Global cellular market trends

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Wireless Intelligence

Global cellular market trends and insightQ4 2012

December 2012

wirelessintelligence.com • [email protected] • twitter.com/wi

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55+63+69+75+80+84+87+90GlobalHigh-speed networks now account for more than 25% of connections• WorldcellularconnectionsinQ32012reached6.40billion;inQ42012we

estimatethequarterclosedat6.54billion• Connectionsinthedevelopingworldpassedthe5billionmarkinQ3and

nowcomprisealmostfourfifths(78.9%)oftheglobaltotal• 3G/4Gtechnologiesnowmakeupmorethanaquarterofglobal

connections

First LTE Advanced network goes live in Russia• Therewere50networklaunchesduringQ42012,ofwhich32wereLTE• (includingoneLTEAdvanced),fiveDC-HSPA+,nineHSPA+,oneHSDPA

andthreeWiMAX• Therearenow134liveLTEnetworksworldwide,includingsevenTD-

LTE,threeLTEwithVoLTE,oneAXGPandYota’s(Scartel)LTEAdvancednetworkinRussia

Rapidly increasing mobile data use helping to drive economic growth• Ericssonestimatesthattotalsmartphonesubscriptionswillreach1.1billion

bytheendof2012,andexpectsthemtogrowto3.3billionin2018• Accordingtothevendor,globalmonthlymobiledatatrafficdoubled

betweenQ32011andQ32012toreacharound900PB,andisexpectedtogrowwithaCAGRofaround50%from2012to2018,a12-foldincrease

• ResearchproducedbytheGSMA,DeloitteandCiscoindicatesthatdoublingofmobiledatauseleadstoanincreaseof0.5ppinacountry’sGDPpercapitagrowthrate

• Ericssonobservedthatattheendof2012,theaveragemobilePCusesaround3GBofdatapermonth,comparedto450MBpermonthforasmartphone

• ThevendorsaysthatWCDMA/HSPAnowcoversmorethan50%oftheworld’spopulation,upfrom45%in2011,andthatby2017anestimated85%ofpeoplewillhavetheopportunitytoaccesstheinternetusingWCDMA/HSPA

Quarterly forecast accuracy • Ourestimatesarereplacedduringthequarterbytheactualresults

reportedbytheoperatorandregulatorycommunity• Thedeltabetweenourestimatesatthebeginningofthequarterandthe

actualresultsforQ32012stoodatjust-0.35%

47+54+60+65+71+75+79+829 120%

8100%

7

80%6

2009 2010 2011 2012 2013 2014 2015 2016

60%5

40%

4

20%

3

2

1

0 0%

Con

nect

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ion)

Market penetration

Technology split

CDMA (Family) GSM WCDMA (Family) LTE (Family) Other

9+69+19+1+2+c7+52+30+7+4+c2012

69%

52%

30%

7%4% 7%9%

19%

1% 2%

2016


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38+44+51+57+63+67+71+73Africa

Q3 2011 Q2 2012 Q3 2012

Connections(million)

Total 614.4 686.4 713.1

Contract 24.0 27.9 28.9

Prepaid 590.5 658.8 684.5

CDMA(Family) 17.2 15.4 14.9

GSM 555.8 610.2 630.3

WCDMA(Family) 41.4 60.7 67.8

Netadditions(million)

Total 29.6 21.6 26.7

Contract 0.9 1.7 1.0

Prepaid 29.0 20.2 25.7

Growthrate,quarterly

Total 5.1% 3.3% 3.9%

Contract 3.7% 6.3% 3.7%

Prepaid 5.2% 3.2% 3.9%

Growthrate,annual

Total 19.1% 17.4% 16.1%

Contract 17.7% 20.6% 20.6%

Prepaid 19.2% 17.3% 15.9%

Marketpenetration 58.5% 64.2% 66.4%

ARPU $8.16 $7.64 $7.49

31+37+43+49+56+61+65+691,250

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750

2009 2010 2011 2012 2013 2014 2015 2016

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60%

40%

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2+88+10+0+0+c1+70+28+1+0+c2012 2016

70%88%

10%

28%

1% 1%2%


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wirelessintelligence.comAfricaLTE close to commercialisation in South Africa

South African operators’ LTE plans accelerate• VodacomSouthAfrica’sLTEnetworkwasofficiallyswitchedon;duringthe

quarteritexpandedcoveragefrom70tomorethan500basestations• MTNSouthAfricaannouncedthecommercialrolloutofitsLTEnetwork,

withover1,600basestationsalreadyupgraded• 8taandNeotelarecurrentlyconductingLTEtrials;bothareplanningto

launchacommercialofferingnextyear• CellChasalsostartedLTEtrials,howeveritwillnotlaunchacommercial

serviceuntilthe“governmentfinalisesitspositiononanationalwholesaleLTEnetwork”

A tough quarter for governments and regulators• EgyptiantelecomsentrepreneurNaguibSawirishaslauncheda$5billion

legalclaimagainsttheAlgeriangovernmentforactingunlawfullyinitsdealingswithDjezzy

• TheawardofthethirdSenegalesemobilelicencetoExpressoisunderinvestigationtoascertainwhethertherewereirregularitiesintheprocess

• NetherlandBritishCompany(NBC)successfullychallengedtheawardof3GlicencesintheDemocraticRepublicofCongotomobileoperatorsAirtel(BhartiAirtel),Tigo(Millicom),VodacomandAfricell(Lintel)

• TheKenyanregulator(CCK)istobedisbandedandreplacedbyaregulatorthatisfreeofgovernmentandcommercialinfluenceaspartoftheIndependentCommunicationsCommissionofKenyaBill2011

Countering the use of fake handsets• UCC,theUgandanregulatororderedthecountry’smobilenetworkstostart

blockingcounterfeitmobilephonesfrom30thNovember• TheKenyanGovernment’sdirectivetoban‘fake’mobilehandsetstook

effectatmidnighton30thSeptember,beginningwiththedisconnectionofaround845,000counterfeithandsetsfromthenetworksofSafaricom,Airtel(BhartiAirtel),yu(EssarTelecom),andOrange(TelkomKenya)

Insight: Foreign investment in Africa rising, further opportunities in the pipeline

Whiletheirtwolargestcompetitors,MTNandVodacom,ploughaheadwiththeirLTE rolloutplans, rumourscontinue tocirculatearound the futureof the twosmallerSouthAfricanmobileoperators8ta(Telkom)andCellC(OgerTelecom).Bharti Airtel is said to be interested in acquiring eithermobile operator. Thiswould further boost the group’s African presence following its acquisition ofZain’sAfricanassets,andwouldpotentiallyprovidefundsforamoreaggressiveLTErolloutfortheoperatorconcerned.

However, within South Africa the messages appear mixed. In October, thegovernmentturneddownKT’s(SouthKorea)offertobuya20%stakeinTelkom,whileoutgoingCEONombuleloMoholihasrejectedthepossibilityofanytie–upbetweenCellCand8ta,statingthattheTelkomBoardwasnotlookingatanykindofdeal.

Despitethisreluctance,CommunicationsMinisterDinaPulehashintedthatarevised strategy for Telkom could include possible partners in terms of bothfixedlineandmobileoperations.Shehaspresentedanumberofoptionsaimedathelpingtoturnthegrouparound,withthegovernment’srecommendationstobemadeattheANC’sconferenceinlateDecember.

AsidefromSouthAfrica,anumberofdealspointtoaninflowofforeigninvestmentinAfrica’stelecomssector.InOctoberViettelGrouppurchaseda65%stakeinEGOTELTanzania–whichisthoughttobelaunchinga3Gnetworksoon-aspartofaplantoinvestupto$338millioninthecountry.Furthermore,NovembersawinvestmentfirmCapcomspend$210millionona90.5%shareinamergedNigerianentity,comprisingMTSFirstCommunication’sspectrumlicenceaswellasStarcommsandMulti-Links’CDMAbusiness.

In October, Vimpelcom announced its intention to dispose of several of itsbusinessesinAfrica(andAsia)aspartofarationalisationofitsglobalbusiness.Initial reports indicate that its sub-Saharan African units in Burundi and theCentralAfricanRepublicaswell as itsZimbabweanbusinesswillbesold. Inaddition, December saw Vimpelcom reach an agreement with the Algeriangovernmenttoacquirea51%stakeinDjezzy.


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59+64+70+74+78+81+83+85Americas

Q3 2011 Q2 2012 Q3 2012


Total 975.6 1032.5 1044.4

Contract 392.2 408.2 413.0

Prepaid 583.4 624.3 631.3

CDMA(Family) 205.9 201.4 196.5

GSM 569.7 560.6 557.2

WCDMA(Family) 167.3 227.7 242.4


Total 25.5 13.6 11.9


Prepaid 16.5 9.4 7.0


Total 2.7% 1.3% 1.2%

Contract 2.4% 1.1% 1.2%

Prepaid 2.9% 1.5% 1.1%

Growthrate,annual

Total 11.4% 8.7% 7.1%

Contract 11.4% 6.5% 5.3%

Prepaid 11.4% 10.1% 8.2%


ARPU $27.53 $26.97 $27.33

*Note:datatableincludesNorthernAmerica,butthisisdiscussedseparatelyonslides11–12

55+60+67+71+75+79+82+85150%

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2009 2010 2011 2012 2013 2014 2015 2016

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19+53+25+2+1+c13+36+39+11+1+c2012 2016

13%

36%

19%

53%

25%

11%

1%1%2%


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wirelessintelligence.comAmericasStill room for growth with almost half of Latin Americans unconnected

América Móvil driving connections growth from Mexico down to Argentina• InQ32012,147operatorswitnessedpositivequarterlynetadditions

totalling11.0millionconnections,while9operatorsrecordedlossesof658,000intotal

• ThelargestgainwasrecordedbyClaro(AméricaMóvil)inArgentinawith1.4millionnetadditions,followedbyVivo(Telefónica)inBrazilandTelcel(AméricaMóvil)inMexicowith1.1millioneach

• Weexpectslightlyhighergrowthof2.2%or14.7millionnetadditionsinQ4,whenMexicowillpassthe100millionconnectionsmark

Central and South America show high levels of multiple-SIM use• Ourresearchindicatesthatwhiletherewere671millionconnectionsinthe

region(excludingNorthAmerica)inQ32012,only91.8%or616millionofthesewereactive

• Whileconnectionspenetrationcurrentlystandsat111.0%,uniquesubscriberpenetrationisjust51.6%or312millionsubscribers

• ThisisduetomobilesubscribersinSouthandCentralAmericahavinganestimated2.00SIMcardseachonaverage,comparedto1.56intheCaribbean

More high-speed mobile broadband networks emerging across the region• Movistar’s(Telefónica)LTEnetworkwentliveinMexicoinOctober• AméricaMóvil’sTelcelbrandalsolauncheditsLTEnetworkinaninitialnine

MexciancitiesinNovember,offeringsixLTE-compatiblehandsets,whilethegroup’sClarooperationinPuertoRicoalsodebutedthetechnology

• InQ4HSPA+networkswentliveinColombia,TrinidadandTobagoandBritishVirginIslandsviaMovistar(Telefónica),bmobile(TSTT)andDigicelrespectively

Smartphone revolution spreads across Brazil and beyond• SmartphonepenetrationatTIM(Brazil)doubledyear-on-year,from19.5%

inQ32011to39%inQ32012• MeanwhilerivalVivo(Telefónica)reportedthat78%ofnewcontract

customersinQ3optedforsmartphones,comparedto55%ayearago• InPanama,MasMovilreportedsmartphonepenetrationof26%inQ3

2012

Insight: Oi in pole position as Brazilian operators firm up LTE rollout plans

Followingonfromthe2.5GHzspectrumauctionthattookplace inJune,thepastthreemonthshasseenallfourmajoroperatorsinBrazilsetouttheirLTEplans. With the country set to host the world’s two largest sporting eventswithin thenext four years– the footballWorldCup in2014and theOlympicandParalympicGamesin2016–andgiventhecoverageproblemsthatsomemobileusersinBrazilhavefacedinrecenttimes,thereisadditionalpressureontheoperatorstoprovidesufficientcapacity forhigh-speedmobilebroadbandusagebymillionsofBrazilians and tourists alike.RegulatorAnatel has set adeadlineforcommerciallaunchofLTEinanumberofcitiesbyApril2013,aheadoftheConfederationsCup–apreludetotheWorldCup–takingplaceinJune.

Fourth-largestoperatorOi lookssettobefirstwithLTEservices,promisingacommerciallaunchinRiodeJaneirobeforetheendof2012.Oi,whichhasbeenconductingLTE trials in thecity sinceOctober, hasselectedEricsson,NokiaSiemensNetworks (NSN)andAlcatelLucentasvendorsandplanstoextendthenetworktocover50%of thepopulation insevencitiesbytheApril2013target.Third-placedClaro(AméricaMóvil)isalsoconductinganLTEtrialinSaoPaulo,havingalreadyundertakentrialsinthreeothercities,andlookssetforacommercial launch insixcitiesaheadof thedeadline.Ericssonhasbeen theequipmentsupplierineachofthosetrials.

Meanwhile,market-leaderVivohasselectedEricssontoinstall2,700LTEbasestations,principally in theNorthandmid-Westof thecountry,andHuawei toinstallafurther2,000,mainlyinSouthandNortheastBrazil.EricssonandHuaweiwillalsoactasvendorsforTIM,alongsideNSN.Withtheonlyhalftheamountofspectruminthe2.5GHzbandasVivo,TIMisalsolookingtolaunchLTEinthelonger-range450MHzbandtoimprovecoverageinruralareasofthecountry.

DespiteOihavingtheearlymoveradvantage,weexpectitslargerrivalstohavecaughtupintermsofabsoluteLTEconnectionsbytheendof2014,althoughthetechnologywillstillbeinitsinfancyatthattime,accountingforlessthan1%oftotalconnections.However,weexpectthisproportiontoincreaseto8.7%or31.1millionconnectionsby2017,splitbroadlyequallyacrossthefouroperators.


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48+58+66+72+78+82+86+89Asia

Q3 2011 Q2 2012 Q3 2012


Total 3,264.8 3,540.4 3,583.1

Contract 554.8 602.3 619.5

Prepaid 2,709.9 2,938.0 2,963.8

CDMA(Family) 308.1 325.2 315.0

GSM 2,545.3 2,663.7 2,670.3

WCDMA(Family) 356.5 460.3 488.9


Total 102.2 90.4 42.7

Contract 16.7 16.4 17.2

Prepaid 85.5 73.9 25.8


Total 3.2% 2.6% 1.2%

Contract 3.1% 2.8% 2.9%

Prepaid 3.3% 2.6% 0.9%

Growthrate,annual

Total 17.5% 12.0% 9.8%

Contract 12.7% 11.9% 11.7%

Prepaid 18.5% 12.0% 9.4%


ARPU $9.79 $9.33 $9.39

48+58+67+74+80+86+91+954,000

5,000

3,000

2,000

2009 2010 2011 2012 2013 2014 2015 2016

1,000

0

Con

nect

ions

(mill

ion)

Market penetration

120%

100%

80%

60%

40%

20%

0%

Technology split

CDMA (Family) GSM WCDMA (Family) LTE (Family)TD-SCDMA Other

9+74+14+2+1+0+c8+57+23+6+6+0+c2012 2016

57%74%

9%14%

8%6%6%

23%

1%2%


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wirelessintelligence.comAsiaData services in Asia offsetting ARPU declines

Rapid 2G to 3G/4G technology migration• AsofQ42012,20%ofmobileconnectionsinAsiaarerunningon3G

networks,anadoptionratealmostonparwiththeglobalaverageof24%• WesternAsiaaveragesthehighest3Gadoptionintheregionwith36%

ofitsconnectionbaseon3G,comparedto30%inEasternAsia,21%inSouth-EasternAsia,andonly6%onaverageinCentralandSouthernAsia

• Meanwhile,LTEcontributes2%ofconnectionsinEasternAsiainQ42012drivenbydemandinSouthKorea(28%ofconnections),Japan(7%),Hong-Kong(1%)andTaiwan(0.1%)

• Sixteenoperatorshavelaunched(FDD)LTEnetworksinAsiabetweenJanuaryandNovember2012,comparedtoonly2TD-LTEnetworks

Data services help to stabilise ARPU trends• Sincethelaunchof3GservicesinIndiatwoyearsago,blendedARPUhas

graduallystabilisedataround$2.50bymid-year,offsettingthedecliningtrendobservedsince2006

• AlsoinIndia,dataARPUatBhartiAirtelincreasedfrom$0.72to$0.79betweenQ2andQ32012,whileitincreasedfrom$0.86to$0.91atIdeaCellularoverthesameperiod

• SimilartrendshavebeenrecordedinthePhilippinesandIndonesiawhereblendedARPUisstabilisingataround$4

• InMalaysia,dataARPUincreasedonaverageby$0.30betweenQ32011andQ32012atCelcom(Axiata),DiGiandMaxis,whorecordeddataARPUat$4.02,$2.18and$5.07respectivelyinQ32012

• SimilartrendshavebeenobservedinThailandasAIS,DTAC(Telenor)andTrueMove(TrueCorporation)recordedanaverage$0.40increaseindataARPUbetweenQ32011andQ32012,thethreeoperatorsreportingdataARPUof$1.13,$1.06and$0.9respectivelyinQ32012

• MeanwhileinTurkey,TurkcellandVodafoneaveragedayearly$0.35increaseindataARPUinQ32012toreacharound$1.50onaverage,whileAvea(TurkTelekom)recordeda$0.85increaseindataARPUoverthesameperiodto$2.20

Insight: Smartphone adoption accelerates in China

In December, Apple announced that ChinaUnicom andChina Telecom soldover2millioniPhone5handsetsinthefirstthreedaysofavailability.Thetwooperators are aggressively launching new smartphones in order to competewithmarket-leaderChinaMobile,whichisyettolaunchaversionofthelatestAppledevicecompatiblewithitsTD-SCDMAnetwork.Interestingly,accordingto Chinese web services company Baidu, 16.1% of smartphones in Chinaearlierthisyear(Q12012)werecounterfeitmodels,while26.2%hadcomefromunbrandedvendors.

ChinaUnicomexpectstosell140million3Gphonesnextyear,companyofficialshavesaid.Theoperatorclaimsalmost50%ofChina’s3Gmarket,havingsoldover70million3GphonesasofearlyDecember2012.Overall,around190million3GmobiledeviceswillbesoldthisyearinChina,up73%year-on-year.ChinaUnicom iscurrentlyexpanding its3Gnetwork to improveruralandsuburban3Gcoveragetoaround78%ofpopulationintheseareasfromitscurrent39%,whilstalsostrengtheningcapacityinurbanareas.

ChinaTelecomreportedthatsmartphonesaccountedfor30millionconnectionsas of June this year, with smartphone penetration (as a percentage of 3Gsubscriptions) greater than 60% in the first half of 2012. The operator hasadopteda3Gsmartphonedrivenstrategywithapriorityplacedonaffordablesmartphonespricedataround$160.ChinaTelecomfurtherstatedthatitsfocushas largely been on “cultivating customer habit in data usage” through thelaunch of compelling devices such as the iPhone, alongwith an increase inspecialtystoresandcustomerassistanceonapplications.

AsdemandforsmartphonesanddatadevicesacceleratesinChina,operatorsareseeingsubstantialincreasesindatatraffic.ChinaUnicomreportedthattheaveragemonthlydatatrafficper3Ghandsetuserwas138MBbyJune2012,comparedto111MBatChinaTelecom.Meanwhile,ChinaMobile’sdatatrafficincreasedby188%year-on-yearinQ32012,includingamajorboostinitsWi-Fitraffic.Theoperator’smobileWi-Firevenuessurgedby139%between1H11and1H12,whileearlierthisyear(Q12012)itwasreportedthat61%ofitsentiremobiledatatrafficwascarriedoverWi-Fi(84PB/quarter).


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86+87+90+92+94+97+98+100Europe

Q3 2011 Q2 2012 Q3 2012


Total 988.0 1002.5 1010.8

Contract 365.4 383.9 389.6

Prepaid 621.1 617.0 619.8

CDMA(Family) 6.6 7.4 7.8

GSM 667.3 628.3 618.9

WCDMA(Family) 313.1 364.9 381.6


Total 12.4 4.9 8.3


Prepaid 5.7 -1.1 2.8


Total 1.3% 0.5% 0.8%

Contract 1.9% 1.6% 1.5%

Prepaid 0.9% -0.2% 0.5%

Growthrate,annual

Total 3.1% 2.8% 2.3%

Contract 6.0% 7.1% 6.7%

Prepaid 1.4% 0.3% -0.2%


ARPU $22.11 $18.83 $18.45

64+64+67+68+70+72+73+75150%

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2009 2010 2011 2012 2013 2014 2015 2016

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Technology split


1+59+39+1+0+c1+37+51+11+0+c2012 201637%

59%

39%

51%

11%

1%1%1%


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wirelessintelligence.comEuropeEurope accounts for almost half of all global LTE networks

8.3m net additions in Q3 due to strong growth in South and East• DuringQ32012connectionsgrewby0.8%to1.01billion,equivalentto

136%populationpenetration–thehighestacrossallregions• 158operatorswitnessedpositivequarterlynetadditionstotalling12.9

millionconnections,while25operatorslostacumulative4.6millionconnections

• Russiasawthelargestcustomergainswithatotalof2.4millionnetadditions;MTS(Sistema)added1.1millionconnections,MegaFon744,000,Tele2710,000,Rostelecom595,000andBeeline(VimpelCom)442,000thankstopromotionaloffers,retailpresenceexpansionandmobilebroadbandgrowth

LTE is gaining ground across Europe with 57 LTE networks in place • BetweenOctoberandDecember2012,19operatorslaunchedLTE

networksin13countries,includingFrance,ItalyandtheUK• InQ32012,therewere2.4millionLTEconnections;Russia,Germanyand

Swedentogetheraccountedfor73%oftheregion’sLTEconnections

Smartphone adoption displays no signs of slowdown • Vodafone’ssmartphonepenetrationacrossitsEuropeanfootprintwas31%

inQ3,upfrom22%lastyear,whileTelefónica’sreached33%inQ3(25%Q32011)

• Ofcomreportedthat58%oftheUKpopulationownsasmartphone;asofQ3VodafoneUKboastedthecountry’shighestsmartphonepenetrationat50%,followedbyO2(Telefónica)with44%,andEE(FT/DT)at38%

• InSpain,Movistar(Telefónica)andVodafoneeachhad7.1millioninstalledsmartphones,translatinginto34%and44%penetrationrespectively

• GermanoperatorsstilllagbehindtheirWesternEuropeancounterpartsintermsofsmartphonepenetration,withO2andVodafonereporting24%and28%respectively

• AnumberofEasternEuropeanoperatorsreportedhealthyquarterlysmartphonevolumegrowth:O2CzechRepublicshoweda10%increaseinitsinstalledbasetoreach29%penetration,T-MobileHungarywasup7%toreach25%,OrangePolandincreased12%to19%penetrationandMTSRussiawasup8%to18%

Insight: 3 Austria gets green light for Orange acquisition

InFebruary2012,3(Hutchison)announcedthatithadreachedanagreementtobuyOrangeAustriafromitsowners–private-equityfirmMidEuropaPartners(65%ownership)andFranceTelecom(35%)-forEUR1.3billion.InDecember2012,theEuropeanCommissionfinallyapprovedtheacquisition.

Following extensive negotiations with the EC, 3 has committed to give upspectrumtoanynewentrantthatshouldemergeinAustria,andallocate30%of thenewcompany’scapacity towholesaleaccess for 16MVNOsover thenexttenyears.TheoperatorhasalreadyinkedanMVNOagreementwithcableoperatorUPCAustria,whichwillcomeintoeffectafterthetakeover.3AustriahasalsosignedadealwithA1tosellupto64basestationsand2x13.2MHzofpairedfrequencies-aswellasintellectualpropertyrightstoOrange’spreviousbrand,One,anditsyouth-focusedprepaidbrand,Yesss!-forEUR390million.Thissub-dealhasreceivedthegoaheadfromregulatorTKKandtheAustrianCartelCourt.

Thetransactionwouldmergethird-placedOrangeandfourth-placed3tocreateapowerfulnumberthreebehindA1andsecond-placedT-Mobile.BasedonQ3data,thedealwouldcreateacombinedentitywith3.8millionconnectionsanda29%marketshare,howeverthedisposalofYesss!(around700,000connections)willresult in3.1millionmobileconnectionsanda23%marketshare.Ontheotherhand,theYesss!takeoverstrengthensA1’sposition,increasingitsshareofconnectionsfrom40%to46%.

TheAustrianmarketisnotonlysaturated(160%populationpenetration)butalsowelladvanced,with3Gconnectionsaccountingfor60%oftotal,andthreeoutoffouroperatorshavingdeployedLTEnetworks(Orangebeingtheexception).3’saggressivecustomeracquisitionstrategy- fuelledby itscompetitivedataoffers-helpedtomaintainmarketshareandincreasedatarevenueto49%ofitsARPU.3claims that thisdealwill allow it tohastenLTEdeployment,andcompetebetterwithothermarketplayers.

Thedeal,ifitgoesthrough,couldsetaprecedentforsimilartakeoversacrossEurope,bringinginanewwaveofM&Aactivity.


11


76+81+87+89+92+94+95+96Northern America

Q3 2011 Q2 2012 Q3 2012


Total 359.6 371.7 373.2

Contract 273.9 277.5 278.4

Prepaid 85.7 94.2 94.9

CDMA(Family) 189.3 188.9 184.9

GSM 54.8 40.9 38.2

WCDMA(Family) 94.6 111.7 114.4


Total 7.4 2.1 1.5


Prepaid 3.8 1.5 0.7


Total 2.1% 0.6% 0.4%

Contract 1.4% 0.2% 0.3%

Prepaid 4.6% 1.6% 0.7%

Growthrate,annual

Total 8.9% 5.5% 3.8%

Contract 8.5% 2.7% 1.7%

Prepaid 10.5% 14.9% 10.6%


ARPU $49.13 $48.98 $49.72

63+68+73+76+78+80+82+84500

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51+12+30+6+1+c39+8+27+26+0+c2012 201630%

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39%

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1%


12

wirelessintelligence.comNorthern AmericaData boom continues thanks to growing LTE coverage and device sales

LTE coverage expands rapidly as Verizon’s deployment almost complete• AT&TexpandeditsLTEcoverageto160millionpeopleinDecember,and

planstoincreasethisto250millionbyend-2013and300millionby2014• Verizon’sLTEnetworknowcovers250millionpeople,andtheoperator

expectstocompleterolloutbymid-2013,sixmonthsearlierthanplanned• InCanada,RogersWirelessreportedthatitsLTEnetworkcovered60%of

thepopulationattheendofQ32012

Operators reporting big data increases on the back of LTE• Verizonannouncedthat35%ofitsoveralldatatraffictravelledoverits

LTEnetworkattheendofQ32012,andtheoperatorexpectsthatinafewmonths’timethemajorityofitstrafficwillbetransmittedoverLTE

• MetroPCSreportedthatsubscriberstoitsunlimiteddataplansusebetween2GBand2.5GBpermonthonitscellularnetwork

• SincelaunchingLTEinJuly2011,RogersWireless(Canada)hasseenan80%increaseindatausage,andexpectstraffictogrowsix-foldby2016

4G smartphones gain popularity while T-Mobile cuts device subsidies• SmartphonepenetrationatVerizonincreasedfrom39%inQ32011to55%

inQ32012;theoperatorsold4.5millionLTEdevicesduringQ32012• Sprint(SprintNextel)revealedinOctoberthatithadsold1millionLTE

smartphonespriortothelaunchoftheiPhone5• USCellularreportedthathalfofthesmartphonesitsoldinQ3were4G• T-Mobile(DeutscheTelekom)confirmedthatitwilleliminatealldevice

subsidiesduring2013–fromthenoncustomerswillhavetopaythefulldevicecostupfront,purchasebyinstalmentsorsupplytheirowndevices

Shared data plans exceed operators’ expectations• AT&Tgained2millionsubscriptionstoits‘MobileShare’dataplanswithin

fiveweeksoflaunch,withmorethanathirdoptingfor10GBorlargerplans• Verizonreportedthat13%ofitscustomerbaseareonits‘Share

Everything’dataplans,usinganaverageofmorethan2.6devicespercontract

• Onasimilarbasis,Verizonnowreportsanaveragerevenueperaccount(ARPA)metric,whichwasup6.5%year-on-yearinQ3to$145.42

Insight: Sprint, T-Mobile eye up further spectrum as US market consolidates

October 2012 saw themost significant amount ofmerger activity in the USmobile industry for several years, with the announcement of T-Mobile USAandMetroPCS’mergerquickly followedbySprint’sagreement tobemajorityacquired by Japanese operator SoftBank. The T-Mobile/MetroPCS deal willconsolidate the former’s position as the country’s number four player with12.2%oftotalconnections(onapro-formabasis).Whilethemergerwillgivethecombinedoperationastrongpositioninthevalueendofthemarketwith20.8%ofthecountry’sprepaidconnections,theresultingsynergiesshouldalsoallowittocompetemoresuccessfullywithAT&TandmarketleaderVerizononLTE.

Thiscanbeachievedthroughcombiningtheoperators’AWSspectruminthe1700/2100MHzbands(inwhichMetroPCSalreadyprovidesLTEfor1.1millioncustomers), an action which T-Mobile CEO John Legere claimed would “…increaseourcontiguousspectrum forLTEby40%”.Specifically, in2013 thenewentitywouldbegintomoveMetroPCScustomersoffthatoperator’sCDMAnetworkandontoT-Mobile’snewLTEnetwork in theAWSspectrum,aswellasitsre-farmed1900MHzHSPA+network.Around60%ofMetroPCS’CDMAcustomersareexpectedtobemigratedovertotheT-Mobilenetworkswithinayear,andthenetworkislikelytobeshutdownandthespectrumre-farmedin2015-bywhichtimetheLTEdeploymentacrossthecombinedAWSspectrumshouldbecomplete.

Meanwhile, Sprint has secured funding to continue its network upgradeprogrammethroughSoftBank’s$20.1billioninvestment,ofwhich$8billionwillbenewcapital.TheoperatorhassetaboutsecuringnewspectrumforitsownLTEdeployment,agreeingadealwithUSCellular(TDS)topurchasespectrumand connections in the Midwest and entering into talks with Gamma (DishNetwork)overfurtherspectrumholdings.However,Sprint’sbiggestmovehasbeentoagreea$2.2billiondealtobuythe48.3%itdoesnotalreadyownofWiMAXoperatorClearwire,whichholdsasmuchas150MHzofspectruminthe2.5GHzband.

Whilebothmergersremainsubjecttoregulators,approvaliswidelyexpectedtobegrantedearlynextyeargiventhatbothdealswillputtherespectiveoperatorsinastrongerpositiontocompetewiththetoptwoplayersinthemarket.


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Joss Gillet Senior Analyst

Calum DewarLead Analyst

Sylwia KechicheAnalyst

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