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Global migration: Increasing shift from 2G to 3G networks

May 30, 2014

Global 3G uptake has picked up pace over the last few years with several countries migrating from 2G to 3G networks. 3G connections worldwide have quadrupled since 2008 to a total of 1.7 billion. This number is further expected to reach 4.2 billion by 2017, representing a growth rate of 20 per cent per annum.

However, 3G penetration varies significantly across different countries. According to the “GSMA Mobile Economy 2013” report by AT Kearney, 3G penetration in Europe stands at 66 per cent, whereas in the emerging markets of Asia-Pacific and Africa, it stands at 17 per cent and 8 per cent respectively, showing a significant potential for the uptake of these services in the future.

Further, GSMA Wireless Intelligence expects that with the growing uptake of 3G services, global data consumption will increase from 852 petabytes per month in 2013 to 7,363 petabytes per month in 2017. In absolute terms, the volume of traffic generated by data services such as web browsing and emails is projected to increase from 490 petabytes per month in 2013 to 2,577 petabytes in 2017. In terms of technology usage in the 3G space, high speed packet access (HSPA) will continue to account for the majority of connections with the technology’s share in the 3G space almost doubling from 16 per cent at the end of 2013 to over 30 per cent by 2017. In comparison, the share of 3G CDMA technologies (EVDO) will remain flat at about 4 per cent between 2013 and 2017.

Worldwide, the majority of wideband code division multiple access (WCDMA) operators have already upgraded their networks to HSPA and a large number of operators have deployed dual-carrier HSPA+ technology in order to offer download speeds at par with 4G networks. Currently, 123 countries support live 260 HSPA+ networks. In fact, there has been a significant decline in the number of WCDMA-only devices in operator portfolios over the last two years as they have been replaced by HSPA-enabled devices. Moreover, almost all data devices (dongles, tablets, mobile hotspots and laptops) are now 3G compatible, with nine out of 10 being HSPA enabled.

At present, migration from 2G networks is evident in mature regions such as Western Europe, where the number of 2G and 3G/4G connections is almost equal. However, despite the growth in 3G networks, 2G technologies continue to account for over 80 per cent of connections in China and more than 90 per cent in India, the world’s two largest mobile markets. In comparison, in highly advanced markets such as Japan and South Korea, migration to 3G/4G networks has reached a stage where 2G networks are now being switched off. Further, 2G connections constitute less than a quarter of the total telecom networks in mature markets such as the US and Australia.

Developing countries are now rapidly migrating to 3G networks as they recognise the economic value of upgrading to networks that support higher speeds. A joint study by the GSMA and Deloitte shows that a 10 per cent shift from 2G to 3G networks increases gross domestic product (GDP) per capita growth by 0.15 percentage points, while a doubling of mobile data usage leads to an increase of 0.5 percentage points in the GDP growth rate. For instance, countries characterised by a higher level of data usage per 3G connection – such as Russia, the UK and South Korea – have seen an increase in GDP growth of up to 1.4 percentage points.

A look at a few of the key 3G markets across different regions…

Africa

ABI Research estimates that the 3G subscriber base in Africa will grow from 114 million in 2013 to 210 million by 2015. A few of the major markets in the region, like Ghana, Nigeria and South Africa, have already achieved 100 per cent penetration in the 3G space. Higher usage of mobile data in the region is being driven by growth in sectors like health care and education. Operators across markets are offering users 3G access at affordable prices. For example, within Nigeria, three leading operators – MTN Nigeria, Zain Nigeria and EMTS – have undertaken major tariff reductions, allowing low-income subscribers to migrate to the 3G network.

Asia-Pacific

Various industry reports suggest that Japan, which led the initial growth in 3G networks in the Asia-Pacific region with large-scale deployments, has reached saturation. The growth in the 3G market in the region is now being led by China. The total 3G subscriber base in the country increased from 233.5 million in 2012 to 417 million at the end of 2013, witnessing a growth of 78.7 per cent. China also has 270 million active Android-based smartphones, most of which are 3G enabled. With 4G having been rolled out in China as late as December 2013, industry experts forecast continued growth in the 3G subscriber base over the next few years. Further, 3G services are witnessing growing uptake in other Asia-Pacific markets including India, Bangladesh, Indonesia and Malaysia.

Despite a positive outlook for the growth of 3G markets in the Asia-Pacific region, the GSMA states that in a number of countries, small block sizes and limited spectrum will impact the growth of 3G networks. New-generation technologies require a minimum amount of contiguous spectrum for operators to deliver high speed data services. For example, operators need a minimum of 5 MHz of spectrum blocks for delivering a ubiquitous 3G experience across the network. The GSMA underlines that in order to accelerate the growth of 3G in potential markets, regulators need to ensure that adequate spectrum is available to operators, and there is a clear road map that spells out the future availability and timing of spectrum release, thereby minimising uncertainty for operators.

Middle East

According to the International Telecommunications Union, the Arab states witnessed large-scale 3G deployments beginning 2011 and continuing to 2013-14. Leading 3G countries in the region include Iran, Saudi Arabia, Kuwait, the UAE, Oman, Bahrain, Jordan and Iraq. Research firm Informa Telecoms & Media forecasts that the majority of countries in the Middle East will see a growth in 3G connections over the next four years. Iran will witness the highest growth in 3G subscribers and is likely to bypass Saudi Arabia by late 2016 to become the largest 3G country in the region. Further, Iraq will bypass Syria and become the third largest 3G country in the Middle East by late 2015. Going forward, Informa Telecoms & Media forecasts that the number of 3G subscribers in the UAE and Saudi Arabia will reach 55.31 million and 12.43 million respectively by 2015. 3G subscriptions in the two countries are expected to grow more than 30 per cent year on year. The UAE being a relatively affluent market, telecom operators in the region are well placed to get a substantial portion of existing 2G mobile users to migrate to 3G networks.

Latin America

Latin America continues to lead the growth in the American 3G market. According to 4G Americas, a wireless industry association, the total number of 3G connections in Latin America is expected to grow from 192 million in 2013 to 258 million in 2014. 4G Americas further states that even though the number of 4G connections in Latin America is expected to grow about fourfold in 2014, reaching 6.4 million by the year-end from 1.7 million in 2013, 3G connections will continue to outgrow 4G connections. Brazil, Peru, Venezuela and Argentina are some of the leading 3G markets in Latin America.

 Europe

The region supports a high level of 3G and smartphone penetration. In fact, Europe has been a leader in the adoption of 3G services. At present, more than 90 per cent of the European population lives within 3G-covered areas. The leading 3G markets in Europe include Italy, Germany, Spain, the UK and Sweden. According to the GSMA, all these markets have high 3G penetration. For example, in Italy, out of a total subscriber base of 91.7 million, 59 per cent are 3G subscribers, and in the UK, which has a telecom subscriber base of 79.3 million, 66 per cent of users are on 3G networks. On an average, there are more active 3G SIMs per capita in Europe than in any other developed region in the world, despite a number of countries having 3G SIM penetration rates of over 100 per cent. As per the “GSMA Mobile Economy 2013” report, Europe has seen a significant technology shift in recent years, with the proportion of 3G handsets increasing sharply. From about a fifth of total handsets in 2008, 3G devices now account for over half of all devices in Europe and by 2015, they are expected to account for about 61 per cent of the total handset market.

Conclusion

The GlobalComms Forecast Service indicates that while 2G has been the dominant wireless technology globally, accounting for 70 per cent of the world’s 6.8 billion mobile subscribers, the number of 2G subscribers declined for the first time in 2013. The 2G subscriber base stood at 4.8 billion in 2013, registering a decline of 3 per cent over the previous year. It is expected that by 2018, 2G will no longer account for the majority of the mobile market, which will instead be dominated by next-generation technologies including 3G and 4G.

 
 

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