Global cellular market trends and insight, Q1 2011

Africa

Trends: Changes in market dynamics influence profitability New entrants beating growth expectations * In Morocco, inwi launched GSM services in February 2010 and reached 5 million total connections by year end. Its total revenues reached MAD 3.76 billion for an EBITDA of MAD 451.7 million. In 2011, inwi is set to invest MAD 1 billion in capital expenditure. The operator’s growth has been driven by simplified and attractive prepaid voice offers, unlimited voice contract offers as well as data services. Inwi has been registering 100,000 Internet Pass and 250,000 MSN Pass subscribers each month * 8ta (Telkom) launched in South Africa in October 2010, and LibyaPhone Mobile launched in Libya in January 2011 * Mobile WiMAX networks launched in Q4 2010 in Zimbabwe, Ghana and Nigeria by Econet Wireless, Kasapa (Expresso) and Mobitel, respectively Glo Mobile launched Africa’s first LTE network in Nigeria in January 2011

Prepaid SIM registration responsible for quarterly declines * Fifteen of 179 total operators reported quarterly negative net additions in Q4 2010 totalling 1.1 million connections - an improvement from a year ago when 25 operators reported quarterly declines totalling 3.3 million connections * Ten operators are expected to report negative yearly net additions in Q1 2011 – representing a decline of 3.4 million connections * The declines are partly due to the impact of prepaid SIM registration imposed by regulators in Tanzania, South Africa, Ghana and Kenya * In Nigeria, struggling CDMA operators asked for a state bailout which has been ruled out by the regulator (NCC). CDMA operators have been hit by prepaid SIM registration which mandated the use of SIM based CDMA handsets, forcing them to clear out stocks of handsets at a discounted price

No material impact from recent political turmoil * In Egypt and Tunisia, Orange noted that the current political turmoil had a “limited impact, so far, on the Group’s top line ... no damages to assets” and that business was “running as usual” * In Côte d’Ivoire, however, political instability is an issue and Orange’s network has been affected by acts of sabotage

Insight: Price wars and immature data opportunities Airtel recently reported that Africa is characterised by low usage and high prices compared to India - its domestic market – which has high usage but low prices. In 2010, the operator noted that Africa was averaging 112 MOU and US$7 ARPU against 454 MOU and US$5 ARPU in India.

In Kenya, Airtel started a price war in August last year by slashing voice call rates by 50% from KES 6 to KES 3, and more recently reduced them further to KES 1. Late last year, Airtel was also offering free modems forcing yu (Essar Telecom) to introduce data modems priced at KES 2,599 with two months’ free unlimited browsing. In addition, Airtel forced Kenya’s market leader, Safaricom, to reduce the price of on-network SMS to KES 1 from KES 3.5. As a result, Airtel managed to double its customer base to 4 million in 12 months but was also strongly criticised by Safaricom which called for radical action from the regulator (CCK) to limit minimum prices. Safaricom warned that such low prices are not sustainable and could cost the industry some KES 20-26 billion in revenue losses.

Similarly, in Tanzania, Zantel (Etisalat) has asked the regulator (TCRA) to issue guidelines to stop the price war that started early last year and has led to low prices of TZS 1.70 per second for off-network calls and TZS 0.50 per second for on-net calls. Price competition is also intense in Egypt where Orange stated that lower ARPU levels are due to tariff inelasticity, aggressive promotions and the addition of new “bottom of the pyramid” customers.

Meanwhile, MTN acknowledged that data opportunities (other than SMS) were still immature outside of South Africa where it reached 3 million 3G handsets (of which 1.6 million were smartphones) and 946,000 data devices such as dongles. In Nigeria, MTN sold 40,000 3G handsets in 2010 and 150,000 dongles compared to 166,000 3G subscribers and 44,000 dongles in Ghana. In addition, MTN had 4.3 million mobile money customers in December 2010 – of which 1.8 million were in Ghana.

Americas

Trends: Strong growth continues as operators invest big in 3G Solid subscriber growth across the region * Of the 142 operators active at the end of Q4 2010, only seven witnessed negative quarterly net additions representing a total of 826,000 connections, compared to six operators and 1.7 million connections a year ago * For the year 2010, 12 operators suffered subscriber declines to a combined level of 1.8 million, including a 1 million loss for Movistar in Venezuela * In Q1 2011 we predict small quarterly losses for just four carriers, with the region overall growing 2.6% to 582 million connections

América Móvil and Digicel swap ops in Central America and Caribbean * América Móvil agreed to purchase Digicel’s operations in Honduras and El Salvador, and sell its Jamaican subsidiary Claro to Digicel – when the deal completes in Q2 2011 we expect Digicel to control 79% of the Jamaican market * Cable & Wireless acquired a 51% stake in BTC Bahamas for US$210 million

Data revenues jump as region embraces mobile broadband * In Argentina, Movistar (Telefónica) reported year-on-year data revenue growth of 94.9% to US$78 million (up from 7.6% to 11.3% of service revenue) * The company’s Colombian operation recorded an equivalent figure of US$46 milion, up 262% year-on-year (from 4.9% to 15.6% of service revenue) * Data revenue for Vivo (Telefónica) Brazil increased by 65.4% on Q4 2009 to reach US$298 million (up from 7.5% to 11% as a percentage of service revenue)

CAPEX levels increase as operators splash out on 3G licences and infrastructure * Movistar (Telefónica) were the big investors in infrastructure in Mexico with CAPEX up from US$340 million in 2009 to US$2.15 billion in 2010 * The company’s operations in Chile and Argentina also substantially increased CAPEX in the year to US$399 million and US$258 million respectively * The big spenders in Brazil were TIM, with CAPEX at US$1.52 billion (a 19.9% increase on 2009) and Vivo at US$1.47 billion, up 6.9% on the previous year * Subsequently, at 40.2% year-on-year we predict the region will have the second-highest 3G connections growth rate in 2011 (after Africa)

Insight: Mobile broadband, contract services drive growth in Latin America A burgeoning middle class and an increasingly stable regulatory framework continue to provide an ideal platform for mobile operators in Latin America to drive up customer value. This is primarily being achieved through expanding 3G services in the region, with increasing sales of smartphones and 3G modems driving rapid growth in data revenues and migration of subscribers from prepaid to contract services. Additionally, operators are offering multi-play ‘bundles’ to generate further revenue from existing mobile and fixed subscribers.

Q4 2010 saw an across the board increase in data revenues for the region’s major players, including a 36.6% year-on-year increase for América Móvil (most notably a 65.3% jump in Chile). Significantly, of the company’s 8.2 million quarterly net additions in the region, 1.9 million were contract subscribers – twice that of Q4 2009. In Brazil, contract subscribers now account for 31% of the operator’s customer base, with data revenues in the country up 21.7% on the same period in 2009. Also in Brazil, data revenues for TIM jumped 31% year-on-year in Q4 2010.

Telefónica has also made a clear commitment to migrating customers from prepay to contract services as a value driver, with contract net additions in 2010 increasing by a factor of three over 2009. Subsequently, non-voice revenue improved by 43.4% year-on-year to make up 23% of service revenue in 2010, an increase of four percentage points on the previous year. Additionally, the operator reported that across the region, 66% of its fixed-line customers had signed up for some form of bundled offer, boosting mobile broadband subscriptions.

We expect these trends to continue in 2011 and beyond due to the significant investments being made by operators in 3G infrastructure. For example, Telefónica has recently acquired new spectrum in Mexico in the 1900 MHz and 1700 MHz ranges as it continues to roll-out its mobile broadband network. Similarly, Vivo acquired additional spectrum in Brazil at Anatel’s auction in December, while Nextel has recently successfully bid for 3G spectrum in both Brazil and Mexico.

 Asia Pacific

Trends: Emerging markets support record quarterly growth Highest ever quarterly net additions driven by key emerging markets * Growth in Q4 led by India, China, Indonesia, Vietnam and the Philippines * Chinese 3G connections reached 47 million (6% of total) in Q4 while India’s Airtel has already hit half a million 3G connections since January’s launch. * Only three of 164 operators in the region reported negative net additions in Q4

Consolidation underway in frontier markets * True Move acquired Hutch Thailand in January and plans to replace its CDMA network with WCDMA/HSPA to bypass on-going 3G auction delays * TeliaSonera’s Star-Cell (Applifone) and Smart Mobile (Latelz) Cambodia completed their merger in January * PLDT Philippines announced planned acquisition of Sun Cellular (Digitel) in March * Telkom Indonesia is reportedly planning a significant M&A deal in Cambodia while Mobile-8 is looking to acquire Smart Telecom Indonesia * Celcom and DiGi Malaysia agree network sharing deal

3G rolls out in India while LTE momentum grows * Tata first private Indian player to launch 3G (November), but soon followed by Reliance (December), Airtel (January), Aircel (February), Vodafone and Idea (March) * CSL Hong Kong launched region’s first LTE network in November followed by NTT DOCOMO Japan in December * South Korea’s SK Telecom announced planned July LTE launch while Telstra Australia scheduled LTE launch by year-end * NTT DOCOMO is planning LTE-Advanced trials targeting 1 Gb/s speeds while China Mobile has been given the go-ahead for large-scale TD-LTE trials * 850/900 MHz spectrum auction in Hong Kong won by SmarTone-Vodafone and 3 (Hutchison)

Regulatory initiatives make their mark * Mobile Number Portability launched nationwide in India in January, following on from December’s launch in Thailand and trials in China * SIM card registration was introduced in Fiji from November precipitating connection declines while similar moves are considered in the Philippines * Solomon Islands plan to issue a third licence this year

Insight: Pressure grows for in-market consolidation despite high growth rates While allegations of corruption continue to swirl around the controversial granting of Indian 2G licences, the established players (and main winners of last year’s 3G spectrum auction) have been busy rolling-out their 3G services. Meanwhile, Q4 data published by the regulator, TRAI, indicate that many of the new 2G operators have substantial inactive subscriber bases including Etisalat DB (only 36% active), Videocon (37%) and Uninor (45%), while established players Airtel (92%), Idea (90%) and Vodafone (76%) have much higher active bases, highlighting the difficulties the new entrants have in attracting and keeping subscribers. Other figures published by the TRAI indicate that over 3.8 million subscribers have ported their number since the nationwide introduction of MNP in January, with Vodafone, Idea and Airtel again the biggest winners and BSNL seeing the biggest loss, followed by the CDMA arms of Reliance and Tata. The pressure for consolidation among the country’s 15 players continues to grow, though it is currently limited by regulatory conditions. While a relaxation of the M&A rules appears to be on the agenda, especially as it would enable more efficient use of the limited spectrum available, it is likely to be some time before for any changes are implemented. Meanwhile, the winners of the technology-neutral BWA spectrum have swung firmly behind TD-LTE. Nationwide licence holder Infotel Broadband (Reliance Industries) has thrown its support behind TD-LTE, with most other auction winners including Airtel and Aircel also now publicly backing the fledgling technology. Recent reports suggest that Qualcomm considers its objective of pushing the development of TD-LTE in India as largely done, as it is now weighing up a sale of its BWA spectrum for a tidy profit.

The pressure for in-market consolidation also remains strong across the Asia-Pacific region in spite of high market growth rates due to fierce price-based competition. Improved economies of scale prompted Cambodian operators Star-Cell and Smart Mobile to combine, reducing the market to (a still hefty) eight operators. The country’s high growth rates remain attractive however, as evidenced by reports that Telkom Indonesia is in negotiation for a Cambodian operator acquisition. In Indonesia, (another market with eight cellular operators) Mobile-8 was reported to be looking to acquire Smart Telecom - its existing smartfren marketing partner. Elsewhere, Celcom and DiGi Malaysia signed a network sharing deal in January that is expected to cover 4,000 sites by 2015 and result in MYR 150-250 million in combined annual savings. This deal is expected to place pressure on rivals to pursue similar network sharing deals to reduce capital expenditure.

Eastern Europe

Trends: Subscriber growth masks decline in revenues Subscriber growth largely continues, but with notable exceptions * Of the 127 operators active at the end of Q4 2010, 19 witnessed negative quarterly net additions representing a total of 1.5 million connections, compared to 30 operators and 3 million connections a year ago * During 2010, 21 operators suffered connections declines to a combined level of 6.9 million, including a 3.1 million loss for life:) (Astelit) in Ukraine * In Q1 2011 we predict quarterly losses for 12 operators totalling 2.8 million subscribers, including 2.4 million from the suspension of MTS Turkmenistan

Revenues continue to decline for many operators * For the 27 operators that reported, total revenue was down by 1.9% for the quarter to EUR4.7 billion * Nineteen operators recorded a decline in recurring revenues during 2010, a decrease of some EUR235 million * The remaining operators saw an average growth of 11.2% or EUR194 million, including MegaFon (Russia) which accounted for EUR152 million

Data revenue trends are encouraging * In Russia, MegaFon reported year-on-year data revenue growth of 81.3% to EUR149 million (up from 7.2% to 11.6% of total service revenue) * Meanwhile, the equivalent figure for Orange (Telekomunikacja Polska) in Poland was EUR33 million, up 24.6% year-on-year (from 6.1% to 7.3% of total)

LTE arrives in Poland and Estonia * EMT (TeliaSonera)’s LTE network went live in Estonia in December 2010, hot on the heels of Mobyland (Aero2) and CenterNet Mobile which have jointly launched LTE in Poland * Meanwhile, Kcell launched Kazakhstan’s first WCDMA network during the quarter * Whilst there were no new network launches, four MVNOs launched during Q4 2010 – two in Poland and one each in Romania and Russia * Vodafone launched WCDMA and HSPA in Albania, while across the region five MVNOs began operation (four in Russia and one in Poland)

Insight: MTS takes the initiative as three-way 3G battle hots up in Russia 2010 saw the competition for 3G subscribers between Russia’s three main players (MTS (Sistema), Beeline (VimpelCom) and MegaFon) become heated. MTS began the year in the weakest position, with an estimated 3.8 million WCDMA subscribers (5.5% of its total customer base) compared to 6.1 million (12.0%) for Beeline and 6.3 million (12.1%) for MegaFon. However, by the end of Q4 2010 MTS had more than doubled its 3G subscriber base to 8.6 million, ahead of Beeline and MegaFon on 7.9 million and 8.0 million, respectively.

Annual growth in WCDMA HSPA connections for MTS was particularly impressive, almost trebling since Q4 2009 to reach an estimated 3.5 million. This was still slightly behind MegaFon on 3.6 million (up 43. 4% on 2009) but some way ahead of Beeline, whose 2.4 million meant just a 7.8% increase on 2009. The substantial overall rise in HSPA connections can be attributed to mobile broadband demand, with sales of USB dongles increasing considerably in 2010. MTS claimed to have sold between 2 and 2.5 million dongles during the year, up from around 500,000 in 2009, with MegaFon also recorded sales of 2.5 million. Meanwhile, Beeline’s latest report records just 1.5 million USB modem users as of Q3 2010.

As discussed in our Q1 2010 review, the disparity between active SIMs and device sales in Russia lends MTS an advantage due to its competitively priced 3G tariff MTS Connect, in that customers bring devices purchased at a lower price from another operator to take advantage of the lower-priced tariff that MTS offers. This particularly affects Beeline, which we understand to have the lowest dongle prices of the three operators. MegaFon also benefit from this phenomenon, as it is able to offer the best 3G coverage due to its higher level of investment in infrastructure. MegaFon had a CAPEX/Revenue ratio of 30.5% in Q4 2010, compared to 18.2% for Beeline and 15.4% for MTS (both figures for Q3 2010).

This intense competition is set to continue on a new battleground, as Russia moves to a wholesale model with LTE. Yota’s recent announcement that it would contract and run the country’s nationwide LTE network will potentially see each operator take an equal share in the venture come 2014.

Western Europe

Trends: Contract growth led by data services Maturity levels continue to impact net additions * Eleven of 95 total operators have reported negative sequential net additions in Q4 2010, totalling 1.8 million connections, compared to 17 operators a year ago which totalled 3 million connections * In Q1 2011, this slight improvement will carry on even though 12 operators are still expected to record negative yearly net additions leading to a drop of around 8 million connections from Q1 2010

Encouraging contract growth * Overall yearly growth stalling (0.5% in Q4 2010) in the region * The migration of prepaid users to contract is showing encouraging trends as contract growth is offsetting prepaid declines in most markets

Seasonality to impact revenue trends further * 27 operators reported declining recurring revenues between Q4 2009-10, a decrease of EUR 1.2 billion * The 17 remaining operators have recorded an average yearly growth of 5-7% for an increase of around EUR 600 million

Positive data trends * Data ARPU continues to help stabilise blended ARPU in the region * Data represents 15% of recurring revenues following an increase of around 2.5 percentage points between Q4 2009-10 * Blended ARPU expected to fall to EUR 22 in Q1 2001 while data as a share of revenue is set to increase sequentially by 1 percentage point

LTE network launches on track * Eight operators commercially launched LTE networks in Denmark, Finland, Sweden, Austria and Germany in Q4 2010 * A combined 45 MVNOs have launched during Q4 2010 and Q1 2011

Insight: Tiered pricing and smartphones lead the charge In most cases, contract growth is attributed to demand for data services such as mobile broadband as well as the uptake in smartphone sales. In the UK, Everything Everywhere reporded that 82% of contract connections were smartphones in Q4 2010 compared to 26% for Orange France and 23% at Orange Spain. In Sweden, Norway and Denmark, more than 60% of handsets sold by TeliaSonera in 2010 were smartphones – in Sweden the ratio reached 7 out of 10.

Both Vodafone Italy and Deutsche Telekom Germany reported that smartphones represented 50% of handset sales in Q4 2010 - equating to 550,000 smartphones sold for Vodafone Italy, while Deutsche Telekom sold 347,000 iPhones and 45,000 Windows Phone 7 devices. Overall smartphone penetration at Vodafone Europe reached 17%.

The introduction of tiered pricing is also seen as an enabler for further data revenue growth which Vodafone has scaled to all its markets, recording data attach rates of 46% across Europe in Q4 2010 (58% in the UK). Orange Spain saw its data offers for smartphone and dongle penetration multiply by a factor of 1.9 year-on-year, supporting ARPU growth. In the UK, O2 (Telefónica) is focusing on products such as O2 Money and O2 Media to leverage mobile data revenues, whilst it noted the increased demand for tariffs such as ‘O2 Blue’ or ‘O2 o’ as well as ‘My Handy’ in the contract space in Germany.

Similarly, TMN (Portugal Telecom) in Portugal reported that the growth in contract customers was a result of continued uptake of mobile broadband services and the introduction of new high-value tariff plans such as TMN unlimited or all net unlimited. In addition, last November TMN also launched its own-label low-cost Android touchscreen smartphone, Sapo a5, priced at EUR 149.90.

In Spain, 3G operator Yoigo (TeliaSonera) reached its EBITDA breakeven target in Q4 2010, four years after launch, and is expected to become cash flow positive by the end of the year.

Middle East

Trends: Regional growth steady ahead of spreading unrest Net additions driven by frontier markets * Growth in Q4 led by less penetrated markets: Afghanistan, Iran, Iraq and Yemen * Zain Saudi Arabia and MTN Irancell exceeded 1 million net additions while MTN Yemen and Mobily Saudi Arabia surpassed half a million each in Q4 * Seven of 53 total operators reported negative net additions in Q4 primarily reflecting impact of new competition and regulator initiatives

Political turmoil derails proposed Etisalat/Zain tie-up * Proposed deal for Etisalat to acquire 46% of Zain collapsed in light of current political and economic turmoil in the region * Uncertainty still surrounds agreement for sale of Zain Saudi Arabia to Batelco and Kingdom Holding in light of Etisalat/Zain deal failure * Reported that Saudi Telecom and Mobily considering a merger of their respective tower assets ahead of stake sale * France Telecom announced deal to acquire 20% indirect stake in Korek Telecom Iraq

LTE imminent as HSPA+ deployments continue * Eleven HSPA+ networks now deployed across the Middle East * Saudi Telecom launched the region’s third dual-carrier 42 Mb/s HSPA+ network in January * Zain Jordan deployed its 21 Mb/s HSPA+ network in March * Etisalat UAE is expected to deploy region’s first LTE network imminently * Mobily Saudi Arabia announced it has awarded LTE contract to Samsung

Regulators look to increase competition Syria announced plans to auction a third licence in April Iraq expected to issue fourth national licence this year 3G licences scheduled to be issued in Afghanistan this year Mobile number portability scheduled for introduction in Bahrain by May First MVNO agreements reached in Israel by Free Telecom and Rami Levy with Pelephone (Bezeq) followed by Alon Cellular with Orange (Partner Communications)

Insight: Middle East growth steady as regulators seek to boost competition Unlike Western Europe where market saturation has seen connections growth slow, the Middle East region continues to witness steady subscriber growth despite the fact that nearly half the region now exceeds 100% penetration. This is due to high rates of growth in the remaining low penetration frontier markets, together with large expatriate populations in several of the oil-rich states pushing market penetration figures towards 200%.

However, some operators are showing the effects of regulatory initiatives with operators in Turkey, Bahrain and Qatar all reporting connection losses. Turkcell reported prepaid connection losses in Q4 on the back of falling multiple SIM card usage - reported as representing 13% of the market in Q4. The operator also felt the impact of interconnection rate cuts introduced during last year, with substantial growth in data revenue offset by lower voice revenue. Bahrain’s two largest operators, Zain and Batelco, are also both witnessing connection declines in the wake of the implementation of SIM card registration in the latter half of 2010. They are also seeing the impact of a price war triggered by the entry of the third operator Viva (Saudi Telecom) in Q1 2010, which claims to have already achieved a market share of 30%, resulting in its rival operators both reporting falling revenues and profits. Another incumbent that has struggled since the introduction of competition is Qtel, having ceded some 25% of the Qatari market to Vodafone since the operator’s launch in Q3 2009. Vodafone also announced that it achieved its first-ever quarter of positive EBITDA in Q4, whereas Qtel reported connection and revenue declines both for Q4 and 2010 as a whole.

Regulatory moves elsewhere in the region have seen Syria announce it will auction a third licence in April with reports indicating France Telecom, Qtel, Saudi Telecom and Turkcell are set to bid - highlighting the appeal of the few remaining low-penetration markets. Despite on-going instability, a similar field is expected to be interested in entering Iraq following the announcement that a fourth national licence is to be issued this year. France Telecom this month confirmed the attractiveness of the market by agreeing a US$245 million deal to acquire a 20% indirect stake in the smallest existing national Iraqi operator, Korek Telecom.

USA/Canada

Trends: Calm before the storm as AT&T/T-Mobile get set to disrupt landscape AT&T hope to close acquisition of T-Mobile “within 12 months” * AT&T and T-Mobile surprised the US market by announcing a US$39 billion merger this month which will see Deutsche Telekom take an 8% stake in AT&T * The merger aims to address AT&T’s key deficiencies in the ‘next era’ of network usage: spectrum and infrastructure availability * Tie-up quells all rumours of a Sprint/T-Mobile merger which would have proved costly and complicated for short-term GSM/CDMA integration * Sprint has already urged the Department of Justice and FCC to “decide if this transaction is in the best interests of consumers and the US economy”

Market landscape remains unchanged at the top in Q4 * Sprint emerged from 11 quarters of consecutive connections losses in 2010, stabilising in Q2 and Q3, adding 1.1 million in Q4 (4% growth year-on-year) * T-Mobile lost 23,000 net connections in Q4 after a promising Q3 recovery

AT&T first to adopt for tiered data plans * AT&T previously announced tiered data pricing in June 2010 and updated in Q4 that 10 million customers have since switched from unlimited packages * Verizon is set to follow suit in the summer, using its current unlimited tariffs to entice iPhone switchers from AT&T in the short-term * Sprint reiterated its commitment to unlimited data but raised tariffs by US$10/month for smartphone users in January 2011 * T-Mobile continues to rate-limit usage over 5 GB/month * Rogers Wireless introduced ‘data pool’ between devices for CAD 15/month

First LTE handsets pre-empt avalanche of devices in 2012 * Verizon launched LTE in December, gaining 65,000 net adds during the month * MetroPCS remains its sole contender in the US, offering cheaper plans starting at US$40/month without contract * Adoption driven by modem sales but first LTE devices such as the HTC Thunderbolt appearing * Sprint tie-ups similar to Leap Wireless/LightSquared now key to any potential LTE rollout in order to remain competitive

Insight: Competition concerns loom over big-picture fix for network capacity Just how disruptive might an AT&T/T-Mobile merger be? Analysis on the deal falls squarely in the court of consumer choice: a key tenet of the FCC’s investigation will be to establish if the remaining regional players – the likes of Cricket Communications (Leap Wireless), MetroPCS and US Cellular – can provide sufficiently aggressive tariff competition to keep individual markets balanced. Secondly, equipment suppliers will find themselves squeezed by an effective monopoly on GSM infrastructure and handsets which will see variety such as T-Mobile’s own-brand devices fall by the wayside. Lastly, Sprint will undoubtedly offer the most vociferous opposition to the deal which would see a common partner in matters such as regional regulation and wholesale access disappear. Equally, should the deal pass regulatory approval, look for Verizon to strengthen its transatlantic partnership with Vodafone to counter Deutsche Telekom’s influence at AT&T.

The merger is illustrative of how the marketplace is being shaped by increasing demands on network capacity. AT&T cited an 8,000% rise in mobile data traffic over the past four years and this corresponds squarely with a rise in more capable devices. Over 80% of contract net additions in Q4 were for ‘integrated devices’ while Verizon saw 75% attributable to smartphones alone, now 49% of the total contract base. Revenue-wise, regional players GCI, MetroPCS and Cricket outpaced the market with year-on-year increases in total revenue of 32%, 15% and 13% respectively (the US average was 7%). The leader in the data camp however was nTelos Wireless which grew non-voice revenue 36% annually, squarely ahead of AT&T, T-Mobile and Verizon which registered 27%, 25% and 22% increases respectively. The average non-voice share of revenue now stands at 28%, compared to 23% a year ago.

In Canada, Rogers Wireless saw a similar trend, revenue gains driven by a 32% increase in non-voice. Likewise, the operator added 635,000 new smartphones, now 41% of the overall contract base. Its ‘pooled data’ plan proved contentious (offering multiple-device data access on a single plan for CAD 15/month, yet with no extra data allowance) but offers a baby step towards data buckets for unlimited devices. Rival Bell bested these results with a 38% increase in non-voice revenue and Telus 36%, the former noting a surging smartphone base (up 82% annually). Bell has the lowest smartphone mix of the three however; just 28% compared to 33% for Telus of their respective contract bases.