U.S. Mobile Data Prospects in 2009

The U.S. wireless data market grew 7.3 percent sequentially in the third quarter 2008 and 37.5 percent year over year to reach $8.8 billion in data services revenues. For first nine months, mobile data revenues of $24.5 billion were equal to the revenues generated for all of 2007. 

The big question is what happens in the fourth quarter and after, as it appears handset upgrades and sales, for example, already are slowing. Some observers think wireless data service revenes will hold up. Analyst Chetan Sharma, for example, notes that text messaging represents 40 percent of all data revenues, and that the texting habit is unlikely to change. 

In the third quarter, U.S. messaging volumes grew 38 percent while messaging revenues grew six percent. Use of wireless dongles and cards for mobile PC access has been a big driver of revenue of late, and Sharma thinks that could an area of softness though, for the simple reason that many former users will fall victim to layoffs, while managements might be less generous in providing such technology to their remaining employees.

Still, it is conceivable that mobile data growth in the U.S. market will flatten out in 2009, says Sharma. "If the job loss rate increases substantially, more than it has been in the third quarter and into the fourth quarter, we might, just might, start to see flattening of data revenues in the first quarter of 2009 and gradual decline over the course of the year," says Sharma. 

Mobile providers probably can counteract economic issues by emphasizing sales of sub-$200 smart phones bundled with data plans, Charma says. To the extent there is an economic effect, it is likely to be on average revenue per user, Sharma suggests. 

That likely will be the case for wired network providers as well, as price and bundle promotions increase.

Operators in Europe have already started to feel the pinch, Sharma says. Vodafone and Telefonica recently have seen a decline in overall revenues. Though overall service revenues declined 1.7 percent, data revenues grew 30 percent. That suggests the importance of data plan, handset and bundling programs.