Slicing up the Mobile Services Revenue Pie

The very first mobile telephones, huge briefcase-sized devices, first appeared in the 1980s and towards the end of that decade a nascent mobile phone industry was emerging. According to industry research, forecasts predict that 2008 will be the year that the worldwide mobile industry becomes a one Trillion US Dollar industry. For an industry to go from zero to USD 1 trillion in just 20 years is a staggering achievement, equal to a CAGR of almost 30 percent sustained for 20 years, an achievement previously unequalled by any other industry at any time in human history. 2007 became the year to see worldwide mobile handset shipments exceed 1 billion for the first time, and as 2008 begins so the world also crosses the highly significant 50 percent mobile penetration point, and the industry enters a year where gross industry revenues are set to reach 1 trillion Dollars.

As simple voice and text messaging services have become commoditised, prices and margins have come under intense pressure, forcing mobile network operators to expand non-voice mobile services to gain competitive advantage. A wide variety of value-added non-voice services have emerged, from mobile music, to email, mobile TV and video downloads, location based services, games, gambling and mobile payment services. In 2007, worldwide, non-voice services accounted for 18.9 percent of total mobile services revenues, and this figure looks set to keep growing, reaching more than 25.5 percent by the end of 2012. To put that in context, worldwide consumer spending on non-voice mobile services in 2012 will exceed 251 Billion US Dollars - more than a quarter of a trillion Dollars per annum.

• 1. What is the overall value of the worldwide mobile industry?
• 2. Where does the money come from?
  • Which services?
  • Which geographical regions?
• 3. Where does the money go to?
  • Handset vendors?
  • Infrastructure equipment vendors?
  • Retained by network operators?
  • Content partners?
• 4. How will these revenue flows change over the coming years?
• 5. Where is the real money now, which services make the most money, and which services are making the most profit?
• 6. How does the value of these services change across different regions and markets?

In 2008 we estimate MNOs worldwide will collect total revenues of USD 874.3 Bn. Interestingly, voice and SMS get little publicity in the mobile world these days. Just take a look at the conference agenda for the annual Mobile World Congress in Barcelona in February 2008. Looking down the list of topics covered in the 4 day conference, all the talk is about mobile TV and video, HSPA, mobile IM, DRM, mobile finance, mobile search, social networking, data pricing and mobile enterprise solutions. All of these are exciting growth areas and most of these topics offer a great deal of promise for the future. But amid all this excitement, there is barely one mention of voice as a subject, and barely any mention of SMS as an application, yet voice and SMS generate well over 80 percent of the total service revenues flowing into this industry right now, and it' s predominantly voice and SMS that have built this USD 1 trillion business over the last 20 years. Our forecasts show that in 2008, 88.9 percent of total MNO service revenues worldwide will come from voice and SMS, and that figure is likely to remain as high as 85 percent even by the end of 2011. But that still leaves more than USD 161 billion from data services in 2008, rising to over USD 251 by 2011, and this report looks in detail at those services to see where the money is coming form and how it' s split out among the various players in the value chain.

We analyze the MNOs share in content revenues and we look in detail at how that share is changing over the next 4 or 5 years.