United States Telecommunications Report Q1 2008

BMI estimates that during the first nine months of 2007, the number of US mobile subscribers grew by 6.6% to reach 248.516mn. We now believe that the sector grew by 9.3% in 2007 as a whole, estimating that the US mobile sector ended 2007 with 254.7mn subscribers and a penetration rate of 84.7%.

Although growth was slower than predicted in the earlier half of the year, faster growth in the third quarter of 2007 led us to believe that we had been overly pessimistic for overall annual growth. Despite the stronger than expected 2007 growth, we expect the general economic slowdown in the US economy to affect mobile subscriber growth in the months ahead and predict that the sector will grow by just 7.1% during 2008.

At the end of Q307, the six largest network operators accounted for 92.4% of all US mobile subscribers.

Although the remaining portion of the market is still highly fragmented, it continues to consolidate, and this process of consolidation is gradually reducing the total number of network operators in the country.

At the end of 2007, CDMA operators MetroPCS and Leap Wireless were close to completing their merger. Furthermore, in November 2007, AT&T completed its acquisition of Dobson Cellular for US$5.1bn and, in December 2007, it was reported that the shareholders of US cellular operator SunCom Wireless had approved the company's buyout by T-Mobile USA. The deal, which was first announced in September 2007, will see German-owned T-Mobile pay US$2.4bn in cash and assumed debt to acquire all of SunCom's assets, including 1.1mn subscribers in the south-eastern US, the US Virgin Islands and Puerto Rico.

Meanwhile, US broadband growth in 2007 appears to have been significantly slower than we had previously predicted. The broadband subscriber market grew by over 11% in the first nine months of 2007, to reach 63.892mn; this would suggest that the overall growth rate for 2007 was considerably lower than in the previous year. During 2007, AT&T held onto its leading position in the country's broadband market and, by the end of September 2007, had actually increased its market share to 21.5%; AT&T has therefore widened the gap between itself and Comcast, which increased its market share from 20% at the end of 2007 to 20.2% at the end of September 2007. We continue to expect the proliferation of quadrupleplay services, together with new government legislation which is aimed at boosting broadband take-up in rural areas, to drive broadband growth in 2008. Nevertheless, economic slowdown is expected to temper the rise in subscriber numbers in the months ahead. Based on evidence of slower growth in 2007 and signs a slowdown in consumer spending, we have downgraded our growth forecast for the US broadband market. We predict that the market will expand by 12.9% in 2008 and expect the market to grow at a steadier but more gradual pace thereafter; anticipate the number of subscribers climbing to 108.7mn by the end of 2012 (reflecting a penetration rate of 34.9%).