Research Notes

Mobile World Congress 2009 – a Preview by Strand Consult

Next week the Mobile World Congress will start again and once again many of the most important people in the mobile industry will flock to Barcelona to show their new products, exchange knowledge and share points of view. The Mobile World Congress remains the telecom industry’s largest get-together – a get-together that attracted 55.000 visitors last year.

Traditions are wonderful. Traditions are one of the things that maintain a certain level of stability in our lives. And if you work in the mobile industry there is no doubt that attending the Mobile World Congress is a tradition that is hard to do without. Unfortunately there are a number of people who will not be attending this year’s conference. The financial climate and the increasing pressure on the infrastructure providers has resulted in many people either losing their jobs, or alternatively being asked not to attend the Mobile World Cup Congress.

If you choose to view the MWC from a financial crisis viewpoint, it is not difficult to find the depressing things. We believe one should take a different approach to the MWC and look at how things will be in the future. We believe it is important to see how the mobile industry can help improve the world’s financial economy and make daily life easier and more inexpensive for the many people, companies and institutions that use mobile solutions to streamline their work and every day lives.

For many companies, the year 2009 will be the moment of truth and we believe that those that are innovative and that can deliver new and exciting products that the market cannot do without, have a chance of being successful in 2009. We believe that those companies that can help operators, corporate customers and others in reducing their costs will also have the chance at selling their solutions on a difficult market. Simply put one could say that the mobile industry’s market players either need to justify their right to exist – or leave the business.

What will we see at MWC in 2009?

We have no doubt that once again this year the Mobile World Congress will produce a lot of hype. Many market players will use their PR companies to announce to the world that their solution is unique. Some market players will recommend using advertising based business models to achieve success, while others will claim the path to success in the mobile world will be phones like the iPhone and Android based handsets. Strand Consult disagrees with these market players.

To everyone who tries to hype their solutions, we can only say that they ought to read our analysis that shows that the iPhone is the operator’s worst friend: In fact our analyses show that 4.5 million Norwegian’s today annually spend more money on mobile services than the many millions of iPhone users around the world. So if we had invested in a company that was trying to create a market position by claiming that the iPhone would make them rich, we would most probably immediately replace the management! The market in the mobile industry is not the 0.1% of customers around the world that have an iPhone, it is the 99.9% of the mobile customers that have other phones that the mobile industry is making a living from – and will be making a living from in the future. They are the customers that generate cash flow!

This year we will learn that mobile broadband is not just a regional success, it is a global success and the number of customers that are purchasing a mobile broadband connection daily is exploding. Mobile broadband is the fastest growing product in mobile history! Today, mobile broadband has become many people’s primary broadband connection and on many markets customers are migrating away from DSL products and over to mobile broadband products.

It will be exciting to hear this year how the roadmap for UMTS towards LTE will develop and how quickly this development will happen. We believe that LTE will be marketed as a natural evolution of UMTS and we believe there will be a great deal of focus on the fact that LTE – like UMTS – will cover a wide spectrum, perhaps even an area wider than UMTS is covering today. There is no doubt that the future network will be a combination of UMTS and LTE, the question is however to what extent GSM will be phased out and how WIMAX will develop in a world where the infrastructure providers are focusing on mass-market technologies. MWC 2009 will probably show that WIMAX is under pressure and that it is a technology that is standing in the shadow of UMTS.

There will most probably also be a great deal of focus on how fixed line and mobile will converge, or whether these two solutions should converge? We guarantee that a number of players will push towards fixed-mobile convergence. On the other hand why should those two technologies converge and what would the business model be for these products? Are we talking about product bundling or technological bundling? Again this year we will be hearing a good deal about UMA and femto-cells. The question is whether the people talking about the solutions will also talk about the underlying business models. We are having difficulty in seeing the business models and understanding how a mobile operator can plan their network based on the expectations of a number of femto cells within a certain geographic area.

We believe that infrastructure providers like Ericsson, Nokia Siemens Networks and Alcatel-Lucent will have a great deal of focus – and talk a great deal – about delivering equipment to operators that will be marketed as forward-compatible equipment. In other words, equipment that can be upgraded to new technologies as they are launched. Their main message this year will be how they can give operators increased value for their CAPEX and how they can help operators reduce their OPEX. Companies selling hardware will send out the message that they can deliver the capacity the operators will be requiring over the coming years and that they can deliver it so that the equipment can develop together with the customer and market. The question arises whether this will result in operators being forced into taking a single-vendor strategy, or whether they can continue with a multi-vendor strategy?

There will be focus on capacity – and when we go home from MWC 2009, many will probably have realised that the largest data quantities will not be consumed on smart phones, but on portable PCs. The number of new PCs with built-in 3G is exploding and customers are flocking to purchase these products, while an increasing number of operators are simultaneously moving focus away from high-end phones and over to portable PCs with built-in 3G/HSDPA.

We do not believe that the telephone manufacturers will be forgotten this year; but compared to previous years they will most probably be marginalised. It will be exciting to see this year how many new market players will emerge. We believe a number of new players from the IT world will be giving the mobile world a go.

We also believe there will be a great deal of focus on mobile applications at the MWC 2009 and on how to use mobile applications – and how mobile applications can help make many people’s daily lives easier around the world. This year there will be a great deal of focus on the usefulness of mobile applications and we are certain that we will see many exciting and very useful applications and solutions at both the conference and exhibition.

There is no doubt that the usefulness of mobile solutions will be high priority. Mobile applications are much more than simply mobile e-mail, Java games and ring tones. We will see that the technology, bandwidth and customers are ready to use the new mobile possibilities. In fact we have no doubt that many companies can not only use mobile applications to streamline their business, but that companies and public institutions can also become more accessible and efficient by taking advantage of mobile applications.

This year there are a number of exciting presentations at the Mobile World Congress that all show how mobile applications are being used around the world. We will see how these applications are being used regardless of whether people live in the Western world or in the emerging markets. The use of mobile applications and solutions is not a national or regional phenomenon – it is a global phenomenon. We are looking forward to hearing about the many exciting cases.

There are 3 main areas – business models, business models and business models…

But one thing is new technologies, how customers embrace new technologies and what possibilities there will be in the future. How that technological development will be financed is a completely different ball game. We hope that the financial crisis will make the many innovative market players increase focus on the underlying business models. Those of us that still remember the recession the telecom industry experienced after the year 2000, where the telecom and IT bubble burst, can remember that the companies that survived that recession were those that focused on how to produce, market and sell their solutions based on a healthy business model. We believe that those companies that remember this in 2009 will also have a large chance of returning to the Mobile World Congress in 2010. The others we wish good luck on whatever path they choose to take.

Regarding business models, the largest discussion will be whether they should be based on direct billing, the relationship between the service provider and end user, or whether the operators’ billing system should be used to charge for the services that customers purchase and use on their mobile phones, or for the mobile broadband connection that PCs use to go online.

At Strand Consult we have been working a great deal in this area and we believe that the operator centralised model already known from the premium SMS market will spread to a number of other areas. We believe that we will especially see this model implemented on the mobile broadband services market. In our report “Successful Strategies for the Mobile Broadband Market” we have examined this area and created the business model that we believe will succeed on this market. We call it the BCAP model (Broadband Content and Application Provider).

You can read more about this model here:

The bottom line for 2009 is…

There is no doubt that the Mobile World Congress 2009 will be exciting despite the financial crisis. For many, the year 2009 will be the year where they meet the moment of truth and what companies will experience will be very much along the lines that we have written in our 2009 market predictions: .

We have absolutely no doubt that there will also be many companies that try to hype their solutions – on the other hand the question is whether these market players shouldn’t instead tried to adapt their businesses to the mobile reality that generates cash flow?

The Mobile World Congress will, as always, be an interesting conference. It will have a variety of serious speakers and hopefully still a high number of participants. This week will again be the one in which the greatest amount of news in this industry is announced.

All these are good reasons to come to Barcelona next week. Strand Consult has been in this business for 15 years with the sole purpose of helping our customers navigate in an ever-changing industry.

We are looking forward to some very exciting days in Barcelona – the Mobile World Congress will undoubtedly again surprise many people this year and even though we will go home with many answers, we will once again end up having a number of new questions that will need answering next year.

If you would like to meet with Strand Consult during the MWC, please email us your contact details and the details/purpose of the meeting, and we will get back to you. Journalists are most welcome!
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