CEO Blog: A Great Report from Evercore Partners on Mobile Tech

At Infobright, we spend much of time in the world of machine-generated data. That's why we go to Mobile World Congress each year, as it is filled with people and companies who are fueling the surge in Big Data, and in particular, machine-generated data. So I was particularly interested in a report written by Evercore Partners that I received from Evercore's Paul Deninger entitled "Trends in Mobile Communications and Technology", which was written just after this year's Mobile World Congress in Barcelona. I found the report to be extremely informative. It really took a holistic view of the market and zeroed in on the key trends and issues. Here are some of the central points they make in the report (and I am quoting directly from the report here):

• Relentless migration of data and entertainment consumption to mobile
  • Mobile data volumes have grown 33-fold in the last five years, and are projected to grow 18-fold in the next five years
  • Video traffic, which is now 50% of mobile traffic and will be 70% by 2016 has surged due to the proliferation of OTT and time/device shifts in content viewing habits, forcing over 40% of traffic off traditional wireless networks to WiFi networks
  • WiFi is delivering almost twice as much mobile data to users as the AT&T and Verizon cellular networks combined

• Relentless migration of mobile devices to smartphones
  • Smartphone penetration in North America has grown from 26% in 2009 to 75% expected by 2013, while global penetration has grown from 15% in 2009 to 42% expected in 2012
  • 2012 sales of tablets and laptops in the U.S. is estimated to total $33.2bn vs. $33.7bn for smartphones

• Increasing wireless bandwidth constraints
  • Despite this traffic growth, delays in spectrum allocation and carrier uncertainty regarding data intensive business models have contributed to a lack of increase in carrier capex
  • Carriers outside the US, Japan and Korea have been slow to deploy new LTE networks
  • Big winners have been tower, DAS, Wi-Fi and "small cell" related companies

• High-end smartphone duopoly squeezing carrier margins through subsidies
  • In the U.S., subsidies now exceed annual capex; this trend is not likely sustainable, and may force carriers towards lower cost solutions
  • Subsidies paid by AT&T and Verizon have doubled in 2 years: from ~$10.3bn in 2009 to an expected ~$21.2bn in 2012
  • In five short years the profit pool in the handset area has seen a dramatic shift, with Apple now garnering 79% of profits and Nokia having gone from a 60% profit share to zero; Apple gets a higher subsidy than all other products, hence a dependency on the status quo

• Most of the future growth will come from low-end smartphones (under $150)
  • Given that Asia and Africa have smartphone penetration below the global average, as well as the need for new web entrants (e.g., Facebook and Amazon) to penetrate those territories with affordable products, future low cost disruption is possible through Android and HTML5-based ecosystems

The report is awesome. I want to thank Paul for allowing me to reference it here, and suggest that anyone interested in seeing the entire report reach out to Paul directly at Deninger at Evercore.com. If you are interested in this market, then you will definitely like the report.

Regards,

Don