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Wedbush predicting trouble for mobile operator networks

While the industry seems to be coming off the holiday break with a passionate anticipation for Google’s first phone which is to be called Nexus One (seriously people, it is just one phone. It doesn’t mean that much) – and while newsletters, bloggers and analysts are busy positioning themselves as the lead gurus in predicting trends for 2010, it is worth taking a step back to Wedbush Securities wireless data report which was released in late December.

Wireless data grew 29% in 2009 (largely driven by a huge increase in both picture and text messaging), which is close to the growth of 32% achieved in 2008.  Smartphones have now become a mainstay and in fact are expected to be roughly 18% of all phones shipped this year, compared to about 12% in 2008:

Smartphone and handset shipmentsWith the growth in smartphones comes the increased usage of video, which is what lays the heaviest burden on networks (+ of course laptops etc using wireless access for email and more). While video has shown tremendous growth, essentially doubling from 8m to 16m over 6 quarters, one has to wonder whether this is driven by a small class of really heavy users vs all smartphone owners:

Mobile video growthHowever, if you are a mobile network operator, you already have a problem despite this heavy user group not getting that much larger – because networks are already strained. Ask anyone who have tried to watch a live sports game on their mobile, especially in the city where one of the teams hail from. Nearly impossible. The heavy usage of video by certain users coupled with business users increased access to email when on the move is already creating a bad user experience, which could destroy a newbie smartphone owner’s desire to ever get a data plan (unless you are forced into it by your operator, which is ridiculous when the quality of service is so poor).

3G is expected to still be the main bearer of data, but it is also important to note that a large part of shipments will still be 2,5G handsets:

Handset Shipments (Millions) by Generation

Handset shipments by generation(Source: Wedbush and IDC)

Why is this important?  Well, from a mobile marketers perspective or a media company’s perspective, you cannot ignore this segment of the market.  Granted, it is logical to assume that the shipment of 2,5G handsets may be skewed towards poorer countries, but given that replacement cycles have taken a hit in the economic downturn, 2,5G phones still matter and are likely to matter for some time.  Apps are cool but wap is not dead – by any means.

There is one other note worthy point in Wedbush’s report, which has to do with the estimation of the market share of smartphones. The current estimates seem to indicate that Android’s share will be quite small in the next 3 years:

Smartphone Shipments by OS

Smartphone shipments by OSSource: (Wedbush and IDC)

Given that Motorola is now focusing exclusively on Android (and Verizon backing the flag ship device with a $100m campaign), and announcements from SonyEricsson and Samsung about further Android devices, this seems extremely under estimated, especially since there will be plenty of lower priced Android devices. (Note: if you have an interest  in learning more on smartphones and market share, please read my article on this subject and vote!).

Posted in The Business of Mobile.

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