Informa 4G Strategy 26-11-2013

4G Strategy: Successful
operators show how LTE can

improve KPIs
Paul Lambert
www.informatandm.com
www.informatandm.com 2013 Informa Telecoms & Media
Copyright
2013 Informa UK Ltd.
All rights reserved.
The contents of this publication are protected by international copyright laws, database rights and other intellectual
property rights. The owner of these rights is Informa UK Ltd, our affiliates or other third party licensors. All product and
company names and logos contained within or appearing on this publication are the trade marks, service marks or trading
names of their respective owners, including Informa UK Ltd. This publication may not be:-
(a) copied or reproduced; or
(b) lent, resold, hired out or otherwise circulated in any way or form without the prior permission of Informa UK Ltd.
Whilst reasonable efforts have been made to ensure that the information and content of this publication was correct as
at the date of first publication, neither Informa UK Ltd nor any person engaged or employed by Informa UK Ltd accepts
any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as
no liability can be accepted in this regard - readers assume full responsibility and risk accordingly for their use of such
information and content. Any views and/or opinions expressed in this publication by individual authors or contributors are
their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa UK Limited
Contents
Contributing analysts........................................................................................................1
4G strategy: Successful LTE operators show that increasing usage is key to improving
KPIs..................................................................................................................................... 2
4G strategy: Successful operators show how LTE can improve KPIs.............................. 4
Fig. 1 Global, LTE subscriptions by region, 3Q11-3Q13............................................................................................................... 4
Fig. 2: Global, number of LTE networks by region, 2Q13............................................................................................................ 5
Fig. 3: Top 10 countries worldwide by 4G penetration, 2Q13...................................................................................................5
Fig. 4: Top 20 LTE operators worldwide, by subscriptions, 2Q13............................................................................................. 6
Fig. 5: Key drivers for LTE networks launches and subs uptake............................................................................................... 6
Fig. 6: LTE devices launched in 2013, by LTE mode, as at 2Q13.............................................................................................. 7
Fig. 7: Leading LTE operators, pricing approach............................................................................................................................. 8
Fig. 8: Netcom (TeliaSonera Norway), evolution of LTE price plans: Oct-10, Apr-11, Apr-12 and Sep-13.............. 9
Fig. 9: UK, Vodafone and EE monthly plans, Sep-13.................................................................................................................... 9
Fig. 10: US, AT&T and Verizon Wireless, each advertising that they offer the best 4G network............................ 11
Fig. 11: Vodacom scaling the network and device availability......................................................................................... 11
Fig. 12: EE expanding the network and the range of devices and evolving its pricing strategy......................... 12
Fig. 13: Verizon Wireless KPIs, 3Q11-2Q13.....................................................................................................................................13
Fig. 14: LTE-only service announcements, up to 3Q13..............................................................................................................14
Fig. 14: LTE-only service announcements, up to 3Q13 (cont.)............................................................................................... 15
Fig. 15: EE, 4G marketing, 3Q13.......................................................................................................................................................... 15
Fig. 16: Selected VoLTE deployments and plans, end-Sept 2013...........................................................................................16
Fig. 17: Global, LTE subscriptions, by region, 2013-2018......................................................................................................... 17
Fig. 18: LTE subscriptions in selected countries, 2013-2018................................................................................................... 17
Fig. 19: Selected LTE roaming launches/ plans, Nov-13............................................................................................................18
4G strategy: Emerging Asia operators market LTE to high-end users but need to
evolve pricing models to make a return on investment.............................................. 21
Fig. 1: Asia Pacific, 3G as % of total subscriptions, key markets, 3Q12............................................................................. 22
Fig. 2: Asia Pacific, in-service and planned LTE networks, emerging markets................................................................ 22
Fig. 3: Bharti Airtel, Smart, Globe, LTE subscriptions, 2Q12 and 3Q12.............................................................................. 23
Fig. 4: India, LTE (Bharti Airtel) and DSL/FTTH (BSNL) price comparison......................................................................... 23
Fig. 5: Bharti Airtel India, LTE and 3G pricing comparison.....................................................................................................24
Fig. 6: Bharti Airtel, per-megabyte premium, 3G vs. LTE......................................................................................................... 25
Fig. 7: Philippines, Smart and Globe LTE and 3G pricing, Dec-12........................................................................................ 25
Fig. 8: Globe and Smart, per-megabyte premium, 3G vs. LTE................................................................................................ 26
Fig. 9: Bharti Airtel and Globe Telecom, additional LTE data-plan comparison............................................................ 26
Fig. 10: LTE Logos and branding.......................................................................................................................................................... 27
Fig. 11: LTE devices offered by Bharti Airtel, Globe and Smart..............................................................................................27
Fig. 12: Globe Telecoms LTE-smartphone portfolio.................................................................................................................... 27
Fig. 13: Bharti Airtels LTE value-added services...........................................................................................................................28
Fig. 14: Asia Pacific, key LTE networks launched in/planned for 2013..............................................................................28
Fig. 15: 2G-prepaid-to-LTE-postpaid migration plan................................................................................................................. 29
Fig. 16: LTE subscription forecast by region, 2013-2017.......................................................................................................... 30
Fig. 17: Asia Pacific, LTE subscriptions by country, 2013-2017............................................................................................. 30
4G strategy: AT&T focuses on LTE-network quality and coverage in competition for
US 4G leadership.............................................................................................................33
Fig. 1: Data-speed comparison by data protocol......................................................................................................................... 33
Fig. 2: US, average monthly data traffic, Dec-09 to Dec-12.................................................................................................... 34
Fig. 3: US, smartphone penetration by operator, 1Q11-1Q13............................................................................................... 34
Fig. 4: AT&T, WCDMA and LTE as % of total subsciptions...................................................................................................... 35
Fig. 5: US, LTE-plan comparison, unlimited talk, text and 2GB of data with iPhone 5...............................................37
Fig. 6: Example of AT&T marketing...................................................................................................................................................37
Fig. 7: AT&T, subscription trend by technology, 2Q11-1Q13..................................................................................................38
Fig. 8: AT&T LTE SWOT analysis.......................................................................................................................................................... 39
4G strategy: EE makes the most of its first-mover advantage to show how LTE can
improve KPIs.................................................................................................................... 41
Fig. 1: Comparison of EE's 24-month pricing plans....................................................................................................................43
Fig. 2: UK operators 4G price comparison, Oct-13...................................................................................................................... 43
Fig. 3: EE 4G network marketing, Oct-13........................................................................................................................................ 44
Fig. 4: EE KPIs 2Q12-2Q13...................................................................................................................................................................... 45
4G strategy: Etisalat sees 4G smartphones as chief tool for preserving a high-value
edge, but revenue increase is a tough prospect........................................................... 48
Fig. 1: UAE, smartphone penetration, 1Q11-1Q13..................................................................................................................... 49
Fig. 2: UAE, operator postpaid market share, 1Q13................................................................................................................... 50
Fig. 3: Etisalat UAE, mobile coverage by technology..................................................................................................................51
Fig. 4: Operator 4G dongle stand-alone prices..............................................................................................................................51
Fig. 5: Etisalat, Du, monthly data pricing, per gigabyte........................................................................................................... 52
Fig. 6: Etisalat iPhone 5 pricing........................................................................................................................................................... 52
Fig. 7: Etisalat 4G subscriptions, 4Q11-1Q13................................................................................................................................ 53
Fig. 8: Etisalat LTE SWOT analysis...................................................................................................................................................... 53
4G strategy: Sprint supercharges LTE with launch of Spark tri-band services as US
races to LTE-Advanced.....................................................................................................56
Fig. 1: Sprint Spark marketing.............................................................................................................................................................. 56
Fig. 2: Sprint's enhanced spectrum position...................................................................................................................................57
4G strategy: Verizon Wireless rides aggressive LTE strategy to stellar results but
needs to innovate to retain US and global leadership................................................. 59
Fig. 1: US, mobile broadband subs as % of total mobile subs, 1Q11-4Q12...................................................................... 60
Fig. 2: US, smartphone connections and penetration, 2011-2017...................................................................................... 60
Fig. 3: Verizons four strategic network platforms...................................................................................................................... 61
Fig 4: Verizons LTE business model................................................................................................................................................... 62
Fig. 5: Verizon Share Everything plans............................................................................................................................................. 63
Fig. 6: Verizon's LTE marketing.............................................................................................................................................................64
Fig. 7: Verizon Wireless selected service changes, Nov-09 to Apr-13.................................................................................. 65
Fig. 8: Verizon Wireless subs by technology, Dec-10 to Jun-13............................................................................................. 66
Fig. 9: US, LTE subs by operator, Dec-10 to Jun-13 (mil.)..........................................................................................................66
Fig. 10: Global, top 15 LTE operators by subscription count, end-Jun 13......................................................................... 67
Fig. 11: US, market share of top four mobile operators, 2009-2012...................................................................................67
Fig. 12: US, monthly ARPU of top four mobile operators, 3Q10-2Q13.............................................................................. 68
Fig. 13: Verizon Wireless selected results, 2010-2012................................................................................................................68
Fig. 14: Verizon Wireless LTE SWOT analysis................................................................................................................................. 68
4G strategy: Vodafones pricing puts faith in the value of premium content ............ 71
UK, Vodafone and EE monthly plans, Aug-13.............................................................................................................................. 71
4G strategy: Global momentum to LTE accelerates as successful strategies
emerge............................................................................................................................. 73
Fig. 1: Why is now the right time to deploy LTE?........................................................................................................................ 74
Fig. 2: How can operators best differentiate LTE from 3G? (Please choose two options)........................................... 74
Fig. 3: Which service or application is driving/ will drive the greatest volume of traffic on LTE networks?
(Please choose one option)......................................................................................................................................................................75
Fig. 4: If you have launched LTE, what increase in ARPU are you seeing when a subscriber migrates to
LTE?.....................................................................................................................................................................................................................75
Fig. 5: If you have launched LTE, what average increase in LTE data usage are you seeing compared with
3G?......................................................................................................................................................................................................................76
Fig. 6: What variant of LTE do you intend to deploy?...............................................................................................................76
Fig. 7: Which spectrum bands do you intend to use to deploy LTE? (Tick any that apply)....................................... 77
Fig. 8: In your view, what is the likely future role of Wi-Fi for operators deploying LTE in the next two to three
years?.................................................................................................................................................................................................................77
Fig. 9: What percentage price premium do you think is right for LTE?............................................................................. 78
Fig. 10: Do you plan to offer any 4G-only content free over LTE to encourage uptake?............................................ 78
Fig. 11: When do you expect LTE-Advanced to be deployed?................................................................................................ 78
Fig. 12: When do you plan to go live with VoLTE services?.....................................................................................................79
Fig. 13: Do you think its possible to charge a premium for LTE voice?.............................................................................79
Fig. 14: When do you expect LTE small cells to be deployed?................................................................................................ 80
Fig. 15: Where do you expect widespread commercial public-area LTE small cells to be deployed first?............80
Fig. 16: Operators are better prepared to offer roaming services across LTE networks in 2013 compared with
2012................................................................................................................................................................................................................... 81
Fig. 17: What do you see are the main barriers to LTE roaming?........................................................................................81
Fig. 18: Do you plan to extend 2G/3G roaming agreements to 4G, or strike new agreements?............................ 82
Fig. 19: A hubbing approach is better for LTE roaming compared with a bilateral approach.................................82
www.informatandm.com 2013 Informa Telecoms & Media 1
Contributing analysts
26 July 2013
Informa Telecoms & Media
Anubhuti Belgaonkar, Senior Analyst
Ismail Patel, Research Analyst
Kristin Paulin, Senior Analyst
Mike Roberts, Principal Analyst
4G strategy: Successful LTE operators
show that increasing usage is key to
improving KPIs
31 October 2013
Paul Lambert
Evidence from the market indicates that successful 4G operators have approached LTE-
network launches initially as a platform to enhance the mobile broadband experience rather
than to generate new revenues by charging more for access to the network. By enhancing
the end-user experience of accessing the Internet on the go without charging more for access,
successful LTE operators are seeing that people use Internet services while mobile more than
they did over 3G. Because of this increase in usage, operators are seeing improvements in KPIs.
This approach is quite different from the way the majority of operators approached 3G:
charge more for access because 3G is a more advanced network that can do more things. It
wasnt until compelling 3G smartphones were launched starting in 2007 that 3G really took
off in terms of people actually using the networks to access the Internet. And as more 3G
smartphones came to the market, operators began aligning their pricing strategies with end-
user expectations to the point where price was no longer a barrier to using 3G.
Before the first 4G launch in 2009, there was a tacit consensus that operators would be able to
charge more for accessing the Internet over 4G than 3G. Some operators pursued this strategy
and found that the market was unwilling to pay a significant premium for 4G over 3G. When
Verizon, AT&T and SKT evolved their 4G pricing to bring it line with 3G pricing, their LTE
subscription rates increased significantly, because the market response to the enhanced 4G
experience was overwhelmingly positive. As a result, they saw a variety of effects: Consumers
were willing to sign up for plans with higher monthly data allowances, and people used the
4G network more. Consequently, operators found that their KPIs improved.
What is it about LTE that causes more use of the Internet and Internet services on the go?
Operators have shown that the enhanced speed of 4G over 3G, along with latency, are enough
to encourage users to spend more time accessing the Internet and doing more things while
on it than they did when they had 3G. This is by itself leading to KPI improvements.
Another crucial element in using LTE to improve KPIs is 4G-network capacity and how
it affects what is probably the most important factor in determining an operators LTE
subscription take-up: pricing. Operators can offer more data with 4G for the same amount of
money they did with 3G because of the capacity benefits of 4G over 3G, and this is encouraging
users to access the Internet on the go more than they did with 3G.
Successful LTE operators are showing that if 4G access is priced in the right way and at the
right level, users will consume more data, which operators are then in a position to monetize.
So what is the right pricing approach? Analyzing the most successful LTE operators, common
approaches emerge:
Using LTE to improve the mobile broadband experience.
Not charging a premium for 4G access.
Increasing the overall value in 4G subscriptions, so users get more than they would
with a comparable 3G subscription.
The impact this approach has had on KPIs is detailed in the report, but here are a few
highlights:
SKT is seeing an almost 50% increase in monthly data usage on LTE compared with 3G,
with the respective figures standing at 1.6GB and 1.1GB at end-June 2013.
AT&T has 35% of its postpaid smartphone base using LTE-capable devices, and the
operators smartphone data usage per device increased as much as 50% year-on-year in
the 12 months to end-2Q13, causing wireless data revenues to increase 19.8% year-on-
year. The increased usage helped improve its total postpaid ARPU 1.8% year-on-year.
EE has found that subscribers who have moved to 4G show an increase in ARPU of
about 10%.
EE says that nearly half of its 4G users say they browse the Web more on 4G than 3G,
and over one in three say they download apps, use GPS services and access social media
more with 4G than they did with 3G.
Although LTE has had a positive effect on some operators KPIs, its important to point out that
LTE isnt a magic bullet to solve all operators problems. But even in an extremely competitive
market such as Japan, LTE operator DoCoMo has been able to outperform the overall market
in some key metrics by pursuing a successful LTE strategy.
Because in essence, and certainly from the end-users point of view, 4G offers an improved
mobile broadband experience compared with 3G, operators first need to work out how to
incorporate 4G into their mobile broadband strategies. This means that before launching
4G, operators have to identify and target users who will most likely benefit from 3G-
to-4G migration. At the same time, because LTE offers an enhanced end-user experience,
operators have an opportunity when they launch LTE to improve their competitive positioning
in the valuable midrange-to-high-end section of the overall market if they can effectively
communicate to the market the benefits of 4G. By being successful in targeting both existing
and new users, many LTE operators have shown improvements in ARPU and churn.
Global 4G momentum is accelerating: Over 80% of the operators responding to Informa
Telecoms & Medias survey on LTE-launch strategies said they believe there is a viable business
case to launch LTE today, and one-third of respondents said they plan to launch LTE this year.
This indicates that now is the time for operators to assess their 4G strategies in the context of
emerging best practice for using LTE to improve KPIs.
4G strategy: Successful operators
show how LTE can improve KPIs
21 October 2013
Paul Lambert
Executive summary
Pricing remains the single most important factor in determining LTE subscription
uptake. Now that the most sought-after devices are LTE-enabled, and in the major
spectrum bands, device availability is no longer hampering LTE uptake, especially in
developed markets.
The most successful LTE operators in terms of subscriptions currently dont charge
more for accessing their 4G network than they do the 3G network. Some that have
charged a premium for 4G access at launch have subsequently moved these prices in
line with 3G pricing and seen much greater success in signing up 4G users.
Successful 4G operators have shown there is no secret to profitably launching 4G.

Speed and the overall perception that 4G offers a tangibly enhanced experience over
3G has been proved to be enough for operators to profitably grow their 4G subscription
numbers.
In emerging markets, operators are pursuing the 4G-price-premium strategy more

aggressively than in developed markets. Operators in these markets should consider
how likely strong subscription uptake will be in light of experience in markets where
this approach has already been tested.
New services are gradually being rolled out over LTE and evidence to date shows that
bundling content and value-added services into 4G subscriptions can both encourage
users to migrate to 4G and then toward using larger monthly data amounts once
signed up to a low monthly 4GB price plan. To develop a content strategy, operators
need to define what segments of the market they are targeting with the content, and
how that fits in with their overall brand positioning.
Market status
While the rollout of LTE networks remains sporadic from a global perspective, increasing
operator commitment to the technology and end-user interest in 4G services, when
positioned in the right way, resulted in a 223% year-on-year increase in global LTE
subscriptions to end-3Q13 (see fig. 1). North America continues to lead LTE subscription
numbers, driven by the early LTE network launches by AT&T Wireless and Verizon Wireless,
while operator commitment in developed and developing Asia Pacific means that this region
comes in second place with a year-on-year subscription growth to end-3Q13 as strong as was
experienced in North America.

Fig. 1 Global, LTE subscriptions by region, 3Q11-3Q13
Western Europe has the largest number of LTE networks (see fig. 2). Europe no longer lags other
regions in terms of LTE subscription numbers as it did after a mixture of regulatory delays
in awarding spectrum and relative lack of operator commitment caused LTE launch delays
in many markets in the region. In other regions, such as Africa and emerging Asia, ongoing
delays to LTE launches can be expected, not least because 3G networks are meeting demand
for data in countries in these regions, combined with regulatory delays.

Fig. 2: Global, number of LTE networks by region, 2Q13
South Korea is by far the most-penetrated country in terms of LTE subscriptions (see fig. 3), a
result of commitment to the technology by each of the major operators, combined with strong
device portfolios and not charging a premium for 4G access.

Fig. 3: Top 10 countries worldwide by 4G penetration, 2Q13
However, it is the US operator Verizon Wireless that is the leading 4G operator by subscription
numbers (see fig. 4), because it is one of the largest operators in the world and has been
extremely aggressive in rolling out its LTE network and pricing services at the same level as 3G.

Fig. 4: Top 20 LTE operators worldwide, by subscriptions, 2Q13
Regardless of region or market, however, a combination of key factors is driving LTE network
launches and subs uptake (see fig. 5).

Fig. 5: Key drivers for LTE networks launches and subs uptake
Crucially, device availability is no longer a barrier to LTE uptake. Not only are the most sought-
after smartphones from leading vendors Apple and Samsung LTE-enabled, along with a wide
range of LTE-capable devices from other vendors, these models are increasingly available in a
range of modes, ensuring they can be launched in multiple markets (see fig. 6).

Fig. 6: LTE devices launched in 2013, by LTE mode, as at 2Q13
Market dynamics
How are LTE operators differentiating and competing?
Pricing remains the single most important factor in determining LTE subscription uptake.
Now that the most sought-after devices are LTE-enabled, and are in the major spectrum bands,
device availability is no longer hampering LTE uptake, especially in developed markets. When
launching LTE, operators have an opportunity to redefine their position in the market: They
can use LTE to reposition in the market around:
A new pricing strategy compared with 3G.
Evolving the brand (potentially in conjunction with the new pricing strategy) to re-
position in the market.
Addressing specific audiences with content delivered over 4G networks.
Using LTE to address new markets (e.g., fixed-broadband segments).

Closely related to this, LTE operators are differentiating from each other and competing in
these main ways:
Pricing and overall value offered as part of the 4G subscription.
Quality of the network and network coverage.
Bundling value-added services/ exclusive content with 4G subscriptions

Pricing
Whether operators charge a premium or not is the single most important lever in determining
the rate of LTE subscription uptake. The most successful LTE operators in terms of subscriptions
currently dont charge more for accessing their 4G network than they do the 3G network.
Some, including DoCoMo in Japan, which charged a premium for 4G access at launch
subsequently moved these prices in line with 3G pricing (see fig. 7).

Fig. 7: Leading LTE operators, pricing approach
Nordic operators, particularly TeliaSonera and Telenor, were among the first in the world to
launch LTE, in 2009. When they launched with limited coverage and without smartphones,
they charged LTE at a significant premium over 3G. This approach mirrored operators 3G
pricing strategies by trying to generate new revenues from the newly-introduced technology.
However, as 3G services evolved, operators brought 3G pricing in line with 2G voice pricing,
charging a premium for data access only. Similarly, as 4G networks evolved, the majority of
operators have brought 4G pricing broadly in line with 3G and, where premiums have been
charged, these have reduced considerably since the initial launch premiums. For example,
after an initial period of charging a premium for LTE by NTT DoCoMo in Japan, 2Q12-3Q12 was
the tipping point for DoCoMos LTE service it cut its LTE fees for select smartphone services
to curb the outflow of customers due to the threat of price competition from rivals. DoCoMo
cut the monthly fee of its LTE service by about 1,000 (US$12.64) from 5,985 for up to 7GB
of data a month.
US operator Verizon has shown that pricing is the single most important thing an operator has
to get right to ensure that subscribers will take LTE. At launch, Verizon opted not to charge a
premium for LTE, but tried to encourage the heaviest users to take out the more expensive LTE
price plans which offer more monthly data. While this was successful at launch in terms of
driving LTE subs uptake, Verizon, like DoCoMo and Telekom in Germany, evolved this approach
over time to bring LTE pricing to parity with 3G. Verizon went against received opinion that
operators should charge a premium for LTE as the Nordic operators had done, resulting in
anemic uptake and didnt charge users more for accessing the 4G network than it would the
3G network.
By comparison, TeliaSonera-owned Netcom in Norway has changed its 4G pricing strategy
considerably since launching services. The operator has moved from charging a high premium
for 4G access and large or unlimited amounts of data to charging less for smaller amounts of
data, which means charging more per MB of data offered (see fig. 8).

Fig. 8: Netcom (TeliaSonera Norway), evolution of LTE price plans: Oct-10, Apr-11, Apr-12 and
Sep-13
Netcoms 4G pricing evolution shows how operators can move away from offering unlimited
data, something which well see is essential operators that opt for this charging approach do.
Is a 4G pricing premium justifiable and sustainable?
When an operator is first to launch LTE in its market, it has the opportunity to price 4G at
a premium to maximize revenues from the relatively price-inelastic segments of the market
prepared to pay more for the enhanced end-user experience LTE provides soon after the
networks launch. While the most successful LTE operators by subscription numbers either
decided against this approach at launch or turned away from it if they did opt for a premium,
some operators are trying to sustain a 4G pricing premium over 3G: O2 UK, EE and Vodafone
UK each charge more for 4G access over 3G by bundling exclusive content into 4G price plans.
For about three quarters, EE was the only operator in the UK offering 4G services. It has
succeeded in educating the market about what 4G is and what its advantages are over 3G. It
had 550,000 4G users at end-June 2013, charging a modest premium about 5 (US$8) over
its 3G tariffs. EE wasnt the only UK operator trying to charge 4G at a premium: Vodafones
entry-level two-year postpaid 4G plan 34 a month for 2GB of data costs 30.7% more than
EEs entry-level plan, at 26 a month for 500MB, although EEs 2GB-a-month tariff costs 20.6%
more than Vodafones, at 41 (see fig. 9).

Fig. 9: UK, Vodafone and EE monthly plans, Sep-13
Vodafones approach to pricing sports and music content suggests that it believes UK users are
willing to pay 5-10 a month to access their favorite content. The success of such a bold and
innovative approach relies heavily on providing an excellent experience for users accessing
the content over 4G.
In emerging markets, operators are pursuing the 4G-price-premium strategy more
aggressively than in developed markets. Operators in emerging Asia for instance, are
positioning LTE as a high-end data service aimed predominantly at high-ARPU users willing
to pay a premium for enhanced data-transmission speeds. In these markets, even entry-level
LTE is priced at a premium to 3G, with operators using high bundled data limits in conjunction
with higher speeds to encourage high-ARPU users to sign up to LTE services.
Bundling value-added services/ exclusive content with 4G subscriptions
Some operators are using LTE as a platform to bundle content and or value-added services
into the 4G subscription either to differentiate from rivals, to justify a premium over 3G
subscriptions or to encourage users to consume more data. Bundling premium content into
4G subscriptions but making access to the services come out of monthly data allowances (like
Vodafone UK) is also a way to increase data usage. However, evidence from some markets to
date suggests that operators are increasing overall data usage by bundling content into 4G
subscriptions even when they dont deduct access from monthly allowances:
SKT in South Korea: SKT doesnt charge for VoLTE access, which it launched in August
2012, the first operator in the world to do so. Neither does SKT charge for rich
messaging access, it bundles Joyn access into 4G subscriptions. Moreover, data usage
associated with Joyn messaging is also be free, including messages sent from Joyn
devices to non-Joyn devices (smartphones and feature phones), which will be delivered
as SMS messages. The operator has also launched Btv mobile, an IPTV service with
550,000 paid subscribers, which began offering a full HD (1080p resolution) video
streaming service, again for the first time in the world, from early July. Full HD video
streaming requires a speed of 2Mbps or above, which is supported by the LTE-A
network which also doesnt consume the monthly data allowance.
EE in the UK: Like SKT, EE is focused not just on launching a 4G network, but adding
value to its 4G price plans to further differentiate from 3G price plans. The operator
offers one free film download a week (that doesnt consume mobile data allowance).
Phone back-up is another value-added service EE bundles into subscriptions, with
different levels of back-up for different levels of subscription. These services have
helped to justify the premium over 3G, and also to differentiate EE from rivals.
Vodafone UK: Vodafone 4G customers get free access to Spotify Premium for six
months offering more than 20 million songs or Sky Sports Mobile, enabling them
to view up to 150 hours of content a month, including Premier League soccer games.
Users on the most expensive two-year contracts (57 and 62 a month) will continue
to receive the content after the promotional period. Other users can take Sky Sports
Mobile for 5 a month and Spotify Premium for 10 a month. The mobile data that is
consumed using these services comes out of users monthly allowances.
Some operators have already detailed plans for using LTE as a platform for premium content
and/ or value-added services:
NTT DoCoMo in Japan: DoCoMo plans to use LTE to enhance the end-user experience
of its portfolio of proprietary services. The operators goal is to move away from being
a telco to offering advanced mobile services in new areas such as education and
healthcare.
Telstra in Australia: Telstra plans to deploy a mobile-capable CDN to improve its

ability to offer multiscreen services and as a platform to attract the enterprise segment
looking to deliver content.
O2 in Germany: O2 is working with cable providers Kabel Deutschland, Kabel Baden-

Wrttemburg and Unitymedia to offer TV, Internet and fixed and mobile telephone in
a single package to customers.
Operators compete on network quality and coverage
As mobile users consume more data to access Internet services, operators are competing
on offering the best quality access to these services. In multi-operator LTE markets, there is
increasing focus on network quality in terms of speed and consistency of experience which
is causing operators to increasingly emphasize the experience users will have on their 4G
networks. Even more than with 3G, operators are using third-party testing to make and
validate claims about offering the best end-user experience in the market (see fig. 10).
Fig. 10: US, AT&T and Verizon Wireless, each advertising that they offer the best 4G network
As LTE-Advanced technologies become more widespread in the market, operators will evolve
their LTE positioning based on the enhancements LTE-Advanced brings to the overall LTE
experience. SKT is already promoting its technology leadership: It is using its LTE network
as a foundation to build a differentiated position based on quality and competitively-priced
services to differentiate from aggressive rivals. SKT launched the worlds first LTE-Advanced
(LTE-A) service in June with peak data speeds of up to 150Mbps, twice as fast as LTE. SKTs LTE-
A pricing is the same as its existing LTE price plans, no extra costs are associated with it.
LTE network and device strategy scaling availability
How operators launch and expand their LTE network is, along with pricing, a key determining
factor for how many LTE subscribers they sign up as the network becomes available to more
people. Operators typically launch LTE in areas of high existing mobile broadband demand
usually major urban areas and then expand to more cities before rolling out to rural areas.
The exception to this approach to date has been when licenses have rural obligations, for
instance in Germany. Vodacom in South Africa shows how, at launch, an operator targeted
LTE at a clearly-defined segment of its user base before expanding availability as the network
expanded (see fig. 11).
Fig. 11: Vodacom scaling the network and device availability
South Africa-based Smile Telecoms launched commercial LTE services at 800MHz in Tanzania
the first operator to do so in Africa after a soft launch in June 2012. Before expanding
to a broad range of mobile users, the LTE service was initially available on prepaid plans
and positioned as a fixed-broadband replacement service aimed at SMEs, households and
individual users via integrated LTE/Wi-Fi routers, USB dongles and LTE MiFi routers. Smiles
initial LTE coverage was in Dar es Salaam and the operator plans to extend coverage across the
country in a phased approach over the next two years.
Similarly, EE launched LTE in major metropolitan areas in the UK with a small selection of
smartphones, and then expanded the network to other parts of the country while adding
more devices and gradually reducing its prices (see fig. 12).
Fig. 12: EE expanding the network and the range of devices and evolving its pricing strategy
Impact of LTE on KPIs early days, positive signs
Ultimately, a successful LTE strategy can only mean one thing improved KPIs. Although LTE
operators havent universally improved their KPIs following launch of services, there is ample
and growing evidence that LTE, if launched in the right way, improves key subscriber metrics:
SKT is seeing an almost 50% increase in monthly data usage on LTE compared with 3G,
with the respective figures standing at 1.6GB and 1.1GB at end-June 2013.
SKT indicates that 39% of LTE use on its network is for multimedia services, compared
with 30% on 3G.
In the seven years to 1Q12, SK Telecoms ARPU fell 20% from KRW40,000 (US$37) to
KRW32,000. After its LTE launch, ARPU began rising in 2Q12, standing at KRW50,100
in 4Q12.
After an ARPU increase of 3.6% in 2012, SK Telecom is expected to raise ARPU by 8%

this year, erasing half the 20% seven-year ARPU loss in just two years.
Since launch, Rogers has seen an 80% increase in wireless Internet usage year-on-year.
AT&T has 35% of its postpaid smartphone base using LTE-capable devices and
smartphone data usage per device has increased as much as 50% year-on-year to
end-2Q13, causing wireless data revenues to increase 19.8% year-on-year. This helped
improve its total postpaid ARPU by 1.8% year-on-year.
EE has found that existing subscribers who have moved to 4G show an increase in
ARPU of about 10%.
A third of Verizon Wirelesss retail postpaid connections now have a 4G device, and as
much as 59% of its total data traffic is now on its 4G network.
Vodafone UK reached 100,000 LTE customers in the seven weeks since putting the new
tariffs on sale, and just five weeks after the network went live; this level of growth is
in line with that of rival operator EE just after its own 4G launch late last year.
With the exception of EE, each of these operators is pricing 4G the same as 3G. What these
operators are seeing is that LTE users are generating more data traffic and so pay for more data
bundles in their subscriptions. Moreover, successful LTE operators are often increasing the
amount of overall value they bundle into LTE subscriptions (e.g., premium content), thereby
encouraging more usage. 4G has also provided operators with a new opportunity to migrate
subscribers onto postpaid mobile broadband subscriptions through intensified marketing
activities that, when successful, have captured consumers imaginations.
Operators have also used 4G launches to simplify their tariff structures often moving to data-
centric pricing and sometimes offering data bundles that can be used across devices. That said,
not all successful LTE operators are seeing KPI improvement this is because of other market-
specific reasons, mainly price competition, which has been the case in Japan.
Verizon shows that a successful LTE launch can lead to improve KPIs, however, in particular in
terms of higher ARPU, stable churn and a higher operating income (see fig. 13).

Fig. 13: Verizon Wireless KPIs, 3Q11-2Q13
Impact of LTE on end-user behavior
There is growing evidence that LTE is causing an increase in usage, simply because
of improved end-user experience encourages greater use. Telenor Norway is seeing 4G
customers download three to five times more megabytes via their mobile on a monthly basis
than a 3G user, which the operator attributes to the higher speeds of 4G. In a survey released
in September, EE found that since launching 4G:
Two in three people are using the mobile Internet over 4G at least an hour a day, with
23% staying online with their 4G mobile devices more than three hours a day.
Nearly 50% say they browse the Web more on 4G than 3G, and over one in three say
they download apps, use GPS services and access social media more with 4G than they
did with 3G.
43% say they use fewer or no public Wi-Fi hotspots since having 4G.
23% say they use their home broadband less since moving to 4G.
A third of UK 4G users stream more content over 4, than they did on 3G, with BBC
iPlayer, Netflix and Sky Go the favorite TV services and tablets driving 60% more video
streaming on smartphones.
EE shows that, launched in the right way, 4G can bring about higher usage and improved KPIs.
EEs strategy of charging a modest premium over 3G (even at launch when it was the only 4G
operator in the market), in conjunction with an overall offering that increases perceived value
to the end user, has been a clear success in the UK market. This strategy has been replicated
by Vodafone, which, like EE, is justifying a slight premium over 3G tariffs on increasing the
overall value to the end user in comparison with its 3G tariffs.
Another key lesson EEs 4G pricing highlights is how important it is not to offer unlimited
data. Operators 4G experience with data shows that offering specific amounts of data in
the range of 500MB-5GB increases the perceived value of the data. It encourages users to
migrate to higher monthly amounts, effectively monetizing usage.
Operators also need to plan an effective 2G/ 3G to 4G migration strategy. Which segments of
its existing user base does an operator want to migrate to 4G? How quickly? How simple can
an operator make it for an existing subscriber to change to a 4G price plan?
In terms of the impact of LTE on operators fixed subscriptions, integrated operators are
still successfully charging separately for LTE and fixed broadband. This is the case even for
operators that have recently added fixed to their overall portfolio, such as EE. Although fixed-
mobile broadband substitution is not yet a widespread phenomenon, LTE is changing end-
user behavior, with LTE a viable alternative to fixed, especially Wi-Fi, access.
LTE-only services
LTE-only services are at the very beginning of their evolution. These examples are the first, and
point to just some of the ways that operators will exploit the unique benefits of LTE:
South Korean cellular operators, LG U+, SK Telecom and KT, are targeting mobile games
to drive their LTE markets.
Operators are beginning to offer content that is only available over 4G, e.g., the UK
operators EE (film) and Vodafone (sports and music streaming).
Sprint is examining how LTE can be used to optimize mobile video delivery.
RCS launches by Metro PCS and operators in South Korea over LTE.
Ericssons partnerships with operators on using LTE for broadcast (including Telia,
Verizon and Telstra).
The key thing is that operator-commitment is there and the emerging partnership mentality
will ensure LTE-only services proliferate. Automotive services using LTE are one major area
poised for the mass market.
Although LTE-only services are in their infancy, the number of operators committing to them
is steadily increasing, with a wide range of different types of services being deployed on LTE-
only networks (see fig. 14).

Fig. 14: LTE-only service announcements, up to 3Q13
Fig. 14: LTE-only service announcements, up to 3Q13 (cont.)
LTE marketing using technology to enhance the brand
LTE operators are using the enhanced qualities of the technology to improve their overall
brand positioning, mainly around the concepts of speed and quality, and, to a lesser extent,
technology leadership. EE, as the first operator in the market to launch the technology, has
positioned its marketing around each of these concepts in a campaign specifically focused on
explaining the benefits of 4G (see fig. 15).
Fig. 15: EE, 4G marketing, 3Q13
Like other operators, EEs 4G website marketing is a mix of communicating the idea of
enhanced performance, in conjunction with short videos that demonstrate the tangible
benefits of 4G over 3G.
Market development
To date, the LTE market has mainly been characterized by network build-out and finding
the right pricing strategy to match consumer expectations. Some operators have already
succeeded in this, although they continue to evolve their strategies as new entrants come to
the market and consumer behavior changes. As more operators launch LTE, competition will
focus more and more on network quality especially for higher-ARPU subscribers. As this
happens, price competition will intensify. Moreover, operators will increasingly compete on
the overall value they offer 4G users. Value to the end user will be not just network quality, but
what content is bundled into 4G subscriptions and what other telecoms services (e.g., inclusive
Wi-Fi) users receive as part of their subscription.
As 4G competition increases, what will determine LTE success?
The idea of true 4G will increasingly become a differentiator among 4G operators. As

such, network quality on data and voice has never been more important and more of
a differentiating factor between operators. Operators are winning and losing the most
valuable subscribers on network quality: speed and coverage.
The most successful 4G operators that have faced competition arent charging a
premium for 4G access but are still seeing an improvement in KPIs by using 4G to buoy
pricing levels by offering enhanced value and quality.
Operators that have managed to charge a premium are operators that havent faced
any, or much, 4G competition. Also, they have only charged a small premium to 3G that
has been justified by increasing the overall value offered.
As 4G competition increases, the operators best placed are those that have the best
network quality, offer the most relevant handset line-up and can offer a select but
highly relevant range of services (that will vary market-by-market).
Evidence from 4G launches to date suggest that those operators that pursue best-in-
class network quality and position marketing around it will succeed in winning and
retaining the most valuable subscribers.
Operators need to plan an effective 2G/ 3G to 4G migration strategy. Which segments

of its existing user base does an operator want to migrate to 4G? How quickly? How
simple can an operator make it for an existing subscriber to change to a 4G price plan?
Voice strategy in the context of LTE
There have been sporadic deployments of voice over LTE (VoLTE) to date, with just a few
operators building on the worlds first VoLTE launch, by SKT, in August 2012 (see fig. 16). This is
because operators have a technology solution to voice in the LTE context that routes voice calls
over 2G/ 3G networks when the call is set up: CSFB for GSM operators and SVLTE for CDMA
operators.

Fig. 16: Selected VoLTE deployments and plans, end-Sept 2013
Because the majority of operators dont have 100% LTE population coverage, a VoLTE call
has to shift to another network to maintain the voice call connection. Operators that have
chosen to offer VoLTE services without near-100% LTE population coverage have pursued
different solutions to ensuring voice call continuity, including deploying SRVCC (Single Radio
Voice Call Continuity), a technology that migrates an LTE VoIP call to a circuit-switched voice
call over 2G/ 3G networks. As leading LTE operators near 100% population coverage, VoLTE
deployments will accelerate.
Forecasts
Informa Telecoms & Media forecasts that the global total of LTE subscriptions will rise from
188.6 million at the end of 2013 to 1.3 billion by the end of 2018, a compound annual growth
rate (CAGR) of 44%. Although North America will account for the largest share in 2013, it will
be overtaken by Asia Pacific in 2014, and will grow at the lowest CAGR at 23% of all the
regions. In contrast, Asia Pacifics LTE subscription base will grow at a CAGR of 52% over the
forecast period and, by the end of 2018, almost half of the worlds LTE subscriptions will be in
this region (see fig. 17).

Fig. 17: Global, LTE subscriptions, by region, 2013-2018
Informas individual country forecasts indicate that the US will remain the largest market for
LTE throughout the forecast period, rising from 89.8 million LTE subscriptions at the end of
2013 to 242.1 million at the end of 2018, a CAGR of 22%.
However, it is in the major Asian markets with the largest populations that dramatic growth
will be seen explaining why this region becomes by far the largest LTE market over the
forecast period. Indias LTE subscription base is forecast to grow at a CAGR of 311% and Chinas
at a CAGR of 150% between the end of 2013 and the end of 2018. By 2018, China and India be
the second- and third-largest LTE markets (see fig. 18).

Fig. 18: LTE subscriptions in selected countries, 2013-2018
LTE roaming
Although LTE roaming is still in the initial phase of deployment, some operators have already
implemented bilateral LTE roaming (see fig. 19).

Fig. 19: Selected LTE roaming launches/ plans, Nov-13
Next year will see a steady increase in the number of LTE roaming agreements as operators
look to increase data usage among consumer and enterprise roamers. Operators are still
experimenting with the best ways to price data roaming. How they price LTE data roaming
will be the key factor that will determine the extent of LTE roaming take-up, in particular
among the price-sensitive consumer segment.
Conclusions and recommendations
Conclusions
Verizon and SKT are among the most successful established LTE operators in terms of
subscription numbers and other relevant KPIs. EE in the UK has shown how an operator can
use 4G to re-invigorate its position in the market and in the process improve its KPIs.
These are the common links between successful LTE operators:
Dont charge a significant premium for LTE: Operators that have successfully charged
a premium for LTE have done so by making the premium small and clearly justifiable,
and at a level the target market will accept.
Build out a network with good coverage in key cities/ areas first, then expand to other
major cities/ urban areas then out to rural areas.
Offer a compelling device portfolio at different price points.
Communicate the value of LTE emphasizing speed in conjunction with enhanced

quality has proved to be enough.
Use LTE to evolve the brand through emphasizing the enhanced experience LTE offers.
Increase the overall value in the LTE subscription: premium content, enhanced voice
and messaging services have been proved to improve KPIs.
Unsuccessful 4G operators have pursued one or more of the following strategies:
Charged a high and unjustifiable premium for 4G.
Havent effectively communicated the benefits of 4G over 3G.
Offered a limited device line-up.
Havent provisioned the network with devices to offer a genuine 4G experience.
Havent aligned marketing with network rollout.
Failed to clearly identify which segments of the market they are aiming 4G at.
Have a weak 2G/ 3G-to-4G migration strategy for existing users.

Recommendations
4G can improve KPIs if launched in the right way this means aligning each element of the strategy to
specific segments of the market that 4G is targeted at
4G pricing, device strategy, network coverage, 2G/ 3G-to-4G migration strategy and marketing
each need to be carefully focused and aligned on the specific segments of the overall market.
Operators must move away from unlimited pricing because it devalues access to the network.
Successful 4G operators have priced 4G access at circa 500MB 5GB, which has been met with
end-user acceptance. In terms of 2G/ 3G-to-4G migration, operators need to develop a strategy
that balances increased revenues with end-user willingness to migrate.
LTE network launches should be just one part of an overall strategy to increase data usage, in conjunction
with pricing and content
4G has shown to bring about increased data usage because of the enhanced end-user
experience it offers. Operators should design their pricing strategy and overall content
strategy to encourage more data usage, which will encourage users to move up to data plans
that offer more data. Evidence from markets such as South Korea and the UK indicates that
increasing the overall amount of content/ number of services bundled into LTE subscriptions
will encourage uses to consume more data much more successfully, rather than charging for
access to specific services.
4G operators must focus on the network to win and retain the most-valuable customers
Its never been more the case that operators can successfully differentiate from rivals by
offering the best-quality mobile broadband experience and, increasingly, on the overall value
they offer the end user. Successful 4G operators have shown that they can effectively use the
network to define a quality/ premium position in the market even when they dont actually
charge a premium for 4G access.
Experience to date shows that pricing 4G at a premium, or offering unlimited data, are not effective
strategies to profitably increase LTE subscription uptake
Operators that have launched LTE at a premium have to justify this strategy by offering a
tangible increased value to the end user. Faster download/ upload speeds arent enough to
justify a premium on 4G over 3G for all but the highest-spending price inelastic mobile users
and at the very early stages of 4G rollout. Operators need to add more value to justify a
premium whether through exclusive content or bundling access to more services, such as Wi-
Fi or broadband access.
Operators in developing markets need to carefully assess why they are launching LTE and decide when is
the right time to launch
Is the 3G network coping with the demand for data? Are there specific opportunities 4G will
enable an operator to target that cant be realized with 3G? What segments of the market will
4G be targeted at most profitably? Will these segments be prepared to pay a premium for a 4G
device when network coverage is patchy? How much tangible first-mover advantage can an
operator gain by being first to market? These are some of the questions particularly pertinent
to emerging market operators assessing their 4G strategy.
Operators should look to partner with companies in adjacent sectors to maximize the value of the network
New services are gradually being rolled out over LTE and evidence to date shows that bundling
content and value-added services into 4G subscriptions can encourage users to migrate to 4G
and then move toward using higher monthly data amounts once signed up to a low monthly
4GB price plan. To develop a content strategy, operators need to define what segments of
the market they are targeting with the content and how it fits in with their overall brand
positioning.
VoLTE is here and LTE operators need to work out their deployment strategies
Despite the early-running on VoLTE from operators in South Korea, operators in the rest of
the world are justifiably in wait-and-see mode as far as VoLTE is concerned. Important
questions still hang over the technology, such as the technical considerations about how to
enable CS fallback, including how to monetize the service. These are questions mean that, at
the moment, operators rightly feel they have no need to answer through experimentation
with their own deployments.
Joyn is also a major undecided potential for operators: Do they commit to this and if so
what effect will it have on other voice/ messaging services? Consumer acceptance of IP voice
and rich messaging services from OTT players mean there is a considerable opportunity for
operators to take back market share for core voice and messaging revenues. The benefits of
VoLTE and rich messaging lie in creating new operator-defined communities rather than in
the default telco go-it-alone mentality. Operators should carefully assess how they can come
together to use VoLTE to create new operator-defined rich-voice/ messaging communities and
grow the addressable market, rather than fight for the crumbs of their own subscription bases.
4G strategy: Emerging Asia operators
market LTE to high-end users but need
to evolve pricing models to make a
return on investment
05 March 2013
Anubhuti Belgaonkar
Executive summary
Operators in emerging Asia are positioning LTE as a high-end data service aimed
predominantly at high-ARPU users willing to pay a premium for enhanced data-
transmission speeds.
Even entry-level LTE is priced at a premium to 3G, with operators using high bundled
data limits in conjunction with higher speeds to encourage high-ARPU users to sign
up to LTE services.
In terms of branding, operators have launched new campaigns with LTE logos
integrated with their own brand to leverage the strength of their brands while keeping
marketing expenses low.
The early LTE operators in the region will need to evolve their pricing strategies to
expand their LTE user bases. Experience from other markets shows that operators that
dont charge a significant premium for LTE have been the most successful in signing
up new users.
Operators in emerging markets should aim to use LTE to increase the overall number of
postpaid data users rather than to generate LTE revenues. To do this, operators need
to isolate segments of their prepaid user bases they can target for 2G-to-LTE migration
by offering service plans at attractive prices that encourage usage, leveraging the
enhanced capacity characteristics of LTE over 3G.
Experience from other markets, with both 3G and LTE, shows that operators with the
best-quality networks can gain a clear competitive advantage over rivals. Operators
that have rapidly expanded their LTE networks after launch have also been the most
successful in signing up new users. Because of the challenges to doing this in rural
areas and the likely returns on investment on LTE in these typically low-ARPU areas,
operators in emerging markets should instead focus on building widespread LTE
networks in major urban centers with excellent capacity, at least in the first phases of
rollout.
LTE operators in emerging Asia will, if they execute their launches well, put pressure on
rivals to launch their own LTE services. Experience from more-developed LTE markets
shows that once an operator starts gaining traction with LTE subscriptions, it becomes
imperative for rivals to follow suit to prevent that operator from taking a strong lead
among high-end users.
Emerging markets in Asia Pacific will see some new LTE-network launches in 2013. Sri
Lankan operators Dialog Axiata and Mobitel announced on Dec. 31, 2012, that their LTE
services were up and running. Maxis Malaysia launched LTE on Jan. 1, 2013, in some
parts of the Klang Valley region, and this year is likely to see many other launches from
other 2600MHz licensees. However, emerging-market LTE launches will be patchy,
with the majority of leading operators in these markets likely to launch LTE in 2014,
with smaller operators adopting a wait and see approach.
Market status
Although Asia Pacific is the leading region in terms of the rate of LTE subscription take-up,
because of early LTE launches in South Korea and Japan, the migration to LTE among emerging
markets in the region has, as expected, been comparatively slow. The main reason is that
emerging markets are not as ready for high-speed data services as more-developed markets,
with 3G serving the needs of the relatively small percentage of the market that is regularly
using mobile data. The number of 3G subscriptions is relatively low as a percentage of 2G
subscriptions in the majority of markets in the region (see fig. 1).

Fig. 1: Asia Pacific, 3G as % of total subscriptions, key markets, 3Q12
LTE launches have also been delayed because most countries have yet to release LTE-ready
spectrum, often because governments are still unclear about which spectrum band to allocate
for LTE. Analog-to-digital-TV migration has also affected the launch timelines, since the slow
migration has led to delays in the availability of digital-dividend spectrum. Moreover, in
countries where 3G services have yet to take off, such as Vietnam, regulators are reluctant
to give the go-ahead to LTE because of the difficulty many operators in the region are having
breaking even on their 3G investments.
Four markets in Asia Pacific have seen early LTE launches (see fig. 2).

Fig. 2: Asia Pacific, in-service and planned LTE networks, emerging markets
Despite the challenge of making a return on their investment in mobile broadband networks,
operators in two key emerging markets in the region India and the Philippines launched
LTE services in 2012. Although Smart Philippines has been upgrading and trialing LTE since
2011, Indias Bharti Airtel was the first to launch commercial LTE services, in April 2012. But it
had just 3,890 LTE subscribers at end-September 2012 (see fig. 3). Current LTE deployments in
these markets focus on urban centers, and none of the operators in these countries that have
launched LTE have announced plans to expand offerings to rural markets in the near future.

Fig. 3: Bharti Airtel, Smart, Globe, LTE subscriptions, 2Q12 and 3Q12
Targeting fixed-broadband users
Operators in India and the Philippines are marketing LTE services primarily to high-end
subscribers, a group that inevitably includes fixed-broadband users in urban markets. The LTE
speeds offered by these mobile operators, via USB modems, are typically much higher than
the fixed-broadband alternatives, giving them a clear advantage in terms of performance. To
attract fixed-broadband users, operators are promoting the superior speeds and the mobility
advantage of LTE among high-end users. And the increasing user affinity for smart devices,
compared with their desire for traditional PCs and laptops, is helping operators target LTE at
the broadband market in general. LTE is priced aggressively compared with fixed broadband,
though typically with much lower monthly data allowances (see fig. 4).

Fig. 4: India, LTE (Bharti Airtel) and DSL/FTTH (BSNL) price comparison
The LTE plans offered by Bharti Airtel provide speeds up to 40Mbps, compared with entry-
level speeds of just 2Mbps offered by BSNL with its FTTH plan and of 16Mbps with its xDSL
plan. Although the costs per megabyte for entry-level LTE and FTTH plans are similar, the xDSL
plan offers significantly more data, resulting in the lowest cost-per-megabyte of the plans
compared. LTE entry-level and high-end plans are significantly cheaper on a monthly basis
than xDSL and FTTH plans.
However, unlike developed markets, such as Japan, where LTE has had a direct impact on
the number of fixed-broadband users, emerging countries are unlikely to see significant LTE-
driven cord-cutting in terms of subscriptions in the near term, largely because of the limited
availability of high-speed next-generation fixed-broadband services to begin with.
Market dynamics
The LTE strategies of Bharti Airtel, Smart and Globe are similar in terms of the market
segments they are targeting and the premium they charge for accessing higher speeds.
The operators are positioning LTE as a premium data service designed to provide quality
connectivity to higher-value users willing to pay additional data charges for higher download
and upload speeds. The three operators are only offering data services, focusing on data cards,
and do not offer voice-based services to their users on the LTE network.
The operators have begun developing a clear strategy for differentiating LTE networks from 3G
in terms of exclusive service or content offerings: Bharti Airtel is focusing on exclusive content
for its LTE users, whereas the Filipino operators are exploring technology and device strategies.
LTE pricing strategies
Although basic service pricing, measured as cost per megabyte, is considerably lower than 3G
pricing, the monthly cost of bundles is significantly higher, because services are aimed largely
at high-end data users, with plans bundling much larger chunks of data limits compared with
3G plans.
India
Bharti Airtels LTE pricing strategy is clearly aimed at high-monthly-data users. The entry-level
LTE plan offers 6GB of data for US$18.40 a month, compared with US$13.80 for a 4GB 3G
plan and US$27.70 for a 10GB 3G plan. In terms of a comparable monthly gigabyte allowance,
Bharti offers 9GB of LTE data for US$25.80, compared with 10GB of 3G data for US$27.70 (see
fig. 5). This shows that Bharti has what can be termed a conservatively aggressive approach
to signing up LTE customers, given the premium it is charging for just 1GB of monthly data
on a 3G plan.

Fig. 5: Bharti Airtel India, LTE and 3G pricing comparison
Bharti Airtels cost per megabyte is lower for LTE services than for comparable 3G services
(see fig. 6). For instance, an entry-level LTE plan costs US$0.003 per megabyte, compared with
US$0.006 per megabyte for an entry-level 3G plan. Similarly, the high-end LTE plan costs US
$0.002 per megabyte, compared with US$0.003 for 3G. Although the lower cost per megabyte
of LTE data is not likely to be a significant deciding factor for subscribers looking at LTE, it will
enable operators to aggressively push 2G/3G-to-LTE migration because of the lower amount
it costs them to carry data over LTE networks compared with 2G/3G.

Fig. 6: Bharti Airtel, per-megabyte premium, 3G vs. LTE
In terms of overall package pricing, LTE is considerably more expensive on a monthly basis,
though data bundles come with a much higher proportion of free data. Bharti Airtels entry-
level plan includes 6GB data for a monthly commitment of US$18.40, while the high-end plan
costs US$55.30 a month with a 30GB data-download limit, three times the volume bundled
with the high-end 3G data plan, which costs US$27.70.
Bharti Airtel offers LTE services for both prepaid and postpaid users, but the plans are identical
and have no lock-in period. Although it is offering a special limited-period price for the LTE
dongle, the devices are sold without subsidy and cost about INR8,000 (US$150) for both
prepaid and postpaid users. This again indicates that Bharti is adopting a conservatively
aggressive approach to signing up LTE users across its entire base, not just postpaid users.
Philippines
The Filipino operators offer LTE as a postpaid service with a two-year lock-in period. Both
operators bundle the LTE USB dongle free of charge, a feature made possible by the long
contract lock-in. The operators LTE pricing strategies clearly have similar goals: to sign up
high-monthly-gigabyte users to LTE, keeping 3G for low-monthly-data users (see fig. 7).

Fig. 7: Philippines, Smart and Globe LTE and 3G pricing, Dec-12
Smarts two LTE plans offer standard download speeds up to 42Mbps, with the pricing varying
based on the amount of data in the bundle. Globe, on the other hand, offers differentiated
pricing based on both download speed and bundled data. Its entry-level plan offers 28Mbps
access speed, though users can increase it to 42Mbps by paying an extra PHP300 (US$7.35)
a month.
There is a significant disparity in cost per megabyte between LTE and 3G services (see fig. 8):
Smarts entry-level LTE plan costs 91.4% less than its entry-level 3G plan, whereas Globes LTE
plan costs 92.6% less. For high-end plans, the difference declines somewhat, with the LTE plans
of both Globe and Smart over 66% cheaper than corresponding 3G plans.

Fig. 8: Globe and Smart, per-megabyte premium, 3G vs. LTE
Like Bharti Airtel, in terms of monthly commitment the entry-level LTE plans are even more
expensive than the high-end 3G options. In Smarts case the disparity is about 76%, while in
Globes case it is just over 260%.
Additional data-usage management
Given that the LTE service aims to target heavy data users in both India and the Philippines, the
operators are offering add-on data-usage plans that users can subscribe to once their monthly
data-bundle limit is exhausted (see fig. 9).

Fig. 9: Bharti Airtel and Globe Telecom, additional LTE data-plan comparison
Globe and Smart are offering introductory promotions of unlimited browsing to attract new
users but plan to offer new add-on plans. Globe has already announced its pricing, while Smart
has not yet made its pricing public.
Bharti Airtel is also offering an LTE version of Smartbytes, a 3G plan that provides add-on data
for users who exhaust the monthly limit on their existing plans. The cost per megabyte for
these plans is slightly higher than the cost per megabyte for regular LTE plans but provides
a cushion to avoid bill shock. In Globes case, the cost per megabyte for add-on plans is lower
and provides users an incentive to increase data usage even beyond the bundled limit.
Branding differentiation
Like the majority of operators in other markets, with the exception of DoCoMo in Japan,
Bharti Airtel, Smart and Globe have not launched distinct brands to market their LTE services
but have instead initiated new campaigns with LTE logos integrated with their own brand,
highlighting both the 4G and LTE aspects (see fig. 10). Using existing brands enables
operators to leverage the strength of their brands while keeping marketing expenses low.
Fig. 10: LTE Logos and branding
Device strategy
Because of the limited availability and high cost of LTE handsets, as well as the absence of any
LTE-based voice services, the three operators LTE strategies are to focus mainly on LTE dongles.
Each operator launched LTE with a USB data dongle and a Wi-Fi sharing device (see fig. 11).
But Globe was the first to launch LTE-compatible smartphones in the Philippines, soon after
the launch of its LTE service (see fig. 12).

Fig. 11: LTE devices offered by Bharti Airtel, Globe and Smart
Fig. 12: Globe Telecoms LTE-smartphone portfolio
Service positioning
Bharti Airtel offers LTE-only content in a bid to encourage take-up of services, offering
exclusive services for its LTE users (see fig. 13).
Fig. 13: Bharti Airtels LTE value-added services
For instance, it offers 35 HD movies in collaboration with Bigflix, a movies-on-demand service,
with free access to 10 movies in the first month, followed by INR149 a month for unlimited
access.
Globe and Smart are focusing on offering plain-vanilla data access to their users, though
Informa Telecoms & Media does expect them to offer exclusive content and services for their
LTE users in 2013 to differentiate their offers. In the meantime, Smart has chosen to highlight
its triband LTE network, which enables it to cater to a larger geographic market and in the
future to a wider range of compatible handsets.
Market development
Emerging markets in Asia Pacific will see some new LTE-network launches in 2013, though
the pace and number are likely to be significantly lower than their developed counterparts.
New markets
A number of emerging markets in Asia Pacific are expected to see commercial LTE launches
in 2013 (see fig. 14).

Fig. 14: Asia Pacific, key LTE networks launched in/planned for 2013
Operators must implement effective LTE-migration strategies
With several LTE launches planned for 2013, emerging-market operators will need to start
outlining a clear strategy to drive service adoption, especially in light of the low 3G-
subscription levels in markets in the region. Limiting themselves to targeting postpaid users
might be futile in these predominantly prepaid markets. Instead, operators should consider
migrating high-end prepaid data users to entry-level LTE postpaid plans to maximize the LTE
opportunity (see fig. 15).
Fig. 15: 2G-prepaid-to-LTE-postpaid migration plan
Smartphones
The availability of compatible smartphones will play a key role in driving the take-up of LTE
services in emerging Asia Pacific markets. Penetration of PCs and laptops is low in these
countries, limiting the potential of dongle-based LTE services. Take-up of smart devices, on
the other hand, is increasing rapidly, even in developing markets, and this is expected to drive
service take-up.
VoLTE
Although emerging-market operators are looking at LTE as a data/broadband service, they
would also have to offer voice service to improve the customer experience. 3G voice offload
is likely to be another reason to offer VoLTE, as operators look to manage 2G- and 3G-network
congestion. Whatever the individual reasons might be, operators in emerging countries will
have to adopt VoLTE services in the near future, and it will become a key parameter in
determining the value of their LTE offerings.
VoLTE services will also enable operators to offer new voice-based services, such as HD voice
and voice conferencing, helping them offset the decline in traditional voice revenues.
Subscription forecast
Informa forecasts that Asia Pacific will account for the largest percentage of LTE subscriptions
from 2014 onward. The launch of LTE services in China will play a key role, with the country
expected to have 144 million LTE subscriptions at end-2017 (see fig. 16).

Fig. 16: LTE subscription forecast by region, 2013-2017
The global LTE-subscription count is expected to reach 940.2 million by end-2017, of which
China and India are likely to account for about 26.7% (see fig. 17).

Fig. 17: Asia Pacific, LTE subscriptions by country, 2013-2017
Conclusions
LTE services are targeting high-end data users
LTE services in India and the Philippines, where the availability of next-generation fixed-
broadband services is poor, are being marketed almost exclusively to high-end subscribers as a
substitute for high-speed fixed-line broadband services. The new services are targeted at high-
value heavy data users who are willing to pay a premium for service availability, improved
service quality and mobility. The plans are designed with this in mind and all operators are
including significantly more data in these plans than in 3G plans, though Bharti Airtel is the
most aggressive in targeting midrange data users with attractively priced LTE plans, whether
prepaid or postpaid.
Smartphones key to driving service take-up
A limited selection of LTE-compatible smartphones and their steep pricing, in the context of
the overall markets, is a key challenge to driving the take-up of LTE services. Although LTE
dongles are offered by the operators, and are even subsidized to some extent, the fact that
the majority of mobile data usage is via smartphones in emerging markets will be a severe
near- and mid-term factor limiting the popularity of LTE services. Operators will need to focus
on offering a strong LTE-smartphone portfolio to ensure wider adoption of the service while
avoiding the heavy-subsidies route.
Focus on urban markets continues
The LTE networks deployed by emerging-market players focus on urban centers. This is the
right approach, given the pricing and premium associated with the positioning of LTE services
in these countries. It is unlikely that the deployments would be expanded to cover rural
markets in the medium term. Operators are instead likely to expand their 3G coverage to
semiurban and rural markets while keeping LTE as a premium service for urban areas with
high demand for data services and high customer willingness to pay a premium for service
quality.
LTE price competition will accelerate
Although the sample size for LTE services in emerging Asian markets is small for now, the
competitive offers launched by the Filipino operators provide a view of the price competition
that is likely with LTE services.
Recommendations
Operators need to adopt more-innovative pricing
Operators will have to introduce lower-priced LTE services before mass-market adoption
takes place. Despite the high-end target segment, offering the LTE experience with small
amounts of data per month can help encourage take-up, since even many high-end users
might not be willing to subscribe to expensive and data-heavy services without first trying
them out. Moreover, as the competition increases, operators will also have to move beyond
just a basic volume/pricing game to offer more innovative services to differentiate their LTE
offers. They could look at examples of innovative pricing from developed-market peers, such
as NTT DoCoMo, which charges customers who add a second LTE device to their original LTE
subscription a reduced amount, driving LTE usage and revenues.
Offer attractive additional data plans for high-end customers
There is a stark contrast between the Indian and Filipino operators when it comes to the price
of data for users who have reached their monthly bundled limit. Globes cost per megabyte
for add-on usage is lower than the calculated cost per megabyte of bundled data, which
works as a good strategy to encourage even higher usage among its subscribers. Bharti Airtel,
on the other hand, charges more per megabyte for add-on usage. Such pricing discourages
heavy users from going beyond their bundled data, limiting the services revenue-generating
potential.
Provide value-added services
Building a clear value proposition for LTE is essential for the growth of LTE services. Operators
need to highlight the quality differences between 3G and LTE so that end-users understand
the perceptible value of the service. A key part of this will be offering exclusive LTE services
to attract new users and retain existing ones. Services might focus on exclusive content, such
as that provided by CSL in Hong Kong, or on voice-based services, such as the VoLTE service
offered by the South Korean operators.
Hone the marketing message to increase LTE take-up
LTE operators must decide which segments of the market they are targeting for LTE and
determine marketing messages that clearly communicate to those users the benefits of LTE.
Operators in markets that have launched LTE successfully have clearly highlighted the speed
advantages LTE offers over 3G, an advantage that has been well received by a broad base of
users. Although communicating speed advantages can be a challenge, what has proved to be
successful is communicating how much faster LTE is over 3G in the context of using popular
services, such as downloading or streaming media.
Define a clear and profitable 2G/3G-to-LTE migration strategy
Operators need to determine which of their users they can most profitably migrate to LTE. LTE
is not for every user, and operators shouldnt fall into the trap of aiming for LTE-subscription
growth for the sake of it. Rather, operators need to isolate their most profitable users and
find ways through existing CRM channels to migrate them to more-valuable LTE plans. More
valuable to the operator should mean offering LTE plans with little or no additional cost to the
end-user to ensure longer contract tie-ins, such as over 24 months. This will be a challenge
for operators with predominantly prepaid user bases, but operators need to carefully segment
prepaid users and target those who would most benefit from an LTE plan. LTE can be a way
to significantly increase the number of postpaid users an operator has rather than a way to
generate LTE revenues.
Expand coverage outside major urban centers
Although operators are focusing on deployment in urban centers, its essential to expand
coverage to other areas to drive LTE take-up in all markets over the longer terms. Emerging-
market players are likely to use 3G to cater to relatively price-sensitive semiurban and rural
markets while using LTE to cater to affluent subscribers in urban areas. However, such a
strategy will restrict the services potential over the long haul, since rural markets account for
a substantial portion of the population in most of these countries, and there is a good business
case to be made for using LTE in these areas because of the lack of fixed broadband options.
Smartphone subsidies will help drive subscription growth but must be well-targeted
Operator-driven device subsidies are rare in emerging Asia Pacific markets because of the
predominantly prepaid base, which makes it almost impossible for an operator to ensure that
subscribers taking advantage of the subsidy will remain on its network for the entire lock-
in period. However, for LTE services, the high-end user base represents a viable segment for
such deals, potentially in conjunction with handset-financing approaches that are gaining
popularity in some markets in Europe. The premium charged for LTE services compared with
3G can be justified by offering heavily subsidized LTE handsets. This will not just increase
smartphone penetration but also drive usage, since LTE access on smartphones will find a
wider potential user base than dongle-based access, given the low penetration of laptops and
PCs in these markets. Most high-end, affluent users would be willing to agree to a fixed lock-
in period in exchange for larger direct handset subsidies.
Work closely with device manufacturers to offer competitively priced LTE devices
Operators in emerging markets should work closely with LTE-device makers to produce
devices specific to their markets. This strategy could be particularly effective in increasing
LTE take-up if vendors produce low-end and midrange devices that meet the needs of low-
to medium-data-usage subscribers. 2014, rather than 2013, is a realistic time frame in which
to do so. Operators might be able to work together through the regional operator alliances to
achieve these goals.
4G strategy: AT&T focuses on LTE-
network quality and coverage in
competition for US 4G leadership
27 August 2013
Kristin Paulin
Executive summary
AT&T was the first GSM-based operator to launch LTE in the US, giving it the advantage
of being the only operator to have HSPA+ fall-back.
AT&T is increasing its investment in LTE through an initiative coined Project VIP, which
will result in more population coverage than originally planned. AT&T focuses its
marketing message about LTE on speed, coverage, price and talk-and-surf.
AT&Ts LTE network regularly receives independent, third-party accolades for best
network in terms of qualities such as speed and reliability.
Although AT&T will not complete its LTE rollout until 2014, the network is fully rolled
out in the major markets. The focus now is on filling in the fringes and smaller markets.
After that, the focus will be on increasing the density of the network with both macro
cells and small cells.
AT&T recently opened up its LTE network to prepaid customers. AT&T markets only one
LTE device to its GoPhone prepaid customers; it should market more widely to prepaid
users, who represent a segment that is becoming more competitive in the US.
Overview
AT&T launched LTE in its first five markets Atlanta, Chicago, Dallas, Houston and San
Antonio in September 2011. AT&T was the third US operator to launch LTE, following tier
2 operator Metro PCS (now owned by T-Mobile US) in September 2010 and market leader
Verizon in December 2010.
AT&T was the first non-CDMA operator to launch in the US, which is significant when
comparing network speeds. AT&T subscribers fall back onto HSPA+ speeds when they leave
an LTE coverage area, while Verizon customers fall back onto 1xEV-DO Rev. A and Metro
PCS customers usually fall back onto the CDMA network, which offers only 1x speeds
(sometimes EV-DO Rev. 0). The CDMA technologies are significantly slower than HSPA (see fig.
1). Consequently, as LTE networks were just starting to roll out, AT&Ts fall-back technology
was a big advantage.

Fig. 1: Data-speed comparison by data protocol
Because its subscribers had access to HSPA+ speeds outside of LTE markets, AT&T did not feel it
had to rush to deploy LTE. AT&Ts strategy was to wait for LTE standards to be fully defined and
take time to ensure that things were done right, including deploying fiber backhaul, which
enables the operators HSPA+ network to provide true 4G speeds for fallback while LTE is being
rolled out in additional markets. AT&T also placed the networks radio heads up on the towers
to provide both speed and power advantages.
Although launching LTE did offload some traffic from its HSPA network, AT&T said that
congestion on its HSPA network wasnt terrible and traffic was under control and that
therefore there was no critical need to launch LTE. Verizon was arguably in a more desperate
situation with its CDMA network and had to roll out LTE faster because its EV-DO Rev. A speeds
could not typically compete with those of HSPA.
However, data usage is still growing in the US. The average megabyte of data usage in the
US is moderate compared with its European peers. In December 2012, the average data usage
for Americans was 1,223MB, according to CTIAs semiannual survey of US wireless operators
(see fig. 2). Although the usage might be lower than that of some other similar countries,
data traffic grew 572% from end-2009 to end-2012. The majority of data traffic in the US
comes from mobile phones: Of the 1,223MB of data traffic in December 2012, 767MB came
from mobile phones. In fact, smartphones consistently account for roughly two-thirds of data
traffic.

Fig. 2: US, average monthly data traffic, Dec-09 to Dec-12
Average smartphone penetration among US operators, where data is available, was 51.23%
as of 1Q13. AT&Ts smartphone penetration is 63% (see fig. 3), which is the highest in the US.
Even at 63%, there is still a lot of room to grow. On top of that, there is the increasing use of
tablets, another area of growth in data usage.

Fig. 3: US, smartphone penetration by operator, 1Q11-1Q13
WCDMA/HSPA users account for over 80% of AT&Ts subscribers (see fig. 4). The proportion is
shrinking each quarter as LTE makes inroads. As of end-1Q13, WCDMA/HSPA accounted for
82% of AT&Ts subscription base, while LTE accounted for 14%. The rest was made up of GSM
subscribers.

Fig. 4: AT&T, WCDMA and LTE as % of total subsciptions
As the number of LTE customers grows, so does data usage. And vice versa: As more
subscribers use data, they will desire better data-capable devices, such as LTE devices.
And the desire for high-speed data on mobile devices is not limited to higher-end postpaid
subscribers. AT&T realizes this. Although AT&T initially targeted postpaid customers with LTE,
it recently opened up its LTE network to prepaid subscribers. Competition has started heating
up in the prepaid sector in recent quarters, as well.
AT&Ts biggest LTE competitor in general is Verizon, and the main area of competition recently
is network reliability. Verizon has the largest LTE coverage of the two, while AT&T is rated
highest by third parties when it comes to speed. The point the two cant seem to agree on
is reliability. Both cite third-party studies for their claim of most reliable network. AT&Ts
most recent ads say, AT&T. The nations fastest and now most reliable 4G LTE network,
while Verizons say, Superfast 4G LTE. Most reliable network. Most coverage, as well as Most
coverage. Most speed. Most reliable. Americas most reliable network. Period.
For years, Verizon used the can you hear me now? guy in its ads. This well-known figure with
the just-as-well-known slogan could be seen going far and wide on his mobile phone, asking,
Can you hear me now? to ensure call coverage was there for Verizons network. Therefore,
when AT&T introduced its most reliable claim in July 2013, it was stepping into territory
Verizon has long perceived its own. The industry has come a long way from the can you hear
me now? guy. That was call quality and CDMA. Now we are talking about LTE and reliability
of calls and data.
With both operators having vast LTE coverage across the nation and strong device lineups,
they need to compete on the level of quality.
Strategic goals
Primary rival Verizon launched LTE almost a year earlier than AT&T and covered a population
of 160 million by the time AT&T launched in its first five markets. There was more of an
urgency for Verizon to launch than AT&T, because, without LTE, Verizon was offering data
speeds of 3.1Mbps on Rev. A, compared with AT&Ts offering of 21Mbps on its HSPA+ network.
Although HSPA+ speeds have a significant advantage over Rev. A speeds, there is no contest
comparing HSPA+ to LTEs maximum theoretical downstream speeds of 100Mbps. Because
of the increase in data usage, the market is now demanding the speeds and reduced latency
offered by LTE. AT&T is increasing the speed of its LTE-network rollouts.
AT&T LTE business model
Network strategy
When AT&T launched LTE, using its fall-back technology advantage and fiber backhaul, it
focused on its combined HSPA+/LTE-network coverage and referred to it as 4G. This made its
4G-network coverage vaster than Verizons from the beginning, even though AT&T was rolling
out its LTE network at a slower pace.
Two and a half years after Verizon launched LTE and one and three-quarters after AT&T did,
this advantage ran out. As of June 2013, Verizons LTE coverage (96% of population) surpassed
that of AT&Ts combined LTE/HSPA+ (91% of population). AT&Ts LTE network alone covers
about 65% of the population, with plans to cover 85% by end-2013.
AT&T says its backhaul adds significant value to its LTE network. AT&T owns all of the
infrastructure in its 22-state wireline footprint and has deployed fiber backhaul. Deploying an
LTE network alone does not guarantee the high speeds. If there is congestion in the backhaul,
traffic will not flow well and optimal network speeds wont be realized.
AT&Ts Project Velocity IP (Project VIP) is also playing an important role in the operators LTE-
network strategy, by enabling AT&T to enhance its LTE-rollout plans. With Project VIP, AT&T
is investing US$14 billion between 2012 and 2014 to significantly expand and enhance its
wireless and wireline IP broadband networks.
Through Project VIP, AT&T plans to expand its LTE network to cover a population of 300 million
by end-2014, up from original plans to deploy LTE to a population of about 250 million by
end-2013. In AT&Ts 22-state wireline service area, the company expects its LTE network to
cover 99% of all customer locations. In addition, by 2015 AT&T said its LTE network will have
a much denser set of macro DASes (distributed antenna systems) and small cells in place.
To help with Project VIPs goals, AT&T acquired spectrum through more than 40 deals in 2012,
and it plans to buy additional wireless spectrum to support its LTE network.
Device strategy
From a device standpoint, AT&T approached its LTE launch by preseeding the market with
devices. A month before launch, AT&T started selling the USB Connect Momentum 4G USB
dongle and the Mobile Hotspot Elevate 4G hot spot, followed shortly after with the HTC
Jetstream tablet in early September. LTE-capable smartphones were available about a month
and a half after launch, when AT&T started offering the HTC Vivid and Samsung Galaxy S II
Skyrocket in early November.
AT&T made its first LTE smartphone available in 1Q12, which means that in the first two
quarters when LTE was available, customers had the option of only the two data devices. In
1Q12 four LTE handsets were available. By 2Q13, 20 were available.
After the network had been in service for nearly two years, AT&T opened it up to prepaid
customers, in June 2013. Although AT&T markets only one device specifically to its GoPhone
prepaid customers, these customers can use any AT&T LTE device. If they do not already own a
device outright, prepaid customers must buy one at full price rather than the subsidized price
offered to contract customers.
Pricing strategy
When AT&T launched LTE, it did not launch separate rates for the network; there was no
premium price. It is typical in the US for service plans to be technology-agnostic.
What AT&Ts LTE launch perhaps did for rates was cause AT&T to shift focus to data. Last year
AT&T started offering Mobile Share plans, which offer unlimited voice and messaging. The
variation in price points comes from the size of the data bundle and the number of devices
sharing it.
AT&Ts service plans, as well as Verizons, are priced higher than Sprints and T-Mobiles. None
of these nationwide US operators charges a premium for service plans (see fig. 5).

Fig. 5: US, LTE-plan comparison, unlimited talk, text and 2GB of data with iPhone 5
Marketing strategy
After AT&T launched its LTE network, advertising focused on the speed of the technology. One
TV ad showed two men tailgating at a sporting event. Someone approaches and gives the men
a recap of something that just happened. The two men have already learned this because they
saw it on their phone running on AT&Ts LTE network. With speeds up to 10 times faster than
3G, AT&Ts 4G LTE has enabled our two tailgaters to find out everything faster, transforming
the breaking news into something so 42 seconds ago, the voiceover says.
By late last year, AT&Ts marketing messages had expanded to include not only speed but also
price, network size, network coverage and talk-and-surf. In November 2012, AT&T launched
its new series of commercials, called Its not Complicated, featuring unscripted children with
imaginative answers to simple questions, such as, Who thinks more is better than less?,
Whats better: faster or slower? and Whats better: bigger or smaller?. The commercials end
with one of the following messages:
Its not complicated. Bigger is better. And AT&T has the nations largest 4G network.
Its not complicated. Doing two things at once is better. AT&T is the only network that
lets you talk and surf at the same time on your iPhone 5.
Its not complicated. Saving is better. Switch to AT&T and your family can save up to
$100/month with Mobile Share.
Its not complicated. Faster is better. And AT&T has the nations fastest LTE network
for your iPhone 5 (see fig. 6).
Fig. 6: Example of AT&T marketing
Results
AT&Ts LTE network is faring well. It appears to have a good reputation that is backed up by
independent third parties. For example, AT&T has won awards from Root Metrics for overall
call, text and data-network performance on a market-by-market basis. AT&T was first or tied
for first in 61 markets tested between January and June 2013. In May 2013, PC World ranked
AT&Ts LTE network the fasted for average download and upload speeds in the most recent
20 market-speed test. In June 2013, PC Magazine named AT&T the fastest LTE network in the
US, as well as the fastest in all six US regions specifically: Northeast, Southeast, North Central,
South Central, Northwest and Southwest. The network ranked fastest in 24 of 30 markets
tested: Atlanta, Austin, Boston, Charlotte, Chicago, Dallas, Denver, Houston, Indianapolis,
Kansas City, Memphis, Miami, New Orleans, New York, Philadelphia, Portland, Raleigh, Salt
Lake City, San Diego, San Francisco, Seattle, St. Louis, Tampa and Tucson.
Most recently, in July 2013, AT&T added most reliable network to its collection of accolades
from independent third parties. An undisclosed third party rated AT&T the best for delivering
mobile content across LTE networks. Until now the accolades have been about speed fastest
network. The most recent one was about reliability.
Subscription trends
Unlike its chief rival, Verizon, AT&T does not regularly release LTE-subscription figures. In its
1Q13 earnings, however, AT&T did give an indication, for the first time, of its LTE-smartphone
take-up. At end-1Q13, it had about 15 million LTE subscriptions (see fig. 7).

Fig. 7: AT&T, subscription trend by technology, 2Q11-1Q13
This means AT&Ts LTE take-up has occurred at a slightly faster rate than Verizons. AT&T
reached 15 million in its seventh quarter of service. In Verizons seventh quarter of service, it
had only 10.9 million subscriptions, and it took another quarter to get to about 15 million. LTE
take-up has been faster for AT&T than for Verizon because there are more devices available
now. Verizon launched so early that devices werent prevalent.
AT&T also said its LTE take-up has been helped by its flexible plans a range of individual
plans and mobile share plans are available to customers and promotions such as prepaid
gift-cards, waived activation fee and coveted devices, such as the iPhone 5 for US$99.
ARPU/revenue trends
AT&T expects the speeds offered by LTE, the choices of its service plans, its growing LTE-
network coverage and the growing number of customers on the LTE network to generate
increased usage that will also enable AT&T to increase its revenues.
On its 1Q13 earnings call, AT&T said it expects to experience single-digit-percentage revenue
growth in wireless for the long term, because there is still room to grow with smartphones,
with sales rates at 90% and the customer base at 70%. Along with this, AT&T said it expects
to continue to see customers adding tablets and other data devices to their plans. As AT&T
completes its LTE deployment, it expects to continue to see growth in the use of other services,
such as video.
Strategic outlook

Fig. 8: AT&T LTE SWOT analysis
Conclusions
AT&Ts LTE network has gained a good reputation
AT&Ts LTE rollout might be proceeding more slowly than Verizons, since AT&T has higher
speeds on its fall-back technology outside of LTE coverage, but the pace is working for it. AT&T
has been consistently receiving accolades for LTE-network quality and speed. It is safe to say
that AT&Ts LTE network has gained a good reputation. The author uses AT&T LTE and finds
it to be lightning fast and much better than Wi-Fi in terms of speed. Along with this, at the
CTIA Wireless trade show earlier in the year, casual discussions often centered on the poor
Wi-Fi service at the convention and how using LTE over mobile was a much better experience
at the show.
AT&T has rolled out the bulk of its LTE networks and is now filling in the smaller markets and looking to
LTE-Advanced and VoLTE
In the near term, AT&T will continue to roll out LTE in new markets. It is at the stage in its
rollout plans where it is reaching the smaller markets and the fringes of markets already
launched in, rather than launching in any major new markets. The major cities are already
covered.
AT&T also plans to begin rolling out VoLTE in select markets in 2013. AT&T has the ability to
deploy VoLTE on a market-by-market basis, whereas Verizon has to deploy nationwide at one
time, because, unlike AT&T, it did not use a distributed architecture to build its network. The
distributed architecture enables AT&T to launch one market at a time or as ready. For VoLTE,
this means launching on a market-by-market basis. AT&T has been conducting extensive drive
tests of VoLTE in each market, with quality being tested until its the same as HSPA+, after
which the network is turned on in the market. With Verizon not having a circuit-switched fall
back, it has to do a national rollout. It will be all or nothing for Verizon and VoLTE.
AT&Ts long-term plan is to make its LTE network denser to safeguard heavy usage
For the long term, since AT&T is a significant way through with its LTE-network rollouts,
the focus will be more on making its network denser. As of July 2013, AT&Ts LTE network
covered a population of more than 225 million across 326 markets. By end-2013, AT&T plans
to reach 90% of its goal of covering a population of 300 million by end-2014. AT&T has already
started making its network denser, but the real ramp-up will occur in 2014 and 2015. As part
of Project VIP, AT&T plans to add 50,000 cell cites 40,000 small cells and 10,000 macro cells
nationwide, wherever needed. All of the macro cells will be LTE, and the small cells will initially
be 3G but later moving to LTE, depending on equipment availability. The denser the network,
the more capacity it can handle. This will ensure a better experience as usage and the number
of users increase.
Recommendations
AT&T should move away from bigger is better and focus more on faster is better
AT&Ts current ad campaign focuses on Bigger is Better, Faster is Better and Doing Two
Things at Once is Better. AT&T should focus on Faster is Better, because that is its real
advantage at the moment. AT&T should capitalize on the third-party findings that put AT&Ts
network ahead of its peers, including Verizon, in terms of speed and quality. AT&T should
quietly remove the focus on Bigger is Better, because that is outdated. AT&Ts network is no
longer the biggest. AT&T has long grouped its HSPA and LTE coverage together under the 4G
network umbrella and compared this to Verizon. AT&Ts coverage initially surpassed Verizon,
but that stopped being the case in June 2013. When Verizon realizes this, AT&T could be made
to withdraw the claim anyway, because it is no longer valid.
Verizon should tout the fact that its LTE coverage is more vast than AT&Ts HSPA+LTE
Verizon should take advantage of its wider LTE coverage and include it in its marketing. AT&Ts
marketing right now includes the message Bigger is Better, in reference to its LTE network.
AT&T should expand its new focus on LTE for prepaid customers
AT&T recently opened up its LTE network to prepaid subscribers. This was a good move, since
it is hitting a whole new segment of potential subscribers, those who want a month-to-month
plan that mimics postpaid, but without the commitment. This is a really popular area in the
US today. This type of plan also will yield higher prepaid revenues than a minute-to-minute
prepaid customer. AT&T markets one LTE smartphone under its GoPhone brand, but AT&T
said customers can bring any AT&T LTE device to the network. They can buy the device at the
full retail price, rather than the advertised subsidized price. It is likely that AT&T is dipping its
toe in, since it is only marketing one device right now. AT&T should expand its promotion in
this area to several devices and spur interest in this category.
This strategy would weave in well with AT&Ts new prepaid sub-brand strategy, which
involves its recent launch of a new brand, Aio Wireless, with a prepaid unlimited-plan
platform, as well as AT&Ts newly announced acquisition of Leap Wireless, offering wireless
service with the same prepaid unlimited platform.
4G strategy: EE makes the most of its
first-mover advantage to show how
LTE can improve KPIs
23 October 2013
Paul Lambert
Executive summary
EE, along with other 4G leaders such as Verizon Wireless, AT&T and SKT, is defining and
shaping what it means to be a successful 4G operator, and, like those other operators,
provides a benchmark for other 4G operators, especially those yet to launch, to judge
their strategy by.
EEs 4G pricing strategy has been to target the high-mid to high end of the market
at launch and then evolve its pricing to a broader base of users. The key factors
determining this approach have been encouraging higher-spending users and early
adopters to sign up to tariffs priced at a slight premium at launch, and device
availability.
As the higher-spending users have been targeted, and as 4G device prices have come
down, EE has slightly reduced the prices of its 4G tariffs and/ or increased the amount
of data included in them. It has also expanded its 4G tariffs to a broader base first by
including shorter contract periods and then introducing prepaid 4G offers.
EEs bundling quality content and services into 4G tariffs is proving to be an effective
way to increase usage when combined with a quality network experience. The
operator says that subscribers that actively use its film and music content are much
less likely to churn, and much more likely to recommend EE to others.
The pricing of the other UK operators looks high in comparison with EE at the moment,
especially in light of its latest moves, and EES 4G rivals will need to closely evaluate
how likely their 4G rates are to encourage users to either migrate to them or join EE in
favor of its lower rates. The rival operators will need to concentrate on the segments of
their existing user bases that are most ripe for profitable migration from 2G/ 3G to 4G
or potentially lose subscribers to EEs more attractive offerings.
Overview
EE was the first operator in the UK to launch 4G, in October 2012, and held its position as sole
4G operator in the market until Vodafone launched in August 2013.
EE has been extremely effective in educating the UK market about what 4G is, signing up 4G
users and using its 4G network as a foundation to improve KPIs. It is one of the most successful
4G operators in the world, judged by its overall impact on the market and the effect its 4G
services have had on its KPIs. EE, along with other 4G leaders such as Verizon Wireless, AT&T
and SKT, is defining and shaping what it means to be a successful 4G operator, and, like these
other operators, provides a benchmark for other 4G operators, especially those yet to launch,
to judge their strategy by.
EE has been fully committed to rolling out its 4G network and signing up users without
diluting the potential value in the network by pricing services at a low level. The 4G network
rollout was the fastest in Europe in terms of coverage: It covered 10 cities at launch, increasing
this to 117 towns and cities by the end of September 2013.
EEs network now reaches over 30Mbps, which puts it among the fastest in the world. It had
one million 4G users by October 2013, 12 months after launch, which is around 10% of its
customer base a 4G net adds rate on a par with other aggressive 4G operators such as Verizon,
AT&T and SKT.
Broadly speaking, EEs 4G success can be attributed not only to being the first 4G operator in
the UK, but also to:
Offering a truly 4G network experience.
Implementing an extremely effective pricing strategy.

Bundling relevant content and services into 4G subscriptions to both stimulate data
usage and differentiate from its 3G pricing.
Strategic goals
EE says that one of its main strategic goals with 4G is to reduce churn, and that a key focus in
the first year has been to migrate existing subscribers to 4G price plans. Its 4G pricing strategy
has been to target the high-mid to high end of the market at launch and then evolve its pricing
to a broader base of users. The key factors determining this approach have been encouraging
higher-spending users and early adopters to sign up to tariffs priced at a slight premium at
launch, and device availability.
As the higher-spending users have been targeted, and as 4G device prices have come down, EE
has slightly reduced the prices of its 4G tariffs and/or increased the amount of data included
in them. It has also expanded its 4G tariffs to a broader base first by including shorter contract
periods and then introducing prepaid 4G offers.
EEs latest move, in October, was to broaden the appeal of 4G beyond the mid-to-high spending
users and tech-savvy early adopters to a broader base by launching a new premium 4G offer
at the same time as widening the appeal of 4G at the lower end of the market. Its latest pricing
strategy comprises:
A premium 4G offering 4GEE Extra offering faster speeds and inclusive roaming
minutes, with prices starting at around 25% less than EEs entry-level 4G launch tariff.
Prepaid 4G.
A new entry-level 4G plan, around 47% less per month than EEs entry-level 4G launch
tariff.
The core focus of EEs 4G pricing strategy in its attempt to migrate customers to 4G was
to charge a slight premium to 4G at launch and then steadily decrease this over time: The
premium dropped from 5 (US$8) at launch to 2 by 12 months after launch. EE targeted 4G
at the mid to high end of the market at launch, and then broadened out to the lower segments
over time.
EEs approach is different from the one that other successful 4G operators have taken, which
has been to charge no premium for 4G access. That EE has been able to do this and hit
its subscription targets, and match these successful operators for 4G subs uptake, is both a
function of its unique position in the UK market as the only 4G operator for 10 months, and
also its strategy of bundling premium content into its competitively priced 4G tariffs, content
that further differentiates the 4G offers from 3G beyond the enhanced experience 4G offers.
Market positioning
EE has positioned itself in the UK market around both a new brand and its 4G network, which
has at the same time been an integral part of the new brand. The operators EE brand launch
encapsulated both its 4G launch and the merger of the UK units of Orange and Deutsche
Telekom (DT), which continue to operate as separate brands.
Pricing
At launch, in October 2012, EE priced 4G at a slight premium to the comparable 3G services
offered by Orange and DTs T-Mobile. By offering LTE at an entry-level 36 a month for
500MB of data, with unlimited calls and texts, EE addressed LTE to its entire postpaid mobile
broadband user base. It charged a premium on LTE for those who wanted more data use: All of
EEs LTE plans were charged at 5 per month more than its 3G plans, with the most expensive
being 56 for 8GB.
In May, EE evolved its LTE pricing ahead of its rivals 4G launches by introducing 30-day SIM-
only tariffs to increase the popularity of its 4G service without reducing its contract or 12-
month SIM-only prices. The move was consistent with the operators gradual evolution of its
4G tariffs. Like its postpaid and 12-month SIM-only prices, all the monthly SIM-only tariffs are
priced according to data, with unlimited voice and SMS bundled with each tariff. They also
offer access to premium content without charging for the amount of data used.
EE started offering prepaid tariffs in October 2013 at the same time as it launched new
introductory 4G tariffs starting at 18.99 per month (see fig. 1) as a way to attract what it calls
the mass middle of the market. These tariffs are 2 more than the equivalent Orange/ T-
Mobile 3G tariff.

Fig. 1: Comparison of EE's 24-month pricing plans
At the same time, EE launched a new premium 4G tariff, which was 5 more than the
comparable 3G tariffs from Orange and T-Mobile, which offers download speeds of 30Mbps
and over and free roaming to certain countries, including the EU, the US and Australia. As such,
EE retained the 5 4G launch premium by adding more value to each tariff.
EE highlights the fact that 4G users cant get bill shock because it alerts users when they
near their data allowances at 80% and 100% after which point they are not able to use data
without buying more. This safety net is important to encourage data use by doing away with
the possibility of bill shock.
In the context of the overall market, EEs pricing strategy is more evolved than rivals, indicating
that operators can gain a first-move advantage if they launch 4G ahead of rivals. EEs 10-month
4G head-start was a result of delays in awarding spectrum rather the rivals unwillingness to
launch services.
Both Vodafone and O2s 4G pricing strategies have replicated EEs by charging a premium at
launch, which are larger than EEs was almost a year after launch (see fig. 2).
Fig. 2: UK operators 4G price comparison, Oct-13
Premium content/ services
To increase the overall value included in its 4G packages, EE has partnered with the premium
content brands in the Internet space that are relevant to its target markets. Alongside LTE, a
key component of EEs 4G launch was its differentiation around the value-added services it
offered with its 4G subscriptions: These included a phone-backup service (Phone Clone); a
film-download and streaming service in cooperation with FilmFlex; a music service through
its partnership with Deezer; as well as a new set of roaming plans to encourage customers to
use data while traveling.
Bundling quality content and services into 4G tariffs is proving to be an effective way to
increase usage when combined with a quality network experience. EE says that subscribers
that actively use its film and music content are much less likely to churn, and much more likely
to recommend EE to others.
Branding
EE has been extremely effective in introducing and communicating the benefits of 4G to
the UK market. It has placed a significant emphasis on its EE brand and what this means in
practice: A quality network experience with an emphasis on speed.
Like 4G operators in other markets, EE has used the enhanced experience that 4G technology
offers to evolve its brand from when the operator had only 2G/ 3G networks. And, as in other
markets, EE has used enhanced quality and speed to communicate its brand positioning and
differentiate itself from its rivals (see fig. 3).
Fig. 3: EE 4G network marketing, Oct-13
Over and above marketing its 4G network capability and what it means to end users, EE, like
other leading 4G operators, has been and is still active in communicating the upgrades it
makes to the network in terms of speed enhancements and coverage expansion. This works
in tandem with the operators overall 4G marketing, and serves to raise awareness of 4G
additions to its 4G coverage.
Network evolution
EE launched 4G in 10 cities in October 2012 and had extended coverage to 16 cities a third
of the UK population by the end of the year. By the end of September 2013, EE had launched
4G in 117 towns and cities across the UK covering more than 60% of the UK population.
Expansions in network coverage have been aligned with network enhancements to increase
speeds. In April, EE doubled the 4G-network headline speeds to 80Mbps and doubled average
speeds to 20Mbps. In October, it increased network speeds to 30Mbps as part of 4GEE Extra,
its premium 4G offering,.
EE expects to have 65% of the UK population covered by 4G by the end of 2013. In addition,
it is looking at further improving speeds further by testing carrier aggregation, which will
allow it to offer theoretical maximum speeds of up to 300Mbps. The company will also target
customers in rural and underserved areas, using its 800MHz spectrum purchased in February
to offer 4G as a fixed-broadband replacement.
Results
Targeting existing subscribers has been a key part of EEs 4G subscription-growth strategy. The
operator says that around two-thirds of its 4G users are existing customers. It also says that its
subscribers on the T-Mobile brand are showing a willingness to migrate from their unlimited
data plans to tiered EE pricing to access faster network speeds, indicating that an operators
existing subscription base should be the main hunting ground for 4G uptake if targeted in the
right way. EE says that it is proactively contacting existing users in a segmented way to target
those most likely to be willing to take out a 4G subscription.
The operator is already seeing 4G have a positive impact on its KPIs, with blended ARPU, ex-
regulation, up 2.2% year-on-year as data as a percentage of ARPU reaches 51%, as well as other
improvements (see fig. 4).

Fig. 4: EE KPIs 2Q12-2Q13
Over and above these KPI improvements, EE is seeing that:
The existing customers moving to 4G show an increase in ARPU of around 10%.
EEs 1H13 EBITDA margin rose to 22.9%, up from 20.3% in 1H12, driven in part by
postpaid growth.
The postpaid churn rate improved to 1.1% in 2Q13, compared with 1.2% in 2Q12,
which EE says was driven by a differentiated network experience and compelling
propositions.
56% of new postpaid adds in 2Q13 were for 4G contract plans or 4G-ready devices, up
12 percentage points from 1Q13.
Blended ARPU ex-regulation increased in 2Q13 by 2.8% year-on-year to 18.40.
In June, EE hit the half-million LTE subscription mark, seven months after its launch
of services.
In terms of the impact 4G has on the way end users access the Internet, EE says that:
Two in three EE users are using the mobile Internet over 4G at least an hour a day, with
23% online via their 4G mobile devices for more than three hours a day.
Nearly 50% say they browse the Web more on 4G than 3G, and over one in three say
they download apps, use GPS services and access social media more with 4G than 3G.
43% say they use fewer or no public Wi-Fi hotspots since having 4G.
23% say they use their home broadband less since moving to 4G.
Video downloading, uploading and streaming accounts for 26% of network traffic over
4G with YouTube accounting for 14% alone.
Half of all 4G customers (49%) own tablet devices alongside their smartphones.
Streaming peaks during morning commute, lunch, evening commute and especially
throughout the evening. People are using 4G devices as second screens or switching
to tablet devices in their downtime.
These data points show that, if positioned in the right way, the enhanced speeds of 4G lead to
an increase in usage, which, if priced in the right way, can lead to increased ARPU when users
increase their monthly data allowances.
Strategic outlook
EE will see increasing competition for 4G subscribers, although at the moment its rivals
pricing mainly targets their existing subscribers. As Vodafone and O2s 4G network coverage
expands, they can be expected to price 4G more competitively. 3UK has already said it will
bundle 4G into its 3G tariffs, although the effect this will have on the entire market is most
likely to be limited, given the fact it is a distant fourth in the UK market.
EE says that it is at the start of the pay-as-you-go journey on 4G, and it has the opportunity to
sign up higher-spending prepaid users with its latest prepaid offering
EEs rivals, by comparison, having launched at end-3Q, are in the phase of mainly targeting
their own mid-to-high spending customers with migration to 4G from 2G/ 3G. EE has
capitalized on its unique position by charging a justifiable premium for 4G services. With the
arrival of other operators to the 4G market, EE has reduced this premium and is likely to have
to reduce it further as competition intensifies (see fig. 2 above).
Data usage will continue to see strong growth in the UK as consumers move more and more
of their Internet access onto mobile and as the Internet experience on mobile improves in
terms of speed and coverage. Because of this, the quality of the network will be increasingly
important in the future: Operators that have the best network quality and coverage will
increasingly be in a position to differentiate from rivals whose networks are not so good. In
the UK market, only Vodafone has a spectrum allocation comparable with EEs, which makes
it likely that these two operators will compete for subscribers, in particular those for whom
network experience is important.
Conclusions
EE has been extremely successful in launching 4G into the market because it aligned the key
levers necessary for 4G subscription uptake: network coverage, pricing and marketing. EE has
also struck partnerships with Internet players VoD provider FilmFlex and Deezer to bundle
content into 4G subscriptions that is proving popular with users. EEs rivals have replicated
this approach, which means that operators in the UK will increasingly look to differentiate
over content and overall value included in 4G tariffs, especially contract plans.
As a result of its successful 4G launch, EE has seen a positive impact on KPIs. Key to this
is, again, the right pricing approach, in conjunction with a clearly segmented and phased
migration strategy from 2G/ 3G to 4G: EE targeted 4G at the mid-to-high end in the first
instance, charging a premium, and then expanded to a broader base of the market, charging
no premium, as the network expanded and the price of 4G devices came down.
While pricing remains the single most important factor determining 4G subscription uptake,
the mid-to-high UK 4G market is being defined in terms of network quality and content
offered both of which are shaping operators market positioning more and more. Even
though content isnt the determining factor for consumers 4G operator choices, it can play a
key role in driving LTE usage, and, in turn, positively affect churn.
Recommendations
Because competition in the UK 4G market is poised to intensify, operators need to refine their 4G pricing
strategies, especially in light of EEs regulatory-enabled head start
EE had the luxury of being the only operator to offer 4G for four quarters and has taken
advantage of this by offering 4G at a slight premium to its 3G tariffs, a premium it has
gradually reduced as it expands its network and as more affordable devices come to market.
The pricing of EEs rivals looks high at the moment, especially in light of its latest moves, and
EES 4G rivals will need to closely evaluate how likely their 4G rates are to encourage users to
either migrate to them or join EE in favor of its lower rates. They will need to effectively target
the segments of their existing user bases most ripe for profitable 2G/3G-to-4G migration or
potentially lose subscribers to EEs more attractive offerings.
UK 4G operators will need to continue to focus on network coverage and quality to sign up and retain
high-value subscribers
Network quality is even more important with 4G than with other networks, as it is even more
of a differentiator than in the past. 4G operators will be able to win and retain high-value
subscribers by offering the best network experience and communicating the fact that they
do. 4G operators in the UK and elsewhere need to be aggressive in building out their network
coverage and capacity. Working with handset partners plays a key part in determining the
network experience and operators need to work closely with them to ensure the network
experience is the best it can be.
Develop an effective content strategy through partnerships that offers relevant, premium content as part
of the 4G package
Although content and value-added services in general are less of a determining factor in
choosing an operator than pricing and network experience, what an operator offers in
this area is becoming gradually more important for UK mobile users. Each of the UKs 4G
operators offers compelling premium content already, but how this is packaged into 4G
subscriptions varies from operator to operator. Vodafone, for example, deducts the amount of
data consumed accessing its premium content this could either prove to be an effective way
to encourage more monetized data usage, or it may result in a lackluster usage over 3G. The
way the market reacts to this type of approach over the coming quarters will have an influence
how operators approach pricing or not for their premium content.
4G network launches have seen operators invigorate their overall branding and marketing activities and
they need to continue with heavy marketing activities to stay relevant to consumers
4G network launches in the UK, as in other markets, have been an opportunity for operators
to refresh their brands. Operators need to see 4G as a platform for new or invigorated market
positioning.
4G strategy: Etisalat sees 4G
smartphones as chief tool for
preserving a high-value edge, but
revenue increase is a tough prospect
25 July 2013
Ismail Patel
Executive summary
As a converged operator with an aggressive NGA strategy, Etisalat launched LTE in the
UAE in late 2011 with a theoretical maximum download speed of 100Mbps.
The operator is looking to target two segments: with 4G smartphones and tablets,
high-ARPU UAE residents and expats; and with dongles, short-term expats who do not
want a fixed line.
Etisalat competes with Du, which also offers 100Mbps LTE, in pricing and speed.
Neither operator seems to have a clear advantage, because their plans are very similar.
In terms of pricing, Etisalat by and large is only differentiating between 3G and 4G

when it comes to device sales, not data allowances or speed. Still, 4G take-up has not
exceeded expectations, with about 15,000 dedicated 4G subscriptions and 25,000 4G-
enabled smartphone subscriptions at end-1Q13.
Etisalat began offering 4G smartphones in December 2012, and the LTE opportunity
remains relatively untapped as Etisalat tries to figure out its retail and bundling
strategy for LTE handsets. Among 4G-enabled devices, it discriminates only with the
Samsung Galaxy S4, by charging a premium for access to LTE.
The operator should consider bundling mobile broadband with its superfast fixed
broadband, for differentiation purposes and to make the most of its fixed and mobile
assets, especially targeting those customers in its fixed-network footprint.
With most major urban areas of the UAE blanketed with advanced fixed and mobile
networks, it is high time for innovation that uses the capabilities of these networks,
including partnerships in add-on services and content justifying the high investment
in NGA deployments.
Overview
Etisalat launched LTE in December 2011 in the UAE, a few months after the first regional
launches in Saudi Arabia. When it first launched on nonsmartphone devices, the operator did
not differentiate between 3G and 4G pricing like in advanced LTE markets, such as the US
and South Korea meaning that essentially all customers are 4G subscribers if they have a
4G-enabled device. For LTE access on the Samsung Galaxy S4 handset, the company charges a
monthly service premium for postpaid users and a device premium for prepaid users.
The UAE is one of the highest-data-consuming markets in the Middle East, and its smartphone
penetration has grown 21 percentage points in the past two years, to 80% (see fig. 1), making
the market ripe for LTE networks, because their spectral efficiency is better than that of 3G.
And Etisalat recently boosted its theoretical 4G download speeds from 100Mbps to 150Mbps.

Fig. 1: UAE, smartphone penetration, 1Q11-1Q13
The main target markets for LTE services are smartphone and tablet users, typically high-
ARPU UAE residents and expats wanting to access data services from their smartphones and
tablets, and mobile-only users, typically white-collar expats who do not want a fixed-line
subscription because their stay is short or their employment status is uncertain.
There is also potentially a third target market category: business and public-sector users,
though Etisalat has not yet launched tailored packages they would be looking to adopt. LTE
for corporate customers would entail improved cloud-computing services and M2M, which
Etisalat does cite as one of LTEs benefits on its retail website.
The network has been relatively problem-free since launch in terms of reliability and is
providing some of the highest speeds in the world. However, as far as service innovation is
concerned, there have been no significant developments, which has been the case for most
global LTE operators. With dongles, the company has been marketing LTE by emphasizing
download speeds, which it recently boosted to a theoretical 150Mbps.
In the context of the UAEs competitive dynamics, LTE is an important step for Etisalat in terms
of trying to maintain KPIs and enhance end-user service satisfaction. Its rival, Du, launched
100Mbps LTE in mid-2012. With both operators providing high speeds, they are competing on
packaging and pricing. Etisalat subsidizes its dedicated LTE devices when taken with higher
data allowances on postpaid packages (the highest of which is 20GB a month), whereas Du
has a fixed price for its LTE dongle and a fixed price for its 25GB-a-month rolling plan, which
resembles a prepaid package.
Strategic goals
Etisalat launched LTE in the UAE to maintain its strategic position as a technology leader in
the region. In the past three years Etisalat has been responsible for one of the fastest urban
FTTH rollouts in the world, and the operator wanted to replicate that situation with mobile.
Whereas the company said at the beginning of its FTTH rollout that it expected new revenue
streams, it later acknowledged that return-on-investment was difficult to realize. Informa
expects a similar story with LTE: Non-SMS data revenues will not be boosted significantly just
because data-download speeds are increased.
A secondary reason for the LTE rollout was impending competition from Du, which launched
LTE in the summer of 2012. There is fierce competition between the operators in all segments
of the mobile market. Effectively targeting the top end of the market, which consists of
users who will buy LTE-enabled devices, is essential if Etisalat is to preserve its revenues and
maintain its market share.
A tertiary aim with LTE is to shift the burgeoning 3G traffic to 4G. The expected growth in
mobile data demand in the UAE will only be met with a 4G network.
In terms of fixed services, such as Internet access, IPTV and OTT, the UAEs FTTH market
is one of the most advanced in the world, especially in Abu Dhabi, where Etisalats eLife
operates, and Dubai, where Dus Real Broadband operates. Thus, LTE is unlikely to pose a
threat to native residents fixed-broadband subscriptions. However, Informa believes that LTE
is making inroads among white-collar expats who are unsure of their length of stay or intend
to stay for a year or two. This saves them the hassle of subscribing to a fixed line; in areas
where mobile data reception is reasonable, mobile broadband would be the logical choice.
However, Etisalat has not sold the rest of UAE customers on the value of LTE compared with
HSPA+, which is still a reasonably fast network, other than its download-speed potential,
potentially leaving a large number of subscribers on high-speed 3G for the foreseeable future.
Etisalat has also talked about using LTE for e-gov, e-education, e-health, e-business, smart-
utility and environmental services. Although such a statement is broad, LTE is being
implemented in Emirati public schools as part of Sheikh Mohammed Bin Rashid Al Maktoums
Smart Learning Initiative, at a cost of about US$275 million; the project includes a free tablet
provided to every student. If the pilot is successful, the project will most likely be rolled out
to other government institutions and public services in the country. The impact this can have
on LTE is potentially huge and will cause a paradigm shift in how LTE is perceived: from
being a service reserved for high-end users to a mainstream network upon which the critical
institutions of the country rely.
A potential objective for Etisalat could be to offer quadruple-play packages that incorporate
fixed broadband, landline, IPTV and mobile broadband. This would help lock in its FTTH
subscribers. Regional giant STC has started offering quadruple-play packages in Saudi Arabia,
but such plans have not yet materialized in the UAE. And Etisalat is wary of cannibalizing
its stable wireline-broadband customer base. Unlike in some other countries, such as Japan
and Sweden, direct competition on a mass scale between fixed broadband and LTE has not
materialized in the UAE. In Japan, NTT East and NTT West have seen a drop in FTTH net
additions because of the huge popularity of LTE services, and some customers have dumped
fixed in favor of mobile broadband; and in Sweden, many rural ADSL subscriptions have
churned to LTE.
In the first year of launch, when there were no 4G-enabled smartphones in market, Etisalat
focused on postpaid users with its LTE devices (dongles mainly, but also routers and modems),
retailing 4G service in six- and 12-month contracts, without charging extra for accessing the
network.
With LTE targeting high-end users, understanding the postpaid segment is essential. As it
stands, Etisalat leads the way in postpaid market share (see fig. 2), though Du is closing in on
overall market share.

Fig. 2: UAE, operator postpaid market share, 1Q13
Business model
The company initially launched LTE at 2.6GHz. However, with the Apple iPhone 5s 4G
capability being tied to a limited number of bands, one of which was 1.8GHz, late last year
the operator decided to refarm its 1.8GHz spectrum, which Etisalat uses for 2G customers,
who, Informa estimates, account for half of the operators subscriber base. Etisalats decision
to refarm is indicative of where the company feels the future is: The 2G subscriber base is
shrinking, thanks to migration to 3G, and 4G is where the next upscale smartphone segment
is and will be.
Etisalat says 80% of the population has FDD-LTE coverage, with more than 1,000 base stations
in Abu Dhabi, Dubai, Al Ain and Ras Al Khaimah (see fig. 3). The company has not yet expressed
a rural-area strategy, though Informa believes the upcoming 700-800MHz harmonization for
mobile broadband is a potential solution for remote broadband: Etisalat has a small WiMAX-
d network, found in certain suburban areas. Also, with the arrival of VSAT from YahClick
targeting mainly businesses in offshore, desert and rural areas LTE has the potential to
compete with satellite broadband.
Fig. 3: Etisalat UAE, mobile coverage by technology
What is apparent is that for Etisalat to remain competitive in the less urban region of the
country, the rollout will have to continue, and coverage will have to be strengthened both
indoors and outdoors. This will take a few years.
Both Etisalat and Du provide modems, MiFi routers and dongles over 3G and 4G. The company
offers three 3G dongles: 7.2Mbps, 21.6Mbps and 42.2.Mbps (see fig. 4). Although device costs
vary between 3G and 4G devices, Etisalat does not have different pricing for LTE service than
for 3G and HSPA+. This indicates that LTE is heading toward becoming a standard service
with the additional merit of higher download speeds. Although the service price is the same,
the equipment price is substantially different: Etisalats fastest HSPA+ USB dongle, 42.2Mbps,
costs AED499 (US$136), AED300 cheaper than the LTE dongle.

Fig. 4: Operator 4G dongle stand-alone prices
Each Etisalat dongle is subsidized according to the Plus 1GB, Extra 5GB and Ultra 20GB mobile
broadband postpaid packages the company offers, also taking into account the contract
length. Just after launch, the company did not subsidize the device, but just before Du
launched LTE, it started subsidizing by contract length and data plan. Dus LTE dongle is also
sold at a fixed AED799, with a greater allowance of 25GB a month for a cheaper AED55 (see
fig. 5).

Fig. 5: Etisalat, Du, monthly data pricing, per gigabyte
The 4G smartphones sold by Etisalat are the Apple iPhone 5 (4Q12 launch), BlackBerry Z10,
BlackBerry Q10, BlackBerry Q5 (first launch globally was in UAE), Samsung Galaxy S4 and
Samsung Galaxy S4 Mini (4G not enabled by Etisalat).
The only subsidies offered on 4G smartphones are with the iPhone 5 and Samsung Galaxy
S4. The iPhone 5 is sold in three forms: full fee for the device alone, subsidized on a 12-month
contract, and a data-only plan on an 18-month contract (see fig. 6).

Fig. 6: Etisalat iPhone 5 pricing
The Samsung Galaxy S4 is the one anomaly in Etisalats handset-pricing strategy regarding
discrimination between 3G and 4G, with the company charging a premium for access to its
LTE network via the handset. The S4 alone costs AED2,749 with 4G enabled, but AED2,599
with only 3G enabled. Etisalats S4 customers on a 12-month postpaid contract (same services
bundled as with the iPhone 5) or an 18-month data-only contract can also access the 4G
network through the handset. In both cases, the handset is free, with a monthly cost of
AED499 and AED249, respectively.
Du has a similar strategy with the S4, with a two-tier pricing structure for the device based on
LTE access. The only difference is that Du users can subscribe to either 1GB- or 4GB-a-month
plans, for AED285 and AED340, whereas Etisalat offers 2GB only. Like Etisalat, Du also sells the
S4 Mini without access to LTE.
Results
Etisalat has not revealed the number of dedicated LTE data devices it has sold, but Informa
estimates that, by end-1Q13, about 15,000 LTE dongle users had signed up to the service.
IPhone 5 and BlackBerry customers can automatically access the 4G network if they have
a data plan on their phones. The actual number of 4G-smartphone customers is unknown,
though Informa estimates it to be growing gradually, standing at 25,000 at end-1Q13 (see
fig. 7), which is expected take-up considering Etisalat only began offering 4G smartphones
in December 2012. An estimated 10,000 customers have adopted the Samsung Galaxy S4,
without 4G access, and the S4 Mini, which has not yet been enabled for 4G services by the
company.

Fig. 7: Etisalat 4G subscriptions, 4Q11-1Q13
It is too early to assess the impact LTE has had on revenues, ARPU or traffic, though traffic is
expected to increase as the percentage of 4G smartphones increases. If LTE is bundled with
FTTH (or FTTH is bundled with LTE), Etisalats LTE service will reduce fixed churn.
Strategic landscape

Fig. 8: Etisalat LTE SWOT analysis
Conclusions
LTE still a dumb pipe in the UAE
Like most other markets, there have been no standout services or features associated with
Etisalats LTE offering. Customers in the UAE are among the most tech-savvy in the region
and are well aware of what they need and what they dont. As it stands, the 4G dongle is still
mostly a vanity service and is restricted to those who want an upgrade from HSPA+, have a
good 4G-network connection and do not subscribe to a fixed line.
First to market bore no fruit
Although Etisalat was first to market, it did not capitalize much on its six-month head start,
for three reasons:
Beyond marketing LTEs high speeds, it lacked a broader retail strategy. Etisalat hoped
that many customers would genuinely be interested in higher data speeds, but take-
up has been modest and is in sharp correlation to those who actually need the service
or have extra to spend on it. The matter might have been different had Etisalat actively
marketed and showcased 4G to real customers, not only at events such as GiTEX.
As an operator operating LTE initially at 2.6GHz, it could not develop a smartphone

strategy, since there were only two lesser-known 2.6GHz-enabled 4G smartphones for
most of 1H12 in the entire world, neither of which Etisalat considered selling.
It was unsure where LTE spectrum bands in devices were heading. As it turned out,
the critical Apple iPhone 5 launched in 3Q12 without 2.6GHz enabled for 4G. By
then, Du had already launched LTE at 1.8GHz, compatible with the iPhone 5s LTE
capability, essentially taking the lead, whereas Etisalat was forced to refarm its 1.8GHz
2G spectrum.
As it stands, both companies are competing on pricing and download caps not much
different from traditional 3G data packages. Although 150Mbps 4G is almost four times as
fast as the fastest HSPA+ network, at 42.2Mbps, the markup in the context of the lack of 4G-
tailored services might prove to be too much for the majority of customers. In the UAE, it
is likely that the increased introduction of 4G-enabled smartphones will ultimately be the
deciding factor in the take-up of 4G data: Dedicated devices, on their own, will not bring in the
revenue required to justify the rollout. Even 4G smartphones will only be gradually adopted,
and it will be about five years before 4G becomes mainstream, since all current 4G devices are
still upscale. Until 4G-enabled handsets become mainstream, it will be touch-and-go with LTE
take-up, though the enthusiasm is there.
Recommendations
Develop data-centered pricing for all 4G smartphones
Etisalat should have in place an LTE-smartphone strategy for all 4G smartphones, built around
data plans, in a breakaway from the traditional strategy of data playing second fiddle to voice
and SMS as core services. The real revenue stream in the coming years for the high end of the
market will come from LTE data plans. Smartphone packages both postpaid and prepaid
will have to be bundled or centered on data, with potentially further pricing segmentation
based on certain content and apps. Data has stepped out of being merely a churn reducer and
become a primary service akin to traditional voice and SMS.
Reconsider charging a premium for access to the LTE network
Etisalat is charging a premium for access to 4G with the Samsung Galaxy S4. Informa research
shows that, in other LTE markets, charging extra for 4G has not been a fruitful strategy for the
operator. If Etisalat is merely trialing this approach with the S4 to assess whether an access-
based two-tier pricing strategy would be successful in the UAE, it should have considered
doing so with a lower-profile 4G handset, such as the S4 Mini.
Either way, Informa believes that the future will be universal access to 4G without premiums.
Etisalat should assess whether it is making decent-enough margins by charging for LTE access
from 4G smartphones and whether initially restricting access is inhibiting the adoption of
4G handsets, risking the churn of higher-value customer to Du, which might become the first
operator to remove the 4G-premium barrier.
Develop content partnerships to maximize the value of 4G
Content partnerships are a good way to start differentiating between 3G and 4G. Partnerships
can lead to offers of discounted or free access to certain content. This can prove to be an
effective tool in winning certain consumers and will enable customers to maximize the
benefits of LTE. This concept has not taken off in the UAE yet, possibly because of net
neutrality; however, it is a feature in other markets in the region, such as Saudi Arabia,
not least with Etisalats subsidiary, Mobily. Of note from a regional perspective is the recent
content partnership between Zain Group and OSN to allow Zain users in Bahrain and Kuwait
to access content via mobile. Regulation permitting, a trial for 4G subscribers with any one
popular content service might provide an indication of how popular such deals are with
Emirati mobile users.
Bundle FTTH with LTE
Since there is no fixed-line competition (because of the stalling of bitstream negotiations in
2011), Etisalat should consider using its FTTH service to bundle LTE with fixed to keep its
mobile subscribers from churning to Du. Operators around the world STC being one of them
have caught on to quadruple play and have incorporated mobile data into fixed-broadband
packages. Etisalat has the capability to take such steps, and bundling can be implemented
immediately. In fact, since there is competition in mobile, LTE can take center stage and make
FTTH an add-on to the 4G service. The likelihood is that, in time, Du will look to consider such
bundles as well.
In Japan, KDDI bundles FTTH with LTE, not vice versa. The company says that using FTTH as a
booster for LTE rather than the other way around makes FTTH more attractive, by linking it
to the mobile accounts of all subscribers in one household, thereby using LTE to increase the
incentive to subscribe to FTTH.
Use LTE to elevate company brand and arrest decline in KPIs
Etisalat should present 4G as its leading mobile service and in the process freshen up its
image as the UAEs premium mobile operator. This would help Etisalat become the default
choice for customers wanting a high-end mobile service in the UAE. However, there is little
prospect of improving brand equity through LTE, because Du is considered an equal in terms of
branding, and because Etisalats legacy status, which used to attract some degree of customer
loyalty, has long passed.
Although it is highly questionable that LTE would have a noticeable impact on ARPUs and top/
bottom lines in the UAE in either the short or long terms, having 4G as the top mobile service
would inevitably maintain Etisalats competitive edge in the high-end segment, a market in
which Du is trying to gain inroads in what has essentially been Etisalat territory for quite
some time. If it can at least arrest the decline in ARPUs and revenues which have been the
hallmark of Emirati operator KPIs for the past several quarters that would be a bonus.
Explore avenues to launch public, national and corporate LTE services
With 4G having been launched in the public-education sector last year, Etisalat should look at
other governmental sectors to maximize its LTE potential and capabilities. These could be e-
gov, e-health, smart utility grids and detailed environmental services. Part of the UAE Vision
2021 is to boost the private sector, at the core of which are corporate and large businesses.
Etisalat should research what the business needs of each sector are, and which ones can be
satisfied with 4G technology, and tailor services according to those demands.
4G strategy: Sprint supercharges LTE
with launch of Spark tri-band services
as US races to LTE-Advanced
07 November 2013
Mike Roberts
Whats happened?
Sprint has started to dramatically improve the speed, capacity and coverage of its 4G services
by launching Spark, its new LTE service that runs in three spectrum bands (versus one
previously) and two duplexing modes TDD and FDD to double peak downstream speeds
to 50-60Mbps.
Sprint also demonstrated LTE downstream speeds of 1Gbps using LTE-Advanced (LTE-A) and
its newly deep and wide spectrum portfolio which now leads the US market following Sprints
July acquisition of full control of Clearwire, which has 120MHz of 2.5GHz TDD spectrum in
90 of the top 100 markets in the US. Specifically, Sprint used LTE-A carrier aggregation (CA) to
combine three 20MHz channels in the 2.5GHz band to deliver 1.3Gbps downstream with TDD
LTE (TD-LTE) in a demo at its labs in Silicon Valley.
The number-three US carrier has started lighting LTE services in the 800MHz FDD and 2.5GHz
TDD bands, in addition to the 1.9GHz FDD band which has supported its LTE services since
launch in July 2012, and is marketing its new tri-band LTE services under the new brand Spark
(see fig. 1). On November 8, it will launch three smartphones that support seamless use of the
three LTE bands the Samsung Galaxy Mega, Samsung Galaxy S4 Mini and LG G2.
Fig. 1: Sprint Spark marketing
Spark is a leap toward LTE-Advanced (LTE-A) although it does not initially support the key
feature of LTE-A carrier aggregation (CA) due to a lack of device support for the feature in
the 2.5GHz TDD spectrum band where Sprint will initially use CA. However, Sprints tri-band
LTE devices do support CA in other bands so support for the feature in the 2.5GHz band should
not be long in coming, which could help Sprint claim the first LTE-A launch in the US. This
would be ahead of rivals such as Verizon Wireless which is also racing toward LTE-A.
Tripling or quadrupling the LTE spectrum deployed
With the launch of Spark, Sprint will triple, and in some cases quadruple, the amount of
spectrum it has deployed for LTE services. Its initial LTE deployment in the 1.9GHz FDD band
is typically based on 10MHz of spectrum split into one 5MHz channel for upstream traffic
and another 5MHz channel for downstream traffic. With Spark, Sprint is lighting at least
20MHz in the 2.5GHz TDD band (which uses the same 20MHz channel for upstream and
downstream traffic), along with an estimated 10MHz (5MHz upstream + 5MHz downstream)
in the 800MHz FDD band.
In a blatant but effective PR move, Sprint unveiled Spark on the same day it released weak
3Q13 results, in an attempt to shift attention from its troubled past to its potentially-bright
future. Sprint had an operating loss of US$398 million in 3Q13 compared with an operating
loss of US$231 million in 3Q12, free cash flow of US$ -909 million compared with US$ -404
million in 3Q12, and net revenues that were down 1% year-on-year to US$8.7 billion. The group
saw postpaid subscriber net losses of 360,000 which helped drive its total wireless subs to 54.9
million, down from 56.0 million in 3Q12 but up from 53.6 million in 2Q13.
Why does it matter?
With the announcement of Spark, Sprint is moving to put the twin disasters of Nextel
and Clearwire further behind it by using the key asset of both companies spectrum to
significantly improve its competitive position.
Sprint has recently passed several huge milestones:
June 30: Closed the Nextel iDEN network
July 1: Closed the acquisition of the 50% of Clearwire it didnt own for US$7 billion
July 10: Softbank closed the acquisition of 78% of Sprint for US$21.6 billion.
Closing the iDEN network freed up nearly 20MHz of prime 800MHz spectrum that Sprint
is now using partly for CDMA voice services and partly for LTE services. In both cases, the
spectrum will significantly improve Sprints coverage, which has always been one of its weak
points compared with Verizon Wireless and AT&T.
Sprints completion of the acquisition of full control of Clearwire, which was enabled by
Softbanks acquisition of Sprint and an injection of billions in funding, is a huge leap forward
for Sprint. It brings Clearwires massive holdings of 2.5GHz TDD spectrum fully under Sprints
control, giving it substantially more LTE spectrum than its rivals, which will enable it to offer
faster LTE services to more subscribers.
In short, these milestones mean Sprint is finally putting the disasters of Nextel and Clearwire
behind it by bringing the prime spectrum assets of the companies into one market-leading
spectrum portfolio that it can use to create significant competitive advantage in the US
market. Sprint has also bolstered its holdings in the 1.9GHz PCS band by acquiring PCS
spectrum in five US markets from US Cellular in November 2012 for US$480 million to further
strengthen its spectrum portfolio (see fig. 2).
Fig. 2: Sprint's enhanced spectrum position
Sprint Spark is also a huge win for Nokia Solutions and Networks (NSN), which is one of the
network vendors for the 2.5GHz TD-LTE deployment, along with Alcatel-Lucent and Samsung
these three will each deploy one-third of the Sprint 2.5GHz networks. NSN has struggled in
the US but can now claim two of the top four carriers as customers, given its FDD LTE contract
with T-Mobile US.
Finally, Spark is a loss for Ericsson, which is one of Sprints FDD LTE RAN vendors along with
Alcatel-Lucent and Samsung but which did not win a share of the 2.5GHz TD-LTE deployment.
Whats next?
Sprint says there is now limited availability of Spark in five markets New York, Los Angeles,
Chicago, Tampa and Miami. The operator says that Spark, or its 2.5GHz LTE services, will have
population coverage of 100 million by the end of 2014 and is due to be available in 100 major
cities across the US by 2016. Its initial LTE network, based on the 1.9GHz PCS band, currently
covers 230 markets and will be available to a population of 200 million by the end of this year
and 250 million by mid-2014.
Sprints main initial phase of Spark is the 2.5GHz TDD-LTE deployment, which was started
by Clearwire. Sprint says it will stick with Clearwires plan to light 5,000 of the 55,000 Sprint
sites with 2.5GHz TD-LTE by the end of the year by adding 2.5GHz radio heads to the sites. The
radios will support 8 x 8 MIMO, which is based on eight radio transmitters and eight receivers,
and is another feature of LTE-A. Sprint says this will be a first in the US and will deliver far
better performance than the 4 x 4 MIMO or 2 x 2 MIMO deployed by its competitors.
Sprint also provided an update on its High-Definition Voice service, which it offers via its
3G network but which others plan to offer via LTE-A. Sprint says its HD Voice service has
population coverage of 85 million today, increasing to 250 million by mid-2014. It expects its
customers to have 12 million devices supporting HD voice by the end of this year increasing
to 20 million by the end of 2014.
What should you do?
Sprint: Deliver Spark on schedule to build a competitive advantage and put your overall
Network Vision program back on track after delays. Give equal priority to deploying LTE
at 800MHz to improving coverage, which is a longstanding and major weakness, and to
deploying LTE at 2.5GHz to provide better speeds and capacity than your competitors.
Sprints competitors: Accept that Sprint is slowly but surely putting its troubles behind
it and shaping up to be a formidable competitor in the US mobile market.
NSN: Trumpet your LTE-TDD win with Sprint and use it to strengthen your position in
a significant emerging segment of the global LTE market.
US consumers: Spark will take years to complete but, as it goes live in your area, it could
offer LTE services that beat market leaders AT&T and Verizon on coverage, speed and
price, so is worth serious consideration.
US regulators: Celebrate that the number-three player in the is back on its feet and in
a much stronger position to take on dominant players Verizon and AT&T to make for
a more competitive US mobile market.
4G strategy: Verizon Wireless rides
aggressive LTE strategy to stellar
results but needs to innovate to retain
US and global leadership
03 October 2013
Mike Roberts
Executive summary
Verizon Wireless, the largest LTE operator in the US and the world, has used its early
launch and aggressive rollout of LTE to gain competitive advantage in the US and
leadership of the global LTE ecosystem.
The carrier has used the transition to LTE as an opportunity to redesign key aspects of
its services, such as migrating from unlimited plans to tiered and shared data plans.
The carrier has an aggressive and successful LTE strategy across all key areas including
spectrum acquisition, network deployment, devices, pricing and marketing.
Verizons LTE results include 31.1 million LTE subscriptions accounting for 50% and
25% of the US and global markets, respectively along with rises in revenues and
EBITDA and a fall in churn.
One of the carriers main challenges in the LTE market is how to retain its leadership
now that all top four US carriers have launched LTE and main rival AT&T has
accelerated its rollout.
Verizons US$130 billion investment to gain full control of Verizon Wireless could help
it meet this challenge by enabling a new level of integration and innovation based in
large part on LTE.
Overview
Verizon Wireless, the worlds largest LTE operator, reached a major milestone at the end of
June, when it substantially completed its nationwide LTE rollout in the US. The carrier now
offers LTE services to more than 300 million people almost 95% of the US population in
500 markets across all 50 states. Just as impressively, Verizons LTE network now covers 99%
of its 3G network, which is quite an achievement given that the operator launched LTE only
in December 2010 and that its 3G CDMA network is more than a decade old.
Verizon is a bellwether for LTE, given its early adoption and large-scale rollout of the
technology, which led it to play a leading role in driving the global LTE ecosystem to
commercialization. The operator has also proven how to build a successful strategy and
business around the technology, having introduced a host of strategic initiatives since
launching LTE, going from strength to strength with its results.
There is no doubt that Verizons high-stakes move to LTE has been a success, and that the
keys to its success have included its comprehensive strategy, rapid nationwide network
deployment, aggressive pricing and large portfolio of the best new smartphones. As a result,
Verizon is the largest LTE operator globally by far, with 31.1 million subscriptions at end-2Q13,
well ahead of AT&T, which had 17.3 million, and Japans NTT DoCoMo, which had 14.2 million.
Verizon Wireless has also improved KPIs virtually across the board since launching LTE, with
metrics such as subscription count, churn, revenue and EBITDA showing solid gains from a
very strong start in 2010. For example, Verizon Wireless posted EBITDA of US$29.73 billion in
2012, up from US$26.08 billion in 2010.
Its not always easy being on the cutting edge of a new technology, however. Verizons LTE
network suffered a series of major outages in 2012, with its new IMS core network often
to blame. Although those problems now seem to be under control, Verizon is pushing the
envelope again by gearing up for one of the first large-scale launches of voice-over-LTE (VoLTE)
services, which it plans for next year. The launch was originally scheduled for 2012 but has
suffered a series of delays due to the immaturity of the technology and the complexity of a
major rollout of mobile VoIP services.
Verizon has recently announced plans to pay a whopping US$130 billion to Vodafone to
acquire the 45% of Verizon Wireless it does not already own, a move that is likely to accelerate
LTE innovation at Verizon.
Market context
Of course, Verizon had the advantage of launching LTE in a mature mobile market
and, more specifically, a mature mobile broadband market. The US is the largest mobile
broadband market in the world by subscription count: It had 198.3 million mobile broadband
subscriptions at end-1Q11, accounting for 62.6% of the countrys mobile subscription total
mobile. And with the launch of LTE, mobile broadband penetration in the US has continued
to climb, reaching 79.6% at end-4Q12 (see fig. 1).

Fig. 1: US, mobile broadband subs as % of total mobile subs, 1Q11-4Q12
In addition, there were 111.5 million smartphone users in the US at end-2011, accounting for
34% of total mobile connections. Thats a huge addressable market to which operators can
upsell new smartphones using a faster LTE network, and of course smartphone penetration
has only grown since then, reaching 44% of total mobile connections in 2012 and 52% in 2013.
In addition, smartphone penetration of the population in the US is set to continue growing,
from 60% at end-2013 to 89% at end-2017, fueling growth for LTE as more subscribers upgrade
to LTE-enabled smartphones (see fig. 2).

Fig. 2: US, smartphone connections and penetration, 2011-2017
Strategic goals
Verizon has made it clear that networks are its core business and that network innovation is
the key to its success and growth. Within that overall vision, it has identified four key networks
as the companys main growth platforms: 4G LTE, FiOS fiber-to-the-home, global IP backbone
and cloud-based data centers (see fig. 3).
Fig. 3: Verizons four strategic network platforms
For 4G LTE, Verizons strategy is nothing less than to transform its mobile business at every
level, covering networks, devices and services. A strategy so ambitious and far-reaching will
take many years and huge investment to achieve, but it is clear that Verizon is fully committed
to it. The operator has largely completed the key aspects of its LTE-network transformation,
after investing tens of billions of dollars to deploy a nationwide LTE network with 95%
population coverage, not to mention a new nationwide mobile backhaul network and entirely
new IMS core network.
No carrier would adopt such a far-reaching and massively expensive strategy without good
reasons, and for Verizon it boiled down to the fact that its CDMA network technology was
losing ground to WCDMA/HSPA, largely because the global CDMA ecosystem was far smaller
than that of WCDMA/HSPA. In the middle of the decade, CDMA was fast losing its claim as
the best mobile technology in the market. For a company that sees the mobile network as
it key asset and growth engine, and that tirelessly promotes the market-leading quality and
coverage of its network, that was a serious problem. For Verizon, the answer was equally
serious in that it meant moving away from the CDMA technology at the heart of the company
to deploy an entirely new nationwide LTE network, nationwide backhaul network and IMS
core network, each of which required a multiyear, multibillion-dollar investment.
In addition, Verizon aimed to do all this before the competition, namely archrival AT&T. AT&T
launched HSPA services in late 2007, which led it to claim to have faster data speeds than
Verizons CDMA 1xEV-DO network. In addition, AT&T touted the ability of its WCDMA/HSPA
network to support simultaneous voice and data services, something Verizon could not offer
with its separate voice (CDMA2000) and data (1xEV-DO) networks. To top it all off, AT&T
launched the iPhone in 2007, and the device quickly turned into a runaway success that not
only redefined the smartphone market but gave AT&T a significant competitive advantage in
the market.
These events led Verizon to a full-on commitment to bet the future of its mobile business on
the worlds first large-scale commercial deployment of LTE.
Business model
The US was not the first market to see LTE launched, and Verizon was not the first operator in
the US to launch the technology. That honor goes to MetroPCS, which launched LTE services
in September 2010. But Verizon is arguably the most committed to the technology, both in
the US and globally, including its willingness to adopt an aggressive business model to drive
adoption (see fig. 4).
Fig 4: Verizons LTE business model
The following sections provide more detail on the business models key areas.
Network
Verizon was the first of the top four US operators to launch LTE. Main rival AT&T launched LTE
nine months later, in September 2011. Sprint launched LTE in July 2012 and T-Mobile US in
March 2013. Verizon has had a significant lead in LTE coverage since its launch, though AT&T
has closed the gap considerably, covering 225 million people with LTE as of end-June, equal to
75% of Verizons coverage of 300 million.
Verizon most likely decided to launch LTE before its main rivals because it was finding it
difficult to back up its longstanding claim of having the leading mobile network in the US
something that has always been a top strategic priority for Verizon and has been central to its
marketing campaigns. The problem started in late 2007, when AT&T launched HSPA services
with a peak downstream speed of 14.4Mbps. In contrast, Verizon was offering 1xEV-DO Rev.
A services with a peak downstream speed of 3.1Mbps. The problem became more acute as
it became clear that AT&Ts road map included HSPA+ services with downstream speeds of
21Mbps and dual-carrier HSPA+ services with speeds of 42Mbps. With the CDMA network
road map beyond 1xEV-DO Rev. A looking problematic, Verizons best option was to jump to
LTE before its rivals, to regain mobile network leadership in the US.
Verizon laid the foundation for its LTE-network leadership in the 700MHz auction in early
2008, when it spent US$4.7 billion to win Block C, the block with the largest bandwidth and
the only one to have nationwide coverage. Five blocks A to E were offered in the auction, of
which Block C was the largest by far in terms of bandwidth, with 22MHz, followed by Blocks A
and B, with 12MHz each; Block D, with 10MHz; and Block E, with 6MHz. Verizon spent another
US$4.7 billion to acquire 25 licenses in Block A and 77 licenses in Block B.
AT&T focused on Block B, spending US$6.6 billion on 227 licenses, giving it a strong spectrum
position, though not as strong as Verizons. The auction results are still relevant today, because
Verizons single block of nationwide spectrum has helped it deploy a nationwide network
faster than those of rivals including AT&T. Whats more, since the 700MHz auction AT&T has
been scrambling for more spectrum, which has led it to make a host of smaller spectrum deals
in a variety of bands. Mobile operators often say that any spectrum is good spectrum, but a
fragmented spectrum portfolio creates technical complexity, which in turn can slow network
deployments.
Having completed its initial nationwide LTE deployment in mid-2013, Verizon is turning its
attention to adding capacity to its network, particularly in busy metropolitan areas. It plans
to start deploying LTE small cells in 2H13 and to start deploying LTE on its 1.9/2.1GHz AWS
spectrum, in addition to its 700MHz spectrum. It plans to use the carrier-aggregation feature
of LTE Advanced to make LTE services operate seamlessly across the two spectrum bands.
Verizon is also in the midst of a huge effort to launch VoLTE services, slated for 2014,
supporting features such as high-definition voice, instant messaging and video chat.
Although Verizon has suffered many delays with VoLTE, it says its schedule is now on track.
The new offerings will no doubt be a significant addition to its LTE services, though Verizon
will not have the same time-to-market advantage with VoLTE that it did with LTE. In fact,
AT&T is likely to launch VoLTE before Verizon, in late 2013, and T-Mobile plans to launch the
technology in 1H14, at a similar time as Verizon.
Verizon established LTE-network leadership via an early and aggressive nationwide launch
of services, and used that leadership to gain market share and improve its already-strong
financial results. But rivals responded by accelerating their LTE plans, and some such as AT&T
have almost closed the gap and might move ahead of Verizon in areas such as VoLTE.

Devices
Verizon was one of the first operators to launch LTE smartphones and has rapidly expanded
its portfolio to include most smartphone vendors and a number of price points. As of July, the
carrier offered 29 LTE smartphones, with pricing starting at free with a two-year contract. All
of the carriers flagship smartphones support LTE, including the iPhone 5 and Samsung Galaxy
S4. As of July, Verizon offered 12 tablets, 10 of which supported LTE, and four USB modems,
all with LTE.
Verizons early lead in LTE smartphones is coming to an end, however: AT&T was offering
20 LTE smartphones as of 2Q13. In addition, Verizons migration from CDMA to LTE meant
that its devices needed active dual-mode technology, keeping LTE connectivity on all the time
for data access, plus CDMA for voice and messaging services. As a result, Verizons early LTE
smartphones had relatively poor battery life, though integrating CDMA and LTE at the chipset
level has significantly improved performance. Verizons goal in the medium-to-long term is to
migrate to LTE-only devices, to reduce cost and complexity and improve battery life.
Pricing
Although some operators globally have tried to charge a premium for 4G services, Verizon
priced LTE services the same as its 3G services. In fact, in 2011-2012, Verizon offered a
promotion that gave LTE users twice the data allowance of 3G users for the same price.
In addition, in July 2011, Verizon switched from unlimited to tiered data plans when it
launched its Share Everything plans (see fig. 5). The plans, virtually all of which include
unlimited voice minutes and texts, charge a monthly fee for each device, plus a monthly fee
for a bucket of data that can be shared across as many as 10 devices. For example, the fee for
a smartphone is US$40 a month, and 1GB of shared data costs US$50 a month, for a total of
US$90 a month.

Fig. 5: Verizon Share Everything plans
The Share Everything plans, which are similar to the shared data plans offered by AT&T, have
been a success from a network perspective in that they re-establish a link between usage and
pricing. In addition, not charging by technology encourages migration to the best available
data network (typically LTE), which in turn lowers costs, given the lower cost per megabyte
of LTE relative to 1xEV-DO. Verizons LTE network was already carrying more than half of the
carriers mobile data traffic in 2Q13.
Marketing
Since launching LTE in December 2010, Verizon has run a sustained marketing campaign
trumpeting the superiority of its LTE mobile network and devices. The comprehensive
campaign which covers national TV, print media, the Web, local billboards, radio and
newspapers is rivaled in scope only by AT&Ts campaign, in which it claims that its HSPA+
network constitutes the nations largest and fastest 4G network. Verizon disputes that AT&Ts
network is larger and faster, and its marketing focuses on its superior LTE coverage (see fig. 6).
Fig. 6: Verizon's LTE marketing
Rivals have not simply conceded the 4G market to Verizon, of course. AT&T in particular has
invested massively in its HSPA+ and LTE networks, in a bid to catch and even pass Verizon.
Once its network approached the scope of Verizons, AT&T started sponsoring, citing and
promoting third-party tests that it says prove that its 4G LTE network is faster and more
reliable than Verizons. Verizon disputes the claims.
LTE a key part of strategic overhaul of services
Alongside and, to an extent, catalyzed by its aggressive LTE stratetgy, Verizon has set
about redefining many of the key aspects of its mobile service over last several years,
with the changes typically designed to improve results in a market increasingly driven
by smartphones and data usage. These include doubling early termination fees (ETFs) for
smartphones in November 2009, the elimination of device-upgrade programs in January 2011
and the introduction of shared data plans in December 2012 (see fig. 7).

Fig. 7: Verizon Wireless selected service changes, Nov-09 to Apr-13
Although these initiatives will not be explored in detail, they go hand-in-hand with Verizons
LTE strategy, which has helped accelerate smartphone penetration. In addition, these broader
strategic initiatives have also improved KPIs and results: Doubling ETFs helped reduce churn;
eliminating device-upgrade programs cut device-related costs; and the introduction of shared
data plans helped control data usage and costs.
Aggressive VoLTE strategy suffers delays
There is often a price to be paid for being the leader in a given technology, as has been the case
with Verizons implementation of VoLTE. In February 2011, flush with the success of its LTE-
network launch, Verizon announced successful VoLTE test calls on its commercial network
and said that it planned to optimize VoLTE services in 2011 before launching them in 2012. The
launch did not happen in 2012, however, and has still not happened as of September. Verizons
latest target date for its VoLTE launch is 1H14.
The reason Verizons VoLTE launch has suffered such a long delay is that the technology was
not ready. When creating LTE, the global mobile industry made a conscious decision to design
it to support data services only, using existing 3G and 2G networks to deliver voice services.
That was an excellent decision in that it simplified and accelerated LTE, helping make it the
most successful mobile technology launch in history. But with LTE designed to support data
rather than voice, adding voice services is complex, difficult and expensive.
In addition, Verizons VoLTE challenges have been compounded by its ambitious plans to
move rapidly to LTE-only devices for voice in other words to use only VoLTE for voice,
with no fallback to traditional circuit-switched voice services on its 2G/3G CDMA networks.
In contrast, WCMA/HSPA operators typically develop and launch VoLTE services with a
technology called single-radio-voice-call continuity, which enables VoLTE calls to switch to
traditional 2G/3G voice networks when a subscriber moves out of LTE coverage.
Verizons focus on LTE-only devices is in turn driven by its current strategy of using dual-radio
LTE devices, with an LTE radio for data and a CDMA radio for voice services. The strategy has
worked in that it enabled Verizon to launch LTE smartphones early, but dual-radio devices are
more expensive and have lower battery life than single-radio LTE devices, which are the norm
for WCDMA/HSPA/LTE operators.
Results
Verizons aggressive business model for LTE has delivered results across a host of metrics,
including subscriptions, churn, network usage, ARPU and revenues. Just in terms of network
usage, Verizon recently reached the milestone of having its LTE network carry more data traffic
than its long-established CDMA networks, with the LTE network accounting for 59% of data
traffic in 2Q13. To put that figure into perspective, at end-2Q13 LTE subscriptions accounted for
26.5% of Verizons total mobile subscription count (see fig. 8). The figure is actually a market-
leading level of LTE subscriber penetration AT&T was in second place, with 16.05% and
data traffic is migrating to LTE even faster than subscriptions.

Fig. 8: Verizon Wireless subs by technology, Dec-10 to Jun-13
In terms of subscription count, Verizon is the dominant LTE operator in the US, with 31.1
million LTE subscriptions at end-2Q13, almost twice as many as AT&Ts 17.33 million (see fig.
9). Verizon had 50% of the countrys LTE subscriptions and AT&T 28%, followed by Sprint, with
15%, and T-Mobile via its recent acquisition of MetroPCS with 8%.

Fig. 9: US, LTE subs by operator, Dec-10 to Jun-13 (mil.)
Verizon Wireless and AT&T rank as the top two LTE operators globally by subscriptions, with
Verizon accounting for 25% of global LTE subscriptions at end-2Q13, ahead of AT&T, with 14%,
and NTT DoCoMo, with 11% (see fig. 10). Overall, the worlds top 15 LTE operators account for
94% of LTE subscriptions.

Fig. 10: Global, top 15 LTE operators by subscription count, end-Jun 13
A major strategic initiative such as LTE is only one of many factors including services,
devices, prices and competition that have a significant impact on general, companywide
key performance indicators (KPIs), but several of Verizons company-level KPIs have clearly
improved since its LTE launch. For example, Verizons mobile market share had declined from
33.17% at end-2009 to 32.88% at end-2010 (see fig. 11), while AT&Ts rose from 29.26% to
30.72% over the same period. After launching LTE in December 2010, Verizon saw its market
share rise 0.65 percentage points over the two years to end-2012, ahead of AT&Ts increase
of 0.46 percentage points. Over the same period, Verizon also outperformed Sprint, whose
market share rose 0.15 percentage points, and T-Mobile, which saw a decline of 1.1 percentage
points. Although Verizons market-share gain over the period is not huge in absolute terms, it
is significant, given that the operator was already the leader in the mature US mobile market.

Fig. 11: US, market share of top four mobile operators, 2009-2012
Verizon has turned in an even stronger performance in mobile ARPU, where it was the market
leader before launching LTE, with a monthly figure of US$50.05 in 3Q10 (see fig. 12), ahead of
AT&T, with US$49.91. Despite starting with a relatively high ARPU in global terms, Verizons
figure rose to US$55.15 in 2Q13, up 8.26% from 3Q10. Over the same period, AT&T saw its
ARPU decline 4.49%, to US$47.67. T-Mobile saw an even sharper decline of 22.53% over the
period, to US$36.41 in 2Q13, while Sprints ARPU rose 5.98%, to US$51.43.

Fig. 12: US, monthly ARPU of top four mobile operators, 3Q10-2Q13
Overall results show the same trend, with Verizon Wireless managing to improve on its
already strong position in the market since its launch of LTE. Certainly, not many mobile
operators in the world could boast of improving KPIs across the board in recent years and
ending 2012 with 98 million retail subscriptions and record-low churn of 1.19%, helping
generate US$30 billion in EBITDA on US$76 billion in revenues (see fig. 13).

Fig. 13: Verizon Wireless selected results, 2010-2012
Strategic outook

Fig. 14: Verizon Wireless LTE SWOT analysis
Conclusions
Verizon Wireless is the largest LTE operator by far globally and a bellwether for the
technology and market, showing both the opportunities and risks of LTE. Judging by Verizons
impressive LTE adoption and results, there is ample opportunity to use the transition to LTE
to create a competitive advantage, though Verizon has had to invest heavily to manage risk
of the new system.
The foundations of Verizons LTE success have been its aggressive and wide-ranging LTE
strategy, rapid network deployment, large and diverse device portfolio, competitive pricing
and aggressive marketing. Verizon has had so much success with LTE largely because it
committed to it so fully. This is a high-risk, high-reward strategy, and over time it has become
clear that Verizon has largely mitigated the risks and enjoyed the rewards.
Challenges have included relatively poor battery life on early CDMA/LTE smartphones,
nationwide LTE outages in 2012 and a delayed VoLTE launch. Technology leadership is a risky
business, but Verizon has managed the risks well, albeit with the help of a very large budget.
Since launching LTE in December 2010, Verizon Wireless has shown improvements in
virtually all KPIs, including subscriptions, market share, churn, ARPU, revenues and EBITDA.
Verizons KPIs were far from weak when it launched LTE, with market share of 33%, churn
of 1.38% and EBITDA of US$26.08 billion on US$63.4 billion in revenues. But as of December
2012 it had improved market share to 34%, churn to 1.19% and EBITDA to US$29.73 billion on
US$75.9 billion in revenues. Verizon has also used the transition to LTE as an opportunity to
introduce other major service changes to further improve results, including shared data plans
and device financing.
Recommendations
Verizons success is clear proof that an aggressive and comprehensive LTE strategy combined
with strong execution can lead to robust adoption and compelling results. Verizon was
already one of the worlds largest and most profitable carriers, however, and it operates in
a unique market. Carriers in other markets will have to carefully evaluate which aspects
of Verizons LTE strategy are the most relevant, realistic and profitable in their competitive
environment.
Verizon defines something of an LTE wish list that carriers can use to shape their LTE
strategies and plans across the key areas of strategy, spectrum acquisition, network rollout,
device portfolios, service pricing and marketing. Verizons CDMA heritage makes parts of
its LTE strategy unique, particularly in terms of networks and devices, but many others are
broadly relevant, including pricing and marketing.
Although Verizons LTE strategy and launch has been a strong success overall, it proves once
again that technology and market leadership comes with costs. In Verizons case, the costs
include LTE-network outages and a long-delayed VoLTE launch, but the carrier has managed
these risks relatively well, and other carriers can learn from its experiences.
Verizon also proves that the transition to LTE is a golden opportunity to redesign services, to
improve results in markets dominated by smartphone and data usage. With the transition
to LTE accelerating smartphone adoption and data usage, Verizon switched from unlimited
individual data plans to tiered shared data plans that include unlimited voice and text. The
move was a triple improvement in that it re-established the link between data usage and
charges, encouraged adoption of new devices by sharing data buckets across multiple devices,
and protected voice and text services by bundling unlimited usage with all data plans.
Verizons competitors need to continue racing to narrow its lead in LTE, particularly in
network coverage and device availability, while developing unique LTE offers. AT&T has
almost caught up with Verizon in terms of LTE smartphone availability and plans to catch up
next year on LTE coverage. It also moved ahead of Verizon recently by opening its LTE network
to prepaid users. Both Sprint and T-Mobile are racing to deploy LTE and undercut Verizon and
AT&T on service pricing.
Verizon might be vulnerable for several years as it digests its US$130 billion investment
for full control of Verizon Wireless, something competitors can capitalize on. The deal will
strengthen Verizon in the long run, particularly given 100% access to the huge cash flows
of Verizon Wireless, but in the short-to-medium term it will constrain Verizons budgets and
financial options. Competitors need to take advantage of this window of opportunity to
accelerate their LTE plans and strengthen their market positions.
Verizon needs to move LTE to the next level to retain its market leadership in the US and
globally. Verizons LTE strategy and service has been a huge success to date, but its leadership
is fading as its US and global competitors catch up. The carrier needs to use the move to VoLTE
and LTE Advanced to regain and strengthen its leadership position. This will be a challenge if
Verizons massive investment in Verizon Wireless restrains its budget, however.
4G strategy: Vodafones pricing puts
faith in the value of premium content
08 August 2013
Paul Lambert
Whats happened?
Vodafone UK is set to enter the 4G market in London on Aug. 29, pricing LTE services at a
premium to 3G and bundling premium content into the plans. Vodafone is charging 34 (US
$52.70) a month over two years for 2GB of 4G access on a plan that includes devices, and
SIM-only plans start at 26 a month for 2GB of data. Through a six-month promotion, 4G
customers get free access to Spotify Premium offering more than 20 million songs or Sky
Sports Mobile, enabling them to view up to 150 hours of content a month, including Premier
League soccer games. Users on the most expensive two-year contracts (57 and 62 a month)
will continue to receive the content after the promotional period. Other users can take Sky
Sports Mobile for 5 a month and Spotify Premium for 10 a month. Mobile data consumed
using the services comes out of users monthly allowances.
O2 UK is also set to launch 4G on Aug. 29, initially in the cities of London, Leeds and Bradford.
The operator plans to offer LTE in 10 more cities by end-2013, and Vodafone plans to launch
4G in 12 more cities by year-end. O2 states that its LTE network will cover 5 million people at
launch but has yet to release pricing details for services.
O2s and Vodafones LTE networks will compete against Everything Everywhere, whose LTE
network covers 95 cities.
Why does it matter?
For mobile operators in the UK, like those in other advanced, extremely competitive mobile
markets, 4G is above all an opportunity to attract and retain the most valuable subscribers. As
such, the success of Vodafones and O2s 4G launches will determine how many high-spending
subscribers they are able to attract, which in turn will affect their KPIs.
For about three quarters, EE has been the only operator in the UK offering 4G services. It has
succeeded in educating the market about what 4G is and what its advantages are over 3G.
It had 550,000 4G users at end-June, charging a modest premium about 5 over its 3G
tariffs. The operator has demonstrated the positive impact that 4G can have on KPIs: Existing
subscribers who have moved to 4G show an increase in ARPU of about 10%.
Vodafones entry-level two-year postpaid 4G plan 34 a month for 2GB of data costs 30.7%
more than EEs entry-level plan, at 26 a month for 500MB, though EEs 2GB-a-month tariff
costs 20.6% more than Vodafones, at 41 (see fig.).

UK, Vodafone and EE monthly plans, Aug-13
Rather than aiming its 4G launch at a broad segment of the market, Vodafone appears
to be targeting its existing customer base and, within that, the higher-spending users. In
terms of the broader market, Vodafone is competing effectively for these higher-spending
users, by charging significantly less for 2GB of data than EE. Differentiating its offerings by
including varying amounts of Wi-Fi data in its plans is an innovative approach to pricing the
overall amount of data users can consume while on the go. With some UK operators offering
unlimited Wi-Fi data with their mobile plans, however, it will be interesting to see if Vodafone
customers are willing to pay extra for incremental increases in inclusive Wi-Fi data.
Vodafones emphasis on premium content is a bold effort to maintain ARPU and could be
sustainable if the market reacts positively to it. Its strategy of bundling content with 4G
services shows how operators can use 4G as a foundation to increase the overall value they
offer subscribers. By promoting its content offers so heavily, Vodafone is using 4G as a way to
reposition itself as a provider of premium content, not just core telephony services. Similarly,
EE offers a range of free film services and includes music streaming on its most expensive
tariffs, which it markets heavily.
Whats next?
Vodafones strategy of pricing its 4G services high and offering premium content will enable it
to skim off the higher-spending users in the market. It also leaves it considerable room to lower
prices as competition intensifies, thereby becoming attractive to a wider section of the market.
Vodafones entry-level 4G pricing, already high compared with that of EE, will seem even more
so when 3 launches 4G, because 3 has already said that it will charge no premium for 4G
access. O2 UK, which hasnt made public its 4G pricing, is likely to follow EE and Vodafone in
highlighting its range of content when it launches 4G.
At the same time, Vodafones premium-pricing strategy for 4G bodes well for the future
profitability of UK operators. Their 4G pricing so far indicates that they are likely to engage
in modest price competition at the middle and high end of the market rather than pursue
intense price competition at the low end. As such, UK operators are probably counting on 4G
to help them to stem declines in ARPU by driving take-up of premium services at the middle
and high end of the market.
What should you do?
UK operators need to avoid a 4G price war. Vodafone UKs 4G pricing is good news for the
market, since it shows that the operator is not using price as the main lever to compete for
high-value users. Although its premium-pricing strategy is unlikely to garner it a large number
of users initially, at least from other operators, the operator has significant room to adjust
prices downward over the coming quarters.
Operators need a premium-content strategy. Vodafones reliance on premium content and
EEs content offerings are evidence that UK operators are moving away from an emphasis
on core telephony toward competing on premium content. Competition among UK mobile
operators is edging toward a basis in who offers what content.
Operators need to market and price premium content effectively. Vodafones approach to
pricing sports and music content suggests that it believes UK users are willing to pay 5-10
a month to access their favorite content. The success of such a bold and innovative approach
relies heavily on providing an excellent experience for users accessing the content over 4G.
Given that its 4G network is far behind its 3G network and EEs 4G network in terms of
coverage, Vodafone could be taking a big gamble in charging so much for premium content,
at least in the near term. The markets reaction to this strategy will shape all UK operators
approaches to charging for premium content and will determine how aggressively they
pursue exclusive content deals in the future.
Core telephony remains the foundation for competition, and that means coverage and
capacity. Despite the rise in importance of premium content, the network is a crucial
foundation for 4G when it comes to competing for the most valuable subscribers. As people
consume more content on their mobiles, the quality of the mobile broadband experience is
becoming more important. High-value users will choose their operators less for the premium
content available and more for how fast they can download their media. Operators must
continue to keep a high-quality mobile broadband experience at the heart of their 4G
strategies and convey the superior experience they can offer.
4G strategy: Global momentum to LTE
accelerates as successful strategies
emerge
28 October 2013
Paul Lambert
Executive summary
Over 80% of the operators responding to Informa Telecoms & Medias survey on LTE
launch strategies said that they believe that there is a viable business case to launch
LTE today; one-third said that they plan to launch LTE this year.
The main reasons given by the operator respondents pertain to gaining a competitive
advantage by launching LTE: Current networks dont offer sufficient capacity, users
want greater speeds and operators want to create new revenue streams using LTE.
Operators are seeing changes in consumer behavior, and the initial signs are that LTE
users are consuming more data than 3G customers: 28% of the operator respondents
to the survey are seeing an increase in data usage of 11% or more when a subscriber
migrates to 3G.
While the majority of respondents believe that not charging a premium for LTE access
is the best approach to LTE pricing, around a third believe that a 6-15% premium is
sustainable. Evidence to date indicates that operators can most successfully drive LTE
subscription uptake if they dont charge a premium over 3G services. Operators that
want to charge a premium for LTE will need to work out how they can increase the
overall value of the 4G subscriptions to justify a premium over 3G.
The majority of operators are in no hurry to launch either LTE-Advanced or VoLTE,

which suggests that 2014 will be another year of preparing for these technologies
rather than actual market launches.
Market status
To gain a view of the status of the worldwide LTE service launches and operators strategies
for positioning LTE in the market, Informa Telecoms & Media conducted a survey in 2Q and
3Q 2013. The survey focused on the key areas surrounding LTE launch strategies, including:
Timing of LTE network launches.
How best to position LTE in the market.
LTE network strategies.
Effect of LTE on KPIs.

The overall sample was 444 respondents, including board level executives, sales and
marketing managers and technical experts. The largest proportion (33.5%) of the respondents
are based in Europe, 23.4% in Asia Pacific and the rest fairly evenly split between the Americas,
the Middle East and Africa.
The first question 4G licensees need to address is when to launch LTE. Key factors influencing
this decision are:
How well are current networks coping with the demand for data?
How much competitive advantage can an operator gain from launching LTE?
Does a rivals LTE launch compel an operator to launch LTE?

The vast majority (83.4%) of the operator respondents believe that there is a viable business
case to launch LTE today; 32.5% said they plan to launch LTE this year. The main reasons
given by the operator respondents pertain to gaining competition advantage by launching
LTE: current networks dont offer sufficient capacity; users want greater speeds; and operators
want to create new revenue streams using LTE (see fig. 1).

Fig. 1: Why is now the right time to deploy LTE?
Market dynamics
How operators position LTE relative to 3G, in particular in terms of pricing and marketing, is
the single most important component of their LTE launch strategy. The most successful LTE
operators have shown that not charging a premium for LTE is the key ingredient in ensuring
LTE subscription uptake. Even if they price their LTE services on a par with 3G, LTE operators
nonetheless have to position the new network in new ways to ensure they realize maximum
value from their investments in the LTE network.
Differentiating LTE from 3G
Speed and latency, and quality are the main ways operators can differentiate LTE from 3G,
according to operator respondents to the survey (see fig. 2).

Fig. 2: How can operators best differentiate LTE from 3G? (Please choose two options)
In terms of specific services, video is, by far, the service type that operators are seeing drive
the greatest volume of traffic on LTE networks (see fig. 3).

Fig. 3: Which service or application is driving/ will drive the greatest volume of traffic on LTE
networks? (Please choose one option)
Expected impact of LTE on KPIs
LTE operators are looking to the technology to drive data usage and in turn improve KPIs, in
particular ARPU. LTE is providing operators with a new lease on life, and not just in terms of
being able to offer an improved user experience, a chance to sharpen branding messages and
an opportunity to differentiate themselves from rivals. Operators are also seeing changes in
consumer behavior, and the initial signs are that LTE users are consuming more data than 3G
customers: 28% of the operator respondents said they saw an increase in data usage of 11%
or more when a subscriber migrates to 3G (see fig. 4).

Fig. 4: If you have launched LTE, what increase in ARPU are you seeing when a subscriber
migrates to LTE?
With the right pricing strategy, operators are successfully using LTE as a platform to increase
data usage. Almost half of the survey respondents are seeing an increase of over 20% in LTE
data usage compared with 3G half of these (24% of the total) are seeing an increase of over
30% (see fig 5).

Fig. 5: If you have launched LTE, what average increase in LTE data usage are you seeing
compared with 3G?
Network strategy
Because of this increase in data usage, network quality has never been so important in
winning and retaining mobile broadband users than it is with 4G. The majority of operators
plan to deploy FDD-only networks, with around one-third of operators planning to deploy FDD
in conjunction with the more spectrally-efficient TDD variety (see fig. 6).

Fig. 6: What variant of LTE do you intend to deploy?
The TDD bands have not yet made a major impression on the global spectrum map, but the
launch of LTE services based on TD-LTE in major markets, such as China and India, will begin to
have an impact in the coming year. Informas forecasts for the rate of growth of LTE services in
these countries show that the addressable market for TD-LTE could be 30% of the total by 2018.
There is a wide range and number of LTE spectrum bands from sub-1GHz to above 3GHz. The
1800MHz and 2.6GHz bands are the most popular bands for LTE deployment, with the highly-
valued 800MHz band in third place (see fig. 7).

Fig. 7: Which spectrum bands do you intend to use to deploy LTE? (Tick any that apply)
Wi-Fi continues to play an important role in operators 4G strategies as it did in 3G. Many
4G operators are bundling free Wi-Fi into their 4G tariffs both to increase the overall value
that end users receive with 4G tariffs and to alleviate traffic on the network. According to the
survey, operators are almost equally split on what the best business model is for offering Wi-
Fi partnering with Wi-Fi providers; or rolling out their own Wi-Fi networks (see fig. 8).

Fig. 8: In your view, what is the likely future role of Wi-Fi for operators deploying LTE in the next
two to three years?
EE offers a noteworthy alternative view on the role of Wi-Fi in the overall 4G offering: The
operator says that 43% of its 4G subscribers are actually using Wi-Fi less now they have 4G
subscriptions.
Go-to-market strategy
How operators price LTE is one of the main tools they have to determine the level of LTE
subscription uptake. While the majority of successful LTE operators in terms of subscription
numbers havent charged a premium, some have opted to charge a premium for LTE access.
While just over a third (35%) of respondents believe that not charging a premium for LTE access
is the best approach to LTE pricing, around a third believe that a 6-15% premium is sustainable
(see fig. 9).

Fig. 9: What percentage price premium do you think is right for LTE?
Evidence from LTE operators to date strongly suggests that charging no premium is the best
approach to pricing LTE services to ensure strong subscription growth. Some operators are
also bundling content into 4G subscriptions to differentiate them from 3G services and also
from their rivals 4G offerings. While some 4G markets, such as the UK and South Korea, are
seeing competition between operators in terms of what content they offer, in the majority of
markets this is not happening. According to the survey, almost 71% of operators dont have a
strategy to zero-rate content over 4G networks (see fig. 10).

Fig. 10: Do you plan to offer any 4G-only content free over LTE to encourage uptake?
Market development
The first operator to launch LTE-Advanced was SKT in June 2013. With LTE-Advanced,
operators can offer faster network speeds. Over 70% of the operator respondents don't expect
to launch the technology until 2015 at the earliest (see fig. 11).

Fig. 11: When do you expect LTE-Advanced to be deployed?
Although the worlds first VoLTE launch, by SKT, took place in August 2012, the majority of
operator respondents dont plan to launch the service until 2015, when the technology will
be more mature and when the business case for rich voice is clearer (see fig. 12).

Fig. 12: When do you plan to go live with VoLTE services?
While some operators may try and charge for VoLTE, SKTs approach of bundling its VoLTE-
based rich-voice services into its overall 4G package is likely to become the norm as operators
maintain ARPU levels by increasing the value included in 4G subscriptions rather than
charging more for specific 4G services: Over half of the survey respondents dont think its
possible to charge a premium for LTE voice (see fig. 13).

Fig. 13: Do you think its possible to charge a premium for LTE voice?
LTE small cells may play more of a role in operators LTE networks than they do with 3G as
operators look to improve LTE hot-spot and indoor coverage. The survey findings were that
only 1.5% of operator respondents dont plan to launch LTE small cells (see fig. 14).

Fig. 14: When do you expect LTE small cells to be deployed?
LTE small cells will play a more prominent role in the developed markets of Asia Pacific than
elsewhere, according to the survey (see fig. 15).

Fig. 15: Where do you expect widespread commercial public-area LTE small cells to be deployed
first?
LTE roaming
The majority of operators have yet to finalize their LTE roaming strategy as they are at the
early stages of in-market LTE rollouts. There still are numerous building blocks that operators
need to put in place to realize the LTE opportunity, including the increased complexity and
challenges that come with LTE roaming service deployment (see fig. 16).

Fig. 16: Operators are better prepared to offer roaming services across LTE networks in 2013
compared with 2012
LTE offers operators the opportunity to streamline the number of roaming partners they have
as much as it creates new service opportunities. According to the survey, 54% of operators
expect to have fewer than 50 bilateral roaming partners as they evolve toward LTE, suggesting
a growing role for roaming hubs as operators look to LTE to reduce roaming complexity. At
the same time, the number of bands being used by operators is by far the main barrier to LTE
roaming (see fig. 17).

Fig. 17: What do you see are the main barriers to LTE roaming?
LTE rollouts will see operators adopt a variety of strategies to enable LTE roaming, including
making new agreements, extending their existing agreements for LTE roaming, or combining
their existing agreements with new ones. Only a fifth expects to make new agreements for
all their LTE roaming, the rest divide equally between the other two options (see fig. 18).

Fig. 18: Do you plan to extend 2G/3G roaming agreements to 4G, or strike new agreements?
Similarly, operator respondents believe that a mixture of hubbing and bilateral agreements
will be best for LTE roaming (see fig. 19).

Fig. 19: A hubbing approach is better for LTE roaming compared with a bilateral approach
Given that bill shock remains one of the most significant barriers to data roaming, operators
must carefully assess how they can effectively drive data-roaming traffic.
Conclusions
While the majority of the survey respondents believe that not charging a premium for LTE
access is the best approach to LTE pricing, around a third believe that a 6-15% premium
is sustainable. Evidence to date indicates that operators can most successfully drive LTE
subscription uptake if they dont charge a premium over 3G services. Operators that want to
charge a premium for LTE will need to work out how they can increase the overall value of
their 4G subscriptions to justify a premium over 3G.
Speed and latency, and quality are the main ways operators can differentiate LTE from 3G,
according to the surveys operator respondents: Evidence from successful LTE operators to date
shows that speed is enough to convince consumers of the benefits of 4G over 3G.
Operators are seeing changes in consumer behavior, and initial signs are that LTE users are
consuming more data than 3G customers. According to the survey, almost a third of the
operator respondents are seeing an increase of 11% or more in data usage when a subscriber
migrates to 3G. As a result of this increase in traffic, operators need to invest in their networks
not just to be able to cope with the increase, but also to be able to offer a reliable quality
network experience.
Recommendations
Operators should either charge 4G services at the same rate as 3G or only charge a modest premium by
bundling additional value into 4G subscriptions
Evidence to date suggests that not charging a premium for 4G is the best way to drive
4G subscription uptake and at the same time improve KPIs. LTE can increase revenues and
improve churn if the overall proposition is well-defined and clearly targeted at the right
user segments. LTE operators need to effectively target existing users and appeal to the
wider market of mobile data users. Pricing, marketing, segmentation, network experience and
device line-up are the foundations and components of a successful 4G launch.
Operators must invest in the LTE network to be able to offer a quality mobile broadband experience
The quality of the network is even more important with 4G than it was with 3G. Operators
can successfully position themselves in the market around offering the best-quality network.
They are competing more and more intensely around which one has the best network in terms
of speed and latency.
Contact us:
Informa Telecoms & Media
Mortimer House
37-41 Mortimer House
London, W1T 3JH
UK
Phone: +44 (0) 207 017 4994
Fax: +44 (0) 207 017 4783
Email: marketing.enquiries@informa.com

Informa 4G Strategy 26-11-2013

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Informa 4G Strategy 26-11-2013

Uploaded by

Copyright:

Available Formats

4G Strategy: Successful

operators show how LTE can

Using LTE to improve the mobile broadband experience.

Not charging a premium for 4G access.

Successful 4G operators have shown there is no secret to profitably launching 4G.

In emerging markets, operators are pursuing the 4G-price-premium strategy more

A new pricing strategy compared with 3G.

Addressing specific audiences with content delivered over 4G networks.

Using LTE to address new markets (e.g., fixed-broadband segments).

Pricing and overall value offered as part of the 4G subscription.

Quality of the network and network coverage.

Bundling value-added services/ exclusive content with 4G subscriptions

Telstra in Australia: Telstra plans to deploy a mobile-capable CDN to improve its

O2 in Germany: O2 is working with cable providers Kabel Deutschland, Kabel Baden-

After an ARPU increase of 3.6% in 2012, SK Telecom is expected to raise ARPU by 8%

The idea of true 4G will increasingly become a differentiator among 4G operators. As

Operators need to plan an effective 2G/ 3G to 4G migration strategy. Which segments

Offer a compelling device portfolio at different price points.

Communicate the value of LTE emphasizing speed in conjunction with enhanced

Charged a high and unjustifiable premium for 4G.

Havent effectively communicated the benefits of 4G over 3G.

Offered a limited device line-up.

Havent provisioned the network with devices to offer a genuine 4G experience.

Havent aligned marketing with network rollout.

Have a weak 2G/ 3G-to-4G migration strategy for existing users.

Offering a truly 4G network experience.

Implementing an extremely effective pricing strategy.

The existing customers moving to 4G show an increase in ARPU of around 10%.

Blended ARPU ex-regulation increased in 2Q13 by 2.8% year-on-year to 18.40.

In terms of pricing, Etisalat by and large is only differentiating between 3G and 4G

As an operator operating LTE initially at 2.6GHz, it could not develop a smartphone

June 30: Closed the Nextel iDEN network

The majority of operators are in no hurry to launch either LTE-Advanced or VoLTE,

Timing of LTE network launches.

How best to position LTE in the market.

LTE network strategies.

Effect of LTE on KPIs.

Does a rivals LTE launch compel an operator to launch LTE?

You might also like