Large numbers are often bandied about when it comes to the mobile telecom industry. Impressive growth rates, billion dollar market sizes, and huge investments are often quoted. But it can be easy to get this out of context. We recap some industry statistics and try to get things into proportion.
You might even find the answers include a few surprises.
What's the annual revenue income of all mobile operators combined?
You might guess at a few hundred billion, but you'd be wrong. It's over a trillion, yes that's $1,130,000,000,000 each and every year according to GSMA Intelligence. Add in sales of unlocked phones, tablets and related services sold directly from other companies brings this up to about $1.5 trillion.
This is dominated by the US operators, such as Verizon Wireless who reaped $81 billion or more from their 101 million customers. Their high ARPA (Average Revenue Per Account) of $156/month has allowed them and other US operators to invest much more heavily in infrastructure and handset subsidies than seen in many other countries. Only China Mobile beats them with $91 Billion.
Gross profit varies widely across the industry. Verizon's 29.5% isn't unusual, but that has to be used to pay back the spectrum licences and heavy early investments during the launch phase.
Mobile operators are heavy contributors to the government coffers. In addition to spectrum licence fees, their revenue is very easy to track and capture tax from. In poorer countries such as Albania, Afghanistan etc., mobile operators can be the largest single contributors to the national exchequer. A careful balance is needed - the industry warns that too high taxation levels hinder take-up and limit their own investment.
How many subscribers worldwide?
Many of us now have more than one cellular device – a smartphone, a tablet, a Mi-Fi cellular to Wi-Fi access point. This has led to the industry discriminating between subscribers and connections. At this year's Mobile World Congress, the GSMA chairman revealed there were 7 billion connections (i.e. active SIM cards in use) by 3.5 billion users. He wants to see a further 1 billion users added by 2020. GSMA Intelligence displays the constantly increasing figures.
China Mobile has the largest customer base, some 784 million and growing served by 1.4 million base stations, 4 million Wi-Fi access points and consuming over 4 trillion voice minutes/year. Although with only about 5 million LTE subscribers today, I'd expect them to become the largest LTE network by subscribers in a relatively short space of time. The availability of the iPhone 5 will make a major difference, since it didn't support China Mobile's 3G TD-SCDMA technology.
What's often underestimated is the number of people still relying on 2G GSM. It's over half, with LTE reaching just 200 million at end 2013 although growing rapidly. More than half of all cellular devices are still basic cellphones or feature-phones, not smartphones.
Mobile phones (5.4 Billion) far outnumber TV sets (about 2 billion) or computers of all kinds (about 1.5 billion), according to Tomi Ahonen's 2014 Almanac
Which company makes the most net profit from the mobile industry?
Surprisingly, it's not an operator or even an infrastructure vendor. It's Apple, who despite a relatively small 17.9% market share by device numbers according to IDC, achieve higher revenues than any mobile operator and retain the most profit. Despite some comments predicting gloom and doom about Apple's future position, they have $159 billion in the bank, in cash. That's more than quite a few countries could lay claim to.
Samsung, whose profits had a one-off hit last year due to a very large employee bonus payment, had a much more modest profit margin. They have dominated the smartphone/handset market by volume, with Android devices generally contributing to 90% of shipments today. A full breakdown of handset shipments by brand and OS for 2013 can be found here.
The handset/device business is extremely fickle as we've seen from the recent demise of Nokia and Blackberry, and the situation could change quickly.
Here's a rundown of the top 10 companies by revenue (last year's position in brackets), adjusted to show only wireless/mobile revenues. Source Tomi Ahonen's 2014 Almanac
1 (3) Apple iPhone, USA, smartphones . . . . $ 112 B
2 (4) Samsung Galaxy, S Korea, handsets . $ 103 B
3 (1) China Mobile, China, operator . . . . . . . $ 91 B
4 (2) Verizon Wireless, USA, operator . . . . $ 82 B
5 (5) AT&T Wireless, USA, operator . . . . . . $ 65 B
6 (6) Vodafone Mobile, UK, operator . . . . . . $ 58 B
7 (7) Telefonica Movil, Spain, operator . . . . . $ 52 B
8 (9) T-Mobile, Germany, operator . . . . . . . . $ 50 B
9 (8) NTT DoCoMo, Japan, operator . . . . . . . $ 49 B
10 (10) Orange Mobile, France, operator . . . .$ 44 B
Which country has the most LTE subscribers?
A year or so, an answer of South Korea might have been appropriate. Japan might have been tempting. But the US has rapidly dominated the scene with over half of all LTE connections – some 100 million at end 2013 out of 200 million worldwide.
Where does the $1.5 trillion go?
There are four main costs to running a mobile network:
- Spectrum licences: Effectively a government tax that is often cleverly increased by using auctions to maximise the amount raised. Expressed in dollars per MHz per member of population covered, you can quickly realise that this can add several hundred dollars to the average mobile phone contract. Those in a few lucky countries aren't charged any fee for spectrum.
- Infrastructure. Building out the network, covering everything from actual radio equipment, site rental, installation and backhaul transmission. The bulk of the cash is spent on the radio network, with perhaps only 20% or less in the core network and associated services.
- Handset subsidies: The entire dealer distribution network including branded high street stores is an expensive way to capture and retain customers, but has been used for decades. We've seen some recent changes to this, with the subsidy shown as a financing charge on the mobile phone bill that can be paid off early and allow annual upgrades – making the process a lot more visible to the end user.
- Operations: Covering everything from head office, marketing & PR, through to sending out the bills and customer care/call centres.
As an aside, one of the issues with Small Cells has been which of these categories should the cost be applied to. Often it's been hidden in the customer care budget, where they've been used as a customer retention tool. But should it be factored into the Spectrum licence, because you'd need to acquire less additional spectrum? More likely, it will become part of the infrastructure budget once the costs are seen to be cheaper than further macrocell investment.
How many Macrocells, Small Cells and Carrier Wi-Fi Access Points are there?
Occasionally I've seen potential confusion between
- the number of cellsites (i.e. physical site locations, which might each have a lot of co-located equipment)
- the number of basestations. Multiple operators might co-locate their own equipment at the same site
- the number of cell sectors. A three or six sector site is managed as three or six separate cells, which can lead to some exaggeration.
There are roughly about 5 million macrocell sites worldwide, ranging from the cell towers higher than the Empire State Building to units the size of a hotel minibar.
The number of Small Cells shipped to date will differ depending on whether you include residential Femtocells or not. These dominate the total today. Figures from the Small Cell Forum published for end 2013 totalled 7.9 million, of which about 200,000 were non-residential. They forecast the annual Small Cell shipments to exceed the current installed base of approx 5 million macrocells within 2-3 years, and reach that level for non-residential small cells alone by 2018.
Carrier Wi-Fi is growing in volume, but still trails by comparison.
ABI Research estimate there are 4.2 Carrier Wi-Fi hotspots deployed today, the majority being in APAC region. China Mobile alone has over 420,000. When you compare that with the approx 200,000 Enterprise Small Cells, that doesn't seem quite such as lead as I'd expect.
However, that figure again contrasts sharply with the residential and other non-carrier Wi-Fi (e.g. private hotel, coffee shop etc.) figures which report 139 million units shipped during 2013 alone, of which about 10% were destined for Enterprise use. Many of these have been integrated and incorporated into sharing networks, such as FON. Comcast this month claimed over 1 million Wi-Fi hotspots available to share between its customers.
So what can we conclude from this? The mobile industry is huge, far beyond the size of many other global industries. Retained profits exceed the funds of many sizeable countries.
Ultimate power and strategic decisions are consolidated into the hands of relatively few senior executives across 32 network conglomerates. Ahonen suggests that perhaps as few as 100 people could have determined the fate of Windows Phone. Could it be a similar smallish number that decide the pace of adoption of LTE, Small Cells and Carrier Wi-Fi?
Even with a relatively few crumbs from this massive table, the Small Cell industry could become sizeable compared with other business opportunities . Forecasts that this could become 20% of the RAN equipment market by 2018 seem quite feasible to me, making it at least a $10 Billion industry. This is further augmented by the costs of installation, backhaul and maintenance which are significantly greater for outdoor/urban uses. That should lead to higher total revenue forecasts for LTE urban small cells in particular.