whitepaper operator survey ott blows up mobile universe

8/13/2019 Whitepaper Operator Survey OTT Blows Up Mobile Universe

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OTT Services Blow Up the Mobile Universe.

Operators Must Act NOW!

A whitepaper by Sponsored by

September 2013



METHODOLOGY

Research was conducted by mobilesquared during May and

June 2013. The project involved a multi-layered approach

based on direct and indirect research.

Direct research involved two elements. Firstly, the mobile

operator research used an online survey of agreed questions

between mobilesquared and tyntec. The survey was pushed

out to mobilesquared’s global mobile operator database.The rst wave of mobile operator research was conducted in

3Q2011 and repeated in 2Q2012.

Secondly, primary research based on 1-2-1 interviews with

mobile operators and OTT service providers and vendors,

extensive research and interviews at key industry events, such

as the Global Messaging Congress in London and LTE World

Congress in Amsterdam in June 2013. And indirect research,

i.e. secondary and tertiary research (primarily online based).

Forecasts for this whitepaper have been constructed using a

6-step process.

1. mobilesquared forecasts are based on subscriptions, and

not subscribers, which factor in consumers owning more than

one smartphone device. This has been applied to 68 markets

(See Page 9).

2. The research then involved updating smartphone

penetration as a percentage of subscriptions per market.

3. The next step was to identify OTT communication user

penetration as a percentage of the smartphone user base in

each market.

4. Key data points were extracted from the direct and indirect

research to identify OTT communication users and usage

trends for voice from providers such as Skype and Viber,such as percentage of “OTT off-net communication” mobile

calls compared to Skype-to-Skype calls for example. These

key data points provide key data reference points for the data

modelling. Other OTT communications provider data has been

included in the modelling where applicable. Repeat OTT

communications user and usage trends for messaging, using

data from services such as WhatsApp.

5. Termination rates from the mobile operator research were

applied to trafc projections to create revenue forecasts.

a. OTT communication revenue forecasts are based on a

variable rate for OTT off-net communication, ranging from

$0.015, $0.025, $0.035, and a universal rate of $0.06 for

OTT-to-mobile calls, and a at-rate of $0.01 for all OTT

off-net communication SMS trafc. These termination

rates are based on actual numbers acquired during the

research process.

The mobile forecasts included in this report focus only on the

global mobile operator opportunity from trafc generated from

an OTT communication service provider to a xed or mobile

phone using a traditional phone number. For the purposes of

this report we call a Skype call to a mobile phone, for example,

an “OTT off-net communication” call. Therefore, the forecasts

in this report only cover the trafc and revenues generated by

the termination of “OTT off-net communication”

communications (voice and messaging). The forecasts do not

look at the total OTT communication opportunity, such as the

revenues generated from WhatsApp downloads or projected

subscription costs, for example. Neither do the forecasts

include OTT music or OTT TV.

METHODOLOGY | PAGE 2



Table of contents

METHODOLOGY & INTRODUCTION 2 - 4

EXECUTIVE SUMMARY 5 - 8

AN OVER-THE-TOP UPDATE 9 - 21

FORECASTS 22

KEY MARKET DATA 23 - 25

PAGE 3 | TABLE OF CONTENTS



INTRODUCTION

INTRODUCTION | PAGE 4

This whitepaper follows on from a similar research

project conducted in 2012 by mobilesquared entitled:

OTT Services: How Operators Can Overcome the

Fragmentation of Communication.

In the last 12 months mobile operators have now

acknowledged that over the top (OTT)

communication services have become thegreatest threat to their revenues, replacing the

previous incumbent of churn. This whitepaper will

focus on where OTT communication (voice and

messaging) is today, the potential threat of the major

players, and how mobile operators can limit the

impact OTT services will have on their revenues.

mobilesquared’s latest research reveals that in the

last 12 months the adoption and usage of OTTcommunication has accelerated considerably, more

mobile operators are looking to partner with OTT

players as they look to minimise their decline in

messaging revenues, and offset their lack of service

innovation.

http://www.tyntec.com/resources/whitepapers/wp-how-operators-can-overcome-the-fragmentation-of-communication-long-version.html






EXECUTIVE SUMMARY

The Top 5 markets will generate OTT off-net

termination revenues of $6.6 billion in 2013 and

$36.5 billion in 2017. Interestingly, in 2013 the Top

5 markets will account for 84% of total global OTT

off-net termination revenues, but this will drop to 68%

in 2017 as other mobile markets get in on the act and

their smartphone penetration increases.

Operators are now more open for

partnering with OTT players,

compared to the results of last

year’s whitepaper.

In summary, operators are now more open for

partnering with OTT players, compared to the results

of last year’s whitepaper, as they look to capitalise onthe innovation emanating from the OTT

communication space. Operators realise they need

to act sooner rather than later and most have stated

they now have a plan in place and have moved away

from blocking, imposing surcharges or lowering the

quality of service. Their original approach to make

money from charging for data is declining, and their

preference is to partner with OTT players by renting

out virtual phone numbers and terminating OTT trafcas they can participate in revenue streams.

EXECUTIVE SUMMARY | PAGE 8



AN OVER-THE-TOP UPDATE

The driver for the accelerated adoption of OTT

communication services (voice and messaging) over

the last 12 months is the continued take-up of smart-

phones. mobilesquared forecasts there will be 1.6

billion smartphones (in the top 68 mobile markets –

see Methodology) by the end of 2013, and will

increase to 3.1 billion smartphone users by 2017.

Key markets, such as the USA, Germany, UK, SouthKorea, Canada, Netherlands, Australia, Sweden,

Hong Kong, and Singapore will have over 85%

smartphone penetration by 2017. Consequently, the

potential number of OTT communication app-based

users will double between now and 2017.

*TOP 68 MOBILE MARKETS (SEE METHODOLOGY)

SOURCE: MOBILESQUARED

The on-going adoption of smartphone users

globally will have a direct impact on the increase in

OTT communication users and usage. By the end of

2013, mobilesquared forecasts the number of users

who use OTT services on their smartphones will be

925.5 million, and will more than double over the

forecast period to 2.1 billion in 2017. By this time,

the Top 5 smartphone-based OTT communication

markets (China, USA, Brazil, India and Germany) will

account for almost 1.13 billion users.

The potential number of OTT

communication app-based users will

double between now and 2017.

In 2013, OTT communications’ penetration of

smartphone users is 55%, and this will increase to

66% in 2017.

These latest forecasts represent a signicant uplift on

mobilesquared’s original 2012 projections as outlined

in the whitepaper “OTT Services: How Operators

Can Overcome the Fragmentation of

Communication”. As this whitepaper will demons-trate, there has been an exponential increase in OTT

smartphone usage over the last 12 months, with two

OTT messaging services, WhatsApp and WeChat,

growing by over 375 million users.

*TOP 68 MOBILE MARKETS (SEE METHODOLOGY)


PAGE 9 | AN OVER-THE-TOP UPDATE

Smartphone forecasts, top 68 mobile markets

Smartphone-based OTT user forecasts










Interestingly, the accelerated OTT communication

adoption over the last 12 months has been

reected by the mobile operators’ response to the

survey question covering the percentage of their

subscriber base that will be using OTT services in

2014. There is a considerable difference in the

response compared to last year’s research. In 2012,

the majority of mobile operators expected between 6to 50% of their subscribers to be using OTT services.

In 2013, mobile operators are clearly expecting a new

wave of OTT users adopting the services in 2014,

most likely based on what they have witnessed over

the previous 12 months. The mobile operators also

identied a maturing of existing users, with over

one-fth of operators expecting more than 50% of

their subscribers to be using OTT.

Mobile operators are clearly expecting

a new wave of OTT users adopting

the services in 2014.


THE SKYPE’S THE LIMIT

OTT communication services use mobile operator

infrastructure to access the internet to deliver an

array of communicative services from voice and

video calls to messaging. There are established OTT

players in this space like Microsoft-owned Skype and

WhatsApp, and more recent additions like Viber and

WeChat.

Skype now has over 1 billion sign-ups, though the

company says it actually has 280 million active

monthly users, of which 55 million users are logged

on and using the service simultaneously at any one

time during the day a gure that has risen from 42

million in 2012. Therefore, there are an additional 13

million people using Skype and potentially making

voice and video calls, and messaging at any-one-

time compared to last year. Mobile operators – in

developed markets at least – can only dream of such

user growth. To put that growth into context, at the

end of June 2012 Vodafone Group’s total subscriber

base had grown 1.7 million over the previous quarter.

The most important gure from a mobile operator’s

perspective is the amount of trafc Skype is now ge-

nerating. In April 2013, Skype announced that its

active users are now spending a total of 2 billion

minutes per day on Skype. That equates to 730

billion minutes a year. On average, each of these

active users spends just over 7 minutes per day, or

2,555 minutes a year using Skype communication

services.

AN OVER-THE-TOP UPDATE | PAGE 10

What percentage of an operator`s subscriber base do you

think will be using OTT services in 2014?




In 2012, mobilesquared estimated that Skype was

costing the telco industry $41 million per day and $15

billion per year, based on the assumption that a call

costs $0.05 per minute. When applying these latest

numbers to the existing assumptions, that gure has

rocketed to $100 million per day and a staggering

$36.5 billion per year.

Skype user and usage gures are expected to

continue to grow unabated. The Skype app is among

the top 10 downloads of all time for Windows Phone,

iOS and Android. In July 2013, Skype conrmed that

its app had been downloaded over 100 million times

by Android devices alone. As smartphone

proliferation continues globally, Skype will consolidate

its position as one of the leading cross-device

communication services for end users, far removedfrom its original online PC-based beginnings.

In April 2013, Skype announced

that its active users are now

spending a total of 2 billion

minutes per day on Skype.

In the mobile operator survey, 43% of mobileoperators said that Skype presented a major threat to

their revenues, especially now that it has the backing

of Microsoft since its acquisition in 2011. An

additional 14% of mobile operators believe it could

potentially be a threat to their revenues if Windows

devices become mainstream. Over a quarter of

mobile operators claim to have not witnessed any

increased threat from Skype to their revenues

since the acquisition. The remaining 14% were either

undecided or did not think Skype posed a threat to

revenues.


WHATSAPP

In the last 14 months WhatsApp has exploded into

life. In June 2012, there were 75 million WhatsApp

users globally, sending 2 billion messages a day,

equating to 27 messages per user per day. Based on

2009 to 2012 user adoption trends, mobilesquared

last year projected the number of WhatsApp users

would increase to 250 million by 2016. In April 2013,

WhatsApp CEO Jan Koum announced the service

was bigger than Twitter which has over 200 million

active users. He then followed-up this statement in

June 2013 by revealing that WhatsApp had around

250 million users, growing at a rate of 14.6 million

new users per month. That represents user growth of

233% in 12 months. However, most recently in

August, WhatsApp revealed that it had added a

further 50 million users over the previous 2 months,

taking its total to over 300 million users. And there

are equally impressive numbers when it comes to

trafc.


Since being acquired by Microsoft, has this impacted your belief

that Skype presents a major OTT threat to operator revenues?





In June 2012, there were 75 million

WhatsApp users globally, sending 2

billion messages a day.

In 12 months, the number of daily messages sent

has increased from 2 billion to 10 billion, though that

doesn’t reveal the true extent of the story. WhatsApp

recently said that it had processed a record 27 billion

messages in one day, with 10 billion inbound sent

messages and 17 billion outbound received

messages.

ALTERNATIVE OTT COMMUNICATION

PROVIDERS

In the messaging and chat space, there is something

of a land-grab underway. Viber now claims to be aproprietary cross-platform instant messaging VoIP

application for smartphones, and continues to be hot

on the heels of Skype with over 200 million users in

almost 200 countries. The company is yet to

generate revenues, but will launch a “sticker store”

before the end of 2013. Stickers are characters

engaged in various activities, a kind of

next-generation emoticon, and have been instrumen-

tal in generating signicant revenues for Asian-basedOTT communication providers.

Since 2010 a number of alternative OTT chat apps

have emerged in Asia to appeal to specic markets,

but have actually gone on to become global

successes. Since KakaoTalk launched in South

Korea it has now amassed over 80 million users.

A year later in 2011, Line launched in Japan and now

has over 140 million users globally. In the same year,

WeChat hit the smartphone space in China and now

has over 400 million users around the world. In 2012,

WeChat doubled its user base from 100 million to

200 million in 6 months, and it had doubled its user

base once more by June 2013. There are of course

other players with millions of users such as Nimbuzz,

Pinger, HIKE and eBuddy all to consider.

In the VoIP space, Rebtel’s worldwide user base

of 23 million is dwarfed by the messaging and chatOTT communication providers, but the company can

boast revenues of $80 million in 2012 and a projected

turnover of $100 million for 2013.

One OTT communication provider starting to feel

the competitive heat is Vonage. In the rst quarter

of 2013 its 7.2 million users generated revenues of

$209 million down from $216 million in 1Q2012. The

company attributed this “to fewer subscriber lines and

the expansion of lower priced plan offerings to meet

customer needs”. The VoIP provider is also

experiencing sequential drops in ARPU (average

revenue per user), highlighting the increasing levels

of competition between OTT players.

In 2012, WeChat doubled its user base

from 100 million to 200 million in 6months, and it had doubled its user

base once more by June 2013.

As highlighted across Asia in particular, over the last

24 months there has been a growing proliferation of

localised OTT communication providers,

primarily in the messaging space. Given the majority

of OTT communication providers are global, the lack

of local knowledge and presence in the majority of

markets by OTT service providers is an argument





being developed by the mobile operator community

as they mount their counter-charge against the OTT

communication players. Mobile operators have a

very strong brand in their own local market, and a

direct relationship with their customers, compared to

the “impersonal service” provided by the global OTT

companies.

One interesting point raised during the qualitative

research is, when does a company like Apple contact

a user if they haven’t used or purchased content on

iTunes in the previous three months? The simple

answer is they don’t, potentially leaving the door

open for mobile operators to apply a strategy

focusing on localisation and personalisation to

maintain and enhance their direct relationship with

their subscribers.

Despite the “impersonal” strategy employed by Apple,

the global company continues to march on. There are

now over 500 million iOS devices globally, with iPads

accounting for almost 85 million devices. From those

devices iMessage users now send over 200 million

messages a day (or 73 billion per annum).

There are now over 500 million iOS

devices globally, with iPads accounting

for almost 85 million devices. From

those devices iMessage users now

send over 200 million messages a day.

And then there is the potential resurrection of Black-

Berry as it looks to make its messaging service

“BBM” cross-platform over Android and iOS devices.

This is clearly a ploy to keep existing BlackBerry

users by ensuring they can interconnect with the

more popular OS platforms. But whether this is too

little or too late to redress falling global handsets

sales for the Canadian company remains to be seen.

Operators are now more open than

ever before to considering the

opportunity of partnership.

THE OPERATOR STANCE ON OTT

Mobile operators are under no illusion that OTT

communication will have a nancial impact on the

industry. When surveyed, 36% of mobile operators

expect WhatsApp to have the greatest impact on

revenues. WhatsApp was followed by Google and

Facebook, which both received 21% each of mobile

operators’ responses, and followed closely by

Apple on 14%. Surprisingly, Skype only attracted

7% of mobile operator responses – though when the

impact of Skype, Google and Facebook were

separated out within the quantitative research, Skype

was considered the greatest threat.

This is a strong indication that mobile operators are

more concerned about declining messaging revenu-es than voice, and as a consequence are looking to

partner with OTT communications providers, such as

WhatsApp to offset the decline in traditional mes-

saging revenues with an increase in OTT termina-

tion trafc revenues, as outlined later in this report.

Therefore, it could be argued that in the short term

OTT communications will have a negative impact

on messaging revenues, but a positive impact in the

long term.





Consequently, operators are now more open than

ever before to considering the opportunity of

partnership to bolster their revenues.

GOOGLE

Google+ Hangouts is viewed as something more of a

threat than Facebook, with 29% of mobile operators

believing it presents a major threat to their

revenues. The same number of respondents said

that they view Google+ Hangouts as just another

OTT service, leaving 43% of mobile operators not

believing that the service poses a major threat to their

revenues. As with Facebook Home, mobile operatorsare not interested in partnering with Google+

Hangouts.

Where the potential threat lies with Google is that

with Google+ Hangouts it is starting to build up a

community. Because of its size and ability to

innovate, Google is constantly linked with the OTT

space and a possible strategy for messaging and

communications as a means of monetising its

community. Communications is not Google’s focus

because it is not an ideal underlying service to

provide advertising, and until advertising becomes

accepted by OTT users, Google is unlikely to

seriously pursue the OTT opportunity.


With both Facebook and Google, mobile operators

are wary of the threat both companies could pose,

were they to utilise their resources and scale to

deliver a compelling integrated OTT service. These

OTT sleeping giants are clearly yet to identify a

business case or user model for them to commit

sufcient investment, but for mobile operators they

remain a loaded gun.


Which OTT players will have the biggest impact on your revenues?”

Which of the following statements do you agree with regarding

the impact Google+ Hangout will have on mobile operator

revenues and OTT usage?





FACEBOOK

Only 7% of mobile operators view Facebook Home

as a major threat to their revenues, yet 64% view

Facebook Home as just another OTT service to

contend with, and a further 29% of mobile operators

do not believe Facebook Home poses a major threat

to their revenues. Interestingly, not one mobile

operator would like to partner with Facebook Home.

29% of mobile operators do not

believe Facebook Home poses a major

threat to their revenues.


In fact, the view that Facebook Home is “just another

OTT provider” as highlighted in the mobile operator

survey was supported by additional mobile operator

research. Their view is that Facebook has become a

platform (or ecosystem) and communication is aservice that is largely overlooked by its users, and

has consequently never featured as part of the

company’s core product set.

Part of this reasoning, given Facebook’s scale, is that

it needs to be more relevant and provide more tools

for its user base to interact. What’s more, Facebook’s

goal of encouraging people to spend as much time as

possible on its platform is based on P2F

(peer-to-Facebook) user behaviour, and is not

traditionally associated with P2P messaging,

especially on its mobile app.

Instant messaging and now Facebook VoIP launched

in North America at the start of 2013, and France,

Germany, Italy, Spain and the UK in March, have to

be considered as services on its platform, but are not

traditionally why people use Facebook. And if

Facebook is to become a major threat to mobile

operators, it will need to address this.

In recent months, Facebook has increased the

prominence of chat on its Facebook Home service for

Android devices, which suggests the company

believes there is an opportunity to usurp Google

regarding OTT communication on the vast Android

platform. There are now over 750 million Android

devices globally, and based on recent growth

mobilesquared expects that number to surpass 1

billion devices in September 2013.

THE 2013 MOBILE OPERATOR MINDSET

The number of mobile operators that claim they do

not know how to tackle OTT has risen from 0% to 7%

between 2012 and 2013, though this represents a

minority of the mobile operator community, and

highlights almost all mobile operators do have an

OTT plan or strategy now in place.

Which of the following statements do you agree with regarding

the impact Facebook Home will have on mobile operator

revenues and OTT usage?




The number of mobile operators blocking OTT

services peaked in 2012 with 11%, but has

dropped in 2013 to 6%. Similarly, the growth in

imposing surcharges in recent years from 5% in 2011

to 16% in 2012 has dropped to 0% in 2013. Blocking

has certainly been viewed as a negative tactic

deployed by mobile operators, while a surcharge can

be viewed as a mobile operator tax. While the latter isunderstandable given that the OTT service is reliant

on the mobile operator’s infrastructure, blocking

access, or lowering the quality of the service,

especially to prepaid users, is not consumer friendly

and could potentially lead to churn.

Just over one-ifth of mobile operators

are making money from OTT services

by charging for data.

But where mobile operators embrace OTT

communication services, there continues to be a

business case. Just over one-fth of mobile operators

are making money from OTT services by charging for

data. However, the on-going research suggests that

this gure is falling year-on-year, with almost 50% of

mobile operators claiming to be generating revenuefrom OTT services in 2011, falling to 26% in 2012,

and 21% in 2013. The results to this survey question

reveal something of an anomaly, given the rise in

data trafc and revenues, and would suggest mobile

operators were ideally placed to exploit the rise of

OTT usage.

One possible explanation for this somewhat

unexpected response could be that access to OTTcommunication services is now being bundled by the

mobile operator as part of their simplied post-paid

offering. And if so, this implies that the majority of

mobile operators are adopting a dumb pricing model

and not offering innovative OTT communication data

plans.

A mobile operator offering its own client is losing its

appeal with just 21% of mobile operators in 2013

claiming to, down from 26% in 2012. Perhaps justifying this fall is the increase in mobile

operators that are partnering with OTT providers, up

from 32% in 2012 to 36% in 2013. Alternatively, the

need to offer their own client could be diminishing

as the number of mobile operators deploys IMS/LTE

to offer RCS/RCS-e. Interestingly, this number has

dropped from 47% in 2012 to 29% in 2013. This is

either because the mobile operator has now

implemented an IMS core, or has delayed theirinvestment.

mobilesquared introduced two new categories into

the research for 2013, including the number of mobile

operators expanding their SMS and MMS service

offering. Already, this has become the most popular

tactic used against the threat of OTT, with 43% of

mobile operators deploying these services.

A mobile operator offering its own

client is losing its appeal with just 21%

of mobile operators in 2013 claiming

to, down from 26% in 2012.

Another very recent industry development is mobile

operators partnering to combat the OTT challenge,

though this only appealed to 7% of respondents.






All-in-all, the lack of imposing surcharges, lowering of

blocking services, and the reduction in offering their

own OTT client, suggests mobile operators are

becoming more tolerant and accepting of OTT

players, and also provides a foundation for

mobile operators to partner with OTT providers, as

the survey results, and also the qualitative research,

suggest.


MOBILE OPERATOR STRATEGIES

As identied in the previous section, mobile operators

are becoming more OTT compliant. Mobile

operators have launched OTT communication-baseddata bundles. Mobily in Saudi Arabia, Airtel in

Nigeria and SmarTone in Hong Kong are all offering

data bundles with unlimited WhatsApp messaging,

for example. More recently, a partnership between

Globe Telecom and Viber will provide Filipino

subscribers with voice, text and data bundled with

Viber.

A number of mobile operators have launched their

own messaging apps, such as Bobsled, Glow in the

Philippines and Tu Me by Telefonica. mobilesquared

research reveals that the future of Tu Me is in doubt

because of lower-than-anticipated uptake and usage,

and Telefonica is in the process of reviewing whether

to discontinue the service.

Tu Me is typical of the pressures mobile operators

are facing when launching new services. Mobile

operator OTT applications are emulating pure-playOTT communication players, but are later to market,

so in theory they could be just as successful. But

there is an issue of scale against the established OTT

providers, coupled with the needs to monetise a

service in a given timescale in a company

accustomed to generating billions of dollars for

services every quarter.

But the potential demise of Tu Me does not spell theend of Telefonica’s quest to nd the next big thing.

Wayra is the mobile operator’s start-up accelerator

concept created to support early companies in the

hope their innovation will uncover the next big thing.

TURKCELL GETS THE MESSAGE

Turkcell’s stance towards the challenge posed by

OTT communication providers is clear it is going

head-to-head and looking to compete using mobile

operator capabilities to continue generating revenue

with new services using not only SMS, but new

messaging services and RCS.

For Turkcell, its aim is to increase messaging

revenue with what it describes as “new attractive

services”.

In April 2013, it launched its next generation of

messaging, and where possible, has applied voice

Are you doing anything to combat the use of OTT clients and

applications on smartphones in your market?

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capability, such as now offering an SMS forwarding

service. But it has also launched an SMS signature

service, as well as an SMS Blacklist for unwanted

SMS and a Whitelist.

Since the launch, it is signing up 1,000 customers

a day, which means the company has somewhere

in the region of 100,000 by the end of July 2013.

By supporting the service with a strong advertising

campaign it expects to hit 1 million users by the end

of the year.

Quite rightly, Turkcell identies that OTTs have

become successful because of the smartphone,

inspiring it to develop these new SMS services to

also target feature phone users. Of course, when the

mobile customer upgrades their device onto a

smartphone, it should ensure that Turkcell retainsthat messaging relationship and prevents the

customer from downloading apps. In Turkey,

smartphone penetration stands at 16 million, 24% of

the market, meaning the market is still dominated by

feature phones.

In Turkey, smartphone penetration

stands at 16 million, 24% of the

market, meaning the market is still

dominated by feature phones.

As the mobile operator survey has revealed,

Turkcell will be one of many mobile operators looking

to deliver a next generation messaging strategy to its

customer base. Whether or not the mobile operator

response was referring to Joyn remains to be seen,

but both the quantitative and qualitative research

uncovered a growing concern with the ability of Joyn

to provide mobile operators with the solution to tackle

the OTT messaging boom.

JOYN ME

Joyn is the collective mobile operator response to the

threat of OTT communication to generate revenues

and leverage their infrastructure. The service is being

labelled as a default communication ecosystem,

rather than a messaging service.

Joyn is one example of mobile operators emulatingOTT communication services, and will offer chat,

share les over a running voice call, and incorporate

the user’s location.

In the countries where Joyn has been launched, it

can be a native integration on the device, or is

available as an app. The strategy behind launching a

Joyn app allows customers to adopt the service

before they upgrade their device with Joyn

embedded. In developed markets, mobile phones are

typically upgraded every two years.

Like existing pure-play OTT messaging services,

if both users are Joyn, the messaging will be over

Joyn, but if the recipient is not on Joyn the message

will revert onto SMS. But if the user has a

Joyn-enabled device and receives a message from a

Joyn user in their address book, it will provide entry

into the service.

The consumer perception will be that Joyn is free, as

consumers won’t pay for a service they can already

get for free, but a number of mobile operators are

effectively bundling the data costs of Joyn.

JOYN FRUSTRATIONIs Joyn the solution that will help mobile operators

tackle the threat posed by OTT players? The survey






reveals that only 7% of mobile operators said “yes”,

with a further 29% believing Joyn was the solution

but “has taken too long to launch”. It has taken seven

years from concept to commercial launch, compared

to 6 months for WhatsApp. Of the remaining 64% of

mobile operators, 29% believe Joyn is not the

solution, with a further 35% uncertain of the impact

Joyn will have on their positioning to tackle OTTservices. This means only one-third of mobile

operators have a positive stance towards Joyn.

Only one-third of mobile operators

have a positive stance towards Joyn.


Additional qualitative research by mobilesquared

conrmed the uncertainty of Joyn as the mobile

operator answer to challenge OTT communication.

The time to commercially launch the service has

clearly cast doubt over the service. What’s more,

for it to truly challenge the global OTT powerhouses

it would need to have a similar global offering only

achievable if every mobile operator signs up. Thebelief across the industry, and not just among mobile

operators, is that this will not happen. After all, SMS

only became a core communication service when

mobile operators interconnected. And given that

much of the appeal of OTT services is their

international connectivity; this will be a critical feature

for Joyn.

But the potential frustration that has developed

around the slow commercialisation of Joyn issymptomatic of mobile operators. Mobile operators

are faced with a multitude of opportunities from

numerous sectors, and now have teams exploring

potential digital services. In doing so, a number of

mobile operators believe they are spreading

themselves too thinly across multiple verticals, but

feel compelled to do so because this is still the

betting phase. All the while, the mobile operators

must protect their core voice and messagingrevenues. This is placing heightened pressure on

the creation of new business models. In this evolving

communications space with the introduction of OTT

players, mobile operators need a degree of exibility

and innovation to ensure they adapt with their

environment.

As one mobile operator mentioned during the

research process, they can make a decision and then

instantaneously regret it. But start-ups can make one

decision and commit 100% of their time to making

that decision a success.

In this evolving communications space

with the introduction of OTT players,

mobile operators need a degree of

lexibility and innovation to ensure

they adapt with their environment.

Do you believe Joyn will be the solution that mobile operators

are waiting for to tackle the threat posed by OTT players?




An interim solution to access innovation is through

partnerships, though mobile operators fear brand

dilution if they were to partner with a Google or

Facebook, for example.

In the OTT communication space, mobile operators

are competing with companies operating within a

start-up mentality. Start-ups focus on delivering oneservice or product, compared to a mobile operator

trying to please millions of individual customers with a

portfolio of services.

Another notable factor is that OTT providers are

software people, and their focus is on the data

connection and not on partnering with mobile

operators. Start-ups view the carrier and data as a

way to drive their product forward.

What’s more, the investment community continue to

believe in the OTT space and pump signicant

investment into it. For example, HIKE which now has

5 million users in 4 months has raised $7 million.

MessageMe has raised $10 million in Series A

funding, and Snapchat is in talks to raise $100

million against a valuation of $1 billion.

IS THE TIME TO ACT NOW?

With the accelerated user adoption of OTT services

over the last 12 months predicted to increase over

the coming years, mobile operators have to act now

to preserve voice and messaging revenues. But is

the OTT communication impact on their business

today inspiring the mobile operators to proactively

develop an OTT strategy?

In total, over 56% of mobile operators said that

messaging was in decline, either SMS only (20%) or

MMS only (3%), leaving the remaining one-third of

mobile operators stating that their overall messaging

trafc was in decline. Of the 44% of mobile operators

that claimed they were experiencing a year-on-year

increase in messaging trafc, 17% said the growth

applied to both SMS and MMS, while 20% said SMS

only and 7% MMS only.


This conrms the mobile operators’ fears from last

year’s research where 68% of mobile operators

believed that SMS trafc was the most threatened

service by OTT communication.

68% of mobile operators believed thatSMS trafic was the most threatened

service by OTT communication.

Of those mobile operators that are experiencing

an increase in messaging trafc, 29% claim overall

messaging trafc is up by between 1-5%, 43% of

those mobile operators cited a 1-5% increase in SMS

trafc, while 14% said they experienced an increaseof 6-10%, and an additional 14% of mobile operators

said SMS trafc had grown by over 11%. Despite 7%

of mobile operators claiming to experience an


What is happening to your messaging trafc, year-on-year?



FORECASTS

mobilesquared believes there are three key factors

that have emerged during this latest research. Firstly,

the acceleration of OTT adoption. Secondly, the

concerns circulating within the industry questioning

the impact of Joyn, and lastly, the rise in mobile

operators partnering with OTT providers. When

combined, the rapid adoption of OTT services is

forcing mobile operators to act now and partner withOTT providers instead of waiting for the

much-coveted Joyn.

But there are alternative solutions that allow mobile

operators to tap into the OTT opportunity, and that is

how they must view OTT. The subsequent impact of

more OTT users presents a marked increase in OTT

trafc termination for mobile operators, especially

given the proliferation of OTT services.

mobilesquared forecasts that the global telco

opportunity for OTT off-net communication

termination will be worth $53.7 billion in 2017, a

substantial increase from the $7.9 billion revenues in

2013. In 2013, the termination of OTT off-net

communication xed-line trafc represents the

greatest revenue generator for telcos, worth $4.2

billion in 2013 rising to $20.3 billion in 2017. But over

the forecast period, that gure will be overtaken by

OTT off-net communication mobile trafc termination

revenues, generating $2.2 billion in 2013 and leaping

to $23.7 billion in 2017. SMS termination will account

for $1.4 billion in 2013, increasing to $10 billion in

2017.

mobilesquared forecasts that the

global telco opportunity for OTT

off-net termination will be worth $53.7

billion in 2017, a substantial increase

from the $7.9 billion revenues in 2013.


Operators are now more open for partnering with

OTT players, compared to the results of last

year’s whitepaper. Operators realise they need to act

sooner rather than later and most have stated they

now have a plan in place and have moved away from

blocking, imposing surcharges or lowering the quality

of service. Their original approach to make moneyfrom charging for data is declining, and they prefer to

partner with OTT players by renting out virtual phone

numbers and terminating OTT communication trafc

as they can participate in revenue streams.

FORECASTS | PAGE 22

OTT trafc termination revenues ($)



KEY MARKET DATA

Terminating OTT off-net communication trafc

revenues in the UK will be worth $195 million in

2013 and $1.4 billion in 2017. During this timeframe,

OTT off-net communication mobile trafc termination

revenues will generate $59.7 million rising to $621.5

million, while OTT off-net communication SMS trafc

termination revenues will generate $22.2 million

increasing to $232.7 million.

The UK will have 51.4 million

smartphone users by the end of 2013,

of which 24.7 million will be using OTT

communication services.


THE TOP 5 SMARTPHONE-BASED OTT

MARKETS

The Top 5 smartphone-based OTT communication

markets, led by China and followed by the US, Brazil,

India and Germany, cumulatively total 624.1 million

users in 2013, and account for 67% of the total global

user base. Admittedly, China makes up a substantial

proportion of that gure with 445.9 million. By 2017,

the Top 5 markets will total 1.3 billion users, though

their contribution to total global users would have

fallen to 62% as other markets make minor inroads

on the leading ve’s dominance.


The Top 5 markets will generate OTT off-net

communication termination revenues of $6.6 billion in

2013 and $36.5 billion in 2017. Interestingly, in 2013

the Top 5 markets will account for 84% of total global

OTT off-net termination revenues, but this will drop

to 68% in 2017 as other mobile markets get in on the

act and their smartphone penetration increases.

The Top 5 markets will generate

OTT off-net termination revenues

of $6.6 billion in 2013 and

$36.5 billion in 2017.

KEY MARKET DATA | PAGE 24


Top 5 smartphone-based OTT markets

OTT termination revenues, UK ($)

OTT termination revenues, top 5 markets ($)



KEY MARKET DATA

PAGE 25 | KEY MARKET DATA

Sources:

Mobile operators included in the OTT research

are: 3UK, A1 Telekom Austria, Airtel, AT&T, Bangl-

alinkGSM, Bouygues Telecom, CYTA, Deutsche

Telekom, Du, Etisalat, EverythingEverywhere, Globe

Telecom, H3G Italy, Maxis, MTS, O2 UK, Orange

France, Orange LA, Orange Poland, Orange UK,

Qatar Telecom, Sprint, Starhub, Swisscom, Tele2Lithuania, Telecable,Telecom Italia, Telefonica Spain,

Telefonica UK, Telekom, Telenor, TeliaSonera, Tigo,

T-Mobile Czech Rep, T-Mobile Germany, T-Mobile In-

ternational, T-Mobile Netherlands,T-Mobile UK, Turk-

cell, Vodafone Germany, Vodafone Hungry, Vodafone

Italy, Vodafone UK and Zain.

NB: Not all operators wanted to be listed.

The 68 countries researched are: Algeria, Argentina,

Austria, Australia, Azerbaijan, Bangladesh, Belgium,

Brazil, Bulgaria, Canada, China, Chile, Columbia,

Czech Republic, Denmark, Ecuador, Egypt, Estonia,

Finland, France, Greece, Germany, Guatemala, Hong

Kong, Hungary, India, Indonesia, Iran, Ireland, Israel,

Italy, Japan, Jordan, Lebanon, Lithuania, Malaysia,

Mexico, Montenegro, Morocco, Nepal, Netherlands,

New Zealand, Nigeria, Norway, Pakistan, Peru, Phi-

lippines, Poland, Portugal, Romania, Russia, South

Africa, Saudi Arabia, Singapore, Slovakia, South

Korea, Spain, Sri Lanka, Sweden, Taiwan, Thailand,

Turkey, UAE, UK, Ukraine, USA, Venezuela and

Vietnam.



ABOUT TYNTEC

tyntec is a mobile interaction specialist, enabling businesses to integrate mobile telecom services

for a wide range of uses – from enterprise mission-critical applications to internet services. The

company reduces the complexity involved in accessing the closed and complex telecoms world

by providing a high quality, easy-to-integrate and global offering using universal services such as

SMS, voice and numbers.

Founded in 2002, and with more than 150 staff in six ofces around the globe, tyntec works with

500+ businesses including mobile service providers, enterprises and internet companies.

For more information: www.tyntec.com

ABOUT MOBILESQUARED

mobilesquared is quite simply the best provider of intelligence and insight on the mobile sector. We

excel at conducting dynamic research and writing amazing copy. Our analysts have been covering

the mobile space since phones were like bricks, and this experience allows us to transform ourresearch into expertly crafted reports, whitepapers, publications, and presentations that deliver big

on ROI for our clients. Plus we can offer bespoke 3-year data forecasts broken down by device,

age, gender, location and socio-economic status using our exclusive proprietary Mobile Trends

Platform tool. Clever eh. And because we’re small, we’re exible, completely independent, and

very cost-effective. Learn more about how we can help you by paying our site a visit

www.mobilesquared.co.uk.

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