Global LTE network forecasts and assumptions 2010-2015 - 15 live LTE networks in December 2010 with 170 more planned by the end of 2015

Operators across the globe are in the process of rolling out new networks based on Long Term Evolution (LTE) technology. This year has seen several operators commercially launch the new networks; Verizon Wireless of the US launched commercial LTE services in December while another of the world’s largest market-leaders – Japan’s NTT DOCOMO – plan to switch on their network later this month. With global rollout of LTE now underway, this report outlines GSMA Intelligence’s forecasts for adoption of the technology across the global regions and the factors that will dictate growth such as device availability, regulation and pricing.

Our forecasts cover the period from the launch of the first commercial LTE network in late 2009 through to 2015 and take into account 170 planned LTE networks worldwide, as well as the 15 networks (including two shared networks) that are already live at the time of writing. Our initial set of forecasts are based only on these known commitments and does not speculate on other possible launches that may occur within the duration of the forecast period.

Our key findings are as follows:

• Global LTE connections will reach 300 million by 2015 and will represent 4 percent of the world’s total mobile connections;
• The Asia Pacific region will account for 43 percent of LTE connections by 2015, but growth will initially be driven by developments in Western Europe and North America;
• China and Brazil will account for over half of LTE connections in their respective global regions (Asia Pacific and the Americas) by 2015;
• The most prominent LTE operator groups will be Vodafone, T-Mobile (Deutsche Telekom), Telefonica, Orange (France Telecom), TeliaSonera and Telenor, which will jointly account for almost a quarter of LTE connections at Tier 1 operators by 2015;
• ‘Tier 2’ operators will gradually increase their share of the global LTE market over the forecast period, rising from 16 percent in 2011 to 25 percent by 2015;
• LTE networks will play a leading role in the evolution of cloud-based applications and services;
• Network sharing between operators will have a direct (positive) impact on LTE network rollouts, ensuring optimum cost efficiencies and rapid coverage expansion;
• Migration to LTE will be dependent on regulators allocating suitable frequency bands;
• A significant number of operators are focusing on deploying HSPA+ ahead of LTE, though a business case exists for operators to migrate directly to LTE and leapfrog interim HSPA or EV-DO deployments.

Our LTE forecasting model is based on the adoption of voice and data mobile Internet networks in both mature and emerging markets. We anticipate that LTE operators will initially focus on offering data-only services (via USB dongles) while waiting for voice over LTE (VoLTE) to come into play in 2012. Furthermore, we expect operators to target high-value consumers at launch with premium offers based on tiered pricing. In our view this strategy, combined with the lack of LTE handsets and issues related to spectrum allocation, will limit the growth of LTE connections in the short term.

Regulators are playing a critical role in the adoption of LTE networks as they make additional spectrum available to operators. Three main options are available for the deployment of LTE services, which are: the release of IMT extension spectrum in the 2500-2600 MHz bands, the release of ‘digital dividend’ spectrum in the 700-800 MHz bands and the re-farming of existing spectrum.

LTE forecasts

Our research shows that global Long Term Evolution (LTE) connections will reach the 300 million mark by 2015 and will account for 4 percent of the world’s total mobile connections by this point. LTE connections are expected to pass the 1 million connections milestone in the first half of 2011, with around 3 million net additions per quarter until the end of 2012. We anticipate an accelerating uptake of LTE after 2012-13 as more LTE networks launch and voice over LTE (VoLTE) is introduced. Quarterly net additions are forecast to rise above 10 million throughout 2013 and above 20 million the following year.

LTE connections are expected to represent less than 1 percent of total world mobile connections through to 2012. In 2010, LTE connections will reach 352,584 with live networks in Sweden, Norway, Finland, Denmark, Uzbekistan, Poland, Austria, Germany and the USA. By the end of 2010 we expect 19 LTE networks to be live globally, rising to 55 in 2011 and 185 in 2015.

Our LTE forecast model is based on the adoption of voice and data mobile Internet networks in both mature and emerging markets. LTE uptake will initially be driven by demand for mobile broadband services (USB dongles). We expect that the availability of VoLTE around 2012 timeframe will mark the ‘tipping point’ for substantial handset volume shipments, which will fuel further LTE growth.

As described in Figure 2, we anticipate between 2010 and 2012, LTE will follow a similar adoption pattern to WCDMA (including WCDMA HSPA) but the lack of handset traction and the focus on high-end price segments will limit growth. We expect that the price erosion of WCDMA HSPA devices will drag down the pricing of LTE devices in the medium term, speeding up the adoption pattern.

 Regional LTE forecasts

In 2010, Western Europe and USA/Canada will account for one third of global LTE connections each, followed by Asia Pacific on 27 percent. However, as more operators deploy LTE networks in other regions, the global LTE share of both Western Europe and USA/Canada will decline to 24 percent and 18 percent respectively by 2015. Eastern Europe and the Middle East will both host 5 percent of global LTE connections in five years, while limited deployments in Africa will see the region represent just 1 percent of connections. Asia Pacific is expected to play a significant role in the adoption of LTE services worldwide with LTE connections in the region increasing from around 100,000 in 2010 to more than 100 million in 2015 - increasing the region’s share of global LTE connections from 27 percent to 43 percent.

China, Japan, Indonesia and South Korea to lead LTE in Asia Pacific

The number of users of LTE technology in Asia Pacific is forecast to reach 127 million by 2015, driven by key regional markets such as China, Japan, Indonesia and South Korea. The pioneering LTE operator in the region is expected to be Japanese market-leader NTT DOCOMO, which plans to launch its ‘Xi’-branded LTE service in December this year. We estimate that 20 percent of the Japanese mobile market will have migrated to LTE networks within five years, closely followed by South Korea on 17 percent. Both markets have already migrated a significant majority of their customers (70 percent and 60 percent, respectively) onto WCDMA and HSPA networks, which will support a rapid migration to LTE. Hong Kong’s CSL (Telstra) launched LTE this month, becoming the first Asian operator to do so. We forecast that CSL will command a dominant LTE market share in Hong Kong of around 40 percent by 2015.

Nevertheless, almost half (47 percent) of Asia Pacific’s LTE connections will be based in China, the world’s largest mobile market, by 2015. Even though we predict that only around 5 percent of the Chinese mobile user base will have migrated to LTE networks by 2015, the sheer size of the Chinese market means it will still account for almost half of the region’s LTE connections by this point. Total 3G connections in the country (including CDMA) recently crossed the 100 million mark and are expected to triple over the next three years. Market-leader China Mobile has been conducting TD-LTE trials in 2010 alongside its TD-SCDMA network, and is planning on rolling-out its TD-LTE network as early as 2011. Third-placed China Telecom is also expected to launch LTE services next year, while second placed China Unicom – in collaboration with minority shareholder Telefonica – is expected to launch LTE by 2012.

Australia, New Zealand, Malaysia, Taiwan and Philippines currently have a combined 180 million connections and are expected to contribute a combined 11 percent of total LTE connections in Asia Pacific in five years – deploying a variety of LTE network rollout scenarios. However, these markets are dwarfed by Indonesia, which is on track to surpass 200 million mobile connections by year-end 2010. Assuming current problems concerning LTE spectrum allocation in the country can be resolved, we anticipate that Indonesia will account for over 10 percent of the LTE connections in the region by 2015, behind only China and Japan.

Rapid LTE migration in the Middle East

Middle Eastern operators are moving rapidly towards LTE with eight commercial launches expected in 2011 and 19 by 2015. Bahrain, Kuwait, Saudi Arabia and the UAE have network deployments currently underway and commercial launches are planned for next year in most cases. Zain and Etisalat have positioned themselves as LTE pioneers in the region. Zain is currently planning to migrate its user base to LTE technology in Bahrain, Kuwait, Saudi Arabia and possibly Jordan if the regulator goes ahead with spectrum auctions next year. Zain initially expects to complete its LTE network roll-out in Bahrain which will then serve as a showcase for its operations across the Middle East and Africa. Similarly Etisalat is also well advanced in its plans to launch LTE services in the UAE providing theoretical download speeds of up to 140 Mb/s and maximum uplink rates of 50 Mb/s. In the long term, Saudi Arabia will be the most competitive LTE market in the region, contributing to more than half of the regional LTE connections by 2015 (58 percent). Mobily, STC (Saudi Telecom) and Zain have tested LTE and are currently deploying their respective networks with commercial launches likely to happen next year.

First Latin American LTE networks to launch in Colombia, Chile and Venezuela

In the Americas, Colombia is leading the way in terms of LTE deployments with UNE (EPM Telecomunicaciones) expected to launch in the second half of 2011, initially in three or four large cities. In June 2010, UNE acquired spectrum in the 2.6 GHz band from the regulator - 10 blocks of 5 MHz at COP8 billion (US$4 million) each – the operator has been reported to have invested a further COP150 billion to roll-out the new network. UNE already offers fixed services (telephony, pay-TV and broadband) and will be able to provide its existing subscriber base with LTE mobile services next year, hence boosting competition in the country. In 2012, we expect Chile and Venezuela to see the launch of LTE networks, later followed by Argentina, Peru and Brazil. Chile is expected to be one of the most competitive LTE markets in the region as Claro (America Movil), Entel and Movistar (Telefonica) have all expressed an interest in launching the new technology. Entel has tested the network in early 2010 and Claro is expected to launch services by mid-2011. However, rollout plans depend on the regulator, Subtel, not delaying its plan to auction spectrum in December 2010 and award licences in June 2011. We forecast that by Q2 2011, 10 percent of the mobile user base in Chile will have migrated to 3G networks (in line with the regional average). Nevertheless, Argentina and Brazil are expected to contribute to the largest share of LTE connections in the Americas with 22 percent and 49 percent respectively by 2015. In Argentina, both Movistar (Telefonica) and Personal (Telecom Argentina) have already tested LTE networks and further deployments depend on regulatory measures to auction additional spectrum with timescales likely to be aligned with neighbouring markets, leading to commercial launches in 2013.

Meanwhile, Brazil’s 3G user base is growing at a rapid pace, already representing 10 percent of total connections in the country, and demand for LTE services is expected to be substantial considering the low penetration of fixed broadband. Brazil’s regulator, Anatel, has been pro-active in planning the development of mobile broadband by re-farming spectrum in the 2.6 GHz band. Multichannel Multipoint Distribution Service (MMDS) operators currently operate in the 2500-2690 MHz band and will do so until June 2013 when their spectrum capacity will be scaled back to 70 MHz only, and 120 MHz will be allocated to mobile operators. Spectrum will be auctioned in 2012, leading to LTE commercial launches around 2013. Telefonica-owned Vivo is expected to launch services earlier than its competitors as Telefonica owns an MMDS operator called TVA Brazil which operates on 2.6 GHz frequency. Under this scenario, we anticipate that Vivo will control just under two thirds of the LTE user base in Brazil by 2015 (61 percent), followed by TIM and Claro (America Movil) with 16 percent and 14 percent, respectively, and Oi on 9 percent. By Q2 2010, 22 percent of Vivo’s subscriber base had already migrated to 3G networks (including CDMA2000 1X) compared to 11 percent for TIM, 7 percent for Claro and just over 1 percent for Oi.

Overall, LTE connections in the Americas will reach 11 million by 2015 – just below 2 percent of total regional connections, with Brazil contributing half this total.

Early adoption of LTE in Western Europe

Mobile operators in Western Europe are early adopters of LTE networks, helped by the harmonization of regulatory initiatives from the European Commission. LTE networks represent a logical path for the migration of WCDMA and WCDMA HSPA users which already represent close to 40 percent of total connections in the region. In 2015, we forecast that LTE connections will reach 71 million to represent 12 percent of regional total connections and positioning Western Europe as the most mature LTE region globally along with the USA/Canada. Germany, Italy, Spain and the UK will together contribute around two thirds of total LTE connections in the region in five years (65 percent). In May this year, Germany auctioned additional spectrum in various bands: 800 MHz, 1800 MHz, 2 GHz and 2.6 GHz. O2 (Telefonica), Deutsche Telekom and Vodafone have acquired spectrum in the digital dividend band (800 MHz) and 2.6 GHz and have started to roll-out LTE networks in rural areas as per licence coverage obligations. Deutsche Telekom is expected to launch services by the end of 2010, initially targeting areas in Germany that do not have access to broadband – these areas are referred to as “white spots” and account for about 4-5 percent of German households. In the second half of November 2010, Vodafone Germany switched-on LTE mobile broadband coverage in all states with “white spots” and commercially launched with LTE devices in December. Vodafone has launched a website and a free hotline to inform consumers and businesses about the possibilities of LTE technology and unveil its data packages and tariffs: 7.2 Mb/s downstream speeds, with a 10 Gb cap, will be available for a monthly tariff of EUR39.99, whilst an extra EUR10 a month will allow users to get 21.6 Mb/s download speeds at a 15 Gb cap.

In Italy, TIM, Vodafone and Wind (Weather) have already tested LTE networks and the regulator is expected to auction 2.6 GHz spectrum in 2011. As is often the case in Western Europe, there is potential for network sharing in Italy since 3 (Hutchison) and TIM already have a site sharing agreement. Meanwhile, operators are focusing on the adoption of HSPA+ networks which appears to be the consensus for most operators in the region. The situation is similar in Spain with spectrum auctions expected in 2011. Orange Spain is investing EUR500 million in network upgrades, installing 3G/4G capable base stations while LTE pioneer TeliaSonera is expected to launch LTE services in the country via Yoigo. However, in the UK, regulatory bottlenecks are blocking LTE launches which are not likely to be seen before 2013. The country’s recent political changes have lead to concerns that regulator Ofcom’s priorities will be re-arranged, hence delaying the prospect for spectrum re-farming and auctions. The newly-elected government is expected to show reluctance to review statutory instruments required by Ofcom to auction additional spectrum (including digital dividend). However, it is understood that Ofcom is considering reserving 2.6 GHz frequencies for wireless cameras during the 2012 London Olympics, hence delaying LTE spectrum auctions further.

The Nordic countries (Denmark, Sweden, Finland and Norway) along with the Netherlands represent half of the LTE connections in Western Europe in 2010, reflecting the technological edge those countries maintain over the rest of Europe. Nevertheless, as LTE networks expand across the region, their joint share of LTE connections will drop to 12 percent in five years totalling around 9 million. In May this year, Denmark auctioned additional spectrum in the 2.5 GHz band for which all four mobile operators successfully bid. In the Netherlands, the regulator generated EUR2.7 million last April from the sale of 2.6 GHz frequencies to all four operators and new entrant, Ziggo 4. Under licence obligations, Dutch operators have to start rolling out LTE networks two years after the acquisition of spectrum, which pushes commercial deadlines out to 2012. Meanwhile, TeliaSonera is already offering LTE services in Denmark, Finland, Norway and Sweden. Telenor is taking a careful approach to launching LTE in the Nordics with a clear roadmap in place in Norway under which it is replacing all 2G/3G RAN with new equipment from Cisco and Huawei over the next year before rolling out LTE throughout 2011 and 2012. In Sweden, Telenor and Tele2 are building a common LTE network via a 50/50 joint venture. They are planning to launch their LTE network in Stockholm, Gothenburg, Malmo, Karlskrona and Lund this year and expect to cover 99 percent of the Swedish population by 2013. Around the rest of Western Europe, LTE developments will be highly dependent on the harmonization of spectrum which is being undertaken by the European Commission.

Regulatory issues hindering LTE rollout in Eastern Europe

In Eastern Europe, we expect LTE connections to reach 15 million in 2015 which will represent just under 3 percent of total mobile connections in the region. LTE services are available in Poland as CenterNet Mobile and Mobyland (Aero 2) launched their joint network in September this year. Their initial plan is to install 700 LTE base stations by the end of 2010 to cover over 7 million people. Similarly, MTS (Sistema) and Ucell (TeliaSonera) launched their respective LTE networks in Uzbekistan in July and August this year, reflecting substantial demand for high-speed services in the country. However, Russia is expected to eventually account for the lion’s share of LTE connections in the region, representing 55 percent of total LTE connections in the region by 2015. Yota (Scartel) appears to be the precursor for LTE services in the country despite its false start last September. The operator’s LTE network has been forced to shut down by the regulator only three days after launch and Yota is now expected to re-launch in Moscow and St Petersburg in 2011. In our forecast scenario, we have assumed that the top three operators – MTS (Sistema), Beeline (VimpelCom) and MegaFon – will all launch LTE networks, closely followed by Rostelecom and Sibirtelecom which are all part of the Svyazinvest Group. MTS has said it is considering launching LTE-Advanced around 2013 when the technology is ready, thus focusing on expanding its WCDMA HSPA network in the meantime. MegaFon has already tested its LTE capabilities in Soshi last September and is expected to aggressively compete against MTS and Beeline in the mobile broadband space. At present (Q3 2010), 13 percent of MegaFon’s user base has migrated to 3G networks, compared to 11 percent for MTS and 14 percent for Beeline (VimpelCom). However, the regulator is still blocking the adoption of LTE services in the country as it still has to auction additional spectrum. Previously, the process of awarding 3G licences took a long time to complete and we expect that similar issues will apply to LTE spectrum auctions. The situation is similar in Ukraine where MTS has asked the regulator to consider allocating LTE frequencies to speed up the adoption of mobile broadband services in the country. MTS is hoping to launch 3G services next year, pending the regulator’s go-ahead, and is considering leapfrogging HSPA+ networks to directly launch LTE.

Verizon Wireless leads the LTE charge in the US

In the USA, LTE connections are forecast to surpass the 1 million mark by this year and reach 50 million by 2015. By the end of 2010, the country will contribute to around one third of global LTE connections (36 percent) – similar to Western Europe – with this being reduced to 18 percent in five years as LTE deployments spread across other regions. MetroPCS launched the first LTE network in the country in September 2010 in Las Vegas and Dallas using 700 MHz frequencies. The operator is offering the high-speed service for a flat monthly charge of US$55 with no contract, and is selling an LTE handset - the Samsung Craft - as well as planning on launching a number of LTE Android device next year. It has leapfrogged any CDMA2000 1xEV-DO deployments to directly launch LTE which it plans to expand across its entire footprint of 96 million US residents. However, MetroPCS will face strong competition from market-leader Verizon Wireless which has recently launched its own LTE network in 32 markets in the country. Verizon Wireless aims to cover approximately 110 million people at launch, 200 million people by end-2011 and 285 million potential customers by end-2013. The operator has already said that by 2013 the LTE coverage map will match its current 3G coverage map, and it is expected to complete nationwide deployment by 2014. Our forecast shows that Verizon Wireless will control almost half (46 percent) of the total LTE connections in the country by 2015, closely followed by AT&T at 34 percent while MetroPCS will own 7 percent of the market. AT&T aims to cover 70-75 million people with its LTE network by the end of 2011. It is currently testing the technology in Dallas and Baltimore and expects to launch commercially by the middle of 2011.

Meanwhile, we expect T-Mobile USA to be lagging behind as it does not hold any spectrum in the 700 MHz band unlike its competitors, which is one of the reasons why it is looking into partnerships with other players such as LightSquared (Harbinger Capital Partners) or Clearwire. The latter has been testing LTE in both FDD and TDD modes and is for the moment keeping its options open. Clearwire’s challenge is to find a cost efficient infrastructure to overlay both LTE and WiMAX networks and develop attractive end-user devices to take advantage of a potential multi-mode WiMAX/LTE network. In other developments, Cricket Communications (Leap Wireless) expects to begin broader LTE deployments in the next 3 to 4 years, starting with “white spot” locations in high data-density market centres. The operator is aligning its timescales with the expected availability of low-cost LTE devices and we forecast that it will control only 1 percent of total LTE connections in the USA by 2015. Many Greenfield LTE operators are expected to launch services in the country boosting competition in the mobile broadband segment; these include CenturyLink, Cox Communications, LightSquared and Cordova Wireless Communications (Cordova Telephone Cooperative). A number of LTE networks will also operate for utilities companies such as BayRICS, a public safety network planned for 2011, or Texas Energy Network which aims to service the Oil and Gas industry.

In Canada, most operators are focusing on the adoption of HSPA+ networks and the country’s main mobile players – Bell Mobility (BCE), Rogers Wireless, Telus Mobility and WIND Mobile (Globalive) – are not expected to launch LTE services before 2013. Greenfield operator Shaw Communications is likely to be the first in the country to launch LTE services having committed to a commercial launch in 2011, while other operators are aligning their timescales against VoLTE handset availability. Our forecasts show that LTE connections will reach 1.7 million in Canada by 2015.

Operator LTE forecasts

At an operator level, our forecasts show that Tier 1 mobile operators – defined as operators with a local market share higher than 20 percent - will contribute 75 percent of global LTE connections by 2015. However, Tier 2 mobile operators – defined as operators with a local market share of 20 percent or lower – will become increasingly competitive, accounting for 16 percent of the global LTE market in 2011 but jumping to 25 percent by 2015.

LTE deployments typically take longer for Tier 2 operators as they tend to benefit less from economies of scale and other synergies. At present, the consensus amongst Tier 2 operators is to align LTE rollout timescales against VoLTE handset availability, digital dividend spectrum allocation, and network cost efficiency. Nevertheless, Tier 2 operators – which include a number of Greenfield LTE operators – are expected to boost competition in the mobile broadband segment in the same way they are today in 3G by differentiating their offers from Tier 1 rivals.

Major operator groups Vodafone, T-Mobile (Deutsche Telekom), Telefonica, Orange (France Telecom), TeliaSonera and Telenor are expected to contribute to almost one third of the total LTE connections for Tier 1 operators by 2015, totalling 65 million connections.

Vodafone Group businesses (including its Australian joint-venture with Hutchison) are forecast to reach a total of 20 million LTE connections in five years, equating to a market share of 7 percent of global LTE connections. In key European markets, Vodafone has already earmarked around one third of its user bases on 3G networks for migration and is already turning on commercial LTE services in Germany. We expect Vodafone to be particularly attentive to the enterprise segment, initially with targeted multi-mode LTE dongles.

Telefonica (including Vivo in Brazil) and T-Mobile (including its UK joint-venture with Orange, Everything Everywhere) will both reach over 14 million LTE connections in 2015, controlling around 7 percent and 6 percent of Tier 1 LTE connections, respectively. Telefonica is expected to be more aggressive in the deployment of its LTE networks across its footprint and has been testing LTE capabilities in a number of countries this year including the UK, Germany, Slovakia, Spain, Argentina and Brazil. T-Mobile is likely to adopt a different approach and focus on the adoption of its HSPA+ networks as a short term priority, especially in the USA where the operator does not hold the required spectrum for LTE and is likely to actively look at network sharing solutions.

Meanwhile, Orange (including the UK joint venture) is forecast to capture a market share of 3 percent of global LTE connections by 2015 with an LTE user base of 10 million connections. Initially, the operator is expected to offer WCDMA HSPA/LTE compatible USB dongles to generate revenues from data roaming. In France, its home market, Orange is likely to rapidly roll-out LTE once the regulator, ARCEP, auctions the required spectrum, which is expected to happen by the middle of next year. TeliaSonera is forecast to reach a LTE user base of just over 4 million in 2015, while we expect Telenor to have 1.7 million. TeliaSonera has been a global pioneer in LTE with its first commercial launches dating back to late 2009 .

With regards to network infrastructure vendors, we have tracked vendors’ involvement with 93 networks (including the 15 networks which have already launched) and found that Huawei is the most active across LTE network trials or commercial LTE deployments. The Chinese vendor has been involved with 36 LTE networks, closely followed by Ericsson (25), NSN (23) and Alcatel-Lucent (22). Other planned networks are yet to be officially linked with infrastructure vendors from publicly disclosed announcements. Nevertheless, Huawei appears to dominate the LTE space at present, compared to its domestic competitor, ZTE, which has only been linked to six LTE network developments.

Forecast assumptions

Network rollout

Our research takes into account 170 planned LTE networks worldwide, and 15 live networks (including two shared networks) at the time of writing. Our initial forecasts are based on official operator commitments and we do not speculate on other possible launches. Nevertheless, we do expect additional operator commitments and LTE network rollouts to increase LTE connection forecasts.

Between December 2009 and December 2010, 15 LTE networks officially launched across Austria, Denmark, Finland, Germany, Norway, Sweden, Poland, Uzbekistan and the USA. Operators’ public commitments show that four more commercial LTE networks are expected to launch before the end of 2010. In our initial set of LTE forecasts, we have used the following assumptions when tracking commercial launches:

Almost half of the 170 planned LTE networks have already been tested, and as many operators are planning to launch but waiting for regulators to allocate required spectrum (additional 2.6 GHz or digital dividend, or re-farming of existing frequencies).

A large number of operators are prioritising the adoption of HSPA+ networks before launching LTE, notably 3 (Hutchison) Austria, 3 Ireland, Telus Mobility Canada, SmarTone Hong Kong, Indosat (Qtel) Indonesia, and Vodafone Italy. We consider such strategic moves to be short-term investments aimed at maximizing profits, increasing awareness of mobile broadband services while sustaining their 3G market share until next-generation networks are deployed. Some mobile operators have argued that demand for LTE services is limited until LTE compatible handsets are widely available at affordable price points, hence giving HSPA+ a certain competitive edge for some time. Under such technology roadmaps, HSPA+ networks being deployed during 2011 will push LTE commercial availability back to 2013-14. In such cases, we expect that operators will directly roll-out LTE-Advanced networks, a scenario in place at Russia’s market-leader, MTS (Sistema).

In similar developments, a number of operators are currently deploying 3G networks which are LTE-ready, such as T-Mobile Czech Republic and Telenor Hungary. The 3G base stations are compatible with LTE specifications and the switchover will happen as soon as the regulator allocates required frequency bands. Such investments are mainly happening in markets with low 3G and fixed-broadband penetration, emphasising the importance of mobile broadband as a first means to access the Internet and boosting potential demand for LTE services.

A number of mobile operators could also choose to directly leapfrog to LTE networks, skipping HSPA or EV-DO deployments. MetroPCS in the USA has chosen such a path by launching LTE services in September 2010. The operator is migrating its customer base from CDMA2000 1X to LTE, skipping a CDMA2000 1xEV-DO deployment. In Ukraine, MTS (Sistema) is planning on deploying 3G networks after 2010 and could skip any HSPA+ deployments in favour of LTE should the regulator auction the required spectrum in time. Canadian greenfield operator Shaw Communications also seems to favour this strategy and is expected to launch an LTE network by the end of 2011.

Finally, network sharing is an important factor in LTE network rollout scenarios with a direct impact on cost efficiency and network coverage expansion. A number of joint ventures are already established such as in Poland between CenterNet Mobile and Mobyland (Aero2) and Net4Mobility in Sweden (Tele2 and Telenor), while others are planned such as Ziggo 4 in the Netherlands (Ziggo and UPC), a joint venture between Orange and Play (P4) in Poland, and a joint venture between VNPT and Antares in Vietnam. Network sharing is often chosen by operators that are lacking the required spectrum or those for which the cost of network deployment is too high. In New Zealand, 2degrees has said it is open to network sharing following the decision by the government to free up digital dividend spectrum in November 2013. Network site sharing agreements are already an important feature in many markets such as in Italy (between 3 Italy and Telecom Italia), and such partnerships could eventually scale up to LTE investments should the operators decide to do so. The Kenyan government recently proposed an innovative model whereby a public-private partnership will build the country’s LTE infrastructure which will then be available on an equal basis to interested service providers, including the country’s existing mobile operators.

Spectrum allocation

According to Cisco’s Visual Networking Index, global mobile data traffic will double every year through 2014 to reach 3.5 exabytes per month (or a run rate of more than 42 exabytes annually). Cisco’s research shows that smartphones and laptop datacards are expected to drive more than 90 percent of global mobile traffic by 2014. LTE infrastructure aims to provide more spectrum and more efficient backhaul management to optimise networks for mobile Internet usage and avoid congestion issues. Hence, the adoption of LTE services strongly depends on whether operators are choosing to deploy LTE on FDD or TDD bands, how much “new” spectrum they can acquire and the capacity they will deploy.

FDD and TDD are the two main duplexing modes for LTE. We expect FDD (paired frequencies) to receive the largest share of deployments even though the role of unpaired spectrum is gaining momentum outside of China. TD-LTE is less economical to deploy than FDD but it does allow operators to handle more traffic in the downstream by having an asymmetric uplink versus downlink, hence balancing capacity in a more efficient way than FDD. At present, China Mobile is the main force behind TD-LTE, though operators in India, Malaysia, Taiwan, the USA and Russia have expressed an interest.

Regarding spectrum itself, a number of options are available for the deployment of LTE services, including:

• the release of IMT extension spectrum in the 2500–2600 MHz bands
• the release of digital dividend spectrum in the 700–800 MHz bands
• the re-farming of existing spectrum

Regulators will play a critical role in the adoption of LTE networks as and when they make these options available.

The release of IMT extension spectrum in the 2500-2600 MHz bands

The most common approach will be to deploy high capacity spectrum to cover areas with dense data traffic. This is what operators have focused on so far with TeliaSonera launching LTE in the 2600 MHz band to initially cover Stockholm and Oslo and A1 Telekom (Telekom Austria) launching in Vienna, Austria. This is also the approach that has been undertaken for WCDMA and WCDMA HSPA network coverage since launch.

The release of digital dividend spectrum in the 700/800 MHz bands

Under this scenario, operators will deploy lower capacity spectrum to cover rural areas given that lower-frequency radio waves travel further. This is what operators are planning in the USA, Germany and New Zealand. Regulators are looking to free up spectrum in the 700-800 MHz bands, currently used by analogue TV broadcasters in order to expand mobile broadband coverage to rural areas. In a number of emerging markets, the switchover from analogue to digital TV is not necessarily on the political agenda, which means that telecom regulators are left to lead the negotiations with broadcasting regulators, TV/radio/satellite service providers and governments. Consequently, we have noticed that some regulators in emerging markets are aligning their timescales against larger neighbouring economies mainly to learn from best practices, hence delaying the introduction of LTE services.

The re-farming of existing spectrum

Regulators could allow mobile operators to use some of their existing spectrum in the 2G or 3G bands for LTE services. LTE could be deployed within the heavily occupied 900-1800 MHz bands, which implies that spectrum re-farming should ideally be considered in parallel with the auctioning of 2600 MHz spectrum. The expiry of existing 3G licences (most commonly in the 2100 MHz band) will play an important role in determining the spectrum re-farming route as the licences that are about to expire in a few years could be reassigned to LTE under a strict re-farming agenda providing that operators can redeploy 3G in the 900 MHz bands.

At a political level, a number of countries and international institutions have set targets for mobile broadband developments, pushing spectrum allocation up political agendas. In March 2010, the Federal Communications Commission (FCC) in the US unveiled its National Broadband Plan, in response to the request by US Congress to improve broadband coverage throughout the country in order to fuel economic growth, job creation and global competitiveness. One of the FCC’s goals is to have 100 million US homes accessing download speeds of at least 100 Mb/s and actual upload speeds of at least 50 Mb/s by 2020. This involves the freeing up and allocation of additional spectrum for unlicensed use, fostering ongoing innovation and competitive entry, as well as to update the rules that govern wireless spectrum with a view to increasing capacity in urban areas and range in rural areas. To meet the targets, the FCC is making the 500 MHz band available for broadband within the next ten years and the 300 MHz band for mobile use within five years which will provide the incentive to repurpose spectrum for more flexible use.

Similarly, the European Commission (EC) is following a similar strategy with its Digital Agenda for Europe, which aims to stimulate investments and propose a comprehensive radio spectrum plan. Under this initiative, member states would implement the European Spectrum Policy Programme, so as to ensure the coordinated allocation of the spectrum needed to meet the target of 100 percent coverage of 30 Mb/s Internet by 2020. Between 2010 and 2011, the EC is expected to adopt legislative proposals on the harmonisation of the spectrum management rules, and already accepted the technical harmonisation of the 800 MHz band. The EC also created the Body of European Regulators for Electronic Communications (BEREC) to encourage cooperation and coordination between national regulatory authorities and the Commission, in order to promote the development of the internal market for electronic communications networks and services.

Finally in May 2010, the ITU and UNESCO established the Broadband Commission for Digital Development, which will define strategies for accelerating broadband rollout worldwide and examine how the application of broadband networks could improve the delivery of new social services in areas such as healthcare and education. The Commission has a mandate to fully leverage the power of technology and comprises 30 thought leaders from around the world, including promient figures from the technology and social sectors.

LTE devices

We expect mobile operators to target high-value consumer segments at launch with data-only offers and devices (dongles, datacards and embedded devices). We also anticipate that LTE handset shipments will trigger a faster LTE adoption from around 2012 when VoLTE comes into play and multi-mode LTE handsets (able to function on existing HSPA/EV-DO networks as well as newer LTE deployments) become more widely available and affordable. Initially most mobile operators will offer high-end LTE smartphones (with an average selling price over US$300) to users with heavy subsidies to shift volume, and will charge a premium for monthly data subscriptions.

At the time of writing, we have tracked the availability of nine LTE modems, ten LTE USB modems, and a single netbook, router and handset – from 13 manufacturers including Huawei, ZTE and Samsung. The only commercially available handset at present is the Samsung Craft (SCH-R900) which is distributed by MetroPCS in the USA. The device is a multi-mode CDMA/LTE handset which supports both the 1700 MHz and 1900 MHz bands and boasts a QWERTY keyboard and a 3.3-inch AMOLED touchscreen display. MetroPCS chose the Samsung Craft running Qualcomm’s BREW platform, but the operator is expected to launch a number of LTE-compatible Android devices in 2011. The rapid proliferation of smartphones will directly feed the adoption of LTE services in most markets but we expect the high bill-of-materials for LTE handsets to remain a barrier over the next three years. Among the uncertainties and challenges still impacting the development of LTE devices are the availability and cost of multi-mode chipsets, as well as the evolution of cloud-based applications and services. The latter is expected to push the development of low-latency, high-bandwidth networks and deliver a more promient cloud-based ecosystem capable of supporting a growing number of converged services. In addition, VoLTE is not expected to have an impact on LTE adoption until 2012, leaving operators with a choice of promoting VoIP services in the meantime at the risk of cannibalising legacy voice revenues to some extent. We also anticipate that the migration of 3G smartphones (notably based on Android) towards low-end price tiers will pave the way to more affordable LTE smartphones in the near future.

In emerging markets, we expect that the demand for mobile Internet services and devices will be substantial as USB dongles are in many cases the first means to access the Internet. Nevertheless, shipments of LTE handsets will be limited by high import taxes and duties in markets dominated by retailers and distributors. Economies of scale will be limited initially and local operators are likely to face competition from large operator groups which benefit from synergies.

LTE services

LTE services will be offered under tiered pricing as mobile operators move away from “all-you-can-eat” data plans. By charging customers depending on their monthly data usage and capping data allowances, operators can counter network congestion issues while reserving the fastest access for higher-value customers such as those in the enterprise market. At present, TeliaSonera offers LTE services to consumers for around US$88 per month giving users access to download speeds of 80 Mb/s with a usage cap of 30 Gb, compared to Vodafone Germany which offers speeds of 50 Mb/s for around US$90 per month and volume-capped at 30 Gb. A1 Telekom offers LTE services for around US$120 per month capped at 30 Gb and MetroPCS a 10 Mb/s plan for US$60 per month (based on rate throttling rather than capping). Verizon will charge US$50 per month for 5 Gb of data and US$80 for 10 Gb.

At launch, operators offer different customer incentives to subscribe to new services from free USB dongles to large discounts on, for example, the first 6 months line rental. However, LTE is (and will be positioned as) a high-end service and operators are expected to charge a premium for it over the coming years; therefore we expect this will limit the adoption rate to some extent. In a number of cases, operators expect to generate more value from data roaming by offering dual-mode HSPA/LTE dongles, and will expand their services portfolio as LTE network coverage expands in their domestic markets.

We expect that a number of greenfield LTE operators will introduce services targeted at specific consumer segments and niche markets which will increase competition. In addition, mobile operators with fixed-line businesses have been carefully managing the co-existence of fixed and mobile broadband over the past years in an attempt to avoid the cannibalisation of existing revenue streams. We anticipate that the introduction of new LTE mobile broadband plans will increase the complexity of managing price elasticity for such services.

The way that operators promote and advertise LTE services and how they differentiate it from existing mobile broadband offers will be key in setting the pace of take-up. Japanese operators NTT DOCOMO and KDDI have respectively branded their LTE services “Xi” and “au (*4)” and taken the approach that services should not be pushed by technology but by consumer needs.

Methodology

GSMA Intelligence’s LTE forecast model is derived from the adoption of mobile Internet connections across both mature and emerging markets. We take into account that mobile Internet connections are accessed via a large range of devices depending on whether users have subscribed to a data-only offer or a voice and data package. We expect LTE to be initially introduced as a data-only offering until multi-mode LTE handsets become more widely available and voice over LTE (VoLTE) comes into play. We have therefore assigned each operator a set of mobile Internet data-only and voice connection benchmarks - with specific launch date assumptions for LTE - which have been added together to represent total LTE connections.

Data-only connections benchmark

We have captured data for operators that report data-only mobile connections and calculated the share of such connections over total connections. The results create a set of adoption scenarios which we have indexed and normalised from the first quarter after launch over a period of five years. Our findings have then been divided between mature and emerging markets.

In order to do this, we have normalised the connections data reported by mobile operators which falls under a large umbrella of definitions. The most common definition refers to “mobile broadband” connections which generally represent the number of customers using either a dongle, datacard or embedded laptop to access Internet services (see appendix for the full set of definitions considered). Additionally, operators’ definitions mix different technologies such as EDGE, WCDMA, WCDMA HSPA and CDMA2000.

Voice connections benchmark

We have measured the adoption of WCDMA HSPA voice connections which are defined as the total number of WCDMA HSPA connections minus the number of data-only WCDMA HSPA connections. The share of WCDMA HSPA voice connections over the total sum of connections has been calculated, indexed and normalised from first quarter after launch over a period of five years. Again, our findings have then been divided between mature and emerging markets.

Part of the data normalisation process was to compare the overall adoption patterns for mature and emerging markets (data-only + voice) against the adoption of total WCDMA HSPA connections. The adoption curves have been benchmarked, modelled and fitted against WCDMA HSPA growth. As a result, we have defined four different adoption scenarios since both mature and emerging markets each have a set of voice and data-only benchmarks. We have then applied these against operators’ existing technology migration patterns paced against our LTE roll-out assumptions.

LTE network launch dates for both data-only and voice connections are based on operators’ official announcements and published plans for LTE, as well as regulators’ timetables for LTE spectrum auctions. In a few cases where network rollout timescales have not been announced we have provisioned between 12 and 18 months in order for each operator to select a vendor and build out the network. In addition, we assumed that VoLTE will be commercially available in late 2012 to early 2013, which is also the tipping point for shipments of LTE compatible handsets.

In this initial analysis, we have aggregated LTE-Advanced and TD-LTE connections within our total forecast for LTE. A split between these network types can be found in our Networks tool. As per the ITU definition, the terminology “4G” has been assigned to LTE-Advanced (and WirelessMAN-Advanced2 – more commonly known as 802.16m or WiMAX2) and the terminology will therefore not be used in GSMA Intelligence to represent initial LTE deployments.