Fax: +44 (0) Johannesburg Tel: Fax: London Tel: +44 (0) Fax: +44 (0) Madrid Tel: Fax: Manchester Tel: +44 (0) Fax: +44 (0) Milan Tel: Fax: New Delhi Tel: Fax: Paris Tel: +33 (0) Fax: +33 (0) Singapore Tel: Fax: