From the Yankee Group Report titled "Executive Summary of The Yankee Group Cellular/PCS Competitive Licensing Assessment and Global Cellular/PCS Subscriber Forecast" 11/99
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The Yankee Group believes that as wireless network operators and individual markets reach maturity, network operators will increasingly be measured on new metrics of performance, which will indicate the companies' long-term profitability success. Whereas the industry has traditionally focused on subscribers and average revenue per user (ARPU) as a key metric in an operator's business operations, we believe the long-term de-linking of the market's subscription potential from the subscriber metric will increasingly bring forward the need for new metrics of performance.
Under this subscription-based model of operator performance, we believe that an operator's true measure of performance will be a measure of revenue per some metric of traffic per MHz of spectrum in use. Using rev/bits/MHz-in-use and net income/bits/MHz-in-use metrics, the operator can measure the spectral efficiency and profitability of its greatest underlying asset: its allocated spectrum resources. These metrics also give strength to our argument that technology matters. Depending upon technology selection, equipment provider selection, network architecture, and available spectrum, a given operator will be able to offer a certain amount of erlangs per square mile (i.e., total available measure of traffic) and erlangs per cell site.The Yankee Group is projecting 1.26 billion global cellular/PCS (includes U.S. ESMR and Japan PHS) subscribers by 2005, which represents a 1995-2005 and 1999-2005 compounded annual growth rate (CAGR) of 30.8% and 17.9%, respectively. As shown in Exhibit 9, this growth represents the expansion of global cellular/PCS teledensity from 1.53% in 1995 to 7.89% in 1999, and to 19.54% in 2005. There will increasingly be a de-linking of the subscriber and subscription measurements of an operator's performance due to multiple subscriptions per subscriber, and telemetry applications for multiple industry segments become a new source of growth. For instance, NTT DoCoMo taking the extreme viewpoint estimates that by 2010 only one-third of its subscriptions will be what we today define as subscriber-based services.
This distinction has significant implications for the wireless industry as spectral efficiency and network utilization will ultimately dictate the network operators' addressable markets. Addressable markets will no longer be tied to the population of a given market. Assuming by 2005 a possible 10% gain from telemetry and another possible 5% gain from multiple subscriptions per end user, we believe that by 2005 incremental gains could be in the 10% to 15% range and ramp upward from there in the 2005-2010 period. Utilizing the maximum positive impact and applying that spread to our global subscriber forecast, we can conjecture a total subscription market of 1.417 billion in 2005 versus our subscriber estimate of 1.257 billion. In short, the global cellular/PCS subscriber market continues to defy gravity, and perhaps the subscription model will prove even more profitable. |
