By 2017, it’s forecasted that Over-the-Top (OTT) communication market will grow seven times, increasing revenues from $7.9 billion dollars to a whopping $53.7 billion. But how will operators deal with this hit to their SMS and voice revenues? As year-over-year growth of OTT services chips away at revenues, and more than half of estimated subscribers turn towards OTT telephony services like WhatsApp and WeChat, all signs indicate that the time for operators to act is now. This tyntec-sponsored whitepaper contains original market research by mobilesquared based on survey and personal interviews involving more than 40 Mobile Network Operators (MNOs) and Mobile Virtual Network Operators (MVNOs) from around the globe.

1. OTTServicesBlowUptheMobileUniverse.
Operators Must Act NOW!
A whitepaper by Sponsored by
September 2013

2. METHODOLOGY
Research was conducted by mobilesquared during May and
June 2013. 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.
The first wave of mobile operator research was conducted in
3Q2011 and repeated in 2Q2012.
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 the Global Messaging Congress in London and LTE World
Congress in Amsterdam in June 2013. And indirect research,
i.e. secondary and tertiary research (primarily online based).
Forecasts for this whitepaper 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 9).
2. The research then involved updating smartphone
penetration as a percentage of subscriptions per market.
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 voice from providers such as Skype and Viber,
such as percentage of “OTT off-net communication” mobile
calls compared to Skype-to-Skype calls for example. These
key data points provide key data reference points for the data
modelling. Other OTT communications provider data has been
included in the modelling where applicable. Repeat OTT
communications user and usage trends for messaging, using
data from services such as WhatsApp.
5. Termination rates from the mobile operator research were
applied to traffic projections to create revenue forecasts.
a. OTT communication revenue forecasts are based on a
variable rate for OTT off-net communication, ranging from
$0.015, $0.025, $0.035, and 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.
The mobile forecasts included in this report focus only on the
global mobile operator opportunity from traffic generated from
an OTT communication service provider to a fixed or 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 (voice and messaging). The forecasts do not
look at the total OTT communication opportunity, such as the
revenues generated from WhatsApp downloads or projected
subscription costs, for example. Neither do the forecasts
include OTT music or OTT TV.
METHODOLOGY | PAGE 2

3. Table of contents
METHODOLOGY & INTRODUCTION 2 - 4
EXECUTIVE SUMMARY 5 - 8
AN OVER-THE-TOP UPDATE 9 - 21
FORECASTS 22
KEY MARKET DATA 23 - 25
PAGE 3 | TABLE OF CONTENTS

4. INTRODUCTION
INTRODUCTION | PAGE 4
This whitepaper follows on from a similar research
project conducted in 2012 by mobilesquared entitled:
OTT Services: How Operators Can Overcome the
Fragmentation of Communication.
In the last 12 months mobile operators have now
acknowledged that over the top (OTT)
communication services have become the
greatest threat to their revenues, replacing the
previous incumbent of churn. This whitepaper will
focus on where OTT communication (voice and
messaging) is today, the potential threat of the major
players, and how mobile operators can limit the
impact OTT services will have on their revenues.
mobilesquared’s latest research reveals that in the
last 12 months the adoption and usage of OTT
communication has accelerated considerably, more
mobile operators are looking to partner with OTT
players as they look to minimise their decline in
messaging revenues, and offset their lack of service
innovation.

5. Over the last 12 months, there has been a
considerable acceleration of OTT user growth and
usage. With smartphones to reach 1.6 billion by the
end of 2013 and 3.1 billion by 2017, the number of
smartphone users using OTT communication
services will be 925.5 million this year, and 2.1 billion
by the end of 2017.
The mobile operator survey reveals that they are
clearly expecting a new wave of OTT users adopting
the services in 2014, most likely based on what they
have witnessed over the previous 12 months. The
mobile operators also identified a maturing of existing
users, with over one-fifth of operators expecting more
than 50% of their subscribers to be using OTT.
THE RISE OF OTT SERVICES
The research shows that 43% of mobile operators
view Skype as a major threat to their revenues.
Skype now has 280 million active monthly users
spending a total of 2 billion minutes per day on
Skype, equating to 730 billion minutes a year. On
average, each of these active users spends just over
7 minutes per day, or 2,555 minutes a year using
Skype communication services. Skype is costing the
telco industry $100 million per day and a staggering
$36.5 billion per year.
Mobile operators believe Google+ Hangouts will be
more popular than Facebook Home, though they view
WhatsApp as the clear leader of the OTT market.
WhatsApp now has 300 million users, growing at a
rate of 14.6 million new users per month. That
represents user growth of 233% in 12 months, during
which daily messages sent has increased from 2
billion to 10 billion. Beyond WhatsApp, there are
more messaging and chat apps achieving scale.
KakaoTalk in South Korea have over 80 million users,
Line launched in Japan now has over 140 million
users globally, and WeChat from China now has over
400 million users around the world. WeChat is the
fastest growing OTT app. In 2012, WeChat doubled
its user base from 100 million to 200 million in 6
months, and it had doubled its user base once more
by June 2013. There are of course other players with
millions of users such as Nimbuzz, Pinger, HIKE and
eBuddy all to consider.
HOW OPERATORS PLAN TO TACKLE THE
THREAT OF OTT
The survey reveals that the majority of mobile
operators now have an OTT plan or strategy in place.
With fewer mobile operators imposing surcharges,
blocking OTT, and the reduction in offering their own
OTT client, indicates mobile operators are becoming
more tolerant and accepting of OTT players. As a
result 36% are partnering with OTT providers in 2013,
up from 32% in 2012.
WhatsApp now has 300 million
users, growing at a rate of 14.6
million news users per month.
According to the research, the number of mobile
operators generating revenues from OTT services
by charging for data is falling year-on-year. In 2013,
this figure was one-fifth, down from 26% the previous
year, and 50% in 2011. The results to this survey
question reveal something of an anomaly, given the
rise in data traffic and revenues, and would suggest
PAGE 5 | EXECUTIVE SUMMARY
EXECUTIVE SUMMARY

6. EXECUTIVE SUMMARY
OPERATOR OPINIONS ON JOYN
The collective mobile operator response to the threat
of OTT to generate revenues and leverage their
infrastructure is Joyn, a default communication
ecosystem. Joyn is one example of mobile operators
emulating OTT communication services, and will offer
chat, share files over a running voice call, and
incorporate the user’s location.
The mobilesquared research shows that only one-
third of mobile operators have a positive stance
towards Joyn – of these mobile operators, the
majority believe it has taken too long to launch.
Of the remaining two-thirds of mobile operators, 29%
believe Joyn is not the solution, with a further 35%
uncertain of the impact Joyn will have on their
positioning to tackle OTT services.
29% believe Joyn is not the solution.
Additional qualitative research by mobilesquared
confirmed the uncertainty of Joyn as the mobile
operator answer to challenge OTT. The time to
commercially launch the service, coupled with the
need to interconnect every mobile operator, has
clearly cast doubt over the service. Given that much
of the appeal of OTT services is their international
connectivity, interconnectivity will be a critical feature
for Joyn.
EXECUTIVE SUMMARY | PAGE 6
mobile operators were ideally placed to exploit the
rise of OTT usage.
36% of mobile operators are
partnering with OTT providers in
2013, up from 32% in 2012.
One possible explanation for this somewhat
unexpected response could be that access to OTT
communication services is now being bundled by the
mobile operator as part of their simplified post-paid
offering. And if so, this implies that the majority of
mobile operators are adopting a dumb pricing model
and not offering innovative OTT communication data
plans.
Alternatively, the need to offer their own client could
be diminishing as the number of mobile operators
deploys IMS/LTE to offer RCS/RCS-e. Interestingly,
this number has dropped from 47% in 2012 to 29% in
2013. This is either because the mobile operator has
now implemented an IMS core, or has delayed their
investment.
The most popular tactic now being employed by
mobile operators is to launch next-generation SMS
and MMS service, as their own OTT services are
facing increasing internal pressure. mobilesquared
research reveals that the future of Tu Me is in doubt
because of lower-than-anticipated uptake and usage.
Telefonica is in the process of reviewing whether to
discontinue the service.

7. PROTECTING VOICE AND MESSAGING
REVENUES
But mobile operators must act now, as the impact of
OTT communication is starting to chip away at their
messaging revenues. Between 2011 and 2013, the
research shows that the number of mobile operators
stating that they had not experienced a drop in
messaging revenues as a direct result of OTT clients
on smartphones has almost halved from 62% to 36%.
Over 56% of mobile operators said
that messaging was in decline.
In total, over 56% of mobile operators said that
messaging was in decline, of which almost half of
were experiencing an overall decline in messaging
traffic of up to 5%, and one-third of those mobile
operators experiencing a decline of between 6-20%.
For the first time in the mobilesquared annual OTT
research process, 14% of mobile operators are
claiming that OTT has created a loss of messaging
revenue of more than 21%.
Of those mobile operators that are experiencing
an increase in messaging traffic, 29% claim overall
messaging traffic is up by between 1-5%, 43% of
those mobile operators cited a 1-5% increase in SMS
traffic, while 14% said they experienced an increase
of 6-10%, and an additional 14% of mobile operators
said SMS traffic had grown by over 11%.
Mobile operators can potentially offset this decline in
revenues by tapping into the OTT opportunity. The
subsequent impact of more OTT users presents a
marked increase in OTT off-net termination for mobile
operators, especially given the proliferation of OTT
services.
mobilesquared forecasts that the global telco
opportunity for OTT off-net termination will be worth
$53.7 billion in 2017, a substantial increase from the
$7.9 billion revenues in 2013. In 2013, the
termination of OTT off-net communication fixed-line
traffic represents the greatest revenue generator for
telcos, worth $4.2 billion in 2013 rising to $20.3 billion
in 2017. But over the forecast period, that figure will
be overtaken by OTT off-net communication mobile
traffic termination revenues, generating $2.2 billion in
2013 and leaping to $23.7 billion in 2017. SMS
termination will account for $1.4 billion in 2013,
increasing to $10 billion in 2017.
Operators can potentially offset
this decline in revenues by
tapping into the OTT opportunity.”
The Top 5 smartphone-based OTT markets, led by
China and followed by the US, Brazil, India and
Germany, cumulatively total 624.1 million users in
2013, and account for 67% of the total global user
base. Admittedly, China makes up a substantial
proportion of that figure with 445.9 million. By 2017,
the Top 5 markets will total 1.3 billion users, though
their contribution to total global users would have
fallen to 62% as other markets make minor inroads
on the leading five’s dominance.
EXECUTIVE SUMMARY
PAGE 7 | EXECUTIVE SUMMARY

8. EXECUTIVE SUMMARY
The Top 5 markets will generate OTT off-net
termination revenues of $6.6 billion in 2013 and
$36.5 billion in 2017. Interestingly, in 2013 the Top
5 markets will account for 84% of total global OTT
off-net termination revenues, but this will drop to 68%
in 2017 as other mobile markets get in on the act and
their smartphone penetration increases.
Operators are now more open for
partnering with OTT players,
compared to the results of last
year’s whitepaper.
In summary, operators are now more open for
partnering with OTT players, compared to the results
of last year’s whitepaper, as they look to capitalise on
the innovation emanating from the OTT
communication space. Operators realise they need
to act sooner rather than later and most have stated
they now have a plan in place and have moved away
from blocking, imposing surcharges or lowering the
quality of service. Their original approach to make
money from charging for data is declining, and their
preference is to partner with OTT players by renting
out virtual phone numbers and terminating OTT traffic
as they can participate in revenue streams.
EXECUTIVE SUMMARY | PAGE 8

9. AN OVER-THE-TOP UPDATE
The driver for the accelerated adoption of OTT
communication services (voice and messaging) over
the last 12 months is the continued take-up of smart-
phones. mobilesquared forecasts there will be 1.6
billion smartphones (in the top 68 mobile markets –
see Methodology) by the end of 2013, and will
increase to 3.1 billion smartphone users by 2017.
Key markets, such as the USA, Germany, UK, South
Korea, Canada, Netherlands, Australia, Sweden,
Hong Kong, and Singapore will have over 85%
smartphone penetration by 2017. Consequently, the
potential number of OTT communication app-based
users will double between now and 2017.
*TOP 68 MOBILE MARKETS (SEE METHODOLOGY)
SOURCE: MOBILESQUARED
The on-going adoption of smartphone users
globally will have a direct impact on the increase in
OTT communication users and usage. By the end of
2013, mobilesquared forecasts the number of users
who use OTT services on their smartphones will be
925.5 million, and will more than double over the
forecast period to 2.1 billion in 2017. By this time,
the Top 5 smartphone-based OTT communication
markets (China, USA, Brazil, India and Germany) will
account for almost 1.13 billion users.
The potential number of OTT
communication app-based users will
double between now and 2017.
In 2013, OTT communications’ penetration of
smartphone users is 55%, and this will increase to
66% in 2017.
These latest forecasts represent a significant uplift on
mobilesquared’s original 2012 projections as outlined
in the whitepaper “OTT Services: How Operators
Can Overcome the Fragmentation of
Communication”. As this whitepaper will demons-
trate, there has been an exponential increase in OTT
smartphone usage over the last 12 months, with two
OTT messaging services, WhatsApp and WeChat,
growing by over 375 million users.
*TOP 68 MOBILE MARKETS (SEE METHODOLOGY)
SOURCE: MOBILESQUARED
PAGE 9 | AN OVER-THE-TOP UPDATE
Smartphone forecasts, top 68 mobile markets
Smartphone-based OTT user forecasts

10. AN OVER-THE-TOP UPDATE
Interestingly, the accelerated OTT communication
adoption over the last 12 months has been
reflected by the mobile operators’ response to the
survey question covering the percentage of their
subscriber base that will be using OTT services in
2014. There is a considerable difference in the
response compared to last year’s research. In 2012,
the majority of mobile operators expected between 6
to 50% of their subscribers to be using OTT services.
In 2013, mobile operators are clearly expecting a new
wave of OTT users adopting the services in 2014,
most likely based on what they have witnessed over
the previous 12 months. The mobile operators also
identified a maturing of existing users, with over
one-fifth of operators expecting more than 50% of
their subscribers to be using OTT.
Mobile operators are clearly expecting
a new wave of OTT users adopting
the services in 2014.
SOURCE: MOBILESQUARED
THE SKYPE’S THE LIMIT
OTT communication services use mobile operator
infrastructure to access the internet to deliver an
array of communicative services from voice and
video calls to messaging. There are established OTT
players in this space like Microsoft-owned Skype and
WhatsApp, and more recent additions like Viber and
WeChat.
Skype now has over 1 billion sign-ups, though the
company says it actually has 280 million active
monthly users, of which 55 million users are logged
on and using the service simultaneously at any one
time during the day a figure that has risen from 42
million in 2012. Therefore, there are an additional 13
million people using Skype and potentially making
voice and video calls, and messaging at any-one-
time compared to last year. Mobile operators – in
developed markets at least – can only dream of such
user growth. To put that growth into context, at the
end of June 2012 Vodafone Group’s total subscriber
base had grown 1.7 million over the previous quarter.
The most important figure from a mobile operator’s
perspective is the amount of traffic Skype is now ge-
nerating. In April 2013, Skype announced that its
active users are now spending a total of 2 billion
minutes per day on Skype. That equates to 730
billion minutes a year. On average, each of these
active users spends just over 7 minutes per day, or
2,555 minutes a year using Skype communication
services.
AN OVER-THE-TOP UPDATE | PAGE 10
What percentage of an operator`s subscriber base do you
think will be using OTT services in 2014?

11. AN OVER-THE-TOP UPDATE
In 2012, mobilesquared estimated that Skype was
costing the telco industry $41 million per day and $15
billion per year, based on the assumption that a call
costs $0.05 per minute. When applying these latest
numbers to the existing assumptions, that figure has
rocketed to $100 million per day and a staggering
$36.5 billion per year.
Skype user and usage figures are expected to
continue to grow unabated. The Skype app is among
the top 10 downloads of all time for Windows Phone,
iOS and Android. In July 2013, Skype confirmed that
its app had been downloaded over 100 million times
by Android devices alone. As smartphone
proliferation continues globally, Skype will consolidate
its position as one of the leading cross-device
communication services for end users, far removed
from its original online PC-based beginnings.
In April 2013, Skype announced
that its active users are now
spending a total of 2 billion
minutes per day on Skype.
In the mobile operator survey, 43% of mobile
operators said that Skype presented a major threat to
their revenues, especially now that it has the backing
of Microsoft since its acquisition in 2011. An
additional 14% of mobile operators believe it could
potentially be a threat to their revenues if Windows
devices become mainstream. Over a quarter of
mobile operators claim to have not witnessed any
increased threat from Skype to their revenues
since the acquisition. The remaining 14% were either
undecided or did not think Skype posed a threat to
revenues.
SOURCE: MOBILESQUARED
WHATSAPP
In the last 14 months WhatsApp has exploded into
life. In June 2012, there were 75 million WhatsApp
users globally, sending 2 billion messages a day,
equating to 27 messages per user per day. Based on
2009 to 2012 user adoption trends, mobilesquared
last year projected the number of WhatsApp users
would increase to 250 million by 2016. In April 2013,
WhatsApp CEO Jan Koum announced the service
was bigger than Twitter which has over 200 million
active users. He then followed-up this statement in
June 2013 by revealing that WhatsApp had around
250 million users, growing at a rate of 14.6 million
new users per month. That represents user growth of
233% in 12 months. However, most recently in
August, WhatsApp revealed that it had added a
further 50 million users over the previous 2 months,
taking its total to over 300 million users. And there
are equally impressive numbers when it comes to
traffic.
PAGE 11 | AN OVER-THE-TOP UPDATE
Since being acquired by Microsoft, has this impacted your belief
that Skype presents a major OTT threat to operator revenues?

12. AN OVER-THE-TOP UPDATE
AN OVER-THE-TOP UPDATE | PAGE 12
In June 2012, there were 75 million
WhatsApp users globally, sending 2
billion messages a day.
In 12 months, the number of daily messages sent
has increased from 2 billion to 10 billion, though that
doesn’t reveal the true extent of the story. WhatsApp
recently said that it had processed a record 27 billion
messages in one day, with 10 billion inbound sent
messages and 17 billion outbound received
messages.
ALTERNATIVE OTT COMMUNICATION
PROVIDERS
In the messaging and chat space, there is something
of a land-grab underway. Viber now claims to be a
proprietary cross-platform instant messaging VoIP
application for smartphones, and continues to be hot
on the heels of Skype with over 200 million users in
almost 200 countries. The company is yet to
generate revenues, but will launch a “sticker store”
before the end of 2013. Stickers are characters
engaged in various activities, a kind of
next-generation emoticon, and have been instrumen-
tal in generating significant revenues for Asian-based
OTT communication providers.
Since 2010 a number of alternative OTT chat apps
have emerged in Asia to appeal to specific markets,
but have actually gone on to become global
successes. Since KakaoTalk launched in South
Korea it has now amassed over 80 million users.
A year later in 2011, Line launched in Japan and now
has over 140 million users globally. In the same year,
WeChat hit the smartphone space in China and now
has over 400 million users around the world. In 2012,
WeChat doubled its user base from 100 million to
200 million in 6 months, and it had doubled its user
base once more by June 2013. There are of course
other players with millions of users such as Nimbuzz,
Pinger, HIKE and eBuddy all to consider.
In the VoIP space, Rebtel’s worldwide user base
of 23 million is dwarfed by the messaging and chat
OTT communication providers, but the company can
boast revenues of $80 million in 2012 and a projected
turnover of $100 million for 2013.
One OTT communication provider starting to feel
the competitive heat is Vonage. In the first quarter
of 2013 its 7.2 million users generated revenues of
$209 million down from $216 million in 1Q2012. The
company attributed this “to fewer subscriber lines and
the expansion of lower priced plan offerings to meet
customer needs”. The VoIP provider is also
experiencing sequential drops in ARPU (average
revenue per user), highlighting the increasing levels
of competition between OTT players.
In 2012, WeChat doubled its user base
from 100 million to 200 million in 6
months, and it had doubled its user
base once more by June 2013.
As highlighted across Asia in particular, over the last
24 months there has been a growing proliferation of
localised OTT communication providers,
primarily in the messaging space. Given the majority
of OTT communication providers are global, the lack
of local knowledge and presence in the majority of
markets by OTT service providers is an argument

13. AN OVER-THE-TOP UPDATE
PAGE 13 | AN OVER-THE-TOP UPDATE
being developed by the mobile operator community
as they mount their counter-charge against the OTT
communication players. Mobile operators have a
very strong brand in their own local market, and a
direct relationship with their customers, compared to
the “impersonal service” provided by the global OTT
companies.
One interesting point raised during the qualitative
research is, when does a company like Apple contact
a user if they haven’t used or purchased content on
iTunes in the previous three months? The simple
answer is they don’t, potentially leaving the door
open for mobile operators to apply a strategy
focusing on localisation and personalisation to
maintain and enhance their direct relationship with
their subscribers.
Despite the “impersonal” strategy employed by Apple,
the global company continues to march on. There are
now over 500 million iOS devices globally, with iPads
accounting for almost 85 million devices. From those
devices iMessage users now send over 200 million
messages a day (or 73 billion per annum).
There are now over 500 million iOS
devices globally, with iPads accounting
for almost 85 million devices. From
those devices iMessage users now
send over 200 million messages a day.
And then there is the potential resurrection of Black-
Berry as it looks to make its messaging service
“BBM” cross-platform over Android and iOS devices.
This is clearly a ploy to keep existing BlackBerry
users by ensuring they can interconnect with the
more popular OS platforms. But whether this is too
little or too late to redress falling global handsets
sales for the Canadian company remains to be seen.
Operators are now more open than
ever before to considering the
opportunity of partnership.
THE OPERATOR STANCE ON OTT
Mobile operators are under no illusion that OTT
communication will have a financial impact on the
industry. When surveyed, 36% of mobile operators
expect WhatsApp to have the greatest impact on
revenues. WhatsApp was followed by Google and
Facebook, which both received 21% each of mobile
operators’ responses, and followed closely by
Apple on 14%. Surprisingly, Skype only attracted
7% of mobile operator responses – though when the
impact of Skype, Google and Facebook were
separated out within the quantitative research, Skype
was considered the greatest threat.
This is a strong indication that mobile operators are
more concerned about declining messaging revenu-
es than voice, and as a consequence are looking to
partner with OTT communications providers, such as
WhatsApp to offset the decline in traditional mes-
saging revenues with an increase in OTT termina-
tion traffic revenues, as outlined later in this report.
Therefore, it could be argued that in the short term
OTT communications will have a negative impact
on messaging revenues, but a positive impact in the
long term.

14. AN OVER-THE-TOP UPDATE
SOURCE: MOBILESQUARED
Consequently, operators are now more open than
ever before to considering the opportunity of
partnership to bolster their revenues.
GOOGLE
Google+ Hangouts is viewed as something more of a
threat than Facebook, with 29% of mobile operators
believing it presents a major threat to their
revenues. The same number of respondents said
that they view Google+ Hangouts as just another
OTT service, leaving 43% of mobile operators not
believing that the service poses a major threat to their
revenues. As with Facebook Home, mobile operators
are not interested in partnering with Google+
Hangouts.
Where the potential threat lies with Google is that
with Google+ Hangouts it is starting to build up a
community. Because of its size and ability to
innovate, Google is constantly linked with the OTT
space and a possible strategy for messaging and
communications as a means of monetising its
community. Communications is not Google’s focus
because it is not an ideal underlying service to
provide advertising, and until advertising becomes
accepted by OTT users, Google is unlikely to
seriously pursue the OTT opportunity.
SOURCE: MOBILESQUARED
With both Facebook and Google, mobile operators
are wary of the threat both companies could pose,
were they to utilise their resources and scale to
deliver a compelling integrated OTT service. These
OTT sleeping giants are clearly yet to identify a
business case or user model for them to commit
sufficient investment, but for mobile operators they
remain a loaded gun.
AN OVER-THE-TOP UPDATE | PAGE 14
Which OTT players will have the biggest impact on your revenues?”
Which of the following statements do you agree with regarding
the impact Google+ Hangout will have on mobile operator
revenues and OTT usage?

15. AN OVER-THE-TOP UPDATE
PAGE 15 | AN OVER-THE-TOP UPDATE
FACEBOOK
Only 7% of mobile operators view Facebook Home
as a major threat to their revenues, yet 64% view
Facebook Home as just another OTT service to
contend with, and a further 29% of mobile operators
do not believe Facebook Home poses a major threat
to their revenues. Interestingly, not one mobile
operator would like to partner with Facebook Home.
29% of mobile operators do not
believe Facebook Home poses a major
threat to their revenues.
SOURCE: MOBILESQUARED
In fact, the view that Facebook Home is “just another
OTT provider” as highlighted in the mobile operator
survey was supported by additional mobile operator
research. Their view is that Facebook has become a
platform (or ecosystem) and communication is a
service that is largely overlooked by its users, and
has consequently never featured as part of the
company’s core product set.
Part of this reasoning, given Facebook’s scale, is that
it needs to be more relevant and provide more tools
for its user base to interact. What’s more, Facebook’s
goal of encouraging people to spend as much time as
possible on its platform is based on P2F
(peer-to-Facebook) user behaviour, and is not
traditionally associated with P2P messaging,
especially on its mobile app.
Instant messaging and now Facebook VoIP launched
in North America at the start of 2013, and France,
Germany, Italy, Spain and the UK in March, have to
be considered as services on its platform, but are not
traditionally why people use Facebook. And if
Facebook is to become a major threat to mobile
operators, it will need to address this.
In recent months, Facebook has increased the
prominence of chat on its Facebook Home service for
Android devices, which suggests the company
believes there is an opportunity to usurp Google
regarding OTT communication on the vast Android
platform. There are now over 750 million Android
devices globally, and based on recent growth
mobilesquared expects that number to surpass 1
billion devices in September 2013.
THE 2013 MOBILE OPERATOR MINDSET
The number of mobile operators that claim they do
not know how to tackle OTT has risen from 0% to 7%
between 2012 and 2013, though this represents a
minority of the mobile operator community, and
highlights almost all mobile operators do have an
OTT plan or strategy now in place.
Which of the following statements do you agree with regarding
the impact Facebook Home will have on mobile operator
revenues and OTT usage?

16. AN OVER-THE-TOP UPDATE
The number of mobile operators blocking OTT
services peaked in 2012 with 11%, but has
dropped in 2013 to 6%. Similarly, the growth in
imposing surcharges in recent years from 5% in 2011
to 16% in 2012 has dropped to 0% in 2013. Blocking
has certainly been viewed as a negative tactic
deployed by mobile operators, while a surcharge can
be viewed as a mobile operator tax. While the latter is
understandable given that the OTT service is reliant
on the mobile operator’s infrastructure, blocking
access, or lowering the quality of the service,
especially to prepaid users, is not consumer friendly
and could potentially lead to churn.
Just over one-fifth of mobile operators
are making money from OTT services
by charging for data.
But where mobile operators embrace OTT
communication services, there continues to be a
business case. Just over one-fifth of mobile operators
are making money from OTT services by charging for
data. However, the on-going research suggests that
this figure is falling year-on-year, with almost 50% of
mobile operators claiming to be generating revenue
from OTT services in 2011, falling to 26% in 2012,
and 21% in 2013. The results to this survey question
reveal something of an anomaly, given the rise in
data traffic and revenues, and would suggest mobile
operators were ideally placed to exploit the rise of
OTT usage.
One possible explanation for this somewhat
unexpected response could be that access to OTT
communication services is now being bundled by the
mobile operator as part of their simplified post-paid
offering. And if so, this implies that the majority of
mobile operators are adopting a dumb pricing model
and not offering innovative OTT communication data
plans.
A mobile operator offering its own client is losing its
appeal with just 21% of mobile operators in 2013
claiming to, down from 26% in 2012. Perhaps
justifying this fall is the increase in mobile
operators that are partnering with OTT providers, up
from 32% in 2012 to 36% in 2013. Alternatively, the
need to offer their own client could be diminishing
as the number of mobile operators deploys IMS/LTE
to offer RCS/RCS-e. Interestingly, this number has
dropped from 47% in 2012 to 29% in 2013. This is
either because the mobile operator has now
implemented an IMS core, or has delayed their
investment.
mobilesquared introduced two new categories into
the research for 2013, including the number of mobile
operators expanding their SMS and MMS service
offering. Already, this has become the most popular
tactic used against the threat of OTT, with 43% of
mobile operators deploying these services.
A mobile operator offering its own
client is losing its appeal with just 21%
of mobile operators in 2013 claiming
to, down from 26% in 2012.
Another very recent industry development is mobile
operators partnering to combat the OTT challenge,
though this only appealed to 7% of respondents.
AN OVER-THE-TOP UPDATE | PAGE 16

17. AN OVER-THE-TOP UPDATE
PAGE 17 | AN OVER-THE-TOP UPDATE
All-in-all, the lack of imposing surcharges, lowering of
blocking services, and the reduction in offering their
own OTT client, suggests mobile operators are
becoming more tolerant and accepting of OTT
players, and also provides a foundation for
mobile operators to partner with OTT providers, as
the survey results, and also the qualitative research,
suggest.
SOURCE: MOBILESQUARED
MOBILE OPERATOR STRATEGIES
As identified in the previous section, mobile operators
are becoming more OTT compliant. Mobile
operators have launched OTT communication-based
data bundles. Mobily in Saudi Arabia, Airtel in
Nigeria and SmarTone in Hong Kong are all offering
data bundles with unlimited WhatsApp messaging,
for example. More recently, a partnership between
Globe Telecom and Viber will provide Filipino
subscribers with voice, text and data bundled with
Viber.
A number of mobile operators have launched their
own messaging apps, such as Bobsled, Glow in the
Philippines and Tu Me by Telefonica. mobilesquared
research reveals that the future of Tu Me is in doubt
because of lower-than-anticipated uptake and usage,
and Telefonica is in the process of reviewing whether
to discontinue the service.
Tu Me is typical of the pressures mobile operators
are facing when launching new services. Mobile
operator OTT applications are emulating pure-play
OTT communication players, but are later to market,
so in theory they could be just as successful. But
there is an issue of scale against the established OTT
providers, coupled with the needs to monetise a
service in a given timescale in a company
accustomed to generating billions of dollars for
services every quarter.
But the potential demise of Tu Me does not spell the
end of Telefonica’s quest to find the next big thing.
Wayra is the mobile operator’s start-up accelerator
concept created to support early companies in the
hope their innovation will uncover the next big thing.
TURKCELL GETS THE MESSAGE
Turkcell’s stance towards the challenge posed by
OTT communication providers is clear it is going
head-to-head and looking to compete using mobile
operator capabilities to continue generating revenue
with new services using not only SMS, but new
messaging services and RCS.
For Turkcell, its aim is to increase messaging
revenue with what it describes as “new attractive
services”.
In April 2013, it launched its next generation of
messaging, and where possible, has applied voice
Are you doing anything to combat the use of OTT clients and
applications on smartphones in your market?
No,wearemakingmoneybychargingfordata
No,wedon’tknow
how
Blockingserive
Imposingsurcharges
RollingoutIMS/LTE
toofferRCS/RCSe
ExpandingourSMS
andMMS
serviceofferings
Offeringownclientofferings
PartneringwithOTT
providers
Partneringwithothermobileoperators
Other

18. AN OVER-THE-TOP UPDATE
capability, such as now offering an SMS forwarding
service. But it has also launched an SMS signature
service, as well as an SMS Blacklist for unwanted
SMS and a Whitelist.
Since the launch, it is signing up 1,000 customers
a day, which means the company has somewhere
in the region of 100,000 by the end of July 2013.
By supporting the service with a strong advertising
campaign it expects to hit 1 million users by the end
of the year.
Quite rightly, Turkcell identifies that OTTs have
become successful because of the smartphone,
inspiring it to develop these new SMS services to
also target feature phone users. Of course, when the
mobile customer upgrades their device onto a
smartphone, it should ensure that Turkcell retains
that messaging relationship and prevents the
customer from downloading apps. In Turkey,
smartphone penetration stands at 16 million, 24% of
the market, meaning the market is still dominated by
feature phones.
In Turkey, smartphone penetration
stands at 16 million, 24% of the
market, meaning the market is still
dominated by feature phones.
As the mobile operator survey has revealed,
Turkcell will be one of many mobile operators looking
to deliver a next generation messaging strategy to its
customer base. Whether or not the mobile operator
response was referring to Joyn remains to be seen,
but both the quantitative and qualitative research
uncovered a growing concern with the ability of Joyn
to provide mobile operators with the solution to tackle
the OTT messaging boom.
JOYN ME
Joyn is the collective mobile operator response to the
threat of OTT communication to generate revenues
and leverage their infrastructure. The service is being
labelled as a default communication ecosystem,
rather than a messaging service.
Joyn is one example of mobile operators emulating
OTT communication services, and will offer chat,
share files over a running voice call, and incorporate
the user’s location.
In the countries where Joyn has been launched, it
can be a native integration on the device, or is
available as an app. The strategy behind launching a
Joyn app allows customers to adopt the service
before they upgrade their device with Joyn
embedded. In developed markets, mobile phones are
typically upgraded every two years.
Like existing pure-play OTT messaging services,
if both users are Joyn, the messaging will be over
Joyn, but if the recipient is not on Joyn the message
will revert onto SMS. But if the user has a
Joyn-enabled device and receives a message from a
Joyn user in their address book, it will provide entry
into the service.
The consumer perception will be that Joyn is free, as
consumers won’t pay for a service they can already
get for free, but a number of mobile operators are
effectively bundling the data costs of Joyn.
JOYN FRUSTRATION
Is Joyn the solution that will help mobile operators
tackle the threat posed by OTT players? The survey
AN OVER-THE-TOP UPDATE | PAGE 18

19. AN OVER-THE-TOP UPDATE
PAGE 19 | AN OVER-THE-TOP UPDATE
reveals that only 7% of mobile operators said “yes”,
with a further 29% believing Joyn was the solution
but “has taken too long to launch”. It has taken seven
years from concept to commercial launch, compared
to 6 months for WhatsApp. Of the remaining 64% of
mobile operators, 29% believe Joyn is not the
solution, with a further 35% uncertain of the impact
Joyn will have on their positioning to tackle OTT
services. This means only one-third of mobile
operators have a positive stance towards Joyn.
Only one-third of mobile operators
have a positive stance towards Joyn.
SOURCE: MOBILESQUARED
Additional qualitative research by mobilesquared
confirmed the uncertainty of Joyn as the mobile
operator answer to challenge OTT communication.
The time to commercially launch the service has
clearly cast doubt over the service. What’s more,
for it to truly challenge the global OTT powerhouses
it would need to have a similar global offering only
achievable if every mobile operator signs up. The
belief across the industry, and not just among mobile
operators, is that this will not happen. After all, SMS
only became a core communication service when
mobile operators interconnected. And given that
much of the appeal of OTT services is their
international connectivity; this will be a critical feature
for Joyn.
But the potential frustration that has developed
around the slow commercialisation of Joyn is
symptomatic of mobile operators. Mobile operators
are faced with a multitude of opportunities from
numerous sectors, and now have teams exploring
potential digital services. In doing so, a number of
mobile operators believe they are spreading
themselves too thinly across multiple verticals, but
feel compelled to do so because this is still the
betting phase. All the while, the mobile operators
must protect their core voice and messaging
revenues. This is placing heightened pressure on
the creation of new business models. In this evolving
communications space with the introduction of OTT
players, mobile operators need a degree of flexibility
and innovation to ensure they adapt with their
environment.
As one mobile operator mentioned during the
research process, they can make a decision and then
instantaneously regret it. But start-ups can make one
decision and commit 100% of their time to making
that decision a success.
In this evolving communications space
with the introduction of OTT players,
mobile operators need a degree of
flexibility and innovation to ensure
they adapt with their environment.
Do you believe Joyn will be the solution that mobile operators
are waiting for to tackle the threat posed by OTT players?

20. AN OVER-THE-TOP UPDATE
An interim solution to access innovation is through
partnerships, though mobile operators fear brand
dilution if they were to partner with a Google or
Facebook, for example.
In the OTT communication space, mobile operators
are competing with companies operating within a
start-up mentality. Start-ups focus on delivering one
service or product, compared to a mobile operator
trying to please millions of individual customers with a
portfolio of services.
Another notable factor is that OTT providers are
software people, and their focus is on the data
connection and not on partnering with mobile
operators. Start-ups view the carrier and data as a
way to drive their product forward.
What’s more, the investment community continue to
believe in the OTT space and pump significant
investment into it. For example, HIKE which now has
5 million users in 4 months has raised $7 million.
MessageMe has raised $10 million in Series A
funding, and Snapchat is in talks to raise $100
million against a valuation of $1 billion.
IS THE TIME TO ACT NOW?
With the accelerated user adoption of OTT services
over the last 12 months predicted to increase over
the coming years, mobile operators have to act now
to preserve voice and messaging revenues. But is
the OTT communication impact on their business
today inspiring the mobile operators to proactively
develop an OTT strategy?
In total, over 56% of mobile operators said that
messaging was in decline, either SMS only (20%) or
MMS only (3%), leaving the remaining one-third of
mobile operators stating that their overall messaging
traffic was in decline. Of the 44% of mobile operators
that claimed they were experiencing a year-on-year
increase in messaging traffic, 17% said the growth
applied to both SMS and MMS, while 20% said SMS
only and 7% MMS only.
SOURCE: MOBILESQUARED
This confirms the mobile operators’ fears from last
year’s research where 68% of mobile operators
believed that SMS traffic was the most threatened
service by OTT communication.
68% of mobile operators believed that
SMS traffic was the most threatened
service by OTT communication.
Of those mobile operators that are experiencing
an increase in messaging traffic, 29% claim overall
messaging traffic is up by between 1-5%, 43% of
those mobile operators cited a 1-5% increase in SMS
traffic, while 14% said they experienced an increase
of 6-10%, and an additional 14% of mobile operators
said SMS traffic had grown by over 11%. Despite 7%
of mobile operators claiming to experience an
AN OVER-THE-TOP UPDATE | PAGE 20
What is happening to your messaging traffic, year-on-year?

21. AN OVER-THE-TOP UPDATE
PAGE 21 | AN OVER-THE-TOP UPDATE
increase in MMS in the previous question, not one
mobile operator revealed the extent to which MMS
was increasing.
SOURCE: MOBILESQUARED
Of the 56% of mobile operators which claimed they
were experiencing a decrease in messaging traffic,
almost half of those operators were experiencing an
overall decline in messaging traffic of 1-5% (21.4% of
those operators), 6-10% (7.1%) and over 11% (14%).
The remaining mobile operators revealed that 21.4%
were experiencing a decline in SMS traffic of 1-5%,
and 14% were experiencing a decline greater than
6%. For 21% of mobile operators, they were
experiencing a drop in MMS traffic of 1-5%.
In two years, between 2011 and 2013, the research
shows that the number of mobile operators stating
that they had not experienced a drop in messaging
revenues as a direct result of OTT clients on
smartphones has almost halved from 62% to 36%.
Although there were fewer mobile operators impacted
by OTT in 2011, there was a spread of mobile
operators in 2012 that had experienced a drop in
revenues. However, in 2013, some 28% of mobile
operators had experienced a drop in revenues of up
to 15% compared to 42% in 2012, but for the first
time in the research process, 14% of mobile
operators are claiming that OTT has created a loss of
messaging revenue of more than 21%.
For the first time in the research
process, 14% of mobile operators are
claiming that OTT has created a loss of
messaging revenue of more than 21%.
One positive that can be extracted from this latest
round of research is that the number of mobile
operators that are not experiencing a decline in
messaging revenues has increased from 32% in
2012 to 36% in 2013.
SOURCE: MOBILESQUARED
Given the rise in OTT users and usage over the
last 12 months, this is yet to translate into a steeper
decline in mobile operator messaging revenues.
Admittedly, a proportion of mobile operators have
already experienced a revenue drop of more than
20% and that figure will inevitably increase, so the
time to act is now.
If your messaging traffic is increasing, by what percentage?
Have you seen operator revenues for messaging decline over the past 12
months as a result of increased use of OTT clients on smartphones?

22. FORECASTS
mobilesquared believes there are three key factors
that have emerged during this latest research. Firstly,
the acceleration of OTT adoption. Secondly, the
concerns circulating within the industry questioning
the impact of Joyn, and lastly, the rise in mobile
operators partnering with OTT providers. When
combined, the rapid adoption of OTT services is
forcing mobile operators to act now and partner with
OTT providers instead of waiting for the
much-coveted Joyn.
But there are alternative solutions that allow mobile
operators to tap into the OTT opportunity, and that is
how they must view OTT. The subsequent impact of
more OTT users presents a marked increase in OTT
traffic termination for mobile operators, especially
given the proliferation of OTT services.
mobilesquared forecasts that the global telco
opportunity for OTT off-net communication
termination will be worth $53.7 billion in 2017, a
substantial increase from the $7.9 billion revenues in
2013. In 2013, the termination of OTT off-net
communication fixed-line traffic represents the
greatest revenue generator for telcos, worth $4.2
billion in 2013 rising to $20.3 billion in 2017. But over
the forecast period, that figure will be overtaken by
OTT off-net communication mobile traffic termination
revenues, generating $2.2 billion in 2013 and leaping
to $23.7 billion in 2017. SMS termination will account
for $1.4 billion in 2013, increasing to $10 billion in
2017.
mobilesquared forecasts that the
global telco opportunity for OTT
off-net termination will be worth $53.7
billion in 2017, a substantial increase
from the $7.9 billion revenues in 2013.
SOURCE: MOBILESQUARED
Operators are now more open for partnering with
OTT players, compared to the results of last
year’s whitepaper. Operators realise they need to act
sooner rather than later and most have stated they
now have a plan in place and have moved away from
blocking, imposing surcharges or lowering the quality
of service. Their original approach to make money
from charging for data is declining, and they prefer to
partner with OTT players by renting out virtual phone
numbers and terminating OTT communication traffic
as they can participate in revenue streams.
FORECASTS | PAGE 22
OTT traffic termination revenues ($)

23. KEY MARKET DATA
PAGE 23 | KEY MARKET DATA
US
The US will have 186.7 million smartphone users by
the end of 2013, of which 93.4 million will be using
OTT communication services. By 2017, those figures
will increase to 288.5 million smartphone users and
230.8 million OTT users. Over the forecast period,
the OTT communication penetration of smartphone
users will increase from 50% to 80%.
SOURCE: MOBILESQUARED
Throughout the forecast period, the US will remain
as the second largest mobile market behind China, in
terms of both smartphone users and smartphone-
based OTT communication users. By 2017, the US
will account for 12% of total global smartphone-based
OTT users.
Terminating OTT off-net communication traffic
revenues in the US will be worth $1.8 billion in 2013
and $8.8 billion in 2017. During this timeframe, OTT
off-net communication mobile traffic termination
revenues will generate $225.8 million rising to $2.6
billion, while OTT off-net communication SMS traffic
termination revenues will generate $84 million
increasing to $955 million.
By 2017, the US will account
for 12% of total global
smartphone-based OTT users.
SOURCE: MOBILESQUARED
UK
The UK will have 51.4 million smartphone users by
the end of 2013, of which 24.7 million will be using
OTT communication services. By 2017, those figures
will increase to 71.1 million smartphone users and
56.2 million OTT communication users. Over the
forecast period, the OTT communication penetration
of smartphone users will increase from 48% to 79%.
SOURCE: MOBILESQUARED
Smartphone-based OTT users, US
OTT termination forecasts, US ($)
Smartphone-based OTT users, UK

24. KEY MARKET DATA
Terminating OTT off-net communication traffic
revenues in the UK will be worth $195 million in
2013 and $1.4 billion in 2017. During this timeframe,
OTT off-net communication mobile traffic termination
revenues will generate $59.7 million rising to $621.5
million, while OTT off-net communication SMS traffic
termination revenues will generate $22.2 million
increasing to $232.7 million.
The UK will have 51.4 million
smartphone users by the end of 2013,
of which 24.7 million will be using OTT
communication services.
SOURCE: MOBILESQUARED
THE TOP 5 SMARTPHONE-BASED OTT
MARKETS
The Top 5 smartphone-based OTT communication
markets, led by China and followed by the US, Brazil,
India and Germany, cumulatively total 624.1 million
users in 2013, and account for 67% of the total global
user base. Admittedly, China makes up a substantial
proportion of that figure with 445.9 million. By 2017,
the Top 5 markets will total 1.3 billion users, though
their contribution to total global users would have
fallen to 62% as other markets make minor inroads
on the leading five’s dominance.
SOURCE: MOBILESQUARED
The Top 5 markets will generate OTT off-net
communication termination revenues of $6.6 billion in
2013 and $36.5 billion in 2017. Interestingly, in 2013
the Top 5 markets will account for 84% of total global
OTT off-net termination revenues, but this will drop
to 68% in 2017 as other mobile markets get in on the
act and their smartphone penetration increases.
The Top 5 markets will generate
OTT off-net termination revenues
of $6.6 billion in 2013 and
$36.5 billion in 2017.
KEY MARKET DATA | PAGE 24
SOURCE: MOBILESQUARED
Top 5 smartphone-based OTT markets
OTT termination revenues, UK ($)
OTT termination revenues, top 5 markets ($)

25. KEY MARKET DATA
PAGE 25 | KEY MARKET DATA
Sources:
Mobile operators included in the OTT research
are: 3UK, A1 Telekom Austria, Airtel, AT&T, Bangl-
alinkGSM, Bouygues Telecom, CYTA, Deutsche
Telekom, Du, Etisalat, EverythingEverywhere, Globe
Telecom, H3G Italy, Maxis, MTS, O2 UK, Orange
France, Orange LA, Orange Poland, Orange UK,
Qatar Telecom, Sprint, Starhub, Swisscom, Tele2
Lithuania, Telecable,Telecom Italia, Telefonica Spain,
Telefonica UK, Telekom, Telenor, TeliaSonera, Tigo,
T-Mobile Czech Rep, T-Mobile Germany, T-Mobile In-
ternational, T-Mobile Netherlands,T-Mobile UK, Turk-
cell, Vodafone Germany, Vodafone Hungry, Vodafone
Italy, Vodafone UK and Zain.
NB: Not all operators wanted to be listed.
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, Phi-
lippines, 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.

26. 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 quite simply the best provider of intelligence and insight on the mobile sector. We
excel at conducting dynamic research and writing amazing copy. Our analysts have been covering
the mobile space since phones were like bricks, and this experience allows us to transform our
research into expertly crafted reports, whitepapers, publications, and presentations that deliver big
on ROI for our clients. Plus we can offer bespoke 3-year data forecasts broken down by device,
age, gender, location and socio-economic status using our exclusive proprietary Mobile Trends
Platform tool. Clever eh. 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.