gsmaintelligence GSMAi September 2018 Global Mobile Trends Whats driving the mobile industry?The GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators with over 350 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences. For more information, please visit the GSMA corporate website at gsma Follow the GSMA on Twitter: GSMA GSMA Intelligence is the definitive source of global mobile operator data, analysis and forecasts, and publisher of authoritative industry reports and research. Our data covers every operator group, network and MVNO in every country worldwide from Afghanistan to Zimbabwe. It is the most accurate and complete set of industry metrics available, comprising tens of millions of individual data points, updated daily. GSMA Intelligence is relied on by leading operators, vendors, regulators, financial institutions and third-party industry players, to support strategic decision-making and long-term investment planning. The data is used as an industry reference point and is frequently cited by the media and by the industry itself. Our team of analysts and experts produce regular thought-leading research reports across a range of industry topics. gsmaintelligence infogsmaintelligenceCONTENTS Regional outlook Mega trends shaping the telco industry Europe US China India Asia excluding China/India Latin America Sub-Saharan Africa Middle East Media and content Financial performance Consumers and mobile Networks Internet of Things4 Mega trends shaping the telco industry GLOBAL MOBILE TRENDS Mega trends shaping the telco industry A view to 20255 Mega trends shaping the telco industry +PC PC Of the 1.6 billion new mobile internet users between now and 2025, five countries account for 50% of the growth. China and India are by far the biggest, but Indonesia, Nigeria and Pakistan will each account for 50 million+. Because fixed broadband is negligible in these markets, the next internet generation will not just be mobile first, but mobile only. This raises profound implications for how to access such a large, youthful and mostly non-English speaking demographic in delivering services ranging from healthcare to e-commerce. Global population in 2025 Million Source GSMA Intelligence An incoming generation of mobile-only consumers changes the game for digital services6 Mega trends shaping the telco industry Source GSMA Intelligence 5G and IoT will open up new opportunities to tap diverse enterprise demands in sectors from manufacturing to power generation. The push to the edge raises a tension. Services could be hosted solely within the operators own network (private hardware) or on hardware owned and operated by third-party cloud providers (public hardware). Telcos will become frenemies with Amazon Web Services (AWS), Microsoft, IBM and other cloud companies: on the one hand, they will compete for enterprise clients on low-latency IoT and analytics; on the other hand, they will be partnering or outsourcing for capacity. The 5G and IoT opportunity for telcos lies more in enterprise than consumer 69 +31+G 69% of CEOs surveyed in 2017 rated enterprise services as the most important revenue growth opportunity from 5G Enterprise connections As a percentage of IoT connections7 Mega trends shaping the telco industry Source GSMA Intelligence Global IoT revenue projections Connectivity will remain important but less of a value driver, particularly for non latency-sensitive use cases in IoT such as smart metering. For operators, this raises the question as to whether IoT and 5G enterprise services will be sold as connectivity only (lower value) or as part of a service package including analytics (higher value). It may be that high-grade connectivity is offered as an anchor service but not priced independently of the wider service package. In any case, consultant-style thinking “in the clients shoes” becomes as important as off-the-shelf technology sales. Connectivity will be commoditised; value creation sits higher up in the platform and analytics layers 8 Mega trends shaping the telco industry Source GSMA Intelligence U v dd Build Build exclusive content in-house (e.g. AT we forecast an increase in the attachment rate (the share of mobile users also using the internet) from 65% in 2017 to 86% in 2025.12 Consumers and mobile Source GSMA Intelligence Increase by country in mobile internet users between mid-2018 and 2025 Million 50% of growth in internet users to 2025 will come from five countries Of the 1.6 billion new mobile internet users between now and 2025, five countries account for 50% of the growth. China and India are by far the biggest. The next tier includes Indonesia, Nigeria and Pakistan: each will account for 50 million+. The rest comprises a long tail, clustered in Sub-Saharan Africa and South East Asia. Smartphone access will be a near-given. The more nuanced challenge will be how to engage and retain customers that are mostly young, lower income and non- English speaking, and lack access to services taken for granted in western countries (banking, health, education).13 Consumers and mobile Monthly data bundle costs in major emerging markets Tariff as percentage of monthly income, medium bundle Source GSMA Intelligence, Tarifica Two main factors are behind the mobile internet rise in emerging markets: the continued decline in prices of smartphones, driven by a range of Chinese OEMs, mostly running Android a more recent reduction in the burden on income from mobile data prices. From our analysis of pricing data in a range of large developing countries, a medium level bundle (with allowances of between 600 MB and 2 GB) has fallen from 23% of income in 2015 to 0.51.0%. This particularly matters in developing countries with lower income populations because fixed broadband is not an option. Low-cost Android smartphones and falling data prices are driving the rise in emerging markets Note: Data allowances for the listed countries are taken from representative operators and range from 600 MB to 2 GB per month14 Consumers and mobile Source GSMA Intelligence Smartphone connections as a percentage of total mobile connections Global smartphone adoption will reach 80% by 202515 Consumers and mobile Source GSMA Intelligence Almost three quarters of the global internet base will be mobile only 2025 Percentage of global population16 Consumers and mobile y USgg OTT S tw k Stg vy tg b Source GSMA Intelligence Consumer Survey 2017 Do at least monthly Percentage of smartphone users Facebook, Google, Netflix, WeChat and other large consumer tech platforms redefined their approach to mobile-first four years ago. This helped cement social networking and OTT messaging as widespread among smartphone users, regardless of income. E-commerce is a digital category not yet capitalised on (with the exception of China), with take-up rates in fast- growth markets less than 30%. India is an interesting live test case being fought by Flipkart and Amazon. The country has around 400 million smartphone users, around 20% of which buy something on their mobile at least monthly. Even if this rose to 30%, it would make India nearly as big as the US in user terms. Social and messaging have already adapted to mobile-first; e-commerce still to play for N=1,000 respondents per country17 Consumers and mobile Source GSMA Intelligence 80% of people without internet are covered by 3G/4G whats the problem? At the end of 2017, 3.3 billion people (44% of the population) were connected to mobile internet. Some 4 billion people in the world remain offline. The lack of infrastructure availability is often cited as a problem and it is, but not nearly as much as would be thought. Of the unconnected, 80% live within range of a 3G or 4G signal. The trickiest problems now lie with hidden factors; for example, in low- income countries: 40% of adults are illiterate 500 MB of data costs almost 10% of monthly GDP per capita only 0.2% of all active mobile applications were developed in low income countries in 2017.For further information see: mobileconnectivityindex 99 9 9 95 5 Connected and unconnected population Millions18 Consumers and mobile & d P p 9 7 57 , 9 ,39 53 3 7 , 9 3 3 d vd y 3G/G d vd d d Source GSMA Intelligence Connected and unconnected population Millions Sub-Saharan Africa continues to be the largest non-internet population in the world, with rural coverage still a major challenge along with other barriers. The Indian subcontinent is next but that is changing quickly. Less obvious is that internet access is not only a developing world challenge. In the US and Europe, 300 million people are non internet users even though they live within range of a 3G or 4G mobile network. Stripping out the very young and old, this would appear mostly to come from low-income segments, constraining anything from basic information access to social mobility. Breaking down the unconnected populationNetworks 19 GLOBAL MOBILE TRENDS Networks20 Networks Source GSMA Intelligence vw( Olym) 77 4 (mld 7 bf,v) g x gl+w m xd Ov3mkl gg m 3.Hz d6/8Hz AvlfNA N (Dmb) ddfz () AvlfAN (J ) ddfz (mb)6 wkm7 dby d. vl JAl x +mk E+mk A 4 mll% > .3 bll4% d U UAE g 5G is coming to a place near you (if not already there) * Number of mobile connections excluding cellular IoT, worldwide. * Percentage of global population. * Not exhaustive.21 Networks Projected 5G share of the mobile subscriber base Source GSMA Intelligence We forecast 1.36 billion 5G consumer mobile connections by 2025. While this equates to a global average penetration of 15%, in reality 5G will be driven by a small number of countries. China is the single largest, more than double the US. In each case, the 5G take-up path will be longer than for 4G. LTE speeds are improving, which makes 5G less compelling without new services such as AR/VR. On the supply side, operator capex will be managed prudently to monitor return on investment before commitment to national rollouts. China, Japan, Korea, US and (potentially) Europe are the early 5G adopters 5G connections