Report On The Mobile Industry

contents
introduction 3
3G: Markets and Technology 8

Beyond 3G: Alternative Wireless Broadband 12
Mobile content 16
Services and applications 16
Mobile Games 20
Messaging 24
Mobile Music 28
Mobile TV & Video 31
The Enterprise Market 33
BSS/OSS and Telecoms IT 37

Consolidation: Mergers and Acquisitions 42
Roaming: International roaming regulation 46
Handsets: Software and Devices 49
Fixed-Mobile Convergence 54
Developing markets 58
Middle East and Africa 58
Asia Pacific 62
Latin America and the Caribbean 67
Eastern Europe 71
Mature markets 75
Western Europe 75
North America 78
Asia Pacific 81
• MOBILE INDUSTRY OUTLOOK 2005/06 • 1

introduction
Back to the future:

ARPU disappoints, subscriber
growth rebounds
By Mark Newman
Mobile operators have been reporting record subscriber growth. First it was Vodafone –
5.4 million net adds in 4Q 2004. Then Verizon, a record 1.7 million net adds in the same
quarter. Other operators including Cingular and T-Mobile have also reported a strong
end to 2004. In developing countries growth has been even more impressive. There were
a colossal eight million net additions in Russia in December alone. This even outpaced
China where China Mobile and China Unicom continue to drive growth globally.
In 2005 analysts are – once
Global subscribers and net additions 1997-2004 (mils.) more – predicting a
Cumulative subscribers Yearly net adds slowdown in growth in all
2,000 350
regions of the world. Has
300
there been a single year when
1,500
they have actually over-
250 estimated net additions? But
you cannot argue with their
200
1,000 logic. The number of
countries with 100%
150
penetration or more has now
500
100 gone into double figures.
Can there really be any
0
1997 1998 1999 2000 2001 2002 2003 2004
50 growth left? And in many
Source: Informa Telecoms & Media
developing markets
penetration rates are
reaching 40%-50% – a
figure that seems barely possible given the average income of most of the population.
ARPU figures, meanwhile, remain distinctly unimpressive. Whatever happened to the
upturn that 2.5G services was going to engineer? Where’s the evidence that 3G is going
to create meaningful new revenue streams? And what’s become of i-mode and the Japanese
mobile data phenomenon that gave inspiration and a working business model to mobile
operators throughout Europe and North America?
Looking at subscriber growth trends on the one hand and ARPU on the other – and
throw in a strong dose of unease created by the rise and rise of Wi-Fi – the overall picture
of the health of the mobile phone sector globally is a confusing one. On the one hand,
subscriber growth is confounding all previous expectations. Five years ago the accepted
wisdom was that cellular penetration would peak at 70%-80% in developed markets and
at 20%-30% in developing countries. Having reached 100% in many countries, where
can it realistically be expected to stop? And in the case of ARPU, will there ever be the
uplift promised by 3G?

introduction
Precious little research has been undertaken into the factors behind 100% penetration
rates. The reality is that no more than 70% – or at a real push – 80% of the population
of a single country own mobile phones. In Taiwan, mobile operator TCC surveyed the
market and found that everyone between the ages of 16 and 65 had a phone but that only
65-70% of the total population were mobile phone owners.
Operators’ slowness to disconnect lapsed or non-paying customers – many of who
have switched to another
Top 10 countries by net additions forecast in 2005
operator – is the main reason
behind the high penetration 60
figures. Dual-SIM or dual-
phone ownership is another. 50
Many international business 40
Net add (mils.)

travellers have got wise to high
roaming charges and are, 30
instead, buying prepaid SIM 20

cards in those countries where
they are heavy users. In some 10
cases mobile users buy SIM cards

0
from more than one operator in
a
es
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ilip a
do l
ia
ia
SA
Ru a
In azi
a
ric
Ph esi
di
ss
er
in
So pin
ai
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ig
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the same country because they
U
h
ut
charge different prices for Source: Informa Telecoms & Media
different services. The popularity

of the Blackberry is also starting to have an impact on subscriber numbers. Most of the
three million or so Blackberry users worldwide have separate mobile phones.
As more and more countries go beyond the upper limit for ‘people’ penetration of
70%-80%, we need to reconsider the value and meaning of tracking subscriber growth
on the one hand and ARPU on the other. The problem that we have is that we’re all using
the wrong terminology. We should be talking about mobile subscriptions, not mobile
subscribers. And what we’re measuring today is average revenue per subscription rather
than average revenue per subscriber.
Let’s think for a moment about Blackberry users. Or people who use wireless data cards
for their laptops. Their ‘ARPU’ levels have gone up massively since they bought their
Blackberry or data card but this is not shown up in the figures generated today by mobile
operators. Is there a case for saying, therefore, that ARPU figures today underestimate
how much people are actually spending on mobile services? Similarly, are we
underestimating subscriber (or rather subscription) growth potential?
The incidence of dual SIM/subscription is probably too low today to make a strong
case. But it is something that we need to bear in mind as we make snapshot evaluations
about the current status and prospects for the mobile business.
Much will hinge on whether consumers accept the Swiss army-knife ‘all-in-one’ mobile
device concept. The evidence so far is that they will not. A good test will be the next-
generation i-pod. Apple has already partnered with Motorola to manufacture an i-pod
that can download music tracks over the air from a mobile network. Will people use this
same device as a mobile phone?

introduction
As cellular operators embrace Wi-Fi technologies the ARPU KPI measurement comes
under evenº greater pressure. Wireless broadband is a term that covers a broad spectrum
of network technologies – including 3G. Wireless broadband users will demand seamless
services that travel over different networks. Mobile operators will count wireless
broadband users as ‘mobile subscribers’ even if most of the traffic that they generate is on
different networks.
Similarly, operators appear not to distinguish between subscribers connected directly
to their networks and those who are customers to an MVNO offering services over their
networks. As the MVNO model gains momentum – in Europe principally via discount
online MVNOs and in the U.S. via a wide range of new service providers, this will almost
certainly have a negative impact on ARPU levels. This is principally because mobile
operators sell capacity, or connections, to MVNOs at wholesale rates and it is these, rather
than the retail level, that goes into their ARPU calculations.
Where will the inspiration come from in 2005 and 2006?

For three to four years now Japan – or to be more precise, NTT DoCoMo – has provided
the basic model for mobile operators in 2.5G and 3G. While revenue-share deals may
vary, with most operators retaining more than the 9% share of content revenues retained
by DoCoMo, the basic approach has been adopted by many of the leading operators
worldwide.
But over the last 12 months DoCoMo’s star has begun to fade. i-mode never did enable
DoCoMo to increase ARPU levels. It merely enabled DoCoMo to stabilize ARPU levels
at a time when voice prices and revenues were in sharp decline. For the last one to two
years, however, total ARPU levels have been in steady decline. DoCoMo has been forced
to respond to strong competition from KDDI, which, in late 2003 launched flat-rate
pricing for mobile data services on its 1XRTT network. DoCoMo responded in March
last year with a similar offering which has had the effect of severely restricting any potential
to grow revenues. The downturn in ARPU has also come as a direct consequence of
DoCoMo’s anxiety to migrate customers to its FOMA 3G network. As a carrot to
persuade i-mode 2.5G customers to move to 3G, DoCoMo offers much lower data
transmission prices on the newer network.
South Korea, arguably, offers a better model for mobile operators. South Korean
operators retain a higher share of content revenues – close to 30% rather than Japan’s 9%.
3G is now well established in Korea and, unlike Japan, operators have been able to offer
their customers integrated 2.5G/3G devices. In terms of new services, music (ring tones
and downloading MP3 files), games and video clips are all proving popular.
Globally, there are huge discrepancies between mobile data’s share of total ARPU. The
highest figures are in the Philippines where Globe and Smart, receive 38% and 45% of
revenues respectively from mobile data services. The European average is in the region of
18%, behind Japan and Korea at 25% but way ahead of the U.S. at only 6%.
In the GSM world (Europe and Asia minus Japan and Korea), SMS accounts for close
to 80% of total data ARPU. 2.5G – MMS, GPRS and WAP – have proved a huge
disappointment because of high prices, a lack of compelling services, interoperability
difficulties and poor marketing and customer education. Countries with 1XRTT and
EV-DO have much lower SMS (or mobile email) revenues but operators have been much

introduction
more successful in generating revenues from other services. This is a big concern for the
GSM world. SMS prices are already falling and regulatory intervention to force operators
to offer lower wholesale prices seems inevitable. If operators cannot grow their non-SMS
revenues significantly it is hard to see how data revenues overall will continue to grow.
During the second half of 2004, the improving fortunes of Hutchison Telecom’s ‘3’
businesses in the UK, Italy, Sweden and Austria caught the eye. Cheap voice services have
proved the biggest lure for customers but 3’s impressive ARPU figures indicate that there
is reasonably strong usage of its mobile multimedia services. 3 reported ARPU of €44.25
(US$57.68) in November against a European average of $31. Data accounted for 21%
of this ARPU, up from just 15% four months previously. Football and news clips, music
downloads are all cited as services that have proved popular.
Vodafone became the first of Europe’s leading operators to launch 3G in November.
It has positioned 3G as a high-end consumer offering, pushing the benefits of music
downloads, games and video clips. Orange responded in December with a more subdued
launch and a limited choice of handsets. 3’s experience has shown that until operators can
offer slick, compact 3G devices they will struggle to get 3G off the ground.
3’s improving fortunes will also give food for thought to its rivals who – almost without
exception – are offering an open-access approach in terms of mobile content. 3 operates
a walled garden and has made the sourcing of exclusive content – such as football clips –
a key part of its offering.
3G network and service roll-out will be one of the key issues for mobile operators in
2005 and 2006. There is nothing today to suggest that they will do anything other than
take a slowly-slowly approach, positioning 3G at the top end of the consumer market and
associating it with some of the more advanced services. Whether this will be enough to
attract customers is a different matter.
Business models and eco-systems

In the fixed telecoms market data communications now accounts for the lion’s share of
total traffic. Incumbent operators have seen their revenues from voice – and in particular
long distance voice – services fall sharply but are seeing rapid growth in their broadband
businesses. The advent of VOIP is a new threat and risks cannibalizing voice revenues
further.
Will the mobile business go the same way? Operators are making every effort to prevent
a repeat. Voice prices and revenues remain remarkably healthy. And despite their best
efforts, operators still see mobile data as a long-term opportunity rather than one that will
turn their business upside down – as was the case with the PC-based Internet.
But herein lies the dilemma. If mobile voice prices fall to close to the same level as fixed
network calls, mobile operators could steal a huge amount of traffic and wreak untold
damage on fixed operators. The question is, do they want to? France Telecom, Telefonica
Moviles, Deutsche Telekom, Telecom Italia, NTT DoCoMo, SingTel and Cingular are
some of the largest integrated fixed and mobile operators in the world. Do they really
have it in them to run down one half – the fixed half – of their businesses? A number of
them have started talking in recent months about the potential for developing converged
fixed-mobile networks and services. By bringing their two businesses together they believe
they can develop services and strategies to out-manoeuvre mobile-only players such as
Vodafone, O2, ‘3’ and Sprint/Nextel.

introduction
In developing markets, mobile communications is emerging as the de facto

telecommunications infrastructure. Mobile operators in these countries are under pressure
from governments to offer affordable services to extend telephony into lower-income
groups. The mobile phone has a key role in the development of these economies.
Five years ago the standard approach to building a successful mobile business would
have been to offer limited coverage and to offer high-priced services to only the wealthiest
business and government communities. Sharp falls in the cost of network infrastructure
and of handsets means that operators can now offer affordable services to large parts of
the population. This is evidenced in some of the startling subscriber growth figures of
2004. Only one of the
largest mobile operators
Top 10 operators by net additions in 2004
(ranked in terms of net
additions) in 2004 was Net additions (mil.)
from Western Europe, the 5 10 15 20 25 30 35 40
U.S. or developed Asia. China Mobile
China Unicom
If mobile operators in
Verizon Wireless
Europe or North America Smart Communications
are not prepared to VimpelCom-R
compete head-on with AVEA I.H.A.S
MTS
fixed operators they will
TIM Celular
have little choice but to Radiomóvil Dipsa
base their strategy around Turkcell
the building of new

mobile data businesses. Source: Informa Telecoms & Media
Mobile entertainment
shows some promise but there is no evidence that it will generate the kind of revenues
needed to compensate for the inevitable fall of voice and SMS prices.
This also seems to be the conclusion of NTT DoCoMo, which is now looking for a
new phase in its development beyond i-mode and FOMA. ‘Wallet (FeliCa) phones’ is a
concept that DoCoMo launched last summer. A wallet phone is a micro-payment
mechanism that allows consumers to pay for goods and services in outlets across Japan.
DoCoMo does not charge for transactions and its short-term strategy is for the wallet
phone to become a commonly accepted payment device. So far DoCoMo has sold more
than a million FeliCa wallet phones and the service has won the support of major retailers
and transport companies.
The attraction of the FeliCa approach is that it reduces the reliance on the end-user
– the consumer – to up their mobile phone spend. If the mobile phone becomes a
preferred payment mechanism, operators have the potential to develop new revenue
streams from any retailer or financial institution that wants to conduct commerce over
the phone.
Is now the time for mobile commerce? Back to the future.
Mark Newman is the Chief Research Officer of Informa Telecoms & Media.
Mark has been commenting on the mobile and fixed telecoms sector since 1988. He is a regular speaker
and moderator at international conferences in Europe and Asia and conducts regular briefing sessions
with major banks, telecoms and IT vendors and operators.

3G
3G markets and technology

Until the end of 2003, the failure to launch 3G networks by operators around
the world was met with disappointment and a great deal of consternation,
chiefly from industry commentators and the press. As 2005 gets underway the
perception of the industry seems to have changed. Here, NICK LANE and
DEVINE KOFILOTO look at what the industry now expects from 3G and the
performance of pioneers, such as Hutchison Telecom.
Q: Surely 2005 will be the year of Nick Lane: With so many operators entering commercial 3G launches in 2004, you
3G? would expect 2005 to be the year when 3G hits the mass market on a global scale. At
the end of 2004, the number of 3G subscribers topped 26 million, with a breakdown
revealing that WCDMA had 16 million subscribers surpassing 1xEV-DO on 12
million. However, NTT DoCoMo ended the year with 8.5 million WCDMA
subscribers and 3 with an
estimated 7 million, while Global 3G subscribers (mil.)
1xEV-DO subs mainly came 4Q04 3Q04
from SKT and KTF in South
UMTS Forum WCDMA 16 10
Korea and KDDI in Japan.
CDG 1xEV-DO 12 10
The question is whether
2005 will be the year for 3G in
other regions. In the U.S. Selected 3G subscribers
Verizon Wireless has launched 3* WCDMA 5900759^^ 3256323^
its 3G service commercially.
NTT DoCoMo WCDMA 8,499,200 6,487,600
While Sprint PCS is not
expected to be too far behind O2 Germany WCDMA n/a 9,000
its fierce rival, Cingular Orange France WCDMA 16,000 n/a

Wireless is expected to launch TIM WCDMA 25,000
in 2006. Depending on the T-Mobile** WCDMA n/a 36,000
success of Verizon, 3G will
Vodafone*** WCDMA n/a 458,800
most likely become mass
market in the U.S. in 2006.
There are also mixed signs KDDI 1xEV-DO n/a 1,200,000
for Europe. Orange is SK Telecom 1xEV-DO n/a 5,962,000
targeting 2 million 3G KTF 1xEV-DO n/a 2,760,000
subscribers maximum by the ^ results release 18 Aug. ^^ results release 14 Dec.
end of 2006, while Vodafone * includes Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy, Norway, Sweden
is expecting 10 million by and the UK. ** includes Germany and the UK. *** includes Germany, Italy, Japan (366,400
3G subscribers) the Netherlands, Portugal, Spain and the UK
March 2006. Conflicting
Source: Company data, 3G Mobile
expectations from two of
Europe’s leading operators
suggests mass market take-up is an unknown. Analysing growth potential, Orange’s
figures indicate a greater sense of reality for the market, which is yet to see the
widespread commercial launches from T-Mobile and O2.

3G
Q: Almost two years after the Devine Kofiloto: With the exception of Japan and South Korea, a mass market for
launch of the first 3G network in advanced 3G services such as video telephony, music downloads, 3D games and video
Europe, how are 3G services now streaming does not currently exist. Outside Japan and South Korea, 55 operators
faring among consumers? worldwide had launched 3G services by end-2004, but consumers are yet to be lured
to this new world of multimedia service offerings. Though we are now beginning
to see some traction where Hutchison 3G’s 3G subscriber numbers are concerned,
there is still little evidence to suggest subscribers are beginning to warm up to these
services. The approach of Hutchison 3G, the 3G pioneer, of focusing its subscriber
acquisition strategy on cheap handsets and voice calls has not benefited the 3G
market as a whole. This strategy has largely led to the attraction of users of traditional
voice services and in general failed to stimulate massive awareness in the market.
Nick Lane: For the first couple of months in 2004 3’s performance across Europe
continued to be blighted by lack of handsets. Having addressed that situation with
handsets from Motorola and LG, the company ramped up its subscriber figures from
2.5 million in June to an estimated 7 million by early 2005. Handsets have helped
the operator, but its turnaround in fortunes is mainly due to its ability to offer cheap
voice calls. Granted, it can boast some of the industry’s highest ARPU rates of £43.22
(US$80.58) in the UK and €50.47 (US$65.39) in Italy, but data services contribute
only a nominal percentage. The operator says this is changing, with data services such
as soccer and music video download.
That said, the operator sees video telephony as the killer application for 3G, even
though the service is only successful in pockets for its various divisions. Until it can
harness its 3G network above and beyond its reliance upon voice, the fortune of 3 is
not guaranteed.
Q: But are data ARPUs really a key Nick Lane: Data revenues to a large extent reveal the performance of an operator’s
performance indicator for the data strategy for a nascent service in the short term. As fully-operational 3G operators
industry? are now discovering, maintaining a high data ARPU is an almost impossible task. In
South Korea, the average data revenue per user from 1xEV-DO services dropped
more than 55% in the year to end-June as SK Telecom and KTF migrated their mass-
markets customers to the high-speed data service. The average data revenue for both
operators was Won19,597 (US$17) in 2Q 2003 but had fallen to Won12,555
(US$11) by the end of 2Q 2004. Similarly in Japan, NTT DoCoMo has seen data
ARPU for its WCDMA FOMA service drop as more of the low-spending, mass-
market customers migrate over from 2G.
Concern for the operators should, however, only be short lived. For example,
DoCoMo is sitting on a potential 3G subscriber base of 46 million 2G customers.
The main issue for DoCoMo – and all 2G operators – will be to ensure they can
guard against churn and keep their customers when they migrate to 3G. Only then
will the data revenues flourish.
Q: What technological develop- Nick Lane: The case for HSDPA is already well underway with the technology on
ments can we expect to see in the roadmap of every WCDMA operator. The operators can all see the benefit of the
2005? speed upgrade, which will enable users to download services at speeds approaching

3G
2-3Mbps compared with the existing 384Kbps on WCDMA. Two strategies for the
HSDPA upgrade are prevalent: one is the obvious speed boost, while operators less
focused on the data market can use the software upgrade to bolster capacity for
superior voice services. The vendor community expect trials to begin 1H 2005 with
commercial launches expected in the latter half of 2005 by the more aggressive
operators.
Reports emanating from South Korea suggest that LG Telecom has become the
first operator to trial 1xEV-DV. And with progress expected to be made on EV-DO
Rev. A during the course of the year, advances are being made by both existing 3G
technologies. However, the evolution path for 3G beyond 2008 remains unclear in
what has effectively become a void in the 3G roadmap until the advent of 4G.
At recent 3GPP members’ meetings, leading companies presented their notion for
the future. The one that caught the media’s imagination was Super 3G from NTT
DoCoMo, which was effectively the most commercialized presentation of the
industry’s recommendations for the future. To evolve UMTS, the wireless industry
is about to embark on work for speeds approaching 100Mbps in the downlink and
50Mbps in the uplink using a variety of bandwidths ranging from 1.25MHz to
20MHz for existing and new frequency bands.
One of the technologies that has the backing of the majority of the industry is
OFDM. Already touted to be the technology of choice for 4G, the emergence of
mobile broadband alternatives to wireless such as WiMAX, could force the earlier-
than-expected inclusion of OFDM into the wireless arena.
Nick Lane is Editor of 3G Mobile

Nick has been a telecoms journalist for eight years and joined Informa in October 2000 as launch
editor for IP-Core Network Analyst. Prior to that, Nick worked for Phillips where he launched a number
of titles, including Capacity Wholesale Magazine, Telecoms Deal Report and Telecoms Pricing
Bulletin. Nick became editor of 3G Mobile in August 2004 and now specializes in covering networks,
technology and standardization. He was also lead author of the 3G Network Planning report,
published by Informa in June 2003, and author of IP-Core Networks report, published by Informa in
April 2001.
Devine Kofiloto is a Principal Analyst with Informa Telecoms & Media’s Data division
Devine is responsible for co-managing the research analyst team. His area of expertise covers an in-
depth understanding of the mobile industry with a focus on the Nordic markets.
Devine’s research focus has also included the mobile data space, where he has done extensive work
on messaging and PTT within the European market area, examining key market drivers, market
trends, as well as analysing technological developments within this space.
Informa Telecoms & Media provides business intelligence and strategic services to the global telecoms
and media markets. We specialise in working with organisations to help them achieve strategic
advantage.
Our technology coverage includes:
• Infrastructure and networks, hardware and software
• Handsets and devices.

3G
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Beyond 3G
Alternative wireless broadband

Developments such as WiMAX, Wi-Fi and Ultrawideband could be a major
threat to the 3G community. The 802.16e mobile version of WiMAX is based
on OFDM, which can deliver speeds of at least 1Mbps. OFDM will also play a
role in the development of next-generation cellular standards, including NTT
DoCoMo’s recent proposal for Super 3G, which aims to add OFDM and MIMO
to 3G to boost data rates to 30-100Mbps. Here, MIKE ROBERTS looks at how
the 3G and the broader mobile industry could be disrupted by emerging
wireless broadband technologies.
Q. When will we see mobile WiMAX Mike Roberts: The 802.16e standard is not finalized. The WiMAX Forum says this should
deployed? happen in 1Q 2005, which means vendors could ship 802.16e products next year. But
keep in mind that the WiMAX Forum is running about a year behind its initial schedule
for bringing the 802.16-2004 fixed-wireless version of WiMAX to market. The IEEE
finalized the standard on schedule in mid-2004 but the WiMAX Forum missed its initial
target of launching interoperability certification in 4Q 2004, so delayed it to 1Q 2005.
However, it has just conceded that it will miss that deadline as well, so has delayed
certification to 3Q 2005.
South Korean operators KT, SK Telecom and Hanaro are likely to be the first out of
the gate with services based on WiBro, the Korean wireless broadband standard that is in
the process of merging with 802.16e mobile WiMAX, following an agreement between
Samsung and Intel.
In January the Korean Ministry of Information and Communication awarded the
country’s three WiBro licenses to SKT, KT and Hanaro. Each operator will pay Won117
billion (US$114 million) in several instalments for their seven-year license for 2.3GHz
spectrum, and will have to invest at least Won1 trillion (US$973 million) to roll out
WiBro services, which should deliver data speeds up to 1Mbps and mobility up to
60km/hour.
Samsung, which was instrumental in developing WiBro and has also been involved in
creating 802.16e, says it is developing 802.16e products for commercialization in Korea
by the first half of 2006. Samsung has also recently joined the WiMAX Forum, which
some observers have taken as a sign that the vendor sees WiMAX rather than cellular-
heritage technologies as the best platform for the next generation of mobile broadband
services beyond 3G.
Q. How is the public WLAN market Mike Roberts: The PWLAN market has exploded in the last year, particularly coverage.
developing, and what role are Our research shows that the global public WLAN market more than doubled from
mobile operators playing? 33,944 hotspots at the end of 2003 to 69,759 at end-04. Mobile operators played a major
role in the increased coverage, notably Orange France, which leaped from 839 hotspots
at end-2003 to 6,500 by end-2004 (see fig.).
Not all mobile operators are deploying hotspots, however. In the UK, two top operators
- Vodafone and O2 - recently introduced PWLAN services based on networks owned by
other operators. Vodafone is using the network of BT Openzone, and O2 has teamed

Beyond 3G
with both BT Openzone and The Cloud. Both mobile operators have bundled PWLAN
services with their new 3G/GPRS data services.
Public WLAN hotspot coverage in France by operator and quarter

Operator Type Launch 1Q04 2Q04 3Q04 4Q04 4Q05e
Orange France Mobile Feb-03 2,200 3,578 5,300 6,500 10,000
Swisscom Eurospot Startup Mar-03 110 141 141 266 400
Meteor Networks Startup Jul-03 87 165 212 240 350
SFR Mobile Feb-03 90 165 179 179 200
All Telecom Startup Aug-03 115 130 150 171 250
HotCafe Startup Jul-03 57 63 42 42 42
ADP Telecom Startup Apr-03 40 40 40 41 41
Wifix Startup Nov-02 34 45 38 38 38
Total 2,733 4,327 6,102 7,477 11,321

Source: Wireless Broadband Analyst Database
Q. Will the introduction of HSDPA Mike Roberts: Yes, or at least that’s the view of some major UMTS vendors. They argue
impact the public WLAN market? that HSDPA will be deployed this year as a way to boost UMTS data speeds in hotspots
such as airports, conference centers and hotels - which is of course exactly where public
WLAN hotspots are available.
Certainly HSDPA could turn UMTS into a true wireless broadband service, increasing
speeds to an average of 800Kbps and peaks of 1.5Mbps, compared with peak rates of
384Kbps on today’s UMTS networks. That may not be as fast as PWLAN services, which
can deliver 5Mbps or more, but HSDPA has the advantage of being fully integrated into
UMTS, so all UMTS services will work over HSDPA.
Although mobile operators are already offering PWLAN services alongside their
3G/GPRS data services, subscribers can only use PWLAN access for basic Internet access,
not for 3G services such as video calls.
However, it’s unlikely that HSDPA will displace a substantial number of PWLAN
hotspots, for the simple reason that PWLAN hotspots are a very cost-effective way to
provide basic in-building wireless broadband services. Mobile operators will no doubt
deploy HSDPA in some major hotspots such as airports as a way of improving their basic
3G services, but 3G economics mean that tariffs are likely to be significantly higher than
those for PWLAN services. That would give operators an incentive to run the networks
side by side, so customers willing to pay for advanced services could use HSDPA, while
those wanting low-cost, basic Internet access would still have the option to use PWLAN.
Q. When will we start to see VoIP Mike Roberts: Major VoIP operators in the US are just coming to market with Wi-Fi
over Wi-Fi services? voice handsets, and they have taken a leaf out of mobile operators’ playbooks in that they
plan to subsidize the handsets to grow the market. Wi-Fi handsets offer the prospect of
low-cost calls from anywhere in the world where there’s a public or private Wi-Fi network,
but it will be a while before that prospect threatens mobile operators.
Vonage says it will sell a new Wi-Fi handset from UTStarcom for US$100 from the

Beyond 3G
second quarter as the first of several planned Wi-Fi products, and Net2Phone has released
a Wi-Fi phone at US$160 from an unspecified manufacturer. Vonage has even said that
it may subsidize Wi-Fi handsets to get the price closer to US$50. By comparison, a
number of analysts predicted that Wi-Fi phones would hit the market this year priced at
near US$270.
Proprietary VoWi-Fi services have been used for years in niche segments like
warehouses, but in the last year vendors have started to ship more standards-based VoWi-
Fi products designed for mainstream enterprise and consumer use. For example Motorola
has teamed with Proxim and Avaya to launch a converged cellular and VoWi-Fi service
for enterprises, and RIM recently detailed plans to launch its first Blackberry supporting
WLAN voice and data services.
Q. How is the Ultrawideband Mike Roberts: The UWB standardization process is still well and truly stalled, to the
market developing, and when will extent that the two rival camps have decided to go to market with their own flavor of
we see the first UWB-enabled UWB. The direct-sequence UWB camp, led by Freescale Semiconductor, says consumer
mobile phones? products using DS-UWB will ship in the U.S. this year, which is a delay on earlier
predictions of shipments by 4Q 2004. Freescale started commercial production of its first
UWB chipset last year.
The other camp, led by Texas Instruments and others in the Multiband OFDM
Alliance, says MBOA members will start sampling silicon in 1Q 2005, leading to
commercial production in 2Q 2005 and consumer products with MB-UWB by end-
2005. In November the MBOA-SIG announced that it had finished the physical layer
element of its specification, and was confident that it would finish the MAC layer – and
thus complete the 1.0 version of its specification – in 4Q 2004. However the group missed
that deadline and is now aiming to finalize its MAC layer and full UWB standard in 1Q
2005.
Both camps are very focused on getting UWB into mobile phones, since that’s when
they’ll start to ship huge volumes. Major vendors say they expect to see UWB-enabled
handsets as early as 2006, which means they are likely to actually hit the market around
2007-08. Freescale and former parent company Motorola conducted one of the first
public demonstrations of an UWB-enabled mobile phone at the recent Consumer
Electronics Show in January, but did not detail when they planned to ship commercial
handsets.
Q. How big is the market for UWB? Mike Roberts: All the hype about UWB has tended to obscure the fact that it currently
only legal in one major market worldwide, the U.S., and the technology will certainly not
debut in mobile phones until it is legal in most of the world. That process alone could
take at least two years, given that many regulators in Europe and Asia are in the early stages
of evaluating whether to legalize UWB.
However, in January UK telecoms regulator Ofcom announced proposals to become the
first major market outside the U.S. to legalize UWB for use in consumer devices. Ofcom’s
consultation on UWB closes on March 24, a few weeks before the European Commission
is scheduled to decide whether it should try to adopt a harmonized approach to UWB
across the EU.

Beyond 3G
Mike Roberts is Editor of Wireless Broadband Analyst and 3G Mobile Evolution

Mike has over 15 years’ experience covering the telecoms, information technology and other industries and
is a frequent chair and speaker at industry events such as 3GSM World Congress, Public WLAN Hotspots
and Wireless Connectivity. He also authors strategic market reports for Informa Telecoms & Media, most
recently Wi-Fi Hotspot Operator Case Studies and Bluetooth Status Report: Devices, Applications & Case
Studies. Mike graduated with a BA in economic history from the University of Virginia in 1989 and
researched international economic relations at the London School of Economics in 1991-92.
advantage.

Find out more about our complete product portfolio at:

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Mobile Content
Services and applications

SMS still rules the roost in terms of mobile data revenues in Europe and most
of Asia. But signs are finally increasing that there is reason to be optimistic
about non-SMS data services growth such as the download of ring tones, logos
and games. Here, JESSICA SANDIN and RICHARD JESTY identify the leading
trends in the mobile entertainment world today.
Q: How big is the download Jessica Sandin: According to the second edition of Informa Telecoms & Media Group’s
business? Mobile Music report, global ringtone sales reached US$4 billion in 2004. Ringtone
growth has very rapidly switched from monophonic to polyphonic tones, with real-music
ring tones also starting to show promise as devices enabling these become more
widespread.
In Europe over the past year, we have seen the market for downloadable mobile games
starting to grow substantially. Anecdotal evidence from operators suggests that there are
still relatively few mobile gamers spending money – although some of these players buy
a lot of mobile games. This means we’re seeing early adopters in this particular segment.
The challenge for the mobile games industry will now be to ensure it is releasing games
that are intuitive and compelling enough to be suitable for a much wider mass market.
As they get ready to embrace new technologies such as multiplayer or 3D games, there is
a risk that the industry could lose sight of the ‘casual gamers’ that are expected to bring
in the big bucks in gaming.
Another encouraging sign is the quiet but steady rise in WAP usage. The much-derided
technology now works – by and large – and features color and pictures. Not surprisingly,
this is driving more users to check out the mobile Internet. For example, figures from the
UK’s Mobile Data Association clearly show significant increases in WAP page impressions
month-on-month.
But while these developments show mobile data usage moving in the right direction,
there is still a lot of work to be done to turn the broad mass-market into mobile media
consumers.
Q: What are the services and Jessica Sandin: Both music services and mobile video and TV are addressed in separate
applications to watch in 2005? sections – and there are very interesting developments in both these sectors.
While games downloads are also growing, there is another very interesting aspect of
Java content development, as we’re finally starting to see the emergence of non-gaming
Java applications. It’s still early days for this area, but some brands are launching Java
applets that they market directly to consumers, independently of operators.
Directory company Yell.com has, for example, rolled out a J2ME applet as part of its
service in the UK. Interestingly, the application and basic search functions are provided
for free – users only pay for premium services such as maps showing the location of a
business, or directions. Charges are still low, at £0.25 (US$0.47) per service. In Sweden,
tabloid Expressen offers a J2ME sports results service. Users download the application
and can then select the sports and teams they want to receive details on.

Mobile Content
While usage of Expressen’s sports service is still limited, an increasing number of these
services available directly from brands could both help introduce new users to mobile
data and also shift the balance in the mobile content market further away from operator
portals towards more of a direct-to-consumer dialogue from brands.
Mobile payments and commerce is also seeing increased activity. This area was much
hyped a couple of years ago – now it looks like it may finally be on the verge of taking off.
Q: What other developments can Jessica Sandin: This is a very interesting area. While operators are seeking to satisfy a range
be seen in this direct-to-consumer of service needs on their portals, it’s impossible for them to offer the full scope of services
drive? their wide range of customers will be looking for. Furthermore, there are some services –
such as adult content – that operators are keen to monetize but may not necessarily want
to have on their portals in many markets due to a fear of damaging their brands. If
operators act as the billing conduit, they can still make money off these services.
To take advantage of this, operators clearly must not operate walled gardens but allow
off-portal content. They are concerned, however, about issues such as how content control
– such as age verification - for off-portal services will work.
On the content side of the mobile media coin, content owners – both large brands
such as Disney or record labels and the smaller players – are keen to complement any offer
they have on operators’ portals with a direct-to-consumer service. A D2C offer enables
them to offer cross-network services, use their own sales and marketing channels to market
content and also allows them to keep a greater share of the revenue pie.
For content owners, this model nevertheless remains problematic for any company
that doesn’t already have some sort of channel – be it marketing or retail – to their
customers. These companies will need to invest in marketing to ensure customers can
discover the service.
The D2C model is already proven through Premium SMS. We’ll see a growth in WAP
billing alternatives, and the launch of Simpay, the cross-network billing enabler, will open
up further opportunities for content owners to bill for content and operators to get a slice
of the revenue by billing for it. Furthermore, there are other options, such as retail sales
of content, being tried out.
The whole D2C area is definitely one to watch in 2005.
Q: How do you see mobile content Richard Jesty: The first thing to say is that with mobile content, as with any digital
being delivered to the mass- product, there are a few key differences compared with distribution of hardware products
market consumer in future? like mobile phones and accessories. One is the importance of the direct route to market
– for example via premium SMS, direct response via a call centre or access via a mobile
or web portal. We estimate around 95% of mobile content is currently distributed direct
in this way. To reach mass market audience, mobile value chain players need to get a
balance between this kind of direct delivery and indirect delivery via distributors and
retailers. Mobile phone specialists and operator-owned stores are fine for high value items
which need a lot of advice and support, but the key issue that content providers, operators
and brand owners are all facing is how to put lower priced items such as games or music
in front of a mass audience on the high street or in a shopping mall.
We’re seeing a few different approaches to this issue of developing new channels – one
way is to set up multimedia kiosks in retail stores so that consumers can ‘browse and buy’

Mobile Content
online by using a touchscreen and downloading content to their phone via a Bluetooth
link. This approach also allows distribution outside the normal type of retail environment,
for example at a sports stadium. This has already been piloted with good results at an ice
hockey stadium in Finland, where fans were able to download team details and update
information using a special Bluetooth-enabled kiosk.
Another way is to distribute mobile content in a pre-packaged form so that consumers
can pick it up in a self-service environment from a supermarket or consumer electronic
store. There are various possible formats, but one which is worth watching is the emerging
trend for music and games to be offered on SD cards and targeted at mobile phones
equipped with the appropriate card reader.
With all of these developments going on, the issue of managing channel conflict is one
of the most complex areas of the entire mobile distribution arena, because it deals on the
one hand with the convergence of the pure mobile specialist channel and the mass market
retailer, and on the other with the integration of both the direct and indirect routes to
market.
Jessica Sandin is Head of Portfolio and Principal Analyst, Mobile Content & Applications
Jessica currently manages Informa Telecoms & Media’s portfolio of premium products covering mobile
content & applications. Tracking the mobile data industry on a daily basis since 2000, she has built up
unrivalled expertise in all aspects of the mobile entertainment, content & services space.
Richard Jesty is a Senior Consultant at Informa Telecoms & Media

Richard focuses on mobile content and services worldwide. Over the past four years, he has built up an
in-depth knowledge of the market, developing in-house original online research and carrying out a
number of consultancy assignments in Europe and the U.S.
Richard is the lead author of a range of strategic reports focusing on the global mobile services market,
including Mobile Distribution and Retail, Mobile Payments, Mobile Content and Applications and Mobile
Enterprise.
advantage.
Our content coverage includes:

• TV, Film, Music, Games
• Mobile content and applications, including consumer and enterprise markets.

www.informatm.com
Mobile Entertainment Market 05

London, June 2005
MEM05 is the flagship mobile content event of Informa Telecoms & Media and the Official event of the
Mobile Entertainment Federation. Over 750 participants gathered for MEM04 MEM proved itself as the

Mobile Content
place to do business for the mobile entertainment industry, with a teeming market-floor and several of
the conference tracks being reduced to standing-room only.
MEM05 has two major developments, the move to a larger venue enables the event to accommodate a
far larger audience, and a more extensive exhibition. MEM05 will also run alongside Informa Telecoms &
Media Global Messaging Congress. Running for eight years, this conference regularly attracts those at
the cutting edge of mobile MMS and SMS Value Added Services.
Find out more at www.mem05.com

Mobile Content
Mobile Games
Mobile operators do not generally release detailed information about their
mobile games downloads or revenues. Likewise, distribution channels do not
share such data while mobile games publishers and developers are prevented
from doing so under the terms of their commercial agreements with the
operators or portals. Here, PAMELA CLARK-DICKSON examines the
importance of mobile games to all the companies in the value chain.
Q: Are mobile games generating Pamela Clark-Dickson: There is a lack of transparency that suggests that revenues are
sufficient revenues to provide a relatively low. What information has been made publicly available also suggests this,
viable business for all concerned? despite analyst reports to the contrary.
Mobile games, selected operators
Country Operator Time Subscribers Usage

period (at end-period)
W.Europe
Austria One Jan-Apr 04 1,415,000 50,000 Java games downloads
Spain Telefonica Moviles 1Q04 19,939,000 600,000 games downloads per month
UK Vodafone 2Q04 12,907,000 Est. 50,000 games downloads per week
N. America
U.S. Sprint PCS Jan-May 04 16,281,000 3.5 million games downloads
Asia-Pacific
India BPL 1Q04 2,502,754 2,000 games downloads per month
Airtel Apr-04 1,370,203 40,000 games downloads per month.
User base: 5,000
Hutchison Essar May-04 712,967 75,000-80,000 games downloads per month.
17,500 users
Hutchison Essar Nov-03 482,317 Two free games launched in November holiday
season generated 25,000 downloads from
12,000 unique users in seven days.
Sources: Company data, Mobile Media
Yann Mondon, brand and communications senior manager at France-based mobile

games outfit In-Fusio, recently estimated that mobile games generated global revenues
of US$1.34 billion in 2004 – an increase of more than 100% on the 2003 revenues of
US$350-500 million. The bulk of these revenues – US$300 million in 2003 – will have
been generated in Japan and South Korea. In-Fusio bases these figures on the data that it
is able to collect using the games delivery platform it provides to a number of operators,
and also in its discussions with competitors.
What is clear, however, is that mobile games are an important contributor to most
operators’ mobile data growth. Vodafone UK’s live! portal is reportedly generating £1
million (US$1.8 million) per month in revenues for the operator, sources say. Meanwhile
Spanish operator Telefonica Moviles Espana is attracting 600,000 games downloads per

Mobile Content
month. Publishers are also talking about downloads in the region of thousands per day
per operator for a branded title.
Q: How easy is it for games Pamela Clark-Dickson: Larger, more established games developers with portfolios that
developers to obtain operator include branded titles – such as Germany’s Elkware, U.S.-based Jamdat, and France-based
distribution for their portfolios? Gameloft – have reached the point where they can routinely deal directly with Tier 1
operators such as Vodafone, T-Mobile, Orange and O2.
However most operators’ games departments do not have large teams of people so it
is becoming more difficult for smaller games studios to establish direct relationships with
the larger mobile operators. Operators’ heads of games are now advising the smaller
studios to approach the publishers – such as UK-based Digital Bridges and U.S. outfit
Mforma – that the mobile operator deals with instead.
The smaller games developers may also make better inroads by dealing directly with the
Tier 2 or Tier 3 operators, which may be overlooked by the larger developers or publishers.
Obtaining global distribution has also become a business opportunity for companies
like the UK-based Telcogames, which acts as a kind of super-publisher for developers and
publishers that want to distribute their games broadly within a short timeframe, through
channels that they themselves cannot service.
Q: Why is there so much interest in Pamela Clark-Dickson: Even though mobile games are generating revenues, and the
licensing branded intellectual industry could be said to be viable by virtue of the fact that it is growing both organically
property? and through investment, the revenues are still not significant enough that mobile
operators, publishers and developers can afford to conduct large-scale marketing
campaigns for mobile games.
Instead, mobile games publishers and developers license IP, which they expect will have
a level of brand awareness that will make it easier to sell a game with very little marketing.
Brand awareness also tends to engender a perception of quality on the part of the
mobile subscriber. It has become increasingly clear that this perception bears no
resemblance to reality. It is still the case, for the most part, that a publisher will spend
an inordinate amount of money licensing the IP, and substantially less on producing a
quality mobile game.
This is changing, slowly, as the brands themselves increase their knowledge of the
mobile games space – particularly with regards to determining those games developers
who produce quality games. Operators are also increasingly focusing on quality, and are
culling their games catalogs of titles that are of poor quality or that are not generating
enough downloads.
Q: Is there more to multiplayer Pamela Clark-Dickson: Multiplayer gaming appeals to mobile operators because it will
gaming than hype? be a means for them to generate recurring traffic revenues and establish alternative billing
models such as subscriptions. Operators are also keen to build communities around
multiplayer games in order to drive consumer awareness and uptake. This is a business
model that will be further progressed throughout 2005.
Graham Thomas, vice president of content and services at T-Mobile International told
delegates at the Games Developer Conference in London in September that T-Mobile
needs online games in order to not only increase its mobile data revenues, but also to
provide more advanced services for its more active mobile gamers.

Mobile Content
However, many mobile operators remain reluctant to launch multiplayer games, simply
because the business models remain unclear. Many are also still trying to establish their
single-player downloadable games business.
Pamela Clark-Dickson: The business model for 3D mobile games is even less clear than
that for multiplayer gaming. As with multiplayer games, a key industry concern is that
Q: What about 3D mobile games? there is not yet mass-market uptake of 2D games.
However, a number of operators did launch 3D games by end-2004 – most notably
Vodafone - in conjunction with the launch of their 3G consumer services and handsets.
3D games – while visually more compelling – will be more expensive to produce, will
have larger file sizes and will require more processing power from mobile phones.
Estimates are that a 3D Java game will cost on average US$150,000 to produce -
compared with US$50,000 for 2D game – which means that not only will fewer games
studios be able to afford to develop 3D games, but that those games that are developed
and offered at retail will likely be more expensive to purchase than 2D games.
The higher file sizes of 3D mobile games – which may be up to 16MB – could also be
a problem for network operators, which will have to determine whether they offer 3D
games as over-the-air downloads, embedded into devices or on memory cards.
The playing of 3D games on mobile phones may also run down the battery of the
device more quickly, which will not please mobile operators since the bulk of their
revenues are still derived from voice calls.
Pamela Clark-Dickson: The jury is also still out as to whether there is a market for mobile-
games-centric, wireless-connected devices. The reception for Nokia’s N-Gage has been
Q: Is there a place in the market lukewarm, with just one million devices shipped since launch in late 2003 – although it’s
for mobile-games-centric, wireless unclear how many N-Gages are actually in consumers’ hands.
-connected devices? Initially, the device’s poor design limited take-up – users had to remove the phone’s
battery to install a games memory card, and making phone calls using the device was
ungainly. These shortcomings were remedied in the N-Gage QD.
Nokia’s retail strategy for the N-Gage also proved to be difficult to realize, since it is
trying to sell the device through mobile phone retailers – which are generally not familiar
with selling software titles – and through games outlets, which tend to know very little
about selling activation plans. The vendor is also working to address these issues.
On the one hand, the N-Gage’s poor performance could bode ill for devices such as
Tiger Telematics’ Gizmondo and the Tapwave Zodiac. These devices have limited wireless
connectivity – primarily Bluetooth and wireless LAN – but not voice, which means it is
unlikely that operators will generate revenues from them. However, the Gizmondo should
prove more attractive, since it will also include wireless data capabilities such as GPS,
GPRS, MMS and SMS.
Pamela Clark-Dickson is Editor of Mobile Games Analyst and Associate Editor of Mobile Media
Pamela analyses mobile data developments every fortnight in Mobile Media & Mobile Games Analyst.
She has extensive expertise in the mobile games sector as well as thorough expertise in all aspects of
the mobile content and applications industry.

Mobile Content
advantage.


www.informatm.com
Mobile Games – Management Report
Mobile Games presents an in-depth analysis of the mobile games sector, providing forecasts and market
intelligence. The report includes coverage of the leading players in the industry and takes a detailed
look at the mobile games value chain and business models. It also examines device issues such as Java
fragmentation, and investigates emerging markets including multiplayer and 3D gaming.
Published: April 2005

Find out more at www.telecoms.com/mobilegames

Mobile Content
Messaging
SMS is continuing to boom in markets such as the UK where 25 billion
messages were sent in 2004. MMS has experienced a difficult start and is not
generating much excitement from the end-user while operators are now busy
promoting Push To Talk as the ‘Next Big Thing’. Here, STEVE MAYALL takes
an in-depth look at the latest developments that are driving the messaging
industry including fixed-line SMS and Mobile IM.
Q: Is SMS growth levelling off in Steve Mayall: We have been seeing slow and steady SMS growth in many European
Europe? territories, for example in areas across Eastern Europe as well as in previously sluggish
markets like France. This is only to be expected. While those who use SMS are
maintaining a constant level, the demographic of SMS users is slowly expanding.
Territories where there is room for expansion in mobile penetration show a relative
curve upwards in SMS use as well. We have not seen rival messaging bearers have an
impact on SMS traffic in any European territory.
Interestingly, even within single territories there are differences emerging between the
SMS growth patterns of rival operators. Some have been more successful in marketing
SMS to their subscribers and therefore have discernibly higher usage rates. Given that
SMS can represent between 15- 20% of an operator’s revenue it should be a key strategic
focal point for operators.
Application messaging is also steadily increasing, primarily driven by the use of
premium SMS as a billing mechanism for mobile content including ringtones. However,
as operator portals become more of a base for traffic, and as WAP billing is extended to
billing aggregators, we expect this traffic to drop. In addition content services like
horoscopes will be replaced over time by A2P MMS.
Therefore we expect P2P messaging to show slow growth but A2P messaging will begin
to drop off in parallel with the introduction of WAP billing and MMS growth.
Q: Will the emergence of fixed line Steve Mayall: Not in the short term - at the moment fixed line SMS traffic volumes are
SMS help to grow traffic? very low. The service was first launched by Telecom Italia and Deutsche Telekom late in
2002 and the latter has still only managed to gain around 500,000 subscribers. Part of
the reason is that there are two competing services in Germany and, as with mobile SMS,
significant penetration only occurs when there is full interoperability.
The early signs are that Eastern European countries may see healthier growth for fixed
line SMS before Western Europe. One reason is that there is still room for growth in fixed
line penetration so as more households buy new fixed handsets they are likely to choose
DECT handsets with SMS functionality. In the West more people are choosing to replace
their fixed lines with mobile phones. However, in general, European fixed line SMS will
lead the U.S. market, where SMS has so far failed to match the rest of the world, and also
the Asian market where fixed line penetration is not as high.
Q: Is MMS likely to take off & if so Steve Mayall: This is the billion dollar question. Operators and vendors around the world
when? disagree on whether MMS will be driven by A2P or P2P content. At the moment, though,
most agree that traffic is disappointing (see fig.).

Mobile Content
MMS traffic
Country Operator Traffic - millions of messages
Q1 2004 Q2 2004 Q3 2004
Western Europe Austria Mobilkom 0.70 0.80 0.90
Austria Connect 0.70 0.75 0.80
Belgium Mobistar 2.80 3.40 4.50
Denmark Orange 0.50 0.70 0.90
Croatia VIPNet 0.60 0.80 1.00
Denmark Sonofon 0.43 0.43 0.53
Denmark TDC 0.40 0.69 1.00
Denmark Telia 0.47 0.70 0.90
Finland Sonera 0.65 0.67 0.80
Greece Cosmote 2.37 2.90 3.40
Italy TIM 15.30 13.70 27.20
Norway Netcom 1.59 7.10 8.20
Norway Telenor 3.40 7.00 13.00
Sweden Telia 2.11 2.60 3.90
Eastern Europe Lithuania Omnitel 0.12 0.16 0.24
Lithuania Bité 0.14 0.16 0.19
Romania Orange 0.12 0.13 0.16
Russia KB Impuls 0.24 0.27 1.00
Slovenia Mobitel 0.32 0.37 0.83
Estonia Radiolinja 0.04 0.05 0.07
Middle East and Africa Jordan JMTS 1.20 1.09 1.11
Kuwait Wataniya n/a 3.53 3.50
South Africa Vodacom 1.05 1.86 1.86
Americas USA Verizon 21.00 21.00 25.50
Bolivia movil de Entel 0.01 0.02 0.02
Mexico Telcel 36.00 45.00 63.00
Asia Pacific South Korea KTF 17.00 23.00 27.00

Source: Mobile Media
Interoperability issues are beginning to be resolved but transcoding and interface issues
are still contributing to a poor user experience. In addition pricing models are seen as
confusing and the prices themselves are generally too high for mass market use.
On top of this, because operators still do not know what to expect from user behavior,
they are not sure how to dimension their MMS systems. But since traffic is still low this
has created a market opportunity for vendors looking to enhance the capacity of operators’
MMSCs to handle A2P traffic.

Mobile Content
Operators are focussing on ways to generate revenue from the MMS channel. And
while P2P traffic is not showing huge growth, brands may be interested in the marketing
opportunities in A2P MMS which could have the advantage of stimulating traffic and
also generating interest and awareness in MMS.
Also the penetration rate of MMS-enabled handsets is expected to hit 30% after the
Christmas season in Europe and the U.S. When this happens, P2P traffic may pick up –
although operators still need to resolve critical transcoding and pricing issues in Europe
and interoperability issues in the U.S.
If MMS becomes more affordable for consumers, then P2P traffic will inevitably rise.
Otherwise operators will have to hope that A2P marketing and content services become
successful.
Q: What are the opportunities for Steve Mayall: Mobile IM has remained on the starting blocks for several years now, but
mobile instant messaging? the U.S. is finally looking like it may lead the way. It is now possible to buy handsets in
the U.S. with pre-installed messaging clients that can connect to all four IM communities
(Yahoo! ICQ, AOL and MSN). The fixed IM community of 140 million users is the same
as the base of mobile phone users in North America and the combination of the two is
therefore instantly compelling.
Yet obstacles remain. The user interface is still clunky. Users need to open a client and
log in to send and receive messages and current applications will log out if a call comes
in. Also commercial agreements between operators and the big four IM communities are
not settled.
Cellcos are not clear whether to adopt subscription models for IM or bill per event.
And fixed IM providers have experimented with mobile functionality as a premium
service, but so far this has been met with resistance from the IM community.
Nevertheless, there is demonstrable IM traffic in North America at last and European
operators are starting to scale back their ambitions to build their own IM communities
and may embrace the fixed line communities instead.
Q: Will push to talk have a Steve Mayall: Not immediately. Nextel has 35% higher ARPU than its rivals and a lower
significant effect on operators’ churn rate, which is largely attributed to it being the only U.S. network to offer PTT until
ARPU? recently. However, although PTT has now become the hot topic in messaging, it will take
a while before services start to take off.
This is because many operators are looking to deploy PTT over their data network, as
opposed to using the voice channel. This requires investment in more sophisticated
architecture, and many operators are rolling out PTT in tandem with the upgrade of the
network IP Multimedia Subsystem.
As a result PTT won’t become available overnight, and since most operators believe
that interoperability is crucial for its take-up in the consumer market, rollouts will only
happen as fast as the slowest operator.
Nevertheless, there is much momentum in PTT. There will be many deployments
before the end of this year and next year. Perhaps a bigger issue is whether consumers will
be interested in something as apparently retrograde as walkie-talkie technology on their
mobile phones. Nextel’s PTT users have largely been business users and some operators
– including Orange and T-Mobile – have launched or announced PTT services for these
segments.

Mobile Content
Steve Mayall is Assistant Editor of Mobile Messaging Analyst and Senior Reporter on Mobile Media
Steve is a mobile and music analyst, commanding extensive expertise in the areas of mobile music and
mobile messaging. He follows the general mobile content & apps business on a daily basis and was also
a co-author of both editions of Informa’s Mobile Music report and contributed to Operator Strategies for
Messaging and Mobile Data, a report examining five European Tier 1 operators, also published by Informa.
advantage.


www.informatm.com
Global Messaging Congress

London, June 2005
This year’s event builds on the great success of 2004, where Informa Telecoms & Media brought together
their world leading SMS Congress and Mobile Multimedia Messaging Conference
to create the Global Messaging Congress & Expo.
The 2005 Congress consists of an opening keynote session and two concurrent streams, looking at
maximising current messaging technologies & analysing developing new technologies, including MMS.
This leading 2-day Congress also provides key company case studies, invaluable for benchmarking your
company’s performance in the industry.
The exhibition will provide delegates and exhibition visitors with the perfect showcase to learn about all
the latest messaging products and understand how messaging can benefit their business.
Attendees to last year’s Global Messaging Congress included 33% board level executives and 24%
product managers with companies attending ranging from major operators and messaging vendors to
content providers, application developers and enterprise users.
Find out more at www.globalmessagingcongress.com

Mobile Content
Mobile Music
Informa estimates that the global value of the ring tone market in 2004 was
US$4 billion and will continue to grow over the next few years, particularly as
the North American ring tone market is beginning to pick up. However, the use
of real music ring tones is seeing more and more disputes between the record
labels, music publishers, operators and WASPs. Here, STEVE MAYALL and
JESSICA SANDIN look at the future of the market as well as the likely impact
that ringback tones will have.
Q: Has the value of the ring tone Steve Mayall: We believe 2005 will be a strong year for growth in North America, and
market peaked around the world? globally the market for real music ring tones (real tones) – as opposed to monophonic or
polyphonic tones – will continue to drive growth.
However, in more established markets like western Europe the market may have peaked
for a number of reasons – consumers only have limited disposable income for mobile
content and penetration of ring tone capable handsets is hitting saturation.
Revenue growth is likely to slow over 2005, and the industry is moving to curb the
new rogue elements in the ring tone area offering subscription-based mobile content
services. Recent guidelines issued by the Mobile Entertainment Forum in collaboration
with the operator community aim to curb the practice of misleading subscription services.
Many ring tone subscription services offer the consumer one free tone and then continue
to charge the consumer every week on a subscription basis for tones that the user may not
want, or may not be aware they are paying for. While this practice may generate revenue, it
is more damaging in the long term if consumers begin to feel they are being ripped off.
In addition, some handsets are coming onto the market that allow consumers to record
or make their own ring tone. Many mobile operators do not want this type of
functionality in the handsets that they specify, so the proliferation of such devices is still
limited, but consumer demand might cause the market to open up so that more of these
kinds of devices are available. Also some companies, for example U.S. software outfit
Xingtone, provide software which enables consumers to upload ring tones directly from
the PC to the mobile.
Disputes over revenue shares for real tones may also hold up the growth of ring tones,
as record labels, music publishers, operators and WASPs struggle to find a revenue share
which is acceptable for all parties.
Monophonic and polyphonic tones do not use recordings, so the ringtone industry
evolved without having to deal with record labels. Now with real music ring tones the
labels are involved and are demanding a high royalty rate. As a result many WASPs offer
soundalike tones to avoid paying labels, but this has caused friction within the industry
as labels are now starting to refuse to deal with companies that offer such tones.
Nevertheless, there is still momentum and enormous revenues in the ring tone industry,
and income from the sector is not likely to subside anytime soon.
Q: Will ringback tones be as Steve Mayall: In South Korea, where ringback tone services were first launched, they now
successful as ring tones? generate more revenue than ringtones, leading to high expectations around the world.

Mobile Content
There have been a number of deployments in 2004 with many more due in 2005 but
there are already signs that ringback tones must be marketed successfully or their success
is far from guaranteed.
T-Mobile was the first operator to launch a ringback tone service in Europe starting
with the UK in December 2003 and reaching five territories within a year. But while the
early signs were promising, with 500,000 subscribers by June 2004, the takeup seemed
to slow down in the second half of the year. By end-2004, the operator had reached more
than 700,000 subscribers, but this still represents a very modest increase in spite of two
extra launches in Austria and Hungary since June.
Elsewhere, operators in Japan and Singapore have failed to reach their ringback service
targets. And in the Philippines one operator has quietly stopped charging fees for its
ringback service as consumers have been failing to renew their subscriptions.
Part of the challenge facing operators is the fact that ringback tones are an invisible
service, in that consumers don’t ring their own phone so won’t hear the music they are
paying. The service also needs to be explained to consumers and a wide range of music
should be made available to ensure that songs are changed on a regular basis.
However, operators who can launch and market the service successfully stand to gain
sizeable new revenues. Ringback tones are network-based and so work on all legacy
handsets, which means every subscriber is a potential customer. Also, because the ringback
platform is integrated deep in the mobile network, operators are looking to build larger
content management platforms on top of their ringback service and will be able to offer
bundles of music.
For example, ringbacks could be bought with ring tones and real song downloads for
fans of a particular artist who might want to totally customize their handset with the
artist’s music. Also these kinds of marketing opportunities should be attractive to music
labels, which could also publicise the service.
Q: Will consumers want to Jessica Sandin: This remains to be seen. Mobile full-track music downloads is still a very
download full tracks to their new service, the penetration of handsets able to download music is limited and operators
mobile? are keeping fairly quiet about results. Vodafone did announce that its 3G full-track
download service, run by French company Musiwave, had delivered 600,000 tracks to
end-users between November 2004 and January 2005. That’s an encouraging figure, but
should it should be noted both that Vodafone has bundled some free music downloads
with its 3G offer – this will make up a good portion of the tracks downloaded – and
current 3G users are typically early adopters.
Some voices in the mobile music industry expect the phone to replace MP3 players
and iPods in the not-too-distant future. If storage capacity and battery life permits it,
there may be some chance of this, but we’re sceptical about music downloading occurring
primarily over the mobile network. While mobile network bandwidth is increasing, it’s
still a finite resource compared with fixed-line downloads. There’s merit in being able
to acquire some music instantly, on-the-go. But if consumers want to use phones as their
primary music players, they’re more likely to download the occasional song over-the-air
and upload most songs via their PCs, or perhaps at upload stations in retail outlets.
Furthermore, one area that is frequently overlooked in the full-track discussion is
streaming. On the video side, 3G greenfield operator 3 has noted that streaming video is

Mobile Content
more popular than downloads on its network, despite the fact that the pricepoint is the
same. Users may well be happy to listen to streamed music on their mobiles without
necessarily downloading it. A streaming service does require a flat-rate offer, however, and
business models around it are complex.
Q: Is the music industry ready to Jessica Sandin: Some companies in the music industry are certainly moving aggressively
embrace mobile – and does the into mobile. However there’s a lot of work still to be done to educate the music industry
mobile industry fully understand about what mobile content services can do and how services can be deployed. Currently,
music? perhaps too much emphasis is being put on ring tones and full-track downloads, while
there are a lot of opportunities around artist promotion and marketing, for example, that
remain untapped.
Conversely, the mobile industry is certainly not always on the ball and able to deliver
the services and concepts that the music industry needs. While the two have come closer
and ironed out some differences in the past year, more work remains to be done.
Steve Mayall is Assistant Editor of Mobile Messaging Analyst and Senior Reporter on Mobile Media
Steve is a mobile and music analyst, commanding extensive expertise in the areas of mobile music and
mobile messaging. He follows the general mobile content & apps business on a daily basis and was
also a co-author of both editions of Informa’s Mobile Music report and contributed to Operator Strategies
for Messaging and Mobile Data, a report examining five European Tier 1 operators, also published by
Informa.
advantage.


www.informatm.com
Mobile Music- Management Report
Mobile music is rapidly evolving to a rich and varied marketplace, which is forecast to take a significant
share of consumer spending by 2010. Now in its 3rd edition, Mobile Music management report looks at
the evolving business models which will underpin this growth, and highlights issues such as digital
rights management (DRM) which will become increasingly important in the future.
Find out more: www.telecoms.com/mobilemusic

Mobile Content
Mobile TV & Video

It is still early days for mobile TV services, and the jury is still out as to whether
or not there is a viable business model, but plenty of operators seem to be
jumping on the bandwagon. Here, JESSICA SANDIN says that main interest
tends to be around mobile broadcast using technologies such as DVB-H or
DMB.
Q: Have there been any notable Jessica Sandin: U.S. operator Sprint PCS has managed to build a fairly decent revenue
success yet for mobile TV? stream for its first mobile TV service – MobiTV, run by Idetic – which simply runs TV
channels over the mobile network. Despite quality issues, by October 2004 more than
170,000 subscribers, sources say, were paying US$10 per month for that feed, which is
not optimized for mobile. Sprint has since added another TV service, featuring made-
for-mobile and edited-for-mobile TV content, serving up short clips rather than straight
TV feeds. However, Sprint’s services are running over the regular network, rather than
being broadcast over a separate network.
Q: What is happening with DVB-H Jessica Sandin: South Korea and Japan have launched a satellite enabling mobile broadcast
and DMB? services and vendor Nokia is enthusiastically pushing DVB-H. Even if the DVB-H
technology works – which trial feedback suggests it does – the business case is more
questionable. A separate network requires significant investment, and to get ROI on
deployments operators need significant penetration of DVB-H handsets. To get
consumers interested in the mobile broadcast channels, media companies also have to be
incentivized to produce good programming for the medium. Over 3G, operators have
often had to pay content providers to produce content specifically for mobile, since
handset penetration is not substantial enough to enable media companies to make enough
money through revenue share. This will all add up to quite an investment and require a
lot of confidence in the future success of DVB-H.
Having said that, operators are not the only ones looking at potentially building DVB-
H networks – media companies, cable - or satellite operators could also get involved or
even go it alone. However, media players we have spoken to see only one reason why they’d
invest in DVB-H and that’s to reach mobile users directly without needing to go through
the operator. That’s hardly a scenario mobile operators would like to see happen.
In South Korea, a consortium of media companies and mobile operators is running
the mobile broadcast services and that may be the best way forward for other markets.
Nevertheless, all players in the potential mobile broadcasting value chain have to see the
potential for ROI on whatever money they put into it. Currently, most links in that chain
seem to be curious but far from certain that they can make that return. On top, there are
issues around mobile TV broadcast spectrum that remain to be resolved in many markets.
Q: Is mobile video performance so Jessica Sandin: Since the success of mobile TV will depend on a fundamental change in
far providing any clues to potential customer behavior – from using the phone as a communication device to using it as a
mobile TV success? device for media consumption – results of mobile video services can help indicate whether
there will be a market for mobile TV broadcasting. Here, indications are fairly
encouraging, although as usual hard statistics are difficult to come by in an early market.

Mobile Content
But according to our sources, frequently services that do relatively well are branded
and linked to ‘regular’ TV content in some fashion.
In South Korea, normal TV content is doing better than that made for mobile, say
sources. In the UK, reality talent contest X-factor featured video feeds for subscribers of
3, and FreemantleMedia, the production company behind the show, say the most popular
clips were outtakes from the show that were exclusively available on mobile. Orange says
video content from reality talent shows in France and reality show ‘I’m a Celebrity Get
Me Out of Here!’ in the UK is doing better than expected. Vodafone and Twentieth
Century Fox are clearly also banking on this sort of model with the ‘Mobisodes’ series 24:
Conspiracy, which is linked to the TV series through a parallel plot with peripheral
characters.
advantage.


www.informatm.com
Mobile TV: Broadcast and Multimedia – Strategic Research Report
Mobile TV: Broadcast and Mobile Multimedia, a unique strategic research report provides a detailed,
thorough analysis of the likely factors affecting the success of this sector, the major players in the
mobile TV value chain and the huge revenue opportunities for all involved.
This 150-page report supplies a detailed overview of the potential market for mobile-TV, within the
context of mobile devices, networked entertainment and non-mobile factors. Also evaluated are key
factors including the penetration of digital broadcast technologies and the fixed-line broadcasting
chain.
Published: March 2005

Find out more at: www.telecoms.com/mtv

Mobile Content
The enterprise market

The market for mobile enterprise solutions is certainly picking up and most
market players agree that the conditions for take off are now in place. Here,
GUILLERMO ESCOFET wonders whether the enterprise market is finally
ramping up for that all elusive lift-off that analysts have been heralding for
years.
Q: Has the mobile enterprise Guillermo Escofet: It’s too early yet to talk of takeoff, but cash is beginning to flow back
market taken off? into IT budgets. At the same time, the wireless technology market has become more mature
while mobile networks and devices have become more powerful. Solutions are more robust
and many security issues have been ironed out so things are certainly looking up.
Suppliers have had time to shake out some of the flakiest solutions out there and
understand what the technology can do and cannot do. The industry has wised up since
the peak of the thin-client services hype of the late nineties, for example, when wireless
solutions were expected to run permanently online off remote servers. The persistent
unreliability of mobile networks has put paid to that, with most providers now opting for
thick-client based solutions.
Technologies such as wireless handheld computers have become more standardised
and mass-produced, driving costs down. There are also application development tools
that fit in with applications built on other platforms.
Strategic objectives behind deployments

Mobilize static workers by: allowing them to roam around more in the office;
allowing them to work from home
Enable existing mobile workers by: giving them access to corporate data and apps whilst out in the field
or on the move
Cut costs by: reducing property footprint;
cutting out paperwork / administrative staff;
reduce inventory thru faster parts ordering
Increase productivity by: reducing time spent by workers ordering parts, producing quotes,
receiving job assingments, etc;
reducing human error
Barriers to deployment
Security concerns over: people hacking into wireless networks thru the Internet or by “sniffing”
the airwaves;
loss or theft of mobile devices containing sensitive commercial information
Cost concerns over: cost of supporting and maintaining mobile devices;
cost of mobile data
Employee resistance based on: fear of intrusive technology that could be exploited by overbearing bosses;
fear of technology that means more work rather than make things better for
them
Source: MEA

Mobile Content
But this is not to say that no barriers remain to adoption. One of the biggest obstacles
is proving a return on investment. This is made all the harder by the high costs of mobile
device management and mobile data transmission. Many companies are still holding back
on deployments, waiting for early adopters to do all the hard learning and pave the way.
Q: How strategic is the Guillermo Escofet: It’s surprising how disengaged IT heads have been from the
implementation of mobile deployment of wireless data technology in organizations. Until a year or so ago, most
enterprise technology? mobile enterprise deployments were happening largely independently from CIOs and IT
departments, spearheaded by departmental heads or the whims of individual employees
acting on their own initiative. Very little of it was centrally managed or aligned with the
enterprise’s core business strategy.
Many organizations have, as a result, ended up with a jumble of wireless devices and
access points haphazardly hooked up to corporate IT systems. This has left them
dangerously exposed to security breaches. It has also left them facing huge support and
resource management headaches.
IT heads have begun to wake up to all this and are trying to take the reins. They’re
imposing rules on which mobile devices should be deployed and how they should be used.
The deployment of wireless solutions is becoming more formal, with decisions being
made at boardroom level. Solutions must meet organizations’ core business aims, have
a provable return on investment, and be scalable, manageable and secure.
Q: Who are becoming the dominant Guillermo Escofet: The mobile enterprise market is still young, and the picture of who
players in this space? will become its dominant suppliers is still unclear.
There is a confusing array of players in the market from different walks of life: mobile
operators, device vendors, application providers, middleware suppliers, IT outsourcers
and systems integrators.
While mobile operators have a stranglehold on voice services, the market for wireless
enterprise data services is more exposed to players from outside the mobile realm. IT
players look much more likely to take a dominant role, adding a wireless dimension to
their existing solutions and acting as project leaders in mobile enterprise deployments.
They are keen to grab a slice of the wireless market in the face of decreasing margins on
their own turf.
Although most IT companies have no previous knowledge of wireless, they already are
trusted, well-known names in the enterprise world. They have the clout to easily buy a
wireless solution and resell and repackage it as part of a broader IT solution.
However, it’s surprising how much systems integration is still being done in-house by
enterprises. Despite the growing trend towards IT outsourcing, many, if not most, cutting-
edge mobile enterprise solutions are being built in-house. Most components are sourced
externally, but the systems integration is often carried out by internal IT staff or
independent consultants.
Many enterprises complain of not being able to find providers offering exactly what
they need. Some feel that there are very few players out there, if any, that can provide total
solutions that are robust enough. Some also complain that consultants and systems
integrators charge far too much for their services. These can be prohibitive even before
they’ve gone beyond the proof of concept stage, they say.

Mobile Content
Outsourced wireless data services normally involve several suppliers. The more
vertically targeted the application, the longer and more complex the value chain.
As is typical of embryonic markets, there is a lot of partnering happening in the wireless
enterprise space at the moment. Everyone is jumping into bed with everyone else to
broaden product portfolios, share risks and leverage greater market strength. Much of this
has been encouraged by the adverse economic climate of the past few years and the
realization that it is not practical to try to do everything in-house.
Q: What role are operators playing Guillermo Escofet: Enterprise mobility is by and large alien territory for mobile operators.
in this market? In as much as mobility is about extending corporate IT into the wireless sphere, it’s
something that enterprises are more likely to entrust to IT consultants and systems
integrators than to operators, who are essentially just seen as mobile telephony providers.
In the complex supply chain that goes into making a mobile enterprise solution, operators
often end up playing the role of “dumb pipes” – i.e. providing the means for data
transmission – and doing quite a dumb job of it at that.
Their service is generally seen as bad and overpriced. Mobile networks are not
providing the data transmission speeds and reliability that businesses need for seamless
remote access to backend systems. The prevailing feeling is that the delivery of enterprise
data is still low down in the operators’ list of priorities, with precedence given to voice in
the allocation of often-limited network resources. Having to pay for data per kilobytes,
rather than on a flat-rate basis, puts off businesses. And data roaming charges are often
quite simply outrageous, with rates of between US$10-50 per megabyte quite typical –
and this on GPRS, never mind 3G! All this is likely to drive travelling businesspeople
towards Wi-Fi hotspots, cyber cafes and hotel broadband facilities instead.
This does not mean that operators don’t give a damn about the mobile enterprise space.
They are fully aware of how key corporate customers can be in driving up ARPU, and
that they need to do a lot more to successfully capture a significant slice of this market.
The best strategy for carriers is to recognize their limitations in the corporate IT sphere
and partner with specialists in this field, such as systems integrators, software houses and
technology vendors. Many operators have begun to do that, using third parties as their
main route to market.
Operators will also have direct links to corporates as telephony suppliers – something
they can exploit to sell handset-based applications such as mobile e-mail and PIM. But
they’re out of their depth when it comes to the mobilization of backend systems and
deployment of vertical solutions. Nor is there much of a business case for them to try to
compete in this space, since most of these applications generate relatively small amounts
of traffic while requiring significant development and support work.
Where operators play a more prominent role is in the sphere of off-the-shelf, horizontal
applications such as wireless e-mail or GPRS data cards.
Guillermo Escofet is Associate Editor of Mobile Enterprise Analyst

Guillermo has built up significant expertise in the areas of mobile location and enterprise services since
joining Informa Telecoms & Media in 2003. Guillermo has previously worked in business and current
affairs journalism in Europe and Latin America and has written for a wide variety of publications,
including Newsweek and The Miami Herald.

Mobile Content
advantage.


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Mobile Enterprise Analyst – newsletter and continuous research service
The mobile industry is gearing up to target the enterprise space with value added solutions, and
businesses are finally ready to deploy mobile data services. Mobile Enterprise Analyst, an insightful
monthly analytical research service, comprehensively addresses mobile value added services for
enterprise, public sector and government markets globally.
Coverage includes:
• Mobile data enterprise deployments – discover which companies and organizations are investing in
mobile data
• Operator, vendor and systems integrator strategies for targeting enterprises – revealing who is
winning enterprise customers and how
• Cost, ROI, security and related mobile enterprise concerns – discover which factors are limiting take-
up
• The key drivers of mobile enterprise solution take-up – revealing the user benefits and highlighting
what enterprises are looking for in a mobile data solution.
Mobile Enterprise Analyst continuous research service is available online for multiple users and includes
a fully searchable online archive of back issues to enable powerful market tracking.
Find out more at: www.telecoms.com/mea

BSS/OSS
BSS/OSS and Telecoms IT

The BSS/OSS market is slowly recovering from the bleak situation most
vendors found themselves in 12-24 months ago. The number of new contract
announcements in 2004 may still be down on the previous year but plenty of
large contracts are being awarded and some vendors, such as Amdocs or
Convergys, are doing very nicely. Here, KRIS SZANIAWSKI, ANDY BAIRSTO
and ANN SWALLOW highlight the developing trends across the sector.
Q: Are any new trends developing Kris Szaniawski: Firstly, we are beginning to see some instances of large-scale investment.
in the BSS/OSS market? The OSS sector in particular is notoriously fragmented and operators have tended to
spend on a more piecemeal basis with multiple vendors. But an increasing number of
large service providers such as BT and Telecom Italia are looking to revolutionise their
OSS architecture and large international groups such as Vodafone, Orange and Telefonica
Moviles are seeking to rationalize their back-office systems. Large multi-solution deals
may become more typical in the future.
Secondly, developing markets are contributing much more to BSS/OSS spend. Most
remarkably, we are seeing increasing numbers of deals with African and Latin American
cellcos as these regions plays catch-up to more developed markets and new operators enter
the fray (see fig.). Meanwhile, rapid growth in large developing markets like China, India
and Indonesia is stimulating
infrastructure spend but just as 2004 contracts by region
important is an increasing Africa
6%
willingness by Asian cellcos to Global/ unspec.
West Europe 7%
spend on bought-in solutions 22% Middle-East
3%
rather than relying on in-house
resources as they have in the past.
It is not surprising that we have East Europe N.America
seen a spate of announcements 13% 24%
from European and North

American based-vendors over Caribbean/ Latin America
11%
the last twelve months opening Asia-Pacific
14%
up new regional offices in
developing markets.
Q: What are cellcos spending on to Kris Szaniawski: While BSS/OSS contract announcements may not be setting the world
improve operational efficiency? on fire we are nevertheless seeing pockets of strong growth. Vendors such as MetaSolv
and Intec have fared well off the back of rising demand for technologies outside the core
billing and customer-care market. Service/network management, inventory management,
service provisioning and activation are all OSS areas stimulating operator interest.
Inventory management continues to attract investment if only because cellcos need to
have a good grasp of what they are using and how, they need a strong platform in this area
before investing in other OSS.

BSS/OSS
Service management is also showing promise, to a large extent because operators are
placing more importance on network performance as a service differentiator. The recent
purchase by WatchMark-Comnitel of ADC’s Metrica OSS business goes some way
towards consolidating this particular market.
In the billing sector, prepaid/postpaid convergent solutions are attracting a lot of
attention if not big contracts as yet. Competition is heating up as IN-based vendors such
as Comverse, Ericsson and Siemens vie with more traditional postpaid billing vendors
such as Amdocs, CSG and Convergys.
Q: Billing vendors have been Ann Swallow: We have just carried out an operator survey – the results might not delight
talking about converged prepaid the vendors. Less than 10% of operators said they had a convergent system – not
/postpaid mobile billing but how surprising as they are only just coming onto the market. Well over 30% had no plans
eager are the operators? move to a convergent system, and only a quarter of those who had plans intended to
replace their system. The rest intended to modify their existing system. Less than half of
those planning to upgrade intended to make changes during 2005 and about 40% had
not yet set a timescale.
So what conclusions do we draw? The first is that not many truly converged systems
are actually available – most working solutions have been achieved by a close integration
of traditional postpaid and prepaid systems. The second is that, whether or not the systems
are available, operators are not rushing to change. They have huge amounts invested in
their present arrangements and are not going to throw out what ‘ain’t broke’. Fixes such
as modifying mediation to help with billing for content and CRM for customer
management may well be enough for now.
Q: Why should I be concerned Andy Bairsto: It’s not surprising that the term revenue assurance (RA) has different
about revenue assurance – isn’t meanings for different people – after all it is not about a single function, rather it is about
that a problem for our finance underpinning many of the existing back and front office processes. While RA is, by
department? definition, about revenues and making sure that as a business you collect all the monies
due for the services you provide, it is also concerned with the checking and ratification
of the data that is drawn from a wide variety of different network elements and which
result from millions of customer transactions.
RA is often seen as the solution to the problem of revenue leakage, which can occur at
any point in the revenue chain, from provisioning of the service, through data collection
and mediation, rating and billing to presentment and collection of money. Therefore each
of the departments concerned with these processes should be informed about and actively
engaged in the practice of RA.
There is of course a multitude of consultants and vendors in the market place with
their own flavours of methodologies and solutions aimed at assisting with RA. They cut
across the entire service/support systems spectrum from usage and rating validation
through to fraud management and service validation.
With this in mind, and returning to the initial question, RA should primarily be of
concern to all those departments whose IT systems handle data relating to customer
transactions. In fact, if RA is done correctly, it shouldn’t become a ‘problem’ for the finance
department except when it results in bad debt.

BSS/OSS
Having said all that, a certain piece of U.S. legislation, commonly referred to as
Sarbanes Oxley, has brought the issue back to finance department in terms of having best
practice for auditing, compliance etc. That’s a whole other can of worms that doesn’t need
to be spilt onto these pages!
Q: How should operators be Andy Bairsto: The last couple of years has shown that a lot of operators are heading down
addressing the issues of churn the right path when it comes to customer retention and there are a number of success
and customer retention? Is CRM stories.
dead or should this still be an area What has certainly become apparent is that churn needs to be addressed from two
of investment? standpoints. Firstly the operator needs to look at the type of customer-centric processes
that it needs to put in place – these might include such things as customer loyalty schemes,
personalisation of customer service, web services and customer segmentation techniques.
Secondly the business needs to consider what types of technology need to be implemented
in order to bring about the kinds of processes mentioned above. Within the vendor market
this might be termed as CRM software – although there is a trend to move away from
this label and encompass data mining technologies.
The criticism levelled at many failed or failing ‘CRM’ projects is that they are either
too broad in their objectives or that they are simply not strategic enough. The reason for
this is often that the company is trying to do too much too soon – such as transforming
the entire organisation into a mass of customer-centric activity using every available touch-
point to glean even more information about its customers and feed it all back into one
giant analytical pot which will improve retention, reduce churn and increase profitability.
This is not a bad objective in itself but practically it is highly unachievable unless it is
approached in bite-sized chunks. CRM strategy also needs to be business-specific and
that means taking a tailored approach that reflects the operator’s own unique processes
and requirements.
One of the biggest mistakes in any CRM implementation is to let the technology
features drive the project and impact too heavily on the outcome. Customer relationship
management – and there is a purposeful distinction here in using its full title rather than
its acronym – is certainly not about technology and adapting your focus to incorporate
the software. It should primarily be about the business processes that support your
customer relationships and then applying technologies to automate those processes. This
is also a fundamental reason why CRM, in most circumstances, needs to be customised.
Q: Is there a consensus emerging Kris Szaniawski: If only! There may be growing consensus about what the more innovative
on how to bill for content? cellcos would like to offer - content and service bundles, cross-service discounts and simple
transparent content-based pricing that doesn’t involve a confusing mix of content and
traffic charges - but there is still plenty of confusion about how best to implement new
charging and billing solutions to support this.
Ironically the ability to deliver simple, flexible pricing requires complex solutions to
underpin it.
Legacy billing systems are not equipped to deal with content billing and operators are
increasingly aware that the addition of adjunct solutions to address individual services or
service groups creates as many problems as it solves.

BSS/OSS
The lack of certainty about the appropriate architecture, however, means that many
operators are still holding back from investing or find themselves issuing overlapping
RFPs. Various aspects of content charging can be implemented in different ways, and the
different approaches being proposed by mainstream billing and mediation vendors, niche
players like VoluBill, network vendors and content-delivery platform providers are adding
to operator confusion. It is perhaps not surprising that the number of serious content-
billing implementations is still relatively small.
On the positive side, some large operators, such as Vodafone, have made a strategic
decision to invest in and overhaul their billing systems.
Meanwhile, organisations like the TeleManagement Forum are making concerted efforts
to standardize business-process and system-architectural frameworks – these kinds of
standards-based activities don’t always make the headlines but it is probably advances in
these areas that will most help to eliminate confusion and spur a new round of investment.
Kris Szaniawski is Editor of Billing Plus

Kris has over 10 years’ experience in the communications industry both as a journalist and analyst. He has
worked on a wide range of advisory services, reports and research programs, and has written for Telecom
Markets, Mobile Communications, New Media Markets, Mobile Communications International, Financial
Times, The Guardian. Prior to joining Informa Telecoms & Media he was a senior analyst at Ovum providing
strategic advice to the mobile industry. His current expertise is in billing, customer care, revenue
assurance, OSS and telecoms IT.
Andy Bairsto is a Principal Analyst with Informa Telecoms & Media

Andy is responsible for managing the BSS/OSS sector reports and publication programme. He is the author
of several analytical reports, including Minimising Churn and Building Customer Profitability, Competitor
Analysis of the Top Global BCC Vendors and the latest edition of Fraud and Revenue Assurance. He was
also a contributing author for Global Mobile Prepaid Strategies. Prior to this, Andy was editor of Billing
Plus, a fortnightly newsletter that reports on and analyses business issues within the telecoms industry.
Andy holds an MSc in Information Technology from Loughborough University, with a specialism in human
factors and ergonomics. He has also published work on implementing user-centered IT systems.
Ann Swallow is Markets Group Manager for Informa Telecoms & Media
Ann is manager of the Markets Group, with responsibility for the Global Target Locator database, a
research project that analyses the business and operational support systems used by operators worldwide.
She is the author of the associated series of reports Global Trends in Telecoms BSS and BCC Market
Forecasts. She is also a regular contributor to Billing Plus and is author of a range of strategic reports.
Ann began her telecoms career with what is now BT, then spent a number of years in an independent
telecom consultancy during and after telecom privatisation and liberalisation in the UK.
advantage.


BSS/OSS

www.informatm.com
Forthcoming Reports
OSS Strategies for Achieving Revenue Assurance will examine the causes of revenue loss among
operators and the methods available to plug the leakage.
Email ellen.simpson@informa.com for advance information on this report
Convergent Mobile Billing will examine the current status of the prepaid and post-paid charging
market. This report will include an exclusive operator survey, market forecasts and detailed profiles of
leading vendors.
Email ellen.simpson@informa.com for advance information on this report

Consolidation
Mergers and Acquisitions

The ‘irrational exuberance’ that drove the high prices paid during the telecoms
boom in the late nineties is unlikely to return in the near future, but market
evaluations remain strong. M&A activity is now principally seen for one of two
reasons. Either an operator needs to bolster flagging revenues at home by
expanding into emerging markets, or it needs to consolidate its position at
home. Here, PAUL LAMBERT and GAVIN PATTERSON look at how recent
activity highlights the premium attached to harnessing exponential growth.
Q: The U.S. market has changed a Paul Lambert: The deals that have grabbed most headlines recently were, of course, those
lot in recent months – what’s that have seen the U.S. market consolidate from five to four national players, while the
happened? deal announced in January between Alltel and Western Wireless has created a strong
challenger to fourth-placed T-Mobile USA.
Indeed, moves toward consolidation are seeing the U.S. market undergo a period of
dramatic change. November saw the Federal Communication Commission give
regulatory approval to Cingular Wireless’s US$44.1 billion acquisition of AT&T Wireless
and in January Cingular strengthened its hold on top spot, announcing its first ever
quarter of combined operations since it completed the merger. The operator reported
49.1 million total subscribers end-December after delivering nearly 1.8 million net adds
on a pro forma basis during the quarter. At end-2004, Verizon Wireless, in second place,
had 42 million subscribers.
December also saw Sprint PCS and Nextel Communications announce a definitive
agreement to merge, creating the third-largest wireless operator in the U.S. in a deal
estimated to be worth US$35 billion. With about 35 million subscribers and 5 million
additional subs through affiliates, the merged company, Sprint Nextel, trails closely behind
Verizon Wireless and the enlarged Cingular Wireless.
The emergence of three strong entities in the U.S. has put yet more distance between
them and fourth-placed T-Mobile.
Gavin Patterson: Yes, T-Mobile must be looking over its shoulder now. The operator is a
distant fourth place with 16.3 million subs end-2004 while the combined operations of
Alltel and Western Wireless had about 10 million, making the prospective merged
operator the nation’s fifth largest wireless carrier.
Alltel’s US$6 billion deal for Western Wireless should really be seen as a statement of
intent. Industry watchers expect the deal to mark the start of a consolidation frenzy
amongst some of the regional players as the market gravitates to a smaller number of larger
players.
Q: What other markets are ripe for Paul Lambert: With a multitude of regional and national operators, India is a market that
consolidation? must inevitably undergo consolidation until it becomes, most likely, a four or five player
market. In the first instance, consolidation is likely to be driven by the large national
operators, not least because foreign investors are prevented from owning more than 74%
of a local company.

Consolidation
Mumbai-based BPL, with 2.3 million subs at 3Q 2004, is thought to be a likely target
for a foreign operator. The company is understood to be looking to sell a 49% equity
stake, and several global operators including Vodafone and Deutsche Telekom are believed
to be interested in the stake.
Hong Kong is also a market that suffers from the presence of too many operators (see
fig.). Operators from China are known to be eager to drive consolidation in Hong Kong,
and also to provide seamless roaming between the mainland and the Special Economic
Region. Indeed, China Mobile is understood to be looking at CSL, Hong Kong’s second-
placed operator.
Hong Kong subscribers by network
Operator Network Launched Subs (000)

4Q04 3Q04 2Q04 1Q04 4Q03
Hong Kong CSL TDMA800 Oct 1992 30 31 32 32 33
Hong Kong CSL GSM900/1800 Jul 1993 1,289 1,250 1,220 1,200 1,150
SmarTone GSM900/1800 Jan 1993 1,168 1,150 1,100 1,060 1,043
Hutchison GSM900/1800 May 1995 1,915 1,850 1,800 1,765 1,660
Hutchison CDMA800 Sep 1995 18 26 28 38 40
Hutchison WCDMA Jan 2004 210 145 90 37 not launched
Peoples Telephone GSM1800 Jan 1997 1,086 1,067 1,058 1,050 1,048
New World GSM1800 Mar 1997 1,355 1,300 1,250 1,210 1,180
Sunday GSM1800 Sep 1997 673 670 659 662 660
Total 7,744 7,489 7,237 7,053 6,813
Gavin Patterson: China and Hong Kong are both very interesting at the moment. In
China, the National Development and Reform Commission (NDRC) looks set to
approve division of China Unicom’s mobile assets between the country’s fixed line
operators as part of the government’s 3G licensing regime.
China Telecom is expected to be the largest beneficiary gaining Unicom’s GSM
business while China Netcom will end up with the CDMA operation.
Unicom’s breakup would dramatically alter the Chinese market, as it would present
both Netcom and Telecom with legacy cellular networks and an installed subscriber base,
while offering a path to migrate their existing PAS subscribers.
Meanwhile, in Hong Kong, there are six operators of which only four have a 3G
license. Peoples Telephone, which decided to rollout EDGE rather than bid for a 3G
license in October 2001, has stepped up plans to launch as a 3G MVNO. Peoples has
already talked to Hutchison Telecom, CSL, SmarTone and Sunday about leasing network
capacity. However, while they are obligated to lease 30% of their capacity to MVNOs,
the leasing terms will be under commercial negotiation and are, therefore, unlikely to be
cheap.

Consolidation
Q: And which regions are Paul Lambert: The CEE region is ripe with opportunities, with operators in the mature
generating the most M&A interest? western European markets eager to secure new growth in the untapped emerging mobile
markets of central and eastern Europe.
Cesky Telecom, the Czech fixed-line operator is currently the subject of interest from
five operators in western Europe, comprising (at the time of press), Vodafone Denmark’s
TDC, Spain’s Telefonica, TeliaSonera and Swisscom, each of whom picked up bid
documents for the 51.1% stake in Cesky Telecom, which controls 100% of the country’s
leading cellco, Eurotel Praha.
Cesky Telecom estimates that the stake will be sold for CKr40-60 billion (US$1.74-
2.6 billion), while market estimates have valued the stake at €1.6-2.1 billion (US$2.1-
2.8 billion).
In Bulgaria, Telekom Austria is understood to be looking to buy 100% of leading
Bulgarian operator MobilTel again. In October 2003 Telekom Austria failed to acquire
MobilTel for €1.5 billion (US$2.0 billion) and is now thought to be involved in a bidding
war for control of Bulgaria’s leading operator with Vodafone, Deutsche Telekom and
Canadian investment firm TIW, and is thought to be offering €1.6 billion (US$2.1
billion) for the operator.
Q: Is there much activity in Paul Lambert: Ailing cellcos in the regions’ mature markets are also being targeted for
western Europe? acquisition. Spanish carrier Auna Group, which owns Amena, the country’s third-largest
cellco, is the subject of a bid by a group of private investment firms led by the Carlyle
Group, which is putting together Europe’s largest leveraged buyout with an
€11 billion (US$14.5 billion) offer. It has been suggested the consortium is backed by
a large European carrier looking to expand its presence in the Spanish market, and France
Telecom along with Deutsche Telekom have been linked to the bid.
Paul Lambert is Editor of Global Mobile

Paul has been covering the wireless industry with Informa Telecoms & Media for four years. He has worked
across a variety of news publications, including Global Mobile Daily and 3G Mobile, and was the launch
editor for Eastern Europe Wireless Analyst. Paul has also contributed to analyst reports, providing an in-
depth view of the trends and issues that shape the wireless industry.
Gavin Patterson is Editorial Director of Global Mobile, 3G Mobile and Mobile Handset Analyst
Gavin has been a senior business journalist since 1989 and specialized on the telecoms industry since
joining Baskerville (now part of Informa Telecoms & Media) in 1997 where he helped launch a number of
new products including 3G Mobile and Global Mobile Daily. Previously, he was Business Editor of the
Hongkong Standard and Eastern Express newspapers in Hong Kong. Gavin is a regular fixture at
international conferences in Europe, Asia and North America and also conducts regular briefing sessions
with analysts and media organizations on operator strategy and technology issues.
advantage.

Consolidation
Our global wireless coverage includes:

• Mobile, fixed-operator and service provider strategies and market trends
• Global wireless developments across mature and developing markets.

www.informatm.com
Global Mobile – newsletter and continuous research service
Global Mobile is the leading source of business-critical intelligence on the mobile communications
industry for senior telecoms executives worldwide. With 16 pages of exclusive news, statistics and
analysis into the strategies, players and technologies that are shaping the international mobile markets.
Key coverage includes:
• Key subscriber data for every network in every country worldwide, we feature a different region in each
issue.
• Comprehensive regional profiling providing a detailed summary of the current status of one region
summarising the current trends and likely future developments of 2, 2.5 and 3G network and operator
activity.
Global Mobile continuous research service is available online for multiple users and includes a fully
Find out more at www.telecoms.com/gm

Roaming
International roaming regulation

National regulatory authorities (NRAs), the European Union’s Competition
Commission, as well as the European Regulators Group are each undertaking
examination of inter-operator tariffs (roaming charges) that are the basis for the
cost it makes end-users to use mobile services while abroad. Here, PAUL
LAMBERT outlines the possibility that some operators may face punitive action
while regulators impose stringent cuts on existing rates.
Q: What’s happening with the EC’s Paul Lambert: The European Commission’s Directorate General for Competition has
inquiry into roaming? signalled that operators could be fined up to 10% of annual revenues if they are found in
breach of EC competition laws after claiming that roaming rates are “excessively high.”
The EC has raised this as a possibility that may arise from its three-year inquiry into
companies operating in the UK and Germany.
mmO 2 and Vodafone are preparing to file their responses to the EC’s preliminary
conclusions, which they received this summer as part of the EU’s sector inquiry into
roaming rates. In its preliminary conclusions announced in July, EC Competition
Commissioner Mario Monti called attention to “high roaming fees” arising from O2 and
Vodafone’s abuse of their dominant positions in the UK market.
And in November, an EC competition lawyer told Global Mobile the EC is prepared,
in the worst-case scenario, to impose fines on operators found breaking competition law
in their roaming tariffs up to 10% of annual revenues. Indeed, the EC has proven itself
ready to impose fines on companies judged to have broken competition law, with
Microsoft, Tetrapak and Michelin as precedents.
The EC has also indicated that it may widen its inquiry into international roaming
rates to the rest of Europe. All of mmO 2 ’s assets are in Europe, while about 65% of
Vodafone’s assets are in the region.
Q: What about national regulators? Paul Lambert: Over and above the possible remedies the EC’s Competition Commission
may impose on operators found breaking competition law with their international
roaming rates, the EC’s telecoms package gives NRAs the power to regulate roaming
prices. Beginning Jan. 1 NRAs were empowered to begin investigating international
roaming rates in national markets.
Indeed, the EC has said it is aiming to establish its methodology for examining
roaming rates in the UK and Germany and hopes it will form a template for national
regulatory authorities (NRAs) to force roaming rates to drop in other EU countries.
Adding to the level of regulatory scrutiny of international roaming rates, in December
the European Regulators Group sent out a questionnaire to European cellcos in individual
EU countries for comparable information on their wholesale international roaming prices,
discounts and traffic-direction abilities.
The ERG has said the information will help it “undertake a harmonized market
analysis and will indicate the need for regulation of wholesale international roaming in
Europe.” The ERG aims to present some preliminary results in May.

Roaming
Q: How much does roaming Paul Lambert: It’s hard to say, as operators don’t publish figures for roaming revenues
generate for operators in (perhaps wisely!). Still, informed estimates from roaming solutions providers suggest that
revenues? while only 2-3% of traffic comes from roaming, roaming traffic contributes 10-12% of
revenues, and can generate 25-50% of an operator’s gross margin. There were estimated
to be about 100 million active roamers in 2003, making it a US$50 billion-a-year market
and growing.
Q: Given what’s at stake, are Paul Lambert: Yes, in an indication operators are moving to pre-empt harsh or punitive
operators doing anything to judgements against their IOTs (inter-operator tariffs), Vodafone CEO Arun Sarin said
address the roaming issue? late last year that the operator will cut the cost of international roaming calls next year (ie
2005). Sarin said that roaming calls “will be cheaper” in 2005 and that the company was
planning to launch something “exciting” in the area of roaming tariffs.
At the same time, operator alliances, such as, in Europe, FreeMove and Starmap are
making inroads into lowering end-user roaming rates. In November, FreeMove, the
European mobile alliance formed by Orange, Telefonica Moviles, Telecom Italia Mobile
and T-Mobile, announced its first offering, a predictable pricing structure for
multinational corporations to manage their roaming costs more efficiently.
The alliance will offer customers with operations in the UK, France, Switzerland, the
Netherlands, Belgium, Germany, Italy and Spain a range of services with predictable
tariffs, simple zoning, network independence and transparency. The FreeMove alliance
reaches almost 170 million managed customers in 20 European countries.
Q: Is it only in the European Union Paul Lambert: No, the U.S. regulator, the Federal Communications Commission, released
that roaming rates are too high? a notice of inquiry (NOI) Oct. 26 asking for information, data, comments and analyses
on foreign mobile termination rates. The FCC will look into the cost to U.S. consumers
of making a call from the U.S. to a mobile phone in a foreign country.
The FCC says it has been monitoring the issue of foreign mobile termination rates for
the past few years and has been interested in their effect on U.S. customers. It says the
NOI was prompted by concern about such rates and their possible effect on U.S.
customers from U.S. international carriers.
If the FCC finds mobile termination rates in need of regulatory-led remedies, the
Office of the U.S. Trade Representative would be the most likely arm of the U.S.
government to bring them about. The USTR led the U.S. government’s objection to
China’s pursuit of its own Wi-Fi technology, WAPI, and in May succeeded in forcing a
reversal of policy from the Chinese government on mandating the use of the WAPI
standard.
In Europe, it is understood that the U.S. mobile industry perceives mobile termination
rates to be unusually high in Switzerland and Germany.
Q: What about data roaming? Paul Lambert: Revenue from WCDMA roaming is already a major doubt for operators,
since the cost to offer next-generation services could run up to 15 times that of 2.5G
services. It is clear the mobile operators need to begin to cooperate now on building a new
model for roaming pricing if data roaming is to take off in a 3G environment.
Indeed, cost is one the main barriers to use data in the roaming environment. Vodafone
in the UK charges between £3.50 (US$6.60) and £5 (US$9.43) per megabyte, depending

Roaming
on the customer’s usage plan, for roaming on other Vodafone 3G networks. The off-
network rate rises to £8.75 (US$16.51) per megabyte.
Still, excessive roaming costs could be avoided. Increased use of transit hubs could be
one solution to encourage 3G data roaming. In the existing 2.5G environment, a single-
point connection with 30-plus operators is one of best ways to get fast MMS inter-
networking.
There are, however, moves within the industry to migrate to a more general-purpose
VPN for operators to cope with IMS and GPRS all on the one network.
Paul Lambert is Editor of Global Mobile

Paul has been covering the wireless industry with Informa Telecoms & Media for four years. He has worked
across a variety of news publications, including Global Mobile Daily and 3G Mobile, and was the launch
editor for Eastern Europe Wireless Analyst. Paul has also contributed to analyst reports, providing an in-
depth view of the trends and issues that shape the wireless industry.
advantage.


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Global Mobile Roaming – Strategic Research Report
Global Mobile Roaming offers key in-depth analysis of the current status of the global roaming market.
Based on the results of an exclusive industry survey amongst key industry professional across the world.
This key study examines the key issues affecting the global mobile roaming market including the
emergence of roaming alliances, pricing strategies, virtual home networks, managed roaming and
traffic redirection and a look at roaming across technology
Published: April 2005

Find out more: www.telecoms.com/globalroaming

Handsets
Software and devices

The mobile handset market is enjoying a period of sales growth with global
handset shipments breaching the 600-million mark for the first time in 2004.
Developing markets are becoming more mature, with a greater choice of GSM
and CDMA carriers in markets like Latin America. In more developed markets
like Japan and Europe it is technological innovation that is helping to drive
sales. Here, MICHAEL CARROLL, DAVID MCQUEEN and MALIK SAADI
discuss whether the growth can be maintained, if Nokia will remain top-dog in
2005, and the status of 3G chipset and device development.
Q: Is the current growth in unit David McQueen: Many indications suggest that growth will be sustainable for the next
shipments sustainable? four years. Demand from key developing regions, namely Brazil, China, India, Mexico
and Russia where the market is not yet saturated, will surely buoy global handset sales.
In addition the use of advanced wireless data services will gradually become part of
consumers’ lifestyle mainly in developed countries. In these markets, the growth will be
driven by more active replacements of handsets for devices with enhanced performance,
technical capabilities, and features including high resolution colour screens and cameras,
music players, advanced gaming, slot-in storage, Bluetooth/WLAN, email, location based
services, and support of broadcasting services.
Q: Can Nokia continue to build on Michael Carroll: After a troubled start to 2004, Nokia looked to have picked up the ball
its 2H 2004 sales momentum? again in the back half of the year. The vendor applied its technological ability to react
Top six global vendors' rank by region, 2004

Nokia Motorola Samsung Siemens Sony Ericsson LG Electronics
Less-developed regions
China 1 2 3 <5 <5 <5
India 1 4 2* <5 <5 2*
Other Asia-Pacific 1 3 2 <5 <5 2*
Latin America 1 2 4 3 5 <5
CEMEA 1 3 4 2 5 <5
Subtotal 1 2 3 4 5 <5
Subtotal excluding China 1 2 3 4 5 <5
More-developed regions
Western Europe 1 3 4* 2 4* <5
North America 2 1 3 <5 <5 4
Japan, South Korea <5 <5 3 <5 <5 <5
Subtotal 1 2 3 5* 5* 4
Global share 1 2 3 4 5* 5*
Note; *Co-holder of ranking
Source: CSFB estimates

Handsets
quickly to the shortfalls of its device range, and has driven its work on mobile platforms
in particular, which leaves it in a strong position.
The firm also appears to have softened its stance against operators, having agreed deals
with Vodafone and T-Mobile in 2004, while also joining the primarily operator-led Open
Mobile Terminal Group and GSM Association.
Q: What are the main challenges David McQueen: As the handset market becomes more competitive, Nokia is now facing
facing vendors today in terms of stiff competition across all its markets and product segments. Nokia had not faced the
handset technology? same level of competition prior to 2004 because many of its major rivals faced problems
in sourcing components to meet demand.
In response, Nokia launched more than 44 new products in 2004 – most of them
midrange devices with enhanced features such as colour screens, cameras, and Java.
However, it remains to be seen how Nokia will fare against its rivals’ updated product
lines that feature 65,000-colour screen and megapixel cameras in the midrange segment.
These will compete with Nokia’s midrange products, which have 4,000-colour screens,
and VGA and CIF camera resolution.
Moving forward, the vendor is likely to deploy the same price cutting campaign in the
midrange segment, as it has in its entry level devices. This might be a good strategy for
the immediate future but without innovation and product differentiation the Nokia brand
might lose its prestige as the best seller in the mobile phone market in the longer term.
Malik Saadi: One of the main challenges is to find the right balance between device costs,
performance, network interoperability and style. Handset manufacturers must be able to
differentiate themselves from the competition by understanding the consumer groups
they are targeting and gaining insight into consumer buying behaviour. Customised
handsets to suit the audience will become crucial to encourage further handset sales.
In the longer term, one of the biggest challenges facing the industry is fragmentation.
The mobile phone market is lucrative because it addresses a base of 2.5 billion consumers.
The magnitude of this market has attracted many players from different backgrounds
including, wireless, electronic consumer, computing, and data content industries.
Consequently, there are a wide range of competing solutions in each link of the technology
value chain, as well as some very stark regional and operator differences in adopting these
solutions. Therefore, the industry has to react immediately by implementing common
standards in each link of the value chain to encourage interoperability between competing
solutions, and roaming between different networks and services.
Q: Who do you think are the Michael Carroll: One of the main challenges at present is to develop stable fixed/cellular
forerunners in producing 3G chipsets to tackle the converged device market, as well as developing silicon that combines
chipsets, and what do other silicon a number of wireless technologies, such as GSM/GPRS; GSM/GPRS/EDGE;
vendors need to do to close the GPRS/EDGE /WCDMA; or GPRS/1xEV-DO/DV.
gap? Voice over IP is currently generating a lot of interest, with vendors including Nokia
and Motorola working on devices that should be available later this year. Such terminals
would offer users the chance to have one phone with one number, whether they are at
home or on the move.
The trouble is that it is not always economically viable for a chipset vendor to include

Handsets
every permutation of every wireless technology. A lot was made of the possibility of a
combined cellular/WiFi terminal during 2004. While most chipset providers have the
ability to include WiFi technology in their WCDMA solutions, many have said they will
not produce a compliant chipset until there is a clear demand from handset vendors.
WCDMA Release 99 and HSDPA baseband market competitive summary

Silicon vendor WCDMA/UMTS products HSDPA products
Qualcomm MSM6200 (2Q02), 6225 (2H04), 6250 (2Q03) MSM6275 (4Q04), 6280 (2H05), 7200 (4Q05), 7600
Texas Instruments TCS4105 Not announced
Agere Yes Not announced
Philips Semiconductor Nexperia PCF0501, UMTS companion chip Not announced
Infineon ZyRay supply in a companion chip for integration with E-GOLD family. Not announced
After its acquisition, status of relationship is unknown
Motorola/Freescale Trial with NTT DoCoMo A835 (Sep-05)
Broadcomm Early-stage funding to Innovics and ZyRay. Acquired ZyRay Wireless. Will likely use ZyRay’s solution as a launching
Status of the relationship with Innovics unknown platform for entering into HSDPA
Innovics In development Not announced
ZyRay Wireless Spinner Announced plans, but may not have made significant
(acquired by Broadcomm) progress because of limited resources
Cellular3G TopHat Not announced
Modem Art MA1050 (Rel 99 and Rel 4) Not announced
PrairieComm PCI5110 Not announced
InterDigital Baseband patnership in Infineon Not announced
Intel Bulverde Not announced
Icera Semiconductors No 2H05
Sandbridge Wireless No Not announced
Ericsson Mobile Platforms Yes Yes
Source: Deutsche Bank
Michael Carroll: The consensus in the industry is clear. Ericsson Mobile Platforms and
Qualcomm lead the way in producing WCDMA chipsets, with both being rated highly
for the reliability and stability of their solutions.
The duo’s 15 closest rivals are there or thereabouts, but if you take the status of work
on HSDPA as a marker for progress in WCDMA, you again find only Qualcomm and
Ericsson with a working solution. The slow progress by rivals suggests the bulk of chipset
firms are struggling to produce stable 3G chipset solutions.
Q: Browsers and software are an Malik Saadi: Browsers are featured in virtually all new mobile phone models. However,
increasingly important part of any third party browser vendors such as Openwave, Teleca, or Access will face fierce
mobile handset. How do you see competition from other solutions including advanced OSes such as Symbian, Microsoft,
these markets developing in the or Palm that generally come with integrated browsers. Dynamic UI solutions like those
next five years and will any single provided by Triginex (now part of Qualcomm), Insignia, SurfKitchen, or Action Engine
OS come to dominate? are also potential competitors to browser technology.

Handsets
Service providers are seeking solutions that enable them to push their services to the
end-user while controlling the device in order to tailor the best and highest-generating
revenue services to their customers. Unfortunately, the browser on its own is not the best
solution to achieve this target.
Michael Carroll: It’s becoming clear that no single OS will come to dominate the market
as it stands today. The bulk of OS solutions are restricted to the smartphone market,
which represents a small portion of the overall device market.
The main three players in smartphone OSes -– Symbian, Microsoft and PalmSource
– realise this and are busily amending their products to tackle the next rung down in the
handset ladder, which they dub as Feature phones. Symbian and Microsoft are likely to
have the early lead here, due to the former’s vendor backing and the sheer size of the latter.
PalmSource is more of an unknown quantity. However, its recent decision to offer a
Linux-based version of its OS could prove decisive in markets like Asia Pacific, where
Linux has generated the most interest.
Q: Why not use a 3G data card Michael Carroll: It’s really a question of user preference – some of us will always prefer
plugged into your laptop to access the convenience of a broadband connection and a large display on our desktop PCs, others
multimedia content and data, are confined to carrying laptops around anyway, so the solution would make sense.
rather than a bulky and power- Compared with first generation 3G handsets, laptop PCs do have the edge when it
hungry handset? comes to battery power, but you’re still looking at a usage time of around four hours before
you have to look for the plug. As second and third generation WCDMA devices come to
market, battery life has become less of an issue, with usage times comparable – if not better
– than laptops offer.
Malik Saadi: 3G data cards might be used in the enterprise segment but are unlikely to
be used in the mass market. However, the migration from 3G to higher bandwidth
networks such as HSDPA, CDMA 1x EV-DV or WiMAX is likely to drive significant
growth of PC data cards. These networks will operate at bandwidths higher than 1Mbps,
hence seriously challenging the performance of mobile handset hardware. I personally
believe that services based on these networks will initially be supported by Notebooks via
PC cards because handset hardware technology is unlikely to be ready for supporting these
networks before 2009 or even after.
Michael Carroll is Editor of Mobile Handset analyst

Michael began his career as a telecoms journalist almost six years ago and, in 2000,
launched 3G Mobile Devices newsletter, the forerunner to Mobile Handset analyst – a fortnightly
newsletter covering all aspects of the mobile device industry. He regularly attends major
global industry conferences and has acted as chair at a number of IBC events focused on
mobile handsets.
David McQueen is a Senior Consultant and Analyst at Informa Telecoms & Media
David has over 12 years’ experience as a market and competitor analyst in the
communications industry, now focusing on mobile handset development and vendor
strategies. David has co-authored a number of ARC ’s leading industry titles including

Handsets
Future Mobile Handsets. He holds a Masters Degree in Marketing and an honours degree
in Econometrics and Mathematical Economics.
Dr Malik Kamal-Saadi is Senior Analyst at Informa Telecoms & Media

Malik has over ten years’ experience in the telecommunications industry, having played
a key role in a number of European and government projects. He specialises in market
and technology development and is lead author of many ARC reports including Future
Mobile Computing and Mobile Application Platforms and Operating Systems. He is also co-author of
ARC Group’s Future Mobile Handsets 2003. Malik has a PhD from Group d’Etude des
Semiconducteurs (GES, Montpellier, France), specialising in semiconductor devices and
materials, design and engineering.
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Convergence
Fixed-mobile convergence
The word ‘convergence’ means many different things to many different people.
On the one hand there is the convergence between telecoms and the internet;
there is also the convergence of the mobile industry with various types of
media and, more importantly nowadays, between fixed and mobile networks.
Here, ANTHONY COX, SHANI RAJA and GAVIN PATTERSON look at the
increasing trend towards fixed-mobile convergence from both sides of the
fence and the different strategies being employed by fixed and mobile
operators.
Q: What is the driving force behind Shani Raja: One major driver is the growing popularity of mobile. In western Europe, for
fixed-mobile convergence? example, there has been phenomenal growth in mobile traffic (both voice and SMS) in
recent years. The trouble is, this has been largely to the detriment of many fixed-line
operators, which have steadily been losing traffic and revenues to their mobile
counterparts. Nowadays, we increasingly hear the phrase “fixed-to-mobile substitution”,
which refers to the phenomenon of users increasingly substituting their fixed lines for
mobiles. A recent Ofcom report - Communications Market 2004 - highlighted this trend.
It pointed out that, although fixed-to-mobile substitution was not yet widespread in the
UK, consumer spending on mobile and text services overtook outlays on fixed-line rental
and calls for the first time ever in the fourth quarter of 2003 (£1.8 billion [US$3.4 billion]
compared with £1.7 billion [US$3.2 billion] for fixed). This trend has forced fixed carriers
to raise their game, with the result that a growing number are now developing mobile
strategies.
Gavin Patterson: The next five years will see mobile and fixed operators involved in a land
grab for enterprise customers as operators, vendors and system integrators all seek to gain
revenues from the lucrative corporate market.
Operators with both fixed and mobile offerings - such as France Telecom and Deutsche
Telekom - will fare best so it is not surprising that we are increasingly seeing the
reintegration of fixed and mobile operations as carriers see the benefits of utilizing a
common core network to offer converged services - think of Telecom Italia and TIM and
Sprint FON and PCS in the U.S.
Large-scale implementations are unlikely before 2006, but operators are already
preparing converged services. The stakes were raised at the end of last year by the launch
of BT Mobile, the Vodafone-hosted MVNO from UK fixed-line incumbent BT. BT
Mobile is aimed at the enterprise market with a range of services, including a mobile VPN
and mobile conference calling, and poses a significant threat to mobile operators in the
enterprise market.
BT aims to have a range of converged services delivered to enterprise customers by year
end under its BluePhone project.
Q: What convergence strategies Shani Raja: A number of different types. But as one telecoms consultancy points out,
are we seeing? opinions vary as to what “true” convergence is. Some believe that “true” convergence is

Convergence
where operators are able to offer all-IP networks from the core all the way out to the access
network. For others, it’s enough that circuit-switched cellular networks are able to “talk”
to other packet-switched wired and wireless networks. The BT-led Fixed Mobile
Convergence Alliance (FMCA), for instance, is currently focused on promoting the
development of short-range wireless technologies, such as Wi-Fi and Bluetooth, to enable
GSM and 3G voice and data calls to be steered onto fixed networks. BT’s BluePhone
service is aimed at this, but there are a number of existing broadband players and
newcomers too that plan to take advantage of the growing availability of high-speed
wireless IP access technologies, and the maturing of voice-over-IP technologies. The
danger for mobile operators is that such technologies may allow fixed players to seize a
significant part of enterprise expenditure that mobile operators had presumed would be
captured by 3G services.
Anthony Cox: Voice over IP certainly is causing a stir. Using VoIP for the long-haul
carriage of voice traffic is nothing new - what is changing is that the quality has improved
enough for it to be used in the access part of the network in the last couple of years. VoIP
technology allows any ISP to become a voice operator, threatening incumbents’ local
revenues as well as the revenue they get when traffic “lands” on their networks.
And since the cost base of IP networks is low compared with circuit switched networks,
several incumbents have embraced VoIP themselves. BT leads the field with huge
investments planned in its so-called 21st century network. This should cut its network
management costs and, amongst other things, make it easier to offer integrated mobile
and fixed offerings. In fact the only operators that do not plan to offer residential VoIP
services in 2005 are Belgacom and Swisscom.
Q. Is Wi-Fi something which fixed Anthony Cox: Wi-Fi is often an add-on for a broadband operator – a way one operator
operators are getting interested can distinguish itself from the next player. How Wi-Fi generates revenues in its own right
in? is difficult to picture. In time though, wireless LANs will be integrated into both fixed
and mobile networks. This is already happening with plans such as BT’s BluePhone
project. Mobile operators like mmO2 can add wireless LANs to the edge of their networks
to provide fixed/mobile converged services, stealing voice revenues from fixed carriers
that way.
But the fixed operators are just as well placed to adopt a similar strategy: through a
service provider or MVNO partnership, a fixed operator can tie-in its fixed customers by
offering them mobility both locally, through the wireless LAN, and outside the reach of
the WLAN through the GSM network. Calls will hop onto a mobile network when out
of the “Home Zone”.
With clever pricing an operator such as France Telecom with both fixed and mobile
units may actually be able to increase overall revenues - users will pay for the convenience
of one handset and in-home mobility.
Q: Are mobile operators fighting Shani Raja: They certainly are. One battlefield is broadband services, where mobile
back? operators are hoping to deploy technologies such as HSDPA (a high-speed WCDMA
upgrade) to compete in this market with fixed-line carriers. The trouble is, none of this
is happening in a vacuum. Alternative technologies such as WiMAX and proprietary

Convergence
wireless-broadband solutions from companies such as Flarion Technologies and IP

Wireless are enabling new players to come in and challenge traditional operators on both
sides of the fixed/mobile divide.
Q: What are the long term trends Anthony Cox: On the bright side, traditional revenue streams, such as those generated
across the fixed-line industry? by residential calls, combined with stringent cost-cutting exercises have sorted out most
players’ immediate debt problems. Even if VoIP is a threat to incumbent operators at least
they will receive some revenues from supplying the wholesale broadband needed to offer
it.
Both incumbents and alternative carriers now want to get closer to the end user,
particularly if that user is a large enterprise. Rather than just providing the ‘pipes’ they
will increasingly offer tailored services for (and within) the enterprise.
Anthony Cox is Editorial Director of Telecom Markets

Anthony has been commenting on the fixed telecoms market for six years, initially as one of the founding
journalists at Telecom Finance, where he was deputy editor. Following a year freelancing for major media
groups, including Pearson and Institutional Investor, he joined Baskerville as editor of the fixed-line title
Telecom Markets. Anthony has most recently conceived and designed a fixed-line database tracking
worldwide DSL, cable and broadband and fixed-line connectivity.
Shani Raja is Editorial Director of Mobile Communications

Shani has been writing about the mobile industry since 1998, when he first joined the then FT-owned
Mobile Communications newsletter as a senior reporter and contributed to its fixed-line sister title,
Telecom Markets. He has been a journalist for eight years, including writing for CFO Europe, an Economist-
owned publication aimed at finance directors and treasurers of European multinational corporations.
Gavin Patterson is Editorial Director of Global Mobile, 3G Mobile and Mobile Handset Analyst
Gavin has been a senior business journalist since 1989 and specialized on the telecoms industry since
joining Baskerville in 1997 where he helped launch a number of new products including 3G Mobile and
Global Mobile Daily. Previously, he was Business Editor of the Hongkong Standard and Eastern Express
newspapers in Hong Kong. Gavin is a regular fixture at international conferences in Europe, Asia and North
America and also conducts regular briefing sessions with analysts and media organizations on operator
strategy and technology issues.
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Convergence
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Developing Markets
Middle East and Africa

Mobile subscribers in Africa overtook those of the Middle East for the first time
in 2Q 2004, according to data from Informa Telecoms & Media. African mobile
subscribers reached 64.3 million at the end of June 2004, as compared with
61.4 million in the Middle East at the same date. Africa’s rapid subscriber
growth, the fastest in the world in percentage terms, was largely attributable
to continued robust growth in Nigeria, South Africa, and northern African
markets such as Tunisia and Algeria. Here, JOHN EVERINGTON and
TAWANDA CHIHOTA look at some of the region’s major growth markets and
identify the different trends in the development of the African market versus
that in the Middle East.
Q: How strong was subscriber John Everington: We estimate that subscribers in the Middle East and Africa grew by 36%
growth across the Middle East and in 2004 to 146.7 million, making it the fastest growing region in the world behind eastern
Africa in 2004? Europe. The region added a record 38.5 million subscribers in 2004, in comparison with
27.1 million and 20.8 million in 2003 and 2002 respectively.
As the largest and most competitive market of the Middle East, Turkey enjoyed another
bumper year of growth, growing by 7.2 million to 35.4 million subscribers at the end
of 2004. Subscriber growth in the country has been boosted by the merger of Aria and
Aycell in February 2004 to create Avea, which has been better placed to compete against
market leaders Turkcell and Telsim.
Tawanda Chihota: Africa had about 75.7 million subscribers end-2004, representing
annual growth of more than 45% – widening the gap with the Middle East further. A
number of markets in Africa experienced growth rates in excess of 100%, although it is
accepted that for many of these growth is being experienced from a very low installed
base.
However, the onset of competition in a number of markets has prompted strong
subscriber growth. For instance, Iraq’s market became competitive at the end of last year
when the regional operators were allowed to begin competing on a national basis. Iraqna,
which is backed by Orascom Telecom, launched services in the northern territory of the
country. At the same time AtheerTel, backed by MTC, announced plans to develop
coverage in the central region of the country. Both operators had met their regional
coverage requirements within their first 12 months of operation and so are now allowed
to expand.
Although future subscriber growth will be largely impacted upon by the long-term
political stability, starting with the outcome of the country’s first democratic elections,
Iraqi subscribers are forecast to increase to over 2 million by the end of 2005.
Q: Which are the major growth John Everington: Saudi Arabia’s telecoms market has continued to develop rapidly, with
markets? competition set to arrive for the first in early 2004 in the shape of the UAE’s Etisalat.
Although subscriber additions slowed to 1.8 million in 2004, down from 2.3 million in
2003, the imminent arrival of competition is likely to make 2005 a record growth year
in the kingdom.

Developing Markets
2004 was the year that Nigeria officially became Africa’s largest growth market, with
subscriber additions in the country overtaking South Africa’s for the first time (see fig.).
The country, the largest on the continent, saw its mobile subscriber base increase by just
under 5.5 million, in the wake of
MEA markets exceeding 1 million net subscriber
fierce competition between the additions in 2004
country’s four GSM operators to
Country Subs end-04 Net adds in Growth
sign up new subscribers, they (mil.) 2004 (mil.) (%)
constantly lowered entry costs for
Turkey 35.443 7.190 25.45
new subscribers in order to win
market share. Nigeria 8.830 5.479 163.51
Despite being the continent’s South Africa 18.935 3.305 21.14

most developed market, South Saudi Arabia 9.162 1.812 24.65
Africa’s mobile subscriber base Tunisia 3.713 1.762 90.26
continued to grow in 2004,
Morocco 9.094 1.734 23.56
although subscriber growth is likely
to flatten off in 2005 and beyond. Algeria 3.156 1.706 117.72
In addition the highly developed Egypt 6.995 1.366 24.26

markets of Egypt and Morocco Syria 2.174 1.034 90.74
continue to post robust subscriber Source: Informa Telecoms & Media
growth, although the latter is also

likely to see its subscriber net adds for 2005 and beyond begin to decrease. Its near
neighbours Libya, Algeria and Tunisia, however, are likely to provide robust growth for
some years to come.
Q: What are the main differences Tawanda Chihota: The African mobile market is widely geared towards the further
in the trends and development of expansion of voice services while the Middle East is experimenting with non-voice services
the African mobile market versus in a significant way. Growth in basic voice services remains robust in the Middle East, but
that in the Middle East? technological advances such as WCMDA are higher up the agenda. In Africa, operators
widely remain busy rolling out, powering and securing their networks across wider
geographic regions and prepaid remains very much the de facto payment methodology.
John Everington: Despite some similarities, the Middle East and Africa should on the
whole be considered as separate regions. Africa’s low penetration (standing at 8.53% the
end of 2004) is largely due to its low economic development in comparison with the rest
of the world, including the Middle East. This is particularly true for Sub-Saharan Africa,
which has a lower GDP per capita than any other region in the world, and therefore a
lower mobile penetration (7.4%), the exception of course being South Africa.
Despite dramatic subscriber growth in recent years, Africa in general remains at a very
early stage in the development of its mobile sector. With the exception of the North
African markets and South Africa, the priority for most African operators remains the
expansion of their network coverage and to increase subscribers on their networks. This
dynamic has made Africa the largest growing market in the world in percentage terms in
2004.
Although subscriber growth remains the priority for the Middle Eastern operators in
emerging markets such as Iran, Iraq and Yemen, operators in other countries where

Developing Markets
penetration has grown higher focus on driving more value out of their existing customer
bases rather than chase after a dwindling pool of non-subscribers. This has led to the
gradual spread of GPRS and MMS throughout the region, and more recently the
deployment of EDGE and WCDMA.
Q: EDGE and WCDMA have now John Everington: WCDMA is currently more theory than reality in the Middle East and
been introduced by a number of Africa, despite six operators in the region having launched by the end of 2004. Operators
players in the Middle East and launching have thus far tended to be limited in scope, offering coverage in selected built-
Africa. What types of services are up areas only. In addition, the lack of attractive WCDMA handsets has, until recently,
being offered over these severely hampered take-up of the services.
technologies and what has market Israel is likely to witness the first flourishing of 3G in the region, with one 1x EV-DO
response to them been like? and two WCDMA launches by the end of 2004. So far Partner has been the most
successful at pushing these services, which include video calling and media downloads.
EDGE is likely to spread faster in the region than WCDMA, due to the relative ease
of upgrade for most operators. The technology has so far been seen as an enhancement
for existing GPRS services, although newer services offered by operators, such as video
streaming, are likely to see the technology being more widely adopted. As WCDMA
continues to spread, EDGE will increasingly be used to provide coverage in more remote
areas not covered by initial WCDMA deployments.
Tawanda Chihota is Editor of Eastern Europe Wireless Analyst and Middle East & Africa Wireless
Analyst
Tawanda has tracked the global cellular sector for over five years and in the last 18 months has
concentrated on operator strategy in the emerging markets of the Middle East and Africa and central
and eastern Europe and. He has authored and co-authored a number of management reports assessing
the investment opportunities in the ICT sectors of a selection of emerging markets. Prior to his current
role, Tawanda was a researcher with an independent macro-economic think-tank based in
Johannesburg, South Africa.
John Everington is a Senior Research Analyst within Informa Telecom’s Data and Forecasting Team
John focuses on North Africa and the Middle East and is a key contributor to EMC World Cellular
Operator Benchmarking. In addition to his work with EMC, John is a regular contributor to Middle East
and Africa Wireless Analyst. John joined EMC in September 2002, and previously worked at the Business
Information Centre at PricewaterhouseCoopers in London. John holds a BA in Arabic and History, from
the School of Oriental and African Studies at the University of London.
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Developing Markets

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Developing Markets
Asia Pacific
The Asia Pacific region, if not the entire global mobile industry, is dominated
by the world’s two largest markets – China and India. China, according to
Ministry of Information Industry, saw 65 million net adds during the course of
2004 taking the total installed base to 334 million. For 2005, the MII expects
the mobile penetration rate to reach 30% with 392 million subs. Meanwhile,
India had 48 million wireless subs end-2004, up almost 70% year on year and
equivalent to a penetration rate of just 4.6%. The Telecom Regulatory
Authority of India expects monthly net adds to rise 50% over the next 12-15
months from current levels of 2-3 million per month. Here, LIZ HALL and
NICOLE MCCORMICK discuss the growth potential and opportunities in Asia’s
developing markets.
Has subscriber growth slowed in Nicole McCormick: The MII’s robust targets for 2005 (see fig.) are in line with average
China and India over the past net adds over the last three years. This is despite the fact that net adds in 4Q 2004 slowed
year? down thanks in part to Document 204, which calls on cellcos to rein in excessive
discounting. In the past though, the MII has ensured that its targets are rarely missed.
It is worth noting that the MII’s
monthly subscriber figures are MII telecoms forecasts
significantly overstated when 2004 actual 2004f 2005f
compared with subscriber numbers Mobile subs (mil.) 334 321 392
disclosed by China Mobile and
China Unicom. In fact, the Global YOY change (%) 24 19 17
Mobile Subscriber Database Net adds (mil.) 65 52 58

estimates that China had closer to
Fixed lines (mil.) 316 303 361
303.24 million mobile subs at the
end of September 2004, compared YOY change (%) 20 15 14
with the MII’s estimate of 320
Net adds (mil.) 53 40 45
million, giving a discrepancy of
almost 17 million users. Mobile penetration (%) 26 27 30
India, meanwhile, is certainly
Fixed-line penetration (%) 24 25 28
one of the region’s major growth
markets. TRAI believes that lower Telecom revenues (US$ bil.) 63 63 n/a
“policy-induced costs,” such as YOY change (%) 13 13 n/a
revenue sharing and access deficit
charges, infrastructure sharing, Telecom revenues/GDP (%) 3.9 3.9 n/a
Sources: CLSA, MII
lower handset costs and the
exponential rise in network
coverage to smaller towns and cities, will remain the key drivers to growth.
ABN-AMRO has upgraded its subscriber forecasts 10-12% to 83 million by March
2006 and 113 million by 207. It now expects 100 million subs by October 2006 instead
of March 2007 as it originally forecast.

Developing Markets
What are the other major growth Nicole McCormick: The answer would have been easy a couple of years ago; the
markets? Philippines, Thailand and Malaysia. However, with penetration in these markets gathering
speed – Malaysia’s penetration was 56.6% as of end-September, followed by Thailand on
40.8% and the Philippines on 35.6% – growing mobile subs is more complicated now,
especially since many metropolitan areas have or will soon reach saturation point. That
probably leaves Indonesia and possibly Pakistan as the region’s next most obvious growth
market.
How is the Pakistan shaping up? Nicole McCormick: According to EMC, Pakistan had 6.1 million subs as of end-
September, making for a penetration of only 4%.
Pakistan’s four-player mobile industry has already witnessed sharp price and package
undercutting with the auction of two GSM licenses in April, and now a second wave of
discounting has boosted the industry since the award of WLL-CDMA licenses in late-
August.
Hamid Farooq, CEO of GSM licensee Warid Telecom, said the company plans to start
services in 20 cities in 1H 2005, while Telenor plans to debut its GSM service by April.
Both companies picked up their licenses for a whopping US$291 million in April.
Meanwhile, state-run heavyweight Pakistan Telecommunication (PTCL) launched
CDMA-WLL services in November and has now extended its CDMA-WLL coverage to
85 cities and towns.
Q. Do you expect any significant Liz Hall: Headline grabbing investments in mobile operators in the region were pretty
M&A activities during 2005? scarce during 2004 and 2005 will probably be no different. Most European and US
operators have pulled out of their investments in the region and many Asia-Pacific
operators are now owned in some part by a larger parent company from within the region.
However, there are a few investments up for the taking during the year. In Pakistan, the
government is selling a 26% stake in PTCL, which owns 100% of the GSM network
operator PTML. Interested parties have included SingTel, Emirates Telecommunications,
Kuwait’s Mobile Telecoms and MTN International from South Africa. There will
continue to be further moves towards consolidation within the India market. Hutchison
is awaiting approval from the regulator to acquire Aircel. BPL and Spice Telecom are
further possible acquisition targets. Telekom Malaysia acquired a 27.3% in Indonesia’s
Excelcomindo at the end of 2004 and intends to acquire additional shares to achieve a
majority shareholding in 2005.
The next 12 months could also be the year when the ‘rumor’ that China Mobile may
invest in a foreign mobile operator turns into an actual investment. However, China
Mobile’s foreign aspirations could all be put to one side if 3G licenses are finally awarded
in China during 2005.
What licensing opportunities Nicole McCormick: Licensing opportunities are few and far between on the 2G front in
remain in developing markets? developing markets. On the traditional 3G front, a few countries, including the
Philippines, Thailand, India and, of course, China are yet to detail their licensing policies.
While two new local players have put their hands up for 3G licenses in the Philippines,
due to be issued this year, the 3G window in developing Asia-Pacific countries will, by
and large, be limited for newcomers and foreign operators.

Developing Markets
Perhaps the greatest area of opportunity for a niche player for a lot less cash is in the TDD
spectrum arena as well as the limited-mobility WLL and WLAN/WiBro/WiMAX
markets.
Q. Are we seeing a significant Liz Hall: In terms of the usage of advanced data services over GPRS, over the last year
uptake of advanced mobile data there was definitely progress in expanding the number of users in some developing
services outside the traditional markets within Asia-Pacific. However, there is still a lot more work to be done. During
data-centric markets of Korea and 2004 operators in the Philippines and Thailand had some success growing their base of
Japan? GPRS users. Over 22% of Smart Communications (Philippines) and TA Orange’s
(Thailand) subscriber bases were actively using services over GPRS towards the end of
2004, compared with less than 15% at the beginning of 2004. In the larger markets of
China and India usage of advanced data services is still relatively low: at the end of
September 2004 only 5% of China Mobile and Hutchison’s Indian subscriber bases were
using GPRS services actively.
Even as the number of data users continues to grow, the average amount of data usage
per subscriber continues to shrink – a scenario that is all too familiar when considering
the decline in ARPU in developing markets. Going forward, while operators will continue
to focus on growing the active user base of advanced data services, they will have to keep
working on encouraging existing GPRS subscribers to use more of their data services –
something that will only come through more compelling and user friendly services at
affordable prices.
Nicole McCormick: In countries where SMS is cheap compared with local-call tariffs,
mobile data revenues contribute a high percentage of total operator revenues. The classic
example is the Philippines where PLDT’s and Globe Telecom’s mobile data revenues as a
percentage of total revenues are the highest in the region. As of 3Q 2004, PLDT claimed
that its cellular data services accounted for 48% of its GSM cellular revenues. In the
Philippines, to send an SMS costs just P1 (US$0.02) compared with voice call tariff of
typically around P6.50 (US$0.12) per minute.
MMS is not seen as “improved SMS” in the Philippines, however, and so MMS
revenues are unlikely to see the same spectacular growth as SMS. Globe’s subscribers might
be sending more than 1.5 million MMSes per month, and the company’s GPRS-based
services’ revenues are forecast to at least double this year from P220 million (US$4
million) in 2003 as MMS handsets become more affordable, yet the MMS contribution
to data revenues will remain small.
In countries where SMS has never really taken grip, including Taiwan and Hong Kong,
operators have had to leapfrog SMS straight to MMS. In Taiwan, where the usage of
classical (but complex) Chinese characters has inhibited SMS take-up, operators’ data
revenues remain small. In short, the Taiwan market is very much a handset driven one,
not data led.
Q: So if 3G is out of developing Nicole McCormick: Cheap handsets! During the last 3GSM World Congress Asia
operators’ sights for the minute, conference in Singapore, Singapore Telecom Mobile CEO Lim Chuan Poh called on
what are cellcos’ main concerns vendors to increase volumes of low-cost handsets in the Asia Pacific region, saying devices
for 2G? for consumers as cheap as US$30 will be a major driver toward the next billion subscribers

Developing Markets
worldwide. Lim said the very-low-end market was “unserved,” describing that segment
as the “real untapped potential in Asia.”
In fact, Lim said there’s been a “general reluctance” by vendors to produce low-cost
handsets, which in turn has prevented Asian operators from tapping the potential of the
very-low-end market.
He described low-cost handsets as ranging from non-color terminals with voice and SMS
capability only to color-screen handsets offering MMS and but no cameras.
Nicole McCormick is Editor of Asia Pacific Wireless Analyst and Managing Editor of ASIAcom
Nicole commenced her career in the UK office of Baskerville in early-1996 where she was a reporter on
TVI Daily. Since then, Nicole has edited Pan-Asian Telecom, ASIAcom and Asia Pacific Wireless Analyst
and now covers the telecommunications, broadband and television markets across the Asia-Pacific
region for Informa Telecoms & Media. She has a Bachelor of Arts degree, majoring in journalism and
economics, from the University of Queensland.
Liz Hall is a Principal Analyst with Informa Telecoms & Media’s Data division
Liz is responsible for co-managing the research analyst team. Her special focus is on the Asia-Pacific
region, in particular developments within South East Asia. She is also involved in tracking the strategies
of the world’s largest cellular investors. Liz has presented at industry events, including Informa’s annual
3GSM Asia-Pacific conference, and regularly comments on the state of the industry in publications. Liz
joined Informa in 2001 and holds a MBA from the University of Southampton and an undergraduate BA
in Modern History and Politics.
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Developing Markets

Developing Markets
Latin America and the Caribbean

Latin America and the Caribbean were estimated to have a total of 167.61
million subs at the end of 2004, equivalent to almost 32% growth over the
year. Brazil and Mexico still dominate the region in terms of their installed
bases and growth, while GSM last year overtook CDMA as the most popular
technology. Here, LESLIE HILLMAN and ANA HERMOSA look at the various
regional trends and opportunities.
Q. Which countries are expected to Leslie Hillman: In Latin America last year many people underestimated how the epic
show the strongest subscriber marketing wars between Telefonica Moviles, America Movil and Telecom Italia would re-
growth in 2005? energize subscriber growth in several countries. There has been some discussion that the
companies’ promotions and subsidies would abate somewhat once investors started
complaining about the resulting decline in profits, but don’t believe it.
In Brazil, for example, promotions at Christmas were as bountiful as ever. Lower-priced
handsets also contributed to growth last year. Since operators appear to be continuing the
spending spree and the downward pressure on handset prices continues, mobile subs
growth in 2005 should continue to be strong.
Mexico is also a head-on competition between Telefonica Moviles and America Movil,
but the market there is likely to be more limited by the point at which it reaches
saturation. Mexico had already surpassed 32% mobile penetration in September and
market observers have questioned whether penetration will reach much higher than 40-
45%. But between those two figures there’s still more room for growth in 2005.
Q. Who is winning the technology Ana Hermoso: As of December 2004, there were about 9.8 million subscriptions in the
war – GSM or CDMA? Caribbean, not including Belize, Suriname and Guyana. According to our forecasts, there
will be 13.4 million subscriptions as of December 2009, which means a growth rate in
excess of 50%. A significant proportion of growth will be driven by the Dominican
Republic, which has the second largest population in the Caribbean after Cuba.
Over the last few years there
has been a process of The largest Caribbean markets at end-2004
liberalization in the Caribbean 3.0
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Developing Markets
Q. Are there any M&A opportunities Leslie Hillman: The technology wars have shifted into a higher gear as the two camps
in the region? compete on applications, handsets and mobile data platforms. GSM subs surpassed
CDMA in Latin America in
2004, amid the heavy growth Latin American/Caribbean mobile subs by technology
in big GSM markets such as AMPS
Mexico, Brazil and Argentina 1.6%
(see fig.). Telefonica Moviles’

purchase of BellSouth’s 10 CDMA
25.0%
Latin American operations is TDMA
likely to turn a few more 39.5%
CDMA operators over to

GSM, so it’s probable GSM
will have a better year than
iDEN GSM
CDMA again in 2005. Also, 32.8%
1.1%
expect TDMA’s growth rate to
Note: data is from 4Q 2004
slow from previous years, since
Source: World Cellular Database
operators for the most part
finally halted selling new TDMA accounts and handsets. AMPS is almost completely out
of the picture in Latin America as of the end of last year.
Q: What is the situation with fixed- Ana Hermoso: Between 2000 and 2004, 90% of the TDMA migrations in the Caribbean
line substitution? have been to GSM. During the last four years, nearly half of these migrations have taken
place in 2004, being every single migration in 2004 to GSM. We forecast that as of
December 2004 GSM will dominate the Caribbean region with 39% of the total number
of subscriptions in this technology, followed by CDMA with a 33% and finally TDMA
with a 26%. As a result of this new situation, Caribbean operators will be able to offer
cheaper handsets thanks to the effect of economies of scale, opening at the same time the
door to the ‘profitable’ international roaming market, which continues to attract tourist
to buy subscriptions.
Q. How is Latin America Leslie Hillman: Despite last year’s string of acquisitions, this year there are still a few more
addressing the issue of 3G deals that could be made. For example, Carlos Slim appears not to have lost his interest
licensing? for buying Telecom Argentina, given his purchase of a minority stake in Nortel Inversora,
the holding company for Telecom.
Other Telecom Italia properties are also likely up for sale, if buyer and seller can agree
on a price; Carlos Slim’s America Movil is said to be the most interested party. Millicom
International Cellular has a number of mobile operations in smaller markets across Latin
America that it has been trying to sell, although at this point it’s not clear who would buy
them, unless Millicom is willing to offer a heavily discounted price.
As each year goes by, it becomes less likely that an entirely new player will enter the
Latin American or Caribbean market. That said, there is still speculation that some
European operators, such as T-Mobile or Vodafone, may be interested enough to try it
anyway. Telecom Italia and Millicom in Latin America and Digicel in the Caribbean
would be the most likely sellers for these two to pursue, but don’t discount Vodafone going
for an affiliation with a pan-regional Latin American operator.

Developing Markets
Ana Hermoso: The number of mobile phones in the Dominican Republic overtook the
number of fixed lines in 2001, according to figures released by the state telecoms institute,
Indotel.
The situation in the Dominican Republic is entirely in line with the trend in other
markets, such as Brazil, Argentina and Paraguay for example, where there has been sudden
demand for telecoms infrastructure.
It is cheaper and quicker to meet this demand by installing wireless networks than fixed
lines. Sometimes, residents in less developed areas are forced to choose wireless services
because there is no infrastructure to install fixed telephony where they live.
Leslie Hillman: Latin America could see its first auction of UMTS spectrum in Venezuela
this year, and the region is very likely to see other auctions in 2006, with Brazil having
committed to an auction of 1.9-2.1GHz spectrum next year.
It is also possible that an operator may decide to launch UMTS on 1900MHz PCS
spectrum in Latin America or the Caribbean, following its launch in the United States
last year.
Of course, as all of these deployments happen, operators won’t let you forget that
EDGE and 1xRTT are technically still 3G as well.
Leslie Hillman is Editor of LatinCom and Caribbean Telecoms analyst

Leslie has been covering telecoms and media since 1998 and also has more than a dozen years’
experience covering business, finance and politics in Latin America and the Caribbean, including five
years at Bloomberg News in Miami; Caracas, Venezuela; and Princeton, New Jersey. She provides Latin
American- and Caribbean-related news and analysis for other products at Informa Telecoms & Media
and contributes to the development of statistical databases, yearbooks, and strategic reports as well.
Leslie is a graduate of Cornell University in New York, she speaks English, Spanish, Portuguese and
German.
Ana Hermoso is a Research Analyst within Informa Telecom & Media’s Data and Forecasting Team.
Ana covers North America and the Caribbean and is also a member of the World Cellular Datametrics
team, which tracks the evolution of mobile data services on a worldwide basis. Ana joined Informa in
September 2002, having worked as a telecoms analyst consultant for Accenture in Madrid. Ana holds
two Masters Degrees (Marketing and Business Administration) from the Pontificia Comillas University,
ICADE, in Madrid.
advantage.


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Developing Markets
Caribbean Telecoms Analyst – newsletter and continuous research service
Caribbean Telecoms Analyst, produced in association with CANTO (The Caribbean Association of
National Telecommunication Organisations), is the first analytical subscription newsletter to focus on
the emerging Caribbean fixed-line and mobile telecoms markets. Published every month, the newsletter
provides complete coverage of the region using an intelligent mix of the latest news, detailed analysis
and accurate broadband and cellular data sets.
• Breaking news and trend analysis of the of the activities of Caribbean operators
• Key analysis of the regulatory environment of major Caribbean markets
• Broadband, fixed-line and cellular subscriber data, plus tariff data by country.
Caribbean Telecoms Analyst continuous research service is available online for multiple users and
Find out more at www.telecoms.com/cta

Developing Markets
Eastern Europe
Driven by the explosive expansion of the Russian market, subscriber growth in
central and eastern Europe continues apace. The total number of subscribers
reached 170 million at the end of 2004, up from 144.2 million at the end of
August. For full-year 2003 the total number of subscribers in the region grew
46.5%, the second-highest regional growth in percentage terms after Africa
(excluding the Middle East). In comparison, the global industry grew 21.2% in
2003, while western Europe grew less than 10%. Here, TAWANDA CHIHOTA
and KESTER MANN look at the main growth markets and opportunities in the
year ahead.
Q: Russia is the major market in Kester Mann: While it is true to point out that the growth rate in percentage terms slowed
CEE. Has subscriber growth during 2004 (83% compared with 104% the previous year), net subscriber additions in
slowed over the past year, and are Russia reached a record 31 million, almost 12 million more than in 2003.
current growth rates sustainable? The Russian mobile market more than doubled in size for four consecutive years from
2000 to 2003 and although this sort of increase will not be sustainable going forward (the
market is forecast to grow by 33% in 2005 and just 14% in 2006) the growth in terms of
absolute numbers will nonetheless be significant, with the market exceeding 100 million
subscribers in 2006. Mobile penetration was close to passing the 50% mark at the end of
2004, indicating plenty of future growth opportunity, despite a slowdown in percentage
terms.
The main factor driving growth in Russia is the consolidation of network operators
and the expansion of the three national operators into the regions. When a national
operator enters a new region it is able to launch attractive marketing packages and brings
with it experience in targeting distinct market segments, attracting new subscribers.
Tawanda Chihota: The recent explosion in subscriber numbers in Russia is one of the key
reasons for the continued growth across the whole region.
Russia was second-placed in the region – behind Poland – in June 2002 but its growth
has been such that it is now the region’s largest market by a substantial margin, with over
40 million more subscribers than Poland.
Russia had 68 million subscribers at the end of 2004, according to Informa Telecoms
& Media data, representing a growth rate of 82.6%. Statistics from Russian operators
showed that an astounding 8 million subscribers were added during the course of the
December 2004 alone, more than the number added in China over the same period,
despite China having 10 times the population of Russia. According to Iks-Consulting,
Mobile TeleSystems had 26.54 million subscribers at the end of December, followed by
VimpelCom with 25.7 million, MegaFon with 13.6 million, Uralsvyazinform with 2.11
million, and SMARTS with 1.82 million.
Q: What are the major growth Tawanda Chihota: The Ukrainian market reached a total of more than 13.5 million
markets besides Russia in the subscribers at the end of 2004, a growth rate of 107% for the year, which was largely
region? driven by the success of UMC’s Jeans prepaid package.

Developing Markets
Growth in Poland also remains strong boosted by an ongoing price war where operators
are targeting new market segments, such as the urban youth or older residents who have
previously been resistant to new technologies.
Kester Mann: The Ukraine (7 million), Poland (nearly 5 million) and Romania (nearly
3 million) led regional subscriber growth in terms of net additions outside Russia during
2004, with a further five markets
CEE markets exceeding 1 million net subscriber
each expanding by more than 1 additions in 2004
million subscribers during the year
Country Subs (mil.) Net adds (mil.) Growth (%)
(see fig.).
The Ukraine was particularly Russia 67.898 30.711 82.6
noteworthy, more than doubling Ukraine 13.548 6.997 106.8

in size during 2004, thanks Poland 22.347 4.946 28.4
predominantly to the fierce Romania 10.009 2.971 42.2
competition between UMC and
Belarus 2.434 1.307 115.9
Kyivstar. Meanwhile growth in
Poland has been fuelled by an on- Bulgaria 4.932 1.244 33.7
going price war initiated by market Kazakhstan 2.629 1.169 80.1

leader PTC, and in particular its Serbia 4.343 1.057 32.2
successful new prepaid youth tariff Lithuania 3.22 1.009 45.6
called Heyah. Source: Informa Telecoms & Media
Belarus showed the region’s
largest increase in percentage terms, expanding by more than 115%. However, growth
rates in Poland and Bulgaria were noticeably lower, as mobile penetration in these markets
increased to 58% and 66% respectively at year-end.
Q: What is the status of 3G Kester Mann: A total of 21 WCDMA licenses have so far been awarded in nine markets
licensing and 3G network within the central and eastern Europe region, most recently in Hungary, Croatia and
deployments in the region? Romania. However, many tenders were overshadowed by poor sentiment towards the
industry and over-ambitious efforts to sell at inflated prices, with Tele2 (Croatia) the sole
greenfield WCDMA licensee within the region. In both the Czech Republic and Poland
(twice), the mandatory start date was delayed following requests from the operators, who
argued that the market was unready for WCDMA services and wanted more time to
monitor the progress of the technology elsewhere.
Additional licenses may be awarded in the Czech Republic and Latvia during 2005,
while Bulgaria, Lithuania and Russia will likely take further steps towards tendering
during the year.
Slovene operator Mobitel took the lead in terms of deployment by launching in
December 2003, albeit with limited coverage and handset availability. Three other
operators (two in Poland and one in Croatia) have since also launched services, but only
on a low-key basis, with limited coverage and handset availability.
It is unlikely that significant numbers of operators across the region will have launched
full commercial services with a range of supporting handsets and widespread coverage
until late 2006 at the earliest.

Developing Markets
Q: What is the status as regards Kester Mann: With the industry recovering, operators are again looking at central and
consolidation and M&A activity eastern Europe as a means of expansion into growth markets. Deutsche Telekom, the
amongst operators in the region, largest regional operator in terms of proportionate subscribers, has stakes in 10 markets
and are any players emerging as in central and eastern Europe including three that are now branded T-Mobile. It has made
leading pan-regional players? no secret of its intention to expand further within the region, which includes gaining full
ownership of PTC (Poland) and EuroTel Bratislava (Slovakia).
Vodafone, Telenor, France Telecom (via Orange) and TeliaSonera each have stakes in
at least four regional operators and are monitoring potential acquisition opportunities
within central and eastern Europe. Cosmote (Greece) and Telecom Austria, which is
negotiating full ownership of MobilTel (Bulgaria) and courting Telecom Montenegro,
are also emerging as key investors within the region.
The upcoming privatization of Cesky Telecom, which owns the largest Czech mobile
operator Eurotel, presents a significant opportunity for investors looking to further
strengthen their position within the region.
Tawanda Chihota is Editor of Eastern Europe Wireless Analyst and Middle East & Africa Wireless
Analyst
Tawanda has tracked the global cellular sector for over five years and in the last eighteen months has
concentrated on operator strategy in the emerging markets of central and eastern Europe and the Middle
East and Africa. He has authored and co-authored a number of management reports assessing the
investment opportunities in the ICT sectors of a selection of emerging markets. Prior to his current role,
Tawanda was a researcher with an independent macro-economic think-tank based in Johannesburg, South
Africa.
Kester Mann is a Senior Research Analyst within Informa Telecom’s Data and Forecasting Team
Kester has a special focus on the Central and Eastern Europe markets, where he has undertaken a number
of recent research trips. Kester is a regular contributor to Eastern Europe Wireless Analyst and manages
the World Cellular Data Metrics product, which tracks mobile data deployment and uptake. Kester has a
BSc in Managerial and Administrative Studies and previously worked for Motorola.
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Developing Markets
• Detailed coverage of regulation and licensing at both local and the European level
• Network investment strategy and vendor activity
• Regional subscriber data by operator including total, prepaid and data subscribers.
Eastern Europe Wireless Analyst continuous research service is available online for multiple users and
Find out more: www.telecoms.com/eewa

Mature Markets
Western Europe
Mobile subscriber growth appeared to have peaked in 2000 at about 90
million net adds in western Europe. Growth halved to 46 million in 2001 and
then roughly halved again to 24 million in 2002. Given the high penetration
rate, it might have been reasonable to expect a pronounced slowdown, but
2003 saw faster growth with around 27 million net adds and growth was even
higher in 2004. Here, SHANI RAJA looks at how multiple SIM-card ownership
has reinvigorated the market and what this means for ARPU across the region.
Q: Why do you think growth Shani Raja: We believe it’s a lot to do with the growth of multiple subscriptions across
increased in 2003/04 after two western Europe. Indeed, the official penetration rate in most countries in the region is
years of decline? actually misleading. When we say the region is 90% penetrated, we actually mean that
SIM ownership accounts for 90% of western Europe’s population. We’re talking about
90 subscriptions per 100 inhabitants. But that’s not the same thing as saying that 90% of
people in western Europe subscribe to a mobile service. This is because there is a growing
- but unknown - number of multiple SIM-owners. In other words, the region is not as
highly penetrated as it seems, which is why growth in net additions is becoming so
difficult to predict.
What makes matters more difficult is that some of the region’s mobile operators are
actually promoting multiple subscriptions these days; they have strategies in place for this.
In Italy, particularly, multiple SIM ownership is very popular. Here, users increasingly
Subs growth in the western European cellular market, Jan 2002 - Dec 2004
2002 2003 2004
Net Relative Net Relative Net Relative
Month additions growth (%) Month additions growth (%) Month additions growth (%)
January 1,128,003 0.4 January 1,536,218 0.51 January 2,089,308 0.63
February 932,723 0.33 February 1,461,420 0.48 February 1,915,909 0.58
March 906,237 0.32 March 1,475,293 0.48 March 1,774,652 0.53
April 1,394,226 0.49 April 1,756,532 0.57 April 1,503,549 0.45
May 1,440,694 0.51 May 1,653,864 0.53 May 1,525,261 0.45
June 1,369,631 0.48 June 1,588,320 0.51 June 1,675,732 0.49
July 2,272,841 0.79 July 2,762,531 0.88 July 2,621,435 0.77
August 2,090,948 0.72 August 2,370,262 0.75 August 2,508,689 0.73
September 1,704,962 0.59 September 2,287,662 0.72 September 2,097,921 0.61
October 2,780,371 0.95 October 2,615,779 0.82 October 2,089,739 0.6
November 2,749,139 0.93 November 2,393,565 0.74 November 2,141,698 0.61
December 5,162,938 1.73 December 5,369,928 1.65 December 5,352,570 1.52
23,932,713 8.57 27,271,374 8.99 27,296,463 8.26

Source: Informa Telecom & Media

Mature Markets
hold more than one card to take advantage of varying call rates offered by the country’s
operators at different times of the day. And Vodafone Germany also actively pushes
multiple SIM ownership in the form of “partner cards” – designed for use by the owner’s
other family members, but which are increasingly used exclusively in their own cars.
Now, there’s obviously a good side to all of this. Although the phenomenon of multiple
subscriptions makes subscriber-growth trends harder to predict, it means that operators
have a largely unanticipated growth opportunity. There is no reason why we shouldn’t
ultimately see official penetration rates exceeding 150 % across the region, as multiple
subscriptions grow further. What we need now, more than ever, is a better measure of the
extent, and potential, of multiple SIM ownership. This is something that Mobile
Communications plans to track more closely in the coming months.
Q: How many countries have Shani Raja: Among the major markets in western Europe, the UK, Italy, Portugal and
officially passed 100% Sweden have officially passed the 100% barrier. We believe that these countries have high
penetration? quantities of multiple subscriptions. The same could be said of Denmark, Finland, Greece
and Austria, which also have official penetration rates above 95%. Indeed, of the major
markets, only Belgium, France and Germany have penetration rates significantly below
90%, although all are above 70%. Germany is the country with the highest number of
subscriptions in western Europe - nearly 70 million - followed by the UK and Italy
(around 60 million each) and France (about 45 million).
Q: Has ARPU also continued to Shani Raja: According to the best estimates, ARPU growth looks to have been around
grow in western Europe? 2% in 2004. I’m talking about the regional average, as there are vast differences among
individual operators. Growth in the third quarter of 2004 was around flat for the region
as a whole, but the first and second quarters of last year were a little healthier, so the full-
year figure looks like a 2%, or so, rise. Still, analysts had expected a higher rise than this
in 2004, because 2003 growth was 1-4% (according to various analysts’ estimates) after
several years in which ARPU growth was stable or actually declined. Last year was
supposed to be one in which mobile-data usage, in particular, was expected to grow
following the launch of 3G services in the region and the maturity of operators’ GPRS
networks.
Q: Which operators are seeing the Shani Raja: Vodafone Spain is doing particularly well. Its 3Q 2004 ARPU was about
strongest ARPU growth? €36.70 (US$47.60), a more-than-10% rise compared with the corresponding quarter in
2003. This growth had a lot to do with a 2% growth in its contract base, the operator
says. Its contract base grew from 43% a year earlier to 45%. Some of the worst ARPU
performers were KPN Mobile in the Netherlands and TeliaSonera Mobile of Sweden.
Both are dominant operators in their markets but have been forced to cut prices because
of fierce competition from so-called discount MVNOs. Still, we have to be extremely
cautious when analysing ARPU results these days. It’s not only multiple subscriptions
that can cause a problem. There are also issues around double-counting (where users in
the process of churning from one network to another are counted by both at once) and
differences in the way operators recognise subscribers as “active”, which makes direct
comparisons difficult.

Mature Markets
Q: Finally, what’s happening to Shani Raja: The situation in eastern Europe is very different. There is a wide disparity in
subscriber growth in eastern maturity rates among the various countries in the region. But although the market as a
Europe at the moment? whole is immature compared with western Europe, there are notable exceptions with some
very high penetration rates. For instance, the Czech Republic, Hungary, Estonia, Lithuania,
Montenegro, Slovakia and Slovenia all have comparable penetration rates to the leading
countries in western Europe – respectively, 100%, 80%, 85%, 80%, 99%, 75% and 95%.
The region’s total subscriber base, though, is a lot smaller, only around 90 million. In terms
of net additions, growth is starting to accelerate. Net additions in 2000 stood at around
10.5 million, but then hovered at around 15 million for the next two years. In 2003, net
additions rose to nearly 16 million, but the 2004 figure looks to be much better – more
than 20 million – although we’ve yet to see the kind of acceleration that the western
European market saw in the lead-up to its 2000 peak of 90 million net additions.
Shani Raja is Editorial Director of Mobile Communications

Shani has been writing about the mobile industry since 1998, when he first joined the then FT-owned
Mobile Communications newsletter as a senior reporter and contributed to its fixed-line sister title,
Telecom Markets. He has been a journalist for eight years, including writing for CFO Europe, an Economist-
owned publication aimed at finance directors and treasurers of European multinational corporations.
Informa Telecoms & Media provides business intelligence and strategic services to the global telecoms and
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• Unique, extensive subscriber data penetration data for western and eastern Europe
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Mature markets
North America
The end of 2004 has seen the Federal Communication Commission approve
Cingular Wireless’s US$44.1 billion acquisition of AT&T Wireless. It also saw
Sprint PCS and Nextel Communications agree to merge their operations in a
deal estimated to be worth US$35 billion, while January saw AllTel announce
the US$6 billion acquisition of Western Wireless. Here, TAMMY PARKER
reviews the competitive landscape in the U.S. and takes a look at the future of
wireless broadband services.
Q. Do you think the consolidation Tammy Parker: Despite consumer advocates who would tell us otherwise, my sense is
we are seeing in the U.S. market is that consolidation among wireless operators in the United States is not only beneficial
good for the competitive but necessary. It’s really unfortunate that the Federal Communications Commission was
landscape? forced to adopt a cookie-cutter mentality when it was issuing PCS licenses for the 1.9GHz
band. In issuing only regional licenses and conducting certain auctions that only benefited
small “entrepreneurial” businesses, the commission ensured that numerous weak players
would enter the wireless business and struggle mightily. Unfortunately, the FCC will
continue pushing the same utopian vision of competition in the spectrum auction started
in January 2005.
With so many operators - many major markets are served by at least six wireless
companies - the past few years were marked by a ridiculous amount of redundant building
of parallel networks. Now that some of those operators are consolidating, they can put
their focus on building out networks to areas that have insufficient coverage and deploying
next-generation networks that will provide a host of competitive data services. By lifting
the spectrum cap and allowing some consolidation, the FCC is acknowledging that bigger
is indeed better when it comes to being a wireless network operator.
On that note, however, the one drawback is that the small and regional operators will
struggle all the more to compete against the remaining national behemoths unless they
follow the lead of Alltel and Western Wireless.
Q: Is Alltel planning to become the Tammy Parker: The merger will provide Alltel with coverage in nine new states and will
fifth national operator? boost its coverage in many existing markets but I expect it will continue focusing on rural
states and Tier 2 and 3 markets. Alltel’s acquisition of Western Wireless will create a rural
powerhouse that can serve the top four national operators as a roaming partner thanks to
its multiple network platforms.
While Alltel has made its mark in wireless as a CDMA operator, Western Wireless
operates CDMA networks for its own customers as well as TDMA and GSM networks
for roaming customers. The merged company will expand on Western’s GSM networks
but only in order to increase roaming revenues.
Nevertheless, Scott Ford, Alltel’s president and CEO, told reporters that the company
could be involved in future consolidation activity, as either a buyer or a seller, so it may
be harbouring greater ambitions. Many Wall Street analysts raised their ratings on Alltel
after the merger announcement, in part because the acquisition makes the company
appear an even more attractive takeover target than before.

Mature markets
Q. How important is wireless Tammy Parker: Wireless broadband could be especially huge in North America, where
broadband to the North American businesses and consumers alike are increasingly used to being “plugged in” via the Internet.
market? Future generations will demand the full Internet experience when they’re away from
home or the office, and that opens the door for wireless broadband.
Verizon Wireless sees 1xEV-DO as key to drawing corporate customers, early adopters
and, I’m willing to bet, younger consumers who demand constant Internet connectivity
and applications such as real-time, multiplayer games, multicasting and more. To compete
against 1xEV-DO, rivals will have to deploy the same or find something as good or better
- such as HSDPA, Flarion’s FLASH-OFDM platform or maybe some sort of WiMAX
offering.
The bottom line, as always, will be money. In this case, that means cost of network
deployment, cost per bit delivered and end-user costs. Many people are getting used to
free Wi-Fi hotspot service in coffeehouses that want to draw in foot traffic. The demand
for free Wi-Fi has also prompted the practice of war-chalking, where people mark
buildings that offer, usually unintentionally, unsecured Wi-Fi access.
So, the question is whether wireless broadband services can be offered in such a way
to draw a mass audience that’s willing to pay over the long-term. The jury’s still out, but
I’d be willing to bet a lot of people will gladly shell out a reasonable charge for wireless
broadband that they can access anywhere that their mobile phone works. I know I would.
Q: When do you expect to see the Tammy Parker: All major wireless-networking vendors have now joined the WiMAX
first WiMAX offerings? Forum, pledging some sort of allegiance to the technology, but few are being forthcoming
about their plans or even the technology’s chances for long-term success.
At the start of this year Lucent Technologies became the first major vendor to announce
specific plans pertaining to WiMAX. The manufacturer will integrate Alvarion’s
BreezeMAX product line, considered pre-WiMAX today, into its Accelerate Next-
Generation Communications Solutions portfolio. The idea is to offer a converged
networking solution to service providers that includes the seamless interoperability of
WiMAX, 3G mobile, Wi-Fi and wireline networks. The company is taking a low-risk
approach by becoming a reseller of Alvarion’s products rather than developing its own
solution.
Though the WiMAX standard isn’t even complete yet, there has been plenty of buzz
surrounding the metro-area fixed wireless technology, known as either 802.16-2004 or
802.16 Revision D, and its mobile version, 802.16e. Intel’s commitment to embed
WiMAX in every Centrino chip it sells is seen as an endorsement of the technology’s
success.
Q: Are you surprised that vendors Tammy Parker: Some people think that the major vendors’ participation in WiMAX-
haven’t been more vocal about standardization efforts might represent an effort to keep WiMAX from encroaching too
their plans for WiMAX? far on their turf as there are many issues on which they are likely to clash with WiMAX
advocates.
Ericsson, the world’s largest mobile vendor, signed on with the WiMAX Forum in
December but is focusing its involvement on the wireline side. The company expects
an initial product offering to target the fixed wireless 802.16-2004 standard as a
complement to DSL and other fixed broadband technologies.

Mature markets
Other vendors emphasize that WiMAX is only suitable for fixed applications,
contradicting the major hype from WiMAX advocates positioning the technology to take
on the mobile community – even before a mobile standard for WiMAX has been
developed. The lack of agreed-upon spectrum allocations globally is a major limitation
to WiMAX’s ability to compete with 3G. Unlicensed spectrum is problematic in terms
of interference and quality of service for WiMAX, which is why the WiMAX Forum
began a heavy push in 2004 to focus on harmonizing spectrum bands around the world
for WiMAX systems and to lobby the Federal Communications Commission for more
frequencies, including spectrum in the coveted 700MHz band.
Such moves are generally in contrast to the interest of mobile operators, which are the
major source of revenue for the likes of Ericsson, Nokia and Lucent. In October last year
Fujitsu even accused Qualcomm of attempting to delay ratification of a mobile WiMAX
technical standard. Among Fujitsu’s charges was that Qualcomm dispatched a host of
engineers into the WiMAX Forum to delay the approval of a standard.
Tammy Parker is Editor of North America Wireless Analyst

In addition to editing North America Wireless Analyst, Tammy has also authored four successful research
studies on the wireless communications industry for divisions of Informa Telecoms & Media. She previously
held senior editorial positions at several. high-tech publications in the U.S, including Wireless Week, RCR
and Pen Computing.
Informa Telecoms & Media provides business intelligence and strategic services to the global telecoms and
media markets. We specialise in working with organisations to help them achieve strategic advantage.


www.informatm.com
North America Wireless Analyst – newsletter and continuous research service

Every fortnight, North America Wireless Analyst filters the significant developments across the U.S. and
Canada, analyses their significance and presents a concise, coherent view of the likely future
developments. Regular coverage includes:
• Network investment strategy and rollout – covering the current trends in network rollout and network
technology choices
• Key subscriber data from operators across the regions
• In-depth company, country and sector profiles
North America Wireless Analyst continuous research service is available online for multiple users and
Find out more at www.telecoms.com/nawa

Mature Markets
Asia Pacific
The Asia Pacific mobile market is split between the undeveloped, the
developing and the mature. With almost 640 million subscribers at the end of
3Q 2004 the region certainly leads the world in terms of its installed
subscriber base. However, only 17.2 million were hooked up to either WCDMA
or 1xEV-DO and, of these, 97.1% came from Japan and South Korea –
highlighting the division between mature and developing markets in the region.
Here, NICOLE MCCORMICK examines the main issues affecting the region’s
mature markets.
Q: Is the Japanese market about to Nicole McCormick: Softbank and Japanese ADSL wholesaler eAccess certainly hope so!
get more competitive? But it will be tough going for any new players with a mass market strategy to take on the
might of the incumbents, especially with mobile penetration standing at 66.8% as of
December.
For its part, eAccess has announced plans to embark upon a trial of WCDMA and
HSDPA technologies at 1.7GHz with local vendor Fujitsu and a commercial 3G launch
is targeted for 2006. In early November, eAccess management expressed a preference for
1.7GHz spectrum. Before this, it requested allocation of the 2GHz band for a TDD-
based service, and it is still field-testing Navini Networks’ TD-CDMA-based solution at
2GHz.
eAccess is convinced that it will receive spectrum when the government allocates
frequencies in the 1.7GHz band later this year, and it envisions spending ¥100-300 billion
(US$956 million-2.87 billion) on a 3G network – which is expected to be financed by
debt and possibly equity – through 2010. The company aims to provide 90% mobile
coverage in Japan by 2010 and plans to offer a flat-rate service at about half the price
charged by existing operators.
The Ministry of Internal Affairs and Communications plans to add the 1.7GHz band,
exclusively for use for 3G services, to existing cellular bands in the 800MHz, 1.5GHz
and 2GHz spectrum, and to reallocate a part of the 2GHz band by end-2005.
Softbank’s plans to trial WCDMA at 1.7GHz and says it should be able to construct
a nationwide mobile network for ¥300-500 billion. Analysts say Softbank could receive
spectrum at 800MHz after DoCoMo and KDDI’s migration within the 800MHz band.
However, the MIC is aiming to reallocate 800MHz spectrum only among existing
operators, a process that could take until 2012.
Meanwhile, Softbank is still testing IPWireless’ TD-SCDMA solution at 2GHz and
has also reportedly been in MVNO talks with Vodafone Japan.
Softbank recently also denied reports that it has made a ¥200 billion offer for KDDI’s
PDC mobile business, Tu-Ka which achieved net adds in excess of 10,000 in December
for the first time since June 2001, boosting its subs base to 3.6 million.
Q: Who is winning the 3G battle in Nicole McCormick: The answer is unequivocally DoCoMo for several reasons, including
Japan and why? its strong handset line-up thanks to its close vendor relations.
Japan added 1.38 million WCDMA, 1xRTT and 1xEV-DO subscribers in December,

Mature Markets
representing a 59% increase year on year. As of December, there were 25.7 million
WCDMA and 1x users in Japan (see fig.), which is 30% of all cellular subs.
3G Subscriber Trends in Japan

Dec Mar Jun Sep Dec*
3G Net Additions
Grand Total 867,300 1,472,400 941,100 957,500 1,378,700
NTT DoCoMo 255,100 723,800 572,600 587,500 930,100
au 593,700 742,800 341,600 346,500 379,100
Vodafone 18,500 5,800 26,900 23,500 69,500
3G Total Subscribers
Grand Total 13,756,800 16,692,000 19,486,900 22,607,000 25,694,600
NTT DoCoMo 1,881,000 3,045,100 4,583,100 6,487,600 8,499,200
au 11,764,100 13,509,200 14,704,300 15,858,300 16,829,000
Vodafone 111,700 137,700 199,500 261,100 366,400
3G Subscribers Ratio
Cellular Grand Total 79,787,200 81,519,700 82,713,900 83,836,600 85,483,800
3G Total 13,756,800 16,692,000 19,486,900 22,607,000 25,694,600
3G Ratio (%) 17.2 20.5 23.6 27.0 30.1
NTT DoCoMo Total 45,365,900 45,926,700 46,407,600 46,886,400 47,914,200
3G Total 1,881,000 3,045,100 4,583,100 6,487,600 8,499,200
3G Ratio (%) 4.1 6.6 9.9 13.8 17.7
au Total 15,977,300 16,958,800 17,591,100 18,188,800 18,759,000
3G Total 11,764,100 13,509,200 14,704,300 15,858,300 16,829,000
3G Ratio (%) 73.6 79.7 83.6 87.2 89.7
Vodafone (VGS) 14,774,000 15,002,400 15,108,800 15,173,700 15,211,000
3G Total 111,700 137,700 199,500 261,100 366,400
3G Ratio (%) 0.8 0.9 1.3 1.7 2.4
Note: * December 2004 figures are provisional.
Sources: Companies
During December, DoCoMo added a record 930,100 FOMA subs, up 265% year on
year, taking its more than three year old WCDMA subs base to 8.5 million, or 17.7% of
its total subs. In contrast, as recently as March 2004, FOMA subs made up just 6.6%
of DoCoMo’s total subs.
December marks the fully-fledged launch of DoCoMo’s FeliCa-equipped FOMA
handsets, which should attract new subs and boost replacement rates.
December also saw the launch of rival au’s EV-DO handsets with full song
downloading functionality. For its part, KDDI’s au added 379,100 cdma1x users in
December, a drop of 36% on December 2003. Around 90%, or 16.8 million, of its total
au subs had 1xRTT handsets as of December. The company claimed 1.2 million EV-DO
subs at end-September and 14.7 million 1xRTT subs.

Mature Markets
Vodafone’s WCDMA net adds still did not reach the 100,000 mark during December
with the company taking on just 69,500 new users to its Global Standard 3G service,
despite launching five new and much-touted 3GPP-compliant WCDMA handsets in
December. Vodafone claimed 366,400 3G users – 2.4% of its total subs – and is targeting
half of all users on 3G by 2008.
Q: What are the different Nicole McCormick: Hutchison Whampoa-backed 3 Hong Kong launched its WCDMA
strategies of the three 3G players service Jan. 27, 2004 and reportedly had 210,000 subs at end-December, while SmarTone
now operating in Hong Kong? launched its consumer 3G service Dec. 19 and CSL followed Dec. 21. The fourth 3G
licensee, Sunday, is reportedly due to launch its WCDMA packages in 2Q 2005.
With almost a year’s lead time over its two 3G rivals, it will come as no surprise to learn
that 3 has a significant lead over SmarTone and CSL in terms of handset availability. It is
also a lot more aggressive than its smaller rivals on 3G tariffs. In short, Hong Kong really
has only one serious 3G player in the market right now – 3.
In terms of handsets, 3 has 17 handsets from five handset manufacturers in the market
and it offers attractive handset rebates. In comparison, SmarTone offers only the Motorola
E1000 and Nokia 6630 handsets, while CSL retails just one terminal, the Nokia 6630.
Moreover, a recent Merrill Lynch survey of 11 handsets from 3, found that seven retail
for less than HK$2,000 (US$257) with a 12-month contract. Conversely, handsets from
SmarTone and CSL cost over HK$4,000 (US$513).
Selected Hong Kong 3G tariff plans SmarTone aims to launch eight new models in 1Q 2005,
SmarTone including exclusive stock from Sanyo and Sharp, but Merrill
Monthly tariff (HK$) 128 178 238 368 Lynch doesn’t foresee any retailing for less than HK$2,000
Basic minutes 900 1,100 1,700 3,100 (US$257) until late-2005.
Concerning tariffs, 3 trumps its rivals with the cheapest
On-net minutes 800 1,000 1,100 1,700
subscriber monthly charge of HK$123 (US$15.78) which
Video minutes 30 50 75 130
includes 1,200 minutes of basic voice minutes and 50 video
minutes (see fig.). For the first three months, a subscriber
3 Hong Kong actually can use up to 150 video minutes.
Monthly tariff (HK$) 123 183 263 383 533 SmarTone iN 3G’s cheapest package is HK$128
(US$16.41) per month and includes only 900 minutes of
Basic minutes 1,200 2,000 3,000 4,500 7,000
voice calls and just 30 minutes of video calls. Meanwhile,
On-net minutes 900 1,200 1,500 2,000 3,000
CSL’s cheapest monthly rate is HK$188 (US$24.11) and
Video minutes (1st 3 months) 150 225 300 450 750 includes 1,700 minutes of free voice calls only for One2Free
Video minutes (after 3 months) 50 75 100 150 250 subscribers. In addition, it charges HK$1.50 (US$0.19) per
Sources: Merrill Lynch, companies minute for video calls.
In short, 3 has a much bolder 3G strategy than its rivals in
Hong Kong thanks in part to its ability to tap its parent’s handset economies of scale. In
contrast, its rivals appear to have only dipped their toes into the water with limited higher-
end handsets, less aggressive pricing and not very big marketing campaigns behind them.
Q: What’s the state of play in Nicole McCormick: The number of mobile subscribers in Taiwan has dropped almost 3
Taiwan, Asia’s second-most million between January 2004 and September 2004, to 22.3 million, thanks largely to
penetrated market after Hong operators purging inactive users.
Kong?

Mature Markets
Consequently, the country’s mobile penetration rate (measured in terms of SIM cards
in the market) has been pushed back to a little over 100%.
Taiwan Cellular lost 188,000 net subs in October, with a monthly churn rate of 6.2%,
and its prepaid deactivations increased from 94,000 in September to 165,000 in October.
To give a clearer indication of the extent of the prepaid and postpaid mobile subs cleanup,
net subscriber losses for TCC and its TransAsia affiliate rose from 242,000 in 2Q 2004
to 407,000 in 3Q 2004. The clean-up of inactive subscribers was due to be completed by
December.
Already, the proportion of prepaid subs at TCC has been reduced from 21.4% in
December 2003 to 20.5% as of end-3Q 2004, while the proportion of prepaid subs at
Far EasTone was lowered from 43% to 33% in the same period. At Far EasTone-owned
KG Telecom, the percentage of prepaid users is 32%, down from 37% at December 2003.
March was the biggest month for subscriber culling at KGT, with a reduction of a
whopping 970,406 net subs.
Because of the subscriber purge, Far EasTone-KGT’s blended ARPU jumped from
NT$719 (US$22.68) as of end-2Q 2004 to NT$771 (US$24.32) in 3Q 2004: KGT’s
blended ARPU alone strengthened from NT$629 (US$19.84) in January to NT$946
(US$29.84) at end-September.
Similarly, TCC’s blended ARPU has increased from NT$663 (US$20.91) in 2Q 2004
to NT$711 (US$22.43) in 3Q 2004, with CHT’s figure rising 2% quarter on quarter to
NT$732 (US$23.09).
To prepare for the introduction of mobile number portability – which will now most
likely happen toward end-2005 – TCC and Far EasTone have ramped up customer-
retention programs, including offering subsidized handsets to high-ARPU customers
when their contracts expire. CHT’s handset subsidies rose 6% quarter on quarter to
NT$2,201 (US$69.43).
For its part, Asia Pacific Broadband Wireless says it won’t launch a price war in the lead
up to MNP being introduced. As of mid-November, the firm claimed almost 500,000
subs and it plans to launch 1xEV-DO services in 1Q 2005.
Meanwhile, rival CDMA 3G contender, Vibo Telecom, is yet to secure a vendor, while
CHT and Far EasTone reportedly hope to kick off their WCDMA services by end-1H
2005. TCC reportedly has earmarked 3Q 2005 as its launch date. All operators have a
mandate to launch commercial 3G operations by year-end. MNP and 3G will inevitably
put pressure on the sector, with analysts forecasting slight EBITDA-margin declines for
the leading three cellcos this year.
Nicole McCormick is Editor of Asia Pacific Wireless Analyst and Managing Editor of ASIAcom
Nicole commenced her career in the UK office of Baskerville in early-1996 where she was a reporter on TVI
Daily. Since then, Nicole has edited Pan-Asian Telecom, ASIAcom and Asia Pacific Wireless Analyst and
now covers the telecommunications, broadband and television markets across the Asia-Pacific region for
Informa Telecoms & Media. She has a Bachelor of Arts degree, majoring in journalism and economics, from
the University of Queensland.

Mature Markets
advantage.

www.informatm.com
Asia Pacific Wireless Analyst – newsletter and continuous research service
Asia Pacific Wireless Analyst is your essential fortnightly guide to the shifting power dynamic of Asian
next generation mobile development. From new pricing and tariffing requirements to mergers and
consolidation, every issue includes the comprehensive analysis and data necessary to compete.

• Breaking news, including the latest 3G license competitions, bidders, partnerships, regulations,
mergers and acquisition
• Powerful profiles of operators and service providers
• Exclusive data sets including subscriber numbers, mobile data, WAP and i-mode users and SMS
traffic.
Asia Pacific Wireless Analyst continuous research service is available online for multiple users and
Find out more at www.telecoms.com/apwa

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3G: Markets and Technology 8

BSS/OSS and Telecoms IT 37

• MOBILE INDUSTRY OUTLOOK 2005/06 • 1

Back to the future:

• MOBILE INDUSTRY OUTLOOK 2005/06 • 3

Many international business 40

Net add (mils.)

instead, buying prepaid SIM 20

cases mobile users buy SIM cards

different services. The popularity

• MOBILE INDUSTRY OUTLOOK 2005/06 • 4

Where will the inspiration come from in 2005 and 2006?

• MOBILE INDUSTRY OUTLOOK 2005/06 • 5

Business models and eco-systems

• MOBILE INDUSTRY OUTLOOK 2005/06 • 6

In developing markets, mobile communications is emerging as the de facto

the building of new

• MOBILE INDUSTRY OUTLOOK 2005/06 • 7

3G markets and technology

its fierce rival, Cingular Orange France WCDMA 16,000 n/a

• MOBILE INDUSTRY OUTLOOK 2005/06 • 8

• MOBILE INDUSTRY OUTLOOK 2005/06 • 9

Nick Lane is Editor of 3G Mobile

• MOBILE INDUSTRY OUTLOOK 2005/06 • 10

3G Mobile – newsletter and continuous research service

• MOBILE INDUSTRY OUTLOOK 2005/06 • 11

Alternative wireless broadband

• MOBILE INDUSTRY OUTLOOK 2005/06 • 12

Public WLAN hotspot coverage in France by operator and quarter

Orange France Mobile Feb-03 2,200 3,578 5,300 6,500 10,000

Swisscom Eurospot Startup Mar-03 110 141 141 266 400

Meteor Networks Startup Jul-03 87 165 212 240 350

SFR Mobile Feb-03 90 165 179 179 200

All Telecom Startup Aug-03 115 130 150 171 250

HotCafe Startup Jul-03 57 63 42 42 42

ADP Telecom Startup Apr-03 40 40 40 41 41

Wifix Startup Nov-02 34 45 38 38 38

Total 2,733 4,327 6,102 7,477 11,321

• MOBILE INDUSTRY OUTLOOK 2005/06 • 13

• MOBILE INDUSTRY OUTLOOK 2005/06 • 14

Mike Roberts is Editor of Wireless Broadband Analyst and 3G Mobile Evolution

Our technology coverage includes:

Find out more about our complete product portfolio at:

Wireless Broadband Analyst – newsletter and continuous research service

Every issue of Wireless Broadband Analyst includes:

Find out more at www.telecoms.com/wirelessbroadbandanalyst

• MOBILE INDUSTRY OUTLOOK 2005/06 • 15

Services and applications

• MOBILE INDUSTRY OUTLOOK 2005/06 • 16

• MOBILE INDUSTRY OUTLOOK 2005/06 • 17

Richard Jesty is a Senior Consultant at Informa Telecoms & Media

Our content coverage includes:

Find out more about our complete product portfolio at:

Mobile Entertainment Market 05

• MOBILE INDUSTRY OUTLOOK 2005/06 • 18

Find out more at www.mem05.com

• MOBILE INDUSTRY OUTLOOK 2005/06 • 19

Mobile games, selected operators

Country Operator Time Subscribers Usage

Yann Mondon, brand and communications senior manager at France-based mobile

• MOBILE INDUSTRY OUTLOOK 2005/06 • 20