Shaun Collins

shaun.collins@ccsinsight.com

Twitter: @shauncollins

Making the Right Connections in the New Mobile World

Technology, Tablets and Tariffs

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• Introduction• Market disruptions are immense and unpredictable• New behaviour, new devices, new entrants• Personal and professional cloud • Technology, Tariffs and Tablets• Q & A

This is not the world we planned for

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Massive Disruptions in an Unpredictable Market

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Operators are managing change in a tough trading environment

Note: data refers to share of total for four main operators.

Note: data refers to share of total for four main operators.

Data26.8%

Data33.7%

Data29.8%

Data9.8%

Vodafone27.8%

Everything Everywhere

33.6%

O228.3%

310.3%

Revenue Split, 1Q12

Post-paid26.4%

Post-paid33.2%

Post-paid28.6%

Post-paid11.8%

Vodafone25.2%

Everything Everywhere

34.8%

O229.3%

310.8%

Subscriber Split, 1Q12

38%

40%

42%

44%

46%

48%

50%

4,000

2,000

2,000

4,000

1Q11 2Q11 3Q11 4Q11 1Q12

Revenue (£M)

Data Voice % Data

20%

25%

30%

35%

40%

45%

50%

1Q11 2Q11 3Q11 4Q11 1Q12

Non-Voice Services as % of Total Revenue

Vodafone Everything Everywhere O2 3

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SOURCE: CCS Insight

Post-Pay Jungle - June 2012 - UK

Nokia C6

iPhone 4

RIM 9800

RIM 9300Curve

Samsung Omnia 7

HTC Trophy

LG Optimus 7

Samsung Galaxy 551

HTC Wildfire S

HTC Desire S

Samsung Galaxy S II

RIM 9900

Alcatel OT-990

HTC Titan

HTC Radar

HTCSensation XL

Samsung Galaxy Note

Motorola RAZR

Nokia Lumia 800

Nokia N9

HuaweiBlaze

RIM 9380 Curve

Nokia Lumia 710

Sony Xperia S

Alcatel OT-995

MotorolaDefy Plus

HTC One X

HTC One V

Nokia 302 Asha

Samsung Galaxy S Advance

ZTE Tania

Nokia Lumia 900

HTC One S

Sony Xperia U

Sony Xperia P

LGL3

LGL7

LGL5

Samsung Galaxy W RIM

9360Curve

Samsung Galaxy S3

Motorola RAZRMAXX

Nokia Lumia 610

Nokia 808 PureView

Samsung Galaxy Mini 2

HuaweiAscend G300

RIM 9320Curve

Samsung GalaxyAce 2

HuaweiAscendP1

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Blurring Hardware Categories

8CCS Insight presentation to KPN March 29th 2012

How are users thinking about their mobile/tablet usage?

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Two Megatrends – Smartphones and Tablets

Tablets

Worldwide tablet shipments in 2011 - 65m

Worldwide PC shipments in 2011 - 414m

Our main scenario - tablets take us into a “Post-PC” era

– Long term annual sales potential - 700-800m / year

Source: CCS Insight, various, Apr 2012

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Two Megatrends – Smartphones and Tablets

There is still work to do to realise the full value of smartphone growth

– Smartphones are available at <€100

– The next wave depends on affordability of pre-pay data tariffs

Parallel story with tablets and multi-device tariffs

Source: CCS Insight, various, Apr 2012

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Who’s Buying Tablets?

65:35 male to female

Tablet ownership is concentrated in older age groups

Maps broadly onto wealth distribution in Europe

Demographics are likely to broaden as lower priced devices become available

– E.g. Amazon Kindle Fire

CCS Insight Tablet User Survey: October 2011, EU5

13-17 18-24 25-34 35-44 45-54 Over 55

0%

5%

10%

15%

20%

25%

30%

35%

Tablet Ownership by Age Group - Europe

Apple iPadOther

4500Sample

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Nearly half think of tablets as a genuine new category

One third think of them in computing terms in Europe

– 40-50% in Asia,

Comparisons with mobile phones have much lower weight

– 85% of users do not think of tablets as a “mobile” devices

– This has big implications

But the mobile market complicates the purchase with the 3G option

CCS Insight Tablet User Survey – Oct 2011, EU5

Portable TV with a smaller screen

A mobile phone but with a bigger screen

Other

Super duper smartphone

A laptop but with a smaller screen

Simple easy to use computer

Exactly what it is, a tablet

0% 10% 20% 30% 40% 50%

What Would You Say A Tablet Is?

Other

Apple iPad

4500Sample

What Is A Tablet?

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New Categories Emerge

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Video is a “wrecking ball”for networks

And it’s everywhere

– Social use

– Work use

Data consumption by users on mobile

Source: FT, 4th May 2012

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Data traffic shows astonishing growth

18% sequential growth of total in 3Q11

60% y-o-y growth of mobile data users

300% smartphone traffic growth 2011

Total traffic doubled every 4-5 quarters through 2010 / 2011

We have not reached the half-way point with smartphones yet

~1bn mobile broadband SIMs so far

Data consumption by users on mobile is growing faster than supply

Worldwide mobile data traffic vs. voice

Source: Ericsson Traffic and Market Data Report, November 2011

Data

Voice

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Tariffs are beginning to recognise this new behaviour

Long signalled but significant restructuring of tariffs in USA

– Apply up to 10 devices onto a tariff (at various costs)

– Then add limits of data – all with unlimited voice and text (wi-fi not included)

Long term caps off the voice and text data streams and seeks to capitalise on data Unlimited tariffs will gradually disappear Some anomalies here (Tablets $10/ Netbooks $20) On average this is seen as ARPU accretive for Verizon

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Verizon’s Initial LTE Services Messaging Was Unremarkable

Verizon’s initial marketing of 4G LTE services offered nothing that was not available on 3G

Other than a vague promise of better speed – “become a high octane version of you”

This has now evolved, but only slightly

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Network coverage and capacity – 4G

The need for 4G

3G coverage is hampered by high frequency spectrum bands

– However, operators deserve some criticism here

In some urban areas 3G networks are suffering congestion

The benefit of 4G will depend on the frequency band

– Higher frequencies – urban coverage and capacity

– Lower frequencies – mainly coverage

The result of 4G

The mobile industry does not fully appreciate how good 4G is

An “Experience Good”

– The result is that people will use more data

Operators try to use 4G as a way of raising prices?

4G coverage will take years to build

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So What?

• Massive, unpredictable changes in mobile right now– Fragmentation and complexity is now the standard– Data moves to the centre of the decision making process– More to come – technology and applications

• Cloud computing is capturing the imagination of the user– iCloud and Facebook are creating an expectation around use cases– Desire for connectivity will increase exponentially

• 4G will be crucial to the multiplier– Applications decisions are made on mobile first then desktop– Device decisions and technology play a large role

• Tablets and smartphones replace desktops and laptops– Cloud and applications will drive an improved experience– Access and response times will improve dramatically

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Q & A

@shauncollins

@ccsinsight