The overall wireless telecom market reached $215 billion in revenues and expanded to include 276 million customers in 2009 despite an economic meltdown, according to a new market overview. While the industry isn't out of the woods yet, analysts see better days ahead,
"We project the overall wireless market … to show a 3.3% increase in 2009 and then to expand at mid-to-high single-digit rates," stated the Telecommunications Industry Association (TIA) 2010 ICT Market Review and Forecast. While the full report on the state of ICTs (information and communications technologies) has not yet been published, TIA released its wireless market findings last week.
The size of the total wireless market is expected to increase from $215 billion in 2009 to $278 billion in 2013, according to the report. TIA defines the market as including voice and data services, wireless terminal and infrastructure equipment, and services in support of the wireless infrastructure. The 2009 figures were buoyed by an 8.8% increase in transport services revenues, which offset declines in spending on wireless devices (down 8.9%), equipment (down 13.5%) and infrastructure support services (down 8%).
Wireless subscribers leveling off, but smartphones could drive ARPU
The increase in the number of wireless subscribers to 276 million in 2009 -- a 5.1% increase over 2008 -- was driven in large part by declining services costs that make wireless an increasingly cost-effective alternative to landlines. But TIA notes that subscriber growth is nearing the saturation point.
Wireless penetration is expected to exceed 95% by 2013, up from almost 90% in 2009, the report said. That figure would still trail Western Europe, where wireless penetration is well over 100% in many countries, meaning that there are more wireless connections than people.
Despite the slowdown in subscriber growth, rising sales of smartphones that can handle data applications could lead to a major change in what drives average revenue per user (ARPU), according to TIA. Historically, subscriber growth has been the main ARPU driver, but TIA expects smartphone data applications to lead to accelerated ARPU growth.
Spurred by rising smartphone sales and increased spending on data applications, ARPU rose by 3.6% in 2009, reversing the trend of declining monthly spending that developed in 2008. TIA expects that turnaround to continue over the next four years to the tune of a 4.4% compound annual growth rate.
Additional TIA wireless market findings:
- Bandwidth consumption has carriers seeking solutions. Heavy users continue to create network bandwidth demand problems for operators, as about 5% of wireless subscribers consume about 70% of available bandwidth, according to the report. Carriers looking to better manage data use are encouraging the use of Wi-Fi hotspots for peer-to-peer (P2P) applications and planning to use femtocells to offload data-intensive apps.
- The smartphone boom will continue. Smartphones are expected to account for 41% of device sales by 2013, an increase of nearly 15% over 2009 and 38% over 2003.
- Wireless data spending will explode. Analysts expect wireless data spending to reach $93 billion in 2013, up from $43 billion in 2009. TIA projects wireless data will account for 44% of total wireless services (a 17% increase over 2009).
- Meanwhile, wireless voice will wane. After minimal increases in 2008 and 2009, a slight drop appears to be on the horizon for wireless voice spending. Revenues are expected to peak at $118.9 billion in 2010 before receding to an estimated $117.7 billion in 2013.
- Network infrastructure spending will rise … Analysts expect improving economic conditions and available credit to dovetail with 4G network rollouts to create both need and opportunity for expenditures to increase in 2011. Wireless telecommunications equipment spending is projected to increase to $18.2 billion in 2013, up from $13.7 billion in 2009, driven in part by Wi-Fi- and WiMAX-related equipment.
- …But not yet. The financial downturn and credit crunch led to a 17% decrease in infrastructure spending in 2009, and analysts predict "a further modest decline" of 4.4% for 2010 as efforts to right the economy continue.
- Drops in wireless infrastructure spending. Spending on services such as Global System for Mobile Communications (GSM), code division multiple access (CDMA), Wi-Fi and WiMAX infrastructure dropped by 8% in 2009 and are expected to decrease another 3.1% in 2010, according to the report. A turnaround will start in 2011, however, followed by double-digit gains from 2011 through 2013.
- Coming soon: Additional antennas and cell towers. With more customers buying smartphones, more devices devouring bandwidth, and Long Term Evolution (LTE) and WiMAX deployments on the way, operators will need more antennas and cell towers to handle the demand. "The tower industry expects a period of sustained growth," TIA stated, adding that femtocells increase signal strength in the home and could curb the need for some additional towers.