Research Notes

Mobile World Congress 2011 – a Review by Strand Consult

Once again we are delighted that we can use this newsletter to send Strand Consult’s review of this year’s Mobile World Congress to almost 30,000 people in the mobile industry. 2011 was truly the year of records! Never before have so many people travelled to Barcelona to see what is happening in the mobile industry. This year, over 60,000 people from over 200 countries participated in the congress with the sole purpose of exchanging knowledge and experience about the mobile universe. As usual most of Copenhagen-based Strand Consult’s employees had also moved their office to Barcelona for the week. We were not only delighted to meet many of our customers and partners, but were also very satisfied with the GSMA’s handling of hosting an excellent congress with many exciting speakers and exhibitors.

For many people there are a number of traditions in connection with travelling to the Mobile World Congress, traditions that quickly make you feel very much at home in Barcelona. Already on the flight there is a large probability of meeting a number of people you know, making the trip to Barcelona very much like the start of a holiday where you are travelling together with old friends. However the Mobile World Congress is not a relaxed holiday – but instead a week with lots of hard work for those that want to enter, or are already part of the mobile universe.

In our preview we published before the MWC, we expressed a fear that the conference might have too much focus on the western world’s mobile markets and traditional market players, and too little focus on what is happening in the part of the world that is experiencing the most growth – the emerging markets. The reason for our apprehension was that we were slightly disappointed that some of this years MWC keynote speakers had previously had most of their focus on the western world when speaking at the MWC. We would like to take this opportunity to apologise to Michael O’Hara from the GSMA, who was rather upset when he read that part of our preview. Let us make this very clear – if you shopped around in this years conference program, you will have heard some very interesting and exciting presentations from market players that have central roles on emerging markets – and some of those presentations were among the best at the MWC 2011!

The prelude to the Mobile World Congress was very dramatic this year, as Stephen Elop presented Nokia’s future strategy in London the Friday before the congress started. Our analysis was very simple; we believed that if Stephen Elop could deliver the goods that Friday, he would be the media darling of the whole WMC. But if he couldn’t, this years MWC would be the congress that everyone remembered because Nokia and Stephen Elop were mentally spanked for a whole week! Without going into details, it is safe to say that the MWC 2011 was not the year where Nokia was a media darling, or especially impressed the media. On the contrary, it is understandable that Nokia shareholders chose to dump their shares, sending the Nokia share plummeting by over 20 percent in just two days. Our preliminary conclusion is that Stephen Elop does not yet know how to spell the words “shareholder value”.

The first day is always exciting. The Leadership Summit is an annual tradition which once again boasted an impressive list of speakers and participants. This is one of the most important parts of the MWC and is where the political system gets the opportunity to improve their knowledge about an extremely important industry. One thing that repeats itself year after year is the mobile industry’s request for a larger level of understanding from the politicians. It is pretty impressive that the mobile industry is not asking for the same kind of special treatment that the agricultural and fishing industry is already getting from the EU, but rather than the politicians – and especially the EU – create a long-term political strategy that mobile operators can use when planning their investments.

On the first day there was also focus on the mobile services market at the App Planet Forum, where a number of speakers tried to describe how they perceived the App Market – a market that is receiving an enormous amount of attention, but when measured in cash flow is only a marginal part of the global mobile services market. Sometimes we wish that there was just a little more focus on the knowledge that the Mobile Entertainment Forum members have about what their members are selling to over 1 billion mobile users around the world.

If you stood on a burning platform, is Steve Balmer the man you would hire to save you?

Late Monday afternoon the first big name took the stage in the form of Steve Ballmer. Let me make this very clear – this was 45 minutes where Mr Ballmer, despite promising the opposite, did not want to answer any questions. Instead he basically repeated what Microsoft said last year when launching Windows Mobile 7. There was nothing new in his presentation, asides from inviting his former employee, the happy owner of 3.4 million US dollars worth of Microsoft shares, Stephen Elop on stage to tell about the new cooperation between Nokia and Microsoft. Again this was a repeat of what had already been said by Stephen Elop in London the previous Friday.

If these two gentlemen are supposed to be the mobile world’s winning team, we dread to think what the losers look like. In all honesty, Nokia has chosen to base their whole smartphone strategy on a partner, that one year after launching Windows Mobile 7 is still not able to deliver their smartphone operating system in the languages that are being used on Nokia’s traditional home markets.

A great deal can be said about Nokia, and historically probably most of it will be positive. But never in Nokia’s history has it taken 12 months from launching a new mobile phone, to supporting the Danish, Swedish, Norwegian and Finnish language on that device. Maybe their new partner Microsoft does not believe that it is important to launch mobile phones that support other languages than the four or five main languages of the world? Perhaps Microsoft should learn from SonyEricsson, who are launching Android phones that not only support many languages, but also multiple variations of each language, including numerous versions of Spanish.

When we think of the presentation that Steve Ballmer and Stephen Elop gave on that first day, it wouldn’t surprise us if Steve Ballmer and Steven Elop will be standing on the same platform in 12 months engulfed in flames, despite all the media attention the platform received prior to the MWC. Our recommendation to Nokia shareholders is sell, sell, sell – and do it quickly. The Nokia share is probably one of the most high-risk shares on the stock market today. Perhaps one should start considering whether Nokia’s shares should be called junk bonds in the future? One thing is currently very clear, and that is that neither employees, shareholders, journalists or industry or stock market analysts have any idea of Nokia’s current direction or speed. And to be perfectly honest, we are not sure that Nokia knows either.

Twitter – hot air, hot air and even more hot air.

When Steve Ballmer had finished, Dick Costello – CEO of Twitter – took the stage. If anyone before this presentation had the notion that Twitter consists of a certain amount of hot air, then this presentation will have confirmed that Twitter is a fine solution that mostly consists of huge amounts of hot air. The bottom line is that

Twitter cannot monetise the value of their users. If you compare the size of traffic being generated by Twitter to the world’s SMS traffic, you will see that just 5.5 million Danes from tiny Denmark currently sent significantly more SMSs than all the Twitter uses are sending in the whole world. In the mobile universe, Twitter is not a dwarf, it is a dwarf that is so small that their traffic is totally invisible in a mobile universe where billions of SMSs are sent daily.

We think it is great that people are giving Twitter the credit for what is currently happening in the middle east, but many people have perhaps already forgotten that it was the SMS and the Thai’s use of SMSs that forced a coup against Thaksin Shinawatra following the year-long political crisis. We are sorry, but Twitter is simply a baby brother to the SMS and we have no doubt that dictators perceive SMS as a far greater threat to their dictatorships than Twitter.

It is fantastic when serious mobile operators actually call a spade a spade

Tuesday started with a number of exciting keynotes. Let me say straight up – after Monday’s presentations it was a relief to hear so many operators that this year had a very realistic image of the mobile market that they are a part of. Strand Consult has spent a great deal of time and energy explaining to our customers that it is the dongles and not smartphones that are generating most data traffic in the operators networks, which Wang Jianzhou from China Mobile confirmed very clearly. He gave an excellent presentation based on the current financial reality, rather than on what many CEOs believe the stock market would like to hear at a conference like the MWC.

Likewise the presentation from Vodafone’s Vittorio Colao was also a positive experience. For the first time in many years we experienced an honest Vodafone man that called a spade a spade. He told us that the increasing smartphone sales was not always a blessing, as it often resulted in increased SAC, but not an increase in traffic. On the other hand there was no doubt that Vittorio is a man who likes Opera – when he spoke about the over 2.5 million Opera mini users that Vodafone currently has on their network it was almost like a declaration of love – the type of declaration that most suppliers can only dream of getting from an operator in Vodafone’s league.

Peter Chou believes in God – Peter Chou is God

Later in the day Peter Chou from HTC was on stage. We mentioned in our MWC preview that we were very much looking forward to this presentation and we were most certainly not disappointed. If anyone was still a little depressed after Steve Balmer and Stephen Elop’s presentation the previous day, then Peter Chou was the man to see. There is no doubt that this man is happy and perhaps due to his Asian mentality ensured that his business partners (Microsoft and Google) and competitors (Nokia and Samsung) did not lose face. After his presentation you were left with a warm feeling that here is a man who loves mobile phones. He loves developing and manufacturing new and innovative products and he sincerely hopes that the end-users like HTC’s products as much as he does.

If anyone deserves to be successful it is most certainly Peter Chou. And it is hardly a coincidence that HTC is currently so successful and doing so well that they simply did not need to comment about the challenges that Nokia is facing. During MWC, HTC announced six exciting new products – Nokia announced none. Basically Peter Chou showed how a winner behaves, while Stephen Elop behaved like a loser.

It is at conferences like this where you get the opportunity to compare different market players to each other and once a year get the opportunity in just a few days to meet with industry leaders and discuss the current mobile world and how it is developing. It is no coincidence that over 60,000 people attended this year’s MWC in Barcelona.

Eric Schmidt had learnt from last year – never before has Google been so humble.

Tuesday ended with Eric Schmidt’s presentation and as we had predicted in our MWC preview note, this was a far more humble Eric Schmidt, that spent a great deal of time telling the many operators that Google was very operator friendly and only had the best interests for the mobile industry. Personally I find it a little difficult to believe when Eric Schmidt says things like that. I always get an odd image of two large wolves sitting with Little Red Riding Hood and voting on what they will have for dinner! But there is no doubt that Eric Schmidt and Google had spent a great deal of time ensuring that their presentation matched their audience. When I asked how Google aims to solve the problem that the fragmented Android market is currently creating for mobile phone manufacturers, developers and operators, he made it sound like the solution was just around the corner and that this was a marginal problem. In reality neither operators, developers or mobile phone manufacturers share that point of view with Eric Schmidt.

Having said that, you have to admire Eric Schmidt. Year after year he participates in debates and unlike Steve Ballmer is not in the least afraid of answering even very critical questions from the audience.

Fortunately there is also room for people who can a deliver good show

Wednesday started with a number of exciting keynotes. Seeing John Chambers from Cisco is always a memorable experience. That man can talk about the need for his company’s products in a way that results in many operators probably purchasing more capacity from him that they will actually need in the next hundred years! There is no doubt that John Chambers is a very good salesman and if he wanted to switch to another business we are sure he could very quickly boost the sales of American cars and thereby send the American economy skyrocketing.

One of this year’s absolute best and most entertaining presentations came from Masayoshi Son from Softbank. Let us make this perfectly clear; that man is crazy – and we mean that in the most positive and nicest way. The love that man has for his company, his customers, its shareholders and especially towards money is so real, that Softbank’s previous owners in Japan (Vodafone) must feel completely humiliated. Asians are often very careful to ensure that people do not lose face. On the other hand it appears that Masayoshi Son is made of the kind of stuff that is needed to get the parts of the Japanese industry that are currently in trouble back on track. We can only bow in deep respect to Masayoshi Son – Softbank’s financial results speak for themselves.

If you can’t understand why Nokia shareholders are abandoning ship then read this…

It is no secret that Nokia has had certain communication problems for a number of years –

We had hoped that Stephen Elop would tell us at this year’s MWC that he had finally solved Nokia’s communication problems – but no such luck. Seeing Stephen Elop on stage Sunday and Monday in Barcelona after his presentation in London the previous Friday left you with the feeling that somebody ought to have told him to pop by Finland in between and finish his non-existent plan. Wednesday’s presentation was not about Nokia’s current position and the direction they were heading, but instead a totally trivial presentation of the kind that easily gets lost on YouTube. If you do not have anything important to say it is often far better to be silent – which was clearly the case for Nokia and Stephen Elop in Barcelona.

When the man gets up and tells the audience that it appears as if the market is positive about Nokia’s new strategy, you sit wondering who the man is referring to? It is most certainly not the people Strand Consult has met with, definitely not Nokia’s shareholders who are selling off their shares, nor is it the experts that are wondering why Nokia’s CEO and Chairman of the Board could not agree on when the first Windows Mobile 7 phones would launch on the market.

Despite Nokia selling over 100 million Symbian mobile phones in 2010 and still having a larger smartphone market share than they have on ordinary mobile phones, their CEO Stephen Elop has spent a great deal of time and energy in recent months telling Nokia’s employees, partners and customers about the mobile phones that Nokia will be focusing on in the distant future. At the same time he has tried to make it clear to all these people that Symbian is not a platform they will be focusing on. To translate that into English, his statements will now make it extremely difficult for Nokia’s employees to sell the forecasted 150 million Symbian mobile phones over the next few years. If customers have not realised that Nokia’s smartphones are now officially on sale for the next 12 to 24 months then something is very wrong. In our opinion Nokia’s brand is most probably moving towards becoming a copy of a Chinese mobile manufacturer – making washing machines in the morning and mobile phones in the afternoon.

Sometimes the world is not very complicated – just look at the figures – it’s not that difficult.

Ryuji Yamada from NTT DoCoMo held an exciting presentation. It really gives food for thought that there were only 2.5 million smartphone users in Japan at the end of 2010 and at the same time DoCoMo is most probably the one single operator in the world that has the largest revenue share from non-voice traffic. Maybe operators who believe that the smartphone is the Holy Grail should take a closer look at the Japanese mobile market and the importance of a smoothly running ecosystem, where operators and content providers work together and where the focus is not on any individual OS, but on the service platforms that the mobile phones support.

In the afternoon we saw an excellent presentation where a number of operators from emerging markets discussed the possibilities of network partnerships. This session showed that the industry is increasingly moving away from the strategy of building individual networks as the primary differentiator and that even large operators on emerging markets can see the advantages of building shared mobile networks using the model that Strand Consult has described in a number of reports.

None of the big names are on stage at the last day of the conference. This is when the spotlight is on the technologies that are either part of the current hype or are positioning themselves to be hyped up in the near future. Let there be no doubt that Strand Consult most certainly believes that the technological evolution, embedded technologies, telemetry, NFC, mobile money etc etc are all extremely exciting areas that the industry needs to explore and develop. They are all elements in the evolution that is the foundation of our business. But why is there not far more focus on the underlying business models? There is an enormous need for far more discussion about how to ensure the commercial success of all these new solutions and technologies.

It is fine that lots of technologically minded people can stand up and talk about different new technological wonders. On the other hand we can easily compile a list of technologies that have been presented in previous years and how those technologies never took off, simply because the business models were not in place. We could for example start talking about UMA, DVB-H and some of the many other technologies that received a great deal of attention some years ago, but are dead and buried today.

The bottom line is…

All in all it has once again been a very exciting week in Barcelona. The Mobile world Congress 2011 has been a fantastic experience and many of the keynote speakers during the first days held convincing and very interesting presentations – and those that did not showed the whole industry why the companies they work for are currently experiencing difficulties. MWC 2011 was the year where the successful CEOs bathed in the audience’s admiration, while others clearly showed why they are having difficulty creating value for their shareholders. Many will most probably remember the year 2011 for two things; the year where Stephen Elop explained why he still owns 3.4 million US dollars worth of Microsoft shares and the year where people started understanding why Nokia’s value decreased by over 20% in just a few days.

Thankfully all discussion about the global financial crisis had ceased this year, but there could have been much more discussion about the many different ways that the Telco industry can help the environment. 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 very interesting people in relaxed surroundings.

We are very much looking forward to next year’s MWC, which the GSMA has chosen to move to February 27th –  March 1st, to ensure that the MWC no longer clashes with the Chinese New Year.

Read our last 6 years  Mobile World Congress predictions and reviews below:



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