The Mobile Internet Report Key Themes*

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Mobile Internet Traffic Growth = On Pace to Outpace Desktop – Mobile Traffic Lags Desktop by ~9 Years but Gap Expected to Narrow Desktop Internet Traffic Growth, 2000 – 2009 vs. Mobile Traffic Growth 2009 – 2013E 12,000,000 Data Traffic (TB / Month) 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 2009-2013E mobile Internet traffic growth expected to accelerate faster than first six years of desktop Internet adoption (2000-2005), narrowing the lag Internet Traffic Lag Currently Stands at 9 years Mobile in 2009 = Desktop in 2000 Mobile Internet Traffic Lag Narrows to 8 years Mobile in 2013 > Desktop in 2005 0 Desktop Internet 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mobile Internet 2009 2010E 2011E 2012E 2013E 50 Source: Cisco, Morgan Stanley Research.
Tech Cycles Tend to Last Ten Years Entered Next Major Computing Cycle – Mobile Internet – 2 Years Ago Mainframe Computing 1960s Mini Computing 1970s Personal Computing 1980s Desktop Internet Computing 1990s Mobile Internet Computing 2000s Source: Computersciencelab.com, Wikipedia, IBM, Apple, Google, NTT docomo, Morgan Stanley Research. 51
Page 1 and 2: The Mobile Internet Report Key Them
Page 3 and 4: What You are Reading - The Mobile I
Page 5 and 6: Key Mobile Internet Themes 1) Wealt
Page 7 and 8: …Key Mobile Internet Themes… 3)
Page 9 and 10: …Key Mobile Internet Themes 6) Ma
Page 11 and 12: Key Theme #1 11
Page 13 and 14: Key Theme #1 - Wealth Creation / De
Page 15 and 16: Wealth Creation / Destruction Is Ma
Page 17 and 18: Winners of Each New Cycle Often Cre
Page 19 and 20: NCR Won Big in Mainframe Era, DEC W
Page 21 and 22: Compaq + Microsoft Won Big in PC Er
Page 23 and 24: Net, New Computing Cycles Create /
Page 25 and 26: New Computing Cycle Characteristics
Page 27 and 28: 12,000,000 Mobile Internet Traffic
Page 29 and 30: Pace of company change related to m
Page 31 and 32: Rapid Pace of Corporate M&A Related
Page 33 and 34: Technology Companies Created > Weal
Page 35 and 36: Top Internet-Related Tech Wealth Cr
Page 37 and 38: We Know What Happened Over Past 15
Page 39 and 40: Mobile Internet Likely to Follow Ti
Page 41 and 42: 2009 Global Top 30 TMT Companies by
Page 43 and 44: Key Theme #2 43
Page 45 and 46: Key Theme #2 - Mobile Ramping Faste
Page 47 and 48: Apple iPhone + iTouch = Fastest new
Page 49: Mobile Internet Outpaces Desktop In
Page 53 and 54: User-Interface Revolutions (Overlai
Page 55 and 56: Broad base of IP-based mobile usage
Page 57 and 58: Wireless Network Primer GPS - Glob
Page 59 and 60: Increasingly, Mobile Phone Usage is
Page 61 and 62: Mobile Devices + Infrastructure Ena
Page 63 and 64: Cloud-Based Content / App Services
Page 65 and 66: Machine to Machine (M2M) Takes on N
Page 67 and 68: Rapid growth in number / type of mo
Page 69 and 70: GPS proliferation (and related loca
Page 71 and 72: GPS = 421MM Chipsets Sold in 2008E
Page 73 and 74: WIRED Magazine - “Inside the GPS
Page 75 and 76: 3G proliferation is a big deal. 75
Page 77 and 78: 3G = Key to Enabling Internet Usage
Page 79 and 80: 3G Penetration Inflection Points Va
Page 81 and 82: 3G Growth Still Concentrated in Dev
Page 83 and 84: USA Likely to Remain Most Dynamic 3
Page 85 and 86: Wi-Fi proliferation is a big deal.
Page 87 and 88: Wi-Fi’s High Speed + Wide Availab
Page 89 and 90: 100,000 Wi-Fi Households (USA) = 20
Page 91 and 92: Bluetooth proliferation is a big de
Page 93 and 94: Bluetooth = 1.3B Chipsets Sold in 2
Page 95 and 96: What Is a ‘Smartphone’ We defi
Page 97 and 98: Smartphone of 2009 = As Powerful as
Page 99 and 100: Mobile Internet - Leveraging the Ev
Page 101 and 102:
Notebook PC + Smartphone Shipments
Page 103 and 104:
Impressive / Rapid Growing Smartpho
Page 105 and 106:
Consumer Internet-Enabled Devices -
Page 107 and 108:
Significant Growth in 3G + Smartpho
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Unified Communication (UC) Voice (~
Page 111 and 112:
If VoIP Leader Skype Were a Carrier
Page 113 and 114:
VoIP = Material Impact on Tradition
Page 115 and 116:
Google Voice Putting User in Contro
Page 117 and 118:
Social Networking - Global Phenomen
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Facebook = Garnering Rising Share o
Page 121 and 122:
Powerful Devices (like iPhone) + Ne
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Video = High Usage + High Bandwidth
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Mobile Ramping Faster than Desktop
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Key Theme #3 1) Wealth Creation / D
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Apple Leading in Mobile Innovation
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Apple’s Impressive Share Likely M
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iTunes App Store = Shot Heard ‘Ro
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iTunes App Store = The Killer Mobil
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Mobile App Definition A mobile appl
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Users / Developers / Apple = Likely
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Apple iPhone / iTouch = 2B+ App Dow
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Most Downloaded Free iPhone Apps -
Page 145 and 146:
iPhone Apps for Nearly Everyone - L
Page 147 and 148:
Mobile Developer Mind Share / Focus
Page 149 and 150:
Powerful mobile device usage trends
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iPhone / Android Gaining Mobile Int
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Mobile Internet Operating System Co
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Handset Device Price / Volume Pyram
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High-End Quickly Becomes Low-End -
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iPhone 3G BOM = 33% Lower than iPho
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Apple iTunes App Revenue = Could Su
Page 163 and 164:
Apple leads race for handset profit
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Apple + RIM = 13% Share of Handset
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Apple / RIM - Smartphone Leaders Co
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PC Platform Leaders (Microsoft + In
Page 171 and 172:
Apple iPhone Base Case + Upside Cas
Page 173 and 174:
Scenarios for Apple iPhone Market S
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The Apple Tablet Potential Should N
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Apple - Potential Long-Term Challen
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Google Android’s Open + Low Cost
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Apple may believe its platform mana
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In Technology, Products with Most /
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Multitudes of Android Phones - Tens
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Android’s Conundrum Open-Source S
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Next Generation Android Smartphones
Page 191 and 192:
Apple’s Potential Long-Term Chall
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Native Apps Benefits Challenges For
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Native Apps Should Always Have Perf
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Apple = Likely Well Positioned to N
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Do Incumbents Have Apple-Like Poten
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Smartphones Not Relevant in Emergin
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Retail Sales (Not Carrier Sales) -
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Apple’s Success Has Been Proven i
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Buddhist Phone White-Box “Shanzha
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Don’t Expect Apple to Stand Still
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Carrier Exclusivity Limits Apple’
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iPhone Price Cut to $99 Would Elimi
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Ending Carrier Exclusivity = Could
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Battery Technology Constraining iPh
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Implications of New Horizontal Busi
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Apple’s Vertical Handset Model =
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Apple iPhone + iTouch = On Track to
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Apple iTouch - Key Companion to iPh
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RIM’s Vertical Handset Model = Pr
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Threats from RIM’s Vertical Integ
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Horizontal Handset Model Finally Em
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Opportunities / Benefits from Horiz
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Key Theme #4 235
Page 237 and 238:
Key Theme #4 - Game-Changing Commun
Page 239 and 240:
Facebook and Apple iPhone / iTouch
Page 241 and 242:
Facebook + Apple iPhone / iTouch =
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Social Networks - Underpinning of I
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Social Networking Driving Consumer
Page 247 and 248:
Social Networks - Gaining Material
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Facebook Platform - A Hub for Commu
Page 251 and 252:
Facebook - Next Generation Portal f
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Facebook - Largest Share Gainer of
Page 255 and 256:
Facebook / Twitter Replacing Tradit
Page 257 and 258:
Communication on Twitter Not Only C
Page 259 and 260:
Facebook Users = Heavy Content Crea
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Top 10 Facebook Applications - Game
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Facebook = A Platform for Advertise
Page 265 and 266:
Facebook - Opportunity for Advertis
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Facebook - Advertiser / Vendor Succ
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Social Networks in General = Platfo
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LinkedIn - Social Network for Profe
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Like Twitter and Facebook, Foursqua
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Advertising Follows Eyeballs - Glob
Page 277 and 278:
Facebook - Vibrant Developer / Appl
Page 279 and 280:
Developer / Application Success on
Page 281 and 282:
China Serves as Proxy & Leads World
Page 283 and 284:
Tencent Business Model Overview - H
Page 285 and 286:
Mobile = Future of Social Networks
Page 287 and 288:
Mobile Social Networking in Japan ~
Page 289 and 290:
Facebook Symbiotic with Mobile - Sh
Page 291 and 292:
Carriers’ ‘Walled Gardens’ =
Page 293 and 294:
Apple Unshackled Developers + Consu
Page 295 and 296:
Mobile Commerce = Accelerator for O
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15 Years for Online to Reach 4% of
Page 299 and 300:
Mobile Revolutionizing Commerce - W
Page 301 and 302:
Deep Discounts - Invitation-Only Ti
Page 303 and 304:
Traditional Retailers Using Pings t
Page 305 and 306:
Key Theme #5 305
Page 307 and 308:
Key Theme #5 Growth / Monetization
Page 309 and 310:
Japan has led world by 5-10 years i
Page 311 and 312:
ROW’s Mobile Internet Revenue Mix
Page 313 and 314:
Mobile Revenue (ex. Data Access) pe
Page 315 and 316:
3G Penetration - …Developed / Eme
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Why Has Japan Led the World in Mobi
Page 319 and 320:
Rich Content / Apps / Services - Ja
Page 321 and 322:
Powerful / Internet-Enabled Handset
Page 323 and 324:
Japan Mobile Online Commerce / Paid
Page 325 and 326:
Japan Mobile Online Commerce / Paid
Page 327 and 328:
Japan as Proxy for Technology’s R
Page 329 and 330:
Japan mobile monetization models pr
Page 331 and 332:
Japan’s Mobile Online Commerce /
Page 333 and 334:
Mobile Online Commerce - Promising
Page 335 and 336:
Japan - Physical Products Gaining S
Page 337 and 338:
ROW Also Making Inroads into Mobile
Page 339 and 340:
ROW - Branded Mobile Apps Could Dri
Page 341 and 342:
Digital Content (Music / Video / Ap
Page 343 and 344:
Digital Content - Mobile Games / Mu
Page 345 and 346:
Tencent Business Model Overview - H
Page 347 and 348:
Japan - Virtual / Digital Goods on
Page 349 and 350:
China Serves as Proxy & Leads World
Page 351 and 352:
Developer / Application Success on
Page 353 and 354:
Japan Mobile Paid Services 5 Years
Page 355 and 356:
Rakuten Travel - Mobile Gross Hotel
Page 357 and 358:
Mobile Advertising - Personalizatio
Page 359 and 360:
Japan - Mobile Advertising - 24% CA
Page 361 and 362:
Upside to Mobile Search Advertising
Page 363 and 364:
Heavy Search / Display Advertising
Page 365 and 366:
Interactive Video Advertising Revol
Page 367 and 368:
Desktop Internet Monetization Evolu
Page 369 and 370:
…While Premium Content Revenue (U
Page 371 and 372:
At Margin, Advertising + Online Com
Page 373 and 374:
Users Often Pay for Content as Long
Page 375 and 376:
View of Paid vs. Ad-Supported Conte
Page 377 and 378:
Media Time Spent vs. Ad Spend Out o
Page 379 and 380:
History Proves That Ads Follow Eyeb
Page 381 and 382:
Global Mobile Advertising Scenario
Page 383 and 384:
Global Mobile Online Commerce / Pai
Page 385 and 386:
Global Mobile Internet Ecosystem -
Page 387 and 388:
Global Mobile Internet Ecosystem Re
Page 389 and 390:
Mobile Internet Revenue Mix Shiftin
Page 391 and 392:
Google - Internet Search Innovation
Page 393 and 394:
Amazon.com - Online Shopping Experi
Page 395 and 396:
Some companies can benefit from tec
Page 397 and 398:
How Mobile Internet Revenue May Evo
Page 399 and 400:
Key Theme #6 1) Wealth Creation / D
Page 401 and 402:
Key Theme #6 - Massive Data Growth
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The Carriers’ Capex Conundrum…
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Massive Data Growth Driving Carrier
Page 407 and 408:
Global Mobile Data Trends Imply Ong
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Global Mobile Data Users - 29% CAGR
Page 411 and 412:
Global Mobile Data Users - 55% CAGR
Page 413 and 414:
Company- and Product-level Mobile D
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AT&T = 50x Mobile Data Traffic Incr
Page 417 and 418:
Data = Increasingly Dominating Netw
Page 419 and 420:
European Market Supporting Data and
Page 421 and 422:
Smartphone Data Usage Will Rise wit
Page 423 and 424:
Near Term, Mobile Internet Usage Su
Page 425 and 426:
European Mobile Network Utilization
Page 427 and 428:
As Data Usage Becomes More Importan
Page 429 and 430:
Aggregate Mobile Data Network Suppl
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Network Congestion in High Density
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Total Network Capacity on a Cell Si
Page 435 and 436:
However, As Smartphone Penetration
Page 437 and 438:
Overview of a Mobile Data Network T
Page 439 and 440:
Wireless Capacity - Where Does It L
Page 441 and 442:
Network Improvement Timeline Step A
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Short-Term Network Improvements - H
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Short-term Network Improvements - W
Page 447 and 448:
Wireless Backhaul Capacity Expected
Page 449 and 450:
Mobile Internet Implications for Wi
Page 451 and 452:
Wi-Fi Moves from Carrier Foe to Fri
Page 453 and 454:
Wi-Fi Significantly Cheaper for Car
Page 455 and 456:
Wi-Fi Network Coverage in Home and
Page 457 and 458:
~7,000 AT&T Wi-Fi Access Points at
Page 459 and 460:
Wi-Fi Case Study #2 - Boosting Valu
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Bottom Line = Wi-Fi Offload Will Be
Page 463 and 464:
HSPA + Backhaul Upgrades Should Red
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Long-term Network Improvements - Ne
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Good News = Proprietary Network Opt
Page 469 and 470:
Long-term Network Improvements - Up
Page 471 and 472:
HSPA / LTE Buildout Roadmap - Succe
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LTE = 24x Theoretical Bandwidth of
Page 475 and 476:
39 Operators in 19 Countries Alread
Page 477 and 478:
LTE Introduction Cost Should Be Low
Page 479 and 480:
New Lower Spectrum Allocations, Suc
Page 481 and 482:
Spectral Efficiency ((Bit/S)/Hz), p
Page 483 and 484:
What effect will long-term network
Page 485 and 486:
Raw Network Capacity Improvement Ca
Page 487 and 488:
Underlying Technology Improvements
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Case Study - 2010E Capex Analysis f
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AT&T Plans to Increase Capacity in
Page 493 and 494:
Network Sharing Is Becoming Increas
Page 495 and 496:
In the USA and W. Europe, Carrier V
Page 497 and 498:
Premium Voice + SMS Revenue Share L
Page 499 and 500:
Rapid Consumer / Business Adoption
Page 501 and 502:
VoIP International Long Distance (I
Page 503 and 504:
Mobile Texting Revenue Growth Slowi
Page 505 and 506:
Global Mobile Voice TTM Revenue of
Page 507 and 508:
Mobile Data Pricing Models in Flux
Page 509 and 510:
Flat-Rate Pricing = Necessary for U
Page 511 and 512:
Flat-Rate Wireless Data Plans - Pro
Page 513 and 514:
Flat-Rate Pricing May Also Encourag
Page 515 and 516:
Wireline Broadband Tiered Pricing C
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KDDI Tiered Flat-Rate Pricing Cater
Page 519 and 520:
Bell Canada Combo Plans Bring Tiere
Page 521 and 522:
Base Case USA / W. Europe Carrier O
Page 523 and 524:
Key Scenario Drivers for US Wireles
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USA Wireless Revenue Base Case Scen
Page 527 and 528:
Total ARPU Expected to Decline Slig
Page 529 and 530:
Non-Text Revenue = Key to Data Reve
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W. Europe* Wireless Service Revenue
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Implied W. Europe Wireless Carrier
Page 535 and 536:
Scale, Access to Spectrum and Capit
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…10 Attributes of Winning Wireles
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Scale = Key Competitive Advantage f
Page 541 and 542:
USA Spectrum Holdings - Larger Carr
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Exclusive Devices (such as iPhone)
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But Carrying the iPhone Is Mixed Bl
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Competitive Share Gain Opportunitie
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Scenario: AT&T Loses iPhone Exclusi
Page 551 and 552:
Opportunities for Network Equipment
Page 553 and 554:
Total Wireless Equipment Revenue Ex
Page 555 and 556:
Network Services Is Now ~$80B Addre
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Mobile / 3G Subscriber Trends by Co
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…Mobile / 3G Subscriber Trends by
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…Mobile / 3G Subscriber Trends by
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Key Theme #7 563
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Key Theme #7 - Compelling Opportuni
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Emerging Markets = Significant Long
Page 569 and 570:
Emerging Markets = Significant Long
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At Inflection Point, Long-Term EM O
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Opportunities Could Be Significant
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Over Time, Impact of Mobile Interne
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…Caused in Part by Sub-20% Fixed-
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3G / Wireless = ‘Only Choice’ f
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Vibrant Mobile Value-Added Services
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Emerging Asia VAS Revenue Share Alr
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Emerging Market Carriers Adapted to
Page 587 and 588:
Bharti-Airtel = Cost Savings from O
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Compressing Wireless Data Could Red
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Emerging Markets - Some Near-Term 3
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Near-Term 3G Adoption Barriers = Lo
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Low Post-Paid Ratio + Low GDP per C
Page 597 and 598:
High Monthly Data Plan Costs = Near
Page 599 and 600:
Emerging Markets Regional Analysis
Page 601 and 602:
Regional Analysis / Forecast - Chin
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Chinese Consumers Are Ready for 3G
Page 605 and 606:
3G Creates New Battle Ground for Ch
Page 607 and 608:
iPhone Costs Too High for Majority
Page 609 and 610:
Key Scenario Drivers for China Wire
Page 611 and 612:
China Wireless Revenue Base Case Sc
Page 613 and 614:
Data ARPU Growth Expected to Partia
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India - Near-term Barriers to 3G Ad
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India - Upcoming Auction to Bring 3
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Base Case: Winning 3G Spectrum Does
Page 621 and 622:
Capex Required for 3G Network Could
Page 623 and 624:
Other Emerging Asia - Low Fixed-Lin
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Philippines - Mobile Overtook Fixed
Page 627 and 628:
Indonesia - Mobile Could Accelerate
Page 629 and 630:
WiMAX in Emerging Asia - Still in N
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EEMEA - Carriers Leverage Cost-Effe
Page 633 and 634:
Africa - Mobile Broadband Prolifera
Page 635 and 636:
Middle East + Africa Have the Lowes
Page 637 and 638:
Key Scenario Drivers for Russia Wir
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Key Theme #8 639
Page 641 and 642:
Key Theme #8 - Regulators Can Help
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Net Neutrality - Key to Decentraliz
Page 645 and 646:
In the US, FCC Has Issued a “Noti
Page 647 and 648:
Both Sides of Net Neutrality Debate
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What Could Regulators Do to Acceler
Page 651 and 652:
Lower Mobile Data Roaming Fees = En
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“Not in My Back Yard” (NIMBY) P
Page 655 and 656:
3G Licenses Reshape China’s Compe
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USA Recent Developments - USA F
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Recent Developments - China / India
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Disclosure Section (cont.) Morgan S
Page 663 and 664:
Disclosure Section (cont.) Within t
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Disclosure Section (cont.) Analyst
Page 667 and 668:
Disclosure Section (cont.) Stock Pr
Page 669 and 670:
Disclosure Section (cont.) Importan
Page 671:
Disclosure Section (cont.) MTN does
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