The Mobile Economy 2018 - GSMA
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GSMA Intelligence The GSMA represents the interests of mobile operators GSMA Intelligence is the definitive source of global mobile worldwide, uniting nearly 800 operators with more operator data, analysis and forecasts, and publisher of than 300 companies in the broader mobile ecosystem, authoritative industry reports and research. Our data including handset and device makers, software companies, covers every operator group, network and MVNO in every equipment providers and internet companies, as well as country worldwide – from Afghanistan to Zimbabwe. It is organisations in adjacent industry sectors. The GSMA the most accurate and complete set of industry metrics also produces industry-leading events such as Mobile available, comprising tens of millions of individual data World Congress, Mobile World Congress Shanghai, Mobile points, updated daily. GSMA Intelligence is relied on by World Congress Americas and the Mobile 360 Series of leading operators, vendors, regulators, financial institutions conferences. and third-party industry players, to support strategic decision-making and long-term investment planning. The For more information, please visit the GSMA corporate data is used as an industry reference point and is frequently website at www.gsma.com cited by the media and by the industry itself. Our team of analysts and experts produce regular thought-leading Follow the GSMA on Twitter: @GSMA research reports across a range of industry topics. www.gsmaintelligence.com info@gsmaintelligence.com
Contents EXECUTIVE SUMMARY 2 1 INDUSTRY OVERVIEW 10 1.1 Mobile industry set to reach major milestones over the period to 2025 11 1.2 Mobile represents the highest scale consumer tech worldwide 12 1.3 Mobile internet – new large smartphone markets emerge in the digital era 15 1.4 Transitioning from the connected consumer to the digital consumer 16 1.5 4G takes the lead in 2019, while 5G moves from trials to commercialisation 18 1.6 Financial outlook – pressure on traditional mobile revenue, while 5G capex 20 still uncertain 1.7 Major operators exploring adjacent businesses in an evolving ecosystem 23 1.8 Scaling the Internet of Things – 25 billion connections by 2025 24 2 MOBILE CONTRIBUTING TO ECONOMIC GROWTH AND 26 ADDRESSING SOCIAL CHALLENGES 2.1 Mobile contribution to economic growth, employment and public funding 27 2.2 The growing impact of mobile on the Sustainable Development Goals 33 2.3 Disaster response and the central role of mobile technology 37 2.4 The challenge to connect the unconnected 38 2.5 Digitisation of the last mile across key industries 39 3 MOBILE DRIVING AND ENABLING INNOVATION IN 42 A FAST-EVOLVING ECOSYSTEM 3.1 Financing of tech innovation and development reaches unprecedented levels 43 3.2 The rise of mobile operator financing and collaboration with tech start-ups 44 3.3 Key areas of innovation – IoT, AR/VR, networks and AI 48 3.4 Artificial intelligence moves towards mainstream adoption 50 4 POLICY AND REGULATION – EXTENDING THE BENEFITS 53 OF THE DIGITAL AGE Contents 1
The Mobile Economy 2018 Executive Summary Mobile industry set to reach major milestones over the period to 2025 Having surpassed 5 billion people connected market that will add 1.75 billion new users over to mobile services in 2017, the global mobile the next eight years, reaching a milestone of 5 industry will reach further milestones billion mobile internet users in 2025. over the next eight years. The number of Mobile internet adoption will increasingly unique mobile subscribers will reach 5.9 become the key metric by which to measure billion by 2025, equivalent to 71% of the the reach and value created by the mobile world’s population. Growth will be driven by industry, including its contribution to the UN’s developing countries, particularly India, China, Sustainable Development Goals (SDGs). It Pakistan, Indonesia and Bangladesh, as well also contributes to developments in the wider as Sub-Saharan Africa and Latin America. digital ecosystem, as mobile internet users The speed of growth is slowing though, with are the addressable market for e-commerce, most of the developed world approaching fintech and a range of digitally delivered saturation. The more significant growth services and content. opportunity will lie in mobile internet – a 2 Executive Summary
The Mobile Economy 2018 4G takes the lead in 2019, while 5G moves from trials to early commercialisation In 2019, 4G will become the leading mobile 2025, while Europe as a whole will continue to network technology worldwide by number of make progress with 5G deployments. In total, connections (more than 3 billion) – another these four economies will account for more major milestone for the mobile industry, than 70% of the 1.2 billion 5G connections about 10 years since the launch of early 4G expected globally by the end of the forecast commercial services. Meanwhile, the mobile period. industry continues to make progress with 5G, By 2025, two thirds of mobile connections including successful trials around the globe (excluding cellular IoT) across the world will and the approval of the non-standalone 5G operate on high-speed networks, with 4G new radio specifications in December 2017. accounting for 53% of total mobile SIMs and A number of mobile 5G commercial launches 5G at 14%. To support customer migration and are expected over the next three years in further drive consumer engagement in the North America and major markets across Asia digital era, mobile operators will invest $0.5 and Europe. China, the US and Japan will be trillion in mobile capex worldwide between the leading countries by 5G connections in 2018 and 2020. Scaling the Internet of Things: 25 billion connections by 2025 The number of Internet of Things (IoT) Growth in IoT will be driven by a proliferation connections (cellular and non-cellular) will of uses cases for smart homes, cities, increase more than threefold worldwide buildings and enterprises, as well as between 2017 and 2025, reaching 25 billion. rising investor financing and a supportive While IoT is rapidly becoming a mainstream ecosystem for innovation. Developments technology in some consumer markets in network connectivity to suit a variety of such as consumer electronics and smart IoT use cases, led by operators, also play a homes, the industrial IoT segment is still in its key role; at the end of 2017, there were 30 infancy – but is set to be the largest source of commercial deployments of LTE-M and connections growth going forward. Globally, NB-IoT in 20 countries, including the US, the industrial connections base will overtake China and across Europe. Looking out to consumer IoT connections in 2023. 2025, licensed cellular IoT connections will reach 3.1 billion worldwide, or 12% of total IoT connections. Executive Summary 3
The Mobile Economy 2018 Mobile contributing to economic growth and addressing social challenges In 2017, mobile technologies and services As well as contributing to economic growth, generated 4.5% of GDP globally, a mobile technology is increasingly used for contribution that amounted to $3.6 trillion disaster preparedness and response, and of economic value added. By 2022, this to help address the challenges of access, contribution will reach $4.6 trillion, or 5% cost and quality of service in key industries, of GDP, as countries around the globe including healthcare, agriculture, utilities, increasingly benefit from the improvements education and financial services. Two years in productivity and efficiency brought about into the 2030 Agenda for Sustainable by increased take-up of mobile services and Development, the mobile industry is M2M/IoT solutions. In 2017, the wider mobile increasing its impact across all the 17 SDGs ecosystem also supported a total of 29 million as a result of wider mobile reach and better jobs (directly and indirectly) and made a networks. There is also growing adoption substantial contribution to the funding of the of mobile-based tools and solutions that public sector, with almost $500 billion raised aim to spur the digitisation of systems, through general taxation and $25 billion processes and interactions across a number through mobile spectrum auctions. of industries, especially in low- and middle- income countries. Agriculture and healthcare are notable examples. Innovation reaching unprecedented levels in a fast-evolving ecosystem Globally, private equity companies, venture- and in some cases moves into new business capital firms and corporates have invested lines such as media, content and fintech. $1.2 trillion over the last five years to finance Across Asia Pacific and Africa, collaboration tech start-ups and emerging companies in a between mobile operators and start-ups is range of sectors, with an all-time record level gaining momentum as operators have the of financing in 2017. This continues to support scale and reach that start-ups lack, while innovation and development in technology start-ups have the local innovation that areas such as IoT, augmented reality (AR), operators need. Vodacom, MTN and Orange virtual reality (VR), networks, autonomous have successfully collaborated with start- vehicles and the wider area of artificial ups in Africa, as have Telenor and Axiata in intelligence (AI). Asia. To support innovation across verticals and drive positive socioeconomic impacts, Recent trends and initiatives also show the GSMA Ecosystem Accelerator Innovation increasing corporate venture capital (CVC) Fund is rapidly moving to its third round of activity among operators in both developed applications for start-ups. and developing markets, to drive innovation 4 Executive Summary
The Mobile Economy 2018 Artificial intelligence is the next frontier While the AI industry is currently dominated the customer experience through better by the big tech players in the US (Google, understanding of customer behaviour. Amazon, Apple, Facebook, Microsoft and As emerging technologies – including AI, IoT IBM) as well as the Chinese ‘BAT’ companies and advanced data analytics – converge, 5G (Baidu, Alibaba and Tencent), leading telcos could play an enabling role in realising their across the world are also increasing their full potential. For example, IoT will require focus on AI. From an operator perspective, both more pervasive intelligence and a the range of AI-based applications is moving ubiquitous connectivity layer to allow devices beyond chatbots and digital assistants, to communicate and to support the provision already launched by a number of telcos of data analytics and intelligence on-demand. across Europe and Asia. There is widespread Looking ahead, we expect this convergence recognition that AI will be key to future to intensify, with AI increasingly integrated business and digital transformation as into a growing number of IoT applications well as driving increasingly autonomous and services as well as networks. and intelligent networks and improving Policy and regulation – extending the benefits of the digital age For nearly three decades, policy and competition and consumer welfare, regulatory developments have supported prescriptive (ex-ante) regulations should be growth in the global mobile industry replaced – where possible – with measurable, by creating the conditions that attract performance-based approaches. investment and enable widespread access As the mobile industry moves into the 5G era, to mobile services. However, regulatory the need for pro-investment, pro-innovation reform has struggled to keep pace with the policies and modernised regulatory regimes converged, highly dynamic and evolving has never been greater. Streamlined digital ecosystem. Regulatory and policy regulation and further policy developments objectives are best met by focusing on the in three main areas – spectrum, infrastructure services delivered to consumers, rather than and economics – are key to realising the full the type of company or technology that potential of 5G for consumers, societies and delivers them. To promote market dynamism, industries. Executive Summary 5
GLOBAL MARKET Unique Mobile mobile internet subscribers users 5.0bn 2017 43% PENETRATION RATE (% of population) 61% 66% PENETRATION RATE 71% 3.3bn 2017 5.0bn (% of population) CAGR 2017–25 5.9bn CAGR 2017–25 2.1% 5.3% 2025 2025 53% Smartphones 4G 29% % of connections* % of connections* 57% 2017 2025 2017 2025 77% 5G 1.2bn 14% 2025 of connections* *Excluding cellular IoT SIM connections Mobile operator Excluding cellular IoT revenue 7.8bn 2017 2017 $1.05tn 9.0bn 2025 103% PENETRATION RATE (% of population) 110% 1.9% CAGR 2017–25 $1.10tn 2025
Mobile operator Internet of Things capex 7.5bn $479bn 2017 Total connections 2018 Capex (cumulative) 2020 25.1bn 2025 Mobile industry 4.5% $3.6tn 2017 $4.6tn contribution to GDP 5.0% 2022 Public funding Employment Mobile ecosystem contribution to public funding (before regulatory and spectrum fees) $500bn Number of jobs directly and indirectly supported by mobile ecosystem 29m 2017 2017
The Mobile Economy 2018 Global TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 14% 4% 2025 2017 2025 53% 29% 2G 66% 71% 4G 2017 MOBILE INTERNET PENETRATION 31% 29% 2017 2025 40% 3G 43% 61% Asia Pacific TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 13% 5% 2025 2017 2025 58% 34% 2G 67% 73% 4G 2017 MOBILE INTERNET PENETRATION 24% 2017 2025 25% 41% 63% 41% 3G CIS TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 10% 2025 2017 2025 58% 15% 2G 80% 82% 35% 4G 2017 MOBILE INTERNET PENETRATION 32% 2017 2025 50% 3G 52% 72% Europe TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 31% 2025 2017 2025 41% 19% 2G 85% 88% 22% 4G 2017 MOBILE INTERNET PENETRATION 2017 2025 72% 82% 49% 37% 3G 8 Executive Summary
The Mobile Economy 2018 Latin America TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 7% 5% 2025 2017 2025 74% 66% 23% 2G 67% 4G 43% 2017 22% MOBILE INTERNET PENETRATION 34% 2017 2025 3G 50% 66% MENA TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 6% 6% 2025 2017 2025 68% 51% 45% 9% 2G 62% 4G 2017 MOBILE INTERNET PENETRATION 2017 2025 47% 37% 3G 36% 51% North America TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 49% 3% 2025 2017 2025 68% 8% 2G 84% 86% 4G 2017 MOBILE INTERNET PENETRATION 24% 2017 2025 3G 73% 80% 47% Sub-Saharan Africa TECHNOLOGY MIX* SUBSCRIBER PENETRATION 5G 29% 3% 6% 2025 2017 2025 36% 4% 2G 44% 52% 4G 2017 MOBILE INTERNET PENETRATION 2017 2025 21% 40% 62% 60% 3G *% of mobile connections excluding cellular IoT Executive Summary 9
The Mobile Economy 2018 01 Industry overview 10 Industry overview
The Mobile Economy 2018 1.1 Mobile industry set to reach major milestones over the period to 2025 2017 was a milestone year for the mobile industry: the end of 2017. Looking out to 2025, the mobile the number of people connected to mobile services industry will reach new major milestones across key surpassed 5 billion globally, with 3.7 billion in indicators – unique subscribers, internet users and developing markets. As such, two out of three 4G/5G connections. people in the world had a mobile subscription at Figure 1 Source: GSMA Intelligence Major mobile milestones over the period to 2025 Early 5G commercial launches 1.2 billion 5G across many markets connections TECHNOLOGY 4G takes the lead MOBILE INTERNET Over 5 billion USERS 3 billion UNIQUE MOBILE Nearly 5 billion SUBSCRIBERS 6 billion 2017 2019 2020 2025 Industry overview 11
The Mobile Economy 2018 1.2 Mobile represents the highest scale consumer tech worldwide With more than 5 billion unique mobile subscribers followed closely by Latin America and Asia Pacific at the end of 2017, mobile has a greater reach than – this will largely be due to growing mobile network any other technology. Growth is slowing though as coverage in rural areas and increasing affordability an increasing number of developed mobile markets of both mobile devices and tariffs. are approaching saturation1; as such, it will take Mobile subscribers differ from mobile connections more than eight years to move from 5 to 6 billion such that a unique user can have more than one mobile subscribers compared to the four years SIM card. The number of connections excluding it took to move from 4 to 5 billion. Between 2017 cellular IoT totalled 7.8 billion globally in 2017 and and 2025, India and China will add more than 200 will reach 9.0 billion by 2025. There will therefore million and 70 million new subscribers respectively, be three SIM cards for every two subscribers (a SIM while Sub-Saharan Africa, Latin America and three ownership ratio of 1.5). In developing countries, the other major Asian countries (Pakistan, Indonesia SIM ownership ratio is often higher, especially in and Bangladesh) will generate a total of more than Sub-Saharan Africa (1.7), where many consumers 350 million new subscribers. use multiple SIMs from different mobile operators, In terms of mobile penetration of population, often through dual-SIM handsets, to make use of Sub-Saharan Africa will have the largest increase the best network coverage and call quality in certain between 2017 and 2025 (8 percentage points), locations. 1. By the end of 2017, 30% of the world’s mobile markets, including the majority of Europe, Russia, the US and Japan, had exceeded 85% penetration of their addressable market (those aged 5 years and older). As such, future unique subscriber growth in these markets will be closely linked to population growth. 12 Industry overview
The Mobile Economy 2018 Figure 2 Source: GSMA Intelligence Unique mobile subscriber penetration (Percentage of population) 80% 81% 82% 85% 86% 88% 84% 84% 86% 2017 2020 2025 2017 2020 2025 2017 2020 2025 CIS 68% 62% 65% Europe North America 73% 2017 2020 2025 67% 69% 74% 67% 70% MENA 2017 2020 2025 2017 2020 2025 Asia-Pacific 52% 44% 48% Latin America 2025 2017 2020 Sub-Saharan Africa 66% 2017 68% 2020 71% 2025 Global Industry overview 13
The Mobile Economy 2018 Although the divide in mobile adoption between the highest and the lowest unique subscriber developed and developing regions will reach its penetration will still be about 40 percentage points narrowest by 2025, significant differences remain at in 2025. The 10 countries together account for the country level. For example, among the 10 most nearly 60% of the global subscriber market. populous countries in the world, the gap between Figure 3 Source: GSMA Intelligence Mobile penetration in the 10 largest countries by population Unique mobile subscribers as a percentage of population 90% 86% 85% 77% 75% 72% 63% 60% 55% 50% 89% 84% 82% 73% 68% 63% 53% 51% 49% 39% Russia US China Indonesia Brazil Mexico India Bangladesh Nigeria Pakistan Penetration in 2017 Increase Penetration in 2025 14 Industry overview
The Mobile Economy 2018 1.3 Mobile internet – new large smartphone markets emerge in the digital era By 2025, mobile internet penetration will reach and MiFi routers/hotspots). Smartphones will 61% of the global population and 86% of unique become the leading handset type in all individual subscribers. Most of the 1.75 billion increase in the regions by 2020 and almost all individual countries number of mobile internet users between 2017 and globally by 2025. 2025 will come from China (around 350 million While most developed countries are already highly new users), India (330 million) and Sub-Saharan penetrated, new large mobile internet markets are Africa (280 million). Key drivers of growth include emerging in the developing world. China overtook increasing population coverage of 3G and 4G the US to become the largest smartphone market networks, more affordable smartphones and data by installed base in 2012; four years later, India also tariffs, and an increasing willingness among users to overtook the US. Indonesia and Brazil are growing consume social media and a range of services and fast too; the number of smartphone connections in content online. Indonesia is approaching that of the US. By 2025, Smartphone adoption will grow by 20 percentage there will be more than 10 markets in the world points globally between 2017 and 2025; by then, with over 100 million smartphone connections. three in four mobile connections will operate on These represent major addressable markets for smartphones, with the rest on basic/feature phones e-commerce, fintech and a range of digitally and data-only devices (e.g. cellular tablets, dongles, delivered services and content. Figure 4 Source: GSMA Intelligence Smartphone adoption Smartphones as a percentage of total mobile connections excluding cellular IoT Top five smartphone markets (2025)* 91% 80% 81% 77% 77% China 76% 75% 73% 1.4bn 70% 68% 61% India 57% 57% 55% 1.0bn 52% US 350m 34% Indonesia 320m Brazil 200m North Europe Latin Asia Global CIS MENA Sub-Saharan America America Pacific Africa *By installed base; country level; approximate figures 2017 2025 Industry overview 15
The Mobile Economy 2018 1.4 Transitioning from the connected consumer to the digital consumer While more than 3 billion people use mobile internet (those who regularly consume digital services and globally (internet-connected consumers), their content via their smartphones) has been fastest in digital engagement – measured by the GSMA some of the most developed and tech-advanced Global Mobile Engagement Index (GMEI) – varies markets such as the US, South Korea, Australia significantly between countries. On a scale of 0–10, and across Scandinavia. Indeed, the most highly South Korea (6.8), Scandinavian countries (e.g. engaged smartphone users (‘Aficionados’) are Finland at 6.7, Sweden at 5.8), Australia (5.5) and predominant in North America, while the least the US (5.3) have relatively high mobile engagement engaged (‘Networkers’ and ‘Talkers’) dominate in scores (2017); many subscribers in these countries most developing countries. See Figure 5. use their phones on a regular basis to access not Two major trends will occur over the next decade. only internet-based messaging and social media In the developing world, smartphone users will but also entertainment content (such as movies, gradually transition to higher levels of engagement. music, games and sports), e-commerce and other In the most developed markets, today’s digital digitally delivered services and content (i.e. financial consumers will likely become tomorrow’s services, health, education, government services). augmented customers in the 5G era; they will Pakistan, India and Tanzania have the lowest scores increasingly adopt emerging technologies such (at around 1.0). as augmented reality; virtual reality; technology A deeper look at the segmentation groups of solutions and applications for smart homes, cities smartphone users by their mobile engagement and buildings; and emerging services such as drone pattern reveals that the transition from the delivery, consumer robotics and autonomous cars. connected consumer to the digital consumer 16 Industry overview
The Mobile Economy 2018 Figure 5 Source: GSMA Global Mobile Engagement Index Consumer mobile engagement, 2017 SMARTPHONE USER SEGMENTATION BY ENGAGEMENT PATTERN (Percentage of total smartphone users) Aficionados Pragmatists Networkers Talkers Early adopters Early majority Late majority Laggards North America 53% 36% 5% 6% Europe 46% 42% 5% 7% Middle East & North Africa 34% 33% 25% 8% East Asia/Pacific 26% 36% 24% 14% Latin America 12% 45% 31% 12% South Asia 9% 24% 32% 35% Sub-Saharan Africa 14% 18% 49% 19% Migration to smartphones that operate on high- As video technology continues to evolve (i.e. 4K, speed mobile networks, coupled with increasing 8K, 3D video, 360-degree video) and video-based consumer propensity to engage in the digital content is increasingly consumed across all regions world, is driving mobile data traffic up in all and use cases, video will account for around 75% regions. According to Ericsson (in its Mobility of mobile data traffic worldwide by 2023, up from Report November 2017), global mobile data traffic 55% in 2017 (Ericsson). Newer applications that for all devices will increase eight-fold between make content even more immersive and data 2017 and 2023, reaching 110 exabytes per month. intensive (such as AR and VR), as well as the future Smartphones will account for close to 95% of total availability of 5G networks, will also be drivers of mobile data traffic by 2023. video traffic growth in the most developed markets. Industry overview 17
The Mobile Economy 2018 1.5 4G takes the lead in 2019, while 5G moves from trials to commercialisation In terms of number of mobile connections, 4G years. As well as most of Europe, the list of countries will become the lead mobile network technology includes Australia, China, Hong Kong, India, Japan, in 2019 (at more than 3 billion) and will continue South Korea and the US. to dominate over the period to 2025. Developing While 4G has been driving and enabling the markets are driving overall 4G connections growth. transition from the connected consumer to the Of the 2.5 billion new 4G connections over the next digital consumer during 2010–2020, 5G will play eight years, 1.1 billion will come from three major a key role in the transition to the augmented markets in Asia (India, China and Indonesia) and a consumer in the longer term. Today’s digital further 1 billion will come from Latin America, Middle consumers are the key addressable market for 5G East and North Africa, and Sub-Saharan Africa. services. Many of these consumers will increasingly Meanwhile, the mobile industry continues to make adopt a range of technologies that are expected to progress with 5G, with early commercial launches benefit from the faster speeds and lower latencies expected over the next three years in North America promised by 5G. These include advanced video and in major markets across Asia and Europe. The capabilities (i.e. 4K, 8K, 3D video, 360-degree video US will see its first commercial launch in late 2018. for sports broadcasting), AR and VR applications for The non-standalone 5G new radio (NSA 5G NR) gaming and immersive TV, autonomous cars, and specifications were officially approved in December digital services and content for connected stadia 2017 as part of a wider plan that targets complete and smart cities. standardisation of the 5G system for both non- China, the US and Japan will be the leading standalone and standalone models by mid-2018. countries in terms of connections by 2025, while A large number of 5G trials are also currently being Europe as a whole will continue to make progress conducted worldwide using various spectrum with 5G deployment. In total, these four economies bands, especially 3.5 GHz and 26/28 GHz. More will account for more than 70% of the global 5G than 30 markets are planning to assign spectrum in market in 2025 – nearly 900 million connections in these two spectrum bands over the next couple of a global market that will reach 1.2 billion. Fixed wireless Fixed wireless will be an initial 5G-based use case the opportunity expands to around 30 million in the US, with early commercial launches in 2018 households outside of its existing fibre footprint. following trials in 2017. Verizon will launch in three For operators, 5G-based fixed wireless offers a to five US markets in the second half of 2018. potentially lower cost and faster means – compared The company is targeting a 20–30% penetration to FTTH – of expanding high-speed offerings rate in these markets, with an initial focus on the to households and businesses, bringing the residential space. Verizon plans a broader rollout in opportunity to gain market share and incremental 2019 and has indicated that over a three-year period revenue. 18 Industry overview
The Mobile Economy 2018 Figure 6 Source: GSMA Intelligence Global mobile adoption by technology Share of mobile connections, excluding cellular IoT 53% 4G 29% 3G 14% 5G 4% 2G 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 5G adoption in major countries/regions (2025, percentage of connections excluding cellular IoT) US JAPAN EUROPE CHINA 49% 45% 31% 25% Global 14% CIS SSA LATAM MENA 10% 7% 6% 3% Industry overview 19
The Mobile Economy 2018 1.6 Financial outlook – pressure on traditional mobile revenue, while 5G capex still uncertain Challenging revenue outlook for traditional mobile services Slowing unique subscriber growth, regulatory Europe‘s mobile revenue over the period to 2025 intervention and intense competition continue will also be roughly stable across the majority of to put pressure on operators’ traditional mobile markets. After several consecutive years of mobile revenues. Global revenue will grow by around 1% revenue declines (since 2008), the European mobile between 2017 and 2020 (CAGR) and will roughly sector is benefitting from a lessening regulatory stabilise beyond 2020 at $1.1 trillion. impact, in-market consolidation, a shift to higher 4G data usage and an improved macro-economic China offers the largest revenue growth opportunity performance across many countries. for operators. Despite growth slowing, especially beyond 2020, China will account for around 40% Cross-sector competition is also intensifying in the of global mobile revenue growth between 2017 and digital era; taking a share of the consumer wallet is 2025. Three major Chinese mobile operators will increasingly challenging for companies across the grasp this opportunity, while smaller revenue growth telecoms, media and technology (TMT) ecosystem. in Sub-Saharan Africa, Middle East and North Africa, Internet-based subscriptions for films and music are and Latin America will be spread across a larger growing rapidly, and new devices and technologies number of operators. are entering the market such as home speakers, AR, VR, and the wider consumer Internet of Things. In the US, competition has reached unprecedented This adds revenue pressure to the most established levels; unlimited plans are now the norm and streams including mobile and fixed access, traditional mobile revenue is under pressure after smartphones and traditional media content. years of growth. However, despite near-stable revenue going forward, the US will remain the largest mobile market in the world by revenue ($245 billion in 2025). 20 Industry overview
The Mobile Economy 2018 Figure 7 Source: GSMA Intelligence Mobile revenue outlook $ billion 1,200 1,051 1,080 1,095 403 426 443 1,000 China driving most of the 800 increase 600 648 654 651 400 Europe and North America nearly flat 200 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Developed Developing Note: totals may not add up due to rounding. Industry overview 21
The Mobile Economy 2018 Mobile industry capex has peaked for 4G but 5G to come post-2020 Between 2018 and 2020, mobile operators will There is little guidance on 5G operator mobile capex invest $0.5 trillion worldwide in mobile capex, around the globe. Ultimately, it will depend on a excluding spectrum acquisitions. Some operators in number of factors including the model (standalone, the most developed markets are upgrading their 4G non-standalone or phased approach) selected for networks to faster speeds and lower latencies, while 5G network deployments, the targeted network 5G investment is still in its infancy. In developing coverage, the range of spectrum bands in use, and countries, many operators are still investing in the availability of fibre infrastructure and nationwide increasing the coverage and capacity of their 3G LTE networks. It is also reasonable to assume a and 4G networks. gradual rollout path; indications from the Chinese mobile operators are that 5G investment will follow The expansion of 5G to a larger footprint could a more gradual route and over a longer period require incremental capex, above the approximately than 4G, roughly seven years, from 2018 to 2025. $160 billion expected in 2020. As many mobile Japanese operators claim that the deployment of markets face pressure on traditional mobile 5G will not lead to any significant spike in capex. revenues, any further capex increase beyond 2020 would push global capex as a percentage of revenue above the 15% expected during 2018–2020. Figure 8 Source: GSMA Intelligence Global capex and network coverage 250 79% 200 Network coverage (% of population) 150 Capex ($ billion) 100 50 11% 2% 2% 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Capex 4G coverage 5G coverage 22 Industry overview
The Mobile Economy 2018 1.7 Major operators exploring adjacent businesses in an evolving ecosystem The largest operators are moving beyond their and bags, as well as home security. traditional telco businesses (mobile and fixed) to Several operators – such as Turkcell in Turkey and explore new revenue streams in a fast-changing SK Telecom, Singtel and NTT DoCoMo in Asia – are competitive landscape. While this strategic also targeting the wider digital consumer space play has different flavours, timelines and scales, by offering a range of digital services and content the predominant drivers are the convergence including fintech, e-commerce, content, lifestyle, of telecoms and media, the rise of IoT and the advertising/digital marketing, identity and security evolution of the wider digital ecosystem. solutions. In the fintech market, Orange Bank In the US, AT&T is taking a lead position in the Media launched across France in November 2017, offering and Entertainment industry, although its Time a full consumer banking service on a mobile-only Warner bid – which follows that of DirecTV in 2014 platform. – is still subject to regulatory approval. Verizon has While telecoms will continue to be the dominant also made a number of acquisitions across several source of revenue for operators, these new areas – digital media and advertising (Yahoo and businesses provide new revenue streams, help AOL), IoT (telematics and smart cities) and fibre navigate the IoT learning curve and add business networks – ahead of the 5G era. capabilities in the digital space. For example, In the IoT space, many European operators such Turkcell makes nearly 20% of its domestic revenue as Telefónica, Orange and Vodafone have IoT- from digital services, while Smart Life accounts for dedicated lines of business that provide solutions 10% of NTT DoCoMo’s revenue (both as of Q3 2017). across verticals. In November 2017, Vodafone also In the US, AT&T makes 26% of its revenue (2017) launched ‘V by Vodafone’ in Germany, Italy, Spain from DirecTV – this figure could become nearly 40% and the UK. This is a consumer-oriented IoT product if the acquisition of Time Warner goes through. range that includes tracking solutions for cars, pets Industry overview 23
The Mobile Economy 2018 1.8 Scaling the Internet of Things – 25 billion connections by 2025 According to GSMA Intelligence, the number of • Funding and innovation – IoT start-ups are IoT connections (cellular and non-cellular) will increasingly backed by private investor financing increase more than threefold worldwide between and a supportive ecosystem for innovation. 2017 and 2025, reaching 25 billion. While IoT is Amazon, Cisco, GE, Google, Intel, Microsoft, rapidly becoming a mainstream technology in Qualcomm and Samsung have invested significant consumer markets such as consumer electronics amounts into the developing IoT arena over the and smart homes, the industrial IoT segment is still last five years. Some of them are also adopting a in its infancy – but is set to be the largest source of horizontal business model by establishing their connections growth going forward. Globally, the presence across multiple sectors and segments industrial connections base will overtake consumer of the IoT value chain. A growing number of IoT connections in 2023. companies (such as Sierra Wireless, Gemalto, MobileTEK, Quectel and Telit) commercialise A number of trends will drive development and mobile IoT2 modules for both LTE-M and NB-IoT, growth in the IoT ecosystem over the period to typically supported by software development 2025: kits. Some mobile operators and equipment vendors are also establishing open labs to help solution developers test new concepts and certify products. Figure 9 Source: GSMA Intelligence IoT connections worldwide Billions 25 20 4.7x 15 Growth 2017-2025 10 5 2.5x 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 IoT connections include cellular and non-cellular connections. The term IoT connections refers to Consumer Industrial devices capable of two-way data transmission (excluding passive sensors and RFID tags). It includes connections using multiple communication methods such as cellular, short-range and others. Excludes PCs, desktops, tablets, laptops, e-readers and smartphones. 2. Mobile IoT refers to low power wide area (LPWA) 3GPP standardised secure operator managed IoT networks in licensed spectrum; in particular, LPWA networks designed for IoT applications that are low cost, use low data rates, require long battery lives and often operate in remote and hard to reach locations. 24 Industry overview
The Mobile Economy 2018 • Development in connectivity to best suit a the US and in other regions such as China (part variety of use cases – While the majority of of the 13th Five Year Plan), Singapore (Smart IoT devices – typically in indoor environments Nation), India (100 Smart Cities Mission) and – will likely be connected by radio technologies Qatar (2022 FIFA World Cup). Dubai is also taking designed for short-range connectivity (such as a lead role in preparation for Dubai Expo 2020; Wi-Fi, Z-Wave and Zigbee), other IoT devices that the CEO of the Smart Dubai project announced require wide-area network coverage, coverage on the ambition for 25% of all journeys in Dubai to be the move, lower latency and ultra-reliability will autonomous (i.e. driverless) by 2030. likely be primarily connected by cellular networks • The rise of smart homes – Smart homes are using licensed spectrum. At the end of 2017, there increasingly becoming a platform for a suite were 30 commercial deployments of LTE-M and of digital services, applications and devices, NB-IoT across 20 countries, including the US, and will be the largest source of growth within China and across Europe. Looking out to 2025, the consumer segment. Connections will grow licensed cellular IoT connections3 will reach 3.1 threefold to more than 5 billion by 2025, driven by billion worldwide, or 12% of total IoT connections. home security, thermostats for energy monitoring, • Proliferation of use cases across verticals – The and enabling infrastructure such as routers and number of industrial IoT connections will grow extenders. from 3 billion to almost 14 billion between 2017 Asia Pacific will continue to be the largest regional and 2025, driven by rising adoption of solutions IoT market by number of connections. In terms of for smart buildings (for heating, air conditioning, growth, nearly 90% of all IoT net additions between building security, lighting, office equipment 2017 and 2025 will be in Asia Pacific, North America and automation), utilities (energy, water & gas and Europe. Developing markets will lag behind in smart metering and smart grid solutions) and growth and scale due to lower affordability among manufacturing (inventory tracking, monitoring consumers and enterprises, and a less developed and diagnostics, warehouse management). ecosystem and environment for innovation and • Momentum in smart cities – Smart city initiatives technology deployment. are on the rise across major metropolitan areas in Figure 10 Source: GSMA Intelligence IoT connections and growth by region Billions 2017 Increase (billions) 2025 Asia Pacific 2.8 8.1 10.9 North America 1.9 3.9 5.8 Europe 1.7 3.2 4.9 Latin America 0.4 0.9 1.3 MENA 0.3 0.8 1.1 CIS 0.2 0.4 0.6 Sub-Saharan Africa 0.1 0.2 0.3 3. Licensed cellular IoT refers to cellular M2M (2G/3G/4G/5G) and mobile IoT (NB-IoT/LTE-M) Industry overview 25
The Mobile Economy 2018 02 Mobile contributing to economic growth and addressing social challenges Mobile contributing to economic growth and 26 addressing social challenges
The Mobile Economy 2018 2.1 Mobile contribution to economic growth, employment and public funding The direct economic contribution of the mobile ecosystem The mobile ecosystem consists of mobile operators; employee compensation, business operating surplus infrastructure providers; retailers and distributors and taxes. of mobile products and services; mobile device In 2017, the total value added generated by the manufacturers; and mobile content, application and global mobile ecosystem was $1.1 trillion (or 1.4% of service providers. The direct economic contribution GDP), with mobile operators accounting for more to GDP of these firms is estimated by measuring than 60% of this. their value added to the economy, including Figure 11 Source: GSMA Intelligence Direct contribution of the mobile ecosystem to GDP $ billion, % 2017 GDP 690 0.9% 120 110 110 70 0.2% 0.1% 0.1% 0.1% Infrastructure Mobile Device Distributors and Content, applications providers operators manufacturers retailers and other services Mobile contributing to economic growth and addressing social challenges 27
The Mobile Economy 2018 Indirect and productivity impacts of mobile technology In addition to their direct economic contribution, • 3G and 4G technology allow workers and firms firms in the mobile ecosystem purchase inputs from to use mobile data and internet services. This their providers in the supply chain. For example, improves access to information and services, device manufacturers purchase inputs from which in turn drives efficiency in business microchip providers, and mobile content providers processes across many industries, including require services from the broader IT sector. finance and health. The impact of mobile internet Furthermore, some of the profits and earnings is particularly significant in developing countries, generated by the mobile ecosystem are spent where fixed infrastructure is poor and mostly on other goods and services, stimulating further confined to large cities and business/industrial economic activity in those sectors. We estimate that districts. in 2017, this additional economic activity generated • M2M and IoT allow for the digitisation of services a further $490 billion in value added globally (or and improvement of industrial processes. As 0.6% of GDP). these technologies become increasingly adopted, The use of mobile technology also drives we expect them to create significant benefits by improvements in productivity and efficiency driving cost savings and operational efficiency for workers and firms. Different types of mobile gains in areas such as manufacturing, logistics technology have their own impact on the and retail. productivity of the global economy: Together, these productivity impacts generated • Mobile voice and text services allow workers $2 trillion in value added in 2017 (or 2.5% of GDP). and firms to communicate more efficiently and Overall, taking into account the direct, indirect and effectively (by reducing unproductive travel time, productivity impacts, in 2017 the mobile industry for example). made a total contribution of $3.6 trillion in value- added terms, equivalent to 4.5% of global GDP. Figure 12 Source: GSMA Intelligence Total (direct, indirect and productivity) contribution to GDP $ billion, % 2017 GDP 2,010 3,600 2.5% 490 4.5% 410 0.6% 690 0.5% 0.9% MOBILE RELATED INDIRECT PRODUCTIVITY TOTAL OPERATORS INDUSTRIES IMPACT MOBILE ECOSYSTEM Note: totals may not add up due to rounding. Mobile contributing to economic growth and 28 addressing social challenges
The Mobile Economy 2018 Employment In 2017, mobile operators and the wider mobile sector. Furthermore, the wages, public funding ecosystem provided direct employment to almost contributions and profits paid by the mobile 12 million people across the world. In addition industry are spent in other sectors, which provide to this, economic activity in the ecosystem additional jobs. generated jobs in other sectors. Firms that provide We estimate that in 2017, around 17 million goods and services as production inputs for the additional jobs were indirectly supported in this way, mobile ecosystem (for example, microchips or bringing the total impact (both direct and indirect) transport services) will employ more workers as of the mobile industry to 29 million jobs. a result of the demand generated by the mobile Figure 13 Source: GSMA Intelligence analysis Employment impact Jobs (million), 2017 17 29 INDIRECT DIRECT CONTENT, APPLICATIONS DISTRIBUTORS AND SERVICES AND RETAILERS TOTAL 1 12 4 DEVICE MANUFACTURERS MOBILE OPERATORS 2 INFRASTRUCTURE PROVIDERS 3 DIRECT 1 Note: totals may not add up due to rounding. Mobile contributing to economic growth and addressing social challenges 29
The Mobile Economy 2018 Public funding contribution The mobile ecosystem also makes a significant contributions of firms and employees. We estimate contribution to the funding of the public sector that the ecosystem made a tax contribution to the through general taxation. In most countries, this public finances of governments of $500 billion in includes value-added tax or sales tax, corporation 2017. tax, income tax and social security from the Figure 14 Source: GSMA Intelligence analysis Contribution to public funding by the mobile industry $ billion, 2017 EMPLOYEE INCOME TAX AND SOCIAL SECURITY 160 500 CORPORATION TAX 90 HANDSET VAT, SALES TAXES AND CUSTOMS DUTIES MOBILE SERVICES VAT, SALES 100 TAXES AND EXCISE DUTIES TOTAL 150 Note: totals may not add up due to rounding. Besides the public funding contributions through billion) raised in the 600 MHz auction in the US. general taxation, mobile operators made Additionally, in some countries, mobile operators contributions via two additional channels. In 2017, are subject to sector-specific taxes such as revenue revenues gained from the auction of spectrum share taxes, universal service obligation fund for mobile services totalled approximately $25 contributions, SIM and airtime voucher taxes or billion, with more than three quarters of this ($19 annual spectrum fees. Mobile contributing to economic growth and 30 addressing social challenges
The Mobile Economy 2018 Outlook and trends for the next five years We expect the global economic contribution of the Most of this value-added increase will be due mobile ecosystem to continue to increase in both to productivity gains. In the developed world, relative and absolute terms. In value-added terms, the adoption of M2M and IoT solutions will drive we estimate that mobile will contribute $4.6 trillion increased productivity. In developing countries, to the global economy by 2022 (5% of GDP), up productivity growth will be mostly driven by the from $3.6 trillion in 2017 (4.5% of GDP). adoption of mobile internet services. Figure 15 Source: GSMA Intelligence analysis Outlook to 2022, value added $ billion, % of GDP 4,000 3,500 5.0% 4.9% 4.7% 4.8% 3,000 4.6% 4.5% 2,500 2,840 2,480 2,660 2,000 2,010 2,160 2,310 1,500 1,000 490 500 520 520 530 550 500 1,100 1,150 1,170 1,190 1,220 1,260 0 2017 2018 2019 2020 2021 2022 Ecosystem Indirect Productivity % GDP Note: totals may not add up due to rounding. Mobile contributing to economic growth and addressing social challenges 31
The Mobile Economy 2018 Mobile contributing to economic growth and 32 addressing social challenges
The Mobile Economy 2018 2.2 The growing impact of mobile on the Sustainable Development Goals At Mobile World Congress 2016 in Barcelona, the mobile industry became the first sector to commit as a whole to the Sustainable Development Goals (SDGs) – a universal plan unanimously adopted in 2015 by all 193 countries in the United Nations General Assembly to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. Two years into the 2030 Agenda for Sustainable Development, the mobile industry is having an important impact, demonstrated by its growing contribution across all 17 SDGs.4 The greatest upward movements between 2015 and 2016 were in SDG 3 – Good Health and Well-being, SDG 11 –Sustainable Cities and Communities, and SDG 13 – Climate Action. Of these, two (SDG 13 and 11) are also the SDGs to which the industry is contributing the most (2016 score), along with SDG 9 – Industry, Innovation and Infrastructure. While operators contribute to each SDG in different ways, three major underlying trends explain much of the improvement in the industry’s impact across all the SDGs between 2015 and 2016: Better networks Mobile operators have invested heavily in mobile broadband network infrastructure. Between 2015 and 2016, 4G population coverage grew from 48% to 66% of the world’s population. Including 3G, mobile broadband network coverage reached 83% (2016). In addition to providing wider access to mobile and mobile broadband services, improved network quality and resilience play a critical role before and during epidemics, conflicts and natural or climate-related disasters. They support emergency communication and broadcast services and provide accurate and timely information on the movement of affected populations. More connectivity Operators continue to connect the unconnected and drive development in the cellular M2M space. The economic and social benefits of this are wide-ranging, with connectivity driving improvements in economic growth through improved productivity, infrastructure development and efficiency. Operators have been particularly proactive in pursuing more innovative solutions to roll out mobile networks in remote areas; making mobile services more affordable to the poorest individuals; and driving efforts to accelerate digital inclusion for women. Doing more with mobile Connected consumers are increasingly engaged in the digital world and consume a range of mobile-enabled services for education, agriculture, health, finance and utilities. Looking at the drivers of SDG score improvement between 2015 and 2016, in 2016 more than 100 million new mobile money accounts were registered to reach a total of more than 0.5 billion, allowing users to access financial services that enable them to make investments and manage expenses. There were also 500 million new users of social media on mobile to reach a total of 2.5 billion, helping promote social and political inclusion and facilitating the development of education networks. 4. 2017 Mobile Industry Impact Report: Sustainable Development Goals, GSMA, 2017 Mobile contributing to economic growth and addressing social challenges 33
The Mobile Economy 2018 Figure 16 Source: GSMA Intelligence SDG impact scores Normalised score (out of 100) High Medium Low Potential Potential Potential 3.2 4.1 3.9 3.2 2.8 2.4 3.1 41.6 2.8 2.8 3.4 37.4 4.1 2.9 36.5 2.4 3.5 34.3 34.4 33.6 35.6 2.7 32.6 33.9 29.8 3.0 30.0 30.8 28.7 3.3 27.3 25.5 22.7 21.2 1 5 8 9 10 13 2 3 4 7 11 12 17 6 14 15 16 2015 Impact 2016 score Improvement Mobile contributing to economic growth and 34 addressing social challenges
The Mobile Economy 2018 Moving forward – key challenges and initiatives Although the mobile industry is delivering to maximise their impact across all the SDGs. substantial achievements and its impact is growing The GSMA – in collaboration with operators – has across all SDGs, it is still far from realising its full made several commitments and is working on a potential impact. On a scale of 0–100 (where a score number of initiatives to grow the mobile industry’s of zero means no impact at all and a score of 100 impact. See Figure 17. During 2018, the GSMA means the industry is doing everything possible to will focus on delivering these commitments. In influence that SDG), SDG 9 – Industry, Innovation September 2017, the GSMA also launched a new and Infrastructure had the highest score in 2016 at global campaign – Case For Change – that will put nearly 45, followed by SDG 13 – Climate Action and the spotlight on the work of the mobile industry SDG 11 – Sustainable Cities and Communities, both to help achieve the SDGs and, in doing so, connect at just over 40. The overall impact remains lowest everyone and everything to a better future. for SDGs 14 – Life below Water, 2 – Zero Hunger, and 6 – Clean Water and Sanitation. Meanwhile, the GSMA and the mobile industry will continue to report on its progress each year and Mobile operators, working with the broader mobile will continue to develop and improve the evidence ecosystem, still have much to do to contribute to used to track operators’ impact on the SDGs. With achieving the SDGs. This includes working towards this framework in place, both the industry and the universal access, scaling up new solutions such international community will be able to understand as IoT, and helping to fill gaps in areas such as the impact, progress, challenges and ultimately health, education, finance and utilities through the action needed for the mobile industry to harness its development of mobile-enabled solutions. Only full potential to achieve the SDGs. when this has been achieved will operators be able Mobile contributing to economic growth and addressing social challenges 35
The Mobile Economy 2018 Figure 17 Source: GSMA GSMA initiatives to grow mobile industry impact on SDGs Big Data for Social Good GSMA National organisational Dialogues programmes and for Digital initiatives Impact Partnerships GSMA We Care for the Goals initiatives Campaign Mobile for Connected Development Women (M4D) Commitment Initiatives Initiative IoT Big Data Mobile contributing to economic growth and 36 addressing social challenges
The Mobile Economy 2018 2.3 Disaster response and the central role of mobile technology From Nepal’s 2015 earthquake to the recent In response to the growing challenge, mobile unprecedented hurricanes in the Caribbean, mobile operators, humanitarian organisations and technology is being used to support preparedness innovation labs around the globe are exploring and response activities and to maintain dignity for the potential role of mobile technology in disaster those impacted by natural and man-made disasters. preparedness and response. The GSMA recently There are a growing number of examples of mobile launched the Disaster Response Innovation Fund technology being used in innovative ways in disaster providing an opportunity to unite these efforts, and humanitarian preparedness and response as linking initiatives which have mutual goals and well as helping people after natural events – from bringing their innovative ideas to life.5 ‘super base stations’ to innovative connectivity It is essential that both the mobile industry and provision for displaced populations, humanitarian the humanitarian sector continue to innovate in call centres and digitised response activities, to order to improve their capacity to deal with crises, country-wide early warning systems. and ensure that the needs of affected populations New technology-enabled services have supported can be met. While great strides are being made communities and increased resilience around the in the development of innovative services and world. As natural and man-made disasters increase solutions, no single sector can tackle the scale in their frequency and impact, so the number of of the challenges alone. The Disaster Response people requiring help is growing. More than 90 Innovation Fund will support collaboration that has million people across the world will have needed the potential to enhance or transform preparedness assistance over the course of 2017, with the number and response activities and improve the delivery of of displaced people exceeding 65 million and dignified aid. growing every day. Humanitarian payment digitisation in Northern Uganda Uganda is the largest recipient of fleeing migrants in Africa, with daily new arrivals of refugees averaging nearly 3,000 in March 2017. In less than a year, the refugee population in Uganda doubled to more than 1.3 million, largely as a result of the deteriorating situation in South Sudan. The Bidi Bidi refugee settlement in Yumbe is now the largest refugee settlement in the world, hosting more than 280,000 refugees. In Northern Uganda, the mobile industry and humanitarian sector have collaborated to deliver humanitarian assistance to refugees via mobile money. Such partnerships are a first for mobile operators in Uganda who are rapidly developing their mobile money services to meet the needs of their humanitarian partners, allowing NGOs to deliver humanitarian cash transfers to refugees. Leveraging mobile money for such transfers can reduce logistical costs, give refugees greater dignity and choice, and offer the potential for financial inclusion. 5. https://www.gsma.com/mobilefordevelopment/programmes/disaster-response/innovation-fund Mobile contributing to economic growth and addressing social challenges 37
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