Annual State of Global Mobile Industry 2012 Chetan Sharma Consulting 2

© Copyright 2012, All Rights Reserved. Copying w/o permission is prohibited. http://www.chetansharma.com 1

State of the Global Mobile Industry Annual Assessment - 2012

Research. Technology. Strategy. Intellectual Property. Thought Leadership Summits.

http://www.chetansharma.com/

© Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. http://www.chetansharma.com 2

Table of Contents

• Global Mobile State of the Union - 2012 • Mobile Impacts Everything • Mobile Subscriber and Revenue Growth • Global Markets – Data Growth • Devices – Changing Landscape • Mobile VAS and OTT • Mobile Data Traffic Growth and Solutions • Intellectual Property • Global Markets – Competitive Dynamics • 2012 Expectations



Global Mobile State of the Union 2012

1. Total Global Mobile Revenues to hit $1.5 Trillion in 2012, over 2% of Global GDP – Top 10 operators control 42% of the global data mobile revenues

2. Mobile Services Revenue exceeded $1 Trillion for the first time in 2011 – The number of mobile operators with > $1 Billion in yearly data revenues will touch 50 in 2012

3. Total Global Mobile Data Revenues went past $300 Billion in 2011 – Non-messaging data now owns 53% of the global mobile data revenues

4. Mobile Operator Profits have more than doubled over the last 10 years – However, the wealth is not divided evenly. Asia’s share has tripled at the expense of Europe whose profit share has declined by 50%.

5. Total Global Subscriptions to exceed 7 Billion in early 2013 – China exceeds 1 Billion, India 950 Million. Subscriber growth is in Asia, Revenue growth is in Asia+North America

6. China and India represent 27% of subscriptions but only 12% of the global service revenues – US represents only 6% of the subscriptions but 21% of the global service revenues, 26% of the data revenues, and 27% of the global

CAPEX

7. Mobile Devices are now exceeding traditional computers in unit sales + revenue – 70% of the device sales in the US are now smartphones. Device Replacement cycle is shrinking

8. Samsung and Apple now account for 50% of the smartphone unit share and 90% of the profit share – Difficult environment for other OEMs esp. when ZTE and Huawei are coming strong from the bottom. It will be difficult for pure play

device OEMs to survive long-term

9. Tablets (iPads) has created a new computing paradigm that is having a significant impact on commerce, content consumption, and developer investments – Apple will continue to dominate the segment and iOS will be the leading OS for the segment. Amazon, ZTE, Huawei, to chip away at

the sub-$200 tier



Global Mobile State of the Union 2012 cont’d

10. Mobile Broadband (4G) is being deployed at a faster rate than previous generations, first time data is leading the charge – Over 1.5 Billion broadband connections by 2012

11. Global Mobile Apps revenue has completely (and irreversibly) tilted to off-deck – The decline is directly proportional to the increase in smartphone penetration by region

12. All major markets are consolidating with the top 3 players at 85% of the market – Regulators will have to be more prudent and proactive about managing competitiveness and growth

13. Mobile data traffic 2x YOY in most markets. Mobile Data will be 95% of the global mobile traffic by 2015 – Many countries are facing spectrum exhaust in the next 2-3 years (in certain markets)

14. Mobile Signaling takes up 2x the resources as Mobile Data Traffic – Signaling traffic is growing faster than the data traffic on broadband networks

15. Connected device segment is growing at the fastest pace in the western markets – Operators will have to quickly adapt their strategies to stay relevant in this segment

16. Several multi-billion dollar opportunity segments are emerging – Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few

17. Mobile Ecosystem has become very dynamic and unpredictable – The 5 Platform Amigos – Apple, Google, Amazon, Microsoft, and Facebook dominate though the first two have the real power

18. Mobile Operator Revenue is under pressure from OTT Players – OTT Share of the Global Mobile Revenues increased to 4%



Global Mobile State of the Union 2012 cont’d

19. OTT players forcing operators to up their game – Operators are partnering, launching their own OTT apps, increasing tariffs to manage the margins

20. Intellectual Property has become a key component of long-term product strategy – 21% of all patents granted in US are mobile related. Top 20 control 1/3rd of the overall mobile patent pool

21. Mobile Patent Rankings: US – IBM, Microsoft, Nokia. Europe – Alcatel-Lucent, Nokia, Samsung. Overall – Nokia, Samsung, Alcatel-Lucent – OEMs – Nokia, Samsung, Sony. Service Providers – AT&T, NTT DoCoMo, Sprint

22. In 3-5 years, with few exceptions, if a company is not doing majority of its digital business on mobile, it is going to be irrelevant – Majority (by a good margin) of the consumer interactions with brands will be on mobile

23. Mobile has become the single most important digital channel for engaging consumers and it shows – In the US, mobile revenues were > all Ecommerce And > Music, ISP, Hollywood, and Cable revenues combined

24. We have entered the mobile 3.0 era where “data” is all that matters and it disrupts the value chains – Data will drive majority of the network growth, Contextual data will drive majority of the VAS growth

25. There will be more changes in the next 10 years than in the previous 100 – The value chains will keep disrupting every 12-18 months by the new players and business models. Several verticals are

already getting redefined e.g. retail, health, education, etc.



Key Industry Micro-Milestones

• Apple captures 70% of mobile device profits – defies gravity, obliterates competition

• Apple mobile appstore downloads exceed 25 Billion, 100 Million on Mac – redefines distribution/ecosystem

• Samsung ends Nokia’s 14 year reign as the device king – brutal execution

• Android 300M activations – Juggernaut

• Paypal does $7B in mobile transaction volume

• Square does $5B in commerce transaction volume

• Google > $5B in mobile revenues

• Microsoft revenues from Android > Windows Mobile

• Pandora’s 70% usage is on mobile, Twitter’s 60% of the usage is on mobile – heading towards a mobile-dominant world

• Facebook Instagram Acquisition $1B – Mobile only acquisition to beef up mobile strategy

• Angry Birds approaches a billion downloads

• ESPN does 3.1 billion minutes on mobile in 3/12 – Mobile is where the action is

• Skype traffic over 150 billion minutes – OTT pressure



Key Industry Micro-Milestones cont’d

• KPN messaging volumes decline 15% YOY – OTT pressure

• Mobile Security threats grow 7x in last two years, Android threats up 3000% – Mobile IS IT

• Cisco BYOD ratio – 70% (up 52% in 2011) - BYOD is creating new opportunities for vendors

• US data traffic over 130 quadrillion bytes/month in 2011 – Data traffic 2X YOY, welcome to the yottabyte era

• Fandango sells quarter of its ticket on mobile – commerce is happening

• Expedia does > $1B in mobile commerce – see above

• Microsoft Nokia Multi-Billion partnership – It takes two to tango

• Lightsquared fails – Keep your friends close, enemies closer

• Google Motorola $12.5B – IP becomes key to strategy

• Nortel Patent acquisition $4.5B – IP becomes key to strategy

• AT&T/T-Mobile Failure – DOJ/FCC put down the gavel

• 40% of Kenya’s GDP comes from mobile money – impact of mobile is pervasive

• Millennial Media IPO at $2B – first public market validation of the mobile advertising space

• HP gives up on Palm – Competition forces Corporate Schizophrenia


MOBILE IMPACTS EVERYTHING


Mobile Apps and Services

Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce. The day is not far when mobile commerce will dominate all digital commerce.



Mobile is the single most pervasive technology ever invented


Mobile impacts all Maslow levels

Source: US Department of Commerce

Self

Safety

Physiological

15%

35%

50%

% of Average Spend

Mobile is now 50% of the household IT budget


Context – the most valuable currency in mobile

Knowledge

(about User)

Transactions

(from User)

Demographics/Explicit

Profile

Interests/Implicit Profile

Sensor data

User Intent

Location

Presence

Physiological

parameters

Calendar

Address Book

Social Community

Intellectual Community

M2M

Preferences

Devices in the vicinity

3rd

Party Sources

Browsing, Watching,

Previewing, Flipping

Purchasing, Payments

Communications

Search (Local, Online,

Media)

User Experience

Gifting

Advertising

Pricing

Security/Authorization

DRIVES

Trusted Concierge

Trusted Advisor

Big Opportunities in becoming the trusted Concierge/Advisor to the individual user


MOBILE SUBSCRIBER AND REVENUE GROWTH


The Big Picture

• The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.5 Trillion in 2012 with mobile data representing 28% of the mix. Mobile data services revenue stood at 33%. Global Mobile Data revenues eclipsed $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.

• By the end of 2011, the global subscriptions exceeded 6 Billion. The first 1 billion took over 20 years and this last one took only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. China became the first country to eclipse the 1 billion mark in March 2012. India is likely to arrive at the milestone by early 2013.

• Smartphones are driving tremendous growth around the globe. Amongst the major markets, US leads with 69% sales. The global figure stands at approximately 32%. Some operators expect 90-95% of their device sales to be smartphones in 2012. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.

• China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 – Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant – Korea, UK, Italy, Germany have dropped off or slipped in rankings.

• The number of mobile operators with more than $1B in data revenues will increase to 50 in 2012. This number was only at 13 in 2005.



Global Mobile Market Snapshot 2011

Each dude represents approximately 113 million humans on planet Earth

Global Subscriptions

Global Smartphone

Users

Global Data Users

Global SMS Users

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Global Mobile Market Snapshot 2012

Global Mobile Broadband

Users



Global Mobile Technology Evolution

First time, data is leading the charge



Global Mobile Industry continues to grow at a healthy pace

• Non Operator OTT Revenues at 4% • Voice will fall below 50% in 2012 • Messaging revenues still growing but flattening growth • Access revenues are growing quicker than any other operator segment



Mobile is over 2% of Global GDP



Operators around the world are benefiting from mobile data

50 operators with > $1B in data revs



Global Mobile Industry Growth



Top 10 global mobile data operators – US, Japan, China Dominate



Global Mobile Leaders - 2012

Rank By Subs By Total Revenue By Data Revenue

1 China US US

2 India China Japan

3 US Japan China

4 Russia Brazil France

5 Brazil France UK

6 Indonesia Russia Korea

7 Japan UK Italy

8 Pakistan Germany Germany

9 Germany Italy Australia

10 Mexico India Brazil



Global Mobile Leaders - 2012

Rank By Sub Penetration By ARPU By Data Usage

1 Hong Kong Japan Sweden

2 Finland Canada Finland

3 Portugal Switzerland Hong Kong

4 Austria US US

5 Singapore Norway Denmark

6 Sweden Australia Canada

7 Denmark France Australia

8 Greece Netherlands New Zealand

9 Germany Singapore Austria

10 Switzerland Israel Belgium



Biggest Telecom Groups

Rank By Subs By Data Revenue By NM Data Revenue

1 China Mobile Verizon Wireless AT&T Mobility

2 Vodafone NTT DoCoMo NTT DoCoMo

3 Telefonica AT&T Mobility Verizon Wireless

4 Bharti Airtel China Mobile China Mobile

5 America Movil Vodafone Vodafone

6 Orange Sprint Nextel Sprint Nextel

7 China Unicom KDDI KDDI

8 Vimplecom Telefonica Telefonica

9 TeliaSonera Softbank T-Mobile

10 Reliance T-Mobile Softbank



US at the epicenter of mobile growth

• 2% net-adds, 6% total subs but 21% of service revenues, 26% of data revenues, and 27% of global CAPEX

• Networks: LTE/HSPA+ - Most broadband customers

• Smartphones: Over 70% of the devices sold (more than twice the global average)

• Applications: Billions of downloads (#1) • Pricing: Per Bit, Per Minute, Per Message lowest

in developed world



US – Mobile is the most dominant digital channel



Race to a Billion – China won

Corruption drags down growth



China+India in Mobile

China+India account for 37% of the global population



China regains momentum & the lead


GLOBAL MARKETS: DATA GROWTH


US, Japan lead in revenues; China, India in subscriptions

• Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. Country average is now at 60%.

• Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any other nation due to the size of the market.

• While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $2.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.



Mobile Internet 3.0 – Data as growth engine

1.0

2.0

3.0

KDDI

NTT DoCoMo

3 UK

Softbank Japan

3 Australia

3 Italy

SK Telecom

Vodafone UK

O2 UK

Singtel

KT

Vodafone Spain

Sprint

Vodafone Italy

Vodafone Germany

Verizon

AT&TO2 Germany

T-Mobile US

Rogers

China Mobile

China UnicomVodafone India

Bharti Reliance

T-Mobile UKT-Mobile Germany

T-Mobile Austria

T-Mobile Netherlands

SMART

3 Sweden

Telefonica

Orange France

Orange UK

Bouygues

SFR

Telstra

TurkcellAIS

TIM

$-

$10

$20

$30

$40

0% 15% 30% 45% 60%

Mo

bile

Dat

a A

RP

U (

USD

)

Mobile Data as % of Total ARPU

Mobile Internet - Leading Global Operators (2011)

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Source: http://chetansharma.com/Mobile_Internet_3.htm


http://chetansharma.com/Mobile_Internet_3.htm


All major markets experiencing data growth – Japan, Australia, US leading



Operators seek new sources of revenue

Vo

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Ac

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Ad

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ing

Tra

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ort

atio

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Ho

spita

lity

We

llne

ss

He

alth

Pa

ym

en

ts

Ind

ust

ria

l

En

erg

y &

Sm

art

Grid

Messaging

Access

Voice

New Service RevenueAR

PU

Today Tomorrow

Re

ve

nu

e in

Bill

ion

s

Service and Application Areas

Direction of Revenue Growth

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Source: http://chetansharma.com/Mobile_Internet_3.htm

Operators can generate new revenue streams by focusing on the long-tail of VAS Verticals


http://chetansharma.com/Mobile_Internet_3.htm

DEVICES: CHANGING LANDSCAPE


Devices – Apple, Android Dominate

• Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but can’t do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.

• Apple and Samsung are strong on the top. Huawei and ZTE are coming up strong from the bottom. The middle tier players will have a tough time going forward.

• It will be difficult for pureplay device OEMs to survive long-term.

• Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokia’s valuation has been cut into half. Nokia’s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones (Lumia). While the market hasn’t shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3rd spot in the ecosystem. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.

• Majority of the tablet use is in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. However, of the users who use cellular, the churn is low. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher (e.g. Rogers, Vodafone Spain) but will still be dominated by WiFi overall.



Mobile Devices are dominating the Computing Ecosystem



US leading in smartphone sales

US accounts for roughly 40% of the smartphone sales worldwide



Smartphones driving data growth



Samsung reaches the top of the hill in market share, Nokia struggling



Apple and Samsung control 50% of the unit smartphone sales. Nokia’s share decimated.



Connected devices come in all shapes and sizes

Dat

a Co

nsu

mp

tio

n

High

Low

Low High

Smartphones

SuperphonesTablets

Data Cards/Embedded

Automotive

Picture Frames

Health Monitors

Home Sensors

Energy Meters

Grid Sensors

Number of Units in Market

Feature Phones

eReaders

Cameras

Video Cameras

Security Sensors

Wellness Devices

Copiers, Scanners, Printers

Asset Tracking

Digital Signage/Kiosks

Vending

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AT&T – Connected Devices Growth

Postpaid growth is slowing down in western markets, Connected device segment growing fastest



US Tablet Launches in 2011



US Tablet Market



Competing with iPad



Platform players – 5 Amigos of mobile

Strengths Weaknesses

Apple Step ahead of the competition. Vertical Integration, Brand loyalty, Dev revenues, Commerce, Distribution

Pressure on the operator margins

Google Broad adoption. Broad Support. Open dev platform. Ambitious

Fragmentation. Dev revenues. Lack of clear device strategy. Regulatory microscope

Amazon Deep understanding of the user, Content, Commerce, Distribution, Margin master

New to the device arms race, Lack of OS

Microsoft Bank balance, Operators want a 3rd ecosystem

Late to mobile party, Lack of mobile execution

Facebook ~ 1 B users, 500 M mobile Lack of coherent mobile strategy, Lack of OS



Apple dominates the platform ecosystem

Users

Ma

rk

etc

ap

Apple

Microsoft

Google

FacebookAmazon

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The overall market is basically iOS and Android. Apple marketcap > Microsoft + Google + Facebook or Amazon


VAS AND OTT


The Big Picture

• The traditional operator revenue streams of – Voice – declining and under threat from VoIP

– Messaging – flattening/declining and under threat from IP messaging

– Access – rising but margins are shrinking fast

– VAS – declining in proportion to the growth of smartphones

• Operators are fighting back with – Voice – launching their own VoIP apps e.g. Bobsled from T-Mobile,

partnering with VoIP players e.g. Skype integration, charging for VoIP apps e.g. TeliaSonera €6/month

– Messaging – launching their own IP messaging apps e.g. Huddle from AT&T, partnering with IP messaging players e.g. Whatsapp partnership

– Access – Tiering

– VAS – launch their own VAS apps and industry vertical apps and services



Smartphones are enabling Offdeck to dominate app revenue



Some operators are starting to see the decline in messaging revenues

Some operators in Europe are also seeing declines in messaging revenue

Total SMS Volumes still increasing but revenue in decline



SMS Growth – US takes over Philippines

Philippines SMS volumes/sub declining precipitously due to the rise in IP messaging



Mobile Advertising: All verticals participating



Promising Segments. Leading Companies

• Advertising – Google, Millennial Media

• Payments/Commerce – Paypal, Square, Google, Amazon

• Gaming – Microsoft, Rovio

• Enterprise – AT&T, Salesforce

• M2M – Vodafone, AT&T, Ericsson

• Identity – Facebook, Google, Twitter

• Cloud – Amazon, Microsoft, Google, Salesforce

• Wellness/Health – Qualcomm, Fitbit, Mobisante

Sampling Only


MOBILE DATA TRAFFIC GROWTH


Mobile Data Traffic Growth

• In most western markets, data traffic is doubling YOY

• Sweden, Finland, Hong Kong, and US make the top 4 in terms of MB consumed per capita

• A Multi-pronged approach is needed to have a sustainable strategy long term



Only a holistic strategy to deal with data tsunami can help the operators long-term

• As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.

• To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution won’t be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.

• The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.


Wireless seeing unprecedented growth (US)


US Mobile Data Traffic is doubling every year



Margin preservation key to all operator strategies



Managing data margins will be top priority for all operators

20% 40% 60% 80% 100%

10%

20%

30%

40%

50%

Japan

Sweden

New Zealand

Philippines

Hong Kong

Australia

Germany

Switzerland

Netherlands

DenmarkPortugal

Finland

Italy

Spain

UK

Singapore

Korea

France

Russia

Canada

USIndonesia

Brazil

ArgentinaIndia

China

Mexico Malaysia

South Africa

Data as % of Overall Network Traffic

Dat

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% o

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es

Re

ven

ue

s

Revenue-T

raffi

c Equili

brium

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Source: Managing Growth and Profits in the Yottabyte Era 2nd Edition http://chetansharma.com/yottabyteera2.htm


http://chetansharma.com/yottabyteera2.htm


Management of Data Requires Multiple Strategies

2G

4G

3G

Core Network

Radio Access Network Core Network

Mobile Backhaul

Fiber

Microwave

Copper

LightNetworks

GGSNRNC SGSN

Offloading Traffic

WiFi/FemtoCell

Offloading Traffic

Inte

rnet

Ser

vice

s

Compression/Optimization of Data Traffic

Policy Management

Compression/Optimization

Optimization

Source: Managing Growth and Profits in the Yottabyte Era 2nd Edition http://chetansharma.com/yottabyteera2.htm


http://chetansharma.com/yottabyteera2.htm

INTELLECTUAL PROPERTY WILL REMAIN KEY TO LONG-TERM PRODUCT AND COMPETITIVE STRATEGY SUCCESS


IP is critical to long-term product strategy

• The IP tussles are playing out as expected

• Players with strong IP portfolios will be able to command better negotiating positions, new revenue streams, competitive positioning over the long-term

• On average mobile companies file patents 1.7 times more in the US vs. Europe

• Mobile Patent Leaders in US: IBM, Microsoft, Nokia

• Mobile Patent Leaders in Europe: Alcatel-Lucent, Nokia, Samsung

• Mobile Patent Leaders in Infrastructure: Samsung, Alcatel-Lucent, Ericsson

• Mobile Patent Leaders in Devices: Nokia, Samsung, Sony

• Mobile Patent Leaders in Service Providers: AT&T, NTT DoCoMo, Sprint

• Top 20 control 1/3rd of the total mobile communications patent pool



Patent Power Rankings – Mobile Communications Related Issued Patents 1995-2012

Rank US Europe US+Europe

1 IBM Alcatel-Lucent Nokia

2 Microsoft Nokia Samsung

3 Nokia Samsung Alcatel-Lucent

4 Samsung Sony Ericsson

5 Ericsson Ericsson Microsoft

6 Sony RIM IBM

7 Motorola NEC Sony

8 Intel NTT DoCoMo NEC

9 Alcatel-Lucent Siemens Motorola

10 Qualcomm Qualcomm Qualcomm

Based on an estimation of Mobile Communications Related Patents that have been granted by The USPTO and the EPO. This assessment doesn’t take a look at the quality or the value of the patents



Patent Power Rankings – Mobile Communications Related Issued Patents 1995-2012

Rank OEM/Software Infrastructure Service Provider

1 Nokia Samsung AT&T

2 Samsung Alcatel-Lucent NTT DoCoMo

3 Sony Ericsson Sprint

4 NEC NEC British Telecom

5 Motorola Motorola Verizon

6 RIM Qualcomm T-Mobile

7 Siemens Siemens Swisscom

8 LG LG Telecom Italia

9 Fujitsu Fujitsu SK Telecom

10 Hitachi HP TeliaSonera

Based on an estimation of Mobile Communications Related Patents that have been granted by The USPTO and the EPO. This assessment doesn’t take a look at the quality or the value of the patents



US outpaces Europe in mobile patents



Nokia, Samsung, and ALU – The big 3



Mobile Patent Portfolio of leading mobile players

Nokia

Samsung

Alcatel-Lucent

Ericsson

Microsoft

IBMSony

NEC

Motorola

Qualcomm

RIM

Intel

Siemens

LG

Fujitsu

HP

AT&T

NTT DoCoMo

Hitachi

CiscoBroadcom

Philips

Panasonic

Oracle

Huawei

Interdigital

Ricoh

Sprint

AppleSAP

Kyocera

British Telecom

Verizon

GoogleHTC

T-Mobile

ZTEJuniper

Dell

EMC

Swisscom

Amazon

Adobe

Telecom Italia

Openwave

SK Telecom

Lenovo

TeliaSonera

Asustek

Orange

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 2000 4000 6000 8000 10000 12000

% o

f P

aten

ts I

ssu

ed 2

00

7-1

2

Number of Patents Issued 1995-2012

Mobile Patent Portfolio of Leading Players

© Chetan Sharma Consulting, 2012



IBM, MS lead in US. Nokia, Samsung in Europe



Integration of IP with product strategy is essential for competitiveness in mobile

Market

RequirementsProduct

Requirements

Design and

Development

IP competitive and

risk assessmentIP Protection Process

Public Disclosure

IP Management

Ideation

IP Analysis

IP driven Product Development Cycle

R&D, Other

Sources

Licensing

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NUMERIC

ANALYSIS

SUBJECTIVE

ANALYSIS

PATENT

PROGRAM

ANALYSIS

f(Σ) Patent Portfolio Quotient™

(PPQ)

Source: What is your Patent Portfolio Quotient? http://chetansharma.com/patentportfolioquotient.htm

Improve your PPQ by tight integration with product strategy


http://chetansharma.com/patentportfolioquotient.htm

GLOBAL MARKETS – COMPETITIVE DYNAMICS


Changing Ecosystem Dynamics

It is very clear that the ecosystem dynamics can change very quickly, one just can’t take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumer’s pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T’s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft’s enterprise business, so on and so forth. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.



Competitive Dynamics

• The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesn’t matter if the market is defined by “controlled regulation” like in China, Korea, and Japan or if it is “open market” driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.

• Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a “top 3” operator market. India’s brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.

• The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldn’t have more than 50% of the market share and the number three player shouldn’t have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.

• Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define “communications” and “computing” as we know it.



Competitive Landscape in Major Markets

Source: Competition and Evolution of Mobile Markets. http://chetansharma.com/mobilecompetition.htm


http://chetansharma.com/mobilecompetition.htm



Global Mobile Competitive Index






Eventually all markets consolidate to top 3





WHAT TO EXPECT IN 2H 2012


What to expect in 2H 2012

• More Tiering, faster pace of change of plans. More options, family data plans

• Cost reduction is as important as revenue generation. More players will align their value-chains and cost structures

• Facebook IPO is probably going to be the single biggest event in the technology industry in the next few months.

• Radios will start connecting the digital world with the physical world with significant disruption opportunity

• Mobile Payment Networks will remain intact for the near future as the ecosystem largely focuses on building value on top of the existing exchange platforms

• The intersection of Social, Location, Identity, and Gaming is creating new opportunities

• With connectivity becoming pervasive, mobile will fundamentally start to alter the legacy infrastructure – retail, health, education, energy, computing, travel, entertainment

• Significant tablet adoption in the enterprise directly impacting the traditional computer manufacturers

• Both HTML5 and Apps will continue to grow, the relevancy to any given application will depend on the reach and economics requirements. HTML5 is not going to replace Apps.

• Mobile data growth will double again in 2012. Significant opportunities in managing and understanding of mobile data growth

• Regulators will need to evolve to keep up with the trend to keep their nation globally competitive

• More IP scuffles before licensing settlements

• Consolidation of weaker players, more global M&A

• Significant progress in emerging areas like mHealth, mPayments will come from the developing world while the western countries get mired in regulatory and legacy mess

• Several players face challenging times ahead and 2012 will be critical in their turn around sojourn.


MOBILE FUTURE FORWARD MOBILE’S THOUGHT-LEADERSHIP SUMMIT 09.10.12 SEATTLE WWW.MOBILEFUTUREFORWARD.COM

http://www.mobilefutureforward.com/


Discussions to inform your strategy

• Is 4G a Game Changer?

• Innovation at the Edges

• Mobile Payments and Commerce

• Disruption is in the air

• Mobile Data Services from the Prism of the CIOs

• Solving the 50 year Spectrum Crunch

• Managing the Network Growth

• Opportunities in the Emerging Markets

• The Universe of Connected Devices

• Analytics - How to Collect, Manage, and Use Data?

• Multi-modal Interactions - How Consumers Adapt?

• At the Intersection of Social, Mobile, Commerce, Content

• Battle for the Home – playing in the n-screen world

• What do Developers Want?

• A Smarter Planet - The Role of Mobile in Enhancing Lifestyles and in Making Everyday Decisions

• Drivers for New Sources of Revenue

• Role of Regulations - Spectrum, Privacy, Net-Neutrality

• Mobile Cloud Computing

• Monetizing the network

• From 3 Screens to Multi-screens

• Mobile Universe in 2020


Mobile Executive Summit

Sept 10th, 2012 Seattle

Ever wondered what the future of mobile looks like?

Join us for an extraordinary day of executive mobile brainstorming

Contact [email protected] for

sponsorship and speaking opportunities www.mobilefutureforward.com

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Mobile Breakfast Series

Excellent Speakers. Invaluable Insights. Peerless Networking.

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sponsorship and speaking opportunities

www.mobilebreakfastseries.com

June 7th – Seattle – Mobile Operators and OTT Panel Discussion with AT&T June 22nd – Atlanta – Connected Devices Fireside Chat with David Christopher, CMO, AT&T Mobility Panel Discussion with CNN and Synchronoss June 29th – London – Mobile Operators and OTT Panel Discussion with Telefonica, Orange, Rebtel, Horizons Venture


http://www.mobilebreakfastseries.com/


We look forward to hearing from you

Chetan Sharma

[email protected]

TW: @chetansharma

http://www.chetansharma.com

Mobile Future Forward

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TW: @mfutureforward

http://www.mobilefutureforward.com

Research. Technology. Strategy. Intellectual Property. Thought Leadership Summits.






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