Trends in Mobile Data Business

E-Business-Community Vienna, 23 November 2006

DI Michael Bartz (Sector Manager Capgemini Telecom & Media, Eastern Europe) michael.bartz@capgemini.com, Mobile +43-(0)664-621 86 18

Increasing mobility of the workforce will boost mobile service usage in enterprises
Number of Mobile Workers

Number of Mobile Workers in Western Europe (Million)

80

The proportion of mobile enterprise workforce is increasing: The number of mobile employees in Western Europe is expected to reach 80 million by 2007 Enterprises are increasingly feeling the need to provide connectivity to their mobile workforce: In a survey of 500 IT executives in the U.S over 70% said that they would invest in laptops, Blackberry and PDAs to equip employees to connect to business applications remotely

52

2004

2007

Source: Capgemini TME Strategy Lab Analysis. DTC enterprise research, UK Labour Force Survey, EU Statistics 2004. IDC, Mobilit y in the U.K. & Ireland - Past the Tipping Point?, April 2005. www.itweb.co.za, Managing your mobile workforce, 7 January 2004. www.palmsource, Enterprise adoption of handhelds an d smartphones, 2003. IDC, Usage of mobile operators services by business- an end user survey, July 2004. NetworkWorld, NW500 survey: More handheld devices, please, 7 July 2005. Note: Forrester defines mobile workers as those that spend at least 50% of their time away from their desks.
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Within the business segment mobile e-mail services will provide the major growth potential
Corporate Mobile Data Revenues
Corporate Mobile Data Revenue in Western Europe ( billion)
CAGR 2004-2007E Enterprise Applications Mobile Email Basic Connectivity 88% 64% 6%

Mobile operators are mainly network access providers to enterprises currently: Enterprises rely on application vendors such as IBM and Microsoft for development and implementation of mobile enterprise applications Mobile networks are used for Internet or SMS connectivity over which business users access various corporate applications
Enterprise Applications

2%

3,0

5,2

8% 15% 37%

But they are beginning to get actively involved in providing mobile e-mail solutions to enterprises: Operators offer standardised e-mail solutions to implement mobile e-mail access over various mechanisms such as SMS, Internet, Blackberry devices Mobile e-mail will continue to drive the corporate mobile data revenues in the medium term:

Mobile E-Mail

83% 55%
Basic Connectivity (Internet + SMS)

Enterprises will broaden the base of employees with remote and mobile e-mail access E-mail services attuned to SME requirements will drive revenues

2004

2007E

Source: Capgemini TME Strategy Lab Analysis. IBM Business Consulting Services, Upwardly Mobile, July 2004. IDC Research, E nterprise Mobility Solutions: Vertical Market Analyses, November 2004. Note: The global mobile enterprise applications market is 12.7bn in 2004 with software and services accounting for 40%. EMEA share is 26%. Services/communication revenue going to the mobile operator is assumed to be 5% in 2004 which will increase to 20% in 2007.
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Machine-to-machine (M2M) applications represent an opportunity for operators to develop and sell standardised solutions
Enterprise M2M applications available on the cellular network
Automatic Meter Reading (AMR)
AMR enables remote energy meter reading over the wireless network saving manpower cost while improving forecast of demand and supply based on periodic monitoring of consumption NESA, Denmarks largest power distributor with over 550,000 customers, is introducing a large-scale AMR system relying entirely on GSM mobile communication Wind in Italy provides between 200,000 and 300,000 GSM data connections for the operation of Enels nationwide AMR system These services enable fleet location tracking, arrival status updates, vehicle diagnostic data such as fuel status, delays/stops O2 UK offers the service under PinPoint TRACKER which allows enterprises to constantly track their vehicles' movements

Fleet management

Point of Sale (POS)

This service enables merchants to process credit card payments wirelessly and is of interest to the banking industry The portability of the solution increases scope for redefining point-of-sale location e.g. couriers, taxis are some of the possible new locations for processing payments by credit cards Reliance, India has launched a wireless POS service over its CDMA 1xRTT network where merchants can connect their POS terminals through a CDMA mobile phone (in place of the standard PSTN line) to connect to the banks network
Remote monitoring and surveillance systems enable enterprises to keep track of status and progress of projects real time and also manage the security of property and assets NTT DoCoMo has implemented remote monitoring for Shimizu Corporation, a construction company in Japan, where a camera on the construction site broadcasts the progress of the project to FOMA visual terminals that can also be used to control the camera remotely, rotating it through 340 and zooming in and out

Monitoring and Surveillance

Source: Capgemini TME Strategy Lab Analysis. Metering Internation, The GSM/GPRS Industry Moves Into Metering. Qualcomm webs ite. Operator websites.
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The data revolution is happening in the mobile consumer market

Examples from the mobile consumer market
Already in 2004 UK ringtone sales reached 174m, 216% more than the 80m spent on CD singles.

3,75 million UK customers now buy over one million audio tracks and music videos per month Six months after launch, 50% of Orange Frances 3G users were watching TV on their mobile

RIMs BlackBerry is increasingly challenged by new market entrants: Microsoft, Nokia, Motorola, etc.

Mobile Music & Ring Tones

Samsung presented 10 mega pixel cameraphone in March 2006 (SCH-B600)

Mobile E-Mail & Messaging

Mobile TV & Video

France Telecom targets EUR 400 million by 2008 purely from content services

Trendsetter iPod goes mobile: Apple plans launch of iPhone

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Pioneering operators are already generating significant revenue streams from data services
Income from mobile data
Top ten operators by data as a percentage of revenue (2005)
0% 10% 20% 30% 40% 50% 60% 48% 43% 39% 39% 28% 26% 26% 25% 25%

Vodafone non-messaging data ARPU (June 2003 June 2005)

Philippines - Smart Philippines - Globe UK - Hutchison 3G Indonesia - Indosat UK - O2 Japan - NTT DoCoMo Italy - H3G Korea - SK Telecom Indonesia - Telkomsel

Source: Informa Telecoms & Media (2005)

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At the individual service level, mobile email and video are the most promising
Market Potential of Consumer Data Services in Western Europe
1,6
Bubble size correlates to 2009 data revenues

1,4 1,2

SMS

Monthly ARPU (2009) ()

Possible Winners

Email

1,0 0,8 0,6 0,4 0,2 0,0

Potential Stars
Ringtone Games Music WAP IM
40% 60% 80%

Video MMS

Also Ran's

Information Internet
0% -0,2

Gambling

PTT m-Commerce
100% 120% 140% 160%

Graphics
20%

-40%

-20%

Compound Annual Growth Rate % (2004-2009)

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Source: Credit Suisse First Boston, European mobile data trends, April 2005; Capgemini TME Strategy Lab analysis.

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Increasing device penetration will help mobile email deliver substantial data growth but revenues are to pick up pace only from 2008 onwards
Mobile Email
Mobile Email Revenue and Device Penetration, Western Europe, 2003-2009, million, % Email-supported device penetration is one of the primary drivers of consumer mobile email revenues: Currently, approx. 70-80% mobile subscribers have an email client on their phone and this will rise to more than 90% by 2009 However, many consumers are unaware that their handsets possess such capability European operators are developing strategies to position mobile email as a prime data revenue driver Software and device players recognise the potential of mobile email: Microsoft, licensed its email technology to rival Symbian in March 2005, enabling Symbian devices to send and receive emails from accounts managed by MS Exchange GOOGLE is introducing a custom version of its Gmail email service that can run on any phone with Java software Nokia offers Intellisync Wireless Email for a wide range of devices Motorola has announced it plans to acquire mobile email provider Good Technology

CAGR (2005-2009) = 178%

88% 82% 72%

92%

95%

3.279

56%

36%

1.351

Revenue Email-supported device penetration

556

55

200

2003 2004
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2005

2006 2007

2008 2009
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Source: Credit Suisse First Boston, European mobile data trends, January 2005; Forrester, Mobile Messaging Forecast Europe 2005-2010, March 2005; WMRC Daily Analysis, Nokia, RIM Take Aim at Mobile Email, 9 September 2004; WMRC Daily Analysis, Vodafone to Launch Push Email Service, 22 April 2005; WMRC Daily Analysis, Microsoft Licenses Email Technology to Symbian, 22 March 2005; Capgemini TME Strategy Strategy Lab Analysis.

Operators and music labels view mobile music as an attractive business and some players have witnessed some success so far
Mobile Music
European Legal Music Downloads, 2005-2011, million
674
Sony Ericsson W810i Walkman

483

+196%

269

121 1 9 41

2005

200 6

2007

200 8

2009

201 0

2011

Mobile operators like Vodafone are enjoying some degree of success with mobile music in Western Europe: Music services represent about 10% of Orange UKs data revenues, with subscribers purchasing as many Orange music downloads as CD singles In Spain nearly 10% have downloaded music to their phones so far already by today (EU-5 average = 5%) In its first year Sony Ericsson has sold worldwide 15 million devices of its new Walkman music handsets which has potential to overtake the iPod Apple prepares counter measures with iPhone (mobile Phone & iPod) Market successes in Asian markets have also been witnessed, especially in countries where migration to 3G has been followed by a significant increase in data usage: Chinas mobile music market grew from EUR 150mn in 2004 to EUR 250mn in 2005 Music labels are also interested in mobile music as they can get higher share of the revenues: Music labels can get 40% of the revenues from full-track music downloads vs. 12% revenue share for polyphonic ringtones Nokia just finalized its $60 million acquisition of U.S.-based digital music distributor Loudeye Corp. including music rights However, revenue sharing between the telcos and the music companies results in razor thin margins for these services

Source: Capgemini TME Strategy Lab analysis, Forrester European Music Download Forecast: 2006 to 2011

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Ringtones will continue to dominate revenues in personalisation services

Mobile Personalisation
Mobile Personalisation Revenues, Worldwide, 2003-2008, million
CAGR
7.033

Mobile Graphics

1.817

42%

Ringtones

2.645

316

5.216

17.5%

2.329

2004 UK ringtone sales reached 174m, 216% more than the 80m spent on CD singles: In the US, ringtones sales are also now twice CD sales Ringtones are currently the largest contributors to mobile content revenues and innovative ringtone variations are being devised to hold user interest in the service: Ring tones currently account 34% of the mobile content revenues Ring tone market has been largely dominated by the music chart and is expected to continue Music labels and media houses are entering this market: Ringtones are set to become the number one marketing tool for record companies and artists to launch CD albums Sony has partnered with Sony Ericsson to bring exclusive James Bond Casino Royale mobile truetones, ringtones, clips and even handsets However, current ringtone prices in Europe are unsustainable and analyst expects prices to fall by 50% by 2009

2003

2008

End users are currently willing to spend more money on ring tones than on music downloads.
Source: Coolringtones.blogspot.com, Ringtone sates by type, 7 May 2005. Newsweek web, Dial a song, 4 March 2005. EMI group, EMI Musics Digital Strategy, 1 July 2004. International Herald, Wireless: Replacing the brrring with cash-earning tunes, 18 October 2004. MoCoNews, Mobile music best practices from Japan and Korea, 7 March 2005. Moconews, Ringing back the money, 23 September 2004. KTH Numerical analysis and computer science, Digital Music Distribution and the Market needs, 2005. Total Telecom, Ringbacks set to add mobile ARPU, 4 April 2005. Dutch News Digest, Dutch ringtones market value at up to 30 million euros, 14 December 2004; New Media Age, Rising ringtone users will outweigh price drops, 10 March 2005.
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Mobile TV differs from mobile video in terms of technology and content

Further directions of Mobile TV & Video
Mobile TV / Broadcasting
Definition Users can watch the same standard TV program which is primarily broadcasted for common TV sets Orange, France More than 50 TV channels offered The average time spend for watching TV is 120 minutes per user per month Sonera, Finland 90% of the new 3G customers have subscribed to Mobile-TV service Mobile TV is starting to fly with more and more operators offering this service Customized content is evolving

Mobile Video (on Demand)

User can download/stream video clips (news, sports, fun, etc) on demand

Web 2.0
User can create, share and view own content (audio, photo, video) using online portals

Example

AOL handy videos (download) Music videos, funny, clips T-Mobiles t.zone (stream) Fashion TV, movie trailers Vodafone live! Music video, trailer, entertainnment

youtube.com Upload and share your videos via the mobile phone Verizon plans to partner with youtube to provide video streams to their mobile customers

Outlook

High content suitability for mobile phone users in terms of duration and content Still some time required until attractive service offerings are existing (e.g. video on demand)

Still time to go until mass market availability The mobile phone can become a key tool in the further development of Web 2.0

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Mobile TV and video is forecasted to double annually during the next few years
Mobile Video & TV

Mobile Video and TV Revenues, 2006-2009, Western Europe, Million

1.528

+112%

1.056
842

Video

456

640 471 201

2008 2009 TV

Mobile video and TV services will be adopted by at least 10% of wireless subscribers in 2009 Mobile TV subscribers in Korea to hit 1 million in December 2006 with subscription costs less than $20 per month (based on DMB) Industry broadcasting standard still needs to evolve to service large subscriber numbers Existing 3G technology already provides attractive TV & video services as well as affordable handsets for first wave of interested subscribers In case of significant user growth the current TV streaming via standard cellular networks (3G) will create a bandwidth bottle neck Still unclear which mobile broadcast technology will be the industry standard (DMB, DVB-H, MediaFlo)

159

401
54 2007

138
21 2006

Source: Gartner, How to stimulate interest in Mobile Video, October 2005; IDC, Western Europe Mobile Voice and Data Foreca sts 2Q05, October 2005

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Users across Europe are indicating a strong interest and a willingness to pay for the mobile TV service
Mobile TV Demand

Prospective users have come up with interesting user occasions for watching mobile TV

While waiting in a transportation In a transportation In the office or at school On a trip While walking In a park In a fast food restaurant In a restaurant In your own room In a rest room 33,9 33,9 28,9 28,9 27,8 21,1 16,1 13,3 60,8

70,6

40-60% of European mobile phone users are interested in receiving TV on their mobile phone Current usage patterns show that mobile TV is especially watched during off-peak hours (i.e. morning and noon) The European customer is ready to pay around 10 per month to use TV on mobile In Berlin, viewers indicate a willingness to pay 8-12 per month to access 6-8 different television programs

Source: Capgemini TME Strategy Lab. DigiTAG, Television on a handheld receiver broadcasting with DVB-H, 2005, IPDatacast, BMCO Project Berlin. Company Websites

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In parallel the Web 2.0 revolution opens up new business opportunities not only for internet players but also for telecom operators
Web 2.0 as a new business opportunity & challenge
New online portals growing from day to day (e.g. youtube.com, blogger.com, wikipedia.org) 70,000 new blogs per day

Online portals look for new communication channels to share and crow their content (e.g. content update through mobile handsets) 3 UK SeeMe TV: Create and share videos with your mobile. You'll earn money every time someone watches your video on their handset. Result: 1 mn down-loads a month

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In parallel the Web 2.0 revolution opens up new business opportunities not only for internet players but also for telecom operators
Web 2.0 as a new business opportunity & challenge

New online portals growing from day to day (e.g. youtube.com, blogger.com, wikipedia.org) 70,000 new blogs per day Online portals look for new communication channels to share and crow their content (e.g. content update through mobile handsets)

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In connection to this boom major shifts in ad spending can be observed More money is going to the internet and its players
Mobile services as advertising channel
Media Usage vs. Ad Spending Ratios, US
US ad spending CAGR 00-04 Relative media usage per day (Overall) Relative media usage per day (Youth)

77,5%

71%
21,5% 8,7% 7,0%

43% 33% 21% 7% 19%

Ad spent behaviour follows changed media usage patterns Strong internet usage of youth segment is already well known In the meantime also significant internet usage of overall population compared to other advertising media achieved US ad spending in internet reflects this trend and grows +77% per year Leading brands make a rapid shift towards interactive and personalized advertising Internet and also mobile devices provide ideal technical conditions for implementation of interactive campaigns Coca-Cola, which spends $ 1.5 billion in advertising per year on mobile marketing: We should be spending 50% of our marketing budget [in mobile] within decades

4% 4%
Newspapers / Magazines T V

Radi o

Interne t

Source: Global technology/ Internet Trends, Morgan Stanley, 9 January 2006; Global ad spend set to maintain steady growth , Carat, 6 September 2005; ABM Financial Trend Report, JEGI Capital, 14 November 2005.
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Operators face substantial challenges to keep track of the industry change

Operators challenges
Meeting the needs of dramatically changing behaviour patterns (Brand new Capgemini study available now) Create user interfaces and provide handsets that meet user expectations, e.g. allowing intuitive use Manage the new digital media supply chain Multi channel Multi standard Etc.

User acceptance Consider reshaping the business model and tab into the new funding source of advertising as it is already common practice in the internet business

Financing through advertisement

Content provisioning

Ensure accurate invoicing to the customer allowing flexible pricing models (volume, event, packages, flat rates, etc) Master complex billing between content provisioning and content distributing entities

Billing

Obtain and manage related digital rights for offered content such as Rights TV, movies, sounds & management music, logos, etc

This presentation is available on http://www.apa.at/multimedia/ebc/

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