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.

December 22, 2010 22:12 telliott

In late November Google announced its participation in the final pre-launch funding round for O3b, a satellite network backed by SES and intended to provide broadband access to the developing world. The name refers to the “other 3 billion” – those of the world’s population without broadband connectivity – and the plan is to launch a constellation of Medium Earth Orbit (MEO) satellites that will provide low latency broadband to the area roughly between 45° N and 45° S.

Google was one of the founding backers of O3b, back in 2008, when it confidently expected to have its satellites in orbit by 2010. The first launch is now scheduled for 2012.

I mention this slipped schedule not to be snarky – I’ve missed the occasional deadline and so have you – but to recall the problems of a previous bold satellite venture, the Iridium system. Iridium was going to provide seamless international mobile coverage to business travelers, who would need only one phone and one phone number around the world.

  • This was a great idea in the late 1980s and early 1990s when planning for the system started. A lot less great in 1998 when Iridium finally went commercial: vastly increased GSM coverage and global roaming that actually worked took a lot of value out of the Iridium value proposition.

Will this happen to O3b? Not necessarily, but the global broadband gap is narrowing.

  • Until recently, the African continent was virtually cut off from the global Internet. Now, a frenzy of submarine cable building has people seriously talking about a repeat of the Great Atlantic Bandwidth Glut. True, this only means great connectivity at the landing points; getting bandwidth 500 km inland will be a challenge for a while – and an opportunity for O3b.

africa-connectivity.png

  • 3G service is growing in emerging markets, and is frequently used as a broadband access technology. Coverage is still limited, of course, and is largely unavailable outside urban areas.

O3B promotes the potential of its service as a backhaul technology, and in this it may find more traction than it does as an access method. There are complications, of course. Among other things, the fact that MEO satellites are not geostationary means that any uplink has to have active tracking antennas and some way of handling satellite to satellite handoffs.

And that, as my grandfather said about the automatic transmission, is a lot of stuff to go wrong.


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


September 23, 2010 22:09 David Kerr

September 23, 2010

While there has understandably been a lot of attention given to consumer apps post iPhone and the plethora of application stores that have emerged, business mobility and enterprise mobility offer huge potential from horizontal to vertical applications and from smartphones to iPads and tablets to superphones.

In both NA and W. Europe, business customers account for under 30% of users but are the dominant streams of both revenue and profits for operators. On the device side, premium priced models from RIM, Nokia, and Microsoft Mobile licensees as well as the iPhone have long been key drivers of profits in a market where low single digit margins are the norm.  The explosion of smartphone choices has led to the battle ground moving beyond the corner office, to other executive and now increasingly the midlevel manager.

With a new range of devices competing for space in the corporate market, the issue of corporate versus individual liable has become an increasing priority for IT decision makers. Add on the complexity of managing an expanding list of OS (Android, iPhone, Windows Mobile, Symbian, Palm, MeeGo, Bada from Samsung) and the growing importance of mobile portable devices with access behind the firewall and one can already feel a corporate migraine forming…. And that’s before we even discuss device management, mobility policy, device retirement etc. etc.

I am looking forward to CTIA Fall (San Francisco October 5-7) and in particular to the Enterprise Mobility Boot Camp moderated by Philippe Winthrop of the Enterprise Mobility Foundation. The boot camp spread over two days will address many of the issue listed above with our own Andy Brown featured in an analyst roundtable on October 6th.  I look forward to meeting you there. Don’t hesitate to contact Philippe for passes to this the deep dive enterprise mobility event.

David Kerr

David Kerr
Snr. VP - Global Wireless Practice
Tel: +1 617 614 0720
Mob: +1 262 271 8974


September 21, 2010 02:09 telliott

The mobile market potential of the “bottom of the pyramid” has rightly aroused a lot of interest – including some from Strategy Analytics. The ability to profitably service the huge untapped market of the poor and rural will have a major effect on the long term emerging market prospects of operators like Orange, Vodafone, and Telenor, device manufacturers like Huawei and LG, and infrastructure vendors like NSN, Alcatel Lucent, and Ericsson.

But let’s not forget about the developing world’s middle class, which may number as many as 2.6 billion people. It is middle class consumers who, having some measure of economic security, are in a position to stretch just a little on their handset purchases, or sign up for that slightly frivolous entertainment service. The revenue from each of those stretches, times 2.6 billion, will help fund rural roll-outs and maybe, just maybe, add to the bottom line.

The 2.6 billion comes from Martin Revallion, an economist at the World Bank, who estimated the number of people in developing countries in 2005 whose daily consumption was between $2 and $13 a day, measured on a Purchasing Power Parity basis.

Now, if you are reading this in an industrialized Western nation you might be saying “$13 a day is my idea of poor, not middle class! And $2 a day is very poor.” And in your context you would be right, because that range does not describe the middle class where you live. (In fact, $13 a day was the US poverty line in 2005, which Revallion somewhat arbitrarily chose as his upper bound. $2 was the average officially reported poverty line in 70 developing countries he looked at.)  

The question is whether daily per capita consumption of $2-$13 supports a middle class life in the developing world. This in turn raises the question of what is “a middle class life,” which even those of us who live them find difficult to define. A Middle Class (Perhaps) Shopkeeper in Liberia A Middle Class (Perhaps) Shopkeeper in Liberia

Fortunately, sociological precision is not always required to gauge mobile demand. The key element for our purposes is whether in the local context there is enough of a middle class sense of security at $2 a day – or $3 or $7 or some other number – to free up discretionary spending for non-basic communications services. This is a course of research that we will be pursuing in the next year, and we would welcome comments and suggestions.


August 25, 2010 21:08 telliott

Stay in any business long enough, particularly a growing one, and it’s easy to start thinking that your product or service is the key to human happiness. Automobiles in the early days were going to bring about freedom and the perfection of democracy. Pesticides would eradicate global hunger. Electricity from nuclear power was going to be too cheap to meter.

And let’s face it, we in mobile communications are the same way. Just put enough phones in enough hands and markets will become efficient, families will stay connected, dictatorships will topple, and the Age of Aquarius will finally dawn.

Looking at the developing world it is particularly easy to fall into this mindset: having a mobile phone really can make a tremendous difference in quality of life. But hold on a minute, says ”Mobile Phones and Economic Development in Africa,” a forthcoming study by economists Jenny Aker of Tufts and Isaac Mbiti of Southern Methodist University. Before we assume that m-development, m-health, m-whatever is the only sensible thing to promote, let’s take a cold-eyed look at the evidence.

  • Studies that have produced much cited relationships between mobile penetration and GDP growth – e.g. a 10% increase in mobile penetration is associated with a 0.6% increase in growth rate – do not credibly establish that mobile penetration causes GDP growth, only that the two are associated. They may both be results of some other cause, or the relationship could be reversed: make a country richer and more people are likely to have mobile phones.
  • The use of mobile phones by NGOs to distribute cash is appealing and reduces the NGO’s overhead, but may transfer risk and cost to the beneficiary by forcing them to travel to a retail agent to get their cash.
  •  According to a 2009 FinAcess study they cite, M-Pesa does not primarily serve the unbanked, as 72% of users have a bank account.

Aker and Mbiti are certainly not arguing against encouraging mobile phone use in Africa, only against the idea that it is “the ‘silver bullet’ for development in sub-Saharan Africa.” It doesn’t benefit a millet farmer much to know the price of grain in a market to which there is no decent road.


June 22, 2010 22:06 telliott

For all the talk of mergers and buy-outs, entrances and exits, little has actually changed recently in mobile communications in North Africa.

The rancorous struggle between France Telecom and Orascom for control of Mobinil seemed destined to end in one party or the other beating an ignominious retreat from Egypt. Instead, after closed door meetings and $300 million changing hands, the two will continue to share control of Mobinil. Business goes on exactly as before.

  • No, I tell a lie: FT can consolidate 100% of Mobinil’s revenues, versus 70% before the deal, which would have added 1% to operating revenues in 2009. Orascom has an option to sell out in a year or so, but then FT once had a court order to buy them out and look how far that got them.
  • Elsewhere in Egypt, Vodafone indicated that its 55% stake in Vodafone Egypt might be available. This aroused interest from Telecom Egypt, the state-controlled wireline operator that owns the other 45%, but it turns out they only wanted to get a controlling interest, not take the whole thing off Vodafone’s hands. Talks terminated.
  • ­But not to worry. Others were interested. Like Orascom. That’s right – the Orascom that still owns a big chunk of Vodafone Egypt’s largest competitor. Even a liberal interpretation of anti-trust might have some issues with that deal, but it had a certain superficial plausibility, particularly if Orascom left Mobinil and wanted to do something productive with all the cash it was to get from MTN for the sale of Djezzy in Algeria.
  • Not so fast!, says the Algerian government, already miffed at Orascom. (See “Orascom: Growing, Shrinking, or Becoming Something Different.”) “Algeria refuses to continue being a market where other countries sell their products” according to a member of the governing FLN party. So South African MTN isn’t welcome. If Djezzy is sold, it will be to the Algerian government. Just don’t expect that to happen quickly or to produce mountains of cash for Orascom to buy out Vodafone Egypt.

Beyond the obvious – “it ain’t over til it’s over” – what’s the message here? With a population of 162 million, relatively high personal incomes, and a subscription penetration around 80%, North Africa’s mobile markets are worth fighting over. We expect continued interest and eventually some done deals. After all, Orange Tunisie finally launched as Tunisia’s third operator, after quietly plugging away for a year or so.


June 8, 2010 17:06 rgupta

Realizing the potential emerging markets have, Research in Motion (RIM) has upped its ante and is going full hog in the Chinese market, a market which has been a strong hold of Chinese handset manufacturers.  China Mobile launched Blackberry three years back, and now China Telecom is going to launch Blackberry handsets on its EVDO network. Not only this, RIM’s venture capital arm, Blackberry Partners Fund, which invests in Blackberry applications, has joined hands with China Broadband Capital partners to set-up a US$ 100 million fund for mobile internet and development of Chinese mobile applications in China.  Content localization or developing applications in local language is nothing new for established handset vendors. Nokia’s low cost handsets are available in 11 Indian languages and are offering Chinese content on its devices in China as well. But what’s more important is targeting the right audience at the right time and on the right platform.  Now that two major mobile operators are launching Blackberry on their networks, covering most of the Chinese population, RIM has made the right move to take advantage of the situation. At present Blackberry handsets have been mainly used by high end executives due to high device cost. Applications like email etc are accessed in English, which is not a preferred language in China.   Now that RIM’s focus is on consumer applications and 3G subscribers has been increasing every passing day, Chinese applications on Blackberry devices could make a killing in the Chinese market. It’s not rare for Chinese subscribers to have Chinese applications on mobile devices but it certainly makes a difference if a subscriber finds similar applications on Blackberry devices.  But just offering Chinese applications on the Blackberry may not be enough to ensure RIM’s success. Chinese handset vendors and other vendors like Nokia and Samsung are already offering such applications on their devices. RIM will have to differentiate itself from the already crowded Chinese market by launching some niche applications targeted at different consumer segments. But whether it will be able to make a difference in China, only time will tell.

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.