You have to hand it to Apple. Although it was late to market on mobile, it is the industry outsider that has most wowed the mobile space since its debut a year ago.

It first created a sensation with the iPhone, which has become the handset that many veteran mobile-device makers are eager to copy. And it is now trying to claim a stake in the mobile-content and -applications market, through the launch last week of its App Store, alongside the new 3G iPhone.

Apple is eager to avoid the mistake it made in the desktop space, where it set the standard in computer design but saw Microsoft race ahead when its Windows operating system became the de facto platform for developers designing PC applications.

In the media-player arena, Apple married groundbreaking device design with an application - iTunes - that has become the web’s leading premium music- and video-download store, and it is that marriage that has ensured market dominance of the iPod.

The first version of the iPhone, launched last year, came installed with numerous applications that showed off the device’s cool capabilities, such as its touch-screen interface, rich graphics and motion-sensitive accelerometer technology. But it surprised and disappointed many observers by barring users from downloading applications to the device.

Apple never gave a satisfactory explanation as to why it did that. One reason appears to have been the fear of causing bugs on the iPhone operating system. Some believe, however, that Apple was trying to assuage operator fears that it wanted to compete with them on the mobile content front.

But no such scruples have held back Apple with its second iPhone offering, which not only enables downloads through the App Store but appears to have cut out operators from the value chain completely by billing downloads via iTunes, not users’ mobile bills.

Operators’ billing relationship with mobile users is seen as their strongest guarantee of customer ownership. So Apple is treading on sacrosanct territory by imposing an alternative way of paying for content and apps on its phones.

The possibility that Apple might have agreed to pay operators a small share of the revenue it will be making from App Store sales cannot be entirely dismissed - neither Apple nor operators have commented on the issue - but it looks unlikely.

Apple has a long way to go to catch up with other players in the mobile handset business - not least its old rival Microsoft - to become a leading magnet for mobile application providers. For example, about 18,000 applications have been developed for Microsoft’s Windows Mobile operating system. By comparison, the App Store featured only 500 applications when it was unveiled.

Nokia’s devices, meanwhile, are the handsets that developers most often design applications for. The Finnish giant’s huge share of the handset market ensures that content and application providers targeting the mass market put Nokia phones at the top of their list.

Nokia has also been the most aggressive of the traditional handset players on the content front, exemplified by the unveiling last year of its Ovi mobile Internet offering, combining music, games, location-based services and more.

But neither Nokia nor Microsoft - nor any other traditional player - has the head start that Apple has in digital-content downloads and payments, in the shape of iTunes. Nokia is hoping to bill for Ovi content through the operators. This is one of the things it is looking to secure in its Ovi partnership deals with the big carrier groups - not always successfully. Orange, for example, is enabling access to Nokia’s music store alongside its own on Orange-branded Ovi handsets but won’t allow downloads from the store to be charged on users’ phone bills.

Getting users to pay for content on their mobile via credit or debit card has proved difficult.

The iPhone, and iTunes for that matter, are still very niche compared with the market reach that cellcos and their billing systems have across the globe. But if iPhone sales continue to pick up pace, and if the handset continues to draw the interest of mobile-data-services enthusiasts, Apple could capture a large slice of the mobile content market - and all within its own walled garden.

Free to air terrestrial broadcasting is the key to driving mass market adoption of TV services on mobile devices, according to Chinese handset vendor ZTE.

On Tuesday, the Chinese firm announced that it will be packing free to air mobile TV capabilities into a number of its handsets under an exclusive global deal with chipset manufacturer Telegent.

Speaking to telecoms.com, Weijie Yun, president and chief executive officer of Telegent, said that while vendors and carriers hadn’t exactly been backing the wrong horse with their focus on next generation mobile TV services, they were missing a great opportunity by largely ignoring free to air terrestrial broadcasting.

“The big problem is that no one believed that terrestrial TV could be made to work on the mobile, but I beg to differ,” he said. “Using the right chipset and antennae, it works fine and the key benefit [with analogue terrestrial TV at least] is that it requires no additional infrastructure.”

To date, mobile TV has struggled to win a foothold in the mobile market. Operators have experimented with a number of technologies, with limited degrees of success. While DVB-H has won support in Europe, through its backing by the EC rather than overwhelming operator support, other technologies like DAB-IP, have crashed and burned.

Now, with the global credit crunch and soaring power prices, investment in new technologies and mobile TV infrastructure looks even less likely, argues Dermot Nolan, director of the TBS consultancy.

Nolan notes that South Korea and Japan, have shown that the free to air terrestrial TV model can be a winner on mobile. By February 2008, South Korea’s six-channel free terrestrial T-DMB had around 10 million customers and the 19-channel TU Media pay-satellite service had only 1.3 million customers. In Japan, a quarter of handsets have mobile TV and recent figures from broadcaster NHK indicated that about 20 million handsets were in use. The latest handsets include diversity reception, further improving the mobile-TV service that is available to 80 per cent of the Japanese population.

Although operators cannot directly monetise free to air programming, Yun believes it makes sense as a value add, to drive adoption. “By offering some of the most popular content available, such as news and sports, for free, operators can improve their competitive position.” Yun said terrestrial programming could also be used as a wrapper to push operators interactive services delivered over other platforms.

But one of the main cultural obstacles in the way of terrestrial mobile TV remains in the technology itself. The platform still requires that handsets are fitted with a telescopic antenna, a feature which is pretty much unseen outside of Asia. But Yun said that an embedded antenna model is in development, which may help swing the scales in favour of the platform.

To date, ZTE, which has a healthy presence in its domestic market and a smaller global outlet through agreements with the likes of Vodafone, is Telegent’s big fish. However, Yun said that the company is in discussion with the big five handset vendors, and it looks like a deal with one of more of these could be key to making free to air terrestrial an unlikely mobile TV victor.

The pressure has long been on operators to squeeze cost out of their businesses, while at the same time broadening their service portfolios and growing their footprints to boost turnover.

There are numerous options open to operators that are facing requirements to streamline, ranging from a simple staff cull to offloading what have hitherto been core competencies to third parties. This month, we’ve selected ten of the most frequently debated and polled a range of experts on the benefits that are offered by each one. The ten we have selected are not ranked in terms of importance or value, simply because the impact they have will differ substantially from carrier to carrier.

But they are all in use throughout the operator community and, if one central message rings through loud and clear from the discussions that were had in preparation for this feature, it is that there is no such thing as a quick fix. None of these cost saving manoeuvres offers miracle returns or simple solutions; they all require that the hard work and planning is done in advance.

1. Network sharing
As carriers look at further network rollouts going forward, one option open to them is to deploy a single network in partnership with domestic competitors, retaining shared ownership. It is a strategy with visible benefits, according to Bharti Airtel CTO Don Price:

“If you and I are competing in the same market, it doesn’t make sense for both of us to do the build out. We have an expense that we can’t reduce, you’re left with an expense that you can’t reduce. You’re on the left side of the highway, and I’m on the right side of the highway. What did we do? We crossed the finish line six weeks apart. So as we go forward in the industry, as a network community, let’s build one highway, one common infrastructure and let the sales and marketing guys compete on the cars.”

Economically, it’s difficult to argue with the suggestion that a single network deployed by, say, three operators and then used as a platform for each of their service offerings makes more sense than making that spend in triplicate. But it is far from that simple. Most regulators believe that technology competition is just as important as service competition and a single network in any given market - particularly during a period where new technologies are being deployed - would likely be viewed by telecoms authorities and user groups alike as offering insufficient choice to the end user community.

Regulatory concerns aside, the logistics of such a relationship between competitors might prove too difficult to manage, as Robert Westwick, a consultant in PA’s Wireless Technology practice explains: “The thing about these deals is that you have two parties that have been lifelong enemies going into an arrangement where they have to trust each other and reveal a fair amount of information about themselves in order to get the greatest benefits from network sharing. And that’s very difficult coming from a position where they’ve viewed one another with suspicion and hostility. There’s a big worry that, if it goes wrong when you’ve got that close to the other party, the exit strategy is going to be very complicated.”

2. Cut handset subsidies
In markets where handset subsidies have always been in place - which covers much of the world (notable exceptions include Finland, Italy and South Korea) - the cost of providing mobile phones to users at a low, or even zero charge, has long proven a major expense for operators. For some models the subsidy cost can run to hundreds of dollars per unit and with new handsets routinely offered as an incentive to counter churn, the cost is not a one-off associated only with customer acquisition.

Handset subsidy is a difficult habit to break, as critics of the practice have long warned. Once a customer base is used to the handset being free with a contract, they become conditioned to accept no alternative. Even when service charges are reduced to compensate for a more realistic handset pricing strategy, customers in subsidy markets have been historically unwilling to accept a price hike.

The launch and subsequent popularity of Apple’s iPhone - and the IT vendor’s rumoured insistence that its brand not be devalued by large subsidy - has proven that consumers are willing to pay out for a handset if they desire it enough. But the iPhone is not a bellwether product for the handset market and - top end fashion-led handsets aside - customers generally expect to pay less than the actual value of the handset.

There is something of a Catch-22 for mobile operators when it comes to handset subsidies. In order to get feature-rich terminals into the hands of users who can then be persuaded to spend money on services, they have to absorb part of the cost themselves. There is then no guarantee of service revenue which, even if it were forthcoming, would be at risk of being cancelled out by the subsidy itself.

Carolina Milanesi, research director, mobile devices at Gartner, says that it is very difficult for operators to cut handset subsidies. “Operators tried that in 2000 in the prepay market and sales collapsed,” she says, before suggesting an alternative: “What we have seen operators do is making sure they have return on investment. So if you get a higher subsidy you end up with a longer contract and a higher monthly fee. Some operators have also tried offering cash instead of a phone upgrade,” she says.

3. Network outsourcing
Arguably the most significant operational trend in recent years, outsourcing various aspects of the network, back office functions and application platforms has become a crucial means of opex management for mobile operators.

Driven in equal measure by kit vendors’ search for a new revenue stream and the carrier community’s need to squeeze cost out of its operations, the sector is forecast to grow at 18 per cent over the next four years. Informa Telecoms&Media estimates that the managed network services market will be worth $18.5bn by 2012.

The three leading providers in this sphere - Ericsson, Nokia Siemens Networks and Alcatel Lucent - report contract portfolios between 70 and 165 in size, with contract values ranging between $100m and more than $3bn.

As they grow this area of their business - Ericsson’s managed services operations generate one third of the company’s turnover - the vendors are able to build scale that outstrips even that enjoyed by the largest international operators. This allows them to operate networks at a lower cost than their customers, hence the growing popularity of outsourcing among an operator community that, only a few years ago, was in large part opposed to the concept.

Such arrangements ought not to be rushed into, though, warns Tim Devine, a partner in the Communications Media&Entertainment practice at PA Consulting. It is essential that an operator considering a move into outsourcing has already achieved the smooth running of any element of their operation that they want to hand over to a managed services partner, he says, and PA has advised against its clients moving to outsource in the past because of concerns over a lack of preparation.

“The idea that you can outsource to get rid of a problem is naive,” he says. “If you do that you will give yourself the same problem, just being managed by somebody else.”

For some industry players, the logical extension of outsourcing is that operators need not actually own the network they use to sell airtime to customers. For many CTOs this is as unappealing a prospect as outsourcing was six or seven years ago. But if time has eaten away at those objections, it’s conceivable that carriers could grow to be more comfortable with the radical suggestion that they could actually sell their networks back to the same firms they bought them from.

4. Consolidation
The global expansion led principally by dominant Western European operators was originally motivated by a desire to grow the size of the business. But the economies of scale that large players have been able to build has been a significant upside, as infrastructure vendors have found to their cost.

Today, with hardly any greenfield opportunities remaining, and with an ever decreasing number of unaffiliated operators available to be picked off, larger scale consolidation - the merging or acquisition of entire groups - remains an option for carriers looking to further leverage size to manage cost.

While the emerging markets of the world may now be the major battle grounds for operators looking to secure global dominance, some observers feel there are significant opportunities for further consolidation within developed markets.

“My sense is that I still think there’s a little bit of room [for consolidation] in North America,” says Andy Zimmerman, head of Accenture’s Global Communications division. “In Europe there is definitely an opportunity. In the States, what we’ve seen with the mergers that have been done - excluding Sprint Nextel - is that there are tremendous opportunities. In Europe, where you have one standard, there’s a lot of opportunity to save money. There are obviously regulatory issues, but if they can be managed there is an economic argument for consolidation.”

This is one cost saving measure that favours only a select group of operators. With the emergence of a substantial number of multi-market carriers, any firms looking to play in prospective M&A activity will require a certain level of financial muscle just to get to the table. For smaller operators the only real option is to make themselves as attractive as possible to potential buyers.

But even the largest players in developed markets are not guaranteed success. Their opposite numbers in emerging territories are building huge scale and in many cases have expertise in managing low cost businesses that the Western players simply cannot match. It is only a matter of time before these players stake their claim on developed markets as well. So we can expect further consolidation to be motivated by defensive strategies as well as cost synergies.

5. Headcount reduction
Over the course of this decade, hundreds of thousands of jobs have been cut in the mobile industry as various players have sought to correct the fattening period of the late 1990s and early part of the millennium. While this has hit the supply side of the industry far harder than the carrier community, ‘headcount rationalisation’ - as it is sometimes known - has often proven popular with management keen to make a quick impact on the bottom line.

But Tim Devine warns against a rash approach to headcount reduction. “If you just want to reduce costs, it’s a pretty dumb thing to do,” he says. By his reckoning there is a prevalence of senior management within the industry simply mandating a (for example) ten per cent staff cull across the entire organisation, reasoning that this will be reflected in a comparable reduction in employment costs. But this, says Devine, rarely works well.

“If that’s what you do, then you’re just putting the problem somewhere else,” he says. “We were involved with an operator recently that was doing this. We were talking in particular to the products and services group and they said they’d solved the problem of how to keep output up with less staff by asking the marketing department to shoulder some of their burden. They had their ten per cent savings but they hadn’t optimised the cost base or changed the process, the way the company worked,” he says.

Much as with network outsourcing, headcount reduction requires scrupulous planning and preparation - any organisation embarking on such a programme needs to have a clear sense of what it is trying to achieve other than a simple slashing of numbers. And, like outsourcing, done properly it can be an effective cost management tool.

6. MVNOs and customer selection
Customers who don’t spend a great deal can be expensive to keep. In the past some operators have turned up the heat on certain customers - typically low spend prepaid users who might keep a handset for emergencies or particular, specific use cases - by hiking prices to the point where they exceed the reach of these customers. This kind of enforced churn has generally proven to be lousy PR, however, especially given that a good portion of this customer segment is made up of the elderly.

There will always be a portion of any given market that is marked by a relatively lower spend than other segments and carriers do have to find a way to address these users. A more effective strategy in some markets has proven to be partnering with ‘no-frills’ MVNO operations, building on the philosophy that ‘wholesale is better than no sale’. While not all low cost MVNO plays have proven successful - easyMobile has been one of the highest profile disappointments - there have been some high impact examples, particularly in Denmark.

The danger of such undertakings is that they can contribute to price wars that destabilise entire markets. But the concept can be applied in other directions. Indeed, while it was at one time thought that the MVNO model would be applied to a variety of consumer brands with broadly similar offerings, it has in fact proven to be a far more useful tool for reaching into the nooks and crannies of individual markets in a far more cost effective manner than a network operator would be able to manage alone.

Ethnic-specific MVNO operations are one such example, where the virtual player is able to devote its marketing and subscriber acquisition spend and focus entirely to a particular niche segment that simply would not offer sufficient rewards to a total-market carrier. But as a host, a network operator can share in the gains, without shouldering all of the risk or - more importantly - doing any of the work.

7. Marketing and sponsorship
For something so expensive, the benefits of sponsorship spend are notoriously difficult to measure. When Vodafone was sponsoring the Ferrari Formula One motor racing team some years back, the clearest evidence that the public had made any association between the operator and the team came in the form of a wave of complaints to Vodafone’s various customer service units.

During the Austrian leg of the 2002 F1 season, Ferrari driver Rubens Barrichello was ordered by his bosses to cede the lead he’d held all race to his team mate Michael Schumacher, to strengthen the German’s chances for the championship. After the race, so the story goes, Vodafone’s various customer service units were swamped with complaints from angry motor racing fans, upset at the carrier’s association with such unsporting conduct.

With this kind of spend, it’s often easier to prove a negative than a positive. And the precise size of the deals struck, even those that have been consigned to history, are details that carriers are loath to reveal. Marketing spend is often the first casualty of a financial downturn and there are always question marks over the validity of large headline branding like this.

According to brand analysis firm Marguax Matrix, Vodafone now occupies the top position in the Formula One brand exposure league (with McLaren now, rather than Ferrari) and is unlikely to withdraw from the world of sponsorship. The strategy may not suit all operators but, says Philomena Skeffington, principal consultant in the Information, Communications&Media (ICM) division at management consultancy Mott MacDonald Schema, but it makes no sense to curtail this spend once you have embarked upon it.

“It depends on your strategy,” she says. “If you want to stay up there at the retail end and have a high street presence, then you’d need to think very hard before cutting back on something like this because it keeps your name and your brand out there. But if you want to move further back into the value chain and you want to concentrate on providing the infrastructure to enable customers to connect to mobile networks then you could reduce your spend.”

8. Revenue assurance and fraud
It is a fact of life that mobile operators leak money every month through bad debt, inaccurate rating or billing, and fraud perpetrated from without and within. These are subjects that operators are often reluctant to discuss, maybe for fear of appearing to lack full control over crucial business processes.

Pedro Teixeira, account manager for the Middle East and Africa at Portuguese revenue assurance (RA) specialist WeDo Technologies, cites that revenue leakage for mobile operators can range from two per cent for a mature operator with RA solutions in place, through to six or seven per cent for a large player that has yet to establish an RA strategy. He suggests an overall industry average of between three and four per cent.

According to Kurt Ruecke, who works for Deutsche Telekom’s IT services company T-Systems, revenue leakage runs a lot higher - an average of 13.6 per cent across the telecoms operator community worldwide - with fraud representing the greatest problem, at 4.5 per cent of revenues.

It is sometimes suggested that the only organisations that really draw attention to these kinds of problems are the ones that sell solutions to combat them - scaremongering as a sales pitch, if you like. But, says Teixeira, there is no real call for such tactics, as most operators have embraced RA strategies already.

“If you were to ask me a year or two ago I would have said that many operators were failing to address this,” he says. “But in the last year or so even the operators that are slowly reacting to market changes and needs have realised it is a key area that needs to be addressed.”

But the fact that, as Teixeira says, operators are increasingly driven to meet these issues head on raises questions as to what level of incremental savings can be made. Mott MacDonald Schema’s Philomena Skeffington argues that, by and large, most of the savings that could be made are already being made; at least in the more mature markets.

“It is something that operators take into account,” she says, “so I wouldn’t think there’s a lot of money to be saved there on top of what they are already saving.”

9. Off-shore call centres
A recent trend across a number of vertical sectors, including finance and IT, has been to shift labour intensive customer care functions to locations where workers are far cheaper to employ - and the mobile sector is no exception. Such a move is often part of a wider strategy to introduce tiered levels of service, where premium, high-spending customers benefit from locally sourced customer care, while lower-revenue subscribers are serviced with a second-division offering.

Philomena Skeffington says that there are savings to be made, but argues that painstaking planning is essential if the implementation of such a strategy is to be successful. “You need a detailed plan before you offshore something this complex. When it comes to training you need to get your cultural values across and all of the details about products and handsets,” she says. “These things aren’t trivial and you need to make sure they can all be effectively supported by the off-shore organisation.”

There are numerous anecdotal reports of shortcomings from off-shore customer service organisations, centred not least on serious problems in the communication between a customer and a service agent who is required to speak in a second or third language. And while the headline savings - particularly in wage costs - made off-shoring a popular strategy some years back, practical evidence suggests that it is far from easy to make it work. And operators run the risk of losing subscribers because of poor customer service, which could wipe out the savings made by moving the division overseas in the first place.

“Yes you can reduce cost,” says PA Consulting’s Tim Devine, “but the flip side is that people don’t always get the service that they’re expecting. It’s difficult to do; the banks haven’t really cracked it yet and I don’t think the mobile operators have, either.”

10. Distribution and e-tailing
The costs of maintaining a physical distribution network run high and the popularity of online purchasing among consumers is growing all the time. It is common practice for carriers to offer customers preferential deals - cheaper handsets or more valuable service bundles - if the customer buys online. The cost of provisioning such purchases across the internet is obviously much lower in terms of wages, overheads and inventory.

But there will always be a significant portion of consumers who prefer face-to-face interaction with an operator’s sales force when selecting a handset or a service plan. And when new handsets debut - particularly in the high end - carriers themselves benefit from the ability to offer physical demonstrations. So, while ‘e-tailing’ can offer useful savings, it is not suitable as a standalone distribution strategy, unless perhaps for a particular type of niche player.

“I think e-tailing has a part to play, and I think more people are now buying things online,” says Philomena Skeffinton. “But creativity in distribution outlets is vital as well.”

Distribution models vary market by market, especially with regard to the layer of independent retailers and service providers that are in place. But carriers have learned the value of leveraging retail partnerships and the range of outlets in which handsets and services can be purchased is on the increase. For low end, prepaid service, it is now common practice for supermarkets or petrol stations to stock phones, enabling the carriers to service the market at a much reduced operational cost, freeing up their own properties to focus on high-end, high-spend users.

And, says Skeffington, “If the model changes so you get more of a wholesale retail model in that space, I think you’ll get more different types of organisation at the retail end.”

Telecoms analyst Forrester recently released research refuting mobile industry predictions that mobile broadband connections could overtake fixed in as little as five years.

But the mobile share of the European broadband market will grow to 27 per cent of all connections by the end of 2013, with fixed representing 67 per cent, down from 88 per cent in 2008. The remaining ten per cent will account for users who have both types of connection, said Forrester.

Cellular carriers are seeing rapid growth in USB modems, said the analyst firm, citing 2007 sales in Finland of over 400,000 (from a population of a little over five million) and 3UK shifting 500,000 units in six months. But there are several drawbacks to the proposition that, by Forrester’s reckoning, will stop it displacing fixed broadband.

Performance is one of them. Even with HSDPA the theoretical maximum speed for these services is 7Mbps, the firm said, with actual performance ordinarily falling some way short of this. Fixed speeds are routinely far higher. And while almost all mobile operators now pitch offers of ‘unlimited’ data consumption, they all attach ‘reasonable usage’ caveats to their services.

“Fixed ISPs take little direct action with consumers who break their “fair use” policies,” said Forrester. “[But] the reverse is true for mobile broadband consumers who exceed their usage cap: Vodafone UK currently charges £15 per GB for usage above the fair-usage threshold.”

Comparatively week indoor coverage and a higher penetration of desktop (stationary) PCs than laptops will act as further drags on the uptake of USB broadband solutions, the firm said.

But the outlook for cellular broadband solutions is by no means grim. Forrester believes that the growing popularity of laptops over desktops will spell good news for cellular carriers and that latecomers to the broadband market - users who don’t yet have broadband of any type - are likely to opt for cellular solutions for reasons of pricing and simplicity.

The mobile broadband consumer base will grow to 40 million by 2013, the firm said.

 
 
 
 
The rapid and widespread success of mobile broadband services-which now have more than 100 million subscribers worldwide using more than 300 live networks-is sparking a data traffic boom that will revive the struggling mobile base station market, according to Mobile Networks Forecasts: Future Mobile Traffic, Base Stations & Revenues, a new strategic report and forecasts from Informa Telecoms & Media.

There is also good news for operators, given clear evidence that the mobile broadband boom is helping mobile operators achieve one of their key strategic goals-increasing mobile data revenues in a bid to offset declining voice revenues. For example Vodafone, the world’s largest mobile operator by revenues, reported £2.2 billion in non-messaging data revenues for the year ended March 31 2008, up 55 per cent from £1.4 billion in 2007, due to “strong growth in business email and PC connectivity devices” along with “strong takeup of mobile broadband USB modems.” The operator says it signed up 2 million consumer customers to its flat-rate mobile Internet plans in 2007.

However the bad news for Vodafone and virtually all other operators ramping up mobile broadband services is that data traffic is growing much faster than data revenues, partly due to the launch of flat-rate mobile broadband tariffs. Vodafone notes that data traffic increased by more than tenfold in the year ended 31 March 2008 compared to 2007, versus a 55 per cent increase in data revenues. And the trend is widespread-T-Mobile reported a 10-fold increase in WCDMA/HSPA traffic in first-half 2007 compared to first-half 2006, and operators reporting at least a four-fold increase in mobile data traffic in 2007 include AT&T and Telecom Italia Mobile. Similarly, Swedish telecoms regulator PTS reports that mobile broadband subscribers in the country increased three-fold from 92,000 in 2006 to 376,000 in 2007, but over the same period mobile data traffic increased nearly ten-fold, from 203 to 2,191 terabytes.

The bottom line is that all mobile operators are facing the same dilemma, and it is only going to get worse. Informa Telecoms & Media forecasts that global mobile data revenues will increase 77 per cent from 2007 to 2012, but global mobile data traffic will grow far faster, increasing more than 1000 per cent over the same period. The traffic boom will be driven by a dramatic increase in the use of advanced applications such as mobile browsing and video-for example mobile video traffic will grow more than thirty-fold by 2012, according to Mobile Networks Forecasts. The bulk of the traffic boom will naturally happen on advanced networks such as HSPA, EV-DO, WiMAX and LTE, with LTE for example seeing a 70-fold increase in global traffic from 2010 to 2012.

The de-coupling of network traffic-which has a direct impact on costs-and revenues means mobile operators and vendors will have to reinvent their strategies, products and services to cope with the realities of the new mobile broadband era. This helps to explain why operators and vendors are actively pursuing or exploring everything from network outsourcing, network sharing and spectrum refarming to the launch of new and potentially lower-cost systems such as femtocells and next-generation networks.

Another impact of the traffic boom is that it will lead to rebound in the mobile base station market, which is currently flat due to restrained operator investment and fierce price competition. That has led to tough times for mobile infrastructure vendors, and the reality is that the tough times will continue for several years. But Informa Telecoms & Media forecasts that global base station unit sales and revenues will rebound starting in 2011 as operators are forced to add capacity to existing systems and in some cases to upgrade to next-generation networks such as WiMAX and LTE. In fact the traffic boom helps to explain why WiMAX will overtake CDMA to become the third-largest segment in the mobile infrastructure market, according to the base station unit sales and revenues forecasts in Mobile Networks Forecasts.

Apart from seeing a rebound in base station revenues, Informa Telecoms & Media forecasts that 2011 will also be a watershed in that it will be the year when mobile data traffic overtakes mobile voice traffic, which has always driven mobile network design, rollout and operation.

Clearly the transformation of mobile networks from narrowband to broadband and from voice to data will also raise larger strategic questions for operators. For example, many operators are already moving more strongly into mobile Internet content and services, given the higher margins and stock valuations prevailing in those segments. If their strategies are successful they may exit mobile networks entirely, via sales to new dedicated infrastructure players which may in turn rely heavily on infrastructure vendors to operate the networks.

As mobile operators move into mobile broadband content and services, they will naturally have to decide how to cooperate with and compete against the Internet giants such as Google and Yahoo, which have made no secret of their ambitions add mobility to their hugely successful Internet services. In fact a host of operators are already doing deals with major Internet players, though it is too early to gauge the success of the partnerships.

In other words, the mobile industry is still largely structured around its key product to date, narrowband voice, but that structure is breaking down fast due to the boom in mobile network traffic, which is in turn driven by the boom in mobile broadband services. The mobile industry’s transition to mobile broadband is underway, and mobile operators and vendors may never be the same again.

 
 
 
 
“England is a nation of shopkeepers,” said Napoleon a few hundred years ago, in one of the most famous put-downs this island’s people have ever received. Not that the Informer thinks Napoleon should have been criticising. After all, he was so messed up they named a whole complex after him. And it’s not a shopping complex, either; it’s a psychological one. But he might have sided with British shopkeepers this week, given how important it must have been for him to stand up for the little guy.

Thousands of small independent retailers are boycotting Vodafone prepay products in protest at the one per cent cut the firm will be making in the commission it pays to retailers on top-up sales from August 1st. The first protest was last Friday, when 5,250 retailers refused to sell Vodafone top-ups. The number of stores supporting the protest now exceeds 6,200 and further strikes are planned for today and Saturday.

Kevin Hunt, who manages a chain of independent convenience stores, is leading the campaign. This week he claimed that Vodafone’s UK prepay sales fell by 76 per cent last Friday as a result of the boycott and he’s looking to get 10,000 retailers behind him in a bid to force Vodafone into repealing its cut. He’s also trying to persuade his fellow campaigners to give away prepaid SIMs from other UK operators to customers looking to top up their Vodafone accounts.

Vodafone was unmoved: “This decision reflects Vodafone’s commitment to offer value for money and to invest in products and services that our customers want,” purred a Vodafone spokesman.

“The independent channel is still very important to us and in the longer term we believe that this move will drive further footfall into independent retailers as customers use their phones more for services we have invested in and they want, and therefore top up more,” he continued, pledging not to make any further commission cuts for two years.

Resistance, as they say, is futile.

Somebody should tell that to the GSMA, which fired another salvo at the European Commission this week. European communications’ regulatory Robin Hood, Viviane Reding, says she wants to see the roaming fees for text messages fall by up to 70 per cent. She’ll put forward a rule in October this year to cap charges.

Reding Hood suggested that the new fees weren’t being brought in to help out beleaguered travelling businessmen or indeed to lend a financial hand to politicians and bureaucrats who need to travel to Brussels regularly. “We are punishing our young students, our young travellers, and that is completely unfair,” said Reding, getting down with the yoof.

Playing the role of the Sheriff of Nottingham, Tom Phillips, chief government and regulatory affairs officer at the GSM Association said: “According to our analysis, the average price of SMS roaming services in the EU has declined by 18 per cent in the last year…The Commission’s proposals to single out yet another aspect of the mobile industry and apply retail price regulation, threatens to choke growth and stifle competition.”

But then if he didn’t say something along those lines he wouldn’t be doing his job properly. Unfortunately for Phillips and fellow GSM lobbyists, what Viv wants Viv tends to get; she certainly did last year when she demanded that the cost of roaming voice calls should fall. It’s unlikely that she’ll be thwarted here.

Reding is not alone in the Eurozone. EU Consumer Commissioner Meglena Kuneva has a bee in her bonnet about the unfair antics going down in the world of mobile content. She reckons that some unscrupulous websites are duping credulous punters into parting with their cash for ringtones and wallpapers. This reads like a quick recap on the brief history of mobile content. Crazy Frog still gives the Informer nightmares.

Kuneva led an enquiry that was carried out across 500 websites in the EU and found that 80 per cent need to have deeper investigation for suspected breaches of EU law, specifically regarding the ripping-off of youngsters.

There are all sorts of examples of misleading or downright dirty sales techniques in the world of mobile content apparently. Almost half of all the sites checked had some irregularity related to the information about the offer’s price, over 70 per cent of the websites checked lacked some of the information required to contact the trader, and over 60 percent presented the information in a misleading way.

Firms adjudged to be up to no good will be contacted in due course. Don’t expect any immediate changes though, authorities are being asked to report back on their progress in the first half of 2009.

Meanwhile, South Korean carrier SK Telecom has scotched rumours that it’s looking to acquire US cellular and WiMAX operator Sprint Nextel, saying only that it is looking at business opportunities in the States.

Sticking with WiMAX, it hasn’t been the best of weeks for that community. When chip giant Intel finally unveiled its Centrino 2 platform for notebooks in San Francisco on Monday, it didn’t include the much-touted WiMAX/wifi module. The WiMAX-embedded laptop, lest not we forget, is, er, ‘centrino’ to Sprint’s mobile WiMAX business case. It won’t be much cop if the US carrier’s Xohm service launches commercially in September – the latest deadline set by Sprint – and there are no embedded laptops available on which to showcase it.

You might say, to use a cricketing metaphor and to borrow extensively (OK, plagiarise) from the resignation speech of a former UK Chancellor of the Exchequer, that this would be like “sending your opening batsmen to the crease only for them to find, the moment the first balls are bowled, that their bats have been broken before the game by the team captain”.

The people at Intel say the reason for the delay in shipping out the WiMAX/wifi card to PC manufacturers is to do with FCC-related certification issues and getting the right paperwork sorted out and so on and so on. All the remaining technical glitches, they say, have been sorted out.

So, when will it be ready to ship? “Later this year,” is the informative reply from an Intel spokesperson at the San Francisco launch bash. Given that Intel refers to its fifth-generation Centrino platform as Centrino 2, maybe we shouldn’t take ‘later this year’ too literally.

Intel, though, will no doubt be working as hard as possible to make the ‘full’ Centrino 2 available in time for the Xohm launch. It’s invested too much in WiMAX not to. But wisely, it hasn’t given a more precise and exacting deadline for the appearance of the WiMAX/wifi module. Sprint has already missed its original April 2008 deadline for commercial Xohm launch, and Intel failed to meet a June unveiling for Centrino 2. So why run the embarrassing risk of another missed WiMAX deadline by setting a new one? The Informer only wishes he could have a bit more latitude on his own ‘deadlines’ but suspects he wouldn’t be in a job for long if he continued to flout them.

Over in India, delays are par for the course when it comes to decisions on spectrum licensing. But surprise of all surprises, TRAI (India’s regulatory body) and DoT (Department of Telecommunications), after a long-running feud, have finally come to an agreement about how much WiMAX much spectrum should be awarded and what the reserve price for the licences should be in the upcoming auctions in the 2.5GHz-2.6GHz band. The bad news for WiMAX supporters is that TRAI has ditched its previous (and lower) recommendations for licence reserve prices and sided with DoT. For broadband wireless access services (read WiMAX), TRAI had earlier set a base price of Rs 10 crore, Rs 5 crore and Rs 2 crore for metro, category B and category C circles respectively. Now this has been revised upwards to Rs 60 crore, Rs 30 crore and Rs 10 crore respectively.

But it’s not all sweetness and light between TRAI and DoT. India’s regulatory body has also criticised DoT for keeping it in the dark about how much spectrum is actually cleared in the 2.5GHz band and ready for use by prospective WiMAX licence holders.

Redline, a Canada-headquartered WiMAX supplier, has also had a difficult week. In a revenue outlook ‘update’ (read ‘downward adjustment’) the company said it is cutting $6m off analyst revenue forecasts for 2Q 2008. The updated revenue outlook is now between $9m and $9.5m for the three months ended 30 June 2008.

The company attributes the downward revenue adjustment (which can also mean update) to a number of reasons, including “a softening in the overall demand for WiMAX products based on the current 802.16d standards as operators consider whether or not to wait for the next generation of Mobile WiMAX technologies”.

It sounds almost nice and comforting, doesn’t it? “A softening in the overall demand…” Certainly beats saying “hardly anyone’s buying our kit”.

This is evidently something that Nokia doesn’t have to say. Q2 results out this week show sales of Euro13.2bn, up four per cent both sequentially and year on year. The Devices and Services unit dropped off by one per cent year on year and two per cent sequentially, with revenues of Euro9.1bn, shifting 122 million devices. Meanwhile, Nokia Siemens Networks saw sales go up 18 per cent and 20 per cent by the same comparisons to Euro4.1bn.

That’s the good news. The bad news is that profits dropped from Euro2.83bn for Q207 and Euro1.22bn for Q108, to Euro1.1bn.

$4bn that probably won’t be coming Nokia’s way is that which China Telecom has earmarked for investment in the CDMA network it’s taking over from China Unicom. The firm opened tenders this week and the Informer reckons Huawei and ZTE could be strong contenders.

Soon, of course, the Olympics will begin in Beijing. And this is the last A Week in Wireless for a while, as the Informer is off for his summer holidays. The concurrence of his vacation and the greatest sporting festival on earth is mere happenstance, however. Contrary to rumour, he has not been called up by the Great Britain Olympic selectors. Which is a shame, because you should see the floor routine he does with those ribbons on sticks, it would bring a tear to your eye.

Have a good summer

The Informer

Last week, Oman’s telecoms regulator awarded five “reseller” licenses, allowing the new licensees to launch MVNO services, subject to agreements with host operators. The regulator insists on the term “reseller” rather than MVNO, but in effect they are MVNO licenses.

In Jordan, two license-holders are planning to launch MVNO services, though progress has been held up as a result of a successful lawsuit brought by Orange Jordan against the Jordanian regulator’s legal framework for MVNO operations in the country. But the regulator expects to be able to issue a revised framework shortly, which will allow the two licensees - Friendi Mobile, which also holds one of the new Omani licenses, and the retail chain i2 - to move ahead with their plans.

In both Jordan and Oman, licensees say they expect to launch MVNO services by the end of the year. In addition, Bahrain’s regulator said earlier this year that it will allow MVNOs if agreements are reached between MVNOs and MNOs.

In key markets, such as Egypt and Saudi Arabia, the introduction of MVNOs is still thought to be some way off - about three years away, according to industry insiders - but the regulators in those countries are likely to be studying developments in Jordan and Oman closely. And MNOs in Egypt and Saudi Arabia will most likely be trying to assess what the introduction of MVNOs in their markets means for them.

In Africa, there is only one MVNO: South Africa’s Virgin Mobile. (Operations that are described as MVNOs are not permitted in South Africa, so Virgin Mobile is officially a joint venture of Virgin and host network Cell C.) Africa needs more MVNOs, according to Virgin Mobile CEO Peter Boyd. After a somewhat shaky start, Virgin Mobile has experienced strong subscription growth lately, which seems to confirm that there is a demand for the service. Virgin Mobile had signed up just 100,000 customers a year after its June 2006 launch, but on its second anniversary that number had risen to 495,000.

There is a fairly strong case for MVNOs in the Middle East and Africa. Most countries have or will soon have two, three or more MNOs. And when there are already several MNOs in a market, each with its own network, introducing another MNO that will have to incur the costs of building another network might not be the most effective means of increasing competition.

An MVNO, on the other hand, does not have to build its own network - instead, it uses spare capacity on the network of its host - so its pricing can be competitive. An MVNO can also target particular market segments that are overlooked by MNOs, which tend to focus on the mass market. That niche segment might be the fans of a particular soccer team or, even more specifically, Omani fishermen, who might find it useful to have a service that sent them a text message with the latest prices of hamour.

Or an MNO could use an MVNO partnership as a spoiling tactic against a rival MNO. For example, an MNO that concentrates on the upper end of the market but has a successful rival targeting the lower end could link up with an MVNO to also target the lower end without compromising its premium brand.

MVNOs, like other ventures, are not always successful. US MVNO Amp’d, which targeted the youth market, was one notable failure, filing for bankruptcy in 2007.

But MVNOs have enjoyed fairly strong growth in Western Europe, where they accounted for 7.73 per cent of all mobile subscriptions at end-2007, according to Future MVNO Strategies: Customer Segmentation and Market Evolution, a report published by Informa Telecoms & Media last month.

MVNOs have not achieved as high a level of penetration in Asia Pacific, but this year saw the high-profile launch of Virgin Mobile in India.

MVNOs have been slow to get off the ground in the Middle East and Africa, but perhaps this is where the next big launches could come.

 
 
 
 
The WiMAX-vs.-LTE debate has been contested furiously by backers of the technologies for years, and the weight of industry opinion has appeared to swing in recent months firmly behind LTE as the dominant technology-migration path - largely because of the lethargic pace of global WiMAX deployment.

But although WiMAX might be getting pushed further into the margins, too many commentators are jumping on the bandwagon and criticizing the technology.

Although LTE is the chosen migration path for the world’s leading mobile operators - and HSPA/LTE is going to clean up in developed markets, where subscribers will supplement or even replace their fixed-line residential broadband connections with high-speed HSPA/LTE wireless-broadband service - WiMAX, for all its technical and strategic frailties, still has a potentially huge role to play in the global wireless-broadband market.

It will have no better opportunity to prosper than in Asia Pacific, where billions of people have no means of accessing a fixed-line broadband service.

The industry must remember that fixed broadband remains a relatively niche service in Asia Pacific, which had only 125 million broadband subscriptions at end-2007, compared with 1.34 billion mobile subscriptions.

Developed markets in Asia Pacific will approach broadband saturation over the next few years, and billions of potential broadband subscribers in developing markets are still unable to obtain fixed-line broadband services because no fixed-line infrastructure exists to provide connectivity.

Wireless broadband services are therefore going to be the primary source of Internet connectivity for such markets, and they need to be durable enough to withstand heavy demand for data from billions of users who have been locked out of the Internet era.

Those who tout wireless broadband services delivered over HSPA/LTE networks to give these users their much-needed connectivity should remember that such networks are primarily voice-based and are not designed to provide core broadband services to millions of subscribers.

Data-traffic volumes on HSPA operators’ networks are about 1% as high as those on their fixed-line counterparts’ networks, and HSPA networks are delivering speeds far below their theoretical maximum, even with such relatively light usage.

As a result, there is still a massive case to be made for a specialist data-transmission technology, such as WiMAX, to deliver primary broadband services to billions of subscribers in Asia Pacific, most notably in the potentially huge markets of India, Bangladesh and Pakistan.

There are, of course, problems of affordability, a lack of PCs and a lack of literacy in these countries, shrinking the available market for wireless broadband services. But these three countries have a combined population of 1.5 billion, so there will still be rich pickings available for operators.

In addition, early signs from even chronically poor Bangladesh show that there is a huge pent-up demand for broadband. Mobile operators are already seeing strong growth in the market for even snail’s-pace GPRS/EDGE wireless broadband services.

But despite the potential golden opportunity for WiMAX to deliver connectivity in areas where fixed-line networks are simply never going to be rolled out, WiMAX has some serious problems to overcome if it is to make its case in developing markets.

The first is that mobile WiMAX is jumping around the spectrum band like some sort of crazed rabbit, with deployments taking place across the globe in the 3.5GHz, 2.3GHz and 2.5GHz spectrum bands.

This has massively reduced the potential for WiMAX operators to benefit from the substantially lower prices that would result from standardized network and end-user equipment.

Given the fact that the technology’s key opportunities are in some of the poorest markets on the planet, WiMAX operators must keep affordability in mind and need to do all they can to drive the price of network and customer equipment as low as possible to make the technology accessible to the mass market.

Despite the limitations of HSPA/LTE core broadband networks, mobile operators are going to try bundling wireless broadband with voice services to take advantage of the opportunities being offered by markets with low broadband penetration. And the huge scale of their existing mobile operations means that they will be able to offer HSPA/LTE modems and wireless broadband services at a significantly lower price than WiMAX operators.

That means that WiMAX operators must not only drive their prices as low as possible by pushing for standardization of equipment but must also offer an innovative service that capitalizes on the advantages they have over mobile operators in terms of downlink speeds.

Many mobile operators are highly skeptical of WiMAX’s operating performance in a commercial setting. Nikolai Dobberstein, chief strategy officer of Malaysian operator Maxis, was particularly scathing about WiMAX’s technical capabilities during a panel session at the recent CommunicAsia Summit in Singapore.

Dobberstein told delegates that he had major concerns about WiMAX’s ability to deliver quality in-building reception and said he was skeptical about WiMAX base stations’ ability to deliver reliable services over areas as wide as its backers say it will, especially in a commercial environment.

There is only one way for WiMAX to get past such doubts about its technical abilities: The technology must get out into the market and prove its many critics wrong.

With commercial WiMAX launches scheduled in India, Bangladesh, Taiwan and Malaysia by year-end - and on the horizon in Indonesia, Thailand and the Philippines - the opportunity is right there for WiMAX to grasp. The question is whether it can do so.

 
 
 
 
These days, most of the people the Informer meets consider themselves to be making at least a token effort towards Saving The Planet. There are some, of course, who do a great deal, although they are in the minority. But at the very least most human beings of his acquaintance are motivated to sort their domestic waste for recycling where applicable.

Naturally attitudes and commitments will vary from market to market but the Informer was nonetheless surprised to discover this week that only three per cent of consumers worldwide recycle their old mobile phones. This stat came from a Nokia study, accompanied by the news that 75 per cent of handset users never contemplate recycling discarded phones and almost half are unaware that it is even a possibility.

Researchers interviewed 6,500 mobile users in 13 countries – Brazil, China, Finland, German, India, Indonesia, Italy, Nigeria, Russia, Sweden, UAE, UK and USA – and concluded something that we all know only too well: the majority of disused phones end up gathering dust in a drawer somewhere around the house. This is clearly better than throwing them into landfill though, a fate that’s befallen only four per cent of used handsets according to the study. 44 per cent remain at home, 25 per cent are handed down to friends or family and 16 per cent are sold. As you might expect, awareness of recycling was lowest in the emerging markets where the population have a different set of priorities to those in Western territories.

The Informer’s been having a bit of a dig into environmental issues over the last couple of weeks, including handset recycling. Earlier this week he was chatting to Allison Murray, head of corporate responsibility at T-Mobile’s UK operation, and she said that T-Mobile puts a freepost recycling bag in the box of every handset it supplies so that it’s the first thing the customer sees when they open the package. Hopefully this will get the idea that they should send off their old phone into their head, she said.

“Hmmm,” thought the Informer, who took delivery of a brand new phone last week. “That’s a good idea, I wonder why my new network provider doesn’t do the same thing…?” Then, when he got home that night, he discovered that his provider did do it. He just hadn’t noticed, as he’d whipped all of the bits and bobs out of the package, discarding them over his shoulder, in a frenzied bid to get at the handset itself, like a child on Christmas morning. The bag had been sitting on his kitchen work surface for a week and he hadn’t clocked it. Then again, the other week he left the hob on for two days and nights, so maybe he’s not the best example of eagle-eyed awareness.

In fact, this reminds the Informer about the time he was at college living in shared digs. He was the last to leave the house for the Christmas break and he was the first to return in the New Year. He’d left the gas hob on for the entire break. Later that year the gas bill arrived and to his housemates’ horror it was astronomical. The Informer stayed quiet, the housemates with gas fires in their rooms bore the brunt of the blame and never used their fires again. They might well have been cold, but think of the overall savings in carbon emissions they made.

Anyway, back to handsets, now there are even more ‘green’ incentives to users, in the guise of a number of firms that will pay you for your old phone, allowing them to either break it down or refurbish it and sell it on to emerging markets. Got an old Sony Ericsson W850i? You can get £30 for that from Fonebank, an arm of Corporate Mobile Recycling (CMR). Or if you want shot of your N958GB, it’s worth £145. CMR’s head of marketing, Olly Tagg, told the Informer that the firm recycled close on one million handsets from the UK last year through its work with charities and its direct to consumer programmes.

CMR’s principal market is Africa where, this week, pan-continental carrier MTN extended its merger talks with one of India’s aspiring international operators, Reliance. Discussions between MTN and Reliance’s domestic competitor Bharti Airtel went for a Burton (http://www.worldwidewords.org/qa/qa-gon1.htm) in May this year, with Bharti moved to silence rumours that it was planning a bid for its African counterpart, suggesting a merger of equals was a truer portrayal of the scenario.

This latest bid – and talks have been extended to July 21st – would more likely be classed as a takeover of Reliance by MTN, although Anil Ambani, who owns 66 per cent of Reliance Communications, would become the largest shareholder in the new MTN. There’s one problem, with something of an Old Testament theme – sibling rivalry. Ambani’s elder brother Mukesh wants right of refusal over the deal. Come on boys, play nicely.

In other expansionist news – and if we had sound on A Week in Wireless, this story would play against the backdrop of the Jimi Hendrix version of All Along the Watchtower – Russian carrier Vimpelcom revealed this week that it has fully established the Vietnamese joint venture that it first announced last year.

For its investment of $276m, Vimpelcom – placed second in its home market – holds 40 per cent of the new firm, GTEL-Mobile. Vietnam’s state-owned Global Telecommunications Corporation (GTEL) will hold 51 per cent, while GTEL TSC guards the remaining nine. On announcing its plans last year, Vimpelcom pledged to invest $1bn in the GSM network venture.

That’s the sort of talk that gets the kit vendors salivating in these straitened times. But hark! What’s this? Word of a little boom from within these very walls. Informa Telecoms & Media’s number crunchers reckon there’s a turnaround in the base station market on the way. There are now some 100 million mobile broadband users on more than 300 networks and mobile data traffic is set to increase by 1088 per cent between 2007 and 2012, the firm said this week – which will translate into capacity build out and more kit sales.

Web browsing and mobile video usage will see traffic leap to 1.925PB by the year of the London Olympics in 2012, with mobile data traffic exceeding mobile voice for the first time in 2011.

Principal analyst at Informa, Mike Roberts, said: “The mobile industry is still largely structured around its key product to date; narrowband voice. But that structure is breaking down fast due to the boom in mobile data traffic. The rapid transition from voice to data traffic will lead to a fundamental overhaul of mobile networks, as mobile operators and vendors shift their focus from voice to the mobile broadband internet. This in turn will help drive a wider overhaul of mobile business models and strategy.”

But while these forecasts spell good news for infrastructure vendors, the outlook for operators is not so good. Informa expects that operators will struggle to cope with the traffic boom because the popularity of flat rate tariffs means that mobile data revenues will not keep pace with traffic, and will have a direct impact on costs.

“We forecast that global mobile data revenues will only increase 77 per cent from 2007 to 2012, compared to a 1088 per cent increase in mobile data traffic over the same period,” said Roberts. “This will push current mobile network costs and architectures to the breaking point, and will lead to everything from network sharing and spectrum re-farming to the launch of femtocells and next generation networks.”

In other positive financial news for vendors this week, Ericsson employees who were facing down tax evasion charges have all been acquitted by the Svea Court of Appeal. Among their number was Torbjorn Nilsson, the firm’s chief strategy officer. Charges were filed by the Swedish National Economic Crimes Bureau but ultimately came to nought.

Henry Sténson, senior vice president and head of Corporate Communications, Ericsson, said: “We have at all times been of the firm belief that all the accused were innocent of the alleged evasions of tax control, and that belief has now been confirmed,” he said, crumpling up the other speech he’d prepared about being extremely disappointed and ensuring everyone that the firm would stop at nothing to root out such behaviour in the future.

It was a tax-happy week for Vodafone as well, to the tune of more than $2bn, which is big potatoes by anybody’s estimation. That was the amount Vodafone expected to lose if it was forced to pay UK corporation tax on a subsidiary based in Luxembourg that it set up as part of its Mannesmann acquisition almost ten years ago. HM Revenue and Customs has been chasing Vodafone since 2001 and the ruling will be seen as a blow for the UK Treasury’s anti-tax-avoidance plans relating to UK corporations with overseas subsidiaries. Still, it’ll be Pommagne all round at Newbury.

The hype machine all but bust a gasket this week as the world readied itself for the arrival of the 3G iPhone. By the time you read this missive a few fortunate Kiwis will have already grown bored of accelerometer. As the Informer writes these words the memory of seeing a dozen anxious looking blokes lining up outside the Regent Street Apple flagship shop is already fading, zapped back to the forefront of his mind by the text he’s just received from a mate in Harringey who reckons the Carphone Warehouse has already sold out. Our Stateside cousins will no doubt be green with envy, once again questioning the wisdom of placing the International Date Line down the middle of the Pacific rather than the Atlantic Ocean.

In the run up to today, in the UK, O2 fanned the flames by reporting dwindling stocks of pre-order devices. In Canada, Rogers, is busy making amends after being castigated for taking advantage of its position as the only GSM carrier in the country by charging gadget hungry Canucks a king’s ransom for the privilege of adopting the phone. Steve Jobs was reportedly “disgusted” with Rogers, but the Informer thinks Jobs is probably secretly “pleased” with the spin generated.

There’s not much else to report, most marketers have sensibly been keeping mum this week so don’t expect any more major announcements. We might get some Moore announcements though since today would most certainly be a good day to “bury something”.

Finally, speaking of buried things, one person who might like to invest in an iPhone is Norwich teenager Abbie Hawkins who figured her phone was vibrating this week – on and off – for five hours. Upon investigation she discovered a bat had taken up residence in her underwear. She’d had “one or two” drinks the night before apparently. The Informer can well imagine what it must be like to wake up the wrong side of one or two drinks and find something unsavoury lurking in your smalls, but a bat! One can only assume vampirism is alive, well and thriving in the nightspots of Norfolk.

Holy brassieres Batman!

The Informer

 
 
 
 
The European Commission’s latest attempt to iron out the wrinkles in Europe’s mobile landscape has already led to howls of dissent from operators, which claim the action to reduce mobile termination rates (MTRs) could radically change the appearance of the industry in Europe forever.

In the past five years, Brussels has assessed more than 770 proposals by national regulators, taken advice from the European Regulators Group (ERG) and concluded that price regulation of MTRs across Europe lacks consistency and that a new pricing mechanism is required.

Under the proposed mechanism, only the proportion of costs related to increased capacity requirements for carrying wholesale voice traffic would be included.

The Commission says that, on average, 75 per cent of the costs of mobile call termination are network-related, with the radio access network generating slightly more than half. The remaining 25 per cent is typically accounted for by spectrum costs, business overheads and wholesale commercial costs.

The Commission claims it is merely attempting to spur competition among operators and reduce mobile phone bills by about 70 per cent over the next three years. The ERG itself recommended only a 40 per cent reduction in termination rates in this period - from an average of about Eur0.09 (US$0.14) a minute now to about Eur0.055 a minute in 2011 - so the final outcome is far from certain.

Termination rates are at present determined by individual national telecoms regulators and range from Eur0.02 a minute in Cyprus to more than ?0.18 a minute in Bulgaria.

EU telecoms commissioner Viviane Reding says that termination fees currently account for approximately 20 per cent of operator revenues but do not reflect the cost of providing the service; they are also nine times higher than fixed-line termination rates, she says.

Moreover, the Commission says that fixed operators and their customers are indirectly subsidising mobile operators by paying higher termination rates for calls made from fixed lines to mobiles. This cross-subsidisation was estimated at Eur10 billion in Germany for 1998-2006 and Eur19 billion in the UK, Germany and France for 1998-2002.

Nevertheless, the European Telecommunications Network Operators’ Association (ETNO) says the alignment of mobile termination rates to rates in the fixed sector is not appropriate, as the two networks are totally different, and lead to different termination costs.

ETNO also claims that mobile users are already seeing prices fall by an average of 10 per cent a year, with MTRs themselves falling 40 per cent over the past four years. The association said that radical changes to the method of calculating termination rates may result in consumers having to pay to receive calls or the removal of some cheap tariffs or prepaid packages.

Hamid Akhavan, chief executive officer of Deutsche Telekom, also says the Commission proposal is “too drastic”, while Richard Feasey, director of public policy at Vodafone, said it would fundamentally change the way mobile operators cover the cost of operating a network. What’s more, he said, the proposal could lead to calling-party pays (CPP) giving way to the receiving-party-pays (RPP) model prevalent in Canada, Singapore, Hong Kong and the US, whereby customers end up paying to receive calls.

Brussels says that a settlement system of this type avoids the deficiencies of the CPP system, namely high termination rates, and enables consumers to respond to charges where more competitive alternatives exist.

Some leading operators also reckon that large decreases in revenues from termination would signal the end of handset subsidies in Europe, increasing the cost of ownership for customers, lengthening replacement cycles and affecting overall handset sales across the region.

Credit Suisse points out that the reduction in handset subsidies in Europe and North America in 2001 caused handset demand to weaken dramatically, along with the replacement rates for several quarters. “While this remains a risk, especially if subsidies were cut, we believe that the impact may be more minimal now than in the past,” stated Credit Suisse in a report.

The bank says that if replacement rates do moderate as consumers postpone purchases because of the lower subsidies, global volumes are likely to fall by only 2 per cent. Kevin Russell, CEO of 3, says talk of ending subsidies is merely scaremongering by the likes of Vodafone, O2, T-Mobile and Orange. “From 3’s standpoint, our prices would not go up, our handset subsidies would not reduce, and we would be able to put more value in our bundles, which would effectively mean reducing prices,” he says.

Of course, 3 pays out more in termination fees than it receives, so Russell would welcome a reduction regardless. Nevertheless, beyond a short-term reduction in termination rates, the Commission does not expect a fundamental shift in the way mobile operators conduct their business. The public consultation will run until September 3, and the Commission will issue a final recommendation in October.