Netbooks to Suffer as Tablets Take Off

The analyst Chetan Sharma has released its US Mobile Data Market Update for Q3 2010. The report reveals that the US wireless data market grew 7 per cent quarter-on-quarter, and 25 per cent year-on-year, to exceed $14bn (£8.7bn) in mobile data service revenues in Q3 2010, which is on track to meet, and most likely exceed, the analyst’s initial estimate of $54bn for the year.

Two carriers, Verizon and AT&T, accounted for 85 per cent of the increase in data revenues in Q3 2010. The pair now account for 70 per cent of the market data services revenues, and 62 per cent of the subscription base. Overall ARPU decreased by $0.17. Average voice ARPU declined by $0.99, while average data ARPU grew by $0.82 or 5 per cent quarter-on-quarter. The average industry percentage contribution of data to overall ARPU in Q3 was 33 per cent.

Connected devices
In the connected device category, tablets, led almost singlehandedly by the iPad, are taking the lion’s share of revenues. The category posted 12 per cent quarter-on-quarter growth. Chetan Sharma expects that in less than five years, the connected devices category will generate more revenue for the operators than the entire prepaid segment in the US. While today, connected devices represent only 3 per cent of quarterly data revenues, this segment didn’t really exist a few months ago and will keep on gaining strength every year for the foreseeable future, the company says.

It adds that the addition of connected devices units and revenues to the mix masks the tremendous growth in smartphone-related data revenues. For example, T-Mobile lost 360, 000 postpaid subs, but added 300,000 connected devices for a net loss of 60,000 subscriptions. Because of lower ARPU, connected devices have a dilutive impact on the revenues and ARPU so the overall ARPU for the postpaid segment for T-Mobile was $52 instead of $55.

The iPad literally created a new category and rest of the industry is scrambling to respond. Some just want to follow Apple’s trail to cash in, while others don’t want to compete head-to-head with Apple, so they are launching smaller sized units. There will be others who will launch devices at every inch increments just to see what sticks. However you might slice and dice the market, the analyst says, the segment is here to stay, and Netbooks will take a hit as the category was the creature of a falling economy and with a viable alternative, the need for Netbooks diminishes.

Mobile data consumption

Data traffic continued to increase across all networks. There are some superphones that routinely average more than 1GB/month, while as a category, superphones average 700-800MB/month. By the end of 2010, Chetan Sharma expects the average US consumption to be approximately 325MB/month, up 112 per cent from 2009.

This puts the US right behind Sweden in the top two by per capita mobile data consumption. While the US lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+ and LTE, most of the cutting edge research in areas of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators, and is being keenly watched by players across the global ecosystem.
Handset sales
On the handset front, Nokia sold 110.4m units in Q3, amounting for 32 per cent of the market share. Samsung shipped 71.4m for a 21 per cent share of the market. Apple also edged past RIM to be in the Top 5. It shipped 9.1m iPhones in Q3, despite ‘Antennagate’.

The US is also leading the way in smartphone sales. In Q3 2010, 47 per cent of the devices sold in the US were smartphones, compared to 24 per cent globally. The fast pace of device introduction has catapulted agile players like Samsung and HTC to the forefront, while others like LG and Sony Ericsson have lost ground. By focusing singularly on Android and by broadening the device portfolio, Chetan Sharma believes that Motorola has written a great comeback script.

Finally, the report notes that there is a significant shift taking place in terms of app revenues. In 2010, it says, there will be more app revenues generated globally off-deck than on-deck for the first time, and while on-deck revenues are in billions of dollars, the decline trend looks irreversible. In the US, this shift will occur next year.

Chetan Sharma’s next US Wireless Data Market update will be released in March 2011, while its next Global Wireless Data Market update will be issued in December 2010.