Research Notes

Mobile World Congress 2012 – a Review by Strand Consult

In 2012, the Mobile World Congress once again set new records with over  67.000 visitors choosing to visit Barcelona to exchange knowledge, experience, visions and of course thousands of business cards. In this digital interactive online world it is actually quite impressive to see how the old fashioned business card is still very much alive and kicking!

Once again Strand Consult participated with a team of five of our consultants. We enjoyed a most exciting week, meeting many of our customers, partners and colleagues. Despite working round-the-clock, we ended up not meeting everyone we had hoped to in the thriving mass of people gathered in the area called Fira Montjuic. Once again we are delighted to continue our tradition of summarising our experiences and opinion about the Mobile World Congress in this MWC newsletter – a newsletter that currently has a mailing list of over 30,000 people that are all related to our fascinating mobile industry.

This year we are very pleased to start this newsletter by praising the GSMA and all involved in arranging the 2012 Mobile World Congress. This year’s congress was no less than fantastic! There was far more focus on developing markets and the challenges that the mobile industry is facing around the globe. It was nice to tell Michael O’Hara when I met him in Barcelona this year, that there was no doubt that this conference was significantly better than those of previous years and that I had no doubt that everyone who had chosen to spend time at the conference this year had received excellent value for their money.

In our preview we published prior to the MWC, we described what we expected would be the main themes of the 2012 conference. Having just we re-read our preview  I can see we actually described most of the messages we subsequently heard from the various market players and their presentations at the Mobile World Congress. We are delighted to see the mobile industry increasingly focus on the challenges that our research teams have been highlighting in recent years. It was refreshing to recognise the challenges that the industry was describing at the conference were the same challenges that we have time and time again stated need to be addressed and are crucial for the further development of the mobile industry. Strand Consult has found a number of solutions and business strategies that can help solve a number of these pending challenges.

The main message of the conference was very clear – we need a better political understanding of the telco industry!

The main message from this year’s Mobile World Congress was very clear; The telco industry needs the political and regulative system to have a much clearer understanding of the challenges the telco industry is currently facing. If you examine much of the regulation being passed by the EU and how many national politicians view the telco industry, it is very clear that the political understanding of the telco industry in many countries around the world is simply very limited. In reality many politicians take for granted that telcos around the world will continue year after year making enormous investments in mobile infrastructure – infrastructure that in reality is vital to our modern society.

Many speakers at the conference including Vittorio Colao, Rene Obermann, Jon Lunder and Sunil Mittal appealed to regulative authorities around the world to make their regulations more predictable. Basically a number of mobile operators stated that what they really need is a far more predictable regulation based on a far better understanding from the regulative authorities of the challenges that the telco industry is currently battling against from the “Over the top” market players like Google, Facebook, Amazon and Apple etc.

Strand Consult has been emphasising these challenges for a number of years and constantly pointed out that the political system in most countries has simply not understood the challenges that the OTT market players are facing and the consequences this can have when combined with political and regulative unpredictability and taxation of the mobile industry. In practice it appears as if most politicians don’t worry at all about the size of the investments the telco industry is currently placing in building and expanding vital national and global communication infrastructure. On the contrary, it appears as if many politicians for some reason expect the telco industry to continue making these enormous investments in the communication infrastructure that is the foundation of our modern society – regardless of how the mobile industry is being treated by companies leeching on their networks or by the political and regulative authorities.

In a world where everybody has felt the consequences of the current financial meltdown, the political system ought to consider what would happen if mobile operators around the world started significantly reducing their communication infrastructure investments, resulting in citizens in a country being unable to access the communication services that have become a natural part of their daily lives. Strand Consult remembers well what happened after the European 3G auctions back in the year 2000. We believe there is a chance that the next large global crisis will not be triggered by governments using too much money, or banks and financial institutions that are not being run in a responsible manner, but instead by telecoms that have no choice but to significantly reduce their investments in vital mobile telecommunication infrastructure.

In the coming months, Strand Consult will be publishing a number of research notes and strategic reports about these challenges. We have no doubt that the reality a number of operators were warning about during their presentations last week in Barcelona will become a reality in various places around the world during the coming year. We believe it is likely that there could be a regional or international crisis somewhere in the world, that is triggered by a Telecom significantly reducing their investments and we expect this type of crisis to initially hit the poorest countries and poorest inhabitants the hardest. In our minds it is not a question of whether this could happen, but rather where it will happen first and when.

The MWC Key Notes are always a combination of exciting entertainment laced with lots of hot air.

The first day of the conference opened with a number of exciting speakers.

Anne Bouverot from GSMA gave the usual opening presentation and told us that the MWC was being attended by 140 government delegations and that operators were hoping that SIM based NFC would become a goldmine. Unfortunately our research does not point in that direction .

Then Anne Bouverot spend some time talking about GSMA’s new initiative RCS that is being marketed under the name Joyn. This is a new type of API which will make it easier to create mobile multimedia services on top of operators’ networks, provided that the operators support Joyn and provided that the customers’ mobile phones also support Joyn. In our opinion this strategy is very similar to the UMA concept which as you know flopped big time. Right now we do not have any great faith in this new concept.

Again this year Vittorio Colao represented Vodafone. Just like the MWC is here to stay, it appears that Vodafone is one of the companies that will always have a keynote presentation at every MWC. However unlike previous years, I think that Vodafone actually had a real message this year. It was very exciting to hear about Vodafone’s challenges on emerging markets and especially the regulative challenges that Vodafone has been tackling. In my opinion Vodafone has always been an operator that often has overestimated their ability to execute their visions and Vittorio Colao’s current visions about RCS, mobile payment via NFC and a mobile Visa wallet are in my opinion all products that belong in the same vision category as Vodafone Live and 360. In other words visions that Vodafone will probably find difficult to bring to market. I would have liked to see Vodafone focus more on the regulative challenges they started talking about and spend more of their keynote time telling the politicians in the audience that every time a Vodafone company wanted to invest money in mobile infrastructure, they first had to battle things out internally within Vodafone regarding which company in the group should have access to which funds in which countries.

Ralph de la Vega fra AT&T is a nice guy. His biggest challenge is currently how to get access to enough spectrum to service his customers in the long term. Breaking off his engagement with T-Mobile has been expensive for AT&T and Ralph seems a little like man who has experienced a runaway bride – except for the fact that the girl really wanted to marry, but wasn’t allowed to by the USA competitive authorities. It is a great pity for both AT&T and T-Mobile that the deal fell through. On the other hand it is probably a decision that is healthy for competition in the USA.

One of the keynote speakers I had been greatly looking forward to seeing was Bret Taylor from Facebook. There is no nice way of phrasing this; for some reason Facebook chose to send their apprentice, instead of sending one of their top brass and thereby sent a very clear signal that their interest in the mobile industry is basically non-existent and that in their opinion the mobile industry is nothing more than a dumb pipe. When Bret Taylor had finished telling us about the 425 million people that currently use Facebook on their mobile and that 90% of mobile customers in Nigeria and South Africa use Facebook on their mobile, he continued his presentation by marketing Facebook’s Open Graph platform – a platform which will ensure that developers increasingly create services that function on top of Facebook’s APIs!

Yes, Facebook’s figures are impressive. But after that presentation it was painfully obvious that Facebook’s CTO knew nothing about billing in the telco industry and that Facebook’s largest problem today is that they have no mobile strategy that can help them capitalise on the enormous mobile traffic they are generating. Just like the many exhibitionists that use Facebook to expose every tiny little detail in their personal life, Facebook exposed at this year’s MWC that they have very limited insight and understanding of the mobile universe. If I was a Facebook shareholder I would be very worried about owning part of a company that has no understanding of the mobile industry and that has no business strategy on how to capitalise on all the mobile traffic they are creating. Funnily enough a small company like Opera in Norway has had no problem in handling these challenges – challenges that Facebook currently does not even comprehend!

One of the presentations I enjoyed the most was Bill Ford’s presentation of Ford’s future intelligent car and transport visions. It was a presentation many will probably remember for many years. Not only are we talking about the great grandson of Henry Ford, who revolutionised the whole car industry, but also a man who has the same passion for his industry and the products he is creating and selling, as his great-grandfather had. I have to admit, Bill Ford is without a doubt the nicest and most sympathetic car salesman I have ever met. After Bill Ford’s presentation I was left thinking that it would be fantastic if the mobile industry had more people that had the same dedication and passion for their products and services as Bill Ford. Bill Ford’s presentation was cool and relevant, showing how it is possible to combine intelligence in cars with telco services and thereby optimise both our transport system and our society.

Nokia announced that Nokia would now preinstall WhatsApp on all their series 40 mobile phones. In my opinion that is really bad news, reminding me about how SMS traffic in many countries is annually decreasing by over 20%. Perhaps Nokia should have asked mobile operators in Holland, Denmark, Norway, Finland and a number of other countries whether they think it is in the operators’ best interests that Nokia preinstalls an application like WhatsApp on their mobile phones? Our research shows it is most definitely not:

Tuesday is always the best day!

The second day of the conference is always the day with the most important presentations. This year’s focus was on the area of the mobile industry with the biggest changes – regions with growth and lots of innovation regarding new mobile products and services. With companies like Telefonica, Vimpelcom, Barthi, T-Mobile and Cisco taking the stage, Tuesday did not look like it was going to be disappointing.
When Telefonica started describing the development they are seeing in South America and especially Brazil, you quickly realise that any depressing news from Spain is completely outweighed by the fantastic results from South America. Telefonica should be proud of their people that are creating their success in the South American region. There is no doubt that Telefonica in Spain and some other parts of Europe are currently facing challenges that are rather depressing compared to the impressive results from South America.

Jo Lunder is an amiable Norwegian that has headed the company Vimpelcom for a number of years over two periods of time. There is no doubt that he is a company man and knows what it requires to create a large, healthy and successful mobile operator. His message was very clear – he was also one of the speakers that was asking for a greater political understanding of the challenges the mobile industry is currently facing. Jo Lunder also spoke warmly about infrastructure sharing, which is perfectly natural considering the number of countries that Vimpelcom is operating in and the geographical areas they are servicing.

Sunil Mittal from Barthi in India has created an impressive company. His humility was very impressive and his dream of delivering good quality and affordable telephony and broadband access to Indians and Africans was commendable. There is no doubt that he has had an advantage of being one of the first players on the Indian market. On the other hand there is also no doubt that his company is very well run and that they quickly saw an advantage of outsourcing parts of their network to partners that could operate the mobile networks far more cost efficiently than a mobile operator. Barthi has been an impressive case study for many years and will continue to be an important case study on how to achieve success for many years to come.

Tuesday’s first panel debate talked about growth needing to come from mobile broadband and the challenges regarding the smartphone development and the significance of market players like Google, who believe they can use the mobile operators networks to deliver OTT services to end users. If anyone in the panel debate audience did not already know this, the mobile industry really needs to examine its current business models and start looking at how to adapt and optimise them to be successful in the future.

After the panel debate Rene Obermann from Deutsche Telecom took the stage and his message was also very clear. He stated that operators will increasingly need to make money from APIs in the future and that companies that deliver services on top of the mobile operators networks will need to pay an increasing share of the revenue they are generating in the future. Rene Obermann’s presentation was fine and showed that he too is looking for new business models that can help ensure his company’s growth and success in the future.

Cisco’s John Chambers is also a frequent speaker at the MWC. But while Bill Ford comes across as a genuinely sympathetic car salesman, John Chambers simply does not give the impression of being a Mr. Nice Guy at all. The day John Chamber stops working for Cisco he should consider contacting Bill Ford and applying for a job as a car salesman, although I doubt that somebody like Bill Ford would be interested. John Chamber’s presentation was a repeat of his previous presentations; their traffic is growing, mobile operators need to purchase more capacity, etc etc. There was really only one problem with his speech this year and that was that he had trouble explaining Cisco’s wireless strategy. On the other hand they can finish their wireless strategy when NSM Wireless has cleaned up their act and created a wireless infrastructure provider. At that point in time NSN Wireless would be a natural new acquisition for Cisco.

John Chambers was followed by Ben Verwaayen fra Alcatell-Lucent. Let me state straight away, Ben Verwaayen was an extremely happy man. After many years where Alcatel Lucent announced one poor result after another, Alcatel Lucent is now moving forward and posting much better results. I sincerely hope that Ben and his team can hold on to this positive trend and that Alcatel Lucent will have some good years before having to deal with some type of the consolidation that has increasingly been affecting the infrastructure industry for some years.

The panel debate that followed did not match our expectations. The debate can best be described by being left with the feeling that you had just listened to a panel of dumb pipes discussing how to market and sell the invisible man sitting high up in the cloud. Perhaps the panel participants should spend a little more time acquiring more knowledge about this very complex subject, rather than just blurting out what they think the audience might want to hear.

Eric Schmidt returned this year. I can easily understand if he didn’t feel very welcome…

Eric Schmidt held his usual presentation Tuesday afternoon. However this year he was slightly more quiet and humble and stayed away from many of the subjects that a number of operators had been talking about during Monday and Tuesday mornings presentations. In my opinion Eric Schmidt is currently the world’s largest parasite. Yes, Google is currently making some of the world’s most cool applications that customers simply love – but Google is not contributing in any way to the mobile infrastructure that is both vital for our modern society and an important part of their mobile business. On the contrary they are optimising their tax payments to ensure that their revenue and earnings are channelled to geographical locations that offer the best terms and conditions for Google. Strand Consult has published many different research notes about Google and how Google is currently doing business. We really recommend that you read our latest research note about Google if you would like to learn more about this controversial subject. 

On the other hand it takes guts for a man like Eric Schmidt to return year after year and speak at the MWC. He is one of the few speakers that takes questions after his presentation. It is however a pity that he does not address some of the heavy criticism that Google had been receiving during some of the Mondays and Tuesdays prior presentations at the conference. In fact it was disappointing to see that there were hardly any critical questions from his audience. But this is not unusual at this type of conference. Many people are simply afraid of a man like Eric Schmidt. He is the one man in the whole world that has the power to totally remove your company’s presence from Google! And even though he probably won’t, he could if he wanted to!

After Google’s last major “Panda” update, some companies lost 30-40% of their Internet traffic overnight – resulting in shares plummeting and the need to immediately lay off employees.
His presentation started with a presentation of the new Chrome Browser. Eric Schmidt demonstrated how Google will ensure that they know absolutely everything about you. It was very apparent that Google’s real product is all the people using Google, rather than the actual technology Google is using. I had to suppress a small smile when Google claimed that their browser is free. Google’s browser is not free unless you accept that you put all the knowledge about you as a person and all your habits for sale on the Google shop shelf and accept that all this information about you will be sold to the highest bidder – often not even necessarily the company who can offer you the products that are most suitable for you.

The whole presentation of how Google views the Internet and the use of the Internet was basically just a long list of facts. It was very clear that Google sees itself playing a central role as the number of online users increases around the world. Just the fact that there are only currently 2 billion people out of the world’s total population that are currently online, makes Google ecstatic about the enormous growth potential. Google’s presentation was very focused on how the need for storage and communication capacity will explode over the coming years. When you sit listening to Eric Schmidt’s explanation of how fascinating this amazing new future will be, you really get the urge to jump up, stand on your chair and scream “Show me the money Eric”! There was no mention of how Google would help finance the physical mobile infrastructure that is the sole prerequisite for Google being able to offer both their current and future services. It is amazing in a world where there is so much talk about Corporate Social Responsibility, that Google can hold a keynote presentation where you get the impression that social responsibility is not high on Google’s priority list – something you can easily verify by searching for the term “Google social responsibility” on Google’s own search engine.

After his presentation, one of the questions he was asked was about the challenges that some of the operators had already spoken about regarding “Over the top” mobile services. Eric Schmidt replied that the operators were correct and that he was very understanding about their situation and the challenges operators are currently facing. However he believed that it was the regulative authorities that are the real problem and not the operators. It was difficult to understand exactly what he meant with that answer? Google is almost more dependent on access to mobile infrastructure than a junkie is dependent on his drug! The regulative authorities are not cannibalising the mobile operators’ networks – but Google is!

The bottom line is that Google wants to do business in a world where they and their customers have access to cheap mobile broadband, cheap mobile phones and where Google has a browser that knows everything about each individual customer and that works across all devices, thereby allowing Google to sell you to the highest bidder. If you work for Google, Eric Schmidt is your very best friend. But if you do not work for Google he is your worst enemy. In my opinion he is the biggest Internet pimp ever and does business by trafficking people through ads, other ads and even more ads.

Strand Consult has been very critical about Google and how Google is doing business. A few years ago a few large players in the financial industry were catalysts for sparking our current world financial crisis. In our opinion Google could easily also be a catalyst for sparking one or more international crises that could happen if a number of mobile operators around the world start reducing their investments in the mobile infrastructure that is now a vital and invaluable part of our modern society. Google is nothing less than a serial killer that is quietly and elegantly eliminating one industry after another. If anybody challenges them and the way they are doing business, they fake indignity and announce that they are a knight on a shining white horse that is defending democracy and fighting for the neutrality of mobile networks! Any politicians that fall for Eric Schmidt’s charm should be prohibited in participating in any political work or decisions, until they start understanding the consequences that Google’s way of doing business is having on society.

The last two days of the conference were relaxing and entertaining.

The day started with Dennis Crowley from Foursquare explaining how their 15 million customers were currently using their service and how they would be using their service in the future. It was an entertaining and very professional presentation from a dedicated man with very little insight in today’s mobile industry and how it is developing. His visions on uses for glasses like these are inspiring and very well founded. However it would be nice if market players like Foursquare and Facebook spent a little more time understanding the mobile industry that they really want to be an integrated part of. Many market players from the online world often have great difficulty understanding the mobile world and assume that mobile operators are dumb pipes. Additionally some of these market players actually think that the mobile operators should be offering them far more help!

HTC’s Peter Chou and Nokia’s Stephen Elop both held fine presentations, both almost repeating what the other had said and both with the same basic messages. The only difference was that Steven Elop was very proud of being able to present a mobile phone with a camera with a higher resolution than Peter Chou could muster. To be honest they behaved a bit like two small boys standing in a men’s room comparing the size of their tools! The fact of the matter is that both their companies are facing some very large and real challenges and nobody is quite sure exactly what role these two companies will be playing in the mobile handset market in three years. Will they be kings of the market, or be reduced to marginal players that will have difficulty making money on a market with increasing competition, decreasing subsidies and an ASP making the smartphone market far less exciting?

When the subject changed to mobile payments, Jon Fredrik Baksaas from Telenor started by explaining their view on the mobile operators’ role on the mobile payment market. Let me be quite clear on this; Telenor was the original operator that created and launched premium SMS using one short code that function across all operators on the market, resulting in premium SMS becoming a huge global success. However regardless of the enormous success of their premium SMS strategy, their mobile payment strategy is very difficult to understand. Telenor is unfortunately one of the many mobile operators that currently have a very unrealistic view of the role they believe mobile operators will have in the mobile payments market.

After that we heard John Partridge from Visa. His presentation was very clear. Visa is already here, Visa will play a central role on the mobile payment market and together with MasterCard Visa has a duopoly. He did not really see how there would be room for mobile operators to play any central role on this market that would give them anything close to the revenue some mobile operators are currently dreaming about. Strand Consult believes that mobile payments will not be a source of revenue to operators, but rather a business area that can help operators reduce churn and help bind the SIM card – and thereby the mobile customers – even closer to the operator.

Another presentation with exactly the same message was by Don Callahan from CITI. By walking the audience through the challenges on the payment market, including security, the risk of money laundering etc. Don Callahan basically said that the banks and financial sector not only held the winning hand, they held the full deck of cards in their hand! While listening to these experienced financial professionals you could not help but wonder how mobile operators plan on handling cash coming in and out of their payment systems. Do mobile operators have plans on changing their current physical mobile stores and making them into high-street banks with armed guards and advanced security systems?

The panel debate that followed also clearly showed that there are many unknown factors that need to be addressed before the mobile industry can hope to take any kind of central role on the mobile payment market. From my point of view I always get the urge in a situation like this to ask mobile operators how they plan on adding value to a payment system that is already functioning perfectly and that has banks, clearing houses, credit card companies and the whole retail market already using an inexpensive and efficient and proven method of handling payments? Strand Consult has no doubt that many mobile market players currently have very unrealistic hopes and dreams about the whole mobile payment market.

Hans Vestberg from Ericsson’s during his keynote talked about all the great things that technology can contribute. No one was in any doubt that here is a man who really loves technology.

The bottom line is…

Once again it has been a very exciting week in Barcelona. The Mobile World Congress 2012 was extremely exciting and many of the keynote speakers during the first days gave exciting and convincing presentations. Others showed the whole mobile industry why the companies they are working for are currently in trouble. The 2012 MWC will be remembered for putting a great deal of focus on some of the challenges that operators are currently facing and will also be the year where Google showed why operators around the world fear the influence that Google is currently having on the telco industry’s ability and willingness to continue to invest billions in future communication infrastructure that is of vital importance to our modern society.

2012 was also the year where you can start seeing an outline of what could create the next financial crisis. Just a few years ago all focus was on the role of the banks and financial institutions. Now politicians should start ensuring that the next financial crisis is not triggered by the telco industry being cornered and bullied by multinational companies leeching on their networks.

We sincerely hope that everyone who visited the 2012 MWC in 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.

We are already looking forward to next year’s Mobile World Congress 2013, where the GSMA has chosen to move the Congress to new surroundings a few kilometres south-west of the current venue.

The new location, Fira Gran Via, has room for even more exhibitors, more visitors and an even larger conference.
Read our last 8 years  Mobile World Congress predictions and reviews below:




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