Research Notes

Mobile World Congress 2010 – a Review by Strand Consult

Once again over 49,000 people with a unique relationship to the mobile industry were gathered in Barcelona for the Mobile World Congress. There is no doubt that the conference has been a great success – when you put that many people in such a small space, from an industry that is so dynamic, the result will be a very special energy that cannot be described, but needs to be experienced.

The Mobile World Congress has many traditions and the combination of gaining industry knowledge, the possibility of meeting colleagues from all over the world, and the social events, results in almost all participants leaving Barcelona much wiser, much more tired and with a great many opportunities to develop and expand their business.

The Leadership Summit
The leadership Summit is held each year. This is where both operators and politicians meet and talk about the challenges within the industry. This year there was a great deal of focus on the Telco industry and how the industry can help the environment. One thing that was debated is why the industry was not visible at all at COP15 in Copenhagen? From Strand Consult’s point of view here in Copenhagen, we can only agree with the criticism.

Despite the fact that we published a number of research notes about this subject: and tried to get some key people within the GSMA to act before COP15, we were unsuccessful in getting the industry to participate at COP15. It is really embarrassing that the one industry in the whole world that can help the environment the most was totally invisible at COP15.

We hope that the GSMA has learned something from this and that they will in the future use more energy on making political leaders aware about the fact that the Telco industry is the industry that can help the environment the most – we have the key to solving many of the world’s problems.

A year with many exciting product announcements – and then there was Nokia…

Every year many exciting new products are announced and 2010 was no exception. We saw many new devices, new OS’s, lots of new services and a wide selection of news about more less advanced hardware.

One company that disappointed this year was Nokia. Not only did they choose to move their chaotic press meeting to ONCE the Institute for the Blind, their event was split into two parts; the launch of Meego and a repetition of the many product announcements from Nokia during the past year.

By launching Meego in cooperation with Intel, it appears that Nokia is trying to create increased volume for their Linux platform and QT – their service platform. One could say that Nokia wants to function on many devices with the same platform, so it needs to be possible to develop services that function across these platforms.

There is nothing wrong with Nokia’s strategy. They have understood the only way to beat Microsoft, Google and Apple is to do it through volume – get the platform to more devices, “However, they have not realized that it’s not about getting on many platforms, it’s about making something the consumer likes. Bees don’t head for the biggest garden; they head for the most beautiful flowers”

Looking through the other announcements from Nokia during the MWC, the biggest news was that Nokia actually had almost nothing to announce. When you take into consideration the size and position of Nokia in this industry and then take a look at how they handled MWC 2010, the word that springs to mind is embarrassing. It is impressive that Nokia had the guts to make such a spectacle of themselves in front of that many industry employees – 2010 was the year when Nokia lost a great deal of their street respect.

Some people would claim that despite the fact that Nokia will sell 550 million phones in 2010, they are in fact in the middle of a deep crisis – not a financial crisis, but a management crisis. A wise man asked me what it would take to get Nokia back on track and my answer was that Nokia needs a man like Tom Ford – someone who is not Finnish. Perhaps many of you do not know Tom Ford:
Tom Ford was employed in 1994 to revitalise Gucci and was so successful that their revenue increased by 90% in just the first year.

Just like the fashion industry, Nokia needs people that can sell tickets like Steve Jobs, Eric Schmidt, Steve Ballmer etc.

The conference – the path to knowledge, entertainment and…

The speakers at this year’s conference once again ranged from very exciting to rather boring. On the whole, most people could learn a great deal from the conference, but some of the speakers ought to have checked their predecessors’ presentations before addressing this year’s almost 4000 participants.

This year, Vodafone’s CEO Vittorio Colao spoke, replacing Arun Sarin who spoke 2 years ago. Strand Consult is well-known for stating our opinion and we were probably a little tough on Arun Sarin 3 years ago when we accused him of not being competent enough to run Vodafone. On the other hand we could see that he was not here this year and someone else was on the podium. Like his predecessor, Vittorio Colao did not speak the truth about what Vodafone should really do, but instead said what he believed the stock market would like to hear about Vodafone’s plans. It is amazing how many people in this industry are focused on stating what they believe the financial analysts would like to hear, rather than creating results that would please their shareholders. Vittorio Colao’s presentation was fine, but it didn’t touch on the massive challenges that Vodafone is currently facing in a number of countries including the UK, Germany, India, Spain etc etc.

We also heard Ben Verwaayen, CEO of Alcatel-Lucent. He was one of many that complained about the absence of the industry at COP15. He gave a fine presentation, but also appeared to be a man in charge of a market player that is at the top of the list of companies that ought to consolidate. At the same time he is boss of the company that is finding it difficult to get an American and French organisation to converge. In our opinion, ALU is a company with many engaged and competent employees, but at the same time a company who most probably are their own largest competitor.

The presentation from Mike Lazaridis from RIM in Canada was one of the presentations that should not have been on the programme. There is no doubt that RIM is doing well, but Mike Lazaridis’ presentation was so US-centric that it was embarrassing. The man on the podium knew a great deal about the North American market, but clearly documented that his knowledge about the rest of the world’s 4 billion mobile customers is very limited. We believe that this attitude is probably the reason why Blackberry is having difficulty on a number of markets in amongst other places Europe.

One of the recurring speakers at the conference is Rob Conway. Last year he focused on the universal charger, but this year his focus moved away from the environment and over to education with the slogan “One goal education for all”. There is no doubt that this goal is important, on the other hand we have difficulty seeing how the mobile industry can contribute in this area apart from being charitable in selected countries. We do not believe that M-learning will solve the current global problem that many children do not learn to read, write and add and subtract.

Education is handled by building schools, having teachers that can teach and ensuring parents have the ability and willingness to send their children to school to learn. We have difficulty understanding how mobile telephones and M-learning can solve the massive problems that many countries have in this area and we believe the mobile industry can primarily help by sponsoring projects and by helping draw attention to a very large problem.

At the same time it was fantastic seeing her Majesty Queen Rania Al Abdullah of Jordan come and speak of her visions regarding There is no doubt that Queen Rania  Al Abdullah really wants to push things forward, her passion and engagement could be felt right at the back of the hall. On the other hand there is a certain risk that she will end up being the exponent of the GSMA’s share of a campaign that will not reach much further than to a press release during MWC. We sincerely hope that the GSMA’s share in ”One goal Education for
all ”   bears fruit for those that currently do not have access to basic education around the world.

This year’s best presentation – indeed one of the best presentations in many years – was from Google’s CEO Eric Schmidt, who together with a number of his employees elegantly and humbly told a bit about Google’s involvement in the mobile industry. This message could be divided into three parts, mobile first, Google is the mobile operator’s best friend and Google’s many initiatives will result in operators having many future business opportunities.

Strand Consult is one of the companies that have a slightly sceptical view regarding Google. We believe that Google has its own agenda regarding the broadband market – which is to ensure that as many people as possible invest as much money as possible in broadband, whereby competition will become so tough that prices become extremely low. Simply put, we believe that Google would prefer that operators are dumb pipes that only deliver connectivity to their customers.

Again this year, John Strand asked the questions that are in many people’s minds, but that few actually ask when facing an industry leader like Eric Schmidt; whether Google would prefer operators to be dumb pipes and whether Google is willing to invest in infrastructure? Eric Schmidt deserves respect for holding his own in the middle of the lion’s den and answering these questions. He answered that on the one hand Google did not want to interfere in the operator’s business models, but that they did not perceive operators as dumb pipes and that Google does not want to invest in infrastructure.

Some may say that those answers were predictable, on the other hand there was no doubt that Google has a very clear strategy and that anybody who thinks that Google will invest in infrastructure is not naïve – he is stupid. You can see Eric Schmidt’s presentation here: and decide for yourself what Google thinks about those that are currently making enormous investments in our society.

The presentation by Ho Soo Lee from Samsung was exciting. You have to respect a telephone manufacturer that sells 220 million phones a year and there is no doubt that Bada is a dark horse on the Smartphone market. The fact that Samsung sells many mobile phones and has a good platform means that it is up to Samsung themselves to decide how successful Bada will become on the Smartphone market.

Nokia’s dream of Meego running on many platforms is fine, on the other hand Samsung already manufacturers many devices including TVs, PCs, mobiles and even fridges. If future devices are going to run on the same platform, then Samsung and Sony are in a significantly stronger starting position than Nokia.

The war over the mobile operating system

At the MWC, many people were talking about the OS war. Here at Strand Consult we do not believe there is an OS war, not least because the Smartphone market is only 15% of the total handset market. All we are currently seeing is how the price of hardware in mobile phones has been decreasing, which it will continue to do. In practice this means that you can produce a Smartphone for around 100 USD. The result is the market for mobile phones with advanced operating systems is exploding – but not due to an increased customer demand for Smartphone’s, but because the handset manufacturers are shipping inexpensive phones with an OS replacement.

Nokia is replacing series 40 with Symbian, Samsung is replacing their OS with Bada and a market player like SonyEricsson is launching X10 and X10 Mini that resembles the W995 but where the X10 Mini runs the Android platform. This is resulting in that many of last year’s mobile phones that were categorised as feature phones, will be Smartphone’s next year – and solely due to the handset manufacturers’ OS replacement.

Many market players want to have the dominating OS, but right now the deciding factor is who has the greatest distribution power. This will result in either the company with the largest volume from their own production (Nokia, Apple and Samsung) or the company with most partners (Android and Windows Mobile) winning in the long term.But right now there is only one winner – and that is the consumer – because none of the market players (except Nokia) are large enough to reach anything close to a dominating position. In the long term there will most probably be two dominating OS, perhaps Symbian, possibly Android, or someone completely different. We believe we will see a fragmented market with 10-12 OS running on the many devices being sold around the world.

On the services side there was a great deal of talk about Apps and we can only refer to our research note about App Stores We believe that this market is far more complex and not just about the number of Apps available, but about having the correct services in demand by customers. This was one of the central subjects in Hugh Bradlow from Telstra’s presentation and it was refreshing to hear a man that viewed operators as a shopping centre and thereby using the comparison that Strand Consult has been using for many years when describing how we believe mobile operators should do business in the future.

During his presentation, Hugh Bradlow touched on the many other challenges we are facing, including the challenges in connection with ensuring standardisation of handset APIs, which will have a central role on the future services market. There is no doubt that Telstra is focused on the more complex real world, than the world that many simply describe as a “war” between a number of OS and some App Stores.

The conferences many presentations showed that the future handset and services market is far more complex than often described by the media. Just the significance of OneAPI which we described in our report requires a great deal of attention from the whole industry and service providers during the coming years.

The GSMA announced that 24 operators will cooperate on a wholesale model for Apps. The problem is that they could not announce when they would actually do this or what business model they would use. In our experience this looks very similar to the many press releases and we have seen through the years that never get past the drawing board. We can’t help remembering, that was launched in 2004 and that never became the success predicted by many at the time.
Mobile broadband – higher speeds and lower prices

The mobile broadband market is exploding and it is not just the number of customers that is exploding, but also the connection speed they are being offered. This year Huawei demonstrated their 600 Mb mobile broadband and Ericsson demonstrated 1 GB. These are of course laboratory experiments using LTE, but do indicate the direction of the mobile broadband market.

There was a great deal of focus at the conference on the many new network devices that function via mobile operators, but unfortunately too little focus on the significance of these devices for operators if the radio transmitter in some of these devices is the same quality as in the iPhone. We believe one of the largest challenges that operators face is that there will be numerous new types of devices on the market in the future built into machines and gadgets, and that there is a significant risk that operators will experience large network problems if the radio malfunctions in even a small number of these devices.

There was also some talk about femto cells (UMA is dead) and many of the market players in the femto cell area now admit that femto cells is not something you give to all broadband customers, but rather a tool that can help solve certain types of indoor courage problems in selected areas. The findings that emerged are the same as the findings we published in our report about the mobile broadband market

There was unfortunately far too little focus on how to add value on top of the mobile broadband products that operators are selling at increasingly cheaper prices. Where will they find new revenue streams and what is going to create growth and help change operators from becoming dumb pipes to intelligent pipes? We believe that OneAPI is one of many answers to that question and we hope that the GSMA and the operators involved can increase the number of APIs at a faster pace than we have seen so far.

In our report we have described how we see the mobile world. Let’s see what happens at next years MWC – we think we will see a much greater focus on OneAPI.
The bottom line is…

All in all it has been a very exciting week in Barcelona and many of us left a little more confused than we were when we arrived – on the other hand that is why we keep coming back to the MWC. We believe that 2010 most probably will be remembered for being one of the years with the least slide-ware and most focus on the world we live in and the market our customers are a part of.

We believe that the financial crisis has made many people focus on areas with guaranteed cash flow and where a serious effort can make a difference. We hope that everyone who visited Barcelona had as much fun and excitement as we did and we would like to take this opportunity to send a special thanks to all those that hosted a number of exciting and beneficial social evening events. The MWC is not only the place to gather knowledge, but also to meet exciting people in relaxed surroundings.

The Mobile World Congress 2010 – a Preview by Strand Consult

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