Research Notes

3GSM World Congress 2007

So, 3GSM 2007 is over. More than 60,000 people from across the mobile industry gathered in Barcelona to peer into the future, but where on earth were the politicians

Over 60,000 people turned up to 3GSM in Barcelona this year to visit the 1,400 or so companies exhibiting their technologies and to listen to the industry’s top executives give their views on the future of mobile.
3GSM is a unique occasion that you’d think would attract prominent politicians from around the world – especially given that the companies represented at the event spend more than E40 billion annually in R&D. But sadly, these companies come from an industry that gets little, if any, political attention.
These days, politicians everywhere talk about globalisation and its importance to the future. But there are as many viewpoints on what the Western world should do to secure prosperity in a globalised world as there are politicians.
One thing is certain. If you think globalisation is a train, then the wireless industry, which meets every year at 3GSM, is the engine. Just about every other sector now depends on it for its growth.
Attending 3GSM over the past ten years has always been a marvellous experience. For most of us in the industry, it is still a “must-go” event and a fixed date in our calendar.
One of the best traditions at 3GSM, of course, is the conference, and this year, as always, the program sparkled with prominent industry names, including Sanjiv Ahuja, Arun Sarin, Carl-Henric Svanberg and many more. Anyone who is anyone in the industry was present, and the conference was, once again, the best place to get an overview of the state of the sector from some of its most significant players.
However, this year was different from past occasions in at least one respect. A bit like young children, the industry’s eyes have traditionally focused on a particular set of “heroes” – companies such as Vodafone, Orange, Telefonica/O2 etc., which tend to come automatically to mind when people think about the mobile sector.
But after this year’s event, my colleagues and I found ourselves asking whether the industry was growing up and needed to re-evaluate its traditional heroes, just as we did at some point with our own childhood heroes.
This occurred to us, for instance, when during the conference, Naguib Sawaris from Orascom, in his usual humorous, down-to-earth manner, poked fun at Sanjiv Ahuja of Orange. The audience at this presentation appeared to fall into two categories – those who saw only that Naguib Sawaris was making fun of Sanjiv Ahuja, and those, like us, who felt it was just like the little boy in the famous Hans Christian Andersen fairytale, “The Emperor’s New Suit”, who pointed out that the emperor was in fact naked.
Another thing we noticed at this year’s conference was that there were a number of old heroes dressed in new clothes. Such people admitted making mistakes in the past, and also to in the past adopting strategies that were not suitable.
Hearing Arun Sarin from Vodafone, for instance, admit that the walled garden approach – on which Vodafone Live has been based – is disappearing was like listening to someone making a church confession! In the past, Vodafone has tried to convince us that it was we who were seeing things wrongly.
I must admit here that my question to Arun Sarin was not a particularly nice a one. But looking at Vodafone’s share price over the past last 3 years, and its exit from one country after another, and comparing its performance with the likes of Telenor, MTC and Orascom, we believed it was fair to ask whether Vodafone had the right captain, and whether it might be time for a change at the helm.
Onto other matters, and 3GSM 2007 will undoubtedly be remembered as the one where the big debate was about which specific wireless technology would win out in the end. On one side of the debate you had the Americans – with companies like Intel promoting Wimax, and so on – and on the other side you had the European manufacturers, with Ericsson promoting 3G LTE.
From our perspective, 3G HSxPA and LTE will win out, a view that is based on the simple fact that operators can easily upgrade their networks to accommodate these new technologies, as well as the fact that 3G has finally achieved volume, which means Wimax as a mobile technology will have a tough time gaining traction – especially when it comes to developing attractive, affordable handsets.
It was also obvious that GSM had triumphed over CDMA, and that even the largest CDMA player, Qualcomm, seemed to have more faith in WCDMA. The winning standard is, of course, likely to be the one that has the largest volumes and cheapest terminals.
Much of the focus this year was also on content, particular of the user-generated variety. However, we seriously doubt that user-generated content will be the a profit maket for mobile operators, although services like YouTube and My Space could be useful to operators in educating customers and thus stimulating the market for paid content.
Seeing a player such as My Space sign an exclusive contract with Vodafone has, in fact, greatly shocked us at Strand Consult – surely My Space users will rebel against Vodafone the moment they realise the consequences of this deal! After all, user-generated content is all about the users themselves, who today possess all the power. You can’t simply trade them like cattle.
As many new handsets were launched during the GSM week as are normally released over a period of 6 months. But the terminals we’re now seeing are smaller, cheaper and better. It’s clear that the manufacturers are moving from a macro-segmentation to a micro-segmentation business model, which means that terminals are designed to match all different types of customers and meet all kinds of different telephony needs – whether that is internet access, email access, camera functionality or mobile TV capability.
Now it’s easy to find at least one or two terminals to suit every particular need. Meanwhile, it is fascinating to learn that 80% of all terminals today are email enabled and that Nokia is currently the largest supplier of cameras as well as MP3 players.
Apple’s absence from 3GSM was something of a surprise. On the other hand, Steve Jobs probably sent some of his people to Barcelona to report back. If so, they would have said something like this: “Mr Jobs, we’re entering a wild industry with more competitors and more products than we’ve ever faced before, and where our rivals can produce in volume at prices that we’ll have a hard time matching.”
If Apple, after 3GSM, still believes that by this time next year they will have a 1% share of the global mobile market, we suggest they take a look in the direction of Microsoft, and consider how many products it has had to develop and how much it has had to spend over four years just to gain 1% market share.
There was, however, one area in which there were fewer players than last year – the infrastructure industry, which has experienced consolidation following the mergers of Nokia/Siemens and Alcatel/ Lucent and Ericsson’s purchase of Marconi. However, this has created space for a number of smaller players to develop, market and sell exciting new technologies that might lead them, down the road, to be swallowed up by one of these larger players.
This space represents a real opportunity for smaller companies, which are going to be at the cutting edge of most of the upcoming innovations in mobile technology going forward. We are certain to see some interesting propositions emerge here, as a result of which the “big 4” could, over the next few years, be buying up a good number of smaller companies.
Of course, it’s hard to say precisely what the mobile industry will look like in the future. But it is frightening to those of us that understand the importance of the mobile industry to globalisation to think that a sector that spends more than E40 billion annually in R&D currently receives less political attention than “Second Life”.
Therefore, we have this to say to politicians around the world – come live in the real world! Come to Barcelona in february and experience just how the mobile industry is driving globalisation, and then tell us how you and your civil servants can justify giving such a low priority to an industry as crucial to future growth as ours.
3GSM demonstrated conclusively that the future is mobile/wireless and that the upcoming scenarios spoken about in 2000 have already become reality – especially when it comes to low-cost, multifunctional terminals and advanced mobile/wireless networks with high bandwidth.
However, a lot of us feel that for too long the political focus has been on things like cheap voice minutes and regulating high roaming prices. To really understand the industry and its central role in the march towards globalisation, politicians need to spend a lot more time getting to know it more intimately. That is why we expect to see them gathered – along with the tens of thousands of others – at next year’s 3GSM.

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