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machine learning and the Internet of Things digital services offline. moving towards an age of automation Age of industrialisation  Age of digital transformation internet. physical world 1970 1980 1990 2000 2010 2020 2030  4 | Megatrends and implications thumbnails stop previous next . information and Age of automation and the connected life artificial intelligence. In the midst of digitisation.

Underpinned by tech advancement Age of industrialisation  Age of digital transformation Age of automation and the connected life Artificial intelligence Analytics Enablers Cloud Horizontal in that they impact the process of Smartphones and smart devices transformation as opposed to specific sectors or industries Software Computing power Connectivity 1970 1980 1990 2000 2010 2020 2030  5 | Megatrends and implications thumbnails stop previous next .

Five megatrends emanating from the mobile ecosystem are driving this change Geographic shift in mobile user growth The internet is mobile. and mobile is the internet Connected device explosion a ca ta ly st th at w ill ac ce The platform economy: messaging was just the start A te l er I a th e pa ce of th es e ‘Open’ is now moving down to the network level tr en ds  6 | Megatrends and implications thumbnails stop previous next .

Ten countries will account for 70% of this growth. IMF 1200 209 Million 1000 337 800 600 400 26 41 200 31 26 22 21 19 17 0 India China Indonesia Nigeria US Mexico Pakistan Bangladesh Brazil Myanmar Additional mobile subscribers Mobile subscribers (2015) (2016–2020) India China Indonesia Nigeria US Mexico Pakistan Bangladesh Brazil Myanmar  7 | Megatrends and implications thumbnails stop previous next . India = 952 million) Top 10 countries by projected new mobile subscribers. Geographic shift in mobile user growth: Asia rising Over 1 billion more people will use mobile phones by 2020 compared to 2015. number of unique mobile subscribers in a country by 2020 (e. with India leading an Asian charge that will account for 55% of global subscriber growth. 2015–2020 Source: GSMA Intelligence. This will rebalance the concentration of consumer purchasing power and technology Note: size of stacked bar equals the total innovation.g.

the internet is now inextricably linked with mobile and vice versa. For an entire generation. Projected mobile internet users and penetration worldwide Source: GSMA Intelligence. This brought ‘mobile-first’ from concept to reality. By 2020 we expect it to penetration of population against 35% of households with home be 60%. Telegeography 5 60% Billion 58% 55% 4 52% 48% 3 44% 40% 2 36% 30% 1 25% 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Mobile internet users Fixed internet households Percentage of population  8 | Megatrends and implications thumbnails stop previous next . The internet is mobile. with mobile internet penetration the point of parity with fixed broadband. and mobile is the internet During 2013. access to the internet via mobile phones passed The gulf has since widened. with smartphones the only access point for many in broadband. ending the year at 36% reaching 44% by the end of 2015. United Nations. emerging markets.

This means the consumer will have a greater variety of connected devices – on average three by 2020 versus 1.000 2.3 2.0 15.5 0.6 20. Connected devices worldwide Source: GSMA Intelligence.2 1.5 in 2015 – providing improved efficiency and controlled automation in daily life.000 1. at home and in the workplace.0 5. as standard practice.7 0.5 10.7 1.9 2. Ericsson 25.4 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Smartphones Tablets PCs Wearables IoT devices cellular IoT devices non-cellular Connected devices per head  9 | Megatrends and implications thumbnails stop previous next . Machina Research.000 1. Connected device explosion Manufacturing processes are building connectivity into new ‘things’. Cisco.000 Installed base (millions) 2.000 0. in the car.

The platform economy: messaging was just the start The platform economy uses smartphones. software and open APIs to create and scale new digital marketplaces for a huge range of services and products From OTT messaging apps …to a broad range of consumer-focused …to major industrial sectors putting sectors reinventing how business is done analytics and automation in the cloud through digital platforms TRANSPORTATION AVIATION POWER DISTRIBUTION Scheduling 1 and logistics INTELLIGENT Connected ENVIRONMENTS 7 Operations 2 products HEALTHCARE optimisation Intelligent Asset performance 3 environments POWER 6 management OIL GENERATION & GAS Field force 4 management Industrial 5 analytics WATER WIND AUTOMOTIVE MINING MANUFACTURING Source: Adapted from General Electric  10 | Megatrends and implications thumbnails stop previous next .

‘Open’ is now moving down to the network level New players and partnerships Software-centric are driving improvements networks are likely to in network deployment. drive a wave of innovation: access and performance the network as an API SOFTWARE-DEFINED OPEN ECOSYSTEMS INFRASTRUCTURE AND NETWORKS ALTERNATIVE New players are using new technologies to connect NETWORK ACCESS people and devices  11 | Megatrends and implications thumbnails stop previous next .

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Consumer insights
Mobile adoption and
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Mobile now reaches 65% of the global population, or 4.7 billion people

Barring perhaps radio, it is the most prevalent technology on earth.

Unique mobile subscriber penetration (global average) Source: GSMA Intelligence

80%

70% 9%

60% 8%

50%

40% 6%

30% 5% 5% 5%

20% 4%

10% 3% 3%

2012 2013 2014 2015 2016 2017 2018 2019 2020
Mobile subscriber penetration Subscriber growth (year-on-year)

 14 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next

It also implies that there is still headroom for new subscriber connections unique growth to the tune of 2. Don’t confuse connections with actual people. Source: GSMA Intelligence  15 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . This ��� ��� overstates the number of actual people (unique subscribers).3 billion mobile connections. data as of Q2 2016.3 4. which equates to a population penetration of virtually 100%.7 There are approximately 7. This is a  much better indicator for the actual reach of mobile. subscribers (people) 99% of population 65% of population *Excludes M2M.5 billion people. On a unique subscriber basis it is just under two thirds. 7. we are far from saturation There is a significant difference between the number of SIM cards and actual people using mobile phones. billion* billion mostly due to multiple SIM ownership.

2015–2020 (billion) (million) India 337 Rest of Asia Pacific 247 China 209 1.1 billion 2015 New subscribers (net) 2020 Note: AJK – Australia. India will be the single largest growth driver of new mobile subscribers Unique mobile subscribers worldwide.1 5.7 Sub-Saharan Africa 141 4. 2015 versus 2020 Net growth in mobile subscribers.6 Latin America 81 MENA US/Canada Europe Country/regional breakdown RoW of growth in new mobile subscribers between 2015 and 2020 AJK Total = 1. Japan and Korea Source: GSMA Intelligence  16 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next .

we expect it to be on average 3% per annum globally by 2020. 100% 80% 60% 68% 47% 51% 40% 43% 20% AJK Europe US/Canada China Latin America Rest of Asia MENA India Sub-Saharan Africa 2015 2020  17 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . though with greater challenges given tougher conditions to reach populations that are more geographically remote and on lower incomes. Africa and a number of other emerging markets. Japan and Korea. 2015 versus 2020 Source: GSMA Intelligence Note: AJK refers to Australia. Reflecting the broader growth to come in new emerging markets Mobile subscriber growth is falling. Unique mobile subscriber penetration. Most headroom exists in India.

symbolising a geographic shift in influence to Asia Mobile phone and internet adoption is one proxy for Six Asian countries will account for 60% of global subscriber technological and economic advancement. India = 952 million) Source: GSMA Intelligence. India is the new China. with all bar the US emerging markets. Top 10 countries by projected new mobile subscribers.g. followed by China. fast-growth Ten countries will account for 70% of the growth in new mobile markets – Indonesia. 2015–2020 Note: size of stacked bar equals total number of unique mobile subscribers in a country by 2020 (e. but joining these are newer. IMF 1200 209 Million 1000 337 800 600 400 26 41 200 31 26 22 21 19 17 0 India China Indonesia Nigeria US Mexico Pakistan Bangladesh Brazil Myanmar Additional mobile subscribers Mobile subscribers (2015) (2016–2020) India China Indonesia Nigeria US Mexico Pakistan Bangladesh Brazil Myanmar  18 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . growth over the period. only liberalised its telecoms market in 2014). Bangladesh and Myanmar (which subscribers worldwide. Pakistan. India will be the single largest driver.

Trading Economics.1% 29 28 5. IMF. 2015–2020) Fixed broadband Mobile internet 100% 38 7.0% 23 40% 2. Source: GSMA Intelligence.6% 7. They are younger.8% 80% 6.5% 27 60% 24 5. ITU Median age Forecast real GDP growth Internet penetration of population (CAGR. with anything from captivating places.2% 20% 0% S a na a an h ar S a a a n h ar S a na a an h ar di si es U di n si nm a es U di si es hi st U ne m In m hi st ad ne hi st In ne C In ki ad ad n C ki n do ya C ki Pa do ya gl do ya Pa gl Pa gl M In an M In an M In an B B B  19 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . The Asian consumer: younger. CIA World Factbook. getting richer and using mobile for internet The geographic shift in where the connected consumer resides This places an added importance on innovation in how to reach doesn’t just mean more people using mobile phones in new these consumers on mobile. entertainment to lifestyle and productivity services such as health or employment searching.8% 37 6. own fewer big-ticket items such as cars and houses (and therefore carry less debt) and are more likely to be mobile-first or mobile-only internet users.

Geographic shift also seen in the rise of new innovation hubs Source: GSMA Ecosystem Accelerator Number of active tech hubs (as of 2016) 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70  20 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next .

creating a large ready- made base of potential new internet users. from the 76% 73% 73% homegrown boom in low-cost Android smartphones. 70% in the US and even higher in the tech-advanced countries of Japan and Korea. 78% China has reached a similar level. 54% 55% India and the other emerging Asian players are at lower levels but fast 49% growing. US/Canada Europe India China Indonesia Pakistan Bangladesh Myanmar Note: figures shown at the top of each bar are projected smartphone adoption in 2020 Adoption in 2015 Increase 2015–20 Source: GSMA Intelligence  21 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . We expect adoption levels of 50–70% by 2020. while Myanmar has virtually 68% skipped the featurephone generation following liberalisation. Smartphone growth is fastest in Asian markets Smartphone adoption is now 60% in Smartphone adoption by 2020 (percentage of connections) Europe.

similar to most advanced regions.000 60.000 Includes top 30 countries worldwide by population GDP per capita ($) Source: GSMA Intelligence.g. Income will become less of a barrier to smartphone ownership Forecast smartphone adoption in 2020 90% Smartphone as a percentage of mobile connections The main sources of future growth in 80% smartphone adoption will be India and a number of other emerging markets (such Indonesia Philippines as Nigeria and Indonesia).000 30.000) will have than incomes in emerging markets. bridging the divide with advanced economies smartphone adoption rates of 60–70% by 2020.000 20. 50% India Smartphone adoption will rise much faster GDP/capita below $10. IMF  22 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next .000 40. 60% Nigeria Several low-income countries (e.000 50. 70% Thailand This will be driven by continued falls in device costs and rising incomes. 40% 30% 20% 10% 0% 0 10.

notably Huawei. Growth is being driven by sub-$200 devices. -4% -16% -2% Samsung Apple Huawei Oppo Xiaomi 2014 2015 2016 (Q1) Source: Strategy Analytics  23 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . 173% Oppo and Xiaomi. up from 28% two years ago. One of the main losers of this has been 87% Apple. suggesting that its volumes may have peaked. led by Chinese OEMs 274% Unit shipment growth for top five manufacturers worldwide The low-cost smartphone story continues to be led by Chinese manufacturers and the Shenzhen ecosystem. Chinese handset makers took 36% of global smartphone shipments in Q1 2016. The company has now reported two 64% consecutive quarters of negative sales growth for the iPhone in 2016. with much of this in the sub-$200 category. until now a beneficiary of China’s rise.

underpinned by skilled yet cheap labour – hence the proportionately larger contribution to the economy from device making. The declining device prices and Moore’s Law make it hard to see many other Low countries becoming a rival in this space. 0% 20% 40% 60% 80% 100% Device Distributors Content Infrastructure Operators manufacturing and retailers and services Source: GSMA Intelligence  24 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next . including employee compensation (wages. income India will likely be an exception. China’s boom in homegrown manufacturing is set to last Distribution of value added in high-.g. benefits etc). tax). business profits and payments to government (e. China falls into the ‘medium income’ bracket.and low-income countries To understand how China has become a powerhouse in handset making. medium. with many homegrown manufacturers of its own. it has engineered a tech Medium ecosystem in Shenzhen comprising income handset and chip makers to drive scale. it is useful to examine the distribution of value added across the mobile ecosystem value chain. High income Value added is the total income generated by a company or sector.

Apple and Google have cemented the OS duopoly Share of smartphone shipments by manufacturer and OS (US. 2015) 10% 62% Percentage of smartphone shipments 2% 4% 7% 15% 35% 24% 2% 1% Apple (iOS) Samsung LG ZTE Motorola HTC Other Android Android Windows Blackberry Source: Strategy Analytics. GSMA Intelligence  25 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next .

X iOS 9 84% 32% Source: Apple.X.X.X – 4. Strategy Analytics  26 | Consumer insights – Mobile adoption and device ownership thumbnails stop previous next .3.X 19% Lollipop 5.X iOS 8 Jelly Bean 10% 11% 4. May/June 2016 Older Older Marshmallow 5% 4% 6. however. For Google. Android is still highly fragmented ��� � � Platform version by OS.X 35% Kit Kat 4. Google.1.X.

Consumer insights Mobile internet – next access. behaviours and the unconnected thumbnails stop previous next .

The internet is mobile. behaviours and the unconnected thumbnails stop previous next . and mobile is the internet Projected mobile internet users and penetration worldwide 60% 58% 4 55% Billion 52% 48% 3 44% 40% 2 36% 1 30% 25% 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: GSMA Intelligence. Telegeography  28 | Consumer insights – Mobile internet – access. Mobile internet users Fixed internet households Percentage of population United Nations.

Worldwide. That means that around 75% (48%/65%) of 12% mobile users will also be internet users. 60% The same figure was only 55% in 2012. behaviours and the unconnected thumbnails stop previous next . but it will rise as 40% 24% mobile phone ownership increases. 17% Global internet penetration overall is still lower than that (around 45% including fixed and mobile access). and people with mobile phones start using the 60% internet on 3G or 4G. three quarters of people with a mobile phone use it for the internet Breakdown of global population in terms of mobile phone and internet access 100% Percentage of population 28% We project mobile subscriber penetration 80% 35% of 65% by the end of 2016. 20% 48% 30% 0% 2012 2016 2020 Own mobile phone and Use mobile phone but use it to access the internet only voice and text Do not own mobile phone Source: GSMA Intelligence  29 | Consumer insights – Mobile internet – access. More interestingly. 48% will own a mobile 46% and use it to access the internet.

0 2011 2012 2013 2014 2015 US UK *Including TV. tablet.0 1.5–3 hours per day consuming media on their smartphone (equivalent to around 30% of all media time*) 3.5 People now spend on average 2. GSMA Intelligence  30 | Consumer insights – Mobile internet – access.5 2. radio and print Source: eMarketer. behaviours and the unconnected thumbnails stop previous next . mobile. PC.0 3.0 Hours per day 2.5 0.0 7% 0.5 1. Advanced markets: more time online on mobile devices… Daily time spent consuming media on mobile 4.

ownership is now 85% of adults 52% based on our recent survey. 25% E-reader Fitness trackers and smart watches were the subject of much hype in 2014 and 14% Fitness tracker 2015. which remain king Device ownership among UK adults 85% Smartphone Smartphones are arguably the most 80% Laptop commonly owned consumer electronics device. behaviours and the unconnected thumbnails stop previous next . taking the UK as an example. 54% In advanced countries. 7% Smart watch 0% 20% 40% 60% 80% 90% 2015 2016 Source: GSMA Intelligence Consumer Survey  31 | Consumer insights – Mobile internet – access. …specifically on smartphones. but these have yet to materialise into anywhere near a mass-market phenomenon. penetration is Tablet nearly saturated. Desktop PC Tablets have grown to over 50% but this is unlikely to move much further given longer 48% Smart TV (internet enabled) replacement cycles and the fact many of them are shared among several people in a household.

now operating on faster connections. with 3G the remainder. A decade-long shift in technology – 4G sunrise. 2G will not disappear altogether (it still carries much voice traffic) but it will be a minority. 2G sunset Equally important to the device layer is the fact that people are In 2011. Generational shift – projected split of mobile connections base Source: GSMA Intelligence 100% HISTORIC FORECAST 4G 80% 3G 60% 40% 2G 20% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020  32 | Consumer insights – Mobile internet – access. with 3G and 4G the vast majority (71%). 80% of the world still was on 2G. behaviours and the unconnected thumbnails stop previous next . we will have gone through a reversal. By 2020.

maps Entertainment Lifestyle Source: GSMA Intelligence Consumer Survey 2016  33 | Consumer insights – Mobile internet – access. e-commerce and banking coming to the fore on mobile Consumer activities on mobile phone: US. at least once a month) 80% 60% 40% 20% 0% Make Email Social IP General Read news Use maps Streaming Streaming Watch Gaming Music Music Order and Online Access Health phone calls networking messaging web video video live or free paid purchase banking government services browsing free paid replayed TV goods services Communications News. UK and Korea (average) (percentage of mobile owners. behaviours and the unconnected thumbnails stop previous next . Video. information.

Use of IP messaging versus SMS SMS growth is average of four quarters to March 2016. Reported data not available for US and Canada. Source: GSMA Intelligence including Consumer Survey 2016 80% 60% 40% 20% 0% -20% -40% Spain Italy Holland Greece Romania Austria Portugal Germany UK US Australia Canada France Consumers that use IP messaging SMS MORE than SMS volume growth  34 | Consumer insights – Mobile internet – access. behaviours and the unconnected thumbnails stop previous next . Facebook Messenger. The trend is much less evident geographic differences. although there are notable in SMS usage are also evident. WeChat Southern Europe is the hotbed. and it is here where the declines etc – continue to grow in popularity. Austria (A1) and France (Bouygues). Figures are based on Vodafone for all markets except Australia (Telstra). where less than 40% of people say they use IP messaging more than SMS. in the US and Canada though (and even the UK and France). IP messaging apps are taking off faster in some countries IP messaging apps – WhatsApp.

IP messaging and video than for voice calls or SMS on a daily basis. and also a higher likelihood of using a home broadband connection for things 20% like watching video. behaviours and the unconnected thumbnails stop previous next . Usage profiles are skewed towards young people Proportion of mobile phone owners who do the following every day (UK) 60% 50% There are clear differences in the internet usage profiles of different demographics. we are starting to see a growing “data- first” mentality in the older age bracket. Even here though. particularly in the US. 10% 0% Social networking IP messaging Streaming video SMS Phone calls Phone calls cellular OTT 18–34 35–54 Source: GSMA Intelligence Consumer Survey 2016  35 | Consumer insights – Mobile internet – access. This likely reflects a degree of comfort using established functions. those in the 18–34 age bracket now use smartphones 40% more for social networking. The ranking order is reversed for the 35–54 30% age group. Age is the most obvious.

India and Sub-Saharan Africa are all below 40%. Australia. underlining the scale of the digital divide. behaviours and the unconnected thumbnails stop previous next .9 billion.4 billion people using the mobile internet against 7. China. A stark digital divide remains. Asia (developing)* 39% There are 3. June 2016 US 67% China 65% Mobile internet penetration is now 46% globally. Japan and South Korea Source: GSMA Intelligence  36 | Consumer insights – Mobile internet – access. MENA 34% India 32% Sub-Saharan Africa 26% 0% 10% 20% 30% 40% 50% 60% 70% 80% Proportion of population *Excludes India. Global average 46% These regions are also highly populous. but this masks a number of countries/regions where adoption is Europe 64% much lower. Developing countries in Asia (such as Latin America 49% Bangladesh).3 billion worldwide. leaving a gap of 3. especially in India and Africa Mobile internet penetration.

Internet advancement across the world: GSMA Mobile Connectivity Index Leaders (14%*): High index scores and high mobile internet penetration. Fast Transitioners (27%): Mobile Internet penetration scores similar to the Leaders. Strong representation from Europe and the Americas. Strong MENA and Latam representation. Need to work on all four enablers. Emerging (29%): Score well on one or two enablers and have below-average mobile internet penetration. Discoverers (11%): Dominated by countries from Sub-Saharan Africa. Transitioners (18%): Typically score well on two or three enablers but still have work to do. Leaders Fast transitioners Transitioners Emerging Discoverers *Percentage of global population Source: GSMA Intelligence based on GSMA Mobile Connectivity Index  37 | Consumer insights – Mobile internet – access. Dominated by countries from Europe and countries with high GNI per capita and urban populations. Strong representation from Asian and African countries. but achieved with lower index scores. behaviours and the unconnected thumbnails stop previous next .

behaviours and the unconnected thumbnails stop previous next . 3G and 4G Source: GSMA Intelligence  38 | Consumer insights – Mobile internet – access. Why? 35+19+46B Affordability 35% Mobile internet subscribers* 46% Covered by a 3G/4G network but have NOT used mobile internet Awareness and lack of relevant local content 19% Not covered by 3G or 4G network Digital literacy Infrastructure and skills *includes 2G. 54% of the world have not used the internet.

g ra ve (a fic ci Pa Proportion of population covered by a 3G or 4G network (Asia. and at a speed and quality of service much e) better than 2G can offer. often remote around 63% in 2014. ili M al V Po M Sr A on M M an on (a In an ar re re Ph m Si C ew C H ic Ko m ch Ko fic B Ti ew N er lo en ci ne N m So Pa Fr ru A B a si A  39 | Consumer insights – Mobile internet – access. up from The remaining uncovered areas tend to be rural. but not the main barrier 3G population coverage has increased to 80% worldwide. driven by investment and network sharing. locales where the economics of expansion mean different This puts the majority of people in range of a network fast enough models are necessary. March 2016) Source: GSMA Intelligence a si A 100% 80% 60% 40% 20% 0% an ds an m a a os ar e h na ) oa m al oa ga am m do a a ka a lia es th ao ji ia ru nd ng Ze h d e an ia n s ge ve Fi or di ni st di si si es ut pa an ep es al a ua la m or au in go an La n iw t st hi m m ac i D Ton la Ko ay ne do e In bo tn hu ap So di ra tr ad la sa al Ja yn n pp -L N C ki N ai G Sa Sa N Ta iL M on us al ie ya al Is ve e B us ng g Pa gl Th or l a. a. Network coverage: significant challenge. to access the internet. behaviours and the unconnected thumbnails stop previous next .

behaviours and the unconnected thumbnails stop previous next . not the main barrier Cost of mobile ownership as share of income (Africa. World Bank. Affordability: also a significant challenge but. selected markets) 250% Cost of ownership defined as cost of: 200% Voice and SMS low-user basket. monthly + 150% Data access lowest possible price for 500 MB of prepaid data. ITU  40 | Consumer insights – Mobile internet – access. again. monthly 100% + Handset price which is amortised with a four-year 50% replacement cycle 0% C er d r i o a e al da a ia a ia go a aw ca nd bi ne ic on h ha R eg op n ig an ot on fr za D m as al ui Le C ga N n hi A s w Za M C n ag G Se Le Et U Ta h R ra ut ad er So M Si Cost of ownership Cost of ownership bottom 40% of earners top 20% of earners Source: GSMA Intelligence.

The biggest challenge is making the internet relevant on a local level What do non-internet users see as the reasons for not getting online? Latin America Barrier Asia Northern Africa and Caribbean Sub-Saharan Africa Lack of awareness and 72% 58% 51% 36% locally relevant content Lack of digital literacy 24% 39% 39% 38% and skills Affordability barrier 25% 36% 29% 29% Lack of network coverage 3% 9% 6% 6% Security and trust barrier 2% 9% 7% 3% Other 12% 12% 12% 25% Source: GSMA Intelligence Consumer Survey 2015  41 | Consumer insights – Mobile internet – access. behaviours and the unconnected thumbnails stop previous next .

efforts have shifted among mobile operators and internet companies into designing content and services that appeal on a local level. (e.g. gaming usage in local language for education. These are.g. web browsing etc. local news)  42 | Consumer insights – Mobile internet – access. instant messaging. with efforts prioritised in expanding coverage and lowering the cost of ownership.) employment. Locally created content in local language that is relevant across Created locally but mostly used Created locally and allow demographics. news. videos etc. both in language and in the value proposition. CE non-users. Example ecosystem even if they can access and afford it. agriculture. fundamental. entertainment (e.g. and social media) e-commerce. the answer so far has been no. shown for Latin America As such. behaviours and the unconnected thumbnails stop previous next . relevance LOC AL CREATION The surprising truth is that for many LOC and creation.g. What is local content and why does it matter? Content in local language Created internationally but Allow usage in local language and primarily relevant for provide content beyond In trying to connect the unconnected (e.) entertainment (e. but LO E CA Locally relevant AG so too is the question: is the internet L GU content sits in RE L AN relevant for me? the sweet spot of EVAN L AL language. movies. content has for many years been the forgotten ingredient. content for entertainment (e.g. of course. discovery apps) to the internet.

000  Million Mbps 1.398 80 1.236 0. an educational tool on mobile phones becomes While technically on the internet. be illiterate. Source: GSMA Intelligence Distribution of mobile internet users (June 2016) Theoretical download speeds 1. it limits what people can do to clearer. LTE-A) GPRS EDGE UMTS HSPA HSPA+ LTE LTE-A  43 | Consumer insights – Mobile internet – access.014 0. the higher bandwidth needed to support video as. Connection speed creates a ‘hidden’ divide. for example. but when you includes GPRS and Edge. HSPA+) 4G (LTE.600 100 100 1. with most of these in emerging markets consider that many internet users in such countries will also such as India. 35% still access the internet on 2G A third of people on the mobile internet still access it on 2G. EDGE) 3G (UMTS.000 60 800 23% 750 40 600 400 20 200 14.400 42% 84 1. mostly text-based interfaces (Facebook has an SMS product for this reason).4 0 0 0.179 1.384 2G (GPRS. which Video may seem like something unimportant.200 35% 1. HSPA. behaviours and the unconnected thumbnails stop previous next .

Industry performance next and ecosystem dynamics thumbnails stop previous next .

Global mobile revenue versus subscriber growth Source: GSMA Intelligence 14% 12% 10% 8% 6% 4% 2% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Subscriber growth Mobile revenue growth  45 | Industry performance and ecosystem dynamics thumbnails stop previous next . Our forecast is for annual mobile revenue rising internet penetration in emerging markets and the shift to growth of around 2% globally out to 2020. higher speed 4G usage more broadly. Mobile revenue growth has stabilised around 2% globally Slowing subscriber growth means there is less natural growth to This may seem low but there is plenty of upside potential given come in mobile revenues.

BRICs – slowing revenue growth impacts global total China has slowed down from its heady growth of the last India is the fastest growing of the four. while Russia and Brazil continue to struggle with a mobile and technology set to increase significantly on a global challenging macro-economic outlook. with its influence in 3–4 years. scale.15% 13% 13% 12% 12% 10% 7% 5% 4% 1% 2% 1% 0% -5% -10% -9% China India Russia Brazil Global average 2010 2015  46 | Industry performance and ecosystem dynamics thumbnails stop previous next . Mobile revenue growth in key markets Source: GSMA Intelligence .

Mobile is susceptible to a downturn as most sectors are. IMF 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -5% GDP growth Mobile revenue growth  47 | Industry performance and ecosystem dynamics thumbnails stop previous next . Performance of mobile revenue growth in relation to GDP growth Developed country averages shown Source: GSMA Intelligence. Macro pressures: the mobile industry is getting more resilient The economic picture is mixed depending on the region. but ongoing LTE adoption and data traffic growth are helping to sustain momentum.

and specifically the UK. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 However. GDP growth and mobile revenue growth. and the UK 2% is one of the most competitive markets in Europe. 4% Mobile has become as close to indispensable as anything. IMF  48 | Industry performance and ecosystem dynamics thumbnails stop previous next . ILO. 2006–2020 8% Europe. especially for London -4% given that it has become the de-facto choice for budding European start-ups or -6% foreign ones looking for a European HQ. -8% Unemployment (15+) Real GDP growth Mobile revenue growth Source: GSMA Intelligence. with GDP growth forecasts lowered in the wake of the event. so the risk to financial performance for telcos is perhaps less than 0% other industries. there will be a number of issues to grapple with in pan-regional regulation and in innovation. has an added level of uncertainty following the 6% UK vote to leave the EU. aside from any direct financial -2% impacts. Europe’s outlook faces extra uncertainty post UK vote to leave EU Europe: employment.

EBITDA margins recovering. More broadly. 33% 31% 29% 27% 25% 2010 2011 2012 2013 2014 2015 Asia US Europe Source: GSMA Intelligence  49 | Industry performance and ecosystem dynamics thumbnails stop previous next . helped by a 37% recovery in revenue growth and strong cost control. this reflects a more stable 35% competitive environment and continued growth in 4G LTE penetration. but structurally lower in Europe and Asia EBITDA margins for mobile operators by region 41% Percent of revenue 39% EBITDA margins have risen in Europe and the US in the last year. both positives.

but that still means a total the five years to 2015 to fund LTE coverage expansion. and even that is likely before most 5G investment given that international standards will not be in place until 2020. Mobile industry capex has peaked for 4G but 5G is still to come post-2020 Capex investment from mobile operators increased markedly in We expect this to abate somewhat. Mobile sector capex of $860 billion to come between 2016 and 2020 Source: GSMA Intelligence 200 Annual mobile capex ($ billion) 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020  50 | Industry performance and ecosystem dynamics thumbnails stop previous next . of $860 billion between 2016 and 2020 (around 16% of global operator revenues).

Free cashflow is being squeezed by low revenue growth and high capex Free cashflow being squeezed by rising capex – especially in Europe 40% Percentage of revenue 35% Asian and European operators are spending the majority of their operating 30% income on capex.e. creating pressure on free 13% cashflow (i. this is less of a 20% burn on revenue. but because ARPU levels are much higher ($50 versus 21% $30 in Western Europe). 15% 10% 23% 5% 12% 10% 0% US Asia Europe Note: figures are for 2015. leaving a higher free 17% cashflow margin. what is left after investment). the US actually spends more 25% capex per mobile subscriber. Perversely. Free cashflow is calculated as Free cashflow EBITDA minus capex (as share of revenue) margin Capex Source: GSMA Intelligence  51 | Industry performance and ecosystem dynamics thumbnails stop previous next .

business profits and payments to government (e.000 seek to redefine business models to 8% Distribution and retail compete in a digital era. benefits etc). growth in value added for the mobile ecosystem as a whole is now being 200 driven by the content and services layer (which will increase from 10% to 14% from 2016–2020) as more time is spent on apps consuming video content. 600 While the mobile operators are one level of a complex value chain that makes up the broader mobile ecosystem (from infrastructure vendors to internet 400 64% Operators companies). However. Value added is the total income generated 800 10% Device manufacturing by a company or sector.200 Share of total $ billion % 14% Content and services What does value mean? The term has taken on several meanings as companies 1. 0 2012 2016 2020 Source: GSMA Intelligence  52 | Industry performance and ecosystem dynamics thumbnails stop previous next . they continue to account for roughly two thirds of value added. including 4% Infrastructure vendors employee compensation (wages. tax). Around 65% of the mobile ecosystem value added comes from operators Economic value added in mobile ecosystem 1.g.

Projected revenue distribution across mobile ecosystem Source: GSMA Intelligence (base case forecast extrapolating current growth to 2025) 3. SAP software licensing 500 Content Revenues from online video Amazon (excluding e-commerce). equipment and services contracts ZTE. BlackBerry. Micromax 2. internet-connected devices Linkedin.000 Advertising Advertising Total digital ad spending on Facebook. Huawei. HTC. Samsung. communications revenues (voice. Network equipment and tablet sales ZTE.500 Devices Network Spend on telecoms equipment Ericsson. Tyco and services 1. Using the By contrast.000 Data Software Revenues associated with Microsoft. SMS and mobile data) to fall from 41% of the overall ecosystem in 2015 to 38% by 2025. Netflix. we project from 3% to 17% over the 10-year period. Google.500 mobile internet services Software Devices Revenues from smartphone Apple.g.000 voice and SMS messaging Data Revenues associated with 2. Twitter 1. Xiaomi. Yahoo. Spotify) will increase current run rates of growth as a base case scenario. OTT content (e. There is a shift in revenue towards platforms and content The same shift can be seen in terms of revenues. Spotify 0 as well as e-book sales 2015 2020 2025  53 | Industry performance and ecosystem dynamics thumbnails stop previous next . Oracle. Hulu.500 Annual revenue ($ billion) Description Major companies Content Voice/SMS Revenues associated with Mobile operators 3. Cisco. Voice/SMS and music streaming services Netflix. Qualcomm. Tencent. Nokia/Alcatel. Huawei.

74 trillion Google Facebook 413 Amazon 400 Netflix 311 300 219 200 171 1. This value shift is affecting investor perceptions: growth versus income Enterprise value (EV) – fourfold increase for large cap tech since 2010 Note: EV data as of 12 November 2015 Source: Yahoo Finance 500 EV indexed (2010=100) 4.3× Large cap MNO AT&T US/Eur/Latam Verizon 132 $1.1× Large cap tech Apple $1.24 trillion Vodafone Deutsche Telekom 117 119 119 113 Orange 100 100 107 Telefónica TIM 2010 2011 2012 2013 2014 2015 América Móvil  54 | Industry performance and ecosystem dynamics thumbnails stop previous next .

Spain Orange Jazztel September 2014 EUR 3.441 have yet to embrace this trend in the absence of extensive fixed/cable network infrastructure. and AT&T’s purchase of DirecTV.830 Prominent examples include Vodafone’s US AT&T DirecTV April 2014 USD 48. Most emerging markets Belgium Liberty Global Base (KPN) April 2015 EUR 1.048 Most of this has happened in Europe. Germany Vodafone Kabel Deutschland June 2013 EUR 8. Spain Vodafone ONO March 2014 EUR 7.500 purchase of cable firms in Germany and Spain. the US and to some extent parts of Asia and UK BT EE November 2014 GBP 19.038 Latin America. with cross-sector M&A helping to accelerate the shift to all-IP networks – Acquisition Country Acquirer Target Month Year Currency price an important underpinning to operate a convergent business model.875 five years involved mobile operators France Numericable (Altice) SFR February 2014 EUR 18.  55 | Industry performance and ecosystem dynamics thumbnails stop previous next .374 A quarter of telco mergers over the past Netherlands Liberty Global Ziggo January 2014 EUR 10. Convergence is one direction of travel for telcos Telco appetite for fixed/mobile Notable telecoms M&A deals in last three years convergence has grown in the last three years.698 Portugal Altice Portugal Telecom November 2014 EUR 8.488 purchasing (or combining with) cable companies or satellite pay-TV operators.

30% 20% 10% 0% Belgium France Spain S. at under a third of households. mobile and pay TV) have been launched. evidence of genuine demand for all four services from 40% one provider is low. Despite the supply-side push. fixed broadband. consumer demand for quad play is limited Quad-play take-up rates 60% 50% Even in markets where quad-play services (fixed phone. Korea UK Germany Japan US Italy Use one provider Use all four services for all four services Source: GSMA Intelligence Consumer Survey 2015  56 | Industry performance and ecosystem dynamics thumbnails stop previous next .

com. AT&T’s planned streaming TV service based on DirecTV content. Prominent examples include Verizon’s 30% millennial-focused Go90 app. 10% 0% US South Korea UK Source: Nielsen. Ooyala. companies have said their investments will take time to bear fruit. 25% These are very new. so the jury 20% is still out on the success of this strategy. BARB  57 | Industry performance and ecosystem dynamics thumbnails stop previous next . The focus of convergence is shifting towards video Streaming video take-up 50% Percentage of households 48% Operators globally are increasingly 40% investing in the development of exclusive 42% mobile-only or at least mobile-first content to drive data traffic and subscriber loyalty. however. and Singtel’s HOOQ in Asia.

Future view next + thumbnails stop previous next .

information and Age of automation and the connected life artificial intelligence. In the midst of digitisation. machine learning and the Internet of Things digital services offline. moving towards an age of automation Age of industrialisation  Age of digital transformation internet. physical world 1970 1980 1990 2000 2010 2020 2030  59 | Future view thumbnails stop previous next .

Underpinned by tech advancement Age of industrialisation  Age of digital transformation Age of automation and the connected life Artificial intelligence Analytics Enablers Cloud Horizontal in that they impact the process of Smartphones and smart devices transformation as opposed to specific sectors or industries Software Computing power Connectivity 1970 1980 1990 2000 2010 2020 2030  60 | Future view thumbnails stop previous next .

and mobile is the internet Connected device explosion a ca ta ly st th at w ill ac ce The platform economy: messaging was just the start A te l er I a th e pa ce of th es e ‘Open’ is now moving down to the network level tr en ds  61 | Future view thumbnails stop previous next . Five megatrends emanating from the mobile ecosystem are driving this change Geographic shift in mobile user growth The internet is mobile.

Future view The platform next economy thumbnails stop previous next .

software and open APIs to create and scale new digital marketplaces for a huge range of services and products From OTT messaging apps …to a broad range of consumer-focused …to major industrial sectors putting sectors reinventing how business is done analytics and automation in the cloud through digital platforms TRANSPORTATION AVIATION POWER DISTRIBUTION Scheduling 1 and logistics INTELLIGENT Connected ENVIRONMENTS 7 Operations 2 products HEALTHCARE optimisation Intelligent Asset performance 3 environments POWER 6 management OIL GENERATION & GAS Field force 4 management Industrial 5 analytics WATER WIND AUTOMOTIVE MINING MANUFACTURING Source: Adapted from General Electric  63 | Future view – The platform economy thumbnails stop previous next . The platform economy: messaging was just the start The platform economy uses smartphones.

Messaging platforms – up and up Continued rise of IP messaging platforms 1. 600 Whatsapp was first to hit 1 billion users.000 Users (million) The IP messaging app user base is growing 800 exponentially. GSMA Intelligence  64 | Future view – The platform economy thumbnails stop previous next . Growth will continue with the spread of low-cost smartphones. 400 200 0 2012 2013 2014 2015 2016 (Q1) Facebook Whatsapp WeChat Messenger Line Kakao Source: company reports. The global user base is approaching 3 billion. A new wave of apps such as Snapchat is growing quickly.

focused on a handful of apps. further entrenching their dominance. But people download fewer apps and engagement is increasingly These new platforms integrate a growing range of services. The rise of the new app constellations: dominating user engagement… Millions of apps are now available across the two leading app These are the new platforms or ‘app constellations’: Facebook. WeChat etc. stores. Average number of apps Average number of apps Average number accounting for 80%+ of Time spent on phone installed on device* of apps used daily app usage per day US 37 12 3 5 hours Worldwide 33 12 3 4 hours *Apps installed does not include preinstalled apps Source: SimilarWeb  65 | Future view – The platform economy thumbnails stop previous next .

28 11. integrating 1 a broad range of services. & Community Talk Story Plain We have made estimates based on associated revenues and user counts.29 6 Commerce Kakao Bank Wallet 2 & Payment Giftshop Pay Kakao 0 0. 2 monetising by advertising Note: ARPU expressed as annual equivalents.49 4 10 10.45 Media & Content Daum Media Daum Webtoon Kakao Music Expand sources of monetisation 8 5 6 Games Kakao Daum Game Games 4 5.06 O2O Facebook WeChat Kakao Line WhatsApp Kakao platform (Korea)  66 | Future view – The platform economy thumbnails stop previous next . GSMA Intelligence Platform Story Daum YellowID Messaging platforms making money without charging for communications 14 3 ARPU ($ per year) Recommendation Daum Daum Kakao & Search Search Maps Topic 12 13. while we have made Advertising Kakao estimates for WeChat. Data is for three-month period to March 2016 except for WhatsApp (6 months to June 2014). User base growth & engagement and Communications Kakao Kakao ARPU levels are not disclosed for individual messaging platforms. Facebook data is reported. Source: Company reports. …and monetising a growing range of services Most successful apps (mainly messaging or social-based) are building ever-wider ecosystems (app constellations). Kakao and Line.

Developments are being driven by the Fleet major mobile ecosystem players such as Google and Apple. The next smartphone? Infotainment Telematics services services Value in automotive is shifting to software and services. Data intelligence & visualisation Source: Intelligent Mechatronic Systems  67 | Future view – The platform economy thumbnails stop previous next . Up to two thirds of new cars sold by 2025 Traffic are expected to be connected (built-in or smartphone-based). Cars are emerging as new platforms to UBI offer a variety of content and services. Consumer focus – cars. ranging from infotainment to telematics. These trends may accelerate with the Human–Machine Premium M2M rise of electric vehicles. Road IHS forecasts 20 million autonomous cars charging by 2035. which may prove services interface a catalyst for further disruption of the automotive sector.

Consumer focus – voice. The super platform? Voice can be the next platform. Relies on dumb terminals linked by high-speed networks to intelligence (AI and natural language) in the cloud. Initial applications are focused on the smart home and personal assistants. Voice (combined with advances in AI) has the capability to become a super platform that coordinates devices and data across a broad range of applications. Other use cases could include digital health (diagnosis and treatment plans) and the enterprise space (to automate business communications and improve workplace productivity). also described as ‘conversational platform’. with a target of 10 million in 2017.  68 | Future view – The platform economy thumbnails stop previous next . Amazon Echo sales of over 3 million to date.

g. The latest development in terms of device control point is the voice-controlled hub (Amazon Echo. Thread). Examples of smart home ecosystem players A number of players are trying to establish an ecosystem based around their products. There are multiple initiatives in place to address fragmentation and enable economies of scale. Consumer focus – smart home. though the overall Application based Hub at the centre Voice based market remains fragmented. both at the application level (e.  69 | Future view – The platform economy thumbnails stop previous next .g. Google Home etc. Promise. need to reduce fragmentation Several smart home platforms have emerged. AllSeen Alliance) and at the networking level (e. partnering with device manufacturers to link those devices to their smart home platforms.). which could be seen as a progression from controlling the device via an application or central hub.

Consumer focus – virtual reality. From science fiction to real life

Artificial Content
intelligence platforms VR expected to have both consumer and
enterprise applications.

Initial focus on consumer and gaming:

–– HTC Vive sales around 100,000 to date

–– Facebook reportedly targets 400,000
Oculus Rift sales in 2016.
IoT New UX

Affordable Robust security
hardware applications

Fast
networks

 70 | Future view – The platform economy thumbnails stop previous next

Industrial sectors are also being transformed – the industrial internet

Industrial internet: the power of 1% Industrial internet platform – GE Predix

Potential performance gains in key sectors TRANSPORTATION

Estimated value AVIATION
Industry Segment Type of savings over 15 years POWER
(Billion nominal US dollars) DISTRIBUTION

Aviation 30 Scheduling
Commercial 1% fuel savings
INTELLIGENT
1 and logistics
ENVIRONMENTS
Connected HEALTHCARE
Gas-fired Operations 2
Power 1% fuel savings 66 7 products
generation optimisation

Intelligent
1% reduction in POWER
Asset performance 3 environments
OIL
& GAS
Healthcare System-wide
system inefficiency
63 GENERATION
6 management
Field force
4 management
1% reduction in
Rail Freight 27 Industrial
system inefficiency WIND 5 analytics
WATER

Exploration 1% reduction in capital
Oil & gas 90
& development expenditures MINING
AUTOMOTIVE

MANUFACTURING

Source: Adapted from General Electric Source: Adapted from General Electric

 71 | Future view – The platform economy thumbnails stop previous next

Industry transformation powered by scalable horizontal IoT platforms

A number of horizontal platforms have emerged to shift industrial
processes into the cloud.

HPE IoT platform, Intel ARTIK Cloud, Alibaba Cloud,
GE Predix Cloud and Microsoft Azure are all recent examples.

Vertical platforms Horizontal platforms addressing
different verticals

Move from vertical to
horizontal platform
Data analytics

SECURITY
folder compass share layers

DATA
Storage Discovery Aggregation Harmonisation

Connectivity and device management

Connectivity

GATEWAY

Devices and connected objects

Source: GSMA Intelligence

 72 | Future view – The platform economy thumbnails stop previous next

0 movement started in Germany and is supported in manufacturing by combining advanced robotics. IoT. 3D printing. data analytics. Daimler and Siemens to enable the fourth connected devices to increase productivity and reduce time industrial revolution. platforms and such as Bosch. First programmable Cincinnati slaughterhouses logic controller (PLC) Modicon 084 1800 1900 2000 First Industrial Revolution through the introduction of mechanical production Second facilities with the help of Industrial Revolution water and steam power through the introduction of a division of labour and mass production with the help of Third electrical energy Industrial Revolution through the use of Degree of complexity electronic and IT systems that further automate production Fourth Industrial Revolution through the use of cyber-physical systems Source: Adapted from DFK  73 | Future view – The platform economy thumbnails stop previous next . Evolution to fourth industrial revolution 1784 1870 1969 First mechanical loom First assembly line. AI. ‘Industry 4.0 or Industrie 4.0 enables business model innovation The Industry 4. by the German government and a number of large companies cloud computing.0’ – made in Germany but indicative of the wider overhaul Industry 4. sensors. wastage.

Future view Network disruption: next APIs and the shift to open thumbnails stop previous next .

Networks are the new hotbed of innovation Access and spectrum (unlicensed options) Infrastructure is becoming more open at several levels • Equipment Equipment – moving to softwarisation • APIs Network APIs of controls • Access and spectrum Base stations Key implications • Easier access for consumers • Lower cost operating model for network providers Network core Controller • Faster innovation  75 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next .

Devices – Hardware – OS The move to software-centric networks is likely to drive a wave of innovation and a growing range of new providers offering new services: the network itself becomes Connectivity ? And more to come.  76 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . Analytics and advertising SOFTWARE The equipment market will be disrupted as network equipment is increasingly Network infrastructure commoditised and intelligence moves (SDN and NFV) to the software layer... with a range of innovative new players entering the space. Softwarisation of networks: new use cases from network. particularly with the adoption of both software-defined networks (SDN) and network function virtualisation (NFV). lower cost model Software disruption sees new players capture value in the mobile stack Examples The telecoms industry is now seeing growing momentum in the move to more Content and services software-centric and programmable networks. an application programming interface (API).

creating a new dimension of operator- startup ecosystem engagement. T-Mobile’s agreement with Twilio to launch Twilio Programmable Wireless and the AT&T/ IBM partnership on open standards-based IoT tools are good examples of this. • Today. Open APIs further leverage the network as an asset Examples of recent operator API initiatives in emerging markets Mobile operators are increasingly opening up their APIs to third-party developers.000 APIs. Europe and developed Asia continue to focus on use cases optimised for enterprises and IoT such as identity management and authentication. there are around 15. with 40 new ones created every week. growth in emerging markets Jul 2015 Sep 2015 Dec 2015 Jan/Feb 2016 Feb 2016 April 2016 May 2016 in the Middle East. markets third party in Malawi before mobile money Tanzania (M-Pesa) (BongoHive) year partnership developers and pan-African and location and Ghana developers to power local start-ups expansion APIs opened to (Vodafone Cash) ‘Google IO’ event selected incubated start-ups Source: GSMA Ecosystem Accelerator  77 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . third parties in ot local tech hub enters a three- and e-commerce. Meanwhile. Billing. including digital payments to developers and money) API API “Tap 2 Bill” API opened APIs opened to API programme platform Ideamart start-ups in seven opened to local launch announced to all. Africa and Asia is Pan-Africa Kenya Malawi Pakistan Ghana and Zambia Sri Lanka Tanzania being driven more by the consumer SMS API opened M-Pesa (mobile Carrier billing Mobile Connect Mobile Money Presentation of Dialog’s API opportunity. Operators in North America.

Redefining connectivity through alternative network access Redefining connectivity: examples of new network technologies Licensed/   Service/application Use case unlicensed spectrum The mobile ecosystem is seeing rapid P2P networks Firechat Messaging/bandwidth sharing N/a innovation in areas of radio access layer   Jott Messaging N/a and device to device connectivity. LTE-U. Satellites Consumer connectivity Unlicensed/licensed Drones/balloons Consumer connectivity Unlicensed/licensed  78 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next .   Filament Industrial IoT Unlicensed   LTE Direct Local discovery Unlicensed/licensed Future connectivity will be provided by   Messaging multiple networks using different radio technologies. Network Veniam (Mesh Wi-Fi) Industrial and consumer IoT Unlicensed/licensed enhancements Artemis pCell Personal LTE cells Licensed These future networks will also use a mix Wi-Fi voice Consumer connectivity Unlicensed of licensed and unlicensed spectrum. LAA and MuLTEfire Consumer connectivity Unlicensed New players will challenge the role of New networks Sigfox Industrial IoT Unlicensed operators as the central providers of Filament Industrial IoT Unlicensed connectivity.

GEO • Google Project Loon uses network of floating balloons: trials underway in India • Satellites 1.000 Satellite Microsoft White Space Project uses gaps in low Earth orbit. New Zealand. instead the focus is on partnering with Drone/unmanned aircraft 20 operators to connect aerial with LTE for ground service. Australia. Civilan airspace 10 Sri Lanka and most recently Indonesia have all had joint pilots launched through this partnership model. Mobile base station Ground coverage  79 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . Facebook and Google are highly unlikely to seek to become a mobile operator. weakening signal strength Altitude (km) Satellite geosynchronous • Facebook Aquila uses solar powered planes Earth orbit. LEO TV frequency bands: promises significantly greater range than Wi-Fi. although timelines for commercial rollout are still unclear.000 of altitude. Last mile connectivity in emerging markets is a growing use case Drones and balloons could offer wide area coverage but limited capacity Aerial networks are designed to maximise ground coverage through the advantage 40. Argentina. Increasing area coverage. Brazil.

GSMA Intelligence  80 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . Growing potential to use unlicensed spectrum Qualcomm has introduced a standalone version of LTE-U. called MuLTEfire. LTE-U/LAA In the US. • Offloading data traffic. Unlike LTE-U it does not depend on licensed spectrum and operates solely in unlicensed spectrum – which means holding a licence in another spectrum band is no longer required to operate in the 5 GHz band. Source: Qualcomm. • Expanding the mobile network and complementing currently owned licences with minimal investment structure. Verizon and T-Mobile have been testing LTE-U in co-operation with Qualcomm. AT&T and US Cellular have also showed interest in developing the technology to improve the quality of their services. Other uses cases include IoT (in LPWA networks such as LoRA and Sigfox) and the use of TV white space for backhaul. Advantages of unlicensed spectrum as technological support for licensed bands: • Faster download speeds over very short Unlicensed spectral waves in 5 GHz band carry voice and data traffic (rather than licensed frequencies in lower bands) distances without a separate Wi-Fi network – important in case of low-frequency bands (under 1 GHz) which provide more coverage but less capacity in rural areas and indoors. reducing strain on main network.

6 66–71 71–76 81–86 Source: GSMA Intelligence  81 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next .9 5.2 4.5 41.5 25.6 3. 3. potential spectrum bands for 5G deployment.0 4.2 50.5–27. to ensure both the coverage of rural regions and sufficient capacity in more populated areas.9 4.5 3.3 4.4 37–39.7 4.5 4.5–47 47.8–33.5–41.5–29.5 39.4 4.5 27.4–52.1 4.25–25.8 4.5–43.8 3.5 45.25–86 GHz) will be required.6 4. 5G spectrum requirements are already being explored and tested Planned upper bands use worldwide for 5G deployment Standards for 5G technology have not been defined yet.0 Already released Considered for 5G use Tests/trials Millimeter wave (24-86 GHz) EU US China Japan Korea GHz 24.3-5 GHz EU US China Japan Korea Band start point (GHz) 3.2–50.3 3. but A balanced release of both sub-6 GHz (470 MHz – 6 GHz) and operators and regulators worldwide are already considering high-frequency millimeter bands (24.4 3.5 31.7 3.

equipment manufacturers and internet companies. and core & management. Ecosystem partnerships are an acknowledgement it can’t be done by a sole actor Telecom Infra Project In February 2016. backhaul. Intel. Nokia. developers. • TIP brings together companies across the value chain. Deutsche Telekom and SK Access Backhaul Core & management Telecom. are focusing on three areas: access. Juniper. including mobile operators. • Members. Source: Adapted from Facebook  82 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . Vodafone. Facebook launched the Telecom Infra Project (TIP). Core network optimisation Media-friendly solutions high-frequency wireless Greenfield telecom networks It joins a growing range of open source System integration Open DWDM optical line and site optimisation systems partnerships: • The Huawei Open ROADS Community • Central Office Re-architected as a Data Centre (CORD) • Open Network Operating System (ONOS). including Facebook. to help solve infrastructure problems worldwide. Unbundled solutions High-bandwidth.

Future view Artificial Intelligence (AI): next The super enabler? thumbnails stop previous next .

The rise of AI – real advances in capabilities AI system passes Turing test? Siri/Google Now redefine human-data interaction Growing wave of VC funding & M&A activity IBM Watson wins game of Jeopardy IBM Deep Blue beats Kasparov UK and Japan renew focus on AI Interest in AI AI as a field founded falls sharply Dartmouth College 1950 1960 1970 1980 1990 2000 2010 2020  84 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next .

AI has several different strands Artificial intelligence AI.3bn do intelligent things’. has several +53% yoy different strands: Natural language processing developing systems that can understand human language Machine learning developing systems that can learn from experience Corporate Venture Deep learning Capital M&A learning by ingesting huge amounts of data Source: GSMA Intelligence. CB Insights  85 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . defined as ‘systems that can Venture Capital In last year $2.

image and video recognition   Virtual. A broad range of emerging use cases for AI Personal assistants Robotics Speech. Machine learning computer vision Artificial Intelligence  Logistics Gaming Surgery and Contextual and healthcare recommendations  86 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . augmented reality.

and delivers the intelligence behind applications the ‘Pop’ ride-sharing service myDiModa fashion à la AI PredPol algorithmic policing The ‘learning’ application adjusts to a user’s The machine learning company helps police fashion sense over time by analysing ‘selfies’ forces ‘predict’ where crime will take place using and making contextual recommendations crime patterns. which facial expressions. an AI supercomputer. and location data.  87 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . and Deep Text. content. dispatch range of vertical sectors including healthcare. presenting the results on mobile devices Integrating AI seamlessly AI-centric strategy AI to drive engagement Recent acquisitions include Increasing focus on machine Facebook is developing Deep Emotient. intelligence system enables the shortest time possible to insurance and personal travel.ai AI mobile search Qualcomm Research is continuing to develop The mobile search company. including iPhone pick-up. and Turi. behaviour analytics. software that recognises recognising emotions by analysing new products are fueled by faces. which focuses on learning and AI. Google Home and Allo chat app. adds contextual and behavioral The deep-learning approach is said to create data gathered from a user’s smartphone to a “human-like pattern-matching capabilities” proprietary search algorithm IBM cognitive computing Uber predictive logistics Watson. Machine bots could then interact directly with users. currently in the “brain-inspired” computing platform Zeroth. private beta. A range of Face. now works in a Artificial The company’s predictive. analyses posts to understand the focuses on machine learning. Emerging ecosystem of AI-focused companies Qualcomm brain-inspired learning Weave. real-time. which AI. including Google Assistant.

PC Cortana Microsoft April 2014 iOS and Android Further extension of Microsoft’s new cross-platform and ecosystem strategy (US and China) 100 million active monthly users on Windows 10 Improve consumer ease of daily planning and search August 2015 Facebook Smartphone M Facebook Uses manual human oversight for all queries (unlike competitors). Accessible across a range of devices Google Android Assistant (beta) Google Home New conversational interfaces improve human interaction Extension of Google Now Accessed via proprietary devices such as Amazon Echo Alexa Amazon June 2015 N/A Amazon Echo and Dot Growing range of other services can be accessed and controlled by Alexa  88 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next . tablet. (beta) (proprietary) (Facebook Messenger) Play is to use these ‘trainers’ to help AI learn and improve Accessed via chat app (Allo) or via Google Home Google August 2015 Smartphone. Personal assistants (or bots) are one of the early battlegrounds in AI Company Launch OS availability Device capability Strategy Improve consumer ease of daily planning and search. Improve consumer ease of daily planning and search Smartphone. car Siri opened to third-party developers with iOS 10 Windows (global). tablet. following recent acquisition of Turi watch. with potential to target the home Smartphone. PC. tablet. Siri Apple October 2011 iOS Will increasingly use AI. TV.

AI is advancing rapidly but still some way from superintelligence

Developing superintelligent AI may be possible in this century Three stages in the development of AI*:
• Artificial narrow intelligence: which focuses on
only one area (the case today)
• Artificial general intelligence: performs any task
System capability

a human can
• Artificial superintelligence: more intelligent than
humans in multiple areas

Fundamental debate around the future
implications:
Superintelligence (ASI)
• AI as a positive force that makes people
smarter
• AI ‘revolution’: more powerful machines make
humans largely irrelevant

Human baseline (AGI)

Takeoff
duration

Now Takeoff ~2075
~2045

Note: AI is artificial intelligence, ASI is artificial superintelligence and AGI is artificial general intelligence * According to Nick Bostrom – www.nickbostrom.com
Source: WaitButWhy.com, Nick Bostrom, Superintelligence: Paths, Dangers, Strategies; A.T. Kearney analysis

 89 | Future view – Network disruption: APIs and the shift to open thumbnails stop previous next

Regional views
next

+

thumbnails stop previous next

Regional views
Asia Pacific
next

thumbnails stop previous next

Commercial Commercial China Mobile trial launch Source: GSMA Intelligence  92 | Regional views – Asia Pacific thumbnails stop previous next . Pilots are planned around major sporting Winter events (such as the 2018 winter Olympics Commercial KT Pilot launch Olympics / launch in South Korea). A region of contrasts: On one hand. operators in CJK appear Olympics launch intent on doing the same for 5G. the cutting edge. NTT DoCoMo Field trials Commercial launch Commercial launches have already been scheduled for 2020 – an ambitious plan given that international standards will only be agreed the same year. While the US rolled out 4G coverage at a Winter Commercial SK Telecom Pilot launch more rapid pace. using densely populated Soft launch stadiums as a convenient test-bed for ultra low latency services such as immersive Olympics / video (augmented reality). such as with 5G… 5G timelines 2016 2017 2018 2019 2020 The CJK triangle (China/Japan/Korea) is WRC 2019 ITU timeline Requirements Workshop Proposals Specifications among the most advanced in the world (Spectrum) in terms of high-speed fixed and mobile networks.

which correlates with tech adoption Most of Asia is low income. low income. …On the other. Poorer households. The Philippines. assertive in implementing national digital agendas with remits including anything from updating urban infrastructure. with 82% of the population living on This will change as economic growth filters down to individual less than $10.  smartphone hubs to help lower device costs. on average. Population distribution Mobile internet penetration Mobile broadband penetration (3G+4G) 800 80% 100% People (million) 700 70% 80% 600 60% 500 50% 60% 400 40% 40% 300 30% 200 20% 20% 100 10% 0 0% 0% Under $2 $5 $10 $20 $30 Over Under $2 $5 $10 $20 $30 Over Under $2 $5 $10 $20 $30 Over $2k –5k –10k –20k –30k –50k $50k $2k –5k –10k –20k –30k –50k $50k $2k –5k –10k –20k –30k –50k $50k Average income per capita ($) Average income per capita ($) Average income per capita ($)  93 | Regional views – Asia Pacific thumbnails stop previous next . Source: GSMA Intelligence Thailand. Internet and 3G/4G as of June 2016. For this reason. governments have become increasingly so at lower speeds. financial services access and transportation to championing homegrown Note: population figures as of 2015. but that takes years and is not an individual less likely to be connected to the internet. are income growth. and those who are do effort.000 per year. Indonesia and Malaysia are all strong examples of this.

Nepal Our survey evidence suggests that while affordability is still a Bangladesh problem. Sri Lanka making local content a priority to reach the 1 billion non-internet India adults in Asia – by far the largest source of new internet users Philippines worldwide. A 1 billion people internet opportunity: in need of relevance The question of why people do not use the internet is perhaps more interesting than why they do. Myanmar Laos Lack of awareness Lack of Cambodia and locally digital Lack of Pakistan relevant literacy and Affordability network Security and Barrier content skills barrier coverage trust barrier Other Vietnam China 30% 89% 11% 0% 2% 15% Malaysia India 80% 21% 23% 3% 4% 9% China Indonesia 75% 10% 46% 2% 3% 12% Thailand Philippines 51% 27% 13% 8% 1% 22% Thailand 88% 23% 22% 1% 2% 3% Vietnam 80% 20% 24% 0% 1% 12% Asia 72% 24% 25% 3% 2% 12% Subscribe to mobile Covered but do not Not covered by broadband subscribe to mobile mobile broadband broadband (3G + 4G) High perceived barrier Low perceived barrier Source: GSMA Intelligence Consumer Survey 2015  94 | Regional views – Asia Pacific thumbnails stop previous next . it is not the biggest. The main issue is that people do Indonesia not see the relevance of the internet in their local environment. Half (53%) of people in Asia live within range of a 3G or 4G Percentage of population network capable of supporting higher speed internet access but Asia 27% 53% 21% do not subscribe to the available mobile service.

Regional views India next thumbnails stop previous next .

Adoption is still only 59% around 25%. however. India is now the fastest growing major smartphone market in the world Smartphone sales growth (2015) 74% Smartphone adoption is plateauing in most advanced markets at 68% around 70–75%. Europe Source: GSMA Intelligence. Strategy Analytics  96 | Regional views – India thumbnails stop previous next . India has also made local manufacture of devices a priority through its ‘Make in India’ programme in an attempt to reduce its reliance on Chinese-made devices. India has yet to ride the wave. By contrast. 30% Two thirds of smartphones sold in the first quarter of 2016 were made in India. with unit shipment growth near zero or negative. Most input materials are. Falling device costs are the main driver. and an increasing share below $100 (below $50 is less common given that previous experiments in this range have largely been unsuccessful due to poor quality). with unit volumes growing at 30% per year. still imported 24% from China. with ASPs now below $150. which could slow the pace of decline in device costs. 8% 7% 6% Smartphone shipment growth Smartphone penetration Percentage of connections India China US W.

200 40% conscious consumers. Reliance Jio’s nationwide 4G network will add to pricing pressure in a country already in need of consolidation. although 250 50% coverage is more limited at 27%. which has increased from 30% to 75% of population over the period. This will help drive some take-up for price. 150 30% 100 20% 4G launch timeline 50 10% Q2 2016 Bharti Airtel Aircel Idea & Vodafone Telenor Reliance Jio Q2 2012 Q3 2014 Q4 2015 Q1 2016 H2 2016 0 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Quarters since 4G launch Connections (millions) 4G adoption Source: GSMA Intelligence  97 | Regional views – India thumbnails stop previous next . 4G expansion has eaten up some of the capex as well. with 300 60% Connections (million) Share of connections base the fruits of this seen in hugely expanded 3G coverage. Time for 4G? 4G in India Operators have invested $18 billion in capex since 2012. Our current forecast is for 4G adoption of 20% by 2020. 4G is now accelerating.

Broadband Public Internet Electronics e-Governance NINE PILLARS Highways Broadband for all Access Programme Ongoing programme Manufacturing Existing structures inadequate Critical for transformation eKranti Early harvest IT for jobs Universal Access to Information for all Ongoing programme to programmes Ongoing and new Mobile connectivity Utilise existing be revamped with new To be completed schemes elements Ongoing programme infrastructure within a year Source: GSMA Intelligence. Digital India is the Indian government’s identity TU NT Participative RE ME governance through ambitious plan to provide lifelong unique and authenticable Financial ER mobiles inclusion OW digital identity for all citizens. D AN • More than 40% of all ration cards. Digital India gains momentum Building digital India through mobile DIG ITA LI NF RA High-speed S mobile TR broadband UC Digital Launched in 2015. Digital THREE Secure cyber locker VISION AREAS space Progress since launch: Integrated government departments • Local mobile manufacturing up by 83% in the last two years. Cashless financial transactions • 250 million bank accounts are linked to unique Aadhar cards. The Aadhaar information systems services project is the world’s largest national identification project. Department of Electronics and Information Technology. Digital literacy • The Unique Identification Authority of India authenticates over 40 lakh Mobile enabled Geographic realtime e-Gov transactions per day via the Unique Identity ‘Aadhaar’ card.DEM GOV N ERNMENT & SERVICES O enrolments have been linked to Aadhaar cards. India  98 | Regional views – India thumbnails stop previous next . which would enable them to EMP Local access a wide range online services within a safe environment. content Public cloud DIGITAL infrastructure The mobile industry pledged to invest $75 billion at the launch of the Digital India programme in July 2015. LPG connections and rural employment .

Regional views Africa next thumbnails stop previous next .

Sudan Kenya 41m 47m An increase in internet access will need to 4% be balanced with efforts to make online content and services relevant – Facebook Egypt 92m is not a panacea. 9% Tanzania There are. Algeria 40m On balance we are optimistic. however. Africa’s decade? Mobile subscriber growth will be 5%+ per year until 2020 12% 10 largest countries in Africa (by population) Projected annual subscriber growth (2015–20) Notions of ‘Africa’s decade’ have been made before. but largely proven Uganda 40m unfounded. we expect DRC 6% (population 78 million) and Ethiopia (100 million) to grow at 7%+ per year. for example. good reasons 54m to believe the next 10 years will be DRC transformative in terms of mobile and 78m 8% internet access. and 2% forecast net growth of 200 million mobile internet users between 2016 and 2020 – South Africa 55m the largest of any region except Asia. Mobile subscriber growth in major Nigeria Ethiopia African markets is among the highest in 100m 185m the world. 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Mobile subscriber penetration (2015) Source: GSMA Intelligence  100 | Regional views – Africa thumbnails stop previous next .

which should be 15% positive for revenue growth. internet consumers are increasingly using OTT messaging apps (e. a lack of low-frequency spectrum are all factors hindering growth. Cameroon and DRC. WhatsApp is used by around 80% of smartphone owners in South Africa). but growth will increasingly come from relatively new 3G markets. For operators. 57% Advanced countries such as South Africa still have headroom. in some cases. However. 4G remains more of a future proposition. Higher smartphone penetration translates into higher data usage. the implications are mixed. 7% 4% 2010 2015 2020 Smartphone Data revenue as adoption % of service revenue Source: GSMA Intelligence  101 | Regional views – Africa thumbnails stop previous next .g. This will place added importance on bundled data pricing to mitigate direct impacts on lower use of SMS and potentially voice. Limited coverage. notably Algeria. Smartphone adoption will rise from 25% to more than 50% by 2020 Smartphones will cross 50% of connections by 2020 20% Smartphone adoption remains low. but we forecast it to increase to more than 50% by 2020. lack of devices at affordable price points and. driven by falling device costs. There are now 74 live LTE networks across 32 countries in Africa but penetration is 25% just 1% and our expectation is 7% by 2020.

and 3G coverage is around 50% in Africa – by far the lowest of Nigeria 50% any region (Asia is 80%). Recent macro weakness and currency devaluations have not 20% helped. Cameroon Côte d’Ivoire Ghana This is largely a result of the challenging network economics 40% Botswana in rural and remote areas. Network sharing initiatives and Morocco South Africa alternative connectivity solutions – mostly aerial-based – have Tunisia gained momentum. as reflected in the UN Sustainable Development 80% Goals. Expanding coverage to support internet adoption is both a challenge and opportunity Much of Africa lives rurally – the majority of the unconnected 100% % of rural population Mobile and internet access are now universally recognised as 90% important enablers to providing core life service access to rural Uganda populations (from financial services access to out-of-classroom Malawi Ethiopia education). Kenya Rwanda Mozambique Africa has become a closely watched test-bed for how to reach 70% Zimbabwe Tanzania unconnected consumers because of its heavily skewed rural Sudan population. making the efforts to move to a leaner cost model in 10% network expansion that much more prescient. with Google and Facebook increasingly 30% Algeria active in the region in search of partnerships with operators. Zambia Mali 60% Senegal DRC Angola Egypt The challenge is in reaching them: fixed infrastructure is sparse. 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 3G coverage Source: GSMA Intelligence  102 | Regional views – Africa thumbnails stop previous next . capex budgets tend to be denominated in dollars or euros.

Regional views US next thumbnails stop previous next .

leaving significant upside still to come.2 80% 83% 10 8 60% 62% 6 6. By the end of 2015. predicting that per-user traffic will rise from 2 GB per month to more than 11 GB. Cisco  104 | Regional views – US thumbnails stop previous next . the challenge is monetising data consumption Both the US and Canada have near-ubiquitous 4G footprints at This is reflected in the forecasts for mobile data. US operators on average had 54% of their subscribers on 4G tariffs. with Cisco 98% and 92% coverage respectively. 4G share of mobile connections in the US Projected mobile data use per individual 100% 12 GB per month 11.1 40% 4 4. The 4G story still has room to run.3 20% 2 1.9 1.2 0% 0 0. video will account for the lion’s share.6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Canada US Global 2014 2019 Source: GSMA Intelligence.

with adoption still less than 30%. In contrast to Asia. Europe for home broadband (presumably because of more favourable has been slower (in part because of the timings of 800 MHz economics than fibre). adoption reached 30% three Field trials have taken place. Cisco  105 | Regional views – US thumbnails stop previous next . Speed of 4G take-up since launch of the first LTE service 70% 4G share of connections 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Note: AJK refers to Australia. commercial launch auctions). using 5G as a last-mile solution years after services launched and is now nearing 60%. It remains to be seen whether the same will be the case for 5G. Early adoption driven by investment in strong network coverage The US has proven to be an early adopter market for 4G. reflecting the need to further explore the consumer demand case and business model from the host of options currently being floated. Japan and Korea Europe US & Canada AJK Quarters since launch Source: GSMA Intelligence. driven by strong network rollout. timings have not yet been announced.

taking 44% of net adds over the 12 months to March 2016.0 Million 3.0 0% 0.5 6% 2. This is also reflected in its ability to win new contract customers.0 9% 2.5 -3% 0. with mobile service revenues growing above 10% the last four quarters.0 3% 1.5 12% 3. Service revenue growth in US US contract net additions 15% 4.0 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Sprint AT&T Verizon T-Mobile Sprint AT&T Verizon T-Mobile  106 | Regional views – US thumbnails stop previous next . Competitive dynamics – T-Mobile’s strong growth T-Mobile has become the fastest growing operator in the US.0 -6% -0.5 -9% -1.5 1.

Regional views Europe next thumbnails stop previous next .

top five European markets Note: growth figures are year-on-year. environment and continued shift to higher usage 4G tariffs. Europe. with GDP territory in 2017. The mobile market is more resilient now growth forecasts lowered in the wake of the event. a more stable competition environment and lessening in negative territory. and specifically the UK. Source: GSMA Intelligence 3% 0% Growth settling in low single digits by 2017 -3% -6% -9% -12% -15% 2010 2011 2012 2013 2014 2015 2106 2017 2018 2019 2020 UK Germany France Europe Italy Spain  108 | Regional views – Europe thumbnails stop previous next . has an added level of We expect the aggregate market to move back into positive uncertainty following the UK vote to leave the EU. than it was at the time of the financial crisis in 2008. with LTE Forecast mobile revenue growth. Continued recovery in revenue growth for European telcos European mobile revenue growth continues to recover after years headroom. helped by a slowly improving economic regulatory impact from termination rate cuts all helping.

The UK and Netherlands are the two major markets in the range of 60–70% adoption (as a share of most advanced at around 50% take-up. 4G take-up is highly varied across Europe Note: figures are as of June 2016. This leaves a lot of room for growth. Upside potential from 4G growth to come Smartphone take-up is fairly consistent across Europe. total connections with Italy and Austria below 20%. especially watching video. which should give a boost to financial performance and consumer satisfaction given increasing demand for always-on connectivity. with most The same is not true for 4G. but it falls off from there. Source: GSMA Intelligence 77% 77% 69% 69% 71% 69% 65% 62% 50% 52% 38% 38% 26% 24% 19% 11% UK Germany France Italy Spain Netherlands Belgium Austria Smartphone adoption 4G adoption  109 | Regional views – Europe thumbnails stop previous next .

European In Europe.74 15% 2 2.7 per subscriber per month. which is reflected in its expansive 4G footprint. operators spent nearly 20% of revenue on capex. Mobile capex intensity (percentage of mobile revenues) Mobile capex per subscriber per month (2016 forecast) 25% 10 $ per subscriber per month 9.55 10% 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 US Europe Asia US Europe Asia Source: company reports. leaving an in-between period before the next ramp up for 5G post-2020. This has subsided (as in Asia and the US). but before 5G: ‘in-between’ investment cycles During the height of 4G network expansion in 2013/14. Post 4G capex.71 8 20% 6 ion to ans up exp p m G Ra nd 4 fu 4 4. mobile capex spend is $4. GSMA Intelligence  110 | Regional views – Europe thumbnails stop previous next . This is almost double that of Asia but half of the US. Even at 16% of revenue. that equates to an expected €133 billion over the five-year period to 2020.

Regional views Latin America next thumbnails stop previous next .

with This region is also among the most social-media charged in the around 50% of mobile subscribers using the internet.3 4. We Are Social  112 | Regional views – Latin America thumbnails stop previous next . with Argentines spending more than four hours penetration.8 3.3 60% 63% 3. per day. driven by increased smartphone South America. Hyper charged internet users Internet penetration continues to rise in Latin America.9 56% 60% 3. Mobile internet penetration by region Time spent on social media (hours per day) 80% 5 Percentage of mobile subscribers 70% 76% 66% 4 4.8 50% 3 40% 39% 2 30% 20% 1 10% 0% 0 Sub-Saharan Asia Pacific Latin Developing Developed World Argentina Philippines Mexico Thailand Brazil Africa America countries countries 2015 2020 Source: GSMA Intelligence. We expect world: three of the top five markets in terms of time spent are in this to rise to 66% by 2020.

000 133% 50% 126% 111% 112% 40% 1.000 20% 10% 500 38% 0% 0 -10% Argentina Brazil Chile Ecuador Mexico Peru Uruguay Data traffic growth Data revenue growth Total service revenue growth March 2015 March 2016 Growth (YoY) Note: traffic growth is for the three months to March 2016 compared to the same period of the previous year.000 80% MB per user per month 183% 70% 2.500 60% 2. Source: GSMA Intelligence  113 | Regional views – Latin America thumbnails stop previous next . Surging data traffic has yet to filter through to revenue growth Smartphone data usage has doubled in a year (Telefonica figures) Unfortunately much of that traffic is yet to be monetised 3.500 92% 30% 1.

with -10 -7% -7% -6% Brazil in particular mired in recession. There is also an impact from high inflation. The region’s -1% -0. and network equipment denominated in foreign currency more expensive for operators. and is -5% -4% expected to remain negative in 2016. and contract customers delaying upgrades. -40 -37% -36% -50 -53% -60 Source: Oanda  114 | Regional views – Latin America thumbnails stop previous next .2% 0.3% -0.1% 0% 0% GDP growth was –0.4% The macro-economic environment 0 remains challenging.3% 0. Challenging macro environment Currency devaluations hit consumer spending and investment Change in local currency value versus US dollar (June 2015 versus June 2016) Fr en El G C ch raz Ve N A H C Su Pa os ras ua via Sa G ic U Ec ze rg ol on ru Pa ne e G ua M ru ta rin ar ra te B lv om en B uy ua B du na zu ex ol C ag gu gu m ya ad Pe el R am tin an hi do i m bi ic el al ic i ua na ay ay or le o a a a a a a a il r 0. -30 which makes imported smartphones more expensive for consumers. with prepay customers (78% of -20 -17% the base) reducing monthly spend.9% in 2015. -9% -9% This can have an impact on consumer -14% -13% spend.

Regional views Middle East next thumbnails stop previous next .

25% • Meanwhile. in countries such as Afghanistan. 65% 60% In these markets. 77% • By contrast. boasts the highest 34% smartphone adoption rate in the world. 0% t r E el bi i in an n on y ia n q an en e ra d ai a ke tin a Ira Ira A r ra ra A Sau at a st m m rd w Sy an U r Is ah es Q ni Ku Tu Ye O Jo b ha l B Le Pa fg A Mobile Mobile internet Smartphone Note: smartphone adoption measured as percentage of broadband 2G only Voice only Not subscribed adoption connections. at 83%. 20% 23% 23% 23% smartphones account for less than a quarter of connections. 2G is still the dominant 61% 59% 59% technology for the mobile internet. A region of great diversity Mobile and internet access across Middle East The region varies hugely in terms of mobile 100% Percentage of population market maturity: • In some markets. particularly most of those in the GCC. mobile penetration is over 90%. in Yemen and Palestine. There is similar diversity in smartphone 40% adoption: 39% 37% • The UAE. less than half of the 71% population subscribe to mobile services. 74% Yemen and Palestine. particularly 55% in Palestine where 3G is yet to be launched. and the vast majority of subscribers are mobile 80% 83% internet users (mostly 3G and above). Source: GSMA Intelligence  116 | Regional views – Middle East thumbnails stop previous next .

supported by growing venture It plans to develop smart solutions in Zain markets throughout the region (Bahrain. • It is home to a booming startup scene. capital. free Wi-Fi and Lebanon and Saudi Arabia). A particular use case is • Some of the main areas of focus have been smart cities. smart during Haaj. accounting for just over 2% of total connections. UAE Etisalat is planning to develop a smart theme park.  117 | Regional views – Middle East thumbnails stop previous next . metering and security. a smart city advisory firm. my Identity’ campaign. monitoring consumer locations. • Tel Aviv is ranked one of the world’s most innovative cities. Du and Etisalat provide a service which allows people to renew Emirates IDs digitally without visiting service centres. frequent startup competitions. with a “seamless and engaging” guest experience through mobile devices. Saudi Arabia The Saudi government is mandating biometric fingerprinting on all SIMs for reasons of security. Kuwait. Saudi Arabia and UAE are launching Mobile Connect services. Various Zain has acquired NexGen. Jordan. There are currently just under 10 million cellular M2M connections in the region. seed funds. web portals. accelerators. Iraq. and digital signage. automotive. • Many international venture-capital firms. smart kiosks There is also a vibrant innovation ecosystem emerging in Israel. GCC states are increasingly seen as pioneers in mobile Saudi Arabia STC has developed a crowd management service for technology innovation. wristbands. The region is home to pioneers of new technology Key initiatives of new services in the Middle East Market Inititative Smart cities Qatar Ooredoo has a business development team focusing on mega projects – Hamad International Airport and Lusail Smart City are example bids that Ooredoo has won. scientific research institutes and Digital identity high-tech companies are headquartered there. UAE As part of UAE EIDA’s ‘My number. Various Operators in Jordan. Jordan • This number will more than double to 25 million by 2020 and UAE are heading in the same direction. (5% of connections). co-working spaces.

Mobile is also helping to overcome socioeconomic issues Countries with highest displaced populations. 8 • There are now 20 live mobile money services in 10 markets across the region. The total displaced populations from Syria. 2 0 Syria Colombia Iraq Afghanistan Sudan South Sudan Yemen Nigeria Somalia DRC Source: UNHCR  118 | Regional views – Middle East thumbnails stop previous next . in all countries in the region more than half of the population is financially excluded according to the World Bank. and providing 4 more effective. • The mobile industry is improving network preparedness and restoration. coordinated support to humanitarian responders and disaster-affected populations. 2015 12 Million 10 Aside from Iran. 6 Iraq and Yemen account for a third of total world displacements.

About us thumbnails stop previous next .

Spectrum Editors Henry James Matthew Iji Sylwia Kechiche Mobile Ecosystem Specialist Senior Analyst. Regulatory Economics Aastha Gupta Director of Industry Radar Joss Gillet Mike Rogers Director. Financials Lead Economist Director thatt@gsma. Authors Editor in Chief Authors Hyunmi Yang Akanksha Sharma Kalvin Bahia Mike Meloán Chief Strategy Officer Senior Analyst Senior Economist Lead Analyst Barbara Arese Lucini Kavi Bains Nuno Afonso Lead authors Senior Analyst Analyst. Product and Commercialisation Lead Analyst. Forecasting Analyst. Forecasting Senior Analyst Senior Manager dgeorge@gsma. M2M Ed Barker Head of Industry Strategy Jan Stryjak Maximo Corral San Martin Xavier Pedros Lead Analyst Analyst. Forecasting Lead Analyst.com Francesco Rizzato Mark Little Robert Wyrzykowski Analyst. Forecasting Senior Manager Analyst. Data and Partnerships Senior Analyst  120 | About us thumbnails stop previous next . Financial Modelling Senior Analyst David George Calum Dewar Kenechi Okeleke Pablo Iacopino Director Director.com David Evans Mark Giles Pau Castells Tim Hatt Director.

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