Emerging Markets Communications Strategies

Analyzes the issues facing existing and new players who are looking for a share of growing mobile markets in over 30 developing countries, including the developing regions of Asia and Africa.

November 25, 2010 04:11 telliott

On the occasion of America’s great festival of consumption and the official start of the riot of gift buying it seems appropriate to pause for a moment to consider Sharing.

I’m not talking about the last piece of pecan pie or the game controller. I refer to network sharing, which is on my mind because of a couple of recent stories:

  • A Bloomberg report last week mooting interest on Ericsson’s part in owning networks and providing capacity to multiple operators, with Africa mentioned as a possible target area.
  • A report in the Business Daily (Nairobi) indicating that Kenya was planning not to issue LTE licenses to private operators but instead create a public-private partnership to own and operate the network, leasing capacity to all service providers.

Africa has had some experience with infrastructure sharing already, and the pace may be picking up: American Towers just purchased 3,200 towers from Cell C, intending to lease back tower capacity to Cell C and provide smaller operators access to a national footprint. But what Ericsson and the Kenyan government are talking about goes a step beyond that, into a business model where every operator is a MVNO. Worried about becoming a dumb pipe? – forget it. We’ll be the pipe.

This model has attractions for the developing world. For one thing, it gets around the difficulty that many operators have in disengaging from the expensive arms race of network coverage. And it would probably speed rural development.

But it doesn’t change the fact that it will cost a lot of money to provide Africa with mobile infrastructure, and it doesn’t create that money. Both the Ericsson and Kenya proposals – sketchy as they are at this point – include unnamed partners who are presumably putting up some or all of the capital: Valter D’Avino, Ericcson’s VP of managed services, characterized the endeavor as “Ericsson plus a financial company,” and the private half of Kenya’s “public-private partnership” is likely to be asked to put up some cash.

So the question then is – and I apologize for the lack of holiday spirit – “What’s in it for me if I’m the money guy?” Governments may be able to justify infrastructure investment on the basis of business development; Ericsson obviously would see ongoing revenue from network management and equipment sales. Making the case for private investment in African mobile infrastructure may be a bit more challenging.


October 12, 2010 04:10 David Kerr

sa photo dk

At CTIA in San Francisco last week, away from the fanfare around LTE rollouts and the next dozen tablet devices (ok, I exaggerate a little), Sprint had an announcement which will have significantly higher impact on mobile broadband adoption and revenues: Sprint ID. 

Sprint ID promises to up the ante on personalization and ease current feature phone users into the smart phone ranks.

Sprint ID offers instant personalization along key themes/packs where the operator has done the heavy lifting of identifying and group related applications of interest to different persona from wallpaper to ringtones to apps. While the one click marketing line is not quite matched by reality given pesky little things like accepting terms and conditions etc, Sprint ID is a significant breakthrough in my opinion as:

  • it broadens the market appeal of Smart phones to current feature phones users with a simple to understand offer in a range of device price points including the critical $49 and $99 levels.
  • it tackles one of the biggest weakness of all app stores: discoverability of content and simple personalization.

Three handsets were featured at launch of Sprint ID: Sanyo Zio™, Samsung Transform™, LG Optimus S™. These three devices cover key price points in the Sprint portfolio and provide customers with a range of form factors, industrial design and brand to meet their tastes. Interesting to note that both LG and Sanyo retain the right to put their own packs on their handsets as well. This is a big win for LG as its Optimus S™ will be available for under $50 with contract giving the vendor a much needed boost in the smartphone space. Samsung meanwhile continues to shine at Sprint occupying the lucrative $149 spot with its Transform™. All three devices of course require a Sprint Everything Data plan.

However, for me the more significant impact is that operators and oems are finally realizing that customers don’t buy phones or services or apps… what they really want are positive experiences

… be that socially connected, sports, education, health and fitness, fashion etc. This is something that our User Experience team has been evangelizing for the last 7+ years. Whether its 80k apps on Android or 250k on Apple store or 10K on RIM, one common experience has been exasperation at the huge waste of time, energy and emotions in finding ANYTHING!!! Which happens first, eyes glazing over or fingers cramping with so much scrolling? Either way the net result is often a disappointing experience which the early smart phone coolaid drinkers have learned to live with.

Newbies to the smart phone arena, will certainly have less tolerance and spend less time to personalize their device and enable applications. Sprint ID is well tailored to the next wave who are taking tentative steps into the smart phone space

 

David Kerr

dkerr@strategyanalytics.com


July 7, 2010 11:07 rgupta

Qualcomm stunned many by participating in India’s recent wireless broadband auctions. It bagged licenses in 4 circles including metros Delhi and Mumbai. (The other operator which got licenses in these two circles is Reliance Industries (RIL). Reliance got the broadband license for all the circles in India). Qualcomm has decided to tie-up with some other operator for TD-LTE based broadband services in India.  It is a very strategic move by Qualcomm to push TD-LTE in India. The only competition for TD-LTE in India is WiMAX and the main competitor for Qualcomm would be RIL, if the latter opts for WiMAX, which looks very unlikely.   Broadband penetration in India is less than 1% so there is a huge untapped population that can be targeted. But operators will initially target metro and ‘A’ category circles as these are the circles where demand for broadband is high. Metro circles in particular will be the target as most high ARPU customers live there. Since only Qualcomm and RIL have licenses to operate in Delhi and Mumbai, they have an advantage.  It makes sense for RIL as well to opt for TD-LTE as the operators, which have got 3G licenses would like to tie-up with the TD-LTE operator rather than going for WiMAX due to compatibility issues. And if RIL goes for TD-LTE then WiMAX will take a backseat in India as other operators too are likely to follow RIL. Tikona, another operator, which got licenses in five circles has already said that it would go the RIL way on technology.     So it looks like that initially Qualcomm has an edge over others in BWA play in India. It will not operate directly but will be benefitted hugely by the royalty on technology and chipsets (TD-LTE). The only player that can be the threat to Qualcomm on chipset side could be Samsung. If Samsung comes out, which is very likely with TD-LTE chipsets, the competition will become stiffer. 

The loser here will be WiMAX and Intel in particular. Operators are not quite upbeat about WiMAX. If Qualcomm manages to successfully roll-out TD-LTE devices and gets major BWA operators on its side, then it could be an end game for WiMAX in India

Rahul Gupta

June 4, 2010 20:06 David Kerr
sa photo dk

 

 

 

The inevitable movement to tiered pricing which started with Verizon Wireless acknowledging its plans to do so for LTE and has been accelerated with the much anticipated data plan announcement by AT&T this week.  So, what next?

    • Will we see significant priced based competition for mobile data among the top US operators?
    • Will we see significant movement in share of adds for AT&T as iPhone wannabees are tempted by a plan of only $15?
    • What impact will lower data plans for smartphones have on AT&T’s Quick Messaging Devices and Verizon Wireless equivalent?
    • How long before we see family data plans and shared usage across multiple devices?

The move by AT&T is a smart play to extend the smartphone momentum as the low hanging fruit of Apple aficionados, multimedia techies and style seekers willing to pay top dollar has been significantly penetrated.

There is no doubt that the iPhone remains the coolest device on the marketplace and the end to end user experience remains easily the best in class. So, reducing the TCO to attract the next 20% of customers to a paid data plans while educating customers about data usage levels and managing the traffic risk is very smart business in my opinion.

The lower price points will help AT&T maintain its current leading share of smartphone users and may be attractive to casual social networkers

  • Although the 50 photos allowance is not exactly generous! For casual messenger, and social network status checking and moderate email the new DataPlus plan is quite attractive overall and will likely attract a portion of customers who would otherwise opt for a Quick Messaging Device from AT&T or a competitive offering from Verizon Wireless.

I do expect to see some modest price competition among the big operators

  • with T-Mobile most likely to drive prices lower given their need for scale and to protect their predominantly youth centric customer base. but also expect an increasingly strong Verizon Wireless handset line up to compete strongly.

The impact on Quick Messaging Devices is in my opinion likely to be modest

  • as a traditional qwerty remains overwhelmingly the input of choice for heavy messengers in the US although there is definitely room for lowering the $10 mandatory data plan on featurephones

Family data plans and data plans which allow access across multiple devices are in the pipeline

  • but will probably not make an appearance until 2012+ as part of LTE offerings.

From a device vendor perspective, the move to lower priced iPhone plans is likely to put further pressure on vendors like LG who have yet to make a credible offer in this space as well as RIM who will find more competition in the consumer space.

The lower pricing on data plans will be music to the ears of ambitious new entrants like Huawei, ZTE who plan to bring mass market priced devices to the US & Europe. The lower TCO of smartphones as a result of downward pressure on service prices boost their addressable market.


May 20, 2010 21:05 David Kerr

sa photo dk

 

May you live in interesting times as the old Chinese proverb goes. Well in the information, communication and entertainment industry we certainly do. Some very interesting questions face our industry whether we look at:

  • the outcome of much delayed Indian 3G auction or
  • the battlegrounds around HSPA+ and LTE or
  • the surging Android ecosystem vs. weakening Symbian or
  • the upside potential for WebOS under it new owners
  • the potential disruption caused by mobile cloud phones and device

Every major technology advancement has lead to a massive disruption in the handset and infrastructure vendor community.

  • In 3G, Motorola’s slim myopia led to its near ruin and has provided huge growth for Samsung and a foothold in international markets for LG and SEMC.
  • On the infrastructure side 3G was expertly grasped by Huawei and ZTE leading to a new wave of M & A and a new world order which counts Nortel as a victim and seriously challenges ALU.

So how will the migration to 4G change the playing field?

  • Who will benefit most on the operator/service provider side?
  • Will Cloud Phones be disruptive in LTE?
  • Will operators find a path to realign the traffic/revenue mix with mobile broadband devices?

I would welcome your thoughts on these key questions. Also don’t forget to join our client webinar on Thursday May 27.

 

David


April 28, 2010 03:04 telliott

"I have been over into the future and it works” said Lincoln Steffens after a 1921 visit to Russia. Well, I have been over into one version of the present –Internet access in Manila via 3G dongle – and I’m not quite as optimistic as Steffens. True, Globe Tattoo is way better than my hotel’s lame Wi-Fi, but I don’t think it’s a long term solution for connectivity, whether for the First, Second, or Third World. Good news first. Setup was easy. The instructions showed clearly how the SIM card slips into the Huawei-built dongle, which my computer recognized with no issues.  tattoo-dongle2.jpg

After a couple of minutes of software loading, I was online, at respectable if not blazing speeds. Keeping half an eye on a speed meter, I recorded one instantaneous burst of 539.4 kbps, and several in the 200’s and 300’s, although the average was a lot lower.

  • Considering the slow dial-up speeds the hotel’s Wi-Fi was delivering, I wasn’t unhappy. And as a bonus, Globe is cheaper. Globe bills at PHP 5 (US$ 0.11) per 15 minute increment. This would be PHP 480 (US$ 10.90) for 24 hours, versus the hotel’s PHP 600 (US$ 13.65).

So what’s not to like? Inconsistency, for one thing. Those average speeds contained a lot of slow periods mixed with some high speed bursts. Even when stationary it kept slipping from HSDPA to what it calls 3G to EDGE speeds. This presumably reflects the shifting burden of traffic on capacity-limited cell sites even in (I blush to admit) one of Manila’s more upscale districts. speed-meter.jpg

This is a problem for applications like Strategy Analytics’ VPN, which requires regular communication from the client. Something – possibly the dead spells or the switching from HSDPA to 3G – interferes with that check-in process, dropping me many times. VoIP is out of the question – I couldn’t even talk with Globe customer service.And what did I want to talk with Customer Service about? Why, how to add more funds to my account, of course. Tattoo may be imperfect, but it beats the alternative.

  • And speaking of alternatives, this experience has made me appreciate that the emerging market opportunity for overlay wireless data networks, whether WiMAX or LTE, is not just a rural and secondary city play. There might be a few takers right here in Makati.


March 30, 2010 00:03 David Kerr

sa photo dk Returning from CTIA in Las Vegas last week and with only 2 days before going off on vacation to Florida, I found myself reflecting that two of the most interesting meetings I had at the show were with mobile operators.

During CTIA I spent some time with AT&T emerging devices and T-Mobile M2M teams and was impressed with how both these units had managed to cut (or at least untie) the cord to the mother ship and avoid having innovation stifled by the Borg up at Corporate.

    • AT&T’s efforts to encourage a broad range of new applications and devices has definitely paid dividends with Mr. Lurie and his team adding an impressive 1M users in Q409 as a result of new device categories (mostly PND and EBR).
    • T-Mobile revealed a somewhat unheralded pedigree in M2M.

Partnership is the order of the day.

AT&T highlighted partner applications ranging from location enabled pet collars (Apisphere) to glow cap bottles to aid compliance with medication schedules (Vitality) to a very cool new tablet from Openpeak which is very different to the announced but apparently supply side challenged iPad.  Verizon Wireless and Sprint are of course also praying at the alter of open development but perhaps with less public presence.

When I think of enterprise mobility, AT&T and Verizon Wireless are top of mind but T-Mobile has in fact quietly been developing strong competency in the M2M space over the last 7-8 years.

T-Mobile offers four different SIM form factors to suit specific applications and have enjoyed triple digit growth for the last four years. T-Mobile US has quietly activated “hundreds” of different device types on its network with only a handful of devices being rejected or pulled due to network unfriendly characteristics. These devices span Telematics, Connected Energy, Telemedicine and several other applications.

So what is the common DNA of two very different operators that has allowed them to innovate and focus on new opportunities? Separation and operational autonomy to facilitate and open funnel approach to partners and speed of execution not normally associated with US carriers.

In the case of AT&T, the Emerging Devices group was chartered with developing a new space and freed from the legacy of voice & data consumer tariffs and prepaid/postpaid categories which just don’t cut it in the new connected reality where users will have multiple devices connected but used in very different ways. Mr. Lurie and his team have been able to streamline device certification and experiment across the spectrum of business models for new connected applications.

For T-Mobile, speed of certification (days not months) and the independence of being a self-contained unit (own engineers, own sales although linked to broader enterprise group) reporting to Finance & Strategy have allowed them to pursue their “easiest to do business with” approach to the M2M markets.

So, the takeaway? Innovation is alive and well at US operators but separation from the collective corporate mind is essential.

David Kerr


March 24, 2010 14:03 telliott
Around the dawn of time – that is, 2004 or so – wireless religious wars raged, and an attractive WiMAX mythology got started. WiMAX was the Rebel Alliance against the Empire, the plucky little underdog technology stickin’ it to The Man, with his closed architectures and walled gardens. This mythology had flaws. To begin with, if “rebels” Intel, Craig McCaw, and Motorola aren’t The Man, they look an awful lot like him. And we should have kept religion out of it: it’s about making money getting bits from Point A to Point B, not about setting information free or changing the world. The proximate cause of this rumination was the announcement by Packet One, the Malaysian WiMAX operator, that 2010 is “the year of WiMAX devices.” (It’s also the year of biodiversity, according to the UN, and the year of the tablet, per Nvidia.) PacketOne will launch a WiMAX embedded netbook later this year, augmenting its array of dongles and fixed modems. And it’s this, rather than Sprint’s CTIA announcement of its WiMAX smartphone, that illuminates WiMAX’s true future. That is to say, WiMAX will make more money toting ones and zeros in places like Malaysia than in places like Las Vegas. Why? Because there isn’t much of anything else in the developing world, even in relatively advanced countries like Malaysia. Dodgy DSL and overworked or soon-to-be-overworked 3G networks pressed into service for fixed access. FTTH? Fuggedaboutit. LTE? LOL. WiMAX in its present state provides reasonably robust, reasonably affordable connectivity in the 512k to 1 Mbps range - most of the time - with user-installable CPE. Sure, they’d laugh at that in Seoul, but in Mombasa you’ll get some takers. Heck, you’ll get some in Waco, Texas. And to that point, this might be a good time to note that our modest WiMAX forecasts for emerging markets, while perhaps conservative, are generally in line with one known data point: Packet One’s 140,000 subscribers as of February. Early last year we forecast about 166,000 consumer subscribers in Malaysia by year-end 2010. A couple of other operators have finally launched, so that number will be surpassed, but not by an order of magnitude. It’s still going to be a small fraction of the total wireless subscription base. In other words, a good solid business meeting a real need. But no threat to the Empire. - Tom Elliott

February 24, 2010 14:02 telliott
My late husband, the President of Nigeria, left me a large telecommunications company. I need someone of your skills and reputation to help privatize it. Please send me your bank information …  Well, it probably didn’t happen like that, but the flap about China Unicom’s alleged participation in a bid for Nigerian Telecommunications Ltd. (Nitel), Nigeria’s national telecoms carrier, does make you wonder if they should tune their spam filters a bit. The story, in brief: On Tuesday, 16 February a consortium called New Generation Ltd., which allegedly included China Unicom, was reported to have won an auction for Nitel, with a bid of US$ 2.5 billion. This was $1.5 billion more than the next highest bid. Bloggers muttered darkly about inside deals. Wait, it gets better.
  • On Wednesday, China Unicom denied being part of the consortium. It had only offered to serve as technical advisor, although it might eventually be interested in an equity stake. (Original reports cited a figure of at least 20% ownership, though China Unicom’s subsequent official statement confirming their interest did not quantify it.)
  • Interested parties then started trying to contact another consortium partner, referred to in the first press releases as “Dubai-based Minerva Group.”
    • I emailed the Dubai office of Minerva Financial Services, based in the Channel Islands. They were not the Minerva in question, did not know who was, and – reading between the lines – rather wished people would stop asking.
    • The Lagos Daily Champion got similar denials from two other Minervas in Dubai, including Minerva FZ, a wireless VAD, which is at least halfway plausible.
    • Reuters reports that calls to Minerva General Trading were not returned.
  • In case New Generation disappears, the second bidder, at $956 million, is scarcely a household word in telecommunications, either: Omen International, registered in the British Virgin Islands. Go ahead, Google them and see if you find more than I did.
Entertainment value aside, what can we get from this mess? It would be tempting, but unwise, to decide that Nigeria should be avoided until it starts acting more like Switzerland. That could be a long time, and meanwhile Africa’s largest mobile market presents some real opportunities – along with equally real challenges. The fact that China Unicom – generally speaking, no dummies – would consider an equity position ought to suggest that serious players are weighing the risks and rewards. But don’t bring your checkbook to the first meeting. - Tom Elliott Update, 10 March 2010. In a development that should surprise no one, it has been reported today that the head of the Bureau of Public Enterprises, the agency supervising the sale, has been sacked. Well, technically "suspended," but I suspect it amounts to the same thing.

February 4, 2010 17:02 rgupta

I must first admit I was not a huge fan of Indian handset brands a year back and I still wonder what made them think about competing with established players like Nokia, RIM Blackberry, Samsung and even the ZTE’s of the world.   Maybe the thought of the untapped rural and low-income customer base of India crossed their minds but will they ever be able to match the scale of distribution network these established players have? I doubt it.  For over a year ,Indian handset brands like Micromax, Karbonn, and Intex have been aggressively selling handsets in the open market in India. The way they have positioned themselves and their hunger to grab customers really amaze me. They are tough competitors for low-cost Chinese handsets even though they offer similar features and price. and in fact have outsourced manufacturing to Chinese OEMs. Last quarter they got a break when the government banned Chinese phones which were without IMIE (International Mobile Equipment Identity) numbers, and aggressively marketed mobiles with valid IMIE numbers  Most of the Indian companies are concentrating on popular handset features such as FM radio, water resistance, currency checker, and 30 days of stand-by battery life.   Most of the Indian brands are following the footsteps of established players in branding and retailing. They are selling their devices at both organized retail -  mostly big retailers like ‘The Mobile Store’, ‘Hotspot’ etc. -  and unorganized retail which are mostly electronic stores and other multi-product outlets in rural areas.  Indian vendors are trying to use branding as effectively as the established players to grab the attention of customers. They are aware that the low-income and rural customer doesn’t care about brand value but the urban customer does. They have started sponsoring cricket events and entertainment shows which has resulted into getting mindshare among urban customers (http://timesofindia.indiatimes.com/sports/cricket/series-tournaments/sri-lanka-in-india-2009/top-stories/Karbonn-Mobiles-to-sponsor-India-Lanka-ODI-series-/articleshow/5336694.cms). Micromax and Karbonn are considered established Indian brands. Besides these, Lava, Intex, and Ray are some other brands which are getting good response from customers.  I believe the aggressive approach taken by Indian handset vendors could make a small impression in Nokia and ZTE’s ULCH market share not only in India but in neighbouring countries as well where they plan to launch handsets this year. 

Our Wireless device strategies report (http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=4213) says that Indian handset vendors will grab 3% market share by 2013. They are obviously not dominating the market, but they are here to stay and could be a potential threat to foreign vendor that are eyeing rural and low-income subscribers.

Rahul Gupta