4G Roll Out Analysis: Winning Strategies and 5G Implications

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As LTE adoption passes 50% in North America and 9% worldwide, we review the operators who did best and worst and draw conclusions for the mass adoption phase of 4G. The analysis provides a valuable template for all players in the 4G race, and has important implications for plans for 5G.

Identifying & Analysing Key Operators

In search of the best practice in 4G deployment, we first had to pick out the operators who did best on quantitative metrics, before we could drill down qualitatively to investigate why. We screened all the 40 MNOs that have so far launched 4G in the BRICS, the United States, the top 5 European markets, China, Japan, Taiwan, and South Korea, on the following indicators.

  • Monthly headline ARPU, converted to US dollars
  • Market share by subscribers
  • Quarterly net-adds
  • 4G adoption, % of the subscriber base
  • EBITDA margin %

Where possible, we also collected information on network density (i.e. subscribers per cell), and on spectrum holdings. In Figure 1, we plot EBITDA margin against the change in market share in percentage points since Q4 2012, sizing the bubbles by US dollar monthly ARPU. The axes are set to the average values for each metric.

Figure 1: 8 out of 40 MNOs made the cut for further analysis 

 

Source: STL Partners, themobileworld.com, company filings

The top-right quadrant shows those operators who are above average both on improving margins and gaining share. We picked those operators who got into the top-right quadrant – above-average EBITDA margin and positive share growth – for at least two quarters, and have a positive trend, for further research. Those are:

  • Chunghwa Telecom
  • Free Mobile
  • Verizon Wireless
  • AT&T Mobility
  • Wind
  • Bharti Airtel
  • 3UK
  • MTS

We expected to find that those operators who chose market share first, initiating the price disruptions in the US and in France, would have sacrificed margin as they chased share. An example would be T-Mobile USA, additionally marked in purple on the chart. This is essentially the scenario allegedly needing “market repair” which is dear to the hearts of European telco lobbyists. However, as Figure 2 shows, we found something very different. Profitability is actually gradually increasing with subscriber growth, but only for the top-performing operators. Again, bubbles are scaled to ARPU.

 

  • Executive Summary*
  • Identifying & Analysing Key Operators
  • A Design for Success*
  • Parameters*
  • Commercial Options*
  • What Strategy Did the Top Eight Adopt?*
  • Conclusions on the Network for the top Eight*
  • Conclusions on the Commercial Strategy*
  • Getting It Wrong*
  • Operator Case Studies
  • Conclusions and recommendations*

(* = not shown here)

 

  • Figure 1: 8 out of 40 MNOs made the cut for further analysis
  • Figure 2: The fastest-growing 4G operators are either holding or gradually increasing their EBITDA margins*
  • Figure 3: Scale helps, but less than you might think*
  • Figure 4: A strategy matrix for 4G operators*
  • Figure 5: An introduction to carrier aggregation*
  • Figure 6: Parameters of our 8 leading 4G deployers*
  • Figure 7: MTS holds onto margins as data volumes surge*
  • Figure 8: Wind’s data revenue gains now offset losses from voice entirely, at 37% margins*
  • Figure 9: VZW’s service margin soars despite the price disruption*
  • Figure 10: AT&T service margins are also high and rising*
  • Figure 11: Service margins are rising strongly at 3UK*
  • Figure 12: Six operators who are struggling to escape the lower-left quadrant*
  • Figure 13: Sprint and T-Mobile are playing the same game but only one is winning*
  • Figure 14: Sprint toned down the smartphone bonanza in 2015*
  • Figure 15: Vodafone’s European OpCos are improving, but it’s been a hard road*
  • Figure 16: Vodafone Germany’s turnaround plan – 1800MHz plus backhaul*
  • Figure 17: Project Spring still hasn’t filled the fibre gap*
  • Figure 18: Free, despite being the smallest and latest to start of the French MNOs, had an outstanding score on our latency index*
  • Figure 19: T-Mobile USA’s latency performance is market-leading on a blended 3G/4G basis*
  • Figure 20: T-Mobile USA generates fewer high latency events than any US operator*

(* = not shown here)

Technologies and industry terms referenced include: , , , , ,