1 Generation Next Five pathways to TMT growth in emerging markets
2 2 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Contents 3 Contents Generation Next: Five pathways to TMT growth in emerging markets 1 Introduction About the report This report is for TMT leaders and investors, their trusted advisers, in-house counsel and anyone doing business with TMT and related companies to help navigate pathways to TMT growth in emerging markets. The Generation Next study is based on Linklaters specialist legal and TMT insights, Ovum s market and forecast data and qualitative interviews with business leaders from 30 multi-billion dollar TMT power players, including mobile network operators, technology vendors, content providers and banks. 2 Key trends 2.1 Next generation broadband 2.2 Content and applications 2.3 Mobile money 2.4 The Cloud 2.5 Mobile health 3 Conclusion
3 4 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Key trends 5 Generation Next: Five pathways to TMT growth in emerging markets This report highlights five routes to growth in emerging markets TMT players can t afford to ignore in their search for the next billion consumers, the obstacles they may face along the way and the countries where we believe most of the growth will take place. The emerging countries featured in this report are: Brazil, Russia,,, Indonesia, Malaysia, Mexico, South Africa, Nigeria and Kenya. Content and applications 84% increase in content and applications revenue in emerging markets $30bn forecast revenue $16.3bn revenue Obstacles Licensing structures, political uncertainty, local infrastructure, skills Mobile VAS revenue Mobile music revenue represents $1bn existing revenue represents $1bn forecast revenue growth Next generation broadband 174% increase in broadband connections in emerging markets Mobile health $10bn existing revenue (2012) $10bn forecast revenue growth (2017) $8.8bn forecast revenue (2017) NEXT BILLION NEXT BILLION Mobile gaming revenue Obstacles Obstacles, piracy, privacy rights Connectivity, interoperability, infrastructure, IP rights protection, operational risks, censorship 184% increase in mobile health revenue in emerging markets $3.1bn revenue (2012) Obstacles Mobile penetration, literacy levels, affordability, regulatory framework, bureaucracy, taxation Obstacles Operational execution, restrictive regulation, complex taxation, service quality, interoperability The Cloud 382% $10.4bn forecast revenue increase in Cloud ICT service spend in emerging markets $2.2bn revenue Mobile money predicted increase in mobile money transactions by $858m revenue 3376% $29.8bn 2017 forecast revenue
4 6 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Introduction 7 Introduction Emerging markets present a unique set of challenges which defy the rules of developed market business models. Emerging markets represent the greatest revenue opportunity for a telecoms, media and technology (TMT) industry facing stagnant revenue growth, market saturation and declining profitability, a far cry from the double-digit growth which companies and their investors had become accustomed to. Today s TMT power players are shifting their focus to the promise of high growth offered by emerging economies. But with this great opportunity comes great risk. Having connected the next billion consumers with the low hanging fruit of voice and SMS services, the rules of the game for TMT players in emerging markets are changing fast. Emerging markets present a new set of challenges, as companies face a need for new business models. Winners and losers will be determined by their agility in overcoming challenges of geography and technology, but more importantly by how they remake their organisations and ways of working and partnering to meet the demands of this radically different landscape. The TMT markets in the emerging economies of Africa, Asia, Eastern Europe, the Middle East and Latin America have changed beyond recognition in the last decade. The growth of mobile networks and services in particular has enabled established global players such as Vodafone and Orange to enter new markets while also creating opportunities for new regional powerhouses such as Airtel, América Móvil and MTN to emerge. In the process, TMT players have transformed the way people communicate, work, live and play in these rapidly changing economies. As the initial land grab for new connections begins to subside, traditional forms of TMT revenue growth are beginning to slow down in these markets, competition is increasing, tariffs for basic voice and SMS services are declining, and margins are beginning to come under pressure. These factors pose a number of fundamental questions for TMT leaders, namely: Where geographically will future growth come from and how can companies localise effectively to capture it? What are the product and service segments that will drive profitable growth? What strategies and business models should TMT players adopt to tap into these growth opportunities? How can companies align effectively with diverse government TMT strategies and navigate complex regulatory frameworks? And what are the most significant risk factors associated with these opportunities? This report is for TMT leaders and investors, their trusted advisers, in-house counsel and anyone doing business with TMT and related companies to help navigate pathways to TMT growth in emerging markets. We have combined Linklaters specialist TMT insights, Ovum s market and forecast data, and qualitative interviews with business leaders from emerging market TMT power players to forecast market growth, identify key go-to-market strategies and signpost the critical success factors that will shape the future of TMT in emerging markets. We examine in detail five big bets for TMT players in emerging markets and their implications for the future of the industry: 1. Next generation broadband 2. Content and applications 3. Mobile money 4. The Cloud 5. Mobile health Our report concludes with an examination of five critical success factors for TMT players in emerging markets. We hope you enjoy our report, which can be reviewed as a whole or by diving into the five sections described above. This study is part of Linklaters TMT Sector Programme. If you d like to find out more, please get in touch. Roger Barron and Julian Cunningham-Day Telecommunications, Media and Technology Global Sector Co-leaders TMT players have transformed the way people communicate, work, live and play in these rapidly changing economies. For an interactive version of this report go to: tmtgenerationnext.com
5 8 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband 9 Next generation broadband: getting on the broad-bandwagon $193bn Next generation broadband revenues from emerging markets will double to $193bn by Figure 1: Next generation broadband in emerging markets: TMT market growth forecast Country focus: 0 Broadband presents the greatest TMT revenue growth opportunity in emerging markets for the next five years. Demand for bigger-capacity Internet connections in order to attain faster speeds and richer data services, plus the increasing availability of lowercost, smarter devices, are leading to double-digit broadband growth in both connections and revenue. Increased domestic and international cable capacity and more sophisticated wireless networks will provide rapid, cost-effective broadband network coverage for billions of users for the first time, and will act as the innovation platform for a multitude of content and applications services. Next generation broadband (NGB) projects are widely supported by governments in emerging markets which acknowledge that their citizens and businesses need access to high-speed broadband services in order to be economically competitive in global markets. However, TMT companies will need to align their strategies with each local government broadband policy in order to benefit from the incentives and resources made available, as well as to ensure that their supply of new network infrastructure tracks local demand for Internet connections. This will help ensure that shareholders achieve an appropriate return on their investment. Introduction The market for communications services is evolving rapidly across emerging markets. Larger, higher-definition screens, faster processing power and the declining price of mobile devices are raising consumer awareness and appetite for content, data and social networking services. This is creating a surge in demand for the faster broadband and data connectivity required to make the experience of these services truly compelling. Broadband infrastructure and Internet access are also critical for economic development, with much of an emerging nation s future competitiveness reliant on the robustness of its technology infrastructure, a factor which can be magnified in countries where technology can offset some of the challenges of poor physical and transport infrastructure. Indeed, the International Telecommunication Union 2012 report suggests that a 10% growth in broadband penetration can yield about 1% incremental growth in GDP. As a result, many governments are actively promoting policies to boost broadband penetration, which in many cases is accelerating market development, but this may also distort the competitive landscape. For example, the Russian government s decision to award its 4G spectrum on a fee-free basis, but exclusively to domestic players, has forced European player Tele2 to exit the market. While the broadband opportunity for TMT players in emerging markets is significant, tapping into it profitably will pose considerable challenges for service providers and their vendors, who will need to scale up their broadband access services with the right local mix of technologies, commercial packages and partners in order to maximise adoption Broadband connections in 2012 (bn) Forecast broadband connections in 2017 (bn) Broadband revenues in 2012 ($bn) Forecast broadband revenues in 2017 ($bn) Market size and growth The opportunity presented by new broadband infrastructure is unsurprisingly the number one focus area for most telecoms operators and equipment vendors who participated in this study. As a strategy director of a leading mobile network operator told us: Data access is the key strategic growth area for us. Indeed, emerging market broadband connections will grow from 1.3 billion in 2012 to 3.7 billion by the end of 2017, a sizeable 22% compounded annual growth rate (CAGR), while total retail revenues for broadband services are set to grow to $193bn over the same period, as outlined in Figure 1. The pent-up demand for broadband services in emerging markets is a reflection of the under-development of the market and the strong desire for Internet connectivity by their populations. While connection growth will outstrip revenue growth as the revenue per customer is generally lower in these markets, the broadband revenue opportunity is still immense due to the sheer scale of the growth. Broadband in In 2012, overtook the US as the country with the most broadband connections in the world. therefore presents by far the biggest broadband opportunity in the emerging markets. As a senior leader from a leading global vendor told us: Opportunities abound in and we expect the country to be our key growth driver in the next months. By 2017, will have close to 900 million fixed and mobile broadband connections, with almost three-quarters of these over mobile (3G or 4G) broadband. However, the unique nature of the Chinese telecoms market means this broadband opportunity is only open to a few select players. The market is mainly dominated by the three government-owned domestic players Mobile, Unicom and Telecom whose activities are expected to align with government plans for the country s broadband future. The 2008 restructuring of the industry has further entrenched the position of these three players, albeit while making them more competitive against each other. For example, although Mobile remains a behemoth in the mobile market, controlling about 65% of the market in 2012, its fixed division ( Tietong) has not dented the dominance of Unicom and Telecom, which controlled more than 90% of the retail fixed broadband market in Accordingly, jostling for market share among the three state-owned giants will dominate the competitive landscape over the next five years. The key to the future success of these domestic players will be their ability to integrate and coordinate their mobile and fixed broadband roll-out plans. This will require the alignment of LTE and fibre plans and the development of partnerships to address distinct opportunities in regional markets and in the enterprise space. Both of s two major domestic equipment vendors Huawei and ZTE have benefitted from the boom in the market and have solutions to cater for the integrated approach of the telecoms operators. But there are also opportunities for foreign equipment-makers to grab a slice of the market in the country. Despite opportunities in the market, uncertainties remain, especially about the evolution of the 4G (LTE) landscape. Two major concerns are relevant here. First, the future policy approach of the national telecommunications authority in relation to LTE licence and spectrum auctions is unclear. Secondly, as with the Chinese 3G variant (TD-SCDMA), there are concerns about the technical maturity of the TDD-based LTE technology that is favoured by, but which has little adoption elsewhere. Industry executives expect the TDD-LTE device ecosystem to be ready by but worry that they may struggle to support the commercial pickup of LTE in the market.
6 10 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband 11 Next generation broadband: getting on the broad-bandwagon Table 1: Risk forecast for foreign investors Next generation broadband: top five emerging markets Market Key risks Risk outline Risk forecast Indonesia Brazil Russia Source: Ovum/Linklaters. Political Finance Tax Infrastructure Skills Economic Infrastructure Skills Economic Finance Infrastructure Skills Finance Skills : Uncertainties over licensing of LTE spectrum and the mandate forcing some players to accept the locally-supported TD-LTE standard could derail NGB developments in the next 24 months. Political: Government intervention in the telecoms sector is common and access for international players is very restricted. Finance: The pegging of the yuan necessitates more complex financing structures for inbound/outbound Chinese investment. : The regional licensing structure, coupled with the recent spectrum licence scandals and threats of widespread regulatory reform provide significant concerns for potential investors. Tax: The government s attempts to extract significant taxes out of Vodafone have concerned potential investors. Infrastructure: remains plagued by infrastructure problems, especially in the transportation and energy sectors. Skills: recognises its skills gap in the industry, especially the manufacturing of telecoms equipment. : The government is the largest shareholder of the market leader, potentially leading to concerns about the independence of the regulator. Economic: Average monthly revenue per user for mobile telecoms services is very low (below $3), giving very little cushion to telecoms players in a downturn. Infrastructure: Indonesia s multitude of islands poses a gigantic challenge to transportation and logistics infrastructure in the country. Skills: Indonesia faces a skills shortage as it is failing to train enough technical graduates. Economic: Since 2008, lax fiscal targets, growing public debt, rising inflation and government intervention in investment decisions have become major concerns for investors in Brazil. Finance: Fluctuations in exchange rates and taxes on capital inflows and foreign products may constrain international TMT investment. Infrastructure: The forthcoming World Cup and Olympics should improve Brazil s infrastructure, but the level of investment is leading to civil unrest. This may impact the national NGB roll-out. Skills: The lack of a skilled and globally mobile workforce fluent in Portuguese is a source of concern. : The lack of effective separation between executive and regulator has raised concerns about politically motivated decisions, such as recent Russian-only spectrum auctions. Finance: Reliance on commodities prices and fluctuations in exchange rates represent a major risk for players in the market requiring finance. Skills: Continued emigration of skilled personnel and decline in the overall population pose a concern for recruiting skilled staff. Rainy High risk Rainy High risk Active network sharing provides great opportunities to increase costefficiencies and minimise the cost of future network expansion and upgrades. However, operators need to consider the robustness of their partner s infrastructure and put in place a framework with appropriate service levels and a well thought-out exit strategy. Julian Cunningham-Day Telecommunications, Media and Technology Global Sector Co-leader Mobile broadband will be the most effective and affordable means of providing Internet access across many emerging markets. In geographies where there is no fixed access infrastructure in place, it is usually not economical to build one now. For many low income, low population areas, mobile is the only economical solution. In places like Myanmar, which are just opening up their telecoms markets, the new entrants are well positioned to build a next generation broadband mobile network from the start, in addition to meeting the huge demand for voice services. As a result, 3.2 billion connections, or 87% of all emerging market broadband connections, will be over wireless technology. Today, 3G technologies account for most of the mobile broadband connections across emerging markets. While 4G technologies will grow, 3G will remain the dominant mobile technology across the emerging markets in the medium term. The greatest mobile broadband opportunities are to be found in the largest emerging markets. will account for 14% of all mobile broadband connections by As data traffic grows, LTE s capability to support an even more efficient, and cost-effective, data traffic infrastructure will encourage many emerging market players to launch more advanced LTE networks. This will drive rapid growth in emerging market LTE connections, reaching 352 million connections by 2017, or approximately one-tenth of all mobile broadband connections in the emerging markets. Despite the dominance of mobile broadband, fixed broadband will also continue to grow across emerging markets. The explosion in video traffic from websites such as YouTube, Youku and PPTV in, Next generation broadband: top five emerging markets Source: Ovum/Linklaters. All figures projected for Brazil 4 247m Broadband connections (85% mobile) $31bn Broadband revenues (38% mobile) as well as Internet-delivered TV services, will continue to provide a strong business case for the roll-out of fixed broadband infrastructure, particularly in fibre. By 2017, fixed broadband connections across emerging markets will reach 520 million connections. This will represent a small but important share of the total, accounting for 14% of total connections by 2017, yet generating 56% of the total revenue. This reflects the fact that fixed broadband connections will tend to serve the highestincome, trend-setting users at the top of the socio-economic pyramid. In contrast, mobile broadband connections are often the only option for the poorer sections of the population in emerging markets. High risk Russia 2 425m Broadband connections (91% mobile) The five largest broadband revenue opportunities in emerging markets are presented by,, Russia, Brazil and Mexico. These markets, and in particular Russia and, pose considerable regulatory and policy risks. Given the volume of lower-income customers in these markets, operators will also be forced to price their services to ensure affordability for customers while trying to maintain margins to deliver appropriate return on investment risk. Indeed, our research consistently shows that attempts to charge a price premium for FTTx and LTE usually dampen demand and adoption in both mature and emerging markets m Broadband connections (87% mobile) $10bn Broadband revenues (57% mobile) 1 894m Broadband connections (72% mobile) $53bn Broadband revenues (50% mobile) $17bn Broadband revenues (21% mobile) 3 Indonesia 259m Broadband connections (97% mobile) $4bn Broadband revenues (46% mobile)
7 12 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband 13 Next generation broadband: getting on the broad-bandwagon Many emerging market governments are prepared to offer incentives to those who participate in national broadband plans. Telecoms operators and vendors should carefully assess evolving government policy in target markets in order to position themselves to benefit from the resources that governments are making available, and avoid the local protectionism that has harmed new entrants in some emerging broadband markets. Operators will also need to develop infrastructure, strategy and pricing with an eye on the future for the next big bet: M2M the much vaunted Internet of Things. Sophie Mathur Partner Corporate Go-to-market strategies: multi-stakeholder engagement holds the key to success Capitalising on the opportunities presented by the broadband market will require a multi-stakeholder approach in order to deliver the required geographical coverage and economies of scale. Our research has identified six key go-to-market strategies for next generation broadband: 1. Align broadband roll-out with government development strategies: With governments eager to drive investment in broadband infrastructure, telecoms operators and vendors can benefit from the resources and incentives that emerging market governments can make available. Example inducements include amenable spectrum policies (e.g. the fee-free LTE spectrum awarded by Russia); subsidising network roll-out to economically unviable customers (e.g. the Colombian government s plan to use funds from the ICT Fund to provide broadband access to 69,000 underprivileged households); or direct investment by governments in broadbandrelated assets (e.g. South Africa s April 2013 National Broadband Plan which calls for the government to provide necessary funding for broadband initiatives). 2. Embrace a wireless-first network strategy: TMT players in most emerging markets should assume that they will need to provide comprehensive wireless-first broadband access by default, and add wired access incrementally in areas of high demand and where it is economic to do so. Kenya s proposed plan for a single LTE network is a key example of government support for a holistic, wireless-first strategy. 3. Leverage network sharing partnerships: Given the level of resources required to achieve nationwide coverage, operators should consider entering into bilateral and multilateral network sharing agreements to share their costs. This method is already well developed for wireless technologies, where sharing of masts, ducts and power supplies is widespread. Bigger gains, however, will come from active network sharing, where operators share their radio access networks and spectrum. Ovum forecasts that by 2017 at least 50% of all LTE networks in the world will involve some form of active network sharing, and this figure is likely to be significantly higher in emerging markets. 4. Roll-out innovative data pricing strategies: For data consumption to reach its full potential, telecoms operators need to develop new tariffs to make data access affordable to the bulk of their customers. A tariff that includes complimentary access to regularly used content (e.g. access to social networking sites) is a simple strategy to improve the appeal of data access. For example, Google, Facebook and Twitter have signed deals with numerous emerging market operators to offer such plans. The continued fall in smartphone prices has reduced barriers to entry for many bottom-of-pyramid consumers, but operators will need to shift to higher volume/ lower-margin plans in order to reach out to these customers. 5. Drive data consumption with content: TMT players in emerging markets are well positioned to spur creation of local content in their markets in order to drive data consumption on their networks. Offering such content may help the operators enhance customer loyalty and defend against becoming a dumb pipe for other companies content and services, and it can also generate new revenue streams and increase appetite. While a business model based on a limited walled-garden of available content is less secure in today s open Internet ecosystem, many operators can still benefit from providing their customers with access to exclusive curated content. Strategies range from full vertical integration (e.g. DTAC s Farmer s Information Gateway in Thailand) to simple sponsorship deals (e.g. Tigo s service which uses a series of SMS questionnaires to help customers recognise the onset of kidney diseases in Tanzania). With a fully integrated service, operators gain assets and capabilities that can enable them to compete in other areas of the TMT ecosystem. Sport and entertainment content is often a major attraction. As a former executive at a successful media company told us: The most profitable genre is sport, especially football. Globacom, for example, has a deal with Manchester United granting it exclusive rights to video highlights, match images and footage in Nigeria, Ghana and the Republic of Benin. Beyond sport, operators are also offering other types of content such as hosting app stores (e.g. Maxis in Malaysia) and websites (e.g. Safaricom Kenya s classified website). These additional content propositions serve to enhance the operator s core next generation broadband offering. 6. Future-proof your infrastructure for the Internet of Things : While today s focus is on connecting people, operators and vendors and other TMT players must position themselves to capitalise on machine-to-machine (M2M) connections. The hotly anticipated Internet of Things will enable us to connect gadgets from TVs and fridges to cars and houses. A senior executive at a leading global ICT vendor told us: 99% of the things that can be connected are not connected. Between now and 2020, this represents a business opportunity of more than $14trn. Given that most emerging markets do not have an extensive fixed telecoms infrastructure, M2M mobile connections will represent the first opportunity to connect many gadgets across emerging markets. TMT players need to lay the groundwork for M2M now, future-proofing their strategy, infrastructure and pricing models to ensure that partnerships with M2M providers can be industrialised to capture value from new opportunities quickly.
8 14 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Content and applications 15 Content and applications: Country focus: the big emerging appetite for data As consumers continue to seek out smart experiences in the most affordable and immediate ways, the biggest opportunities in content and applications in emerging markets over the next few years will come from value-added services (VAS) such as mobile money, with gaming, music and video playing an increasingly key role. This increase in demand will propel the mobile content market to revenues of $30bn by 2017, almost double its current size. To realise these opportunities, TMT players must orientate their strategies to take advantage of a mobile-led culture in emerging markets. Introduction Digital content in emerging markets has long been the near exclusive preserve of the wealthiest consumers who have access to the same smart devices, broadband connections, purchasing power and payment methods used by consumers in mature markets to enjoy digital content. The growth of mobile data access combined with the decreasing cost of larger-screen smart devices in emerging markets is driving mass access to content and applications for billions of new users. As growth in the number of mobile users decelerates, mobile operators are looking beyond basic VAS such as ringtones and logos, to increasing investment in content and applications to drive mobile data revenue. New 3G and LTE networks and the rising ownership of smart devices are together boosting data revenues in the form of increased usage of mobile broadband. The shift to mobile broadband is coming largely at the expense of VAS, as consumers with smart devices are increasingly finding ways to bypass the traditional operator-led content model. The industry must focus more closely on the affordability of smartphones and broadband data plans, the growing fragmentation of smartphone platforms, and the fine-tuning of monetisation models. Addressing these challenges will require customer-led innovation, as well as strong and equitable partnerships with a mix of local and global content partners. Monetising and paying for content remains a key challenge for the industry, which is fuelling the growth of ad-sponsored and freemium business models. While operator billing is an expensive but effective option for reaching unbanked users, the growth of mobile payment services is changing not only the way users pay for content, but the broader mobile financial services landscape. Market size and growth Mobile will represent 49% of all global Internet traffic by 2017 and, with the vast majority of emerging market broadband connections over wireless technology, mobile Internet traffic is increasing rapidly in emerging markets, providing an opportunity for content creators to access new consumers like never before. In, search giant Baidu, microblogging player Sina Weibo and online video player Youku Tudou, are all reporting that between 15% and 20% of their traffic comes from mobile devices. In, online travel booking company Cleartrip reports that nearly 28% of its traffic is already coming from mobile, much of it over its Android app. More interestingly, mobile also accounts for nearly 8% of its transactions. The adoption of cloud-accelerated (proxy) browsers is opening mobile browsers to the mass market segment, with more devices featuring browsers at increasingly more affordable prices. These lower prices will contribute to persuading the long tail of basic phone users to switch to smart phones and to access the Internet via their mobiles. The potential market is enormous when one measures rising browser usage data from major vendors. Opera Mini claims over 200 million users globally; UC Browser over 400 million; and Nokia announced it has over 80 million users of its Xpress Browser. In the short term, the greatest traction comes from messaging apps, particularly in the social category. This is because the future of messaging will be centred on IP-based messaging and social messaging apps. This is particularly true in Asia, where messaging apps are very popular. The stickiness of social messaging services for customers makes them the ideal platform from which to launch complementary, more monetisable services. For example, Figure 2: Content and applications in emerging markets: TMT market growth forecast Mobile VAS revenues Mobile music revenues Content and app revenues in 2012 ($bn) Mobile gaming revenues Forecast content and app revenues in 2017 ($bn) Late starter rising fast is a great example of an emerging market in terms of its opportunities for revenues from mobile content and apps. Much smaller than, it has also lagged behind Brazil in its overall pace of development, particularly with respect to the deployment of mobile broadband. This slow adoption of mobile broadband has been particularly striking given the negligible fixed Internet penetration in the country. However, a number of factors are converging at the right time to position as the next big growth story in content and apps. While basic mobile connection growth is slowing down, many users are adding mobile broadband plans to their voice and SMS services. As a result, mobile broadband users are projected to grow rapidly, rising from around 60 million connections today to more than 350 million by In parallel, there is rapid growth in smartphone shipments, which are projected to rise rapidly from barely 20 million in 2012 to more than 160 million in This rapid pace of smartphone adoption will swell the installed base to nearly 500 million devices in the country, representing a tremendous addressable market for the consumption of digital content and apps over mobile devices. The single biggest driver of this growth is the availability of the affordable, featurerich Android smartphones that are being imported from. Among all the content categories in, the most popular are messaging apps and mobile video. Like most other Asian countries, messaging, especially social messaging, is very popular in. There is no single dominant player in and usage is currently spread over several apps, including home grown apps from the likes of GupShup, Hike and Nimbuzz. Mobile video is also gaining in popularity, with services from the likes of VuClip gaining significant traction. Mobile operators have also developed their own proprietary or white label services, and are marketing these services heavily. For example, Bharti Airtel has launched a new One Rupee plan for mobile videos. Priced at 1 n Rupee (around 2 US cents), prepaid users can dial a short code to gain access to Airtel s portal, from which they can choose their video clips. Alternatively, they can go straight to the page from a mobile browser. has an overwhelming proportion of prepaid users, accounting for nearly 97% of the total base of connections, making it difficult for operators to profitably market mobile data. However, the launch of 3G networks and the impending launch of LTE are providing a much-needed bandwidth boost to new owners of smartphones. Today, mobile operators are offering very attractive data packages to their prepaid user base and are gaining increasing traction as they replicate the strategies that were successful in the voice market. Until recently, a lack of adequate payment mechanisms was also holding back market development. Now, the availability of app stores like the Nokia Store, with its extensive operator billing arrangements, has made payment for content and apps much easier for the mass market. This reduced friction is manifesting in increased downloads, even from lower income segments. For the small but high-spending postpaid user base in, app stores like itunes and Google Play have all rolled out local versions for the n market allowing these subscribers to pay for content and apps with their credit and/or debit cards.