By the Maravedis Team
The third quarter of 2008 proved very eventful for the WiMAX industry. September marked another milestone with the commercial launch of Sprint's XOHM in Baltimore, which will be a key driver for greater WiMAX market penetration. As of January 2009, Sprint had not yet released details of the results of that launch in terms of subscribers. Also during this quarter, the WiMAX Forum certified another 13 mobile WiMAX products (in the 2.5GHz band) in addition to the first 10 mobile WiMAX products certified in June 2008. In total, 10 vendors now have certified WiMAX equipment. We also saw major operator developments in countries such as Russia and India - the latter considered one of the most promising countries for WiMAX's future, due to its need for greater broadband connectivity. Last August India's Department of Telecommunications announced it would release spectrum blocks in the 2.3GHz and 2.5GHz bands for WiMAX, and in the 3.3GHz-3.6GHz and 700MHz bands for BWA (when available.) According to the Indian regulator, the 2.3GHz-2.5GHz auction will occur in 2009, coinciding with the publication of Maravedis' third edition of its "Opportunities and Challenges for Broadband Wireless in India" report.
Much has been said of late about the battle between WiMAX and LTE. LTE's momentum continues to grow, as it is the technology selected by most mobile operators worldwide. Today there are nearly 400 operators deploying or trialing WiMAX, and over 100 committed to LTE, including many CDMA operators.
However, the industry also struggled during this quarter. The economic downturn affected most WiMAX operators' deployment plans, average revenue per user (ARPU) margins and subscriber churn rates. Most WiMAX operators are finding it difficult to maintain investment plans for new network build-out and enhancement projects, due to the limited capital-raising opportunities. Unwired Australia is one example of an operator hit by the credit crunch. Now struggling to find enough cash to pay for its planned nationwide mobile WiMAX network, Unwired is trying to slash between $20 million and $30 million from the cost of its network. Tata Communications in India is also running out of capital needed to meet its annual operating plan. Billions of dollars are needed to establish these next-generation networks, the fundamental challenge faced by both Greenfield and established operators is in turning a profit from networks that are well under developed.
For the first time in its short history WiMAXCounts reported a significant slow down in service revenue growth compared to previous quarters, dropping from a continuous 21% increase trend quarter-over-quarter to 14% at the end of Q3 2008. In 2009 the economic downturn will continue to slow growth and innovation in many areas, but will also create attractive investment opportunities in the communications sector. According to Venture Capital Firm, the leading trend going into 2009 is an accelerating shift in consumer spending toward wireless services and replacement of landline services. The value of mobile data services will accelerate as consumers rationalize their communications services expenses. Smaller carriers will have room to differentiate themselves with innovative products and services, and operators will revise deployment strategies to remain profitable and increase efficiency with fewer resources. Finally, lower monthly subscription fees could accelerate the adoption of "Personal Wireless Broadband."
At the end of September 2008, WiMAXCounts counted over 2.68 million BWA/WiMAX subscribers, a 13% growth from Q2 2008 and a 91% growth from Q3 2007. The economic downturn affected the ARPU margins and quarterly revenues. Further, the appreciation of the US dollar caused many operators' ARPUs to decline when converted to US dollars; this together with a lower subscription growth rate produced a slower increase in revenue as compared to previous quarters. With a monthly residential ARPU of $46.46 and business ARPU of $125.66, the worldwide subscriber base generated estimated quarterly revenues of $492 million.
Residential subscribers (64%) continue to dominate the number of business subscribers (36%). North America represented the region with the highest residential customer base, closing out Q3 2008 with 78% residential and 22% business. These numbers are heavily weighted by Clearwire USA's residential broadband success, despite the company reporting its lowest incremental increase in new subscribers in its history.
Although XOHM's success is critical for the technology prospects worldwide, as well as for large scale deployments in other regions, some countries still face challenges to WiMAX deployments. The main issues are the lack of sufficient spectrum and delayed auctions preventing some players from proceeding with their deployment plans. This is particularly true in Latin American countries including Mexico, Brazil, Chile and Argentina. In Europe, availability of the 2.6GHz band will open up in the near future, and a handful of countries have already allocated this band. Spectrum for IMT-advanced services will gradually become available for both WiMAX and LTE 4G technologies.
The total number of BWA/WiMAX CPE deployed as of September 2008 reached 2.68 million units, up 15% from the 2.33 million tracked in June 2008. The largest increase in technology deployment during the quarter occurred from devices based on the 802.16-2004 standard, which jumped 19% from the previous 3 months and nearly 50% over the first half of the year. The devices based on 802.16e-2005 experienced a slowdown, mainly due to the loss of subscribers on Korea Telecom's WiBro network. New deployments of proprietary CPE increased during Q3 2008, with over 150,000 units added by the WiMAXCounts operators. The biggest contributors to this number were Irish Broadband, MVS Mexico, Woosh Wireless and Unwired Australia. Clearwire reported a very low subscriber growth, adding only 8,000 proprietary subscribers during the quarter.
The VoWiMAX market is still in its infancy - the cumulative number of worldwide VoWiMAX subscribers is only 269,690. WiMAX players are not yet positioning VoWiMAX as a voice replacement technology because of various technological, regulatory and business hurdles. Barring a few exceptions like Wateen Telecom, Iberbanda, ZAIN, and Mobilink, who have marketed VoIP as an important component of their service offering, most service providers Maravedis has spoken with revealed they are seeing less penetration for VoIP compared to data services.