3GSM’s tale of two industries

The mobile industry has become two businesses. On the one hand, developed markets such as Western Europe, North America and Japan are driven by a constant cycle of technological development, extensive consumer marketing to gain acceptance for new products and a battle to off-set declining margins amid a climate of stagnant subscriber numbers. In developing countries, such as India, China and Latin America, subscriber growth is rampant and the challenge is to manufacture handsets and deploy infrastructure cheaply enough to make services accessible to the maximum number of people.

This dichotomy is evident in the early news flow emerging from the annual industry gathering at 3GSM. Vodafone, the world’s largest mobile operator by revenues, has announced a range of deals in the run-up to the event to bring rich media services such as YouTube, MySpace and Google Maps to customers in its existing markets. Yesterday it also announced it had agreed a USD 11.1 billion takeover of Hutchison Essar, an Indian operator with 23.3m customers, giving it a strategic position in one of the world’s fastest growing markets.

The GSM Association, which runs 3GSM and represents the interests of most of the world’s network operators, is working hard to balance its activites to reflect the needs of these different markets. It is working in partnership with the Sundance Film Festival to encourage the development of video content tailored for high-end mobile devices in an attempt to stimulate interest in entertainment services.

However, at the same time, the GSMA is announcing an initiative to bring simple mobile money transfers to developing nations by working in partnership with Mastercard. The idea is to enable migrant workers to easily send funds back to their home countries using a mobile phone. It’s one of the clearest illustrations of a key GSMA message: the mobile phone is a tool for economic empowerment in developing countries.

This is one of several emerging markets initiatives spearheaded by the GSMA. It is also working with Motorola to develop wind and solar powered cell sites for remote locations in Africa and is already into the second phase of its low-cost handset project, which has seen the cost of a basic mobile device fall below USD 25. Other schemes include a partnership with Ericsson and Idea to use biofuels to power networks sites in rural India and the ‘3G for All‘ handset, where the GSMA invited handset companies around the world to submit tenders for manufacturing a 3G handset at about 30 percent less than the current cost. LG won the deal and will agree supply contracts with the 12 operators worldwide who sponsored the initiative.

The Association should be applauded for playing such an active role in co-ordinating these efforts to bring genuine benefits to developing nations and for its business savvy in recognising this is an important area of growth for the industry.

Companies in mobile telecoms face a strategic challenge of addressing the contrasting requirements of developed and developing markets. The financial community will no doubt be looking at this challenge as an opportunity. The increasingly powerful private equity firms may relish the chance to split an established mobile operator or equipment supplier into a cash generative developed markets business and highly-rated emerging markets growth stock.

In the long-term, I think it makes good strategic sense for big suppliers and operators to address both parts of the mobile business from within the same corporate structure. They can use the cash flow from existing operations to invest in new growth markets and maximise the value of their technology portfolio by re-using older product platforms in developing countries. With a foot-hold established, they will be well positioned to benefit from the rapid evolution of many emerging ecnomomies into more sophisticated markets where mobile devices are the natural choice for advanced communication services by virtue of their ubiquity.

Motorola addresses developing markets, seeks new ideas

Motorola is showing early signs of adopting this approach. While working on projects such as the solar powered cell sites for rural Africa, it is also updating its business and high-end consumer lines with new handsets. After suffering a 48 percent decline in profits from its devices business last quarter, Motorola needs to demonstrate its ability to move on from the success of the RAZR. As predicted in a previous MEX article, the RAZR’s primary selling point of slick industrial design did not prove a solid base for long-term strategy.

The US manufacturer is announcing two new versions of its Q business handset, one for CDMA markets and the other for GSM customers. The Q for GSM is essentially the same as the original Q already on sale in the US. The Q9, however, is updated with a larger QWERTY keyboard, HSDPA, 2 mega-pixel camera and Windows Mobile 6.

Also new from Motorola is the Z8, the first UIQ 3.1 smartphone without a touchscreen. It has an interesting slider design, where the mechanism ‘kicks’ upwards to provide a form-factor similar to a clamshell when open. The Z8 will be provided with a built-in Sky Anytime client, providing access to Sky TV and the ability to remotely programme your Sky box. It’s worth noting this is the first UIQ handset Motorola has announced since publicly commiting to a roadmap based on Linux and Java rather than Symbian OS – I suspect it is not indicative of any strategic change, but consistent with Motorola’s strategy of supplying handsets tailored to the needs of each of its operators. It currently provides Symbian-based UIQ handsets to NTT DoCoMo and Hutchison 3G.

See Phonescoop’s article for pictures and descriptions.

Nokia’s ‘internet company’ transformation

Nokia has made several major announcements this morning, revealing new products and strategy. Insiders at the company have been talking about a strategy shift for some time now, with Nokia attempting to transform itself into an ‘internet company’. If you strip away the hype and the ‘2.0’ jargon, this means it is planning to expand the range of services it integrates into its devices.

On the consumer side, the first manifestation of this is a new platform for accessing mobile video, including partnerships with YouTube and Reuters. This will be pre-installed on the Nokia 95 and available as a download to all N-Series customers. It is also launching its first handset with integrated navigation capabilities, the 6110, using the software platform it acquired from Gate5 last year. With GPS chips finding their way into an increasing number of Nokia handsets, navigation is set to become a big driver for the Finnish manufacturer.

For the enterprise, Nokia is starting to push its email solution, using the technology from its IntelliSync acquisition. The IntelliSync platform is designed to provide email, calendar and contacts synchronisation across a wide range of Nokia and other devices. It is directly competitive with RIM and Motorola, who made a similar acquisition of mobile email firm Good Technology last year so it could get into this area.

In handsets, Nokia is launching several new enterprise devices, including the successor to its 9000 series Communicator range. The E90 incorporates Wi-Fi, HSDPA, a 3.2 megapixel camera, full QWERTY keyboard and a 16 million colour screen capable of displaying the full width of web pages on its 800 x 352 screen. As with previous Communicators, it has two faces – a standard phone on the front and a laptop-style screen and keyboard inside. It is based on the Series 60 platform. Also announced is a mid-priced mobile TV handset, the N77, designed to make broadcast TV services accessible to the mass market.

Another significant announcement fom Nokia is an additional USD 100m for its investment arm, giving it a total of USD 200m to invest in individual ventures and by funding other VCs specialising in mobile. It’s always a good indicator of buoyancy in the market when firms are in a position to top-up their corporate venture funds.

Getting mobile advertising right

Mobile advertising has been much in the news recently. Google stated a couple of weeks ago when it announced another set of impressive quarterly results that it expected to see revenues from mobile advertising flowing in from 2008 onwards. Yahoo has just launched advertising with a series of heavyweight brands on its mobile services across 18 territories.

However, as stated in previous MEX articles, I have some strategic concerns over the viability of mobile advertising in its current form. News of the partnership between Openwave and JumpTap is the most interesting mobile advertising announcement to come out of 3GSM so far. JumpTap, which specialises in providing white label search and advertising solutions to network operators, will links its solution with Openwave’s profiling and personalisation platform.

The result will be advertisements targeted by a wide range of criteria, from content the user has browsed previously and what they’re looking at on the current page to their network behavioural characteristics and search history. Openwave’s platform makes use of the vast stores of data operators hold on users and JumpTap will be able to combine this with its own search technology. The companies describe this as ‘360 degree’ view of the subscriber. It’s a good step towards providing effective mobile advertising.

Browsers evolving into mobile application platforms

Given the focus on increasing revenues from mobile content, browsing technology is naturally going to be a focus of 3GSM. It has improved enormously in the past 18 months, with Nokia launchings it’s Safari-based browser for Series 60 handsets and Opera improving the browsing experience for mid-range handsets with its Java-based Opera Mini.

Opera is announcing its Version 9 browser at the event, which takes the company a step closer to providing a complete applications platform within the browser environment. In addition to zooming and navigation improvements, the new edition will support ‘widgets’ – these are applications that use web technologies such as XML and AJAX, but run outside the browser. In practice, this means you can deliver intelligent and interactive content snippets to the handset idle screen, as well as fully-featured email, mapping, calendaring and other applications inside the browser.

It will be a slow evolution, but I believe the mobile industry will eventually arrive on a model of browser-based applications powered by open web standards. This will be driven by the growing influence of web-based media companies like Google and Yahoo, and a realisation in the operator community that widespread adoption of standards that span mobile and desktop web applications is the only way to drive data service growth.

Other news

RIM has announced the 8800, a new full-size BlackBerry with integrated GPS, media player and trackball.

Adobe has added video support to Flash Lite, providing an easy way for developers to integrate video into mobile applications.

VoxSurf has come up with an interesting use for 3G video telephony, a service no-one else actually seems to be using. Subscribers can dial a shortcode and use a video call to upload an unlimited amount of content to a video blog.

Omnifone has partnered with many of the world’s biggest record labels and more than 20 operators to launch a subscription-based mobile music service. For GBP 1.99 per week, user’s get unlimited downloads. It has also partnered with Openwave subsidary Musiwave to get access to an existing base of operator clients.

Microsoft is launching mobile versions of its search and mapping services for Windows Mobile, but also for Java handsets. Not only is it a rare example of Microsoft using Java, but also a sign that Microsoft’s intentions in mobile extend beyond its own platform.


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