Smart Phones Surpass Basic Phone Sales for First Time Globally

Some trends are so long in coming that the actual event seems anticlimactic. That seems to be true for smart phone sales, which according to analysts at Gartner have surpassed sales of feature or basic phones for the first ever in the second quarter of 2013.

To be sure there will be a market for basic devices for quite some time. But, sooner or later, when nearly every device is “smart,” the term will have lost its meaning, and smart phones will simply be phones.

Global mobile phone sales to end users totaled 435 million units in the second quarter of 2013, an increase of 3.6 percent from the same period last year, according to Gartner, Inc.

Worldwide smart phone sales to end users reached 225 million units, up 46.5 percent from the second quarter of 2012.

Sales of feature phones to end users totaled 210 million units and declined 21 percent year-over-year.

Asia/Pacific, Latin America and Eastern Europe exhibited the highest smart phone growth rates of 74.1 percent, 55.7 percent and 31.6 percent respectively, as smart phone sales grew in all regions.

Samsung had the highest global market share of the smart phone market, at 31.7 percent, up from 29.7 percent in the second quarter of 2012.

Apple’s smart phone sales reached 32 million units in the second quarter of 2013, up 10.2 percent from the same quarter of 2012.

Worldwide Smartphone Sales to End Users by Vendor in 2Q13 (Thousands of Units)

Company	2Q13 Units	2Q13 Market Share (%)	2Q12 Units	2Q12 Market Share (%)
Samsung	71,380.9	31.7	45,603.8	29.7
Apple	31,899.7	14.2	28,935.0	18.8
LG Electronics	11,473.0	5.1	5,827.8	3.8
Lenovo	10,671.4	4.7	4,370.9	2.8
ZTE	9,687.6	4.3	6,331.4	4.1
Others	90,213.6	40.0	62,704.0	40.8
Total	225,326.2	100.0	153,772.9	100.0

Source: Gartner (August 2013)

The news that BlackBerry is exploring “strategic alternatives” (financial speak for “we are for sale”) can be interpreted in light of Gartner’s operating system market share figures as well.

In the smart phone operating system (OS) market, Microsoft took over BlackBerry for the first time, taking the third spot with 3.3 percent market share in the second quarter of 2013.

For a firm that once lead the smart phone market, that continued slippage is a clear sign that BlackBerry rapidly is losing the ability to succeed as an independent company.

Global Smart Phone Sales, by Operating System in 2Q13 (Thousands of Units)

Operating System	2Q13 Units	2Q13 Market Share (%)	2Q12 Units	2Q12 Market Share (%)
Android	177,898.2	79.0	98,664.0	64.2
iOS	31,899.7	14.2	28,935.0	18.8
Microsoft	7,407.6	3.3	4,039.1	2.6
BlackBerry	6,180.0	2.7	7,991.2	5.2
Bada	838.2	0.4	4,208.8	2.7
Symbian	630.8	0.3	9,071.5	5.9
Others	471.7	0.2	863.3	0.6
Total	225,326.2	100.0	153,772.9	100.0

Source: Gartner (August 2013)

Mobile Business Now Faces "End of Growth" Driven by Subscriber Adds

In the second quarter of 2013, U.S. mobile service providers added an aggregate net new 139,000 connections, down about 95 percent from the second quarter of 2012.

It might not yet be possible to say we are at "peak mobile," in terms of the market top in terms of subscribers, but we are getting close. 

Of course, mobile execs have seen this coming for a long time, so it is not a shock nor a surprise. As execs in the video entertainment and fixed network telecom business learned years ago, markets saturate.

When that happens, revenue growth becomes largely unhinged from growth of "lines" or "subscribers." You start hearing terms such as "revenue units." The reason is drop dead simple: when markets saturate, service providers cannot grow by adding subscriber units. 

Instead, they have to start selling more things to a fixed or declining number of subscriber or customer accounts. 

If you want to know why mobile service providers globally are investing in mobile payments, machine to machine services, connected car, mobile commerce, mobile app, home security or mobile advertising initiatives, as well as gearing up for a wave of consolidation, the end of subscriber-driven growth is the reason. 


The almost non-existent subscriber growth is not a shock or a surprise. It has been coming for some time, and service providers had begun a serious movement to new revenue sources some time ago. 

7% of Surveyed Mobile Execs Think Joyn Will Succeed; Only 7% See Skype as Top Messaging Threat

Only seven percent of 40 surveyed mobile executives believe Joyn--the GSMA-backed messaging service, is the solution to combat over the top voice and messaging services such as Facebook, Skype and WhatsApp.

Another 29 percent of surveyed mobile service provider executives say Joyn had the potential to be the solution, but it has taken too long to launch and is too complex. Joyn would need virtually ubiquitous global operator support, and many respondents doubt that will happen.

The study was conducted by mobilesquared and sponsored by messaging service provider tyntec.

The international survey also found that 36 percent of respondents are uncertain of the impact the GSMA-based standard will have on their ability to compete with OTT messaging suppliers, the

Not so surprising, for a firm such as tyntec that competes with Joyn, the study suggests the threat to revenues continues to build, and more mobile service providers decide they should cooperate with, not compete with, the leading over the top messaging services.

Some 36 percent of mobile operators now partner with OTT providers, up from 32 percent in 2012, according to tyntec. About 36 percent of operators believe WhatsApp presents the greatest threat, followed by Google and Facebook, each of which is viewed as the greatest threat by 21 percent of respondents.

Apple was viewed by 14 percent of respondents as being the top threat.

And times have changed. Remember when Skype was seen as the top challenger? The survey found only seven percent of respondents viewed Skype as the ost significant threat to revenues.

Perhaps that is because mobile operators already are resigned to losing international voice revenue, while messaging revenue is viewed as the latest battlefield.

More Consolidation in U.S. Mobile Market is an Easy Call

The U.S. mobile data market predictably continued to grow in the second quarter of 2013, up more than four percent quarter over quarter and more than 14 percent year over year. 

On a broader level, one might easily make a prediction that market prospects for smaller regional service providers now are disappearing, though, as growth has shifted to the four largest national service providers.

Us wireless market_q2_2013_update_aug_2013_chetan_sharma_consulting from Chetan Sharma

How Much Will Global Telecom Revenue Grow in 2013?

Despite obvious stresses, global telecom revenue has tended to grow, in nearly every year. There tend to be dips when global recesssions occur, as in 2008, or in the wake of major market crashes, such as in the wake of the Internet bubble burst of 2000.

Global trends also are a mix of declining, flat to slow growth in developed regions, with growth in emerging markets.

Looking just at enterprise and government segment spending, 2013 looks like a one percent to two percent growth business in 2013. 

Global information technology spending is projected to total $3.7 trillion in 2013, a two percent increase from 2012 spending of $3.6 trillion, according to the latest forecast by Gartner.

But enterprise and government telecom spending actually declined in 2012, and might grow less than one percent in 2013, according to Gartner.

                      Worldwide IT Spending Forecast (Billions of U.S. Dollars)

	2012 Spending	2012 Growth (%)	2013 Spending	2013 Growth (%)	2014 Spending	2014 Growth (%)
Devices	676	10.9	695	2.8	740	6.5
Data Center Systems	140	1.8	143	2.1	149	4.1
Enterprise Software	285	4.7	304	6.4	324	6.6
IT Services	906	2.0	926	2.2	968	4.6
Telecom Services	1,641	-0.7	1,655	0.9	1,694	2.3
Overall IT	3,648	2.5	3,723	2.0	3,875	4.1

Source: Gartner (July 2013)

Fixed broadband is showing slightly higher than the overall telecom services rate. The impact of voice substitution is mixed as it is moving faster in the consumer sector, but slightly slower in the enterprise market, though, according to Gartner.

Gartner’s latest annual survey of 1,959 CIOs worldwide from all industries was conducted in the fourth quarter of 2012 and represents CIO budget plans reported at that time. It included 398 public-sector CIOs from all tiers of government around the globe.

But there will be significant regional differences. The United States, Eastern Europe, Middle East and Africa will grow much faster than Asia-Pacific or Western Europe as a whole, for example.

To be sure, other forecasts are more optimistic. As recently as two years ago some forecasters actually were suggesting global telecom revenues could double in just about five years. That now seems hopelessly wrong.

The global telecommunications industry was not immune to economic forces in 2012 that slowed growth from earlier predictions, according to Insight Research.

Spending for wireline services contracted in 2012, while spending on wireless services grew modestly.  

According to the new industry market study, telecommunications services revenue worldwide will grow from $2.2 trillion in 2012 to $2.7 trillion in 2018 at a combined average growth rate of 3.8 percent.

So Insight Research continies to be more optimistic than do Gartner or Forrester Research analysts.

Mobile subscriber growth compounded with rising usage  will raise wireless revenues by 31 percent from current levels, yet wireline revenues will remain flat until substantial economic recovery kicks in, Insight Research predicts.

Ethernet, cloud, and mobile solutions revenue will show double-digit annual percentage growth, though.

In North America, mobile revenues will grow by 35 percent and wireline broadband revenues will grow by 19 percent over current levels.

Telekom Austria and KPN Wholesale Fiber Network a Sign of "Peak Telecom?"

Telekom Austria and Dutch group KPN have formed a new optical fiber wide area network linking 35 countries, and allowing Telekom Austria to use KPN's network for its customers in western Europe while KPN can use Telekom Austria's network in central and eastern Europe.

Under some circumstances, that would simply represent another bilateral deal between two carriers with complementary network assets. But one might argue we are not seeing normal circumstances in the European telecom market. 

Since about 2008, fixed network revenues have dipped about three percent annually, while mobile revenues have declined about eight percent annually. 

In other industries, such as the oil business, similar trends (declines)  have lead forecasters to talk about "peak oil" and the corollary, the decline of oil production. In Europe, one might wonder whether we already have seen "peak telecom."

If so, and if service providers cannot quickly figure out ways to reverse the revenue declines, mergers and acquisitions are inevitable, as that is one proven way to temporarily bolster declining revenues in a declining business.

It perhaps is noteworthy that the new deal links two firms in which Mexican telecom magnate Carols Slim has investments. The new fiber network is not necessarily an indication of what might happen in the future. But given Slim's obvious interest in becoming a player in European telecommunications, an eventual merger between KPN and Telekom Austria would not be out of the question. 

Both assets could play a role in Slim gaining a foothold in the lucrative German market.