Research Notes

Mobile World Congress 2008 – a Review by Strand Consult

The Mobile World Congress is over and once again a whole industry and over 55.000 people flocked to Barcelona. It all started 18 years ago in Rome where the first GSM Congress attracted 650 participants. From 1995 the Congress developed and grew in Cannes to become the annual event where everything and everyone now converges on Barcelona and where around 50% of the industry’s annual announcements and news is presented. If you are a mobile freak, then the MWC is the place to be to meet like-minded people from all over the world.

And of course Strand Consult was – as usual – present at the congress this year, with five of our employees spending a week in Barcelona to meet and experience the industry that is the foundation of our company. Again this year we experienced many exciting things, but also a great deal of the hype that the PR companies are trying to create around products that are often so boring that they have difficulty attracting any attention from the press at all. On the other hand, that is their job and from where we are standing it seems like many PR companies interest in the actual products they are working with is often very limited.

The week started with Viviane Reding using MWC to announce that she would now give people cheap SMS and data traffic when they are abroad and once again a large part of the press chose – without any criticism at all – to publish her message without any comments regarding the consequences of what she and the whole EU commission are doing. All politicians want to be popular – that is nothing new – but on the other hand, perhaps Viviane Reding should consider the consequences of her regulative proposal. Is it her ambition to kill the innovation coming from companies that are developing different types of technological solutions that take advantage of the fact that some Telcos are charging too high roaming prices? Is it her ambition to give the GSM/WCDMA operators a monopoly on telecommunication at the expense of those investing in alternative networks based on CDMA, WIMAX and Wi-Fi? Here at Strand Consult we believe that the direction the EU is taking on this is dangerous. You can read more about this here:   Strand Consults Position on Regulation

By attending the MWC in Barcelona you can meet all the significant players in the industry and this year was no exception. It came as no surprise that Apple was neither represented among the speakers at the Congress, nor had their own stand. When a company like Apple tries to enter the mobile industry by creating hype about their product, a direct exposure at an event like this could result in the industry maybe realising that the emperor was not wearing any clothes! We are impressed about how many in the industry are talking about Apple and how many handset manufacturers have been inspired by Apple and their iPhone. On the other hand we believe in consumer driven innovation and are having difficulty understanding why so many people are fascinated by the iPhone, when a great many European customers are avoiding it and simply not purchasing it in countries (UK, Germany and France) where it has launched. All in all, Apples PR machine cannot deny that Apple has had to admit – in the same way as Rim, Palm and Motorola – that the European market has greater and different requirements from the mobile handsets that they are purchasing, than those Apple can deliver. The iPhone is not a success in Europe and the question is whether the iPhone has in actual fact received more millimetres newspaper coverage than the actual number of sold iPhones in Europe.

A visit to the MWC is also an opportunity to find out what is happening in the mobile industry in many regions around the world and again this year, many countries had chosen to host national stands to show what smaller local mobile players can offer. Visiting these stands is not only inspiring, but also living proof that the future innovation in this industry will seldom come from the large corporations, but rather be created by smaller companies that are then purchased by the large international companies. Microsoft’s acquisition of Fast, Nokia’s acquisition of Trolltech and Ericsson’s acquisition of Tandberg are three good examples of how Norwegian innovation can become interesting for large international companies with global distribution.

One of the countries that again this year disappointed was the USA. For us in the industry, it appears as if Motorola would be better off replacing their stand in Barcelona with an oxygen tent. Their handset announcements were not just disappointing – they were indescribably frightening. Regarding Alcatel-Lucent, it would appear that the French American cocktail is just not working out. It looks like they are trying to mix oil and water and the question is whether their cooperation with NEC will create a success or end up as a losers club. We believe this is yet another American company that will be unsuccessful. Of course there are many Americans at the congress, but when you take into consideration the size of the country it appears that George Bush seems to be having more success in Iraq than the Americans are in this industry. Two exceptions are Qualcomm and Cisco – Paul Jacobs had a relaxed presentation and with the IPs they are handling, there is no reason not to lean back, enjoy the success and laugh all the way down to the bank. Regarding Cisco, it is always an experience to see their CEO John Chambers perform with a show that is something in between a TV Shop show and an American television preacher. It was without a doubt the show of the year; on the other hand that type of show probably comes over better at the CTIA than at the MWC. Simply put, there were very few American players that positively surprised us at the MWC.

At the MWC you will meet all the large mobile companies, including those that are internationally successful. This year, China Mobile tried to give the impression of being a green operator by presenting their green programme. The presentation by Wang Jianzhou from China Mobile gave the term “Made in China” a whole new angle. Everyone knows that the Chinese are good at copying; on the other hand one would think that in a country that large there would be just one person that could make a PowerPoint presentation look just a little bit more professional – such a low standard is just not good enough at a venue like this. Trying to be a little bit politically correct by emphasising China Mobile’s focus on the environment is nice, but the figures they showed are far from impressive, in other words labelling China Mobile as a green company is far from the truth based on the figures they presented.

As expected, everyone was talking about mobile broadband and figures from many markets are showing an explosive growth in this area. Yet hardly anybody mentioned whether the success of mobile broadband was due to mobile phones or our laptops. Perhaps we should be realistic: yes, mobile broadband is probably the fastest growing mobile product in mobile history, but it is not mobile phones driving the market but portable PCs, so in this area the mobile operators were not saved by their own industry, but by the Internet and the fact that portable PCs have become so cheap that they are now a mass-market product.

In the services area we heard about Nokia’s OVI dream, which we believe will be just as successful as their N-Gage was… The concept is far from being finished and their dream of everyone using OVI to access the many user-driven services is somewhat naïve – why would I want to use OVI to access Myspace or Facebook? There is little doubt that this is Nokia’s dream, but it was Yahoo who showed how to access these services in practice via their newly developed client – an attractive product that got a lot of attention. Basically Nokia would like to build a mobile umbrella for the Internet while simultaneously letting Internet companies bring their services onto mobile telephones. If the USA is to have a chance in this industry it will be if their large Internet companies get a better understanding of the mobile universes, on the other hand if they are up against competitors like OVI they will do just fine in the mobile world.

Sony Ericsson’s announcement of a mobile handset that uses Microsoft’s mobile platform surprised many people, but then again this is not a product that was created by Microsoft and SonyEricsson, but instead by a team consisting of HTC, Teleca, Sony Ericsson and Microsoft. The million-dollar question is whether this cooperation between Microsoft and SonyEricsson will become permanent, or whether it is just temporary. One could imagine that this is a test cooperation designed to compensate for the lack of success that SonyEricsson has had on the corporate market and that this product will thereby decide whether SonyEricsson will choose the Symbian or Microsoft path.

Many spoke about mobile marketing and operators like Vodafone, Telefonica/02, T-Mobile and Orange stated that they have a great future within this area. But again there are many things they are forgetting, including that it was the mobile operators that once dreamt of building huge mobile Internet portals – portals that did not do too well. They also seem to be forgetting that a great deal of their customers are prepaid customers and that they therefore know nothing about them. When Vodafone claim that they know their customers it is not true, they do not know the name, address, age, gender or income of their customers and they cannot identify target groups in their database, as it primarily consists of information about mobile telephone numbers and how much they have called.

When comparing the many presentations about mobile marketing, most of them were characterised by people dreaming of a place in the sun, but that knew nothing about advertising, the size of the advertising market including what it is an advertiser purchases and pays for. Basically the value of the whole world’s advertising market is very close to the value of the whole world’s mobile consumption – who in their right mind would believe that mobile marketing can pay for such a large part of what is happening in the mobile industry, when online marketing on the Internet currently represents between 5 and 10% of the total advertising consumption? Please let’s see some more sense of reality from the mobile marketing industry.

One of the things we again missed this year was people with a realistic attitude to which business models that will drive the mobile market in the future. The MWC is fascinating and it is equally fascinating to see just how little focus there really is on the behind-the-scenes business models. Everyone knows that premium SMS is a success, a good many people know that MVNOs can help reduce operators’ SAC, but where are the creative suggestions as to how we can use exciting business models to drive forward the market for new mobile services? It would be nice to see more focus on how we can activate all the mobile customers that are still only using the red and green button on their mobile handset – we need new business models that can push innovation, increase consumption and create growth in this industry. The solution to that challenge does not lie in advertising and mobile marketing, anybody who has worked in the media industry for more than two hours knows that.

Here at Strand Consult we are already looking forward to next year’s congress and despite our mobile predictions for this year being almost spot on LINK TIL PRE MWC SIDEN there is no doubt that the MWC again positively surprised us this year. Until we find out what pleasant surprises are in store for us when we all meet at next years Mobile World Congress 2009 in Barcelona, we believe that the development of the mobile market will closely follow our predictions for 2008.

MWC 2008 – a preview by Strand Consult

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