Reports: Tablets Steal The Show In The US; But Europe Should Delay LTE


Credit: Chetan Sharma Consulting

What’s the real story on mobile data growth? It depends on who you listen to, and where you live. Verizon Wireless is forking out at least $4 billion to Alcatel-Lucent to build out its LTE network, and the latest stats from Chetan Sharma indicate that mobile data continues to boom in the U.S., with total mobile traffic expected to exceed 1 Exabyte before the end of 2010. But in Europe another leading analyst at Analysys Mason says that plans to move to LTE may be premature, given how data growth is actually slowing.

A bullish time for mobile data in the U.S. Chetan Sharma’s Q3 quarterly report on mobile broadband traffic points out that in the U.S. the wireless data market grew 7 percent in consecutive quarters this year, and has grown 25 percent year-on-year. Mobile data service revenues for Q3 2010 stand at more than $14 billion and they will “meet (and most likely exceed) our initial estimate of $54 billion for the year,” he writes. (You can download the PDF of the report here and the presentation here.)

— Standout operators included Sprint (NYSE: S), with a second consecutive quarter of positive net-adds in subscribers; and T-Mobile which added customers after previous quarters of declining numbers. The boom in connected devices like PCs and tablets are pushing penetration beyond 100 percent for the first time, too.

— Smartphone growth in U.S. outpaced the rest of the world. In Q3, 47% of the devices sold in the U.S. were smartphones, versus 24 percent globally. Apple (NSDQ: AAPL) led the way in revenues, although it shipped only 9.1 million phones compared to 110.4 units from Nokia (NYSE: NOK), which was the market leader this quarter.

— Longer term, tablets are the name of the game, with Sharma noting that “almost singlehandedly…the iPad is taking away the lion share of the revenues” in the connected devices segment. This segment grew 12 percent over the last quarter, which more than made up for the one percent decline in postpaid handset revenues. Sharma predicts that within five years, in the U.S. tablets will generate more revenue for mobile operators than the entire prepaid segment. And netbooks, too, he thinks will sink in the tablets’ wake. Right now tablets represent only three percent of data revenues in the quarter.

But the story appears to be different over in Europe. Rupert Wood, an analyst at Analysys Mason, points out that the vast majority of mobile broadband traffic is coming not from smart phones but dongle-powered PCs and other non-phone, SIM-enabled devices such as tablets. Collectively these are generating over 90 percent of traffic. (How that equates to revenue figures was not included in the Analysys Mason report.)

Meanwhile, smartphones are making up only five to six percent of total mobile broadband traffic, he tells mocoNews, with the majority of their data traffic (about 80-90 percent) being sent over WiFi and fixed broadband. A large part of the PC-based traffic, says Wood, comes from pure-play mobile operators selling mobile broadband to people who are using it as a substitution for fixed broadband. Tablets are making up a very small proportion of the traffic now but that is expected to grow, he adds.

With Verizon Wireless gearing up to launch LTE this month, and Docomo confirming that it will launch its LTE service in December, Wood concludes that operators investing in LTE might be premature in Europe, where the general trend is a deceleration of growth in mobile broadband. In 2009, European mobile data traffic grew by 110 percent. But it will grow by only about 35 percent in 2010, and 2011 presents “no real prospect of a pick-up in growth rates [and] In some markets mobile broadband traffic growth has already come to a standstill,” he writes. So while subscriber bases are still growing, each new person is using less and less data rather than more and more.

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