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.

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


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 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

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


March 5, 2010 04:03 rgupta

 

Once bitten, twice shy.  Bharti chairman Sunil Bharti Mittal doesn’t believe in such clichés.  Unperturbed by the MTN debacle, Bharti is once again trying its luck in African with Zain, which undoubtedly is easier to grab than MTN. It’s actually imperative for Bharti to go for multi-country operators as domestic market has become overcrowded with 8-10 operators in each circle and more to come. We had in fact recommended in a recent report (http://www.strategyanalytics.com/default.aspx?mod=PressReleaseViewer&a0=4844) that Bharti should continue to look beyond India.  A couple of months back the government owned operator BSNL too showed its interest in Zain . At that time we said that the government owned operators should focus on domestic operations and warned that foreign acquisitions could turn out to be a disaster for them. (http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5097) Well, I don’t want to claim that Bharti and BSNL have gone by our recommendations but I certainly believe that they are taking the right approach: Bharti, by going aggressively for Zain and BSNL for withdrawing from it. Bharti has entered into an exclusive talk with Zain till March 25, but this US$ 10.7 billion deal is not as lucrative as it looks. There are some obvious hurdles, which I guess Bharti was expecting. A minority shareholder has emerged from nowhere to claim that Nigerian operations are not covered under this sale. Strive Masiyiwa, the CEO of Econet Wireless, which has a 5% stake in the Nigerian operations of Zain said that Zain gave an undertaking last year that it would not sell its Nigerian assets and he hopes that Zain has disclosed this to Bharti. If this claim holds up it is unlcear what Bharti will get from this deal. Nigerian operations are actually the main contributor to Zain’s overall revenue including Middle-East operations. In 2008, Zain generated fifth of its EBTIDA margins and 22% of its total sales from Nigeria. The other major headache is Zain’s license in Niger. The Niger regulator has reduced the duration of Zain’s license by five years citing poor quality of service, which essentially means Zain will have to wind up its Niger operations this year (Niger license was issued in 2000 for 15 years)or convince the regulator to revoke the decision .

But I hope that this deal will see the light at the end of the tunnel and won’t turn out to be a disaster like MTN for Bharti.

Rahul Gupta

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   

January 7, 2010 21:01 telliott
Barely two months after the break-off with MTN, Bharti is on a shopping spree once again. This time, instead of looking for big buy outs like MTN, Bharti is aiming at a smaller target: a 70% stake in Warid Telecom, the #4 operator in Bangladesh, for US$ 300 million. Warid has around 2.7 million subscribers, which is roughly how many Bharti adds every month in India. So clearly the story here isn’t the impact on Bharti’s bottom line, but rather what the acquisition says about the company’s growth strategy.  After having its fingers burnt twice with MTN, (for details see our recent report “Bharti Airtel- Looking to Start Afresh”) Bharti has now realized that deals of that scale happen once in a blue moon. If it is not content to stay only in India – and why would it be, since it competes with 10 or 12 price-cutting rival for low margin business? – it makes more sense to concentrate on smaller markets with growth potential. Not bad thinking really from the management. I don’t think Bharti will benefit substantially in the near term by foraying into nearby markets like Sri Lanka and Bangladesh, but if nothing else it will give jitters to the other multinationals competing there, like Telenor (majority owner of Grameenphone), NTT DoCoMo, which just last year bought 30% of Aktel, and Axiata, which owns 85% of Dialog in Sri Lanka. After all, here is a well-funded operator with a lot of experience in low ARPU markets, hoping to push a low-ranking operator further up the chart. Bharti’s timing is good, too, beating out Viettel, which was also interested in Warid. So is it a shift in Bharti’s foreign (acquisition) policy to give up on megadeals? It’s not right to say that there is a shift in policy but it’s proper to say that Bharti has become much more aggressive and opportunistic in looking at easier deals to do if they make strategic sense. We also suspect other operators will focus more on incremental expansion. Orange just announced it was done with megadeals, and Bharti competitors like Telenor and Etisalat have always expanded their emerging market footprints slowly and steadily. Might a mature North American operator look at home market saturation and consider a small presence in Africa? Might Telefonica think outside Latin America and look to potentially game-changing investment in a #3 or #4 operator in Asia, like Sun Cellular in the Philippines? And where will Bharti turn next? We shouldn’t be surprised to hear about Bharti acquiring a stake in some smaller African country like Tanzania. So keep watching this space.   - Rahul Gupta

October 28, 2009 17:10 rgupta

 

China has upped its ante to promote its home grown TD-SCDMA technology. The Ministry of Housing and Urban-Rural Development has signed a cooperation agreement with China Mobile to give priority in the use of TD-SCDMA technology for housing and rural/urban development. China Mobile plans to support the ministry with e-governance, information infrastructure, housing programs, public funds and environment protection.  

By June-09, China Mobile had around one million TD-SCDMA subscribers but it has an aggressive plan to cover 70% of the geography by end of 2011which essentially means providing coverage in 238 cities. The deal with the Ministry will help, since the primary task of this Ministry is to provide subsidized housing in the cities. Around 2.5 million households had moved into this subsidized housing by the end of 2008. In May this year, the Ministry released a three-year plan to provide affordable housing for 7.5 million low-income urban households. It’s a huge subscriber base to tap for any operator and since China Mobile has already tied-up with the Ministry, it should be able to grab a major chunk of these subscribers.

Undoubtedly China Mobile is getting strong government support to make TD-SCDMA a mainstream 3G technology in competition with mature 3G CDMA technologies - WCDMA and CDMA 2000. This will definitely help China Mobile to grow rapidly. China Unicom and China Telecom will have to pull up their socks to compete with an over aggressive China Mobile.

China Mobile’s major problem at the moment is to manage and make TD-SCDMA handset available to the subscribers. Vendors too will have to come out with an expanded range of TD-SCDMA handsets at different price points to compete with the more mature and more broadly supported 3G technologies.. At present Samsung, ZTE and Coolpad are the top selling TD-SCDMA handset vendor brands in the country but they still have to go a long way to come closer to WCDMA,CDMA 2000 feature loaded handsets. According to our Wireless Device Strategies Service, the total TD-SCDMA handset shipment in 2008 was 0.1%, which is expected to rise between 3.4% by end of this year and around 8% by 2010. Though China Mobile has been able to rope-in almost all major handset to come out with TD-SCDMA device but due to limited models in this category and poor products quality, these devices are yet to gain grounds in the highly competitive Chinese 3G market. Nokia has recently launched its first TD-SCDMA model 6788 and it will definitely make competition more intense among TD-SCDMA device vendors.

If China Mobile manages to develop a competitive portfolio of handsets that provide a compelling experience on optimized applications, TD-SCDMA can flourish in the country.

  -Rahul Gupta