Technology Forecasts

In the different regions around the world, there are different migration or evolution
paths that the technology may take, and these have an impact on the forecasts of technology uptakes. Because GSM is the main global technology, the evolutionary
path through GPRS, and possibly EDGE toward UMTS, sees the greatest
numbers. Other regions starting out from 2G technologies, such as cdmaOne or
TDMA, have a smaller base in the first instance so the forecast figures for these
evolution paths are naturally smaller.

WCDMA in Figure 1.50 represents the deployment of UMTS systems. By the
end of 2004, there were 47 systems in place, with more than 60 more networks
being rolled out in 2005. By contrast, 20 cdma2000 1 x EV-DO had been established.
The adoption of the WCDMA technology is expected to grow at three times
the rate of EV-DO. By the end of 2010, EV-DO will only account for 14 percent
of 3G subscribers.

It is expected that the established 2G networks will linger for some time to
come. Many users in these networks are low-end users, simply making voice calls,
even if they possess a more sophisticated device. This fact will slow the take-up
of 3G subscriptions and therefore the use of 3G services. 2008 will see a stronger
take-up of 3G as people begin to replace their aging 2G handsets, with around
14 percent of the market being 3G. By the end of 2010, 3G will only account for
about 27 percent of the total number of mobile subscribers. The line
marked “Digital” in Figure 1.51 includes GSM, GPRS, EDGE, and cdma2000
1x RTT.

Manufacturers of handsets will continue to produce 2G devices to supply the
demand from developing regions. Many of these will support 2.5G. This explains
the continuing rise in 2G subscriptions. However, a more regional look at the numbers
in Figure 1.52 shows that the developed markets show a decline in 2G subscriptions
in the short term.

ARPU Forecasts
Despite the introduction of 2.5G and 3G networks and services, most operators
are still experiencing a declining average revenue per user (ARPU) figure, particularly
those in the saturated markets. In addition, many 3G operators are coming
to market with aggressively priced voice tariffs, putting further pressure on overall
revenues. It is expected that voice ARPU will continue to decline and data ARPU
will increase by as much as 30 percent when subscribers begin to use the 2.5G and
3G data services offered by the operators

As shown in Figure 1.54, while revenues from data use will increase by up to 83
percent over the next five years, 80 percent of the operators’ revenue will still come
from voice. Falling voice revenues and slowing global growth will contribute to
falling global revenues by 2010.

Prepaid
Prepaid has proved a mixed blessing for operators. It has stimulated rapid growth
in subscriber numbers and driven growth into markets where previously mobile
communications would have been unthinkable. However, it has also been a factor
in driving down ARPU, because prepaid users are often more concerned with cost,
although that is not always the case.

In the recent past, many of the operators in the mature markets have tried to
persuade their prepaid users to move to contracts, regarding this as a way of persuading
them to spend more money. However, this largely proved unsuccessful — many
operators only managed to migrate a fairly minimal percentage to contracts and
then discovered that they did not necessarily spend any more if they did. At the same
time, it was realized that prepaid users are not necessarily low usage or low-spending
users. On the contrary, many prepaid users are from the youth segment, which tends
to contain early adopters for new and lucrative enhanced data services.
As a result, many of the operators have reappraised their strategy for prepaid
and, rather than simply trying to migrate their customers on to contracts, have
used prepaid as a way of accessing certain customer segments that have not been
targeted until now. During 2004, 73 percent of the net additions were for prepaid
(compared with 51 percent in 2003), and the prepaid share of the market rose
to 55 percent. Regional and country markets have shown that as they approach
saturation, the proportion of net additions going to prepaid rises. Therefore, it is
forecast that a steadily increasing share of net additions will go to prepaid over the
forecast period; and by 2009, 64 percent of the total customer base will be using
prepaid.