Well, current focus switches to inflation From news, Fed's success in stabilising the financial situation has let the markets think that the massive growth risks have receded and that inflation is the next monster on the horizon. From my view, its continuing surge in commodity prices has compounded these inflation concerns. World inflation should rise to around 5% in 2008 after 4.2% in 2007.
I think, current original real economy event that triggered the liquidity crisis, like US housing collapse, has not yet run its course. Moreover, just because financial market stabilisation has been achieved does not mean the same is true for the global real economy. In Asia, the effect of the continuing US consumer slowdown will be felt with increasing force.
In China - from news I have heard that, the return of "hot money" flows, as risk aversion and financial stresses related to the subprime crisis fade, appears to have dulled the authorities’ appetite for a faster pace of yuan appreciation. A key risk would be that the panic hoarding of rice may drive a spike in inflation which would be very hard to control.
Next question: Wondering, how much capital was transferred between oil or energy consuming countries and the producing countries due to the surge in energy prices? *errrrr.... some countries become rich and richer - vice versa*
Monday, July 7, 2008
Saturday, July 5, 2008
China Telecom Industry Review
Executive Summary
Continuing my early review about 3G Global Development, for past 2 months - I have begun to review significant growth after restructuring in China’s telecom industry. Current five service-providers have now been reduced to three full-service telecom service-providers. Birth of these providers suggests that there will be a new market-share pattern in China’s telecom industry. Which company gets the bigger piece of the pie and which gets the smaller will depend on the customers’ choice of service provider in China’s ‘3G’ era. In view of the over 1.4 Billion populations and low penetration, I believe there is ample room in the market for every operator to make a differentiating position and restore growth momentum in the long run.
From news, I have seen that Chinese Government would impose asymmetric regulations on dominant market players for 2 to 3 years to help new entrants catch up. This would prompt the three providers to reposition themselves through differentiation in market, services and/or customers. As the Government has been intending to stimulate competition instead of creating a price war, this would help in cultivating a healthy and sustainable industry development going forward.
China Mobile
I have seen China Mobile, current market share leader, faces development constraints. The mobile phone service provider will inevitably face fierce price wars and high capital expenditure in the next 2 years. The best way to determine which operator acquires the most market share will be by looking at customer flows. Therefore, new additional subscriber numbers will be a good indicator as to which of the three is building the most successful operation going forward. Again, I believed China Mobile should be able to make differentiation in the rural mobile market and high-end individual mobile users market in urban areas.
China Unicom
Another big player, new China Unicom is better than new China Telecom. After restructuring, China Mobile’s business development will be constrained in coming years due to the maturity of TD-SCDMA technology and the possible influence of some un-favorable regulatory policies. My review on the product front, its upgraded CDMA 3G version will be no better than WCDMA. New Unicom will focus on developing G-net after shedding the burden of C-net. I believe that the upgraded WCDMA has the strongest array of products and will be the top choice of China 3G customers in the future.
Additionally, I have heard from news (Financial Times) that Telefonica plans to buy 10% stake to become new strategic shareholder for China Unicom. Currently, Telefonica owns around 5% stake in Netcom; post-merger it would be about 3% of the enlarged China Unicom. In my view, the latest development is positive for China Unicom, at least from a technical standpoint, as any purchase in the open market would support China Unicom’s share price. Arguably, from a fundamental standpoint, Telefonica’s more serious involvement could help the new China Unicom in a number of areas including: 1) lower costs in equipment purchases,
2) more technical know-how and
3) commercial know-how in 3G planning and marketing.
China Netcom
I have my limitation to review China Netcom, just my key concerns on China Netcom are long-term competitiveness in a three player market. For comparison, China Mobile - it faces the largest and strongest mobile operator as above note, while China Telecom has a fixed line footprint twice the size of China Netcom. Facing the fact that fundamentally on the core business than China Telecom — given China Netcom operates in provinces with relatively lower affordability, I expect the impact from mobile substitution, lower mobile tariffs, etc, to be more material than for China Telecom.
Overall Review for Telecom Industry in China
I believe it will be a strong mobile usage growth continues in following year although it will not as fast as past years. From many reviews it says that China added 87 million mobile subscribers in 2007; mobile penetration just hit around 40% with 530 Million mobile subscribers by the year end.
From this point, I estimate China will add an additional around 180 Million subscribers in the next two years with the total of mobile subscribers approaching 700 Million by the end of 2009 and mobile penetration of around 52%. With industry restructuring allowing fixed line operators to participate in mobile operation would accelerate this process.
What next: South Asia Round-up?
Continuing my early review about 3G Global Development, for past 2 months - I have begun to review significant growth after restructuring in China’s telecom industry. Current five service-providers have now been reduced to three full-service telecom service-providers. Birth of these providers suggests that there will be a new market-share pattern in China’s telecom industry. Which company gets the bigger piece of the pie and which gets the smaller will depend on the customers’ choice of service provider in China’s ‘3G’ era. In view of the over 1.4 Billion populations and low penetration, I believe there is ample room in the market for every operator to make a differentiating position and restore growth momentum in the long run.
From news, I have seen that Chinese Government would impose asymmetric regulations on dominant market players for 2 to 3 years to help new entrants catch up. This would prompt the three providers to reposition themselves through differentiation in market, services and/or customers. As the Government has been intending to stimulate competition instead of creating a price war, this would help in cultivating a healthy and sustainable industry development going forward.
China Mobile
I have seen China Mobile, current market share leader, faces development constraints. The mobile phone service provider will inevitably face fierce price wars and high capital expenditure in the next 2 years. The best way to determine which operator acquires the most market share will be by looking at customer flows. Therefore, new additional subscriber numbers will be a good indicator as to which of the three is building the most successful operation going forward. Again, I believed China Mobile should be able to make differentiation in the rural mobile market and high-end individual mobile users market in urban areas.
China Unicom
Another big player, new China Unicom is better than new China Telecom. After restructuring, China Mobile’s business development will be constrained in coming years due to the maturity of TD-SCDMA technology and the possible influence of some un-favorable regulatory policies. My review on the product front, its upgraded CDMA 3G version will be no better than WCDMA. New Unicom will focus on developing G-net after shedding the burden of C-net. I believe that the upgraded WCDMA has the strongest array of products and will be the top choice of China 3G customers in the future.
Additionally, I have heard from news (Financial Times) that Telefonica plans to buy 10% stake to become new strategic shareholder for China Unicom. Currently, Telefonica owns around 5% stake in Netcom; post-merger it would be about 3% of the enlarged China Unicom. In my view, the latest development is positive for China Unicom, at least from a technical standpoint, as any purchase in the open market would support China Unicom’s share price. Arguably, from a fundamental standpoint, Telefonica’s more serious involvement could help the new China Unicom in a number of areas including: 1) lower costs in equipment purchases,
2) more technical know-how and
3) commercial know-how in 3G planning and marketing.
China Netcom
I have my limitation to review China Netcom, just my key concerns on China Netcom are long-term competitiveness in a three player market. For comparison, China Mobile - it faces the largest and strongest mobile operator as above note, while China Telecom has a fixed line footprint twice the size of China Netcom. Facing the fact that fundamentally on the core business than China Telecom — given China Netcom operates in provinces with relatively lower affordability, I expect the impact from mobile substitution, lower mobile tariffs, etc, to be more material than for China Telecom.
Overall Review for Telecom Industry in China
I believe it will be a strong mobile usage growth continues in following year although it will not as fast as past years. From many reviews it says that China added 87 million mobile subscribers in 2007; mobile penetration just hit around 40% with 530 Million mobile subscribers by the year end.
From this point, I estimate China will add an additional around 180 Million subscribers in the next two years with the total of mobile subscribers approaching 700 Million by the end of 2009 and mobile penetration of around 52%. With industry restructuring allowing fixed line operators to participate in mobile operation would accelerate this process.
What next: South Asia Round-up?
Sunday, June 22, 2008
Asia Pacific Telecommunication Round-up
Based on personal view, I still favour the Asian telecoms industry, given low economic sensitivity, continued growth in emerging and certain developed markets, and healthy finances. The future for mature telecoms markets is quad-play strategy. In less developed countries, it is better to service the different parts of the telecoms market individually. I believe the best time for restructuring has passed, due to depressed mobile tariffs and the lack of a pro-competition environment (China). Wireless operators’ earnings should rebound from here, driven by lower capex, ARPU improvements and cost-cutting (Korea). Somehow, I saw Singapore as an ideal market for fibre-to-thepremises; an FTTP-based NBN project can yield high positive NPV (Singapore).
Rough Asia-Pacific Telecoms round-up - again I still favour the Asian telecoms sector, given low economic sensitivity, growth not only in emerging markets but also in developed markets like Hong Kong and Singapore, and strong finances. I am recommending a telecoms bucket that reflects the sector’s attractions. This originally included SK Telecom, Taiwan Mobile, PCCW, DiGi, Telekom Malaysia, SingTel and StarHub. Also, may be DTAC in Thailand. I think DTAC has a good chance of winning a 3G licence by mid-2009; it is performing well operationally, and should deliver strong profit growth this year (ref. to their performance)
For China’s restructuring and other developments - current key story so far in 2Q is the announcement of the long-awaited restructuring of China’s telecoms market. I see this as too little, too late; and it will be very hard to reverse China Mobile’s huge market dominance. In Southeast Asia, I have saw forecasts for Telekom Malaysia, the new pure fixed-line operator, plus reports on TM International, the new pure mobile operator.
Anyway...what next?
Rough Asia-Pacific Telecoms round-up - again I still favour the Asian telecoms sector, given low economic sensitivity, growth not only in emerging markets but also in developed markets like Hong Kong and Singapore, and strong finances. I am recommending a telecoms bucket that reflects the sector’s attractions. This originally included SK Telecom, Taiwan Mobile, PCCW, DiGi, Telekom Malaysia, SingTel and StarHub. Also, may be DTAC in Thailand. I think DTAC has a good chance of winning a 3G licence by mid-2009; it is performing well operationally, and should deliver strong profit growth this year (ref. to their performance)
For China’s restructuring and other developments - current key story so far in 2Q is the announcement of the long-awaited restructuring of China’s telecoms market. I see this as too little, too late; and it will be very hard to reverse China Mobile’s huge market dominance. In Southeast Asia, I have saw forecasts for Telekom Malaysia, the new pure fixed-line operator, plus reports on TM International, the new pure mobile operator.
Anyway...what next?
Oil Shock!!
Again...oil issues! Somehow, current strength of oil prices, and to a lesser degree food prices, is weighing on our emerging market outlook. Until recently, current pace of emerging market growth tended to outperform our expectations, boosting global demand, commodity prices and, thereby, inflation worries. In the future, though, signs of weakening domestic demand, generally tighter monetary policy, and continued high oil prices imply that aggregate emerging market economic growth is likely to be generally slower. It is also likely to be more disparate as the effects of high oil prices impact producers and users differently.
A large portion of rising commodity prices is likely due to growth in emerging markets, which proved more robust than we, or the market generally, expected. Seeing Asia for sample, latest indicators of industrial production in China and India also show deceleration in year-toyear growth, as does production in the broad Asia-Pacific region. These trends are consistent with modest deceleration in emerging market growth and waning pressure on commodity and oil prices.
From my point of view, there are wwo other factors may have been at play, but their contribution to commodity prices is uncertain and highly debated, which are: (1) less assurance in markets over the timing of supply increases in oil (implied in the upward slope of futures prices); and (2) increased demand for oil and other commodities, spurred by low global real interest rates and financial innovation that facilitated access to commodities as assets.
Next question: Do you think there is an alternative oil price paths?
A large portion of rising commodity prices is likely due to growth in emerging markets, which proved more robust than we, or the market generally, expected. Seeing Asia for sample, latest indicators of industrial production in China and India also show deceleration in year-toyear growth, as does production in the broad Asia-Pacific region. These trends are consistent with modest deceleration in emerging market growth and waning pressure on commodity and oil prices.
From my point of view, there are wwo other factors may have been at play, but their contribution to commodity prices is uncertain and highly debated, which are: (1) less assurance in markets over the timing of supply increases in oil (implied in the upward slope of futures prices); and (2) increased demand for oil and other commodities, spurred by low global real interest rates and financial innovation that facilitated access to commodities as assets.
Next question: Do you think there is an alternative oil price paths?
Monday, June 9, 2008
We’ve Been “Running Out of Oil”
Aside from potential concerns about the stability of oil supplies from a geo-political perspective, the rise in oil has in part revived concerns that peak world oil production rates have been reached. Once global oil production begins an inevitable decline, demand must similarly be reduced, if necessary by ever increasing price levels. “Peak oil” is more than a theory. A limited quantity of hydrocarbons does exist in the ground, and at some point, those supplies will be uneconomic to recover. However, a history of oil reserve estimates shows that technological advances and real price increases – which should drive the willingness to explore in more difficult to reach areas – can stretch available supplies.
Oil producers, for example, have used technology to roughly double potential yields from existing deposits over time, and technology is not known for standing still. The last estimate would represent nearly 100 years of daily supply at the current global demand pace, and excludes very unconventional supply resources. But these supply estimates are controversial, disputable, and unobservable until realized by actual production. Leaving issues of global climate change completely aside, I believe political factors might be playing a bigger role in determining available oil supplies than the level of the world’s unconsumed reserves.
Next question: how long we can stay without oil?
Oil producers, for example, have used technology to roughly double potential yields from existing deposits over time, and technology is not known for standing still. The last estimate would represent nearly 100 years of daily supply at the current global demand pace, and excludes very unconventional supply resources. But these supply estimates are controversial, disputable, and unobservable until realized by actual production. Leaving issues of global climate change completely aside, I believe political factors might be playing a bigger role in determining available oil supplies than the level of the world’s unconsumed reserves.
Next question: how long we can stay without oil?
Global 3G Development
I have begun to see significant growth in 3G device adoption over the past 18 months. Based on my analysis, there were more than 306 million subscribers globally using 3G devices as of end-1Q/08 — both Wideband Code Division Multiple Access (WCDMA) and Evolution-Data Optimized (EVDO). However, in spite of the recent growth in 3G device adoption, my estimation that there is still significant upside potential, as 3G still accounts for only around 9% of the total global mobile subscriber base of 3.3 billion.
At present, there are 293 3G network operators globally, which include 211 based on High-Speed Packet Access (HSPA), 26 based on WCDMA, and 82 based on EV-DO. I believe that most of the remaining WCDMA networks will upgrade to HSPA within the next 12 months owing to the relatively low cost of upgrading to higher speed wireless technology — and the potential revenue upside from an enhanced user experience for wireless broadband.
In my view, much of the incremental growth in 3G is being driven by WCDMA, which accounted for roughly 68% of the total 3G device base as of end-1Q/08. Again, my estimation that mobile operators are adding around 22 million new WCDMA device users, per-quarter, globally versus an average of eight million per quarter for EVDO. Going forward, somehow, I expect this gap to widen as WCDMA growth accelerates.
Although 3G accounts for only around 9% of all mobile devices, non-voice applications have continued to become an important source of revenue for wireless carriers (mainly in the form of SMS and ring tone and other downloads). In the developed markets in Asia, Europe, and North America, non-voice revenue accounts for 20%–35% of the total average revenue per user (ARPU).
In Japan, the most developed 3G market in the world, 76% of all mobile subscribers use 3G devices, and non-voice revenue represents more than 30% of total ARPU. In order to encourage greater data usage, DoCoMo first introduced unlimited data packages for its subscribers in June 2004. With more than 45% of Japan’s 3G subscribers on unlimited data plans, average data usage has increased to 19 MB/month in 2007 from 0.96 MB/month per month in 2003. However, I believe that these unlimited data plans seem to have capped some of the potential upside for data revenue growth. DoCoMo reported that 75% of its subscribers had data ARPU of about JPY4,000 per month (US$38) and remaining 25% had data ARPU of around JPY1,200 (US$12) in 4Q/07 (ref. DoCoMo report).
I believe that many of the key factors that have contributed to the migration of 3G in Japan will also help accelerate 3G adoption in other developed markets throughout the world.
In Asia Pacific, I saw that there were 122 million 3G subscribers in the region as of end-March 2008. However, a majority of 3G subscribers in this region are still concentrated in Japan (64% of all 3G subscribers). The second-largest 3G subscriber base outside Japan is Korea, with more than 26 million subscribers, and the third-largest is Australia, with around 7.4 million subscribers.
Even though 3G has only started to gain traction in the Asia-Pacific region, data and value-added services are already an important source of revenue for many carriers in the region, with many of them reporting non-voice ARPU of above 20% of total ARPU — including some developing markets such as China and Malaysia.
Going forward, I believe that wireless data will remain a major source of revenue for carrier in the region. In fact, wireless broadband could become the major, means to access the Internet in developing markets where the fixed line infrastructure is not robust. Thus, I believe that carriers have been considering WiMax and HSPA/LTE to provide wireless broadband in the region.
In Europe, my estimation that there were more than 80 million 3G subscribers in Europe as of end-March 2008, with 3G penetration in excess of 20%. Unlike in the US and Asia-Pacific regions, all 3G networks in Europe are based on WCDMA technology. My analysis that SMS is still the largest component of non-voice revenue, accounting for 14% of total ARPU in FY07. However, as 3G brings a more robust user experience, I estimate that data revenue will increase from 8% of total ARPU to 12% of total ARPU by 2010, while SMS will fall to 11% of total ARPU. Overall data ARPU will increase to 24% of total ARPU by 2010, up from 21% in 2007.
As demonstrated by the estimated incremental ARPU from data (up only 3% from 2007 to 2010), again, I believes that the upside from wireless data for European telecom carriers remains limited. In fact, the potential upside from data might not justify a significant boost in capex and opex to roll out the services.
In United States, my review estimate that the US had more than 60 million subscribers using 3G devices as of end-March 2008, including 11 million subscribers with WCDMA devices and over 50 million subscribers with EV-DO devices. This represents about 23% of the total number of mobile subscribers. The growth in 3G has helped wireless data to become an increasingly critical component of wireless carriers’ service revenue. For instance, wireless data accounted for approximately 23% of retail ARPU, or US$11.94 per user per month, for Verizon Wireless in 1Q/08. Among 3G subscribers that use mobile data applications, that monthly data ARPU is nearly twice the average data ARPU for 2G subscribers. I also believe that the introduction of unlimited data plans in the US by all the major carriers will also help to stimulate wireless data usage.
3G development in Asia Pacific
At the end-March 2008, I saw that there were 122 million 3G subscribers in nine key markets of the Asia-Pacific region. This represents around 36.5% of all mobile subscribers in countries/territories in these markets.
Wireless operators in Asia-Pacific region have launched 3G services in 12 countries/territories, which include Australia, Brunei, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Sri Lanka, and Taiwan. I expect Thailand and India to issue 3G licenses over the next 6-12 months.
Most 3G subscribers in region are concentrated in Japan (around 64% of all 3G subscribers). DoCoMo had 44 million WCDMA subscribers (or 82% of the company’s subscriber base) in Japan as of end-March 2008. The second largest WCDMA operator was SoftBank Japan, with around 14 million 3G subscribers (75% of its subscriber base). WCDMA subscribers accounted for 57% of all mobile phone subscribers in Japan. If I include KDDI’s 20 million EVDO subscribers, the total number of 3G subscribers in Japan rises to 78 million, or about 76% of all mobile subscribers.
Excluding Japan, I think there were around 45 million 3G subscribers in the Asia-Pacific region as of March 2008. The second largest 3G subscriber base outside Japan is Korea, with 26.4 million subscribers, and the third largest is Australia with 7.4 million subscribers.
Data is becoming a key driver of wireless revenue growth
3G is likely to play a vital role in meeting the demand for data services, going forward. For the four largest wireless carriers in US, revenue from mobile data services topped $6.2 billion in 4Q/07 and $22.0 billion in 2007, up from $4.2 billion in 4Q/06 and $14 billion in 2006, respectively. For both AT&T and Verizon, data revenue accounted for around 55% of the year-on-year increase in revenue in 2007, and has been instrumental in stabilizing and even growing monthly ARPU.
This trend in data revenue growth will continue in the US due to the following:
(a) increasing adoption of mobile data services by mobile subscribers,
(b) enhanced coverage of 3G networks, and
(c) rising proportion of the subscriber base using more feature-rich handsets, PDAs, and laptop PC wireless data cards.
I think that Apple’s iPhone (which is just a 2G device at this point), has the potential for rapid adoption of data services beyond just SMS, when the device has a simple interface for data applications. M:Metrics reports that iPhone users are 6x more likely than the broader base to use a browser for news, 10x more likely to do a web search, 6x–20x more likely to view various types of video content, and 100x more likely to access a social networking site.
Around 57% of subscribers were data users in 2007
I estimate that 57% of the subscriber base of the big-four wireless carriers comprises data users, up from 47% in 2007 and 40% in 2006. In addition, data revenue per user has been rising with increasing penetration, which suggests higher data uptake, going forward.
Higher data speeds from HSPA to enhance user-experience and encourage usage
Somehow, HSPA is likely to drive Internet browsing in particular and mobile data in general in 2008. Although 3G handset penetration remains relatively low in US, I think the natural replacement cycle to improve penetration levels. In my view, higher 3G adoption will likely help data revenue growth, particularly for GSM carriers such as AT&T and T-Mobile, where current penetration levels are around 20% and almost 0%, respectively. I expect, AT&T to migrate its handset portfolio, as much as possible, to 3G by the end of 2008.
Also, there are several 3G ‘touch screen’ devices to be introduced in 2008, including a Nokia model code-named ‘Tube’, a 9,000 series from RIM, and the Samsung Instinct, which I believe could be the next catalyst for data growth. AT&T noted recently that 3G devices drive 20% more ARPU than 2G devices, while integrated devices (i.e., QWERTY) drive nearly double the ARPU of traditional subscribers.
Next question: what next?
At present, there are 293 3G network operators globally, which include 211 based on High-Speed Packet Access (HSPA), 26 based on WCDMA, and 82 based on EV-DO. I believe that most of the remaining WCDMA networks will upgrade to HSPA within the next 12 months owing to the relatively low cost of upgrading to higher speed wireless technology — and the potential revenue upside from an enhanced user experience for wireless broadband.
In my view, much of the incremental growth in 3G is being driven by WCDMA, which accounted for roughly 68% of the total 3G device base as of end-1Q/08. Again, my estimation that mobile operators are adding around 22 million new WCDMA device users, per-quarter, globally versus an average of eight million per quarter for EVDO. Going forward, somehow, I expect this gap to widen as WCDMA growth accelerates.
Although 3G accounts for only around 9% of all mobile devices, non-voice applications have continued to become an important source of revenue for wireless carriers (mainly in the form of SMS and ring tone and other downloads). In the developed markets in Asia, Europe, and North America, non-voice revenue accounts for 20%–35% of the total average revenue per user (ARPU).
In Japan, the most developed 3G market in the world, 76% of all mobile subscribers use 3G devices, and non-voice revenue represents more than 30% of total ARPU. In order to encourage greater data usage, DoCoMo first introduced unlimited data packages for its subscribers in June 2004. With more than 45% of Japan’s 3G subscribers on unlimited data plans, average data usage has increased to 19 MB/month in 2007 from 0.96 MB/month per month in 2003. However, I believe that these unlimited data plans seem to have capped some of the potential upside for data revenue growth. DoCoMo reported that 75% of its subscribers had data ARPU of about JPY4,000 per month (US$38) and remaining 25% had data ARPU of around JPY1,200 (US$12) in 4Q/07 (ref. DoCoMo report).
I believe that many of the key factors that have contributed to the migration of 3G in Japan will also help accelerate 3G adoption in other developed markets throughout the world.
In Asia Pacific, I saw that there were 122 million 3G subscribers in the region as of end-March 2008. However, a majority of 3G subscribers in this region are still concentrated in Japan (64% of all 3G subscribers). The second-largest 3G subscriber base outside Japan is Korea, with more than 26 million subscribers, and the third-largest is Australia, with around 7.4 million subscribers.
Even though 3G has only started to gain traction in the Asia-Pacific region, data and value-added services are already an important source of revenue for many carriers in the region, with many of them reporting non-voice ARPU of above 20% of total ARPU — including some developing markets such as China and Malaysia.
Going forward, I believe that wireless data will remain a major source of revenue for carrier in the region. In fact, wireless broadband could become the major, means to access the Internet in developing markets where the fixed line infrastructure is not robust. Thus, I believe that carriers have been considering WiMax and HSPA/LTE to provide wireless broadband in the region.
In Europe, my estimation that there were more than 80 million 3G subscribers in Europe as of end-March 2008, with 3G penetration in excess of 20%. Unlike in the US and Asia-Pacific regions, all 3G networks in Europe are based on WCDMA technology. My analysis that SMS is still the largest component of non-voice revenue, accounting for 14% of total ARPU in FY07. However, as 3G brings a more robust user experience, I estimate that data revenue will increase from 8% of total ARPU to 12% of total ARPU by 2010, while SMS will fall to 11% of total ARPU. Overall data ARPU will increase to 24% of total ARPU by 2010, up from 21% in 2007.
As demonstrated by the estimated incremental ARPU from data (up only 3% from 2007 to 2010), again, I believes that the upside from wireless data for European telecom carriers remains limited. In fact, the potential upside from data might not justify a significant boost in capex and opex to roll out the services.
In United States, my review estimate that the US had more than 60 million subscribers using 3G devices as of end-March 2008, including 11 million subscribers with WCDMA devices and over 50 million subscribers with EV-DO devices. This represents about 23% of the total number of mobile subscribers. The growth in 3G has helped wireless data to become an increasingly critical component of wireless carriers’ service revenue. For instance, wireless data accounted for approximately 23% of retail ARPU, or US$11.94 per user per month, for Verizon Wireless in 1Q/08. Among 3G subscribers that use mobile data applications, that monthly data ARPU is nearly twice the average data ARPU for 2G subscribers. I also believe that the introduction of unlimited data plans in the US by all the major carriers will also help to stimulate wireless data usage.
3G development in Asia Pacific
At the end-March 2008, I saw that there were 122 million 3G subscribers in nine key markets of the Asia-Pacific region. This represents around 36.5% of all mobile subscribers in countries/territories in these markets.
Wireless operators in Asia-Pacific region have launched 3G services in 12 countries/territories, which include Australia, Brunei, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Sri Lanka, and Taiwan. I expect Thailand and India to issue 3G licenses over the next 6-12 months.
Most 3G subscribers in region are concentrated in Japan (around 64% of all 3G subscribers). DoCoMo had 44 million WCDMA subscribers (or 82% of the company’s subscriber base) in Japan as of end-March 2008. The second largest WCDMA operator was SoftBank Japan, with around 14 million 3G subscribers (75% of its subscriber base). WCDMA subscribers accounted for 57% of all mobile phone subscribers in Japan. If I include KDDI’s 20 million EVDO subscribers, the total number of 3G subscribers in Japan rises to 78 million, or about 76% of all mobile subscribers.
Excluding Japan, I think there were around 45 million 3G subscribers in the Asia-Pacific region as of March 2008. The second largest 3G subscriber base outside Japan is Korea, with 26.4 million subscribers, and the third largest is Australia with 7.4 million subscribers.
Data is becoming a key driver of wireless revenue growth
3G is likely to play a vital role in meeting the demand for data services, going forward. For the four largest wireless carriers in US, revenue from mobile data services topped $6.2 billion in 4Q/07 and $22.0 billion in 2007, up from $4.2 billion in 4Q/06 and $14 billion in 2006, respectively. For both AT&T and Verizon, data revenue accounted for around 55% of the year-on-year increase in revenue in 2007, and has been instrumental in stabilizing and even growing monthly ARPU.
This trend in data revenue growth will continue in the US due to the following:
(a) increasing adoption of mobile data services by mobile subscribers,
(b) enhanced coverage of 3G networks, and
(c) rising proportion of the subscriber base using more feature-rich handsets, PDAs, and laptop PC wireless data cards.
I think that Apple’s iPhone (which is just a 2G device at this point), has the potential for rapid adoption of data services beyond just SMS, when the device has a simple interface for data applications. M:Metrics reports that iPhone users are 6x more likely than the broader base to use a browser for news, 10x more likely to do a web search, 6x–20x more likely to view various types of video content, and 100x more likely to access a social networking site.
Around 57% of subscribers were data users in 2007
I estimate that 57% of the subscriber base of the big-four wireless carriers comprises data users, up from 47% in 2007 and 40% in 2006. In addition, data revenue per user has been rising with increasing penetration, which suggests higher data uptake, going forward.
Higher data speeds from HSPA to enhance user-experience and encourage usage
Somehow, HSPA is likely to drive Internet browsing in particular and mobile data in general in 2008. Although 3G handset penetration remains relatively low in US, I think the natural replacement cycle to improve penetration levels. In my view, higher 3G adoption will likely help data revenue growth, particularly for GSM carriers such as AT&T and T-Mobile, where current penetration levels are around 20% and almost 0%, respectively. I expect, AT&T to migrate its handset portfolio, as much as possible, to 3G by the end of 2008.
Also, there are several 3G ‘touch screen’ devices to be introduced in 2008, including a Nokia model code-named ‘Tube’, a 9,000 series from RIM, and the Samsung Instinct, which I believe could be the next catalyst for data growth. AT&T noted recently that 3G devices drive 20% more ARPU than 2G devices, while integrated devices (i.e., QWERTY) drive nearly double the ARPU of traditional subscribers.
Next question: what next?
Saturday, June 7, 2008
New e-Life Trend - Food Portal
Back after seeing e'Life-Style', I know a little about food portals - on the international front, one of the most popular food sites is "Epicurious". The top-level classifications include: Recipes, Features, Cooking, Drinking, Restaurants and Shop. Its Advanced Recipe Search feature allows a search based on ingredients. Recipes also have reviews and ratings by readers. Its seemingly endless array of culinary information includes interviews with star chefs, slide shows of favorite dishes, book excerpts and reviews, culinary travel guides, comprehensive coverage of beers and liquors, buyers' guides, newsletters, glossaries, discussion forums, an enormous shopping area, TV and magazine tie-ins, and around over 10,000 recipes. Bur, there are plenty of other excellent international food sites: AllRecipes, FoodNetwork, and Recipezaar are a few examples.
As I browsed through these sites, I was duly impressed. Their depth and breadth is great, but I could not help but think that these are, still built for the first generation of the Internet. The question I am thinking is: how would we redo these sites (or create new ones) keeping in mind the next Internet? Maybe these sites are more than good enough having created strong brands amongst their users. Or maybe, there is potential for a disruptive innovator. Anyway, I will keep my focus on the Asian food space, since I know it better and also am a direct consumer (as are probably most of us). So, put the thinking caps on: how do we build the Next Great Asian Food Portal?
So, plenty of ideas to build a new food portal ? leveraging existing expert and user-contributed content, with enhancements in the form of formatting for mobile phones, RSS feeds to provide alerts, videos of the cooking process, personalisation, and more. But what is the business model? How does a site like this make money? Here are a few ideas:
Subscriptions: A part of the site could be available only to subscribers. I think the video content should be made available for the equivalent of tens of rupees per download. So, users can get the recipe details for free, but if they want to actually see the entire cooking process on-demand, then it is available for a fee.
Mobiles: Given the growth of cellphones in Asia, they can be tapped as a source for revenue. Food-related information could be a useful "value-added service" for cellphone users.
Advertising: The food industry is quite big and growing. Many Asian foods companies are still not advertising online in a significant way. But the more interesting opportunity could come from neighbourhood restaurants, who can even provide deals if they have space to fill. Non-intrusive contextual text ads could be a useful source of revenue.
Commerce: Selling ingredients and cooking-related appliances could be a potential source of revenue. Making books out of the content that exists on the site is another possible financial source.
Food is a very important part of our lives. A new food site done well could be financially lucrative. The time is right for leveraging a mix of content and technology to create richer user experiences. More importantly, it would also create a platform to build other vertical sites along similar lines.
Next question: Any investors?
As I browsed through these sites, I was duly impressed. Their depth and breadth is great, but I could not help but think that these are, still built for the first generation of the Internet. The question I am thinking is: how would we redo these sites (or create new ones) keeping in mind the next Internet? Maybe these sites are more than good enough having created strong brands amongst their users. Or maybe, there is potential for a disruptive innovator. Anyway, I will keep my focus on the Asian food space, since I know it better and also am a direct consumer (as are probably most of us). So, put the thinking caps on: how do we build the Next Great Asian Food Portal?
So, plenty of ideas to build a new food portal ? leveraging existing expert and user-contributed content, with enhancements in the form of formatting for mobile phones, RSS feeds to provide alerts, videos of the cooking process, personalisation, and more. But what is the business model? How does a site like this make money? Here are a few ideas:
Subscriptions: A part of the site could be available only to subscribers. I think the video content should be made available for the equivalent of tens of rupees per download. So, users can get the recipe details for free, but if they want to actually see the entire cooking process on-demand, then it is available for a fee.
Mobiles: Given the growth of cellphones in Asia, they can be tapped as a source for revenue. Food-related information could be a useful "value-added service" for cellphone users.
Advertising: The food industry is quite big and growing. Many Asian foods companies are still not advertising online in a significant way. But the more interesting opportunity could come from neighbourhood restaurants, who can even provide deals if they have space to fill. Non-intrusive contextual text ads could be a useful source of revenue.
Commerce: Selling ingredients and cooking-related appliances could be a potential source of revenue. Making books out of the content that exists on the site is another possible financial source.
Food is a very important part of our lives. A new food site done well could be financially lucrative. The time is right for leveraging a mix of content and technology to create richer user experiences. More importantly, it would also create a platform to build other vertical sites along similar lines.
Next question: Any investors?
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