GSMA_ME_Report_2014_R2_WEB.pdf

8/20/2019 GSMA_ME_Report_2014_R2_WEB.pdf

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The MobileEconomy 2014


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The GSMA represents the interests of mobile operatorsworldwide. Spanning more than 220 countries, the GSMAunites nearly 800 of the world’s mobile operators withmore than 230 companies in the broader mobile ecosystem,including handset makers, software companies, equipmentproviders and Internet companies, as well as organisationsin industry sectors such as nancial services, healthcare,media, transport and utilities. The GSMA a lso producesindustry-leading events such as the Mobile World Congressand Mobile Asia Expo.

For more information, please visit the GSMA corporatewebsite at www.gsma.com

or Mobile World Live, the online portal for the mobilecommunications industry, at www.mobileworldlive.com

This report is authored by GSMA Intelligence, the denitivesource of global mobile operator data, analysis andforecasts; and a publisher of authoritative industry reportsand research. Our data covers every operator group,network and MVNO in every country worldwide – fromAfghanistan to Zimbabwe. It is the most accurate andcomplete set of industry metrics available, comprising tensof millions of individual data points, updated daily. GSMAIntelligence is relied on by leading operators, vendors,regulators, nancial institutions and third-party industryplayers, to support strategic decision-making and long-

term investment planning. The data is used as a n industryreference point and is frequently cited by the media andby the industry itself. Our team of analysts and expertsproduce regular thought-leading research reports across arange of industry topics.

www.gsmaintelligence.com

[email protected]

Contents EXECUTIVE SUMMARY 2

1 GLOBAL MARKET OVERVIEW 8 1.1 Mobile has scaled dramatically 9 1.2 Accelerating higher speed network deployments driving data growth 12 1.3 Revenue trends 21 1.4 Revenue mix and outlook 30

2 AN INDUSTRY EMPOWERING PEOPLE AND SOCIETY 36 2.1 Mobile is a cornerstone of the global economy 37 2.2 Mobile at the heart of communication today – empowering people and society 42 3 ENSURING A HEALTHY AND PROSPER OUS DIGITAL FUTURE 56 3.1 The Digital Future 57 3.2 The Personal Data opportunity 60 3.3 Connected Living – linking the physical and digital worlds 62 3.4 Digital Commerce – placing mobile at the heart of future commerce 66 3.5 Network 2020: a key pillar of the digital future 68 3.6 The importance of industry and ecosystem collaboration 70

4 POLICY MEASURES TO DRIVE THE GROWING ECONOMIC AND SOCIAL BENEFITSOF MOBILE SERVICES 74

4.1 Spectrum Measures for Mobile Evolution 75 4.2 The importance of best practice taxation 79 4.3 Sustaining effective competition and encouraging investment 80 4.4 Supporting innovation with a common position on Intellectual Property Rights 80 4.5 Avoiding unnecessary restrictions on network management 81


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| Executive summary Executive summary |2 3

THE MOBILE ECONOMY 2014THE MOBILE ECONOMY 2014

However, despite the su ccess of the industry to date,revenue growth for the mobile operators is expectedto slow (the GSMA forecasts revenue growth of2.9% per annum out to 2020, against over 5% inthe previous ve years). Operators across the globeface an increasingly common set of challenges, inparticular rising competitive pressures and increasedregulatory intervention in many markets. This raisesquestions over the sustainability of the currentbusiness model for the mobile operators and theirability to continue to fund the required levels ofnetwork investment.

It is no surprise that mobile has become acornerstone of the global economy, both as anindustry in its own right and as an enabler ofopportunities in other sectors. The mobile industry(both directly and indirectly) contributed around3.6% of global gross domestic product (GDP) in2013, equivalent to over US$ 2.4 trillion. This gure isexpected to increase to 5.1% of global GDP by 2020.In addition, there are 10.5 million jobs supporteddirectly by the mobile ecosystem across the world,while the mobile ecosystem contributed overUS$ 336 billion in public funding in 2013, even beforeconsidering regulatory and spectrum fees.

The mobile industry has also played a crucial rolein the global economy as an innovation platformfor new services. Mobile n etworks provide uniqueopportunities to reach new customers and tomonetise products and services. The industry hasenabled the emergence of a number of “innovationhubs” across the world. These mobile innovationecosystems contribute to the empowerment ofindividuals and societies not only through theopportunities they create, but also through thesolutions and services they deliver.

Mobile connectivity has already transformed daily lifeacross the globe, and mobile is playing a particularlystrong role in socio-economic development in many

developing regions of the world. Mobile has broughtvoice services and Internet access to the previouslyunconnected, bridging the digital divide andempowering communities.

Mobile has also beneted some of the mostdisadvantaged communities through the provisionof mobile money services. This brings nancial

services within the reach of previously unbanked andunderbanked populations, driving economic growthand promoting nancial inclusion. Empoweringwomen through mobile Internet access also hasmore wide reaching benets to broader societies.

The mobile industry is overcoming cost barriersand developing innovative new solutions todeploy networks in more remote and challengingenvironments, especially in developing regions.The industry is already competitive and signicantprice reductions over recent years have helped todrive strong subscriber growth across the world.However, the industry faces a number of challengesif it is to full its growth potential, and regulatorsand policymakers must be careful not to hinder thiswith short-term policies that maximise near-term taxrevenues over the medium-term potential for growthand development.

The mobile industry has the potential to deliver evengreater benets to society in the future: with thepotential of connecting almost anything and anyone.The world of 2020 will offer a range of life-enhancing

services powered by a vibrant mobile ecosystemthat connects the physical and digital worlds.This convergence will unleash a new dimension ofservices that improve the quality of consumers’ livesand the productivity of enterprises. The benets ofmobility will spread far beyond communications toprovide dramatic improvements in sectors such asenergy efficiency, security, health and education.

While subscriber and connections growth ratesare now slowing in developed markets, signicantuntapped potential remains in developing markets.These are forecast to add 880 million uniquesubscribers by 2020. In developed markets, thereis an accelerating technology shift underway inthe global connection base, with an increasingproportion of connections now on higher speed3G and 4G networks (globally this proportion is setrise from a third at the end of 2013 to two thirds by2020). The number of commercially available LTEnetworks is forecast to increase to more than 500in 128 countries across the world over the next four

years, going from covering around a fth of theglobal population today to around half by 2017.

The number of mobile broadband connections hasgrown tenfold from just over 200 million in 2008 towell over two billion by 2013. Growth should remainstrong, driven by rising smartphone penetration,with almost 4 billion mobile broadband connectionsexpected to be added globally in the period out to2020.

Higher speed networks and more advanced devicesare enabling the growth of data hungry applicationssuch as video streaming, internet browsing andle downloads. At a global level, the rate of growthin data traffic is likely to far outstrip the growth inmobile connections.

The transformative effect of mobile has been madepossible by signicant capital investment by themobile operators over recent years, totalling overUS$ 1 trillion in the last six years. Investment hasbeen focused on both improving network coverageand to facilitate the growth in mobile broadbandconnections. Total investments by the operators

are expected to increase going forward in order toaccommodate the strong forecast growth in globaldata traffic, totalling US$ 1.7 trillion out to 2020.

The mobile industry has scaled dramatically over thelast decade. At the end of 2003, there were a little overone billion unique subscribers, meaning that just underone in six people had subscribed to a mobile service. Bythe end of 2013 this gure had increased to 3.4 billionunique subscribers: equivalent to just under half of theglobal population. Globally there were 6.9 billion SIMconnections at the end of 2013, with an average of 1.8active SIM cards per unique subscriber *.

Executive Summary

*GSMA Intelligence estimates thatthe total number ofactive SIMconnections atend 2013 was 6.3 billion.


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| Executive summary Executive summary |4 5


Delivering the digital future will require a morecollaborative approach between the mobileoperators themselves: a new focus on collaborativeaction will bring greater scale to operator activitiesin the global race to meet the needs of the customerin the future. With revenue growth in the broadermobile ecosystem expected to far outstrip that ofthe operators (particularly in the area of content,applications and services), there are signicant

opportunities for mobile operators to generateadditional revenues and so lift growth rates beyondcurrent expectations.

At the same time, new entrants to the mobileecosystem should recognise the need to collaboratewith other players, particularly the networkoperators. Online service providers are dependenton mobile broadband networks that are deployedand maintained by the mobile operators, which inturn requires a sustainable nancial model for theoperators that generate sufficient cash ows to meetthese ongoing investment needs.

Policymakers should ensure that the right conditionsare in place for the full transformational potential ofmobile services to be realised. As the mobile Internetgathers momentum, policy change is required toensure that adequate investment and innovationcomes from all ecosystem players. Operators andinvestors need stability and clarity in order to fundthe signicant investment needed over the comingyears both to extend coverage to more remote areas

and to meet the growing demand for higher speedconnectivity.

The growth of internet access over mobilebroadband networks is dramatically increasingspectrum demand and poses a signicant,disruptive, threat to the industry. Securing additionallong term harmonised spectrum is critical to realisingthe potential of the digital future.

In summary, the mobile industry can only realisethis positive vision of the digital future throughcollaboration between all players: between mobileoperators and the broader mobile ecosystem,including new entrants such as online serviceproviders; as well as through collaboration withgovernments, regulators and other industrystakeholders.

Personal Data Consumer access to a range of digital services could beauthenticated by a mobile operator provided digital identity– linked to the phone number and secured via the SIM;

Digital Commerce Mobile devices will be at the heart of digital commerceecosystem, with the potential to complete all types ofpurchases on connected devices using digital wallets;

Connected Living Intelligent networks connecting an ever greater rangeof devices have the potential to revolutionise the lives ofcustomers and the productivity of many enterprises;

Network 2020 Mobile networks will be at the heart of the all-IP mobilebroadband era, connecting devices and acting as the keyinterface between the physical and digital worlds.

The GSMA has identied four key growth areas thatpresent both signicant opportunities and benetsfor consumers. These areas also provide clearopportunities for mobile operators to collaborate and,in doing so, play an active role in delivering them.


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Unique Subscribers

LTE Networks

Global SIM Connections Mobile Broadband Growth

2013

2017

2013

2020

3.5%CAGR

GLOBALMARKET

3.4bn2013

4.3bn2020

2013 - 2020

54%CAGR

15%2.2bn 5.9bn2013 2020 CAGRCONNECTIONS CONNECTIONS

56%47%

9.2bn

2013 2020

6.9bn

4.2%CAGRGlobal Connection Speed

Revenues

Smartphones Installed Base

2010

2017

2013

2008

2017

3,898 kbpsof the people on the planet

>500 networks

256 networks

In 128 Countries

In 97 Countries

(Source Strategy Analytics)

Note: excludes M2M

Connection Type

Note: excludes M2M

189 kbps

2,890m1,457m237m

2,284m

2G

3G

4G3,732m

3622m 3,163m

1m

416m

2008

2008

2008

2020

2020

2020

2020

2013

Annual revenue growth 16%

US$ 205bnUS$ 2tn

US$ 576bnUS$ 2.9t2020

2013

TOTALECOSYSTEMREVENUES

APPS, CONTENT AND ADVERTISING

2020

2013US$ 1.2tn

US$ 1.4tnOPERATOR REVENUES


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| Global market overview Global market overview |8 9


The mobile industry is continuing to see rapid growth

in connections, subscribers and data traffic, and isplaying a pivotal role in unlocking socio-economicprogress across the world. Many industry sectors areincreasingly digitising and mobilising their productsand services, reducing costs and providing compellingnew experiences for consumers.

Global marketoverview1

More advanced devices (such as smartphonesand tablets) operating on increasingly ubiquitousmobile broadband networks are allowing users toadopt an ever growing range of new services andapplications, which in turn is driving an explosion inmobile data traffic. These transformations and newservices have been made possible thanks to thesignicant investments that mobile operators havebeen making to deliver the sustained growth andubiquity of mobile broadband connectivity.

However, despite the success of the industry todate, revenue growth for the mobile operators isexpected to slow over the coming years. Operatorsacross the globe face an increasingly common set ofchallenges, in particular rising competitive pressuresand increased regulatory intervention in manymarkets. This raises questions over the sustainabilityof the current business model for the mobileoperators and their ability to continue to fund therequired levels of network investment.

3.5%7.7%CAGR 2008-2013 CAGR 2013-2020

NORTH AMERICA

MIDDLE EAST ANDNORTH AFRICA

LATIN AMERICA

EUROPE

COMMONWEALTH OFINDEPENDENT STATES

ASIA PACIFIC

SUB-SAHARAN AFRICA

The mobile industry has scaled dramatically over the last decade. At the end of 2003, there were a littleover one billion unique subscribers globally, equivalent to just under one in six people. By the end of 2013this gure had increased more than threefold to 3.4 billion, equivalent to a unique subscriber penetrationrate of 47%. By 2020, the majority of the world’s population (56%) is expected to have their own mobilesubscription. Multi-SIM ownership means that at the end of 2013 there was a total of 6.9 billion SIMconnections 1, with an average of 1.8 active SIM cards per unique subscriber.

Unique Mobile Subscribers(m)

Source: GSMA Intelligence

20122008 20142010 2016 201920132009 20152011 20182017 2020

2,3442,566

2,7993,029

3,225 3,398

3,583 3,745 3,890

4,023 4,134 4,236 4,334

1.1 Mobile has scaled dramatically

1. GSMA Intelligence estimates thatthe total number ofactive SIMconnections atend 2013 was 6.3 billion


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N AMERICA MENALATIN AMERICACIS ASIA PACIFIC SSAEUROPE

Unique subscriber penetration by region


The global unique subscriber base has been growing at a rate of 7.3% per annum: growthis forecast to continue, but at a slower rate of 3.5% out to 2020. However, this growth is farfrom uniform across the regions of the world. Growth is now largely coming from developingmarkets, which are forecast to add nearly 880 million subscribers over the next seven years,compared to only 56 million new additions in developed markets over the same period.

Unique subscriber penetration rates vary signicantly across regions. Europe has the highestpenetration rates, followed by North America and then the Commonwealth of IndependentStates (“CIS”). Sub-Saharan Africa had the lowest penetration rate at the end of 2013 (at justunder a third of the population), despite having seen the fastest subscriber growth of anyregion over recent years.

78.7%70.8%

60%54.8%

52.2%42.2%

The developed market average unique subscriberpenetration gure is now 79%, which is around the“demographic ceiling” at which subscriber growthtends to stall (with many developed countriesalready above this level). In contrast, uniquesubscriber penetration on average in developingmarkets is only 41%. This highlights the growthpotential for mobile services in developing regions,with only four out of ten people in these countrieshaving subscribed to mobile services. However, thereare also challenges in many of these developingmarkets, with incremental subscribers typicallygenerating low average revenues per user (“ARPUs”)and coming increasingly from rural or remote areas,raising issues for operators about how to bringservices to these lower income populations on a costeffective basis.

Multiple SIM ownership is a feature of many marketsacross the world, in both developed and developingregions, driving a substantial differential between

unique subscribers and SIM connections in manymarkets. Global SIM penetration now stands at 95%,and the gure is already over 124% on average indeveloped markets. We are now seeing a slowdownin the growth rate of connections across all regionsof the globe, linked to slower subscriber penetrationgrowth described previously.

SIM connections have grown globally at a CompoundAnnual Growth Rate (CAGR) of 11.3% p.a. in the veyears since 2008, but are now forecast to grow at arate of 4.2% per annum for the period out to 2020,less than half of the previous growth rate. This willtake the global penetration rate by 2020 to 119%,with connection penetration passing through the

100% level before the end of 2014. The total numberof connections will grow by almost another 2.3 billionby 2020: much of this growth in new connectionswill come from developing markets; adding 2.1 billionconnections over the next seven years.

84.0%

4.2%11.3%CAGR 2008-2013 CAGR 2013-2017

79.3%

67% 70%

52.6% 49.6%

41.1%

32.7%


Global Mobile Connections(m, excluding M2M)

4,0394,665

5,3696,029

6,465 6,886

7,3857,800

8,153 8,457 8,723 8,960

9,179

20122008 20142010 2016 201920132009 20152011 20182017 2020

NORTH AMERICA

MIDDLE EAST ANDNORTH AFRICA

LATIN AMERICA

EUROPE

COMMONWEALTH OFINDEPENDENT STATES

ASIA PACIFIC

SUB-SAHARAN AFRICA


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20122008 20142010 2016 201920132009 20152011 20182017 2020

There is an ongoing technology shift in the globalconnection base, driven by improving coverageof higher speed networks and the increasedaffordability of more advanced handsets anddevices. While 2G remains the dominant technologyin terms of the number of connections, theproportion has fallen from 90% of total connectionsin 2008 to 67% by the end of 2013. The absolute

number of 2G connections fell for the rst time in2013, and this decline is likely to accelerate goingforward. By 2020, 2G connections will accountfor only a third of the total connection base, with3.2 billion 2G connections by that date excludingmachine-to-machine (“M2M”).

The declining proportion of 2G connections reectsthe strong growth in 3G and more recently 4Gconnections. Existing 2G subscribers are migratingto 3G and 4G connections in order to take advantageof more advanced handsets with greater datafunctionality, as well as the higher data speedsoffered by these networks. This is a particular featureof developed markets, where consumers can afford

more advanced handsets and also operators tend tosubsidise handsets for subscribers on contract tariffs.

1.2 Accelerating higher speed networkdeployments driving data growth

Global connections by technology(m, ex-M2M)


2G

3G

4G

The developing region is now home to four in everyve connections worldwide, and just under 80% ofthose mobile connections are 2G-only. In contrast,the proportion of 2G-only connections in thedeveloped world had already declined to 30% by theend of 2013.

While in part this reects the relatively more limiteddeployment of higher speed networks in developingeconomies, it is also due to factors around theaffordability of more advanced handsets. Cost-conscious consumers in the developing world arelooking for the most affordable mobile tariffs anddevices, which is likely to extend the life cycle of

2G networks in these markets. The combination ofsocio-economic and infrastructure challenges meanthat 2G connections will still account of the majorityof connections in developing markets until 2018.

The number of 3G connections globally hasincreased dramatically in recent years, growing from just over 600 million in 2009 to over two billion by2013, accounting for a little under a third of the totalglobal connection base. The 3G base will continueto grow in the future with another 1.7 billion 3Gconnections forecast to be added by 2020.

2G will remain the dominant technology in many lowerincome countries for a number of years to come, incontrast with the technology shift underway in thedeveloped region.

We are also seeing an accelerating uptake of 4Gconnections: these are set to increase from 3% of theglobal total in 2013 to a quarter by 2020, by whichdate there will be 2.3 billion 4G connections.

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000


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| Global market overview14

THE MOBILE ECONOMY 2014

The increase in 4G connections reects theacceleration in LTE deployments in many countriesacross the world. By the end of 2013 there were 256LTE networks commercially available across almost100 countries across the globe. This is forecast toincrease to more than 500 networks in 128 countriesacross the world by 2017, covering half of the globalpopulation by that date against o nly one in ve today.

At a country level, the US, Japan and South Koreaaccount in aggregate for 80% of all global LTEconnections as of 2013. Going forward the focus willshift increasingly towards Asia, with the region set toaccount for almost half of all LTE connections by 2017,with growth being led by China.

1.2.1 LTE network build out gaining pace

Global LTE Deployments

Global LTE Connections and % of Total



17 47

144

256

2010 2011 2012 2013

C O N N E C T I O N S

( M I L L I O N

)

1,134

813

557357

20392257

13.4%

10%7.1%

4.8%2.9%

1.1%0%0%

% O

F T O T A L

C O N N E C T I O N S

20172016201520142013201220112010

LTE

500 NETWORKSIN 128 COUNTRIES

LTE networks are forecast toincrease to more than 500

networks in 128 countries acrossthe world by 2017.

The increase in 4G connectionsreects the acceleration in LTEdeployments in many countries

across the world.


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Investment by operators in deploying higher speednetworks has driven strong growth in the number ofmobile broadband (“MBB”) connections over recentyears, from just over 200 million in 2008 to well overtwo billion by 2013 (excluding M2M connections).Mobile broadband is device agnostic and covers arange of technologies including CDMA 2000; EV-DO;WCDMA HSPA; TD SCDMA; WiMAX and LTE.

Growth should remain strong in the future, withalmost 4 billion MBB connections forecast to beadded in the period out to 2020. HSPA allowsoperators to offer download speeds of over14MBps, and HSPA+ offers signicantly higherspeeds. Attractively priced propositions (and devicesubsidies) in many countries mean that mobilebroadband offers consumers a viable substitute fora xed broadband connection, especially in thosemarkets where xed broadband penetration isrelatively low or where

xed broadband networks have not been fullyupgraded to offer higher data speeds. Operatorshave also encouraged adoption at the lower endof the market for price-conscious consumers, byoffering tailored data plans that trend towardsprepaid tariff structures.

The growth in mobile broadband connections inmany regions of the globe is being driven by rising

smartphone penetration. According to data fromEricsson, around 55% of all mobile phones soldin the second quarter of 2013 were smartphones,compared to 50% in the rst quarter and only 30%in 2012 as a whole. By the end of 2013, there were

just under 1.5 billion smartphones in use, of whichalmost half were in Asia Pacic. Going forward, newsmartphone connections will largely come from theAsia-Pacic region, with just under 900 million newsmartphones expected in the region in the periodout to 2017.

Smartphones installed base(m)

MBB connections


Source: Strategy Analytics

2,890MSMARTPHONES INSTALLEDBASE 2017

321M

184M254M

223M

266M

1,643MAFRICA MIDDLE EAST

NORTH AMERICA

WESTERN EUROPE

ASIA PACIFIC

CENTRAL & LATIN AMERICA

(m, ex M2M)

15%58%CAGR 2008-2013 CAGR 2013-2020

215 364 624 1,030

1,530 2,163

2,774 3,332

3,8864,964

5,934

4,4355,465

2008 2010 2012 2014 2016 20192009 2011 2013 2015 20182017 2020

1.2.2 Mobile broadband and smartphoneuptake accelerating

CENTRAL & EASTERN EUROPE

237 304 431

687

1,031

1,457

1,850

2,222

2,562

2,890AFRICA MIDDLE EAST

NORTH AMERICA

WESTERN EUROPE

ASIA PACIFIC

CENTRAL & LATIN AMERICA

CENTRAL & EASTERN EUROPE

2008 2010 2012 2014 20162009 2011 2013 2015 2017


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More advanced devices (such as smartphones andtablets) operating on increasingly ubiquitous higherspeed networks (both 3G and 4G) are allowing usersto adopt an ever growing range of new servicesand applications. These new services are driving anexplosion in data traffic across the world. LTE userstend to consume almost twice the amount of datathan non-LTE users; 1.5GB per user per month has

been recorded on average across selected operatorsin developed markets 2.

Higher speed networks are enabling the growth ofdata hungry applications such as video streaming,internet browsing and le downloads. Recentdata from Vodafone showed that in the quarter toSeptember 2013, 75% of the company’s data traffic inEurope was already video and browsing.

75% of data traffic is video and browsing

(% Europe Sep 2013)

Source: Vodafone

DOWNLOADING FILES (EG. APPS/MUSIC)

VOICE CALLING OVER INTERNET

SHARING CONTENT (FILES) BETWEEN TWO DEVICES

OTHER (VPN, GAMING, IP MESSAGING, ETC.)

12%

2 %

3 %

8 %

75%VIDEO & BROWSING

1.2.3 Data growth acceleratingThis combination of factors points to ongoing stronggrowth in data traffic volumes. At a global level, therate of growth in data traffic is likely to comfortablyoutstrip the growth in mobile connections. Ericcsonstated that there was an 80% increase in global datatraffic between the third quarter of 2012 and thethird quarter of 2013 3.

Data growth will also be fuelled by the increasingnumber of devices connected to mobile networks,including M2M connections, which includes a rangeof devices and objects including cars, medicalappliances and freight packages. M2M data traffic isforecast to grow strongly as a result of the growth inconnections, driven by a wide range of applications

from smart utility meters to in-car telematicsservices.

Global network speeds are increasing steadilywith the build out of 3G and m ore recently 4Gnetworks. Cisco estimate that the average globalnetwork connection speed was 512kbps in 2012.Cisco also forecast that the average connectionspeed will increase at a compound annual growthrate of almost 50% by 2017, taking the averagespeed to over 3.9 Mbps. At a regional level, themore developed regions such as Europe and NorthAmerica will continue to have the highest connectionspeeds, though the more signicant increase inspeeds will come from more developing regionswhere historic connection speeds are lowest. Theextent of 4G (LTE) network deployments is a keydifferentiator, one of the key reasons that NorthAmerica is expected to continue to see the highestconnection speeds throughout the forecast period.

Average global connection speed(Kbps)

Source: Cisco VNI 2013

189 315 526

8171,233

1,857

2,725

3,898

4x

2010 2012 2014 20162011 2013 2015 2017

SPEED REQUIRED FORHD VIDEO STREAMING

2,500kbps

54% CAGR2010-2017

2. https://gsmaintelligence.com/analysis/2013/11/global-lte-network-forecasts-and-assumptions-201317/408/ 3. http://www.ericsson.com/res/docs/2013/ericsson-mobility-report-november-2013.pdf


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Discoverer

These markets are predominantly prepaid (contractmarket share remains in the single digits) and lowARPU, with approximately 90% of connectionsstill utilising 2G networks. Smartphones contributeless than 10% of total connections, while non-voiceARPU is less than 10% of total ARPU.

Mobile revenue growth among the Discoverersegment is stabilising after an explosive growth rateof 54% during the period 2002- 2006, with growthslowing to 10% over the last ve years. Increasing

penetration among some of the world’s poorestcountries will inevitably lead to declining ARPU,and put pressure on revenue growth. However,competition, intense price wars and mobile marketpolicies have also had a signicant impact on recentrevenue growth and operator protability in thesecountries.

In markets where operator protability is underthreat, device affordability, prepaid voice and dataplans and lower taxes are some of the key factorsthat can help stimulate demand, while ensuringoperators do not pay over the odds for mobile

spectrum will allow them to support lower pricepoints. As has been previously noted in othermarkets—from Europe to India—mobile retailprices will climb in the face of unrealistically highspectrum prices and high taxation, slowing the paceof mobile adoption 6. This is particularly true whenit comes to mobile broadband services, where thecost of deployment for operators and of devices/usage for users is generally higher than for morebasic services.

While unique subscriber penetration rates arerelatively low and show the long term growthpotential for markets in this segment, there are alsochallenges for operators. Operators need to extendnetwork coverage into more rural and remoteareas in a cost effective manner, into areas wheresupporting infrastructure (such as electricity) isoften limited or absent. With new subscribers inthese areas generating relatively modest ARPUs,there is a particular challenge for operators toensure that network deployments generateadequate returns on investment.

The Discoverer segment includes markets mainly inAfrica and Southern Asia, where unique subscriberpenetration still stands on average at only a third

of the population. Unique subscriber growth inrecent years has been very strong, with this segmentshowing the highest growth rate of any segment at15% over the last ve years. However, with only one inthree people having subscribed to a mobile service,there is clearly signicant growth to come.

Segment Trends1.3.1

UNIQUE SUBSCRIBER PENETRATION

MOBILE REVENUE ANNUAL GROWTH

2000 20002012 2012

MOBILE SPENDING AS % OF GDP

0.2%

91%

9%

2.0%

0%

30%


Network technologies% of total connections,

2012 average

Smartphone % of totalconnections, 2012 average,

selected operators

7%

Contract penetration,% of population,

2012 average

3%

3G

2G

6. https://gsmaintelli gence.com/analysis /2013/07/bangladesh-as ias-untapped-mobil e-broadband-opportun ity/394/


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These markets are witnessing strong growth in 3Gadoption with around 30% of total connectionson 3G and a quarter of connections beingsmartphones. While non-voice ARPU and contractpenetration are still relatively low, on average FastGrower markets have seen these metrics break intodouble digits (as a percentage of the total).

There is a common theme across many FastGrower segment countries of increased regulatoryintervention and rising competitive pressures. Anumber of the major countries in the segment haveseen new entrants enter the market, with revenuegrowth falling as a result of increased competitionover recent years.

Mobile operators in Fast Grower markets are facinga dual challenge of having to introduce moreaffordable products and services to meet price-

sensitive demand in rural areas, while ghting highchurn rate in mature urban areas. These marketsstill tend to be dominated by prepaid subscribers.Both smartphone and mobile broadband uptakein these markets is accelerating, while LTEdeployments are also gaining scale leading toincreasing data growth.

For most markets in this segment, the keyto unlocking greater revenue growth lies inencouraging subscribers to adopt smartphones andmobile data services, as voice-only growth modelswill not be sustainable over the medium-term. Anumber of operators in the region have notablyturned to handset subsidies to stimulate datademand growth.

The Fast Grower segment includes the majoremerging markets of China, Brazil, Russia and SouthAfrica (markets that together already accounted for aquarter of the world’s total subscribers at the end of2013), as well as a number of other Eastern European,

Latin American and Asian countries. Uniquesubscriber penetration growth among this segmenthas advanced at a steady pace over the last 10 years,reaching half of the population in 2013.

Fast Growers1.3.2

1.1%

1.9%

30%

11%

48%

7%

2000 20002012 2012




2012 average

23%


selected operators

22%Contract penetration,

% of population,2012 average

17%

3G

2G




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A number of factors inuence mobile revenue trendswithin the Connected Player segment. As outlinedpreviously, unique subscriber penetration tends to stallonce it passes the 80% demographic ceiling, a situationwhich is very evident in the Connected Player segment.However, there are also a number of other factorsnegatively impacting revenue growth.

One of the most often cited reasons for revenuedecline among the Connected Player segment hasbeen regulator-driven reductions in mobile terminationrates (“MTRs”). This is particularly true across Europe,with many operators continuing to highlight theirperformance excluding the impact of MTR reductions.The average MTR across Europe more than halvedbetween 2010 and 2013. Roaming price caps areestimated by the European Commission to havereduced revenues by €15 billion by the end of 2012 7,a major challenge to industry protability at a timewhen operators are seeing overall revenues decline.

The adverse macroeconomic environment has alsoplayed a part in dragging top-line performancedownwards. Figures for Europe as a whole also maskthe signicant variation in growth rates across theregion, with for example Greece seeing a 6.4% declinein GDP in 2012 and Italy a 2.4% decline. It is thesesouthern European markets that have seen the greatestmacro pressures, which are also seeing the mostsignicant declines in mobile service revenues.

Across Europe, slow-to-negative GDP growth hasexacerbated the negative impact of rising competitivepressure on top line revenues. From 2008 to 2012, theaverage HHI across Europe fell by 6.8% indicating anincrease in competition and a decline in the marketpower of dominant operators.

With rising smartphone penetration in Europe, onlinemessaging services such as Viber and WhatsApphave seen exponential growth in Europe over the lastcouple of years. However, the growth of these newservices, which has gone hand in hand with this risingsmartphone penetration, has created a dilemma forthe industry. The enormous growth in third partyapplications is one of the key drivers of increasingdemand for mobile data services, and messagingservices are just one facet of this growth in the broadermobile ecosystem.

The key challenge for operators in this segment is todiversify the revenue base, given the ongoing declinein traditional voice and data revenues. Operators in anumber of countries in Europe have been relativelyslow to launch LTE services, due to delays in allocatinglower frequency spectrum but also due to nancialpressures and falling protability as a result of ongoingrevenue declines. This has hampered the ability ofoperators to monetise data growth and to extend thereach of mobile services into new services and adjacentindustries.

1.3.3 Connected Players

This segment includes many markets in the throes ofrecession, or with very minimal GDP growth, such asthose found in Europe. Mobile revenues for this segmenthave continued to decline over the last four years, withrevenue declines forecast to continue albeit at a moremodest rate. Unique subscriber penetration levels for theConnected Player segment are among the highest in theworld, reaching 80% in 2009, with very limited growthsince then.

2000 20002012 2012


1.3%1.1%

18%

-5%

46%

81%



2012 average

49%


selected operators


2012 average

4G

3G

2G



7. “Digital Agenda: New price caps for mobile dataroaming expected to save families over €200each year and business travellers over €1000”; May2013


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Operators in Digital Pioneer markets have beenmore successful than their Connected Playercounterparts at monetising data growth—notablythrough the launch of LTE networks and compatiblebigger-screen devices—and this has helped toboost operators’ top lines. At the end of 2013,nearly a quarter of connections in North Americawere 4G, while the comparable gure for Europewas only 3%.

Digital Pioneers have some of the highest non-voice ARPU levels worldwide, on average 25% of

the total. In addition, and in contrast to those in the

Connected Players segment, many of these m arketsare still experiencing ARPU growth. The challengefor operators going forward is to further integratemobile into adjacent industries in order to continueto diversify their revenue streams and to furtherexpand the mobile ecosystem. Competition in manycountries in this segment has been less intensein recent years than for many Connected Playermarkets, with regulation often more supportive,though there is no guarantee that these morebenign conditions will continue.

Digital Pioneers

The Digital Pioneer segment includes the mostadvanced telecom markets in the world, includingthose in Northern America, Eastern Asia and theNordics. In contrast to the Connected Playerssegment, mobile revenue growth for this segment

has remained in positive territory over the last fouryears. While unique subscriber penetration rates forthe segment are approaching the 80% threshold, thisdoes not appear to be impacting revenue growth inthe same way as in the Connected Player segment.

1.3.4

5%4%

1.5%1.1% 41%

78%

2000 20002012 2012




selected operators


2012 average


2012 average

4G

3G

2G

84%




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1.4.1 Revenue outlook

There are clear shifts occurring in the revenue compositionof mobile operators at a global level and across the differentsegments. While revenues in the Discover segment areprimarily from traditional voice and data services, revenuesfrom these services begin to decline as markets matureand operators move into the Fast Grower segment andparticularly the Connected Player segment. The challenge for

these operators is then to diversify revenue streams towardsnew data and value added services, and in the processmonetise the explosive growth in data traffic.

At a global level, mobile operator total revenues are forecastto grow by 2.9% per annum out to 2020, reaching a total ofover US$ 1.4 trillion.

Mobile operator total revenue forecasts(US$ Bn)


Source: GSMA

1,127 1,186 1,239 1,288

1,331 1,367 1,398 1,424 1,445

S E R V I C E R E V E N U E S

DISCOVERER FAST GROWERS CONNECTED PLAYERS DIGITAL PIONEERS

TEXT

VOICE

DATA + VAS

1.4 Revenue mix and outlook

2012 2014 2016 20192013 2015 20182017 2020

Growth rates will vary across the regions and segments, with the fastest growth likely tocontinue to come from the Discover segment, while the Connected Players are likely to seeongoing revenue declines, albeit at a more modest pace than the declines in recent years.

Discoverers Digital PioneersConnected PlayersFast Growers


18/44


19/44

€10bn2020

An industryempowering people

and society

GDP

Jobs Public Funding

Mobile Money

10.5M JOBS

Supported by mobile ecosystem

15.4M JOBS

Distributers/ retailersaround 0.1%

US$ 336bn

Contribution to public funding (excludingregulatory and spectrum fees)

The number of active mobile money accounts is growingfast, and in June 2013, there were over 50 million activemobile money users globally. An increasing number ofservices are also reaching scale and 10 have over 1 millionactive users

US$ 465bn

2013 Mobile Industry Impact

3.6%GLOBAL

GDP 2013

US$ 2.4tnMobile industry estimated to contributearound 5.1% of global GDP in 2020

Mobile operatorsaround 1%

Infrastructure andsupport servicesaround 0.1%

Handsetmanufacturersaround 0.1%

Mobile ecosystem directly contributedaround 1.3% of global GDP in 2013

US$ 870bn

Renewable Energy

App Economy

Research shows that deploying green alternatives across Ghana, Cameroon,Senegal and Nigeria could realise savings of $200m per annum and reducediesel consumption by over 70%

A recent report estimatedthat there are already over

US$ 200m

70%

5.1%

2020

2013

2013

2020

PER ANNUM SAVING

100bnAPP DOWNLOADS A YEAR per annum in Europe alone

With the “app economy”generating revenues of over

[1] HTTP://WWW.GSMA.COM/PUBLICPOLICY/WP-CONTENT/UPLOADS/2012/11/GSMA-DELOITTE-IMPACT-MOBILE-TELEPHONY-ECONOMIC-GROWTH.PDF

Source: Vision Mobile

2.5Bn1 Billion

people in lower andmiddle-income countries

are unbanked

ACTIVE MOBILE MONEYUSERS GLOBALLY

2013

50MnHave access to a mobile phone


20/44

| An industry empowering people and society An industry empowering people and society |36 37


The rapid spread of mobile technology has had aprofound socio-economic impact on the economiesof every country in the world. This impact is notonly deep but broad, spanning many aspects ofeconomic, political and social life, making a strikingcontribution to everything from cross-sectorinnovation to GDP growth.

An industryempoweringpeople and

society

2

The mobile ecosystem makes a signicant directcontribution to GDP as an industry in its own right,whilst there is also indirect impact of the mobileindustry on the wider economy, both through raisingproductivity for “highly mobile” workers as well asin more informal areas such as small-holding basedagriculture and sheries services in developingmarkets. In 2013 the total contribution from themobile industry was equivalent to 3.6% of globalGDP, while the mobile ecosystem directly supported10.5 million jobs and contributed US$ 336 billion topublic funding (even before considering regulatoryand spectrum fees).

Mobile has empowered previously disenfranchisedcommunities, bridging the digital divide by bringingvoice services and Internet access to the previouslyunconnected. Access to the mobile Internet andrelated services has been demonstrated to improve

education, health and agriculture productivity, aswell as create employment and entrepreneurialopportunities, leading to improved quality of life forindividuals and their families.

The mobile industry is overcoming cost barriersand developing innovative new solutions todeploy networks in more remote and challengingenvironments, particularly in developing regions. Theindustry is already competitive and signicant pricereductions over recent years have helped to drivestrong subscriber growth across the developingworld. However, the industry faces a number ofchallenges if it is to full its growth potential, andregulators and policymakers must be careful not tohinder this with short-term polices that maximisenear-term tax revenues over the medium-termpotential for growth and development.

The mobile industry is a cornerstone of the globaleconomy; this is evident both through the directimpact of mobile industry ecosystem, and throughthe indirect role that mobile technologies are playingin adjacent industry sectors.

The mobile industry made a total contribution ofaround 3.6% of global GDP in 2013. This includes adirect contribution from the mobile ecosystem of

US$ 870 billion (1.3% of GDP), measured on the basis

of “value add” (estimated as gross prot, or revenueless direct cost of sales). The mobile operators madethe largest contribution to this gure, equivalent to1% of global GDP. The contribution from content andservices in this review reects only those that aresolely delivered by mobile services, and thereforethe gure may be smaller than in other studies thatinclude services delivered by other technologies.

2.1 Mobile is a cornerstone of theglobal economy

Mobile ecosystem direct contribution to GDP2013 GDP impact (US$ Bn)

Source: GSMA Intelligence; Orbis; Gartner; IE Market Research; BCG Analysis

1.3% GDP CONTRIBUTION

US$ 870B IN VALUE ADD

34.8 82.6 49.4 29.50.1% 0.1% 0.1%

1.0%

Suppliers ofinfrastructure and support services

Mobilenetwork

operators

Wirelesshandset devicemanufacturers

Distributorsand retailers

of mobilecommunications

Mobilecontent and service app providers

INFRASTRUCTURE ANDSUPPORT SERVICES

MOBILE NETWORKOPERATORS

HANDSETMANUFACTURERS

DISTRIBUTORS ANDRETAILERS

CONTENT ANDSERVICES

672.4


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The mobile industry’s economic contribution can bemeasured in terms of both supply and demand-sideeffects. The supply-side effects include the directcontribution from the mobile operators, as well asadjacent industries in the broader mobile ecosystem(as discussed above). In addition, there is the indirectimpact of the mobile industry on the wider economy(referred to as the “multiplier effect”). This demand-side impact comes from the productivity gain fromworkers using mobile technologies for their work.

The productivity gain at the global level is mainlybrought about by “highly mobile” workers (29%of the world’s workforce are classied as highlymobile 8) and their use of mobile technology. In more

developing markets, there is also a productivityuplift for small-holding based agricultural andsheries activities, where mobile services can bringbenets such as access to pricing information;online marketplaces and information to optimiseproduction

Finally, there is a 20% uplift effect from the mobileecosystem, which accounts for the broader rangeof goods and services in the economy used bythe mobile ecosystem. The indirect factor andproductivity increases together added a further 2.3%to global GDP, bringing the total GDP impact fromthe mobile industry to US$ 2.4 trillion (3.6% of globalGDP). As well as the contribution to GDP, the mobile

industry also makes an important contributionto employment across the globe. There are10.5 million jobs supported directly by themobile ecosystem across the globe, with thelargest share (3.8 million) from the mobileoperators. Among distributors and retailers(2.6 million), only companies working mainlywith sale of mobile handset and servicesare included. In addition, mobile is assumedto have a substantial indirect employmentcontribution through sale of top-ups andaccessories, which for some countries may

equate to ve to 10 times the number of direct jobs.Furthermore, the mobile ecosystem makesa signicant contribution to public funding:in 2013 this contribution totalled US$ 336billion. Payments come from a range ofareas including VAT and other indirect taxes,corporation taxes, social security and otheremployment taxes, as well as income taxes.These gures are even before consideringregulatory and licence fees, which totalledover US$ 34 billion over the last three years inEurope and the US alone.

There are 10.5 million jobs supported directlyby the mobile ecosystem across the globe.

The mobile ecosystem makes a signicantcontribution to public funding: in 2013 thiscontribution totalled US$ 336 billion.

Total mobile industry contribution to global GDP2013 GDP impact (US$ Bn)

Source: GSMA Intelligence; EIU; BCG Analysis

Job contribution from mobile ecosystem2013 Jobs (Million)

Source: GSMA Intelligence; annual reports; EIU; BCG Analysis

MOBILE ECOSYSTEM

672 196 174

1325 2367

MOBILEOPERATORS

GENERALECONOMY

RELATEDINDUSTRIES

PRODUCTIVITYINCREASE TOTAL IMPACT

1.0%

0.3%0.3%

2.0%

3.6%

INFRASTRUCTURE& SUPPORTSERVICES

NETWORKOPERATORS

HANDSETMANUFACTURERS

DISTRIBUTORS& RETAILERS

CONTENT& SERVICES

MOBILEECOSYSTEM

1.5

3.80.9

2.6 1.8 10.5

8. IDCMobile Worker Population2011-15


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By 2020, the mobile industry’s overall contributionis forecast to reach 5.1% of global GDP, whilstgenerating US$ 465 billion in public funding anddirectly contributing to over 15 million jobs. Theincrease in the overall GDP contribution from themobile industry reects a combination of factors

including ongoing mobile subscriber growth;revenue growth in adjacent industry segments; andthe indirect impact of the mobile industry on thewider economy (which is expected to increase asthe global connection base migrates increasingly tomobile broadband 9).

SERVICEVAT

HANDSET VAT& CUSTOMS

CORPORATETAX

EMPLOYEEINCOME

& SOCIALSECURITY

TOTAL

35.4135.7

57.3

107.3 335.7

40%

11%

17%

32%

100%

Mobile ecosystem contribution to public funding2013 Public funding (US$ Bn)

Source: GSMA Intelligence; annual reports; Factiva; BCG Analysis

Total mobile contribution to GDP will increase further out to 2020GDP contribution (US$ Bn)

Source: GSMA Intelligence; annual reports; Factiva; BCG Analysis

Mobile ecosystem forecast contribution to public funding(US$ Bn, excluding regulatory and spectrum fees)

Source: GSMA Intelligence; Ovum; EIU; BCG Analysis

336 359 379 398

414 430 447 465

2014 2016 20192013 2015 20182017 2020

Mobile ecosystem direct contribution to employment forecasts(M)

Source: GSMA Intelligence; Ovum; EIU; BCG Analysis

10.5 11.4 12.2

12.9 13.5 14.2 14.8

15.4

2014 2016 20192013 2015 20182017 2020

2,367 2,634 2,882 3,113

3,5604,055

3,3283,803

2014 2016 20192013 2015 20182017 2020

3.6% 4.0%4.2% 4.4%

4.6% 4.8%4.9% 5.1%

9. GSMA /Deloitte study(2012): “Whatis the impactof mobile telephonyoneconomicgrowth”


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Mobile is now at the heart of communication – from personal communication, mobilecommerce, to entertainment and professional productivity. Furthermore, mobile has becomean integral part of everyone’s lives. At work or at home, w hile traveling or looking forinformation, we increasingly rely on mobile applications and s ervices.

Mobile connectivity has transformed daily lifeacross the globe, but mobile is playing a particularlystrong role in socio-economic development in manydeveloping regions of the world. Affordable mobilephones and the opportunities they usher in for thepoor, through increased access to communicationsand information is already becoming one of the mostdramatic game-changing technologies the world hasever seen.

In some of the least developed regions, such as partsof Sub-Saharan Africa (“SSA”), there are much higherlevels of mobile access compared to other basicservices, such as electricity, sanitation and nancialservices. For example, in Nigeria there are 56 millionpeople living without access to electricity, and 38million without access to clean water. However,most of the population have the potential to accesshealth, banking and other essential services throughmobile networks (with network coverage for someoperators at 90% of the population).

2.2

2.2.1

Mobile at the heart of communicationtoday – empowering people and society

Driving digital inclusion in thedeveloping world

Access to basic services in Sub-Saharan Africa(%)

Source: GSMA Intelligence; IEA, World Bank

MOBILE FINANCIAL SERVICES ELECTRICITY SANITATION

31%

15-20%

26% 33% 31%

Mobile broadband can provide affordable service tohouseholds at the bottom of the pyramid in several ways.

Firstly, driven by competition in the wireless market, mobile broadband prices, bothin personal computer connectivity (through USB modems) plans and in data plans forsmartphones, have been signicantly reduced in recent years. Service tariffs in LatinAmerica have dropped between 7.3% for dongles and 52% for smartphones in the lastthree years.

Secondly, mobile broadband offers pricing exibility that allows consumers to purchaseservices based on what they can afford (by day, by download volume, or by type of

Internet service being accessed).

Thirdly, mobile access to the Internet through smartphones overcomes other barriersto broadband adoption at the bottom of the pyramid (such as, for example, the cost ofpurchasing a personal computer, limited digital literacy, or lack of access to electricity).

Reduced Prices

Pricing Flexibility

Mobile Access To The Internet

Mobile connectivity, customer data and distributionnetworks are enabling an explosion of innovativenew products and services that can extend accessto these basic services to populations in rural andremote areas. For example, Grundfos Lifelink’smobile-enabled solar-powered water pumps providesafe drinking water to small communities in parts ofSSA thanks to mobile enabled remote monitoringin the pump unit. Mobile technologies can widenaccess to education, particularly in remote areas.Mobile devices can act as a platform to provideaccess to educational content, as well as helping toaddress the shortage of teachers evident in manydeveloping world countries. The role of mobile

services in driving nancial inclusion is examined inmore detail later in this section of the report.

Mobile is playing a crucial role in bridging the digitaldivide, delivering internet access to previouslyunconnected populations, especially in developingmarkets. A recent survey by Analysys Masonfound that 87% of the respondents across Africaindicated that mobile devices were the main meansthrough which they connected to the Internet 10. Thishighlights the importance of mobile, and the needfor the further deployment of higher speed mobilebroadband networks, to bring internet access andmobile services to new sections of the population.

Shared use ofmobile accesses

10. http://www.analysysmason.com/Templates/Pages/KnowledgeCentreArticle1.aspx?id=13066


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Increasing mobile internet access for underservedcommunities in developing countries has beendemonstrated to deliver social and economicimpacts, such as employment and entrepreneurialopportunities and overall improved productivity andeconomic growth for populations and economies.For example in India, commercially protable mobileadvisory services have helped boost productivityand income of smallholder farmers by up to 50%,

and in SSA, mobile-based solutions will be used tosave one million lives and deliver education to 180million students 11.

On an individual level, access to the Internet andrelated services has been demonstrated to improveeducation, health and agriculture productivity,leading to improved quality of life for individuals andtheir families.

The World Bank 12 estimates that mobile broadband has a higher

positive economic impact than xed line broadband particularlyin emerging markets, and found that a 10 per cent increase inmobile broadband penetration drives a 1.4 per cent increase inGDP for low-to-middle income countries.

On a broader population level, access to the Internethas been found to impact the economic growth ofa country overall—increasing GDP, creating more

jobs and reducing poverty—all of which help fuel avirtuous circle that includes improved infrastructureand services and increased internet access andusage.

Further, empowering women through mobileinternet access also has more wide reachingbenets to broader societies. Women havebeen found to play a key role in the social and

economic development of countries as theyare often responsible for the health, education,economic stability and wellbeing of their familiesand communities. The Food and AgriculturalOrganisation for example reported that 80per cent of the food in many low and middle-income countries is cultivated by women andthe Organisation for Economic Co-operation andDevelopment (“OECD”) reported that up to 90 percent of women’s income is directed to their familiesand communities 13.

The mobile industry is overcoming cost barriers and developing innovative new solutionsto deploy networks in more remote and challenging environments, especially in developingregions. The industry is already competitive and signicant price reductions over recent yearshave helped to drive strong s ubscriber growth across the region. However, the industry faces anumber of challenges if it is to full its growth potential, and regulators and policymakers mustbe careful not to hinder this with short-term polices that maximise near-term tax revenues overmedium-term potential for growth and development.

2.2.1.1 Realising the further growth potential ofmobile in developing regions

There are several challenges to be addressed if themedium-term potential of the mobile sector is to be realised:

THE FIRST CHALLENGE is the need to improve the affordabilityon mobile services, especially when considering the low incomelevels in many markets and especially in those segments of thepopulation who have still to gain access to mobile;

THE SECOND of these is the need to improve the business casefor further mobile network build outs; a particular challenge givenlow population densities in developing regions which mean thatmost of the new s ubscriber growth will come from rural (andincreasingly remote) areas;

THE THIRD CHALLENGE is to provide the right conditions for theuptake of mobile broadband and more advanced handsets anddevices in the region.

11. GSMA: The rise ofconnected devices will drive mobile operator datarevenues pastvoice revenues globallyby201812. The World Bank13. GSMA mWomen: Women& Mobile: A Global Opportunity,2010


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Prices for mobile services have fallen substantiallyover recent years, driven by a range of factorsincluding increasing competition in a number ofmarkets, falling equipment prices (both in termsof handsets and for mobile networks), as wellas growing scale for the operators. The mobileoperators themselves have played an importantrole with ongoing investments to improve networkcoverage as well as to introduce new serviceofferings that can attract lower income subscribers.

The rst key challenge for operators in their effortsto further deepen mobile penetration rates is toimprove the affordability of services. This will bringmobile services to a broader range of the population,especially in the developing world. Handset deviceprices continue to fall, both for feature phones aswell as smartphones, which is a key factor in bringingmobile services to lower income segments. There isan important role to play for regulators and other

government agencies in further improving theaffordability and reach of mobile services. Taxes onmobile devices or usage will further hinder efforts toimprove the affordability of mobile services acrossmany developing regions.

The second key challenge to realising the growthpotential of mobile in developing regions lies inimproving network coverage, especially in moreremote and rural parts. Future subscriber growthwill increasingly come from rural areas, wherenetwork coverage is typically poor or indeed oftennon-existent. For example, the lack of electricityinfrastructure and low road density has negativelyaffected network coverage expansion in severalAfrican countries, with minimal levels of urbanisationcorresponding directly to low subscriber penetrationgures (see the chart below).

In many developing regions, an increasing proportionof incremental network coverage is likely to involveoff-grid base stations, opening the potential for arange of alternative solutions including solar power(although these accounted for only 5% of the off-gridsites at the end of 2012) and other “green” solutionsincluding wind, water, biomass and fuel cells.

Commercially driven network sharing deals are anincreasing feature of the mobile landscape in manydeveloping regions, such as in SSA. A number ofoperators in the region are sharing passive elementsof their networks, with several independent towercompanies offering their services to operatorsacross SSA. These deals can reduce both capex andoperating costs for the operators.

The third challenge is to help realise the potentialof mobile broadband. The lack of xed lineinfrastructure in many developing regions meansthat mobile will play a crucial role in bringing internetaccess to the broader population. In addition, therole of 2G networks and feature phones should notbe overlooked, as issues around both smartphoneaffordability and network coverage mean that

many users are accessing the Internet on thesedevices and over lower speed networks. However,many countries in the developing world are onlyat the rst stages of mobile broadband adoption,meaning that the full range of economic and socialbenets that this can bring to the region have yetto be fully realised. The introduction of mobilebroadband networks is expected to positively impacta country’s socio-economic development. Accordingto a Deloitte/GSMA study 15, for a given level of totalmobile penetration, a 10% substitution from 2G to3G penetration increases GDP per capita growth by0.15%.

UK

GERMANY

CONGO

IVORY COAST

SUDANGUINEA

SOUTH SUDAN

ETHIOPIADEMOCRATIC REPUBLIC OF CONGO

100%

80%

60%

40%

20%

0%

A C T I V E S U B S C R

I B E R P E N E T R A I T O N

POPULATION IN RURAL AREAS

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Mobile adoption versus rural population

Source: GSMA IntelligenceResearch shows that deploying green alternativesacross Ghana, Cameroon, Senegal and Nigeria couldrealise savings of US$ 200 million per annum andreduce diesel consumption by over 70% 14.

US$ 200M

14. http://www.gsma. com/mobilefordevelopment/ wp-content/uploads/ 2013/07/GPM-Bi-annual -Report_July13 .pdf15. http://www.gsma. com/publicpolic y/wp-content/uploads/ 2012/11/gsma-de loitte-impact-mobile -telephony-economic-grow th.pdf


26/44



2.2.2 2.2.3The Role of Smart Cities Mobile enabling innovation acrossthe world

In the developing world context, the primarychallenge for cities is typically over-congestion(both urban density and traffic volume) caused bythe unprecedented rapidity of urbanisation in thepast 10-20 years. A further challenge is to developthe educational, transport and communicationinfrastructure to incubate talent and to attractindustry and commerce.

In some developing regions, urban growth has oftentranslated into an increasing number of peopleliving in informal settlements, increasing povertyand inequality. Many developing market cities arecharacterized by insufficient basic infrastructure,particularly in low-income areas, where mobile

services could provide cost effective solutions andprovide the basis for more sustainable urban growth.

City administrations across the world are lookingto harness information and communicationstechnologies (“ICT”), including mobile connectivity,to help address the many challenges of urbanisation,such as traffic congestion, waste disposal and risingenergy usage. ICT can be used to deliver “smart city”initiatives that improve citizens’ quality of life, makepublic services more efficient, generate new sourcesof revenue and fuel economic growth.

Some developing regions have particularly high levels ofurbanisation. For example, urbanisation rates in a numberof Latin America countries average 79% for the regionas a whole 16, ahead of Europe and only just behind NorthAmerica. Latin America has four out of the 15 largest urbanconglomerates in the world: Mexico City (ranked 3 rd ), Sao

Paulo (6th

), Buenos Aires (12th

) and Rio de Janeiro (14th

). Theregion is expected to have 585 million urban citizens by2030. The issue of managing this rapid urban growth andmoving to a more sustainable development path is one ofthe key challenges of the 21 st century.

The mobile industry has played a crucialrole in the global economy as an innovationplatform for new services. Mobile operatorsprovide unique opportunities to reach newcustomers (through mobile connectivity andoperators’ trusted distribution networks) andto monetise products and services. There

has been an accelerating rate of new servicelaunches in developing regions over recentyears. While the health sector still accounts forthe majority of services overall, recent growthhas been driven by nancial services, learningand entrepreneurship/employment.

Note: gures based only on mobile-enabled products and services in developingworld tracked by GSMA (including those merged/closed)

Timeline of mobile enabled p roduct launches in developing markets


Other

CUMULATIVELAUNCHES

mHealthMobile MoneymAgri

2005 2007 2010 2011Pre 2005 2006 20092008 2012

7437 38 46

87

161

239

309338

1,329

991

682

443

28219514911174

16. http://esa.un.org/unup/pdf/WUP2011_Highlights.pdf


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28/44


29/44


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| Ensuring a healthy and prosperous digital future Ensuring a healthy and prosperous digital future |56 57


The world of 2020 will offer a range of life-enhancing services powered by a vibrant mobileecosystem that connects the physical and digitalworlds. The benets of mobility will spreadbeyond communications to provide dramaticimprovements in sectors such as energyefficiency, security, health and education.

Ensuring ahealthy andprosperous

digital future

3

The GSMA has identied four key growth areas thatpresent both signicant opportunities and benetsfor consumers. These areas also provide clear

opportunities for mobile operators to collaborateand, in doing so, play an active role in deliveringthem. Delivering the digital future will require a more

collaborative approach between mobile operatorsand other ecosystem players. A new focus oncollaboration will bring greater scale to operator

activities in the global race to meet the needs of thecustomer in the future.

3.1 The Digital Future

Looking to the future, the world will continue to seerobust economic growth, but also a range of newchallenges which society will endeavour to meet.As much as US$ 48 trillion will have been addedto the global economy as the world’s populationhits 7.7 billion and average GDP per capita jumps astaggering 50% 20 . Emerging markets will continue togrow in importance, with 45% of GDP now generatedfrom urban areas. This will create a new wave ofmiddle class consumption. At a global level one in

six people will be over 60, which will have a dramaticimpact on core public services such as health-care ata time when there are likely to be ongoing pressures

on government spending.Innovation in technology presents the opportunityto address these pressing needs of society. Thecombination of strong growth in the number ofconnected devices together with exponential growthin average data consumption highlight the importantrole that connectivity will play in addressing theseissues in 2020. When coupled with innovations in bigdata analytics, cloud computing and 3D printing theopportunity to connect the physical and the digital

provides a unique platform to improve quality of lifeand productivity.

Addressable amount of data for big data analytics Percentage of cloud-based data traffic

US$ 200 - 400 billion worth relevant products couldbe 3D printable involving cost savings as well as addedvalue from customisation

Proportion of driverless or near-driverless vehicles

The world in 2020 (technology)

Source: GSMA; Machina Research

2013

2013

2013

35%

~0%

750 EXABYTES

US$ 200Bn to

2020

2020

202070%

5-20%

13,000EXABYTES

US$ 400Bn

BIG DATA ANALYTICS CLOUD TECHNOLOGY

3D PRINTING AUTONOMOUS DRIVING

20. Economicgrowthforecasts prepared byGSMAi


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2020The world of 2020 will offer a

range of life-enhancing servicespowered by a vibrant mobileecosystem that connects thephysical and digital worlds.

THE WORLD OF

Ensuring a healthy and prosperous digital future | 59

THE MOBILE ECONOMY 2014

The world of 2020 will offer a range of life-enhancingservices powered by a vibrant mobile ecosystemthat connects the physical and digital worlds. Thisconvergence will unleash a new dimension of servicesthat improve the quality of consumers’ lives and theproductivity of enterprises. The benets of mobilitywill spread far beyond communications to providedramatic improvements in sectors such as energy

efficiency, security, health and education.

Personal Data

Digital Commerce

Connected Living

Network 2020

Become the secureguardians ofconsumer data

Enable and build thedigital commerceecosystem

Connect the physicaland digital worlds

Create the networkfor secure, smartand seamlessservices

The GSMA has identied four key growth areas that present bothsignicant opportunities and benets for consumers, as well as providingclear opportunities for mobile operators to collaborate and in doing so to

play an active role in delivering these opportunities and benets.


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3.2.1

The industry opportunity aroundPersonal Data

Initially, the mobile medium will most likely provide identity management serviceswithin the context of online s ervices; but in the longer term it could add convenience,

security and privacy within the context of real-world identity use cases—fromentering a building to buying goods in a supermarket. Identity is a very broad rangingenabler, and mobile identity solutions can yield value w ithin a far broader setting than

just the mobile world.

There are already a number of new players in the digital arena, such as Facebook,Amazon and Google. Most of these new players have their own solutions to managedigital identities, a number of which could be used as the authentication medium foran individual’s online activities.

This brings a challenge to the mobile operators to retain customer relevance and toplay an active role in the developing personal data market. As the market evolvestowards ubiquitous digitalisation the value of veriable users and their prole data isincreasing 21. Retaining customer relevance depends on operators’ ability to securelyidentify users, while value is unlocked by operators’ ability to provide personalisedservices based on the user’s prole.

As trusted and regulated players operators are in a strong position to offer a solutionto these challenges. Further, operators hold key data assets, such as demographic,behavioural and contextual information. The capability to secure and mediate thispersonal data across the wider ecosystem will enable the seeds of a personal datamarket to emerge.

3.2The Personal Data opportunity

The digital future will encompass a wide varietyof services that are always online, available cross-platform, and accessible from any location. As accessto digital services spreads and technology developsfurther, the mix of mobile services will also evolve toencompass new ecosystems in areas such as mobilecommerce, health, and e-government. However, asindividuals use digital identities to conduct an ever

wider range of activities in the digital world, so thelevel of risk they are exposed to has increased. Asa result, the need for new identity solutions hasbecome ever more critical.

By 2020, consumer access to digital services couldbe veried by a widely adopted, operator provideddigital identier. Identity linked to the phone numberand secured via the SIM would enable users tobenet from ‘bank grade’ authentication to servicessuch as digital passports and nancial services.

The benets of a secure digital identity extendacross all areas of society. For governments thiswould allow the further development of eServices,which would streamline the interface betweengovernments and citizens and allow the delivery ofefficient and effective services. For enterprises thiswould allow greater security around corporate data,as well as allowing more efficient and effective work-

ows.There are many major industries that wouldhave their development constrained without thedevelopment of secure digital authenticationservices. These include public services (includingeHealth), nancial services, and the eCommercemarket.

The opportunity unearthed by the mobile broadbandera means that increasingly large sections of societyalready have access to a broad range of new servicesand applications; the growth in smartphone adoptionand widespread data connectivity has democratisedaccess to digital services across the world. Ashighlighted earlier in the report, this trend is likely toaccelerate, with almost 4 billion mobile broadbandconnections forecast to be added in the period outto 2020.

21. The Value ofOur Data,BostonConsulting Group,2012


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3.3Connected Living – linking thephysical and digital worlds

Mobile is already delivering connectivity to a broadrange of devices, allowing the development ofinnovative new services and applications. This isbringing a new wave of connectivity, beyond tabletsand laptops; to connected cars and buildings; TVsand game consoles; smart meters and traffic control;with the prospect of connecting almost anything

and anyone. The Internet of Things (“IoT”) is theability of devices to communicate with each otherindependent of any human. Mobile networks enablea host of innovative products and services thatbenet consumers and businesses across a growingnumber of sectors. This is what the GSMA refers toas the “Connected Life”.

The connected devices market will open-up criticalnew revenue streams, facilitate new business models,drive efficiencies and improve the way existing

services across many different sectors are delivered.They will represent a very important demand-sidestimulus that helps nance the deployment ofmobile broadband networks around the world. Intotal, the positive impact on the global economycould be worth as much as US$ 4.5 trillion perannum, according to research commissioned by the

GSMA in partnership with Machina Research 22.Connected Living promises a revolutionary stepchange in customer quality of life and enterpriseproductivity. Through a widely distributed,locally agile/intelligent network of smart devices,the Connected Life has the potential to enableextensions and enhancements to fundamentalservices in areas such as education and healthwhile offering the next ecosystem for applicationdevelopment.

*GSMA denition of Smart** Handsets, PCs/laptops & tablets

There will be a dramatic rise in the number ofmobile connections (including handsets, tabletsand machine-to-machine devices), with the numberforecast to reach 11 billion by 2020 (while the totalnumber of connected devices across all accesstechnologies could reach 25 billion). This new classof devices will be a key enabler of a new category ofservices that improve quality of life and productivityof consumers, society and enterprises by linkingphysical and digital worlds.

Source: Machina Research, October 2013

2020 Addressable opportunity for operators in selectedvertical sectors

US$ 196 Bn

US$ 70 Bn

US$ 351Bn

US$ 24 Bn

US$ 92 Bn

US$ 48 Bn

US$ 336 Bn

Health

Smart Cities*

Other M2M

Handsets/Tablets

Automotive

Consumer Electronics**

PCs/Laptops

Total Connected Devices

201311.3Bn

202025.7Bn

Mobile Connected Devices

20136.9Bn

202010.8Bn

22. http://connectedlife.gsma.com/wp-content/uploads/2012/02/Global_Impact_2012.pd


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New services have been launched and are already having an impact in a range of industriesincluding nancial services, healthcare, education and agriculture; in both developed anddeveloping markets.

3.3.1

The industry opportunity forConnected Living

The proliferation of connected devices will create a signicant revenue opportunityfor mobile operators; will put the mobile industry at the centre of connecting adjacent

industries; and ultimately deliver the connected life. In order to fully develop thismarket to its full potential, it is important that mobile operators prepare to play acentral role in the delivery of new Internet of Things (“IoT”) services by supporting theemerging new requirements and business models.

In the near term there is a need to deliver increased network efficiency in order toaccommodate the increasing number of IoT devices; while there is a longer term needto dene the evolution of the network and operator capabilities in order to supportIoT services and new business models.

The mobile industry is in the process of agreeing the denition of a Machine SIM thataddresses remote provisioning requirements, as dened in the GSMA’s EmbeddedSIM Fast Track Project. These devices have fundamentally different requirements thanpersonal devices. Such devices are expected to remain in the eld for up to 10-20years, have wide-ranging form factors, have uncertain after sales locations and beremotely located, which render traditional removable SIM cards unsuitable.

In addition, the industry needs to aim to unlock the potential of Connected Livingservices in a number of markets by working to eliminate existing barriers, forexample, by highlighting the need for a differentiated regulatory/policy treatmentof the Machine SIM. Operators will need to engage with stakeholders in key adjacentindustries, as well as w ith governments and regulators in order to provide the key

foundations of the IoT and to help form the basis of a vibrant ecosystem for the nextgeneration of connected services.

Customer Vision of Internet of Things in 2020

ON THE GOConnected Devices/Cars

Pervasive smart connectivity brings consumers’physical and digital life closer together

Connected intelligent buildings bring the benetshome by driving dramatic improvements in (energy)efficiency and security and extending benets ofhealth and education to the home

Smart cities ensures a networked urban society sharesin the benets of intelligent traffic management, smartenergy grids and security

While spreading the benets to rural areas by enablinginnovation in agriculture and improving access to keyservices such as education and health

IN THE HOMEConnected Home

IN THE CITY Smart Cities

AND BEYOND Agriculture

Source: McKinsey & Company

The IoT ecosystem will revolutionise our customers’ lives from multiple perspectives


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3.4Digital Commerce – placing mobileat the heart of future commerce

All types of commerce will have the potential to becompleted on connected devices, unrestricted bygeographical boundaries and with digital walletsintegrating all stores of value. Intelligence willbe integrated into the commerce environmentvia digital identity to maximise the value for thecustomer and optimise efficiency for the serviceprovider.

Individuals increasingly interact with mobilecommerce services from many different providersand in many different ways. To reduce thiscomplexity, consumers need a straightforward andconsistent approach to organising digital vouchers,loyalty programmes, payment cards, tickets andother items. A mobile wallet can meet that n eed: a

mobile wallet is designed to aggregate and managemobile commerce services, supporting paymentcards, tickets, loyalty cards, receipts, vouchers andother items that might be found in a conventionalwallet (or purse).

A mobile wallet will enable an individual to easilysubscribe to and browse through many services,including payment cards, offers, vouchers

GSMA_ME_Report_2014_R2_WEB.pdf

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