Research Notes

A look back at the GSM World Congress 2005

– A fantastic week

The GSM World Congress is over – 4 incredible days where over 34.000 people with one thing in common spent the best part of a week meeting and exchanging visiting cards and thoughts. The 2005 congress was not that much different from the earlier years congresses and could offer everything you would expect a week in Cannes should contain – stories about how fantastic the future will be, showing off the latest technology and announcing the latest alliances within one of the worlds youngest industries.

Try to imagine if this congress had been held just 15 years ago. The delegates would almost all have come from Scandinavia – and there would have been so few that they could literally all have met in a small restaurant! The industry has seen a tremendous growth since then, with not only over 1 billion users, but already on the way towards 2 billion and with mobile handsets that do not cost 4000 dollars any more – but only 30 dollars!

Before we left for Cannes this year, Strand Consult had already predicted what the focus would be on at this year’s conference – and once again we are very pleased that the events and announcements in Cannes were very close to our predictions.

This year’s congress revealed a number of technological announcements. We heard about the evolution from GSM, GPRS, EDGE, UMTS to HSDPA and HSUPA and on to “Super 3G”. It is now a fact that there is apparently no limit to how much bandwidth we will be able to connect our small handsets to in the future – the question remains as to which applications will be needing that bandwidth and whether the growth in the mobile sector can finance the investments needed for all this new technology.

Nokia announced that they had chosen to side up with their greatest enemy – in other words an announcement that Nokia will support Microsoft’s ActiveSync and Media Player in the future. Nokia felt that this was something their customers were demanding and a prerequisite if they want to market handsets that support popular mail systems and music downloads to mobile phones.

The logic in this decision is easy to understand and in many ways predictable, but one is tempted to ask oneself if Microsoft with this alliance isn’t actually closing two windows of opportunities – and in reality loosing two of their biggest selling points for other handset manufacturers to make handsets based on Microsoft’s Pocket PC platform?

Some analysts might even ask whether the EU will take a closer look at this alliance between two such dominating players as Nokia and Microsoft. The EU had the Windows Media Player booted out of so many million Windows XP licenses – will they just sit back and let the same media player turn up in millions of mobile phones? One thing is certain, Nokia has had to admit – just like the EU did – that the Windows Media Player is the dominating standard for playing digital music and video and by entering into an alliance with Microsoft, Nokia is helping Microsoft consolidate their position in this area.

And while we are talking about Microsoft, this year’s congress was proof that Microsoft’s largest competitor is themselves. That the bear from Seattle is almost invisible in this universe is no secret in the business. After Juha Christensen left Microsoft, the folks at Redmond are just not making waves any more. How many of you are actually aware that the version of Pocket PC 2003 that is on the market today is actually a totally new version – and really ought to be called Pocket PC 2004? As Microsoft put it: they are here for the “long-term business”!

If anyone asked Strand Consult today about Microsoft, we would have to say that we do not believe there is anyone around in today’s mobile business that seems to be using their capability and potential as badly as Microsoft. All we can say is that is a great pity for Microsoft – and a great pity for their shareholders.

Looking at who is using their capability and potential well, you have to admire Canadian RIM. Although just a mobile dwarf compared to Microsoft’s mobile sales, they have really understand how to profile themselves and make themselves much more visible than the Bear from Seattle. If anyone was visible in Cannes it was RIM. Their Blackberry was being advertised everywhere. From our vantage point it was very apparent in Cannes in 2005 that achieving success and visibility in the mobile sector is not just about how big a wallet you have, but that Bill Gates expensive boys can easily be beaten by simply working a little harder – and smarter!

We could easily put together a long list of what Bill Gates and Steve Ballmer in our opinion ought to do about their mobile division, but we can shorten it down to just a few lines: Microsoft needs a new management team for their mobile division. Their present management keep on saying that they are in for the long-term business – Microsoft’s shareholders are expecting short-term results. There is simply no reason to spend 5 years building a house if it can be built in 1.

Cannes 2005 was also a year that left little doubt in people’s minds that the players from Asia are very capable indeed and will be dominating the future mobile market. The GSM standard is European and originated in Scandinavia back in 1990. The head start that the region has had is very close to being overtaken by innovative technological companies from China, Taiwan, India and Israel.

Take India for example. It was fantastic to learn how an operator like Bharti Telecom could actually stand praising Indian Telecom legislation – calling it visionary and future-orientated. It was quite an experience to hear the Indian Minister of Communications, Thiru Maran, that is responsible for the telecom sector state that he felt the telecom industry is one of the fundamental keys to a successful society in the future – how a healthy telecom industry can help create a healthy nation.

Our European politicians are very different types. Many do not believe that telecom politics have anything to do with society, but simply run a telecom politic that is based on consumer/tax politics, rather than telecom politics. The 3G license auctions are probably the worst example of using political tools to regulate consumer prices and impose huge extra taxes on the industry in the form of license taxes. All in all a huge lack in vision and future orientation.

On paper the 3G auctions were very good business for a number of governments. But do those governments have any idea at all what those auctions will cost their society in the long run in the form of greater unemployment, less research and development and how that will effect the European region, if Europe is not the mobile dynamo of the future?

Politicians do not have to intervene to ensure low end user prices. John Strand’s presentation about the whole MVNO market proves that competition can evolve from free market forces. Not only did John Strand use his presentation to describe how the discount providers and MVNO’s managed to achieve such a huge success, but also how the markets have subsequently developed over this past year – and how John Strand thinks the market will develop over the coming years. The basis of John Strand’s presentation is our report “The Moment of Truth – a portrait of the Discount Mobile Operators’ success” Many operators and analysts have been using the information in this report to describe Denmark as a “nightmare” scenario the mobile sector – and even called the discount wave as the “Danish Illness”!

It is a fact that these players have revolutionised the Danish market, forced Orange out of Denmark and forced the market to consolidate. The Danish market is today starting to become a healthy mobile market with an explosive growth in MOU and with mobile prices that are now stabilising.

The politicians in Europe really ought to learn from countries like India and realise that telecom politics are industry politics – the mobile sector is not just a business area that creates value and jobs, but also a very important fundament for a modern future society.

Many operators at Cannes 2005 confirmed what Strand Consult has been saying for the past couple of years – that the future is all about falling minute prices and that the operators are focusing more and more on how to reduce CAPEX and OPEX. Voice traffic will still be the primary driver on the mobile market of the future. Even an explosion in data traffic will not be able to compensate for the price cuts we have seen on ordinary voice and SMS traffic.

The discount MVNO’s like CBB and Telmore have shown the way. is starting up in March in the UK, so let us see whether history will repeat itself once again and we will see a mobile industry that in many ways will experience exactly what the airline industry has been through over the past 10 years.

Strand Consult would like to thank Informa Telecom for a great Congress and a fantastic week. We are really looking forward to next year’s congress which will now move to Barcelona. We believe that 2005 will be a most exciting year and we think that it will in many ways surpass previous years. 2005 will be a year where we will see growth and innovation come from the Asian region – the next billion customers will not come from players that dominate the European region. We believe that Europe and the USA will see a huge boom in the number of discount MVNO’s – just like Denmark, Norway and Finland have had – and that boom will result in falling minute and SMS prices and operators focusing on reducing CAPEX and OPEX.

One thing is certain: once again, the GSM World Congress gave us the answers to many questions.
But now that we are home again – we have just as many new unanswered questions!

Isn’t that really what makes this business so incredibly fascinating?

GSM World Congress 2005

Strand Consult Predictions for 2005

John Strand’s MVNO Presentation

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