This tyntec-sponsored survey, based on interviews with over 60 mobile operators across global marketplace conducted by independent research company mobilesquared, shows clear evidence that there has been a significant shift in mobile operator mindset regarding OTT communications. The perception that OTT (Over-the-Top) communications is a threat has been replaced with a revenue-generating opportunity. Mobile operators are now open and receptive to partnering with OTT service providers. The research revealed that 98% of mobile operators will potentially enter into an OTT communications partnership. From the perspective of maturing OTT service providers, operators’ openness to partnership brings forth even greater opportunity as they are moving towards a revenue generation model—as opposed to just focusing on market capitalization—to prove their commercial viability.

1. FromResistancetoPartnership
Operators shift into monetising OTT
A whitepaper by Sponsored by
November 2014

2. INTRODUCTION 1
EXECUTIVE SUMMARY 2
PART 1: THE NOW
• The exponential growth of OTT communications 6
• Haven’t we heard this all before? 7
• Operator revenue 8
• OTT subscribers becoming more plentiful 9
PART 2: THE NEXT BILLION
• The next billion OTT communication users 11
• All eyes on WhatsApp 12
• Can Messenger beat WhatsApp to 1 billion users? 13
• Mobile operator OTT epiphany 14
• Mobile operators embracing OTT 15
• Joyn remains mobile operator enigma 16
• Mobile operator growth point: A2P traffic 17
• Partnering 17
• Privacy issues 18
• The changing face of communications 19
• A level playing field 19
PART 3: THE MOBILE OPERATOR OPPORTUNITY
• Analysis 21
• Business models 22
• OTT communication forecasts 23
CONCLUSION 24
APPENDIX 25
METHODOLOGY 26
ABOUT tyntec & mobilesquared
Table of Contents

3. INTRODUCTION
INTRODUCTION | PAGE 1
This is the third White Paper focusing on the impact
of OTT communications, such as WhatsApp, LINE,
WeChat and Skype, on the mobile operator business
model. The first White Paper, OTT Services:
How Operators can overcome the Fragmentation of
Communication, was released in 2012, followed by
OTT Blows Up the Mobile Universe. Operators Must
Act Now!, in 2013.
Much has happened since the release of the last
White Paper 12 months ago. Viber was purchased
by Rakuten for $900 million in February 2014, only to
have the deal overshadowed days later by
Facebook’s $19 billion acquisition of WhatsApp.
The rest of 2014 has been played out by OTT
communications providers jostling to become the
“next WhatsApp”, striving to unlock a viable business
model from an exponentially-increasing global
community. WhatsApp remains the only OTT
communications app to offer a subscription model.
But the likes of LINE, WeChat, and Kakao have
expanded beyond OTT communications to become
social media platforms generating revenues from
commerce and advertising. But as O2
inadvertently proved when trying to introduce NTT
DoCoMo’s content delivery platform i-mode into
Europe almost a decade ago, business models from
Asia do not always export successfully.
While the majority of OTT communications providers
concentrate on growing their community and
exploring business models, this provides an
opportunity for mobile operators to play an integral
role and re-emerge as a force in the monetisation
process of OTT communications.
Mobilesquared forecasts OTT communications users
to more than double over the next 4 years. The OTT
communications land-grab is not even at the halfway
stage. But to capitalise on this opportunity, mobile
operators must become smart faster and become an
integral component of the OTT model beyond
simply providing the bandwidth, while the OTT
communications providers must become smart and
incorporate the mobile operators into their
monetisation model if they are to fulfil their
commercial realisation.
This White Paper explores and outlines the OTT
communications opportunity for mobile operators,
and why it’s not too late to get in on the market
dominated by start-ups and upstarts.

4. The OTT communications community is moving
towards a revenue generation model as opposed to
capturing high-market capitalisation, and could be
conceived as being representative of a maturing of
the marketplace. This means in the near term,
greater pressure will be exerted on OTT
communications providers to drive revenues, and not
just increasing their global footprint. Conversely, this
heightened pressure could force the OTT
communications providers to seek partnerships with
mobile operators, as a tactical move designed to
speed the commercial realisation of the service.
This would represent a significant development in the
communications marketplace and would start the
realignment of mobile operators within the
next-generation of (OTT) communications.
Mobilesquared believes this will result in a period of
convergence between mobile operators and OTT
communications providers. This will be driven by two
factors.
Firstly, there has been a significant shift in mobile
operator mindset regarding OTT communications.
The perception that OTT communications is a threat
has been replaced with a revenue-generating
opportunity. Mobile operators have never been more
open and receptive to the notion of partnering with
OTT communications providers, and to this end, OTT
communications providers must look to exploit this
opportunity.
Secondly, the need for OTT communications
providers to monetise their community. Driving this
commercialisation will be a period of maturation
throughout OTT communications providers as their
model evolves beyond pure community-driven user
acquisition, to revenue generation and user
acquisition. The need to partner is compounded by
the fact OTT communications providers have little
or no user information or data, and mobile operators
have customer data in abundance, and limited or no
billing capability.
WHAT THE RESEARCH TOLD US
The research revealed that 97.6% of mobile
operators will potentially enter into an OTT
communications partnership. By removing those
mobile operators that have entered into a
partnership already, this leaves 75% of mobile
operators that are looking to enter into a partnership.
Or an alternative view is that 59% of mobile
operators looking to partner with an OTT
communications provider do not want to partner with
Facebook and/or WhatsApp, even though a similar
number would like to provide a WhatsApp-like
experience to their customers.
Of the mobile operators who have partnered with
OTT communications providers already (23.8%),
58% of these mobile operators have partnered with
Facebook and/or WhatsApp, with the remaining 42%
entered into partnerships with alternative OTT
communications providers. In total, just under 40% of
mobile operators would like to partner with Facebook
and/or WhatsApp.
Not surprisingly, 58.5% of mobile operators said
WhatsApp would be the OTT communication service
they would most like to provide to their customers,
primarily because of its scale. But mobilesquared
research reveals that Facebook Messenger is the
PAGE 2 | EXECUTIVE SUMMARY
EXECUTIVE SUMMARY

5. most likely OTT messaging app to reach 1 billion
users – days ahead of WhatsApp.
SOURCE: MOBILESQUARED
Although 80% of mobile operators said that
decreasing revenues and margins on traditional
offerings is their most pressing concern in 2014, the
same figure believe they can generate revenue from
OTT communication services. A breakdown of that
figure reveals that 22% believe OTT will
generate additional revenues, 27% believe the
additional revenues will come at the expense of voice
and SMS revenues, and 31% believe additional
revenues will be generated via partnerships.
SOURCE: MOBILESQUARED
Yes – OTT will generate additional
revenues for mobile operators
Yes – but at the expense of voice
and SMS revenues
Yes – OTT will generate additional
revenues for mobile operators via
partnerships
No
Undecided
The primary expectation of mobile operators for
partnering with an OTT service provider was to drive
customer loyalty, according to 71% of respondents.
Equally, 34% of mobile operators said it would be to
develop an OTT subscription model and/or use as
a marketing platform, while the up-sale of content
would appeal to 16% of mobile operators.
More than two-thirds of mobile operators (69%) would
be willing to assist OTT communications providers
to verify private user information, with 37% of total
respondents using the data to authenticate a user’s
identity, and 31% to ensure compliance with the
mobile operator provided a system was in place.
Mobile operators would be willing to monetise
gender, age, location, behaviour and preferences.
The majority of mobile operators believe that
partnering with specific OTT providers to charge for
data is the clearest OTT monetisation model.
However, 42% of mobile operators believe that
terminating IP traffic onto a mobile network also
presents a clear monetisation opportunity. Mobile
operators are a little more sceptical when it comes
to monetising their own branded OTT app, appealing
to 25% of respondents. But that was more popular
than the rental of virtual mobile phone numbers (i.e.
without SIM cards) (14%).
Mobilesquared forecasts that the global mobile
operator opportunity for OTT communication will be
worth $42.9 billion in 2018, an increase from $4.2
billion in revenues in 2014.
OTT off-net communication termination for voice
and messaging will account for $4.2 billion in 2014,
and leap to $30 billion in 2018 as mobile operators
partner with OTT communications providers and
open their networks to terminate traffic. OTT off-net
messaging termination will represent the majority of
EXECUTIVE SUMMARY | PAGE 3
The race to 1 billion
Do you believe operators can generate revenue
from OTT services?
22,2%
26,7%31,1%
11,1%
8,9%

6. revenues, generating $19.4 billion by 2018.
But as mobile operators open partnerships with
existing OTT communications providers and
reposition themselves as a critical component in the
monetisation process, revenues generated by going
Through The Operator (TTO) will be worth $465
million in 2015, rising to $12.8 billion in 2018.
The sale of mobile operator data for marketing and
advertising purposes will generate $245 million in
2015, rocketing to $7.2 billion in 2018. During the
same timeframe, OTT-based content sales will
generate $122.5 million and $3.9 billion respectively,
while OTT subscription revenues will be worth $98
million, rising to $1.8 billion.
SOURCE: MOBILESQUARED
Globally, mobilesquared forecasts smartphone-based
OTT users will total 1.26 billion by the end of 2014,
rising to 2.89 billion by 2018, an increase of 130%
over the forecast period. Not surprisingly, the biggest
market will be China with 542 million smartphone-
based OTT users by the end of 2014, leaping to 1.18
billion in 2018. India will be late arriving to the smart-
phone-based OTT party en masse given the size of
its mobile population, nevertheless, it will still have
56.8 million smartphone-based OTT users by the end
of 2014 and 216.9 million by 2018, when it will be the
third largest smartphone-based OTT market, behind
China and the US and ahead of Brazil (185.6 million
smartphone-based OTT users) and Germany (97
million).
SOURCE: MOBILESQUARED
Compared to the previous 4 years, the OTT
communications land-grab is set to accelerate over
the coming 4 years. This is not to say that mobile
operators have a four-year window to develop their
OTT communications strategy, if anything, it has to
act more of an alarm call for them to execute their
OTT strategy immediately in order to capitalise on the
continued adoption, and prevent their
disintermediation from the next billion OTT users, as
indeed they were with the first billion.
PAGE 4 | EXECUTIVE SUMMARY
-
5.000.000.000
10.000.000.000
15.000.000.000
20.000.000.000
25.000.000.000
30.000.000.000
35.000.000.000
40.000.000.000
45.000.000.000
50.000.000.000
2013 2014 2015 2016 2017 2018
Chart Title
Mobile termination SMS termination Adv & marketing Content Subscription
The mobile operator OTT opportunity ($)
* Research for 2013 figure was conducted in 2012, 2014 in 2013 and so on
-
500.000.000
1.000.000.000
1.500.000.000
2.000.000.000
2.500.000.000
3.000.000.000
3.500.000.000
2013 2014 2015 2016 2017 2018
Smartphone-based OTT user forecast
China India United States Brazil Indonesia Russia Japan
Pakistan Germany Nigeria Mexico Italy Bangladesh Philippines
UK Vietnam Egypt Thailand Iran Turkey France
South Africa Ukraine South Korea Spain Argentina Poland Colombia
Saudi Arabia Algeria Taiwan Romania Malaysia Venezuela Peru
Morocco Canada Netherlands Australia Chile Guatemala Portugal
Sri Lanka Ecuador Greece Czech Rep Nepal SWEDEN Hong Kong
Austria Belgium Hungary UAE Bulgaria Israel Finland
Singapore Denmark Azerbaijan Slovakia Norway Jordan Ireland
Lithuania New Zealand Lebanon Estonia Montenegro
Smartphone-based OTT user forecasts*

7. In 2014, every mobile operator included in the
research said OTT communications were now being
used by at least 1% of their customer base. In fact,
56% of respondents said that between 1% and 50%
of their customer base were using OTT communi-
cations, with 26% of respondents claiming that over
51% of their customer base was using OTT
communications.
Mobilesquared predicts it will takes less than 2 years
until over 50% of mobile operators will experience
80% of their customer base using OTT
communications.
SOURCE: MOBILESQUARED
0,0% 5,0% 10,0% 15,0% 20,0% 25,0%
0%
1-5%
6-10%
11-20%
21-30%
31-40%
41-50%
51-60%
61-70%
71-80%
>81%
Don’t know
2015
2014
EXECUTIVE SUMMARY | PAGE 5
What percentage of your customers will be using
OTT communications in 2014 and 2015

8. subscription rate is attached. At $0.99 per year
applicable after the first year, WhatsApp’s annual cost
is negligible to the user.
SOURCE: MOBILESQUARED
But the WhatsApp subscription model has severe
revenue-generating limitations compared to
alternative OTT messaging apps. Japan-based OTT
messaging app LINE’s 300 million users generated
revenues of $338 million in 2013 from games,
stickers and advertising. In 1Q2014 its revenues
were $145 million up from $64 million for the same
period the previous year.
Similarly, WeChat generated $330 million in revenues
in 2013 from games, stickers and commerce. While
Kakao generated revenues of $203 million in 2013
from games (84%) and advertising (14%).
Kakao moved into mobile money in June 2014,
allowing users to send and receive money following
partnerships with the South Korean banks. In
October 2014, LINE also jumped on the mobile
money bandwagon as part of a broader initiative to
extend its engagement with users.
0
200.000.000
400.000.000
600.000.000
800.000.000
1.000.000.000
1.200.000.000
1.400.000.000
1.600.000.000
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
Feb
Jun
Oct
2009 2010 2011 2012 2013 2014 2015 2016 2017
WhatsApp users and revenues ($)
Revenues
TOTAL USERS
PART 1: THE NOW
THE EXPONENTIAL GROWTH OF OTT
COMMUNICATIONS
Over the last 12 months OTT communications has
become a numbers game with WhatsApp heading
the field. On its existing growth trajectory of 800,000
new users per day, it is on course to join Facebook
in the Billionaire’s Club in January 2016. Rival OTT
messaging app LINE too has ambitions of hitting 1
billion users, but its 510 million users trails
WhatsApp’s 660 million users and its daily uptake is
considerably lower.
Then there is LINE with 490 million global users,
WeChat with 440 million, as well as the likes of
Snapchat with over 100 million users, to name just a
few of the OTT messaging apps available. And they
all have one thing in common: becoming the next
WhatsApp. Or, becoming what WhatsApp could have
become if it had developed a monetisation model
beyond just subscriptions, such as advertising, or
commerce (content and games). The industry
baulked at the $45 Cost Per User (CPU) Facebook
paid WhatsApp, but that figure is already towered by
Snapchat’s CPU of $100 CPU based on no revenues.
This is just the beginning.
Given that Facebook paid a staggering $19 billion for
a company that generated revenues of $133.1 million
in 2013 and is not expected to generate in excess
of $1 billion annual revenues until 2017, the OTT
communications playing field has become community
driven over monetisation.
As WhatsApp can testify, it is significantly easier to
build a community when a product or service is free,
or perceived to be free, than it is when a monthly
PAGE 6 | PART 1: THE NOW
Fig 1. WhatsApp users and revenues ($) 1
1
Mobilesquared estimates

9. LINE Pay allows users to make purchases via their
mobile or PC using either a credit card or prepaid
card, as well as letting users split the purchase
across LINE friends via a Share Payment facility.
Users will also be able to send payments to other
users. The LINE app will also soon be able to book
and pay for cab rides, not to mention the launch of
the LINE WOW food delivery service in conjunction
with South Korean food delivery app Woowa
Brothers.
Like Kakao and WeChat, LINE too is evolving into
more of a social media platform, a closed
community, or as more commonly referred to in the
mobile industry, a walled garden, designed to keep as
many people engaged on the platform for as long a
period as possible, with the ultimate goal of spending
more money.
Over the last 10-15 years, the majority of mobile
operators deployed a walled garden content model,
but the only truly successful model was Japanese
mobile operator NTT DoCoMo’s i-mode platform.
Walled gardens have since become synonymous with
mobile operators and failure. Yet, iTunes is effectively
a walled garden that has served Apple very well.
Walled gardens can be a success with scale. iTunes
has a global footprint, as indeed, do the majority of
OTT messaging apps. But as the mobile operators
found out to their detriment, creating a model that
overcomes language and cultural barriers, local
content, price differentiation, to name a few of the
hurdles, is going to be one of the challenges facing
the global OTT communications platform providers
moving forward.
Nevertheless, LINE is intent on growing its business
and pushing up its existing market capitalisation of
$30 billion, a figure which starts to add context to the
WhatsApp deal in line with the rest of the
marketplace. But then Snapchat, some 12 months
after rejecting Facebook’s offer of $3 billion, is now
reportedly worth $10 billion, based on its 100 million
users and zero revenues. Snapchat’s cost per user
(CPU) of $100 is more than double the $42 CPU
Facebook paid WhatsApp. Snapchat’s CPU could
be set to receive a significant injection following the
company’s introduction of advertising in October
2014.
This is perhaps the first step for the OTT
communications community to move towards a
revenue generation model as opposed to capturing
high-market capitalisation, and could be conceived as
being representative of a maturing of the
marketplace. This means in the near term, greater
pressure will be exerted on OTT communications
providers to drive revenues, and not just increasing
their global footprint. Conversely, this heightened
pressure could force the OTT communications
providers to seek partnerships with mobile operators,
as a tactical move designed to speed the
commercial realisation of the service. This would
represent a significant development in the
communications marketplace and would start the
realignment of mobile operators within the next-
generation of (OTT) communications.
HAVEN’T WE HEARD THIS ALL BEFORE?
Regardless of who will be driving the partnership
between mobile operator and OTT communications
provider, the immediate impact of OTT
communications continues to reverberate throughout
the mobile operator community. Four-fifths (80%) of
mobile operators said that decreasing revenues and
margins on traditional offerings is their most
pressing concern in 2014. This was followed by
exploring new revenue generating opportunities
(33%), such as mHealth and connected devices, and
regulatory issues (22%), like roaming and Net
PART 1: THE NOW | PAGE 7

10. Neutrality. The continued surging growth of OTTs was
only a pressing concern for 19% of mobile operators,
with 11% of respondents also stating their inability to
partner with, and monetise, OTT communications.
SOURCE: MOBILESQUARED
In recent years, the OTT communications research
by mobilesquared has not only tracked the
exponential growth rate of OTT communication apps,
but monitored the mobile operator mindset towards
these rival services, ultimately replacing churn as
their greatest concern. In 2014, the latest research
suggests that the continued surging growth of OTTs
has now become accepted within mobile
operators, whom in turn, are now focused on
addressing decreasing revenues and margins on
traditional telecoms offering, albeit a direct result of
OTT communications. But rather than just identifying
the cause, by focusing on the impact – the
decreasing revenues and margins on traditional
telecoms offerings – the mobile operators are
demonstrating a newfound understanding of what
needs addressing. Indeed, included within the
category of “exploring new revenue generating
opportunities”, alongside mHealth and connected
devices inevitably sits OTT communications and
partnerships.
While OTT communications have started the
deconstruction of traditional communications, it is
now incumbent on the mobile operators to reinvent
themselves, and reinvigorate the communications
marketplace by grappling communications control
back from the start-ups and upstarts. After all, users
pay the bulk of their communication fees to their
mobile operators – something that has become
overlooked among the hullabaloo surrounding OTT
communications: If communications is becoming a
subset of data, the logical next step for mobile
operators would be to introduce a data
communications package to complement the data
package? Presently, the majority of OTT
communications providers are yet to demonstrate
a commanding monetisation model. So why can’t
mobile operators make their move now? After all,
their revenues have taken something of a pounding
in recent years.
OPERATOR REVENUE
As stressed in the 2013 research, mobile operators
must act fast, and 12 months on is no different. Forty
percent of mobile operators included in this year’s
research said that OTT communications had
attributed to a decrease in revenues over the last 12
months, 16% said revenues had increased and 44%
said they didn’t know. Almost three quarters of those
mobile operators that had experienced a decline in
revenues over the last 12 months claimed that figure
was between 0% and 10%, with the remaining mobile
operators citing revenue declines of between 11%
and 20%.
Compared to previous years when the research
focused purely on decreases in mobile operator
revenue, this latest data suggests mobile operators
are starting to limit the impact OTT communications
has on their revenues, or at least they are starting to
manage the decreases more effectively.
In 2013, 14% of mobile operators claimed revenues
were down more than 21% as a direct consequence
PAGE 8 | PART 1: THE NOW
Fig 2. What is the most pressing concern for you
as an operator? (Multiple choice)

11. PART 1: THE NOW | PAGE 9
of OTT communications, but this year the maximum
reduction was between 16% and 20% for 5% of
respondents. However, year-on-year, more mobile
operators (33% of total respondents) are now being
impacted by up to a 10% revenue decline, up from
21% of mobile operators in 2013, which does confirm
the impact of OTT communications on mobile
operators is becoming more far-reaching.
SOURCE: MOBILESQUARED
Despite an increasing number of mobile operators
experiencing a decline in revenues as a direct result
of OTT communications activity, the extent to which
the declines are affecting their revenues appears
to be diminishing. It is unlikely that the extent of the
impact of OTT communications on mobile operator
revenues has hit rock-bottom, but this does suggest
that the impact has started to stabilise. How long
this will last remains to be seen, but it is yet another
indicator that mobile operators need to develop a
strategy to respond to the situation urgently.
OTT SUBSCRIBERS BECOMING MORE
PLENTIFUL
Perhaps the biggest indicator that mobile operators
need to develop a strategy to respond to the rise
of OTT communications rapidly is the fact that their
customers are using OTT apps in their droves.
The cliché in business is that you need to be where
your customers are. The emergence of Facebook
resulted in businesses developing Facebook pages.
The rise of Twitter and Instagram have sparked
businesses to open accounts on each respective
service to connect with users. Yet the advent of OTT
communications has prompted the majority of mobile
operators to follow the much-maligned “Ostrich
Movement” – and bury their head in the sand!
In 2014, every mobile operator included in the
research said OTT communications were now being
used by at least 1% of their customer base. In fact,
56% of respondents said that between 1% and 50%
of their customer base were using OTT
communications, with 26% of respondents claiming
that over 51% of their customer base was using OTT
communications.
When asked what percentage of their customer base
would be using OTT communications in 2015, 37% of
respondents expected between 6% and 50%,
while 50% of respondents expected over 51% of their
customer base. In 2014, 6.5% and 2.2% of
respondents believed that 71-80% and over 81%
respectively of their customer base was using OTT
communications. Jump forward 12 months, and that
figure is expected to leap to 11% and 22%
respectively. That means more than one fifth of
mobile operators anticipate over 80% of their
customer base using OTT communications by the
end of 2015.
Clearly mobile operators are not expecting the
deepening penetration of OTT communications
amongst their customer base to appease any time
soon, and based on the trends emerging from the
2014 research, mobilesquared expects it will take
less than 2 years until over 50% of mobile operators
will experience 80% of their customer base using
OTT communications.
5,4%
0,0%
2,7% 2,7%
0,0%
27,0%
26,3%
5,3%
10,5%
0,0%
0,0%
26,3%
14,3%
7,1% 7,1%
14,3%
21,4%20,9%
11,6%
2,3%
4,7%
0,0%
44,2%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
50,0%
0-5% 6-10% 11-15% 16-20% >21% Don’t know
Fig. 3 Over the last 12 months what percentage of your
operator revenues have decreased because of OTT
communications?
2011
2012
2013
2014
Fig 3. Over the last 12 months what percentage of
your operator revenues have decreased because of
OTT communications?

12. communications alternative, and has to be taken as
a serious emerging business model opportunity for
mobile operators.
SOURCE: MOBILESQUARED
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0% 1-5% 6-10% 11-20% 21-30% 31-40% 41-50% >51%
Chart Title
2013 2014 2015
PAGE 10 | PART 1: THE NOW
Compared to the research findings from previous
OTT communications research, there have been
some dramatic changes in mobile operator
expectations over the last 3 years.
When the research asked mobile operators in 2012
their expectations for 2013, they were clearly
expecting between 6% and 30% of their customer
base to be using OTT communications. The following
year expectations altered to reflect a new wave of
mobile operators’ customers adopting OTT
communications (ie 36% of mobile operators
expected 1% to 5% of their customers using the
services), while 22% of mobile operators expected
OTT communication penetration to surpass 50%.
SOURCE: MOBILESQUARED
The research conducted this year reveals that 50% of
mobile operators expect over 51% of their customers
using OTT communications by the end of 2015. It’s
confirmation that OTT communications can no longer
be viewed as a passing fad that will disappear over
time, and now represents a truly global
Fig 5. What percentage of your subscribers will be
using OTT communications next year?*
* Research for 2013 figure was conducted in 2012, 2014 in 2013 and so on
0,0% 5,0% 10,0% 15,0% 20,0% 25,0%
0%
1-5%
6-10%
11-20%
21-30%
31-40%
41-50%
51-60%
61-70%
71-80%
>81%
Don’t know
2015
2014
Fig 4. What percentage of your customers will be
using OTT communications in 2014 and 2015

13. PART 2: THE NEXT BILLION
Connecting the next billion users to affordable
internet access is the ambition of Internet.org, a
global partnership between technology leaders,
nonprofits, local communities and experts.
Mobile networks (2G/3G/4G) cover almost 80% of the
world’s population, but only one-third of the
population are connected, according to Internet.org.
And with the $25 smartphone, devices have become
significantly more affordable, which means mobile
operators will be facing increased pressure on data
plan pricing in the coming years to make internet
access more affordable throughout the developing
world and connect the next one, two, even three
billion users.
What’s interesting with the next 2 or 3 billion internet
users, is that not only will their primary device for
accessing the internet be mobile, but as a
consequence of their internet education from the likes
of Facebook and WhatsApp via Internet.org, OTT
communications will realistically be their primary form
of communication.
This potentially means that the next 2-3 billion
internet users could go directly onto OTT services for
their communication, and ultimately create an even
greater threat to mobile operator revenues than have
been experienced to date. Unless of course, the
mobile operators can get their OTT strategy aligned
in the foreseeable future.
THE NEXT BILLION OTT COMMUNICATION
USERS
Globally, mobilesquared forecasts smartphone-based
OTT users will total 1.26 billion by the end of 2014,
rising to 2.89 billion by 2018, an increase of 130%
over the forecast period. Not surprisingly, the biggest
market will be China with 542 million smartphone-
based OTT users by the end of 2014, leaping to 1.18
billion in 2018. India will be late arriving to the
smartphone-based OTT party en masse given the
size of its mobile population. Nevertheless, it will still
have 56.8 million smartphone-based OTT users by
the end of 2014 and 216.9 million by 2018, when
it will be the third largest smartphone-based OTT
market, behind China and the US and ahead of Brazil
(185.6 million smartphone-based OTT users) and
Germany (97 million).
SOURCE: MOBILESQUARED
Compared to the previous 4 years, the OTT
communications land-grab is set to accelerate over
the coming 4 years. This is not to say that mobile
operators have a four-year window to develop their
PART 2: THE NEXT BILLION | PAGE 11
*Research for 2013 figure was conducted in 2012, 2014 in 2013 and so on
-
500.000.000
1.000.000.000
1.500.000.000
2.000.000.000
2.500.000.000
3.000.000.000
3.500.000.000
2013 2014 2015 2016 2017 2018
Smartphone-based OTT user forecast
China India United States Brazil Indonesia Russia Japan
Pakistan Germany Nigeria Mexico Italy Bangladesh Philippines
UK Vietnam Egypt Thailand Iran Turkey France
South Africa Ukraine South Korea Spain Argentina Poland Colombia
Saudi Arabia Algeria Taiwan Romania Malaysia Venezuela Peru
Morocco Canada Netherlands Australia Chile Guatemala Portugal
Sri Lanka Ecuador Greece Czech Rep Nepal SWEDEN Hong Kong
Austria Belgium Hungary UAE Bulgaria Israel Finland
Singapore Denmark Azerbaijan Slovakia Norway Jordan Ireland
Lithuania New Zealand Lebanon Estonia Montenegro
Fig. 6 Smartphone-based OTT user forecasts*

14. SOURCE: MOBILESQUARED
Interestingly, the impact on how mobile operators
perceive WhatsApp lessens when associated with
Facebook to the extent that Facebook’s purchase of
WhatsApp has not sparked the seismic shift in the
OTT communications landscape one might have
expected.
The mobile operator research in 2013 revealed only
7% of mobile operators believed Facebook posed a
challenge to their revenues, with almost two-thirds of
mobile operators believing Facebook – and
specifically Facebook Home – was just another OTT
service provider to contend with. Facebook’s lack of
a compelling consumer OTT communication offering
was further compounded by the fact that not one of
the mobile operators surveyed wanted to partner with
its OTT service: a messaging failure that conceivably
cost the company $19 billion to fix, even though it
already had Messenger waiting in the wings. This is
in stark contrast to the 36% of mobile operators that
said WhatsApp would have the most impact on their
revenues in 2013.
This year’s research reveals that 46% of mobile
operators believe the combination of Facebook and
WhatsApp represent a risk to mobile operator
revenues. While that represents a significant leap on
last year’s research, the reality is that when
10%
2%
5%
17%
2%
59%
5%
Chart Title
iMessenger
Facebook Messenger
Google +
Skype
Viber
WeChat
WhatsApp
Snapchat
KakaoTalk
ChatON
OTT communications strategy, if anything, it has to
act more of an alarm call for them to execute their
OTT strategy immediately in order to capitalise on the
continued adoption, and prevent their
disintermediation from the next billion OTT users, as
indeed they were with the first billion.
ALL EYES ON WHATSAPP
As WhatsApp is viewed by the mobile industry – yet
to read this White Paper – as the next platform to
potentially reach 1 billion users, it continues to be
viewed as the greatest challenge, according to the
mobile operators taking part in the 2014 research.
Sixty-two percent of respondents identified WhatsApp
as the greatest challenge, up from 36% of mobile
operators in 2013. Skype was viewed by 20% of
mobile operators as the second greatest challenge to
their revenues, but it is the messaging revenues that
the mobile operators remain most protective of.
Only 4% of respondents identified Facebook
Messenger as the greatest challenge to their
revenues. Given Messenger’s meteoric rise in
downloads since the summer of 2014, mobilesquared
predicts mobile operators to label Messenger as the
greatest challenge to mobile operator revenues in
2015, replacing WhatsApp.
As part of the 2014 research, when asked which of
the OTT services they would most like to provide to
their customers, 58.5% of respondents said
WhatsApp. WhatsApp was considerably ahead of
Skype in second (17% of mobile operators) and
iMessenger (10%). The majority of mobile operators
selecting WhatsApp cited its popularity as the primary
reason.
Again, Facebook Messenger has been overlooked by
the mobile operator community as a potential threat,
but it really could become the telco industry’s Trojan
Horse.
PAGE 12 | PART 2: THE NEXT BILLION
Fig 7. If you could choose any OTT service to provide to
your customers, which of the following would you select?

15. 45%
2%
25%
14%
14%
The combination of Facebook and
WhatsApp represent a risk to
operator revenues
We perceive the partnership of
Facebook and WhatsApp to be
irrelevant to the telecom industry
We would like to find out how to
partner with them
We already partner with Facebook
and/or WhatsApp
We do not believe Facebook and
WhatsApp to be any risk to operator
revenues
combined, Facebook and WhatsApp accounted for
58% of mobile operator responses. If anything, the
acquisition has actually nullified the revenue risk
posed by the individual companies.
While 14% of respondents from this year’s research
adopted the opposing view and selected “no risk”,
most telling of all, was that 14% of respondents said
that they have already entered a partnership with
Facebook and/or WhatsApp, and a further 25%
would like to. This means two-fifths of mobile
operators would like to partner with Facebook and/
or WhatsApp and that certainly fits within Facebook
CEO Mark Zuckerberg’s vision of connecting the next
billion people.
SOURCE: MOBILESQUARED
CAN MESSENGER BEAT WHATSAPP TO
1 BILLION USERS?
One key development since Facebook acquired
WhatsApp is that the number of new daily users has
slowed considerably. In February 2014, WhatsApp
was experiencing over 1 million new users per day,
but this figure has subsequently fallen by 200,000
per day, placing the likelihood of the app achieving 1
billion users in January 2016, though if the download
rate continues to subside, to push that milestone
back until later into the year.
One of the reasons for the slowdown in WhatsApp
downloads can be attributed to the sheer amount of
choice. In the App Store and Google Play store, there
are over 2,300 social networking apps, of which 490
are messaging-based apps. And new apps are
emerging on a daily basis, which makes discoverabi-
lity a major issue unless you already have over 1
billion users and need a platform to promote your
app.
Facebook Messenger is one messaging app that is
experiencing an incredible resurgence. When the
company announced it was extricating its messaging
service from its main app in June 2014, it was only a
matter of time until the 1.07 billion Facebook Mobile
users started downloading Messenger. In April 2014,
Facebook had around 200 million Messenger users
amassed in the 3 years since its launch. But from
July 2014 the number of daily downloads on both the
App Store and Google Play has rocketed past that of
WhatsApp.
Mobilesquared estimates that Messenger now has
around 350 million global users, growing by over 1
million per day and accelerating. Furthermore,
mobilesquared forecasts that if Facebook Messenger
can sustain its existing growth for the next 15 months,
it will beat WhatsApp to the 1 billion user milestone
by a couple of days. It is somewhat ironic that the
next WhatsApp will in fact “just be Facebook.”
PART 2: THE NEXT BILLION | PAGE 13
Fig 8. Which of the following statements do you agree with
regarding the acquisition of WhatsApp by Facebook and its
impact on mobile operator revenues and OTT usage?

16. Yes – OTT will generate additional
revenues for mobile operators
Yes – but at the expense of voice
and SMS revenues
Yes – OTT will generate additional
revenues for mobile operators via
partnerships
No
Undecided
SOURCE: MOBILESQUARED
For Facebook, Messenger becomes yet another
channel boasting more inventory to monetise via
advertising. In 2014, mobilesquared predicts
Facebook will generate mobile advertising
revenues in excess of $6.4 billion, and could account
for one-third of total global mobile advertising spend
for the year. What does this mean for WhatsApp
which remains insistent of its mantra of being an
advertising free platform? Well, to date, Zuckerberg
has been respectful of WhatsApp’s business model,
though he did say at Mobile World Congress 2014
that “the vision is to keep the business exactly the
same”; while adding that he wanted to “build a more
profitable model”; something of an oxymoron.
For example, LINE and Kakao are monetising their
platform at $2-3 per person, and Zuckerberg is
confident of achieving similar levels with WhatsApp.
How is this possible when the subscription model is
$0.99 per user?
It is conceivable, that were Facebook to integrate the
WhatsApp platform with Messenger, it could insert an
ad into a WhatsApp-to-Messenger-bound message,
and maintain its commitment of keeping WhatsApp’s
vision of an advertising-free zone and building a more
profitable model. Alternatively, the subscription model
is increased to $2-3 per user per annum.
MOBILE OPERATOR OTT EPIPHANY
Like Zuckerberg, the mobile operators appear to have
had an OTT communications business epiphany, and
are now confident of monetising OTT services. The
2014 research has revealed that a staggering 80% of
mobile operators believe they can generate revenue
from OTT communication services. A breakdown of
that figure reveals that 22% believe OTT will
generate additional revenues, 27% believe the
additional revenues will come at the expense of voice
and SMS revenues, and 31% believe additional
revenues will be generated via partnerships.
Only 11% of respondents said OTT services will not
generate revenue for mobile operators, leaving 9%
undecided.
SOURCE: MOBILESQUARED
The optimism expressed by mobile operators in 2013
has abated somewhat 12 months later when it comes
to OTT services generating additional revenues, with
22% of respondents believing the above statement
as compared to 36% last year. However, the concern
over the impact of OTT services on voice and
messaging revenue appears to be diminishing, with
PAGE 14 | PART 2: THE NEXT BILLION
Fig 9. The race to 1 billion
Fig 10. Do you believe operators can generate
revenue from OTT services?
22,2%
26,7%31,1%
11,1%
8,9%

17. 0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
Chart Title
2011
2012
2013
2014
27% of mobile operators believing OTT service-
based revenues will come at the expense of existing
voice and messaging revenues, compared to 29% of
respondents in 2013, and significantly lower than the
63% from 2012.
This suggests time has provided something of a
healing process for mobile operators since the initial
furore of the impact of OTT services on their
revenues.
This response also reveals consistency throughout
the research by also reiterating the lower-than-
expected revenue loss highlighted earlier in this
White Paper.
MOBILE OPERATORS EMBRACING OTT
But it is the extent to which mobile operators are
starting to embrace OTT communications that is one
of the clear findings of the research. Some 87% of
mobile operators have recognised upsides
associated with increased OTT communication
activity of their subscribers. Fifty-six percent of
respondents identified an increase in billable data
usage, followed by 18% experiencing increased
messaging and data usage. Although 11% said they
had seen an increase in messaging, data and voice
usage, only 2% of respondents selected an increased
in messaging only, an increase in voice usage only
was not selected.
Increased data usage is, perhaps obviously, the key
driver for mobile operators when it comes to OTT
services, and subsequently having an increase on
messaging and voice. But as standalone services,
the positive impact on voice and messaging appears
negligible.
There certainly is a sea-change in mindset regarding
OTT communications among the mobile operators
taking the research this year compared to 2013.
Although the amount of mobile operators that
experience an increase in messaging has dropped
from 7% in 2013 to 2% this year, the remaining
comparable responses listed above are possibly the
first indicators that mobile operators are not only
coming to terms with OTT communications, but
starting to capitalise on the opportunity.
SOURCE: MOBILESQUARED
Over the last 12 months the number of mobile
operators experiencing an increase in billable data
usage as a result of OTT activity has increased from
43% to 56%. Those mobile operators that have
experienced an increase in messaging and data
usage has increased from 7% to 18%. While most
tellingly of all, the number of mobile operators that
are yet to identify any upsides from OTT activity fell
from 36% to 4%.
In fact, 64% of mobile operators said that the upsides
from increased OTT activity by their subscribers were
driving their OTT strategy. Presently, 74% of mobile
operators have an OTT communications strategy,
21% are without an OTT strategy (based on 14%
PART 2: THE NEXT BILLION | PAGE 15
Fig 11. What is your OTT communications strategy?

18. 2%
29%
12%
33%
7%
17%
Chart Title
Yes
Yes, but it’s taken too long and
has too few adopters
Yes, we will explore Joyn but we
will also explore partnering with
an existing OTT provider
No, I don’t believe that it will
ever be successfully launched or
adopted
No
Don’t know
without an OTT strategy and 7% claiming not to know
how to develop an OTT strategy), and 5% intent on
not developing an OTT strategy.
Not one mobile operator included in this year’s
research is blocking or imposing a subscriber
surcharge for OTT services. This development must
be viewed as yet another indication of the mobile
operators’ softening stance towards the potential
threat of OTT communications. This could be down
to the fact that 42% of mobile operators said that they
were making money from OTT services.
JOYN REMAINS MOBILE OPERATOR ENIGMA
One quarter of mobile operators are rolling out IMS/
LTE to offer RCS/RCSe, and 14% said that they have
or intend to launch Joyn – just over half of the mobile
operators that are rolling out IMS/LTE to offer RCS/
RCSe have launched or intend to launch Joyn. And of
those mobile operators that have or intend to launch
Joyn, half have also partnered with at least one OTT
service provider. This suggests that while RCS/RCSe
will help maintain the mobile operators’ relevance as
a communications provider, doubts remain whether
Joyn is the best application to achieve this.
Joyn is the GSMA’s OTT initiative and continues to
be something of an enigma to mobile operators. This
year, only 2% of mobile operators believed that Joyn
is the ideal OTT communications countermeasure,
with a further 29% also believing Joyn could be the
solution but has taken too long to develop and has
too few adopters. Nevertheless 12% of respondents
said that they would explore Joyn while also look to
partner with OTT service providers. Forty percent of
mobile operators believe that Joyn will not be a
success and is not an OTT countermeasure.
SOURCE: MOBILESQUARED
Since 2013, the number of mobile operators yet to
formulate a view regarding Joyn has decreased from
36% to 17% this year. Overall, those that are positive,
or could be positive towards Joyn (ie those
respondents that said “yes, but ...”), account for 43%
of mobile operators compared to 40% that have
adopted an outright negative stance. This compares
to 36% positive and 21% negative in 2013. The
research highlights that negativity has increased
within the mobile operator community surrounding
Joyn as a viable combatant to OTT over the last 12
months, and will be another element used in the
justification of partnering with third-party OTT
communications providers.
One possible casualty from the emergence of
mobile operators embracing OTT communications
could be advanced messaging services, such as
SMS 2.0. There is a clear shift in mobile operator
strategy away from SMS 2.0, with only 5% of mobile
operators offering their own messaging application or
feature, compared to 43% in 2013. Up until last year,
the appeal of advanced messaging services
experienced a year-on-year increases since 2011.
The appeal of advanced messaging services has
most likely receded as mobile operators start to
PAGE 16 | PART 2: THE NEXT BILLION
Fig 12. Do you believe the prospect of the GSMA’s
Joyn initiative can be an OTT countermeasure for
mobile operators?

19. understand and explore ways of capitalising on OTT
communications, especially partnering. But it could
also be attributed to the ascent of A2P traffic.
MOBILE OPERATOR GROWTH POINT:
A2P TRAFFIC
Brands and businesses alike are starting to
understand the benefit of communicating with their
customer base via messaging. Anything from
appointment reminders, to sales confirmation, to
quickfire surveys, are helping companies gain a
greater understanding of their customer’s experience
and delivering greater efficiencies and cost savings in
the process.
What’s more, while OTT communications focuses
primarily on smartphone users, A2P traffic provides
total mobile ubiquity and is device agnostic. Not
surprisingly, this wave of A2P activity is starting to
register with the mobile operators.
Thirty percent of respondents said that A2P traffic
accounted for up to 10% of their overall messaging
traffic during the last 12 months (between Sept
2013-2014), compared to 20% of respondents that
said A2P accounted for between 11% and 30% of
overall messaging traffic. Eleven percent of
respondents claimed A2P accounted for over 41% of
total messaging traffic.
SOURCE: MOBILESQUARED
Over the last 12 months 50% of respondents said
that they have seen an increase in A2P messaging
traffic, compared to just 6% of respondents
experiencing a decline. Mobilesquared research has
revealed that the A2P messaging traffic is increasing
by 25% every 6 months, and stands to represent
the biggest growth for mobile operators in terms of
traffic and revenue in the near-term. Understandably,
given what’s happening to their messaging and voice
traffic and revenues, mobile operators will become
highly-protective of the A2P sector. After all, while
the A2P space remains a corporate, enterprise and
small business domain, the mobile operators remain
in control.
But as pressure mounts on OTT communications
service providers to monetise their user footprint and
increase their cost per user (CPU), it is perhaps
inevitable that they will explore ways of entering the
A2P marketplace.
Presently, mobile operators are the gateway to
mobile customers for A2P traffic, and they must
position themselves as the gatekeeper if they are to
safeguard and secure their long term future in the
A2P space, especially as the number of partnerships
with OTT communications providers increases.
PARTNERING
When asked about partnering as part of a broader
question regarding OTT strategy, 37% of mobile
operators said they were partnering with OTT service
providers. But when specifically asked about
partnering, the number of mobile operators that said
they were already partnering with an OTT provider
(or providers) dropped to 24%. This discrepancy
could be attributed to the fact mobile operators are in
discussions with OTT providers and yet to launch.
PART 2: THE NEXT BILLION | PAGE 17
Fig 13. Over the last 12 months, what percentage of
your messaging traffic was A2P?

20. For example, 31% of respondents said they were
very open and receptive to partnering with an OTT
provider, with a further 26% stating that they were
open to the possibility of partnering but unsure how to
begin the process.
In total, 81% of mobile operators are already
engaged with OTT providers or looking to enter into
a partnership. Twelve percent remain undecided,
leaving 5% waiting for commercial business models
to emerge and 2% claiming there is no value in
partnering.
Certainly in emerging markets – and to a lesser
extent in developed markets – the research
revealed that mobile operators are using brands
such as WhatsApp, Facebook, WeChat, and LINE to
convert customers onto smartphones and drive data
package adoption, spend and usage. A number of
mobile operators believe this is generating a
sustainable business model, while other mobile
operators said they continue to search for clear
monetisation models of OTT.
When asked, 45% of mobile operators said that they
would include OTT for free as part of the standard
data bundle, while 21% would look to monetise the
partnership via advertising and marketing, 16%
selling content or through a monthly subscription
model (10%).
PRIVACY ISSUES
With a growing number of mobile operators exploring
the possibility of partnering with an OTT service
provider to extend their marketing platform, it
introduces additional concerns. For instance, 53%
of mobile operators have expressed their concern
with data privacy issues regarding OTTs, with 32%
claiming they were not concerned with data privacy
issues relating to OTT, or that they had already
implemented the monetisation of this (15%).
More than two-thirds of mobile operators (69%)
would be willing to assist OTT communications
providers to verify private user information, with 37%
of total respondents using the data to authenticate a
user’s identity, and 31% to ensure compliance with
the mobile operator provided a system was in place.
Mobile operators would be willing to monetise
gender, age, location, behaviour and preferences. A
number of mobile operators said they have an open
API platform that can provide a variety of subscriber
data, and were looking to expand the data that this
provided.
The primary expectation of mobile operators for
partnering with an OTT service provider was to drive
customer loyalty, according to 71% of respondents.
Equally, 34% of mobile operators said it would be to
develop an OTT subscription model and/or use as a
marketing platform.
The majority of mobile operators believe that
partnering with specific OTT providers to charge for
data is the clearest OTT monetisation model.
However, 42% of mobile operators believe that
terminating IP traffic onto a mobile network also
presents a clear monetisation opportunity. Mobile
operators are a little more sceptical when it comes to
monetising their own branded OTT app, appealing to
25% of respondents. But that was more popular than
the rental of virtual mobile phone numbers (ie without
SIM cards) (14%).
Entering into a partnership with an OTT provider does
not hold any challenges for 21% of mobile
operators, but for the majority a number of reasons
were cited. Sixty four percent of mobile operators
said that business reasons were the primary motive
it had not forged a partnership with an OTT provider,
followed by infrastructure complexities (26%) and
regulatory issues (23%).
PAGE 18 | PART 2: THE NEXT BILLION

21. Not only are there challenges, but mobile operators
have also expressed their concerns of entering a
collaborative model with an OTT provider. Almost
one-third of mobile operators said that they would
have no idea what the contractual agreements would
look like, based on margin split, staffing levels,
setting KPIs and measuring the success of the
partnership, for example. One fifth of respondents
believe a partnership could be too complicated from
an operational standpoint, based on the processes
and systems, while 6% cited cultural differences as
a likely concern. One fifth of mobile operators said
their concerns were addressed when they entered
the partnership, leaving 18% having no concerns
whatsoever.
THE CHANGING FACE OF COMMUNICATIONS
Concerns or not, mobile operators are being left
with very little option other than to develop an OTT
communications strategy, primarily because of the
exponential adoption of OTT communications by their
customers. As highlighted by this year’s research,
increased data usage, lower-than-expected revenue
losses, coupled with a more general upbeat
positioning towards OTT is the first indication that
mobile operators are starting to come to terms with
their new rivals. Not to mention a growing belief that
OTT apps represent just another rival company
fighting for market share in a highly competitive
marketplace.
Telecoms is merely the latest industry to undergo an
incredibly disruptive force. The airline industry
underwent similar turbulence when budget airlines
like Easyjet launched in the mid 1990s and forced the
national incumbent airlines to reassess their pricing
model in order to compete. The likes of BA,
Lufthansa and American Airlines all survived to tell
the tale.
To a large extent, the telecoms industry is no
different, though it has a clear advantage over the
airlines in that it has an established customer base in
terms of subscribers, compared to a loyal customer
base of repeat flyers.
A LEVEL PLAYING FIELD
So while investment communities are
cock-a-hoop about the hundreds of millions of users
on OTT messaging apps, the mobile operators have
inadvertently become overlooked and even sidelined
in the communications marketplace. Vodafone has
over 400 million customers around the world,
Telefonica has over 250 million, Orange has 236
million and T-Mobile 143 million customers. Not to
mention China Mobile with over 791 million
customers. These numbers are comparable with the
major OTT messaging apps. What’s more, mobile
operators generate substantial revenues.
To make this a level playing field, OTT messaging
apps must be viewed from a national perspective,
which is, on the whole, how mobile operators are
viewed and held accountable. Mobile operators have
a very strong customer footprint, but have become
restricted and segmented by geographical
boundaries and cultural differences. In Germany,
for instance, there are almost 40 million WhatsApp
users (6% of total WhatsApp users), which is three-
times the number of Twitter users (about 12 million).
Yet Telefonica Deuschland, following its successful
acquisition of E-Plus, now has 41 million subscribers.
T-Mobile has 39 million subscribers, and in financial
year 2013, it generated revenues of €7.7 billion in
Germany, and €15.67 billion globally. The combined
global revenue of WhatsApp, WeChat, LINE and
Kakao in 2013 was $1.04 billion.
PART 2: THE NEXT BILLION | PAGE 19

22. PAGE 20 | PART 2: THE NEXT BILLION
Elsewhere, Snapchat has come from nowhere to
amass 80 million users in the US, overtaking
WhatsApp’s 75 million users in the process.
Messenger has around 62 million users and LINE
has 12 million. But all of these figures are
overshadowed by AT&T’s 117 million mobile
subscribers and Verizon Wireless’s 105 million
customers, while T-Mobile also has a very
respectable 50 million customers. For 2Q2014, AT&T
posted wireless consolidated revenues of $17.9
billion.
In the UK, WhatsApp has just over 10 million users,
with 8 million users on Snapchat, and 5 million on
Facebook Messenger. While EE has 27 million
mobile customers in the UK, Telefonica has 23.7
million and Vodafone has 19.5 million.
Mobilesquared data reveals that the US, UK and
Germany have 137.6 million, 32.1 million and 44.1
million smartphone-based OTT users respectively
in 2014. These figures are expected to more than
double by 2018, when OTT smartphone penetration
is forecasted to be close to 100% of the smartphone
user base in each of the three markets. An emerging
trend that mobilesquared has identified across all
developed mobile markets.

23. PART 3: THE MOBILE OPERATOR
OPPORTUNITY
PART 3: THE MOBILE OPERATOR OPPORTUNITY | PAGE 21
With voice and messaging revenues in continual
decline for a significant proportion of mobile
operators and an imminent eventuality for the rest
how long can mobile operators pin their hopes on
data to redress declining revenues and thwart its
inevitable commoditisation? Although the cost of 1GB
of data on 4G today is significantly lower compared to
1GB on 3G five years ago, 4G usage is
significantly higher, with an increasing number of data
users exceeding their data bundles, even though
more users are trading up to higher data plans.
SOURCE: VODAFONE
OTT is not an epidemic but a fundamental
paradigm shift in the way consumers communicate.
The disruptive innovation of OTT communications
has altered the economics of mobile telecoms
forever. And because OTT providers do not operate
under the shadow of million or billion dollar spectrum
investments, network roll-out costs and extensive
network maintenance spend, they can enjoy the
agility of a small team adjusting and tweaking their
product.
The cost for WhatsApp to deliver a message is
three-to-four orders of magnitude less than what it
costs a mobile operator. If the cost structure of OTT
communications applied to the car industry,
everyone would be driving round in Rolls Royces,
Aston Martins and Lamborghinis. OTT
communications is a model of massive volume at
minimal cost, which has also become the framework
in which the mobile operators must compete.
ANALYSIS
The research included a number of different
questions associated with mobile operators
partnering with third-party OTT communications
providers. The percentage of respondents
“partnering” changed with the wording of each
question. The highest response was based on a
mobile operator’s OTT strategy, in which 37.2% said
they were “partnering”. But when asked
outright about their partnering strategy on a separate
question, only 23.8% of mobile operators claimed to
have already partnered. This implies that 13.4% of
mobile operators are in the process of partnering with
third-party OTT providers now.
2
Based on the assumption that “Don’t know” implies that the respondent was
not aware of the extent of OTT penetration within their customer base, otherwise
they would have responded “0%”

24. When specifically asked about the role of Facebook
and WhatsApp, 13.6% of mobile operators said they
have partnered with one or both companies, and a
further 25% of mobile operators would be interested
in partnering with them.
Of the mobile operators to have partnered with OTT
communications providers already (23.8%), 58% of
these mobile operators have partnered with
Facebook and/or WhatsApp, with the remaining 42%
entered into partnerships with alternative OTT
communications providers. In total, just under 40% of
mobile operators would like to partner with Facebook
and/or WhatsApp.
Then there are the 14% of mobile operators that have
launched Joyn, half of which are looking to enter
partnerships with third-party OTT communications
providers as well, as a contingency plan should Joyn
fail.
Overall, 97.6% of mobile operators will potentially
enter into an OTT communications partnership
provided their concerns are addressed. By removing
those mobile operators that have entered into a
partnership already, this leaves 75% of mobile
operators that are looking to enter into a partnership.
Or an alternative view is that 59% of mobile
operators looking to partner with an OTT
communications provider do not want to partner with
Facebook and/or WhatsApp, even though a similar
number would like to provide a WhatsApp-like
experience to their customers.
BUSINESS MODELS
This newfound optimism coursing through mobile
operator veins is best encapsulated by the fact a
number of mobile operators are now exploring what
tools they can provide to OTT communication
providers to help them monetise their service.
Already, 55.6% of mobile operators have experienced
an increase in billable data usage as a direct result
of OTT communications over their network, and 29%
of mobile operators have experienced an increase in
messaging, data and messaging, or data, messaging
and voice.
For 71% of mobile operators, offering an OTT
communications-based service is about driving
customer loyalty, which in turn will potentially boost
messaging and voice usage, and most notably data,
with 66% of mobile operators expecting to charge for
data following a partnership with specific OTT
communications companies.
Whereas opening up APIs and connecting platforms
to allow mobile operators to terminate IP traffic on
their network appeals to 40% of respondents.
As with the data regarding partnerships, there is
some inconsistency across the responses when it
comes to business models. The percentage of mobile
operators intending to develop an OTT subscription
model is 35% in one question focusing on
collaboration, but drops to 11% when specifically
asked about business models for the OTT
partnership. It’s the same with the ability to
monetise the partnership via advertising and
marketing, which drops from 35% in the collaboration
question to 21.6% when linked to business models.
Analysis of the research implies mobile operators
are significantly more comfortable with the notion of
partnering than they are talking about specific
business models associated with partnering, which
after all, is a completely unknown discussion for
them. Mobilesquared believes the fact that the
percentage of mobile operators looking to monetise
an OTT offering drops when the phrase
“collaboration” is swapped with “business model”,
PAGE 22 | PART 3: THE MOBILE OPERATOR OPPORTUNITY

25. -
5.000.000.000
10.000.000.000
15.000.000.000
20.000.000.000
25.000.000.000
30.000.000.000
35.000.000.000
40.000.000.000
45.000.000.000
50.000.000.000
2013 2014 2015 2016 2017 2018
Chart Title
Mobile termination SMS termination Adv & marketing Content Subscription
PART 3: THE MOBILE OPERATOR OPPORTUNITY | PAGE 23
suggests that mobile operators feel restricted or
limited when it comes to discussing business models
with OTT third parties. Presently, the notion of
negotiating a contract with an OTT service provider
remains something of a dark art to mobile operators.
After all, as highlighted by this year’s research, 26%
of mobile operators need advice when it comes to
commencing discussions with a third-party OTT
communications provider, while an additional 30%
said they have no idea what the contractual
agreements would look like.
Clearly light needs to be shed on how to craft a
mobile operator and OTT service provider partnership
contract. There is an opportunity for a company to
create a “What does a mobile operator and OTT
communications company contractual agreement
look like” document to speed up the collaborative
effort now being entertained.
OTT COMMUNICATION FORECASTS
Mobilesquared forecasts that the global mobile
operator opportunity for OTT communication will be
worth $42.9 billion in 2018, an increase from $4.2
billion in revenues in 2014.
OTT off-net communication termination for voice and
messaging will account for $4.2 billion in 2014, and
leap to $30 billion in 2018 as mobile operators partner
with OTT communications providers and open their
networks to terminate traffic. OTT off-net messaging
termination will represent the majority of revenues,
generating $19.4 billion by 2018.
But as mobile operators open partnerships with
existing OTT communications service providers and
reposition themselves as a critical component in the
monetisation process, revenues generated by going
Through The Operator (TTO) will be worth $465
million in 2015 rising to $12.8 billion in 2018.
The sale of mobile operator data for marketing and
advertising purposes will generate $245 million in
2015 rocketing to $7.2 billion in 2018. During the
same timeframe, OTT-based content sales will
generate $122.5 million and $3.9 billion respectively,
while OTT subscription revenues will be worth $98
million, rising to $1.8 billion.
SOURCE: MOBILESQUARED
Fig 14. The mobile operator OTT
communication opportunity ($)

26. CONCLUSION
It is not coincidental that almost every mobile
operator included in the research is open to the
concept of partnering with an OTT communications
provider, and around 80% of mobile operators now
believe they can generate revenues from OTT
communications. Clearly, mobile operators now
believe that partnering will unlock the revenue
generating potential of OTT communications.
Rather than develop their own OTT service, mobile
operators are now intent on capitalising on what is
already available and pursuing partnerships.
Ironically, Joyn has been trying to develop the
ultimate RCS/RCSe communication experience, but
almost two-thirds of mobile operators said they would
like to provide the simplicity of a WhatsApp-like
experience to their customers.
Mobilesquared believes this will result in a period of
convergence between mobile operators and OTT
communications service providers. This will be driven
by two factors.
Firstly, there has been a significant shift in mobile
operator mindset regarding OTT communications.
The perception that OTT communications is a threat
has been replaced with a revenue-generating
opportunity. Mobile operators have never been more
open and receptive to the notion of partnering with
OTT communications service providers, and to this
end, OTT communications providers must look to
exploit this opportunity.
Secondly, the need for OTT communications
providers to monetise their community. Driving this
commercialisation will be a period of maturation
throughout OTT communications providers as their
model evolves beyond pure community-driven user
acquisition, to revenue generation and user
acquisition. The need to partner is compounded by
the fact OTT communications have little or no user
information or data, and mobile operators have
customer data in abundance, and limited or no billing
capability.
To date mobile operators have been tentative and
reluctant to partner with OTT communication
providers. As this year’s research has highlighted,
this is down to not knowing what elements to include
in a contractual agreement, as well as the means by
which to measure success, to not knowing how to
start the process. Ultimately, it has come down to the
fact that OTT communications is yet to have a clear
business model.
Of course, the OTT communication (or social
messaging) platforms emanating out of Asia are
generating a cost per user of up to $3 – significantly
lower than a mobile operators average revenue per
user (ARPU). But from experience, only a select few
companies have made the closed community, or
walled garden model, work. This has resulted in the
mobile operator questioning the justification for
partnering with an OTT communications provider.
But mobilesquared believes partnering will overcome
the lack of business model, and present clear
monetisation opportunities. The functionality,
customer data and billing capability of an operator,
along with the potential of providing an open network
API, when applied to the vast and engaged user
PAGE 24 | CONCLUSION
CONCLUSION

27. APPENDIX
Mobilesquared conducted the international mobile
network operator (MNO) and mobile virtual network
operator (MVNO) research between July and
September 2014. The views of over 60 mobile
operators have been included in the research.
Companies include (in no particular order):
Essar Telecom Kenya, Yu Mobile, Bharti Airtel, PT
Telekomunikasi Selular Indonesia, Telecom Italia,
Juvo, Inc., A1 Telekom Austria, SK Telecom,
Bouygues Telecom, Telecom Italia Mobile, Telecable,
Warid Telecom, EE.DTAG, U.S. Cellular, BT PLC,
Deutsche Telekom, T – mobile, Tele2 Lithuania,
Telefonica, Cellcom Isael, Aircel, Croatian Telecom
Inc., Wind Telecomunicazioni S.p.a., Polkomtel,
COSMOTE GREECE, AT&T, Telekom Austria Group,
EWA, Zain KSA, Airtel Africa, MegaFon, Smart
Telecom, Movicel, Digicel, Tesco Mobile, Telenor,
Telkomsel, du, mtel, TELE Greenland, Hrvatski
Telekom d.d., BH Telecom
SOURCE: MOBILESQUARED
11%
2%
56%
13%
18%
Chart Title
Where are you based?
North America
Latin America
Europe
MEA
APAC
APPENDIX | PAGE 25
community of an OTT communications provider will
create additional revenue opportunities for the mobile
operator.
Business models to emerge on the back of these
partnerships will be created by the re-intermediation
of the mobile operator to a central role for the
delivery of communications. For example, the sale of
mobile operator customer data will provide enhanced
targeting for advertising and marketing, as well as
the up-selling of relevant content to OTT users. The
mobile operator`s billing capability can also be
applied to the up-sale of content, as well as to a
monthly subscription fee for the OTT service. Mo-
bilesquared believes mobile operators should also
explore the opportunity of launching a flat-rate
all-you-can-eat data communications tariff, to
complement the existing data bundle, and to offset
the decline in traditional communication revenues.
Mobilesquared forecasts that the global mobile
operator opportunity for OTT communication will be
worth $42.9 billion in 2018, up from $4.2 billion in
revenues in 2014. The partnership model will be
worth $465 million in 2015 to mobile operators, rising
to $12.8 billion in 2018.
To put this opportunity into context, it has taken 10
years for the mobile advertising industry to generate
$13 billion in global revenues. The mobile operator
OTT partner model can achieve that in 4 years.
Mobile operators are back in the game.
APPENDIX
Fig 15. Where are you based?

28. Job titles of respondents partaking in the 2014
research include:
VAS, Voice & Data Product Manager; Core and VAS
System Roadmap; Head, Future Centre; SVP
Business Development; Lead Architect; Core
Network and Value Added Services Engineering
Director; Manager Data & Devices; Principal
Strategist; VP Core Network & Services; Head of
Product Management – Messaging; Senior
Proposition Manager Voice & Messaging; Senior
Engineer, RAN Rollout Manager, Internet & Mobile
Application Area Manager; Head - Strategic
Alliances; Proposition Manager; Marketing Manager;
New Service Development Manager; Senior Software
Engineer; CEO; International Marketing Consultant;
Head of Marketing; Head of New Business Solutions;
Senior User and Retention Manager; Marketing
Analyst; Strategy Implementation; Lead Member of
Technical Team; Director Data; International Director;
Telecoms, Manager of Device Content; VAS &
Broadband Marketing Communication; CTO
Assistant; Head Value Added Service; CTO; Chief
Marketing and Sales Officer; Head of Network
Architecture; Customer Value Management and
Customer Intelligence Specialist; Head of Research
Department.
METHODOLOGY
Research was conducted by mobilesquared during
July to September 2014. The project involved a
multi-layered approach based on direct and indirect
research.
Direct research involved two elements. Firstly, the
mobile operator research used an online survey of
agreed questions between mobilesquared and tyntec.
The survey was pushed out to mobilesquared’s
global mobile operator database. This was supported
by mobilesquared’s proprietary LinkedIn research tool
to drive responses.
Secondly, primary research based on 1-2-1
interviews with mobile operators and OTT service
providers and vendors, extensive research and
interviews at key industry events, such as Monetising
OTT in London, was used to update market data,
information and identify emerging trends. And indirect
research, i.e. secondary and tertiary research
(primarily online based).
Forecasts for this white paper have been constructed
using a 6-step process.
1. mobilesquared forecasts are based on
subscriptions, and not subscribers, which factor
in consumers owning more than one smartphone
device. This has been applied to 68 markets (see
page 27).
2. The research then involved updating smartphone
penetration as a percentage of subscriptions per
market.
PAGE 26 | METHODOLOGY
METHODOLOGY

29. METHODOLOGY | PAGE 27
3. The next step was to identify OTT communication
user penetration as a percentage of the
smartphone user base in each market.
4. Key data points were extracted from the direct
and indirect research to identify OTT
communication users and usage trends for mobile
voice and messaging, from providers such as
Skype, Viber, WhatsApp, LINE, such as
percentage of “OTT off-net communication”
mobile calls compared to Skype-to-Skype calls for
example, and repeat OTT communications user
and usage trends for IP messaging.
5. Termination rates from the mobile operator
research were applied to traffic projections to
create revenue forecasts.
6. OTT communication revenue forecasts are based
on a universal rate of $0.06 for
OTT-to-mobile calls, and a flat-rate of $0.01 for
all OTT off-net communication SMS traffic. These
termination rates are based on actual numbers
acquired during the research process.
7. The incremental revenue forecasts for Through
The Operator (TTO)/mobile operator
partnership opportunity are based on key data
from the mobile operator research 2014, and
applied to updated OTT smartphone forecasts.
Please note, the mobile forecasts included in this
report focus only on the global mobile operator
opportunity generated from traffic generated from an
OTT communication service provider to a mobile
phone using a traditional phone number. For the
purposes of this report we call a Skype call to a
mobile phone, for example, an “OTT off-net
communication” call. Therefore, the forecasts in this
report only cover the traffic and revenues generated
by the termination of “OTT off-net communication”
communications (mobile voice and messaging). The
forecasts only focus on the direct revenue generating
potential for mobile operators from OTT
communications (terminating voice and messaging
traffic), the sale of customer data, the sale of content,
and the introduction of a subscription model. Indirect
revenue generating sources, such as an increase in
data usage, has not been included.
The 68 countries researched are: Algeria, Argentina,
Austria, Australia, Azerbaijan, Bangladesh, Belgium,
Brazil, Bulgaria, Canada, China, Chile, Columbia,
Czech Republic, Denmark, Ecuador, Egypt, Estonia,
Finland, France, Greece, Germany, Guatemala, Hong
Kong, Hungary, India, Indonesia, Iran, Ireland, Israel,
Italy, Japan, Jordan, Lebanon, Lithuania, Malaysia,
Mexico, Montenegro, Morocco, Nepal, Netherlands,
New Zealand, Nigeria, Norway, Pakistan, Peru,
Philippines, Poland, Portugal, Romania, Russia,
South Africa, Saudi Arabia, Singapore, Slovakia,
South Korea, Spain, Sri Lanka, Sweden, Taiwan,
Thailand, Turkey, UAE, UK, Ukraine, USA, Venezuela
and Vietnam.
Please note, this is the fourth year mobilesquared
has run the mobile operator OTT research. The first
wave of mobile operator research was conducted in
3Q2011 and repeated in 2Q2012 and 2Q2013.

30. ABOUT TYNTEC
tyntec is a mobile interaction specialist, enabling businesses to integrate mobile telecom services
for a wide range of uses – from enterprise mission-critical applications to internet services. The
company reduces the complexity involved in accessing the closed and complex telecoms world
by providing a high quality, easy-to-integrate and global offering using universal services such as
SMS, voice and numbers.
Founded in 2002, and with more than 150 staff in six offices around the globe, tyntec works with
500+ businesses including mobile service providers, enterprises and internet companies.
For more information: www.tyntec.com
ABOUT MOBILESQUARED
Mobilesquared is the best provider of intelligence and insight on the mobile sector. We excel at
conducting dynamic research and writing amazing copy. Our core team of journalists-turned-
analysts have been covering the mobile space since phones were like bricks, and this experience
allows us to analyse and strategize our findings and transform into outstanding reports for clients,
whether for internal use (e.g. market positioning) or external (e.g. white papers, quarterly
publications), even presentations. And because we’re small, we’re flexible, completely
independent, and very cost-effective. Learn more about how we can help you by paying our site
a visit www.mobilesquared.co.uk.