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  4. > The Monetising LTE: capitalising on the growth of mobile handset data

Operators that can bring 4G tariffs to low-end smartphone users will be winners because of a higher potential ARPU uplift.

The number of 4G (LTE) handset connections worldwide will increase from 178 million in 2013 to 1.4 billion in 2018 – a growth of 670% – while mobile handset data service revenue will only grow by 64% during the same period. This presents a major challenge for operators – how to monetise LTE services. Operators are deploying a variety of strategies including price premiums, reserving LTE for premium tariffs, bundling content and broadening connectivity to a wider range of devices through multi-device tariffs.

This report addresses the following topics and provides recommendations for operators.

The challenges of monetising mobile data: Analysing mobile revenue forecasts, assessing the revenue impact of LTE launches, and the impact of this on mobile ARPU.

LTE bundling strategies: Evaluating operators’ value-added services and connectivity extension (that is, multi-device tariffs) bundles for LTE tariffs.

The broader market opportunity: Assessing the impact of LTE on the prepaid market, data allowance overage and the MVNO market.

COMPANY COVERAGE

The following companies are mentioned in this report.
AT&T
EE
FreedomPop
Free Mobile
Hutchison Whampoa
KDDI
LG Uplus
NTT DOCOMO
Orange
SFR
SK Telecom
Telefónica
Telekom Deutschland
(T-Mobile)
Telenor
TeliaSonera
Telstra
Yuilop
Verizon Wireless
Vodafone

Table Of Contents

The Monetising LTE: capitalising on the growth of mobile handset data

Table of contents


About this report


Executive summary


Recommendations


Mobile data is expected to be the principal driver of revenue growth for the industry


Operators need to strike a balance between positioning themselves to address growth opportunities and managing the decline of legacy services


Data consumption is increasing but operators still face challenges to ensure that this translates into upsell of higher data allowances


Operators in most markets charge a price premium for 4G services


In challenging market conditions, a few operators in mature mobile markets have been able to increase ARPU with the help of LTE


In the long term, operators' tier structures for handset data must tackle the ‘running out of runway' problem


Many of the strategies designed to differentiate 4G tariffs involve bundling with other service elements


Many operators around the world are starting to offer 4G-specific content and services and extending connectivity options [1]


Many operators around the world are starting to offer 4G-specific content and services and extending connectivity options [2]


Content and services: Operators should offer premium content for high-end and popular OTT apps for lower-end customers


Extending connectivity: Operators have an opportunity to increase tablet connectivity, but need to reduce costs to match perceived value


Extending connectivity: Multi-device sharing plans and data-sharing services are becoming more common


Limited SMS messages or voice minutes and sub-500MB allowances on
SIM-only tariffs can bring LTE services to low-end customers


Availability of prepaid LTE services is currently limited, but operators are starting to offer it as LTE handsets become more affordable


Overage charges are another potential source of revenue - particularly among low-end users


Operators that use unit-based pricing for overage employ it for different reasons


Throttling is used as a consumer-friendly alternative to charging for overage, but the lack of upsell opportunities makes it of limited interest


Some operators have restricted MVNO access to LTE networks but the sector is producing some innovative data-centric pricing models


About the authors and Analysys Mason


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List of figures


Figure 1: Topics and companies covered in this report


Figure 2: Mobile handset connections by network generation, worldwide, 2013-2018


Figure 3: Mobile retail revenue by region, worldwide, 2013-2018


Figure 4: Mobile handset retail revenue by service type, worldwide, 2013-2018


Figure 5: Voice and data allowances on 4G SIM-only tariffs for selected operators, June 2014


Figure 6: Average mobile handset data usage per month by technology generation, developed markets, 2013-2018


Figure 7: Smartphone respondents' self-reported data usage as a proportion of their data allowance


Figure 8: iPhone 5S 4G smartphone contract monthly fee premium on contract ARPU by operator; June 2014


Figure 9: Mobile ARPU, and LTE launch date for eight MNOs, 1Q 2010-1Q 2014


Figure 10: Approaches to structuring mobile handset data tariffs


Figure 11: Potential operator strategies for differentiating 4G services


Figure 12a: LTE smartphone tariff marketing strategies, by country, June 2014


Figure 12b: LTE smartphone tariff marketing strategies, by country, June 2014


Figure 13: Content and value-added services bundled with 4G postpaid tariffs


Figure 14: Tablet respondents by type of connectivity


Figure 15: Types of multi-device tariff structure


Figure 16: Monthly data allowances and fees for entry-level 4G SIM-only smartphone tariffs, selected operators, June 2014


Figure 17: Availability of LTE on prepaid plans, selected countries, June2014


Figure 18: Operator approaches to overage charges for LTE services


Figure 19: Charges on selected SIM-only LTE packages by data allowance tier, selected operators, June 2014


Figure 20: Selected data plans from LTE MVNOs, USA, June 2014


andnbsp;


Company coverage


andnbsp;


The following companies are mentioned in this report.


ATandamp;T


EE


FreedomPop


Free Mobile


Hutchison Whampoa


KDDI


LG Uplus


NTT DOCOMO


Orange


SFR


SK Telecom


Telefónica


Telekom Deutschland (T-Mobile)


Telenor


TeliaSonera


Telstra


Yuilop


Verizon Wireless


Vodafone

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