the future of wireless ISSUE 168 DECEMBER 2010

featuring
Take a load off:
Traffic management has become essential
in the face of the data boom
Smart ideas:
O'l timers from the handset market are bidding
to retain a stake in the smartphone sector

Watching
the figures
OPERATORS LOOK TO PUT DATA USERS ON A DIET

OFC_MCI168.indd 1 08/12/2010 12:05


18 | flaT raTe chargIng
Unwilling to become locked into a
flat-rate billing structure that would not
generate enough revenue to fund the
provision of mobile broadband service,
operators began to call time on their all-
you-can-eat data offerings in 2010.
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03_MCI168.indd 3
Contents december10
22 | TraffIc managemenT
Many operators are investigating models
that allow them to better manage the
data deluge, improving quality of service
while increasing revenues and lowering
costs. Many look to next generation
technologies but, with so much legacy
infrastructure still in use, congestion will
remain a key issue for some time.
sessions, 4 in-depth technology
tracks and a Rural Coverage and
Connectivity focus day. Co-located
to the conference is a 50+ stand
technology exhibition. Limited
FREE passes for operators and
early booking discounts apply to
all others.
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lTe World Summit 2011
17 -19th May
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27 – 29th September
Paris, France
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Subscribe to mcI today!
tel: 0870 787 6823
Fax: +44 20 8606 7301
email: informa@subscription.co.uk
www.telecoms.com/magazine-subscription/
Front
Editorial 04
News 06
the formation of the Asian Cloud Computing
Association was announced late in november,
although the founding members seem to be
overwhelmingly Western in origin. In other news
from the region, the GsMA has released research
suggesting that mobile telephony could increase
AsiaPac GDP by $729bn. Communications is equally
important in Africa, according to the Ceo of Mtn
south Africa, if the continent is to become globally
competitive. In the UK the project to integrate
the 3G networks of 3UK and t-Mobile has been
completed, with more than 12,000 sites merged.
Us WiMAX player Clearwire has announced a series
of cutbacks in the wake of worsening losses, while
Informa reports that 65 per cent of all mobile traffic
is generated by smartphones.
Analysis 12
Vodafone has introduced a cross border roaming
tariff in a bid to encourage subscribers to use mobile
data services while overseas, although it may not
be sufficient to appease the european Commission.
A report from the Middle east telco World summit,
which took place early in December, offers insight
into the challenges currently exercising carriers in
that region.
InterVIeW
Us debutante Lightsquared is a new carrier in more 16
ways than one. the firm is aiming to redefine the
operator model altogether, eVP Martin Harriman tells
Mike Hibberd, offering transport to other carriers
on a network built and operated by a vendor, and
targeting no direct relationships with the end user.
FeAtUres
Flat rate charging 18
Traffic management 20
Smartphone battles 24
Carrier M&A 26
tHe InForMer
It could all be over for the trusty sIM card as we 28
know it, with the creation of a new task force to
develop embedded sIM technology.
smartphones battles
//page 24
03
08/12/2010 10:15
 EDITORIALDECEMBER10

mike.hibberd@informa.com
Taking the good
with the bad

V
HEAD OFFICE
odafone CEO Vittorio Colao recently work improvement, those networks that were Mortimer House, 37-41 Mortimer Street,
described 2010 as “the year of the beginning to creak under the strain of data London, W1T 3JH
Tel: +44 (20) 701 75000
smartphone”. Colao was promoting traffic—from smartphones and laptops— Fax: +44 (20) 701 75647
the creation of a new pricing structure for were forcing rethinks of a more technical
EDITORIAL
data roaming that Vodafone has introduced nature. Traffic management solutions were Please send all press releases to support@telecoms.com
in a bid to make smartphone use easier on a popular topic in 2010 as carriers tried to Editorial Director
the wallet for European customers (see the find elegant alternatives to piping all traffic Mike Hibberd
Email: mike.hibberd@informa.com
analysis on p14) but his comment on the along traditional lines (p22). Tel: +44 (20) 701 75201
smartphone rang true. And then there was the smartphone mar- Deputy Editor
James Middleton
When we were looking at the key trends ket itself. Apple continued its ascendancy,
Email: james.middleton@informa.com
that have defined the year, it became clear breaking into the top five vendors by ship- Tel: +44 (20) 701 75257
that the smartphone had a part to play in ment, while Android also gained traction. Correspondents:
The Informer
most of them; and not always in the most Microsoft made a late surge towards the the.informer@telecoms.com
positive of ways. end of the year with what looks to be a much
ADVERTISING
Vodafone may well be looking to ease the improved software offering. But could this Sales Manager
financial pain for data roamers but for do- be at the expense of the vendors’ ability to Michael Butcher
Email: michael.butcher@informa.com
mestic users it called for, again in its CEO’s differentiate through form and hardware? Tel: +44 (20) 701 75601
words, “an end to free-ism”. The increasingly Nokia, meanwhile, lived through bleak times
mass market take-up of smartphones, and at the high end of the handset market. 2010 DESIGN & PRODUCTION MANAGER
Joanne Lowe
the increasing enthusiasm among end users could turn out to be a defining year for several Email: joanne.lowe@informa.com
for exploiting their consumption capabilities, handset vendors (p26). Tel: +44 (20) 701 75604

forced carriers in advanced markets into a The next big thing those vendors have to MARKETING / LIST RENTAL
Head of Marketing
dramatic rethink of the flat rate tariffs that deliver is smartphones that will function on Sophie Burdajewicz
they had used to help stimulate uptake in the LTE networks that grew in number dur- Email: sophie.burdajewicz@informa.com
Tel: +44 (20) 701 75461
the first place. ing this year. Colao’s assessment of 2010 was
But question remarks remain over the best closer to the truth than that from those who PUBLISHER
Tim Banham
approach to this problem (p20). Charging by predicted it would be the year of LTE. That Email: tim.banham@informa.com
volume may be simple for carriers to enable, didn’t happen this year and it won’t happen Tel: +44 (20) 701 75218

but it’s not necessarily easy for customers to next. The move to the fourth generation will SUBSCRIPTIONS/ CUSTOMER SERVICES
CDS Global
understand and billing specialists are calling remain gradual; far slower than the surge in Tower House, Lathkill Street,
Sovereign Park,
on operators to come at the issue with greater popularity and usage of those smartphones Market Harborough,
Leicestershire, LE16 9EF
sophistication and imagination. that proved a point—and a problem.
Tel: 0870 787 6823
While reassessments of pricing strategies Email: informa@subscription.co.uk

were driven by fears that revenues would not Register online at

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Mobile Communications International is published by

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Editor
© 2010. All rights reserved. (ISSN 1352-9226)

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04 Mobile Communications International | First for news, best for business

04_MCI168.indd 4 07/12/2010 09:58

 Comviva_MCI.pdf 12/3/2010 12:49:25 PM

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 NEWS december2010
Search our archive at: www.telecoms.com
Big name Western firms combine to form
Asian Cloud Computing Association
A group of 11 companies,
including operators and
vendors, announced the
formation of the Asia Cloud
Computing Association in
November. However, some
observers noted that the
alliance was populated by
Western organisations looking
to exploit opportunities in
Asian markets rather than
the regional stakeholders
themselves.
Under the banner of ACCA,
the non-profit organisation
will work to address regional
issues and challenges in the
adoption of cloud computing
in Asia, addressing privacy
and security concerns,
compliance and regulation,
business models and service
levels, the group said. Its
founding members are
3UK and T-Mobile network consolidation
project reaches completion
The project to merge
the UK 3G networks
of T-Mobile and 3 has
been completed, with
more than 12,000 sites
consolidated. The two
carriers created a third
party organisation, Mobile
Broadband Network Ltd
(MBNL) in 2007 to run
the joint network, with
Ericsson the primary
service provider to MBNL.
The project is believed
to be the biggest of its
kind in the industry
to date, and the firms
said that all 3G sites,
06
06-10-11_MCI168.indd 6
Alcatel-Lucent, Cisco, EMC,
Microsoft, NetApp, Nokia
Siemens Networks, PLDT/
Smart, Rackspace, REACH,
Telenor, and Verizon.
According to Ovum
analysts Mike Sapien
and Claudio Castelli the
fragmented regulatory
environment poses the
greatest challenge to
the group’s aims. “The
association will need to be
engaging policy makers,
service providers, and
especially early users of
cloud computing within the
region to promote, sponsor,
identify and share some
standard messages with
the stakeholders (including
regulators),” Ovum said.
“This will also include
sharing best practices within
transmitters, base
station equipment and
backhaul connected
to the operators’ core
networks are now fully
configured for high
speed mobile broadband
access. Those involved
with the programme said
that bringing the two
networks together was
an order of magnitude
more complex than active
RAN shares that are
designed as such from the
deployment stage.
“It’s without a doubt
the biggest project I’ve
the region, as well as setting
achievable goals that will
reduce barriers to cloud
adoption. It is likely that
a prioritised list of issues,
starting with a few countries
and focusing on a few barriers,
will be more successful than
having broad and general
goals across too many complex
issues and countries.”
Of all the countries in
the region, China continues
to present among the most
challenging regulatory
environments. Foreign
service providers cannot
directly offer telecoms
services within China
and, while joint ventures
and partnerships are
allowed, direct investment
is tightly restricted. It is
still very unclear whether
ever been involved in,”
said Graham Payne,
managing director
of MBNL. “In terms
of the scale, and the
transformation of the
networks of T-Mobile
and 3, it’s an absolutely
monumental project.”
In an exclusive
interview that can be seen
on www.telecoms.com,
Payne goes into detail
about the challenges that
the project threw up.
“We had nothing to look
at as a template,” Payne
explains, going on to
infrastructure or data can
be shared outside China,
which creates unique
design challenges for cloud
services or the ability to
even back up services
outside the country.
It is likely that a
reveal that RNC planning
was particularly tricky.
Undertaking the project
against the backdrop of a
mobile data boom served
to complicate matters
further.
It is likely that this is
just phase one of a much
larger project. Since the
announcement of the
merger of Orange UK
and T-Mobile UK into
Everything Everywhere
earlier this year, it has
looked inevitable that a
degree of integration of
the Orange UK network
prioritised list of issues,
starting with a few
countries and focusing on
a few barriers, will be more
successful than having broad
and general goals across too
many complex issues and
countries, Ovum said.
into the MBNL project
will follow. Everything
Everywhere will not want
Orange to miss out on the
savings made possible by
such a consolidation. More
than 5,000 sites were
switched off as part of the
MBNL project.
Not all carriers believe
that network sharing
is the best operational
model, however. Recently
Hugh Bradlow, CTO of
Australian player Telstra
dismissed network
sharing, describing it as
“a race to the bottom.”
06/12/2010 12:25
Untitled-1 1 06/12/2010 10:11
 vendor view
SPONSOReD AND wRiTTeN BY
Why Innovation is necessary
Together with customers such as MTS, Telenor and Telia Sonera, Mobile Arts provide innovative
messaging and location solutions to over 110 million subscribers across 10 time zones.
A
s every businessman quickly
learns, money spent is money you
must earn. Being cost conscious
is not just calming for the nerves but an
essential component of any successful
business. Anything less results in a sub
par cost-performance ratio and have you
overcharging your customers.
The most obvious scheme for a mobile
network operator to cut costs today is
managed services. Outsourcing the
operations of infrastructure lowers costs
as a result of the synergies obtained by
having one entity operating several dif-
ferent installations, the obvious knowl-
edge benefit of the vendor knowing his
own product best, and the product being
improved as a result of the vendor build-
ing extensive experience from operating
the product in a live environment.
As capital expenditure goes cutting
cost can be seen as a paying off your debt.
And lowering your debts is financially
similar to putting money into the bank,
only at a slightly higher interest rate. Yet,
what is gained from saving on capital ex-
penditure is never going to be more than
your cost for acquiring capital. A business
must create more value. No one would
want to invest in a business that offers to
generate a Return On Capital Employed
(ROCE) not exceeding its Weighted Aver-
age Cost of Capital (WACC).
1G offered “drive and talk”, 2G in-
novated and offered “walk and talk”. The
problem with 3G, at least initially, was
that it did not innovate, it offered “walk
and talk” all over again. Now with 4G,
and with modern handsets over 3G, we
have finally arrived at “walk and surf”.
But with customers surfing on, close to,
all you can eat flat rate data packages,
making their calls over Skype rather than
over a voice service, emailing and chat-
8-9_MCI168_MobileArts.indd 8
ting within games or at social media sites,
rather than by sending text messages,
the future for mobile network operator
looks bleak. Is it now the destiny of the
mobile operator to fight to be the cheap-
est bit-pipe highway to the Google store?
Some say yes and adapt their business
accordingly. But this leads to a pure cost
focus and the aforementioned risk of a
ROCE/WACC problem. In addition, surf-
ing has its shortcomings, especially when
it comes to ease of use and reliability.
Here, when compared to datacom, the
traditional telecom approach repeat-
edly comes out on top. Take this extreme
example; assume that your are in need,
would you prefer to send a World of
Warcraft chat message to the Emergency
Service or to make a phone call? That
said, consumer behaviour is notoriously
difficult to predict. All we can say with
certainty is that certain behaviours are
established and exist today, and even
though the early adopters are quick to
change the majority of users will stay
with their established habits for the long-
est time. As a result classical voice and
text services will continue to be offered
within the “walk and surf” framework of
4G. Innovation also is not restricted to the
latest fad. Indeed we can be innovative
within the framework of what is estab-
lished, and while we utilize interfaces
familiar to our customers. A substantial
part of operator revenues stem from
well-established services such as SMS. Yet
these services, for which demand is con-
stantly increasing, are mostly provided
using legacy installations “leading” in
cost of ownership but lacking in innova-
tion. Simply upgrading the server park
and replacing old software will increase
throughput and save on energy consump-
tion, server floor space and maintenance.
But let us not be satisfied with simply low-
ering costs. Lets innovate.
Despite being really a quite awkward
service, SMS content is very popular.
SMS is used for delivering all kinds of
content including ring tones, images,
news, horoscopes and jokes. The problem
with SMS content is that it requires the
user to know both what phone number
to send a requesting SMS to and which
text to include in the SMS. As a result SMS
content service providers spend a lot on
marketing. Non-marketed SMS content is
quickly forgotten. Adding a SMS Content
Portal makes all SMS content accessible
from one common short code (example
*1234#). This short code is preferably
pre-stored on the SIM card address book.
Once this short code is dialled a menu
system is shown. The menu allows the
subscriber to browse and select from all
available content. The technology used
is called USSD. USSD is supported by all
mobile phones. The portal converts the
USSD menu dialog with the consumer
into SMS content requests compliant with
existing SMS content services. Absolutely
no upgrade is needed by any SMS content
provider. The user receives the content
per SMS, or MMS, as usual and operator
SMS content related revenues increase as
more content is found and downloaded.
Mobile Arts offer the “unhide your SMS
content” program consisting of a power-
ful USSD Gateway and Portal solution.
There are more ways to increase SMS
revenues. In Norway NetCom charge 25
NOK (€3) and Network Norway charge
19 NOK (€2.3) per month for their “SMS
Pluss” offerings. Terminating SMS
features allow subscribers to receive a
copy of incoming and outgoing SMS to
their email, to create automatic reply
messages to incoming SMS and protect
06/12/2010 11:47

Christopher Kingdon
Mobile Arts, CMO
Innovation is not restricted to the latest fad. Indeed we can be
innovative within the framework of what is established, and while
we utilize interfaces familiar to our customers.
against spam. At a similar price point
both operators offer the “Trilling Sim”
service to smaller companies where you
want any partner to be able to pick up and
respond to incoming customer calls or text
messages. Incoming calls and messages
are “copied” to all connected phones. The
Mobile Arts Short Message Service Centre
(SMSC) is a high throughput, full-featured
SMSC supporting both classic originat-
ing SMSC functionality, as well as unique
terminating SMSC capabilities. The SMSC
comes with a suite of embedded SMSC
applications.
Ever more messages originate from an
application rather than from a person.
In addition to premium content delivery
SMS is utilized for purposes such as public
transport or parking ticket payments,
reminders of appointments and advertis-
ing. The Mobile Arts Bulk Short Message
Service Centre (B-SMSC) is optimized for
application to person messaging. Mes-
sages and send lists are created using an
easy to use graphical interface or over an
open API. The B-SMSC offers one simple
unified integration point for all Applica-
tion Originating messages. Service level
control allow for differentiating SMS
pricing depending on priority for delivery
speed and frequency of retries. Flexible
retry scheme settings implement cut off
dates in order for consumers not to receive
offers after the offer runs out. The Bulk-
SMSC also off-loads, the often expensive,
legacy SMSC and provides the operator
with control over application messaging,
using throttling for load protection and
Service Level Agreement enforcement.
Making it easy for SMS application provid-
ers to buy and use SMS increase revenues
from Application Originated SMS.
The ability to change your geographical
location is essentially the definition of mo-
8-9_MCI168_MobileArts.indd 9
Anders Olin
Mobile Arts, CEO
bility. Location is the “mobility parameter”.
Location Based Services consequently
open up a complete domain of services.
Berg Insight estimate that total EU LBS rev-
enues will grow from €214 million in 2008
to about €580 million in 2014. Important to
note is that when it comes to LBS we are no
longer dealing only with expectations, we
now see operators achieving real revenue
success with LBS. There is no one LBS
killer application, rather there are many
services and creating a combined offering
of operator branded and third party service
provider applications is most beneficial.
Location Based Services worth special
mention include the following:
A generic Resource Management service
is advertised and automatically provisioned
over the Operator web page and sold by
the regular small and medium enterprise
customers (SME) sales force. Large enter-
prise customers are offered a completely
customized mobile resource management
solution that is fully integrated with their
business systems. By integrating their
business systems with the offering of an
Operator, the selection of their supplier of
mobile communication services becomes a
strategic choice driven by Return On Capital
Employed (ROCE) considerations. The value
offered by a mobility extended business
system radically reduces Enterprise price
sensitivity and churn.
Maslow’s hierarchy of human needs lets
us sort consumer-focused services. Locat-
ing Emergency callers, Child Trackers and
Personal Security services meet our needs
for Physiological wellbeing and Safety.
Consumers are not price sensitive when it
comes to safety. Social needs are targeted
by many applications. Friend Finder ser-
vices integrate with social media sites and
lets you keep track of where your buddies
are, book activities and receive alerts when
vendor view
friends are around. Geo-tagging is the abil-
ity to “blog” geographically and leave loca-
tion dependant information in Cyberspace.
Exercise logs track your exercise routes and
share them with your community. There
are even communities that will share deco-
rative patterns they have biked! Intellectual
“esteem” needs are met by services that
keep us informed and effective. Traffic and
public transport services inform us of the
most effective route from point A to point B.
Yellow and White pages information servic-
es lets us find what and who we are looking
for. Local weather information sorts the
information to what is relevant for us.
Supporting over 90 million subscribers, in
10 time zones, the Mobile Arts Mobile Loca-
tion Centre (MLC) solution has proven to
offer a direct path to a large portfolio of dif-
ferent Location Based Services. Deployment
costs are reduced by abstracting underlying
integration of the MLC Solution with the
Mobile Operator infrastructure through
an easy to use Application Programming
Interface (API). By offering a range of loca-
tion methods the Mobile Arts MLC solution
meets the needs of different Location Based
Services, from simple services requiring
basic accuracy to advanced services, such as
real-time driver navigation, requiring high
accuracy. Potential consumer fear of using
Location Based Services is removed with
MLC functions that allow the consumer
to control who is allowed to know his/her
location.
In summary, managed services cut costs
but cutting cost is not enough. To create
Return On Capital Employed (ROCE) in ac-
cess of our Weighted Average Cost of Capital
(WACC) we must innovate. And innovation
is not restricted to the latest fad. Indeed, we
can be innovative within the framework
of what is established, and while we utilize
interfaces familiar to our customers. n
06/12/2010 11:47
 NEWS december2010
Search our archive at: www.telecoms.com
Communications key to Africa becoming
globally competitive, says MTN CEO
African operators
need to partner with
regulators and suppliers
to enable sustainable,
long term investment
in communications
infrastructure if Africa
is to become globally
competitive. That was
the message delivered
by MTN South Africa CEO
Karel Pienaar during his
keynote presentation
during the AfricaCom 2010
event in Cape Town in
November.
Much has been made
of the potential for
growth in the African
telecoms sector and
Pienaar said that growth
can only come from
such investment. MTN
has invested $3bn in
infrastructure over the
Mobile technologies could increase Asia
Pacific GDP by $729bn, says GSMA
Mobile industry operator
grouping the GSMA has
published research suggesting
that mobile services could
increase the GDP of Asia Pacific
nations by $729bn in the next
twenty years. The research
is part of the GSMA’s bid to
persuade governments that
the 700MHz spectrum released
as the region’s broadcasters
switch to digital transmission
should be allocated to the
mobile industry.
The research, from a
report compiled by the
10
06-10-11_MCI168.indd 10
past year. Extending
connectivity to rural
Africa was one of the
dominant topics at this
year’s event and Pienaar
said that penetration
rates in the low single
figures were not
acceptable.
Targets are essential
to bringing about
improvements to
these figures, he said,
suggesting that ensuring
50 per cent penetration
for household internet
connectivity in Africa by
2020 could be one such
aim.
Positive developments
in technology should
help to bring about
such improvements, he
suggested. “All of our
investments are going
Boston Consulting Group,
suggests that reserving the
700MHz spectrum for mobile
broadband deployment
could create more than two
million jobs in the region and
increase tax revenues by
$131bn, as well as generating
the regional GDP increase.
The benefits would only
be realised, the GSMA said,
if all national governments
agreed to allocate the
spectrum to the mobile
industry, and if they all
adopted the Asia Pacific
rural,” Pienaar said. “The
technology is so ripe for
that, now. Base station
power consumption is
down 70 per cent. We’re
deploying solar and wind
power solutions. The
economics for this kind
of thing are becoming so
much better.”
Alternative power
solutions can also be used
to bring down the large
carbon footprint of the
African communications
sector, Pienaar added.
He warned that this is an
area of the industry that
is “still being ignored” in
Africa.
Increased competition
is also important for
growth, Pienaar said:
“It’s difficult for me to say
this as an old monopolist
Telecommunity’s 2 x 45MHz
band plan for the 700MHz
band, creating harmonisation
and economies of scale.
“Asia Pacific is a leading
mobile market capable of
driving large economies
of scale and now has the
opportunity to play a pivotal
role in setting the standards
for spectrum harmonisation,”
said Tom Phillips, chief
government and regulatory
affairs officer for the GSMA.
“By allocating the 700
MHz band to mobile, Asia
but competition is good.”
However, he said he was
“not a fan of ‘cream
skimming’ operators”
that focus exclusively on
dense urban areas and/
or wealthy customers.
He argued that operators
should be forced by
regulators to focus on
entire markets, thereby
working to bring services
to as many Africans as
possible.
Mobile termination
rates, a pain point
for many operators in
developed markets as
regulators have forced
them down, do need to be
reduced in some African
markets, Pienaar said.
But again he stressed
that this would be best
done in balance with
Pacific countries could enjoy
significant socio-economic
benefits and provide millions
of people with low-cost
mobile services essential for
their needs, such as internet
connectivity, especially
in rural areas, and much
needed access to education,
financial and health services.
Non-harmonisation of
the 700MHz band will
significantly reduce these
benefits for the entire
region, so it’s imperative that
governments and regulators
the need for continued
investment.
Addressing a lack
of sophistication in
segmentation strategies,
Pienaar joked that “we
have two segments;
prepaid and postpaid.”
MTN South Africa is
beginning to market
prepaid data services, he
said, and while mobile
voice remains the killer
app in Africa, the MTN
group has targeted
data revenue growth as
essential for the business.
The average contribution
of data to overall
revenues across the MTN
group is just 1.35 per cent,
he said, and the firm has
targeted an improvement
to 20 per cent over the
next five years.
take a coordinated approach
to spectrum allocation.”
The report was based on
in-depth studies of Korea, India,
Indonesia and Malaysia. It
concluded that there would be
“a large incremental adoption
of internet connectivity,
particularly in rural areas, as a
result of allocating the 700MHz
band for LTE, including a 14
per cent increase in internet
subscriptions in Korea, 21 per
cent in India, 22 per cent in
Indonesia and 23 per cent in
Malaysia.”
06/12/2010 12:25

www.telecoms.com: The first choice for data-led analysis and independent comment
Clearwire announces cutbacks in face of
rising losses and uncertain future
US WiMAX outfit Clearwire,
in many ways the poster
child of the WiMAX industry,
last month announced a raft
of cost saving measures on
the back of disappointing
financial results. The firm
published its Q3 results in
November, with losses for
the quarter hitting $139.4m,
compared to $82.4m for the
same period in 2009.
In a further worrying
development, the firm also
conceded that it had yet to
sort out funding for its future
evolution, hence the cutbacks.
Clearwire will be making
a “substantial reduction” in
sales and marketing spend,
and suspending the launch of
Smartphones generate 65 per cent of all
mobile traffic worldwide
Smartphone use accounts
for 65 per cent of all mobile
cellular traffic worldwide,
despite smartphone
penetration running at just
13 per cent, according to
research released from
Informa Telecoms & Media.
Usage is set to increase
exponentially over the next
five years, Informa found,
with average traffic per
smartphone user increasing
by 700 per cent by 2015.
Smartphone users across
the globe currently average
85MB of traffic per month,
with Apple’s iPhone proving
the handset on which most
traffic is generated. Devices
running the Android OS sit
behind the iPhone in terms
06-10-11_MCI168.indd 11
branded retail outlets, the firm
said. The arrival of its branded
smartphones has also been
delayed, and 15 per cent of the
company workforce will be
cut from the payroll. On the
network side, Clearwire said it
is discontinuing “development
activities for sites not required
for its current build plan.”
None of this is going to
help the WiMAX player when
its cellular competitors
ratchet up their LTE
deployments. In a move that
was seen in some quarters
as a doom-filled assessment
of its core technology,
Clearwire said in August that
it would be launching its own
LTE trials, which it has now
of traffic generation, and the
Google-backed OS will not
overtake Apple in this metric,
Informa said, because
Android will be deployed
across low-, mid- and high-
user segments.
“The traffic disparity
between smartphone
and non-smartphone is
most pronounced in North
America, where 86 per
cent of mobile data traffic
is currently generated
by smartphone users,”
said Malik Kamal-Saadi,
principal analyst at Informa
Telecoms & Media. Average
traffic per user (ATPU) for
smartphones in the US is
set to hit 776MB/month by
2015, Informa said.
NEWS december2010
confirmed will be concluded
in the first quarter of 2011.
In a bid to dilute the bad
news, Clearwire pointed out
that it added 1.23 million
subscribers in the third
quarter, taking its total to
2.84 million, and it predicted
it would break the four million
barrier by the end of the
year. This would represent a
doubling of its own forecast
“We continue to pursue
all options for future funding
including debt, equity or
a potential sale of excess Bill Morrow
spectrum or other assets,
and we remain cautiously Clearwire CEO Bill Morrow. network will keep us extremely
optimistic that we will resolve “We continue to believe that well positioned in the dynamic
our short-term funding needs our unmatched spectrum and burgeoning market for
in the near future,” said portfolio and our all-IP based mobile data,” he added.
Growth in Western Europe
will also be impressive, hitting
736MB/month in 2015, up
from less than 44MB/month
in 2009. The highest use
will remain in the advanced
markets of Japan and South
Korea, which currently
average 199MB/month and
271MB/month.
Informa said that it had
devised the ATPU metric in With this in mind the is diluted by the platform’s
a bid to help the industry firm predicted that Apple’s breadth of deployment, some
“measure the potential of iPhone will remain the highest high-end Android handsets
new services and revenue traffic-generating platform, have already seen ATPU of
streams such as mobile with 196MB/month for 2010. more than 200MB/month.
advertising.” The analyst Other platforms are catching Informa’s figures do not
firm said that ATPU could up, however, with Android take into account wireless data
also be used by operators ATPU currently sitting at traffic generated by laptops or
to judge the popularity of 148MB/month and likely to tablets on the cellular network,
competing OS platforms and exceed 757MB/month by 2015. nor smartphone traffic over
ecosystems. While Android’s performance wifi networks.
11
06/12/2010 12:25
 NEWS AnAlysIs
Vodafone cuts European data roaming prices
International operator Vodafone has introduced a suite of tariffs
that it says will make data roaming more palatable to end users.
But it may not be enough to satisfy the ever-watchful European
Commission.
U
K-based carrier Vodafone has unveiled a cross-
border roaming initiative that it says will bring
simpler and lower pricing for smartphone and
mobile data usage for customers travelling within Europe.
Amid regulatory pressure to reduce the retail cost of
mobile data usage while abroad, Vodafone said its “new,
simple and transparent” pricing provides daily and monthly
rates for customers to use their domestic handset data
plans overseas.
Those customers who travel occasionally can take
a domestic data plan abroad for €2 per day, which the
operator claims represents a cost reduction of up to 60 per
cent over existing plans and includes an increase to the data
allowance. As part of this package users receive 50MB data
allowance when roaming on all prepaid and postpaid plans
across Vodafone’s European network markets, as well as
Switzerland, Austria, Belgium and France.
Operators are motivated to safeguard data
revenues against commoditisaion as much as
possible, as we have witnessed this year with
the rejection of flat rate data tariffs
For those users who are more frequent travellers there
is the option to take a price plan which includes 25MB per
day data roaming within their monthly domestic package
of £40 and above, or for an additional £10 if the package is
below £30.
Vodafone began offering the new plans in its principal
European markets during late November and December,
in time for the holiday season, and has said they will be
available across the company’s entire European footprint by
summer 2011.
Vodafone CEO, Vittorio Colao, said: “This is the year of
the smartphone and we want our 35 million European data
users to feel free to use their devices in Europe in the same
way as they do at home. We expect smartphone sales in
Europe to grow from 32 per cent today to more than 70 per
cent by 2013, and we want to drive that growth with what
we believe to be the best value, market-leading roaming
data packages.”
The European commission has not eased the pressure
on carriers to bring their data roaming charges down
in the wake of its success with voice pricing, despite
a handover of power this year from Viviane Reding to
Neelie Kroes, the new European Commissioner for the
12
12-14_MCI168.indd 12
mike.hibberd@informa.com
Digital Agenda. Speaking in September to the European
Telecommunications Network Operators (ETNO) at the
organisation’s annual conference, Kroes—who has earned
the nickname ‘Steely Neelie’ for her tenacity—reiterated the
EC agenda.
“The price difference between voice, SMS and data
should relate only to the cost of providing those different
services,” she said. “I want the gap between roaming
and domestic prices to approach zero, and the sooner
the better. Significant differences between roaming and
national tariffs cannot be justified in a true single market,”
she said.
In the context of such ambition, Vodafone’s pricing
readjustment starts to look like it might not satisfy
European regulatory appetites. But operators are motivated
to safeguard data revenues against commoditisaion as
much as possible, as we have witnessed this year with the
rejection by a number of leading carriers of flat rate data
tariffs in domestic markets.
Research from Informa Telecoms & Media highlights the
growing importance of data to the roaming revenue mix.
Forecasts show that global roaming revenues from non-SMS
data are set to grow 246 per cent between 2010 and 2015
to $8.6bn by the end of the forecast period. Voice roaming
revenues are set to grow by 75 per cent to hit $56.5bn, while
roaming SMS revenue growth is expected to grow by just 47
per cent over the period, to $1.8bn.
By 2015, Informa found, non-SMS data will account for
12.9 per cent of roaming revenues, up from 6.9 per cent in
2010, while voice will fall from 89.6 per cent to 84.4 per
cent and SMS from 3.4 per cent to 2.7 per cent.
“Data is core to the future of mobile roaming. It is both
more adaptable for the development of new services and
more attractive to end users—in particular leisure users,”
said Informa analyst Paul Merry. “This segment is the
next great growth market in roaming; although it has a
lower average spend than enterprise, this is more than
compensated for by its considerably greater volume.”
Merry argued that regulation in the area of roaming
pricing is, on balance, a positive for the industry, as it will
encourage uptake of data roaming among that key, leisure
segment. But he warned that operators will have to take
care in developing strategies to counteract lost revenues
from pricing regulation as they run the risk of alienating
users if they hike prices elsewhere in their offerings.
Vodafone’s move was hailed as “positive” and “a sign of
things to come” by Guy Reiffer, vice president of marketing
at roaming services specialist Mach. Reiffer warned that
operators risk losing valuable revenues by keeping prices
high “Currently we are seeing almost half of users simply
switching off roaming capabilities when travelling, for fear
of the resultant bill—a lose-lose situation for operators and
consumers alike,” said Reiffer.
“If data roaming is to be a success story, the industry
needs to be able to analyse usage patterns in order to
create roaming packages tailored to the individual or
business,” he added. n
Mobile Communications International | First for news, best for business
07/12/2010 09:59
Untitled-1 1 30/07/2010 14:12
 NEWS AnAlysIs
From building hotels to building businesses
The 15th annual Middle East Telco World Summit started on a
refreshing note. Instead of the usual talk about the adoption and
benefits of the latest and greatest technology, regional operators
showed their softer side, choosing to focus instead on the customer.
O
pening the event, Informa Telecoms & Media’s
chief research officer, Mark Newman, noted a
recognisable shift in the local market in general,
where the conversation this year has moved on from
chest-beating announcements about the tallest building
or the most opulent hotel, to approaches for building a
sustainable and profitable business.
Etisalat’s vice president of marketing, Khalifa Al Shamsi,
warmed to the theme, referring to the approach as “getting
back to basics”. In his opening remarks he said: “Services have
evolved but one thing has not changed—the customer. The
customer is what all this is about, not the technology. We are
just here to provide a service for the end user. They need to
interact and connect with their social lives. So we are aligning
the whole organisation to be more customer-centric.”
Mobile subscriptions in the Middle East
crossed the 200 million mark in the third
quarter of 2010 to reach 202 million at the
end of September
The telco community has felt the pinch as much as any
other industry through the global economic downturn, with
consumers adjusting their spending habits with the knock-
on effect on operator revenues. But Al Shamsi believes
that, as long as the customer is satisfied, operators in any
given market can avoid going down the route of “direct,
bloody competition.” With no way to differentiate from
competitors, operators are relying on price as the only lever
and will see ARPU decline as a result.
But there is good news. As mobile subscriptions in the
Middle East crossed the 200 million mark in the third quarter
of 2010 to reach 202 million at the end of September,
Matthew Reed, head of mobile research for the Middle East
and Africa at Informa, said the use of mobile data, including
smartphones and mobile broadband services, represented
one of the region’s great success stories.
All of the operators in the six GCC markets have HSPA
networks that allow them to offer mobile broadband
services but there is still plenty of room for growth, Reed
said. Only 7.5 per cent of Middle East mobile subscribers are
using 3G services at present as a number of major regional
markets—including Iraq and Iran—have yet to launch 3G
networks.
Afghanistan is one of those countries gearing up to begin
deployment of next generation mobile technology either
3G or 4G as early as next year. The Afghanistan Telecom
14
12-14_MCI168.indd 14
james.middleton@informa.com
Regulatory Authority (ATRA) was in talks with the country’s
four mobile carriers at the end of November over the
allocation of spectrum for next generation services. It is
not yet certain whether the regulator will simply allocate
spectrum to the operators or whether an auction will take
place, however the aim is to have commercial 3G services
in Afghanistan by the end of 2011. There is believed to be
some discussion as to whether it would be a better move to
leapfrog 3G and go straight to 4G.
The war-torn nation’s telecoms industry has come a long
way since 2002, when there was no mobile service, and is
now approaching 60 per cent mobile coverage. At the end
of September, the market’s mobile operators counted some
13.5 million subscriptions between them, equating to 44
per cent mobile penetration. The market leader is Roshan,
which has four million subscribers, but there is close fought
competition with Afghan Wireless, which has 3.8 million and
MTN with 3.6 million. Etisalat had two million subscribers as
of the end of September.
Over in Iraq, there was feverish speculation that France
Telecom had set its sights on a stake in Korek Telecom.
Due to the nature of the deal however, neither company
was willing to comment, but a spokesman for France
Telecom told MCI that the company’s stated aim is to double
revenues in the Middle East and North Africa region by 2015
and as a result, “Iraq is a part of the zone that is of strategic
significance to us.”
The French operator is clearly on the acquisition trail.
In September, the company signed a memorandum of
understanding with a view to acquiring a 40 per cent share
of Moroccan operator Medi Telecom (Meditel) for €640m.
And earlier this year France Telecom launched as the third
player in Tunisia after winning a licence to provide fixed and
mobile services with partner Divona. A bid for Syria’s third
mobile operator licence is also on the cards.
As for the Iraqi firm, it was known that regional player
Etisalat has been in talks with Korek since 2008, yet MCI
heard that the talks finally collapsed earlier this year and
Etisalat is no longer interested.
Korek originally operated in the autonomous region of
Kurdistan and acquired a national mobile licence in 2007.
However, the firm needs some financial backing to move
ahead with its expansion plans, hence the talks over a stake
sale. Informa analyst Matt Reed believes the purchase of
Kuwaiti logistics firm Agility’s indirect ownership of a 50 per
cent stake in Korek may be the easiest route in for an investor.
According to Informa, the average rate of mobile
penetration in the Middle East was almost 85 per cent
at the end of the third quarter and the regional mobile
market is still growing strongly, with the number of mobile
subscriptions in the region increasing by almost 20 per cent
over the nine months to the end of September.
“Although the rate of growth in mobile subscriptions in
the Middle East will inevitably slow as the regional market
matures, there are still substantial opportunities for
subscription-growth in the less-developed markets, as well
as in mobile data right across the region,” said Reed. n
Mobile Communications International | First for news, best for business
07/12/2010 09:59
 advertisement feature
cover story handsets
Extending a mobile micro payment
solution to provide cross border
mobile money transfer services
Mobile money services are growing exponentially worldwide, with 89 live deployments and
83 planned deployments. However, big differences in uptake can be observed between the
developed economies and the developing economies.
I
n a developed economy where the consumer
has access to multiple payment instruments,
the opportunity for mobile payments lies in
niche micro payment transactions where they
offer an alternative to cash. In Belgium, the
market remained largely untapped in the areas of
parking, public transport, vending and ticketing
until Belgacom launched its PingPing service
and there was a clear need for a convenient
solution that could replace cash and support
dematerialization.
PingPing uses a multi bearer platform that
is open to all end users and merchants, includ-
ing the subscribers of other mobile operators.
This platform offers a number of payment
choices (SVA, telecom bill, separate post paid
invoice …) to the end users that are always
supported by simple processes. The value
proposition towards merchants is an end to
end solution that includes the bearer (leverag-
ing the mobile operators’ data network), the
payment solution (including PoS terminal and
control applications), the collection from the
end user and the settlement with the merchant
and professional services.
PingPing’s wallet is linked to the end user’s
GSM number and can be loaded through a
bank wire or by using a debit or credit card.
A PingPing payment can be triggered by an
SMS or NFC (Near Field communication)
via an RFID tag (and a reader). Transactions
can also be initiated through a web interface,
which also gives a view on the wallet balance
and the transaction history. The PingPing
wallet is currently mainly being used for the
following applications: parking, public trans-
port (ticketing), vending machines and on-line
payments.
The service also supports person to person
transfers and this feature has been enhanced to
allow cross border person to person transfers.
Mobile money services are indeed growing
exponentially in developing economies where
multiple services have been deployed that give
the unbanked poor access to basic financial
services. Mobile operators are most successful
00_MCI168_Belgacom advertorial.indd 15
in reaching the unbanked.
They are able to leverage their
brand, distribution networks,
customer identification and
authentication mechanisms as
well as their experience with
low margin and high volume
services.
Economic growth and
migration are fuelling remit-
tances between developed and
developing economies and
transfers between develop-
ing countries are also on the
increase. These remittances
are currently hampered by
the low penetration of bank accounts among the
population in receiving countries, and by the
high cost of other means of money transfer as
well as by their limited reach into rural areas.
The mobile money transfer industry has
made a good start, but in order to be success-
ful it needs to move from closed-user-group
models to an open ecosystem. Most mobile
money deployments are still limited to domes-
tic payments and transfers. In the case when a
cross border transfer service is being offered,
this relies on a series of bilateral agreements.
As was the case with other mobile data ser-
vices (such as SMS & MMS), once the market
develops, service providers will have to
manage multiple remittance relations and will
increasingly rely on a multilateral solution.
To develop a successful service, operators
need to integrate into a complex ecosystem that
comprises cash in and out agents, banks, exist-
ing money transfer organizations (MTOs like
Western Union, Moneygram, …) and of course
other mobile money service providers.
The current status of the mobile money
transfer (MMT) market means that most
operator led deployments are in receiver
countries whereas there are still very few
mobile money service offering in the sender
markets. To kick start the development of
MMT, a solution is required that connects
advertisement feature
the existing (not mobile) services in mature
markets with the new mobile deployments in
developing markets.
To meet this need, BICS , Belgacom’s inter-
national carrier subsidiary, has developed its
HomeSend service. HomeSend is a global hub-
bing service that enables cross border person-to-
person transfers and roaming recharge. It builds
on the successful deployment of mobile finan-
cial services across the world and aims to bridge
the gap between the financial and telecommu-
nication worlds. HomeSend allows to integrate
the mobile wallet and top-up systems of two
different operators, to enable services that are
mobile centric from sender to receiver, but the
hub is also open to other service providers, such
as money transfer organisations and banks. The
HomeSend service enables end users to transfer
value in different models: mobile to mobile,
cash/bank to mobile and mobile to cash/bank.
The Hub is endorsed by the GSMA and acts
as an open and neutral intermediary between the
various participants in the ecosystem.
It is estimated that mobile could capture 17 %
of the remittance market in the coming 5 years.
The challenge to establish a true mobile to mo-
bile service , lies in convincing operators in the
northern hemisphere that there is a compelling
business case to launch mobile money services
and a remittance service in particular. n
08/12/2010 10:10
 MCI IntervIew

MCI IntervIew

new world operator

US debutante Lightsquared is a new carrier in more ways than one. The firm is aiming to
redefine the operator model altogether, EVP Martin Harriman tells Mike Hibberd.

I
t’s not every day that you come
across a new carrier staffed by
senior executives who are prom-
ising to “reset the industry”. But this
is the bold claim being made for US
newcomer Lightsquared by the firm’s
executive vice president of ecosystem
development and satellite systems,
Martin Harriman.
A veteran of BT, Marconi and Er-
icsson—and more recently emerging
markets WiMAX startup Augere—
Martin Harriman has now joined ex-
Orange CEO Sanjiv Ahuja (Augere’s
founder) at the new US carrier. Light-
squared is backed by Philip Falcone’s
hedge fund Harbinger Investments,
and plans to use a combination
of satellite and LTE technology to
deliver wholesale broadband wire-
less services. It has signed a deal
with Nokia Siemens Networks worth
£7bn that will see the vendor deploy
and operate the network on the new
operator’s behalf.
Harriman’s executive title might
be a bit on the hazy side, but there’s
no lack of clarity in his assertion
that traditional carriers do not excel
at anything that they do—a state
of affairs that he ascribes to the
breadth of their operations. There is
not another industry in the world, he
says, that has such a rigid, vertical
structure. “The operators mine the
iron ore, they smelt it, they make it
into products and then they advertise
and sell those products,” he says. “I
think telcos are quite good at all of it,
but they’re not very good at any of it.
There’s a great opportunity for us to
reset the industry, and we’re doing it
in the biggest market in the world.”
Greenfield carriers are increasingly
rare these days—especially in markets
like the US—and it is imperative that
they differentiate themselves from
the incumbents. For Lightsquared
the differentiation is born of financial
necessity; the firm can’t afford to de-
ploy, own and operate a nationwide
network.
Martin Harriman
“I look with sheer envy at the infra-
structure that Verizon and AT&T have,”
Harriman says. “I’m not necessarily
sure they’re using it in the best way
that they could from a competitive
sense, but I do envy it. I just can’t af-
ford to build that.”
Nor, he continues, would it be
desirable to do so at this stage in the
evolution of the US cellular market.
“If you asked people what they would
build today if they wanted to deliver
broadband wireless services to con-
sumers and businesses,” he says, “I
don’t think that anyone, with their
hand on their heart, would think about
building AT&T.”
Harriman’s take on the incumbent
US carriers is necessarily compli-
cated. On the one hand, he clearly
doesn’t think they’re going about
their business in the most effective
way—and plans to exploit that from
a competitive standpoint. On the
other, the Lightsquared game plan
calls for at least some
of those incumbents to
become customers, so
he can’t dismiss them
completely.
AT&T and Verizon,
Harriman says, are
“two colossal compa-
nies that effectively
control the market”.
And he explains that,
while Lightsquared
will be looking to win
their custom in one
way or another, there
are restrictions on
any relationships they
might seek to build. US
regulator the FCC im-
posed on Lightsquared
a condition that the
firm would not sell
more than 25 per cent
of its capacity to either
or both of the top two
players in the US mar-
ket, he says.
Harriman concedes that the Light-
squared team is “not entirely sure
yet” where all of its revenues are
going to come from. But he says
that he expects the firm to obtain a
large percentage of its revenues from
non-traditional carriers looking to
add a wireless broadband element
to their offering. Behind AT&T and
Verizon, he says, all US carriers are
straining to keep pace; a market view
on which the Lightsquared model
depends. He singles out WiMAX
player Clearwire, which itself has
a business model partly built on
wholesale revenues, as a company
that’s “really struggling”.
As a new type of player in the US
market, Lightsquared needs to define
itself in a way that more traditional
operators do not. It won’t own the net-
work and it won’t market itself to end
users. So what kind of company is it?
“At the heart of this organisation
is a telecoms company,” says Harri-

16 Mobile Communications International | First for news, best for business

18-19_MCI168.indd 16 06/12/2010 11:58


man. “It’s a very small one compared
to what you see in the market today.
But within it, at an executive level, you
see people with the kind of experience
and competence that could see them
at that level in any national operation
in the US, or any other country in the
world. At the next layer down, the same
is true,” he says.
It is below this level that the
reduced size enabled by the firm’s
outsourcing strategy becomes ap-
parent, he says. At this layer in the
corporate structure of a traditional
telco the staff numbers are vast,
Harriman says. But at Lightsquared,
while the layers exist, they are very
much smaller. “We’ve outsourced our
hands, but we’ve not outsourced our
brains,” he says. “While NSN takes
care of everything, they do it under
our direction.”
The fact that the firm’s funding is
also non-traditional for a national
telco has attracted suggestions that
Harbinger Investments’ head man
Philip Falcone, who made his fortune
betting against the US sub-prime
mortgage market, is simply looking to
make a quick return on his investment.
Some estimates suggest that as much
as 40 per cent of Harbinger’s assets
are tied up in Lightsquared.
Harriman dismisses the notion that
Lightsquared is a fast-buck play for its
financial backer. “A lot of people have
said this is just Phil Falcone dressing
this thing up, putting a bit of lipstick
on it and selling it for twice what he
paid for it,” says Harriman. “I hope that
people are starting to realise that’s not
going to happen. We wouldn’t have
raised the debt we raised or signed
the deal we signed with NSN if we
weren’t going to do this, because that
would just be stupid.”
So what about that deal with NSN?
Infrastructure contracts worth $7bn
are as rare as US Greenfield deploy-
ments in today’s market and Harriman
says he was spoiled for choice when
he did the initial RFP. He considered
Mobile Communications International | First for news, best for business
18-19_MCI168.indd 17
submissions from five vendors, all of
which were capable of meeting Light-
squared’s requirements. To Harriman,
this suggests that the infrastructure
market is overcrowded.
“It’s unusual in any industry to
have that many capable players,”
he says. “My view is that there is
more consolidation to come on the
infrastructure side. It’s a volume
game and, if you look at the compet-
ing technologies, typically only one
or two companies make money on
them. It’s unusual that even the third
placed player in terms of market
share makes money. As someone who
worked for the biggest infrastructure
business in the world, I don’t think
[that market] is a great place to be
right now,” he says.
The structure of the deal with
Nokia Siemens is not a straight
Capex deal that will see Lightsquared
buying a certain volume of base
stations—but nor is it a managed
capacity deal of the kind that have
been employed in India. Harriman is
speaking to MCI as the deal is in the
process of being finalised and it is, he
says, extremely complex. He doesn’t
offer a full explanation of how it
works, saying that it is, “made up of
Capex and Opex; a managed service
deal with turnkey capability. It’s not
quite as extreme as the managed
capacity model.”
Managed capacity deals are very
hard to execute successfully, he says,
based on his experience on the sup-
ply side. “They haven’t worked very
well for any of the operators or the
vendors that have gone into them,” he
says. “They’re too complex and they’re
extremely hard to manage. My expe-
rience of being on the infrastructure
side is that the whole process is one
of constant dispute.”
Lightsquared differs from other
US cellular carriers in another fun-
damental way—it will have a satel-
lite element to its offering. As part
of the requirements attached to the
MCI IntervIew
spectrum, Lightsquared has to have
a satellite in the skies, which the firm
launched on November 14th. Just how
much of an asset this will be remains
to be seen, but Harriman says it offers
the firm opportunities that competi-
tors will lack.
“We have to have it, whether we
like it or not,” he says. “We do like it,
though, because it gives us national
coverage from day one; and we’re just
starting to think with our potential
customers about what that means.”
Getting the satellite up is one
thing; delivering attractive devices
is another. Lightsquared has an-
nounced that Nokia will be providing
“branded, data-centric devices”, but
no more detail has been forthcoming.
The vagueness of that statement,
Harriman says, simply covers the
fact that the two firms are involved
in feasibility studies to see what
products might be possible. Qual-
comm has also signed up to provide
chipsets, and Harriman references
one other big smartphone brand,
saying that discussions about a
multimode device with satellite ca-
pability are underway.
At a time when mobile operators are
feeling threatened in their consumer
relationships by handset vendors
and over the top service providers,
Lightsquared appears to be embracing
a model that positions the operator
as a pipe. The original discussions
that led to the firm’s birth centred
purely on the availability of national
spectrum but it soon became clear,
Harriman says, that wholesale was
the way forward.
“Based on a number of factors; the
amount of spectrum, the fact that
we’re at an inflection point in tech-
nology evolution and the fact that
this market is imbalanced in terms
of competitiveness, we decided this
was the right thing to do. And that’s
the journey we’ve embarked upon.”
It’s a journey that the industry will
watch with a great deal of interest. n
17
06/12/2010 11:58
 feature bIllIng

The price is wrong

Unwilling to become locked into a flat-rate billing structure
that would not generate enough revenue to fund the
provision of mobile broadband service, operators began to call
time on their all-you-can-eat data offerings in 2010.

By Mike Hibberd

T
he cost of mobile telephony has always
been difficult for end users to under-
stand—and responsibility for this lies
squarely with mobile operators. After all, most
carriers have traditionally shied away from
telling their users the truth about the costs
involved in providing service.
Handset subsidies offer the perfect exam-
ple. While a few, arguably more enlightened
markets shunned subsidies from the begin-
ning as damaging and addictive, most let
users think handsets were low—or zero—cost
items. The result was the kind of churn pat-
terns that see users hop from one network to
the next every time their contract runs out, in
a bid to get their hands on the latest model.
Without a low price of entry, ran the theory,
mobile telephony would never enjoy wide-
spread adoption. It was a pattern of strategic
thought that resurfaced when operators began
looking to stimulate the uptake of mobile data
services. Tariffs offering effectively unlimited
use of data for relatively low monthly rates
were balanced out by extending the binding
period of the contract.
These tariffs—complementing decent ap-
plications and handsets—certainly did the
job; the resulting surge in mobile data usage
has been well documented. The strain on net-
works has been considerable, with failings

18 Mobile Communications International | First for news, best for business

18-20_MCI168.indd 18 06/12/2010 15:27


from leading operators getting uncomfortably
high profiles within the industry and beyond.
In 2010 the resulting operator backlash
against their own marketing strategies began
in earnest. And while it seems unlikely that
they will ever be able to kick their handset
subsidy habits, operators seem sent on rid-
ding themselves of the flat rate curse.
Among the first carriers to join the purge
were those that were hit hardest, and most
publicly, by the data boom. AT&T and O2
UK, both launch partners for the iPhone, fol-
lowed Vodafone in restricting the volume of
data available to their users as part of their
monthly packages. While these operators were
careful to stress the fairness of their decisions,
effectively pointing the finger at the small
percentage of users that accounted for the
vast majority of traffic, there were declama-
tions of flat rate strategies from some other
operators that had introduced them.
While giving a keynote presentation at
the Nokia World developer event in London
in September, Vodafone CEO Vittorio Colao
spoke of the end of the culture of “free-ism”,
suggesting that every class of service provi-
sion should carry its own price. His comments
came on the heels of Vodafone’s decision to
scrap its fair usage policy and introduce out
of bundle charging for all postpay customers
that exceeded a 500MB monthly limit.
When Dutch carrier KPN announced its
own decision to call time on flat rate tariffs,
CEO Ad Scheepbouwer called the introduc-
tion of tiered pricing “a return to sanity”.
Scheepbouwer was more frank about his
reasons for making the change, conceding
that it was necessary in order for the carrier
to make money from mobile data, rather
than trying to couch the move as designed to
offer a fairer service to the consumer. “Data
pricing needs to be more closely linked to
the cost of delivering the service in order for
KPN to be able to monetize the data growth
opportunity,” he said.
The problem is set to get worse. Informa
forecasts a compound annual growth rate in
global mobile data traffic of 76 per cent from
2008, when traffic totalled 238 petabytes, to
2013 when traffic is predicted to reach 4,105
petabytes.That represents an increase of more
than 1,500 per cent over the five year period.
Revenue growth, on the other hand, will be
nowhere near as extreme, meaning that the
investment required to build capacity into the
networks will not be covered by income from
the service. Global mobile data revenues are
18-20_MCI168.indd 19
set to grow from $175bn in 2008 to $322bn
in 2013, according to Informa, an increase of
only 84 per cent over the same five year period.
But both the investment and the fairness
justifications for a change in pricing strat-
egy may well hold up, as Informa analyst
Thomas Wehmeier explains: “What’s been
galling for these operators is that a small
band of bandwidth hogs have been the cause
of lots of the problems” he says. “These new
tariffs are designed to profitably manage
this small percentage of users, while also
offering attractive pricing for the over-
whelming majority of users whose usage
is much lower.”
Addressing O2’s decision to restrict users
to 500MB per month, Wehmeier says: “There’s
a lot of talk about the hunger for data of iP-
hone users, but our analysis shows that the
majority of users will be comfortably served
by 500MB of data per month. Indeed, there
will be many users who end up paying less
with the new tariff structure since they aren’t
forced to take the top end tariff plan.”
The extent to which consumers will be
sympathetic to these changes remains to be
seen—especially bearing in mind the opera-
tors’ history of poor communication in this
area. More importantly, though, consumers
are used to paying for access on a flat rate
basis; it’s how they pay for fixed line internet,
and how they’ve paid for mobile broadband
access so far.
Compounding the problem is the fact
that most users do not understand how
a megabyte relates to a piece of content.
If they are allowed 500MB of data each
month, how many web pages, videos or
downloads will this get them? After all,
it is no longer the case that smartphones
are the exclusive preserve of tech-savvy,
high-spending early adopters who might
either understand the correlation between
data and cost or simply be impervious to
fluctuations in their bills.
Smartphone penetration is on the increase,
meaning that more and more consumers will
have them; and the usage pattern of the mass
market consumer could be very different to
that of the high end user. This creates another
issue, says Informa’s billing sector specialist,
Peter Dykes. “It is highly unlikely that users
will want to tie themselves to rigid price
plans in which undershooting the volume
cap leaves them feeling they haven’t received
good value and overshooting incurs penal-
ties,” Dykes says.
bIllIng feature
One alternative to charging by volume—
which has already gained some traction
among operators—is to charge by speed of
service. Hong Kong carrier CSL is a pioneer
of this model, which it introduced after
doing a rip and replace on its old network,
installing HSPA+ throughout. The firm’s CEO
Tarek Robbiati told MCI earlier this year that
he was “left with no choice but to provide
speed-based pricing” in response to a 23-
fold increase in mobile data traffic across
his network.
It is expected that such strategies will
become more prevalent with the widespread
introduction of LTE. Vodafone Germany said
this year that it will offer its LTE service on a
price-per-speed model, charging €e40/month
for 10GB of data at 7.2Mbps, e50 for 15GB
at 21.6Mbps and e60 for 30GB at 50Mbps.
Speed-based pricing certainly offers a
greater degree of flexibility than the tiered
pricing of the kind introduced by several
operators this year. But sector specialists
argue that carriers ought to look to more
sophisticated, tailored offerings that take ad-
vantage of the capabilities of modern pricing,
rating and policy management solutions and
the range of information available to them.
“While, in our opinion, there is no choice for
operators but to end their flat rate offerings,
we don’t believe that simple tiered pricing
structures are enough,” says Pekka Valitalo,
market analyst at Polish billing solutions
outfit Comarch. Valitalo argues that carriers
should look to offer consumers pricing options
based on what they observe about their usage,
rather than expect users to understand which
volume or speed most suits them.
Nothing comes for free, of course, and for
most operators, a non-trivial investment
would be required for their billing support
systems. Nonetheless, says Valitalo, “this
investment would be significantly cheaper
than constantly spending to improve network
capacity.”
Peter Dykes agrees: “What is needed is for
operators to understand the full capabilities
of technologies such as DPI and policy control
when working in conjunction and begin to
think in terms of what is possible, as opposed
to what has worked in the past. They need a
large dose of imagination and the willingness
to try something new.”
The migration of the herd away from flat
rate billing for mobile data may well have
begun in 2010, but the destination remains
unknown. n
19
06/12/2010 15:27
 feature traFFIC ManageMent
traffic police
Many operators are investigating models that allow them to better manage the data
deluge, and many eyes have fallen upon next generation technologies. But with so much
legacy infrastructure still in use, congestion will remain a key issue for some time.
By James Middleton
I
t’s well known that mobile broadband has
really taken off in those markets where
operators have deployed flat rate pricing.
But some of these “unfettered” users tend to
generate vast amount of traffic, resulting in a
poor end user experience when networks are
congested. But because revenues are capped,
the pressure piles on operators’ margins and
develops uncertainty over business models.
In a sense, the mobile industry is experienc-
ing the same problem which faced the fixed
line operators some ten years ago: the dreaded
“heavy users,” who take advantage of flat rate
pricing and hammer the network for all they
can. Figures released by infrastructure ven-
dor Nokia Siemens Networks (NSN) on data
gathered from commercial HSDPA networks
over 2010 indicate that fewer than five per
cent of mobile broadband customers use more
than 90 per cent of the available bandwidth.
Jonathan Earle, head of consumer market-
ing at O2 UK—the first UK carrier to push
the iPhone, added the operator’s perspective
on the phenomenon recently, when he said
that: “Data consumption has doubled every
six months which is just an unsustainable
business model… 20,000 or so heavy data
users on our network are consuming about
30 per cent of all our data capacity.”
As a result, many operators have begun
investigating models, which allow them to
better manage this traffic, improving quality
of service while at the same time increasing
revenues and lowering costs. When looking for
ways to deal with the explosion in data usage,
many eyes in the industry fall upon the next
generation, bigger, faster, better technologies.
But with so much legacy infrastructure still in
use, congestion will remain a key issue. So the
20
22-24_MCI168.indd 20
options available boil down to three different
approaches to alleviate strain: move to LTE;
employ some kind of offload strategy (femto-
cells) or network sharing; or deploy optimisa-
tion technologies.The main consideration here
is that the traffic problem for many operators
has already arrived—or will do very soon—and
LTE is somewhat expensive and also has a
long rollout cycle. An offload strategy may be
more affordable and quicker to roll out but it
will still take some time to complete. Which
leaves us with optimisation, a system which is
cheaper still and could potentially be deployed
within weeks or months.
Optimisation is not a new technology.
Indeed, it has existed for at least as long as
the internet has carried traffic. But with the
arguments about net neutrality rumbling
along in the background, it does remain
one of the most controversial elements in
the industry.
Compression technologies are widely
deployed by operators to squeeze more ef-
ficiency out of mobile web browser traffic. In
November, Norwegian software firm Opera,
which develops the world’s most popular
mobile browser, opened a datacentre in Ice-
land to help it compress and manage all the
web traffic for more than 71 million monthly
users of Opera Mini. Opera Mini compresses
data by up to 90 per cent before sending it
to the phone, resulting in more rapid page
loading and more web per MB for the end
user, the company said.
Canadian vendor Research In Motion (RIM)
on the other hand, elected to build its own
network to ensure the traffic to and from its
BlackBerry users was not only free flowing
but also secure. While the service is a hit with
Mobile Communications International | First for news, best for business
its end users, the model has landed RIM in
hot water with certain sensitive governments,
which would like access to their citizens’
communications.
The thing is, with the growing popularity
of smartphones, less and less of that mobile
data traffic is actually coming from web
browsers. More and more is in-application
traffic, and the vast majority of that is video.
“In a typical day, the typical mobile phone user
finds that they’ve spent the entire day on the
internet but they haven’t spent any time on
the web and this is an important paradigm
for operators to deal with,” said Chris Hoover,
VP of product management at transaction
management firm Openet.
This rampant consumption can be ex-
plained in part by the growing adoption of
mobile video. An oft quoted statistic from
Cisco’s Visual Networking index, which tracks
and forecasts bandwidth consumption, found
that video will account for 66 per cent of
global mobile data traffic by 2014, growing
at a compound annual growth rate (CAGR) of
131 per cent from 2009 to 2014.
Derek McManus, CTO of O2 UK, famously
said that “Watching a YouTube video on a
smartphone can use the same capacity on
the network as sending 500,000 text mes-
sages simultaneously.” What throws a span-
ner in the works for the operators and has
the potential for rubbing the net neutrality
folks up the wrong way, is that video can’t be
compressed in much the same way as other
traffic, or not without substantial quality loss
anyway. So optimisation methods must move
with the times.
Georges Antoun, Ericsson’s head of product
area IP & broadband networks, warned that »
06/12/2010 16:56
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 feature traFFIC ManageMent

while he’s seeing growing usage of broad- misation is that many

band network optimisation, the type of traffic operators don’t have
the network is carrying has changed and the the measurement tools In a typical day, the typical
management method must change with it. in pace to see what the
“Video is now the dominant traffic type. If quality of experience is mobile phone user finds
you asked the same question five years ago
it would have been peer to peer (P2P) and
like with and without
optimisation. Lopez
that they’ve spent the
that’s what used to kill the network. But now posits that most us- entire day on the internet
90 per cent of all IP traffic is video and the ers would accept lower
characteristics of video are forcing us to deal video quality over con- but they haven’t spent any
tinuous interruptions
with the network differently,” he said. “As a
consumer I can deal with delays and latency or buffering. time on the web
in most traffic types, but I can’t deal with a To come back to in-
lot of delays in video, so you have to deal with telligent optimisation,
video differently.” such an approach to the
Antoun said that optimisation was a tech- delivery of a quality of
nology that used to fall under the umbrella of service (QoS) strategy
convergence or some form of traffic shaping would allow the crea-
but is now talked about as network intelli- tion of new business
gence, in terms of distributed architecture and models and open new
the collapsing of optical and IP technologies partnership opportuni-
and policies. “We need to understand who ties that create addi-
the users are in the network and what they’re tional revenues or lower
trying to do,” Antoun said. “Intelligence is costs. For instance, an
driving efficiencies in infrastructure but it’s over the top (OTT) video
also about driving applications and value application provider
added services, and the brokering of these that relies on the qual-
services with the end user.” ity of the connection
But while every vendor and its dog seems to would be interested
be getting into the traffic management space in paying the operator
to help operators deal with the date deluge, for having a guaranteed
Dean Bubley, founder of Disruptive Analysis prioritised connection
is concerned that most of what’s on offer at when there are network
present represents a siloed approach to man- constraints and the cus-
agement. “What I’m expecting to emerge over tomer is trying to access
the next couple of years is a smarter and more the application.
holistic approach, where different elements Of course this is one
within the network and billing and charging of the most controver-
system co-operate to make a much more user sial developments of
friendly, application friendly and network QoS policies and at the moment there is no that relationship. So what operators have to
friendly way of managing traffic,” he said. consensus on such a development among capitalise on, as well as using optimisation
Patrick Lopez, chief marketing officer of the mobile operators. One large operator techniques in a smart fashion, according to
Vantrix, agrees: “We implemented optimisa- confirmed to Informa Telecoms & Media that Constantine Polychronopoulos, chief technol-
tion technology in silos as and when it was it always gives a consistent user experience ogy officer of mobile internet infrastructure
needed. So at first we started with ringtones and in mobile broadband and would not differ- specialist Bytemobile, is user data.
wallpapers, then messaging as consumption entiate. In contrast, another large operator “The operators have information about
of multimedia content evolved, then TV on de- confirmed that QoS-based customer segmen- the subscriber that no other entity in the
mand and now video streaming,” he says. “This tation will be implemented and that it is not internet environment can have; for example,
change in content consumption has changed our necessary to let customers know that some of they know everything the subscriber has done
traction in the market. We’ve always had video them will have better experience than others. over the lifetime of their subscription and the
optimisation technology but it’s only over the Some of the loudest detractors to this con- location of each event. They don’t have to let
last 12 months that the market has ‘caught up’ cept—the supporters of net neutrality —internet this data outside of their networks, so they
with us in needing this. Most new customers powerhouses like Google,Yahoo and Microsoft, are very well positioned to win the race for
are for video optimisation,” Lopez said. have established a model that some consider a the mobile internet,” he says. n
End users see more problems with video great threat to the mobile operator community
than with messaging because of its live in that it establishes a direct consumer relation- For more on the death of the flat rate tariff,
nature, and part of the problem with opti- ship and disregards the pipe used to maintain read our feature on page 20

22 Mobile Communications International | First for news, best for business

22-24_MCI168.indd 22 06/12/2010 16:56

MCI_Ad_temp.indd 1 07/12/2010 10:19
 feature sMartphones

rivalries old and new

the central competition in the high end smartphone sector in 2010 was between
apple and android; two relative newcomers to the mobile industry. But as the year
drew to a close, a pair of old sector rivals—Microsoft and nokia—were working hard to
retain their own stakes in the game.

N
o year in this industry treats all play-
ers with the same indulgence and
the close to 2010 saw the fortunes
of protagonists in the ongoing smartphone
saga varying wildly. As Apple made its first
appearance in the top five handset vendors
by shipments—still selling essentially only
one handset model—the Symbian Foundation,
which Nokia took open source in April 2009,
was forced into some awkward emergency
realignment. Meanwhile, the launch of Win-
dows Phone 7 from Microsoft was the eventual
result of a year-long recuperation.
There was a sense of inevitability about
Apple’s arrival in the top league of global
handset vendors. The firm has had a strong
showing in the smartphone rankings since
the deployment of the first iPhone but figures
for the third quarter of the year from IDC
saw the Californian firm overleap both Sony
Ericsson and dedicated smartphone vendor
Research in Motion to claim a coveted fifth
place. An improvement of more than 90 per
cent year on year for Q3 sales saw Apple
ship 14.1 million units. The Q4 approach to
Christmas will no doubt see the firm break
yet more records.
And for some observers, the experiences
of Nokia and the Symbian Foundation, while
less agreeable than Apple’s, were similarly
unavoidable. The cracks started to appear
late in October, when the Symbian Founda-
tion issued a terse statement announcing the
immediate departure of executive director
Lee Williams. Such statements say everything
by saying nothing and it was bad timing for
Nokia, which was still trying to generate
enthusiasm around the latest iteration of
the platform. The announcement was made
just days after Nokia had unveiled three new
Symbian ^3 handsets.
Those in the know suggested that the Foun-
dation was financially destitute and headed
for collapse, forcing Nokia into yet another
emergency rethink.
The creation of the Symbian Foundation
in 2009, and the positioning of the Symbian
OS as an open source platform developed by

24 Mobile Communications International | First for news, best for business

26-27_MCI168.indd 24 07/12/2010 10:07


and for the wider handset community, was
intended to draw a line under the view that
Symbian was simply an extension of Nokia.
The strategy didn’t work, however, and so in
November this year the Foundation was reposi-
tioned once more as a “legal entity responsible
for licensing software and other intellectual
property, such as the Symbian trademark.”
Nokia, meanwhile, had to face the lonely reality
of the fact that it is the only vendor interested in
creating Symbian ^3 product and did so by do-
ing away with ^3 and ^4 branding, consolidat-
ing all releases under the ‘Symbian’ umbrella .
All of which may well have been observed
by Nokia’s old arch-rival, Microsoft, with a
measure of Schadenfreude. The Symbian
Foundation’s misfortunes came hot on the
heels, after all, Microsoft’s own attempted
renaissance in the smartphone space, with
the launch of Windows Phone 7.
Clearly Microsoft has been paying at-
tention to the handset sector trends. WP7,
it was noted by all when the first handsets
were unveiled, bears a striking resem-
blance—in UI terms at least—to the suc-
cessful format given to the industry by
Apple and adopted by manufacturers of
Android devices. Some neat touches, includ-
ing live, updating tiles, offered a whiff of
differentiation but the software giant is
not, with its new handset OS, attempting a
radical market overhaul. WP7 represents an
attempt to win share through familiarity
rather than distinction.
It was no surprise that Microsoft’s key
hardware partner, HTC, was the provider
of several of the launch devices. But it will
be interesting to watch how much muscle
HTC puts into its WP7 activities. Back in
February 2009, when the firm had just un-
veiled its second Android unit, the Magic,
one HTC executive told MCI that Android
was seen within the firm as “an additional
platform” to Windows Mobile, describing
the Microsoft platform as “our DNA, our
core business.”
But while Microsoft has been regroup-
ing, HTC has been scoring significant suc-
cesses with its Android play, emerging from
the white label shadows with a branded
handset offering which is gathering mo-
mentum. HTC sold 5.9 million units in Q2
this year, according to Gartner figures, and
Android represented the biggest chunk of
the business.
Gartner’s Q3 figures showed that uptake
of Android devices has accelerated. There
Mobile Communications International | First for news, best for business
26-27_MCI168.indd 25
While Microsoft looks
to have its strongest
smartphone offering for
years, its old rival nokia
seems to be stumbling from
one quagmire to the next
were 20.5 million Android devices shipped
in 3Q10, second only to Symbian with 29.68
million devices. Microsoft, with WP7 mod-
els not launched until November this year,
managed only 2.25 million units, behind
Research in Motion and Apple. WP7 might
be a lot better than its predecessor, but it
has a long way to go.
With this in mind, Microsoft is looking to
its experiences in the PC market, says Informa
Telecoms & Media principal analyst, Malik
Saadi. “The interesting thing about WP7 is
that it has a consistent user experience across
devices,” Saadi says. “Microsoft is controlling
the UI as well as other features, and it has
set minimum hardware requirements for
the vendors. Microsoft’s aim is to make the
mobile market very similar to the PC market
because their initial strategy of customising
for the operator and allowing flexibility for
the OEMs didn’t work.”
If Microsoft is successful, Saadi says, its
key OEM partners will be unable to differenti-
ate on software and, restricted to hardware
tweaks, will essentially become “assemblers”.
Saadi says he is surprised that Microsoft’s
OEM partners were happy to follow its cho-
sen route, suggesting that the software firm
may have subsidised the products available
at launch.
Nonetheless, the smartphone space is
far more concerned with software today
than it is with hardware. For the time being
the industry seems to have settled on the
best effort form factor, despite the ongo-
ing popularity in some segments for hard
keypad, or the option of a hard or a soft
keypad, for example.
It was Apple that set the standard for
form factor, and Apple that pulled the
handset community into its next phase
of evolution with its user interface. Now,
however, Saadi says that Apple’s leadership
in the sphere of user experience has been
eaten away to nothing. Its competitors have
caught it up. “It is no longer a matter of
sMartphones feature
asking whether or not Apple can be caught,”
he says, “It has been done, in fact. There is
almost no gap between WP7 and the iPhone
in terms of user experience, and if you look
at the DroidX you could argue that it has
a superior UE. Apple’s lead in this space is
already history,” he says.
And there is some evidence that, if Saadi
is right and Microsoft is looking to relegate
hardware yet further, it could meet with
success. Gartner’s figures for smartphone
sales in the third quarter of this year show
that the combined market share of the five
leaders is being eroded by the anonymous
Asian white label vendors that make up the
“others” category in the rankings. “This is hav-
ing a profound effect on the top five mobile
handset manufacturers’ combined share,
which dropped from 83 per cent in the third
quarter of 2009 to 66.9 per cent in the third
quarter of 2010,” says Gartner’s research vice
president, Carolina Milanesi.
So while Microsoft looks to have its
strongest smartphone offering for years, its
old rival Nokia seems to be stumbling from
one quagmire to the next. While Symbian
remains open source, Nokia will likely be
the only vendor to deliver high end product
based on the platform, which will place a
considerable strain on its software budget.
Informa’s Malik Saadi predicts that Nokia
will instead focus on Meego—the Linux-
based OS it announced earlier this year with
Intel—for high end product, using Symbian
to replace Series 40 in the low-end smart-
phone and feature phone tier.
It is not inconceivable that Nokia will
look for another OS string to add to its bow,
though, and Android or WP7 are the only two
options. Both routes would probably send
shivers of distaste down the spines of Nokia’s
leaders but the fact remains that, in the high
end, it closes out 2010 looking more assail-
able than it has ever looked before. Nokia’s
situtation will probably get worse before it
gets better given that there are no fast fixes
in the smartphone market. Microsoft and
Sony Ericsson are both examples of players
that have taken extended periods to lick their
wounds and rethink their positions before
coming back with improved offerings.
Saadi suggests it could take Nokia years
to get itself back on track in the high end
smartphone segment. “If I had some money
on Nokia I would pull it out right now,” he
says. “I don’t believe that they’ll come back
in the near term.” n
25
07/12/2010 10:07
 feature Carrier
xxxxxxxxM&a
Fattening up,
slimming down
Consolidation within the global carrier community continued in 2010, with deals
large and small. For some it was growth through acquisition while for others it was
safety in numbers.
By Mike Hibberd
I
n November Indian carrier Bharti Airtel
began rebranding the African assets it had
acquired earlier in the year from Middle
Eastern player Zain. As the Airtel brand was
rolled out across the 16 operations for which
Bharti paid $10.7bn in March, it represented
the final nail in the coffin of the Zain dream
to become one of the top brands in Africa
and one of the largest mobile operators in
the world.
At the same time, of course, it represented
Bharti’s ascendancy to the lofty heights of the
heavyweight international players at which
Zain had sought to establish itself. Bharti’s
move into Africa was the biggest carrier M&A
story of 2010, but not the only one. No matter
how many manoeuvres we see, it seems, there
are always more to come.
26
28-29_MCI168.indd 26
Bharti’s African deal resulted from Zain
having woefully overstretched itself finan-
cially and operationally. For a time the firm
had no rivals when it came to the size of the
company coffers, but it lacked the experience
of operating in extremely low revenue markets
that was always going to be essential for a
pan-African operator. When it became clear
to the management that they had bitten off
more than they could chew, Bharti was more
than ready to leverage its scale and experi-
ence and try its own hand at mining the rich
rewards of Africa.
Experience in India doesn’t guarantee
success in Africa, of course, and Bharti faces
a key challenge in dealing with 16 different
governments and regulatory environments.
Nevertheless, this was not an impulse pur-
Mobile Communications international | First for news, best for business
chase from Bharti; in 2009 it came close to
securing a deal to acquire Zain’s pan-African,
South Africa-headquartered rival MTN after
sporadic discussions that lasted a couple of
years. Bharti blamed the collapse of that deal
on the South African Government, although
there were also tensions between the two
carriers over which would have the upper
hand in the post-deal structure.
Acquisitions from one carrier often bring
on a process of soul searching from neigh-
bours and competitors and MTN attempted
some M&A activity of its own in the wake of
its former suitor’s successful purchase. But
once again it was not to be. MTN spent part
of the year in discussions with Egyptian car-
rier Orascom and parent company Weather
Investments over what was believed to be the
06/12/2010 17:04

sale of Orascom’s African Portfolio. Always
the bridesmaid, never the bride, MTN then
had to watch Weather Investments cosy up
to Russian player Vimpelcom.
In October Vimpelcom announced a merger
with Weather that will see the Russian carrier
gain 100 per cent of Weather Investments (also
giving it 100 per cent of Italian player Wind),
and 51.7 per cent of Orascom, which has
operations in Algeria, Bangladesh, Pakistan
and Canada. (In November the two firms an-
nounced the disposal of Orascom’s Tunisian
operation.) In return, Weather’s shareholders
will gain 30 per cent of Vimpelcom. The deal
will see Vimpelcom leap from 14th largest
carrier in the world by subscriber numbers
to seventh. With penetration in Vimpelcom’s
core CIS markets reaching saturation, the
move was driven by the need to find new
growth opportunities.
Informa Telecoms & Media pointed out that
the deal shows a trend for Vimpelcom towards
merger rather than the kind of acquisition that
Bharti made. “Following on from VimpelCom’s
recent merger with Ukraine’s Kyivstar, the
operator says it firmly believes that mergers
are the way forward in terms of large-scale
acquisitions,”wrote Informa analyst Gemma
Bunting, quoting CEO Alexander Izosimov,
as saying: “The only way to do this now is
through large-scale mergers.”
The deal is scheduled for completion in
the first quarter of 2011, but there remain a
number of obstacles for the Russian carrier
to overcome. Chief among these is the fate of
Orascom’s Algerian operation, Djezzy. MTN’s
failure to secure a deal with Orascom resulted
from the Algerian Government’s objections.
The Government sees any change in owner-
ship of Djezzy as an opportunity to derive
a windfall of its own—and there remains a
distinct possibility that it may seek to part-
nationalise the operator in order to secure
such an outcome.
It’s a tricky situation for Vimpelcom and
Weather. The disposal of Orascom Tunisia to
Qatar Telecom shows that there is flexibility
in the two carriers’ approach to the deal—
and it is conceivable that they could offload
Djezzy in order to complete the merger. The
problem is that Djezzy is by far the biggest
earner in the Orascom portfolio that will be
included in the merged entity. At the very least
a disposal could lead Vimpelcom to revise its
price downwards.
Vimpelcom has also faced questions over
the benefits of it moving into the saturated
Mobile Communications international | First for news, best for business
28-29_MCI168.indd 27
Vodafone, arguably
the blueprint for the
expansionist mobile
operator, was divesting in
2010 rather than acquiring,
in an attempt to streamline
its operation
Italian market as part of the deal. Wind sits
in third place in Italy, some distance off
the two market leaders, TIM and Vodfaone.
With 19.6 million customes at the end of
September according to Informa’s World
Cellular Information Service, Wind is eight
million behind Vodafone, itself three mil-
lion adrift of TIM. Why Vimpelcom would
look to Italy, where penetration is close to
150 per cent, in its search for growth has
baffled some observers. But Vimpelcom has
argued that experience in a market that is
among the most advanced in the world for
mobile broadband will be of benefit to it
across its portfolio.
If this deal succeeds that portfolio will be
diverse to the point where it might attract
criticism for lack of focus. Vodafone, arguably
the blueprint for the expansionist mobile
operator, was divesting in 2010 rather than
acquiring, in an attempt to streamline its
operation and play to regional strengths. In
September it offloaded its 3.2 per cent stake
in the world’s largest carrier China Mobile,
and a reorganisation of the structure left
other assets, its stakes in Verizon Wireless
and French carrier SFR, as well as minority
holdings in Polkomtel and Bharti Infotel and
Japanese carrier Softbank, outside of the new
organisational units.
The firm said it intended to “maximise share-
holder value” from these assets, which only
meant one thing and the sale of the Softbank
stake was announced in November. Under pres-
sure to return cash to shareholders, Group CEO
Vittorio Colao said that he was uninterested
in managing minorities. It seems likely that
Vodafone will complete the divestment of its
remaining minor stakes as a matter of prior-
ity, although the 45 per cent Verizon Wireless
holding can only really go to parent operator
Verizon, so Vodafone maybe dependent on the
American to set the timing of that deal.
Carrier M&a feature
xxxxxxxx
Back in Vodfaone’s home market of the
UK there was a significant merger, be-
tween the British outposts of Orange and
T-Mobile. The carriers created a 50:50 joint
venture dubbed Everything Everywhere,
creating a market leader with more than
30 million customers and 43 per cent of
the market. But the deal was pitched more
as an exercise in reducing costs behind
the scenes rather than the creation of one
outsized British carrier. The two brands
are being maintained, which makes sense
given their established status in the mar-
ket. The deal was also designed to help the
firms move into adjacent markets such as
advertising and mobile commerce.
One key outcome of the deal will be the
integration of the two firm’s UK network
infrastructure. This will be a continuation of
a project that was started with the creation
of MBNL, the joint venture between T-Mobile
and 3UK that was created to merge their
3G networks. That consolidation project
was completed in November, with 12,000
sites merged.
Graham Payne, managing director of MBNL,
who oversaw the project and will oversee
the absorption of the Orange network into
the fold, argues that such projects will force
competitors to follow suit, given the savings
that are available and the improvements in
network quality that can be achieved. Indeed
many industry players believe that advanced
markets like the UK that have reached satura-
tion point are likely to consolidate down to a
smaller number of networks, even if separate
brand competition remains. This may well
be a driver of future carrier M&A in relevant
markets in 2011 and beyond.
The creation of Everything Everywhere also
raises the prospect of further consolidation
in the UK because it asks questions about
the future of the market’s smallest player, the
self-styled disruptor 3UK. With 5.37 million
subscribers at the end of September, 3 is now
25 million behind the new market leader. It
doesn’t seem likely that the UK competition
authorities would countenance the absorption
of 3 by its network partner Everything Eve-
rywhere, but a purchase by either Vodafone
or O2 would, of course, bring them into the
shared network arrangement.
Interestingly 3 is in a similar market situation
in Italy, where Vimpelcom will soon be arriving.
That could be another situation to watch in
2011 because one thing’s for sure: carrier M&A
is a trend that has far from run its course. n
27
06/12/2010 17:04
 the informer
Farewell Card
it could be the beginning of the end for the Sim as we know it.
T
here comes a time in the life of every
workhorse when there’s nothing else for it
but one last bag of oats and a final clippity-
clop down the road to the glue factory. Younger,
stronger replacements may have arrived, or
technology rendered it outdated, and there’s no
room for sentimentality in these things. This
week we got an inkling that such a fate awaits the
humble Subscriber Identity Module.
In November the GSMA announced the
creation of a Task Force that will develop an
embedded SIM that can be remotely activated.
It all sounds vaguely sinister; certainly if you’re
a traditional SIM card—or a company that makes
them. It was GSMA overlord Rob Conway who
sounded the death-knell for the SIM as we know
it, in that time-honoured fashion of commending
it for its contribution to progress.
“The traditional SIM has been an important
innovation in mobile telephony, and has
provided many benefits to consumers in terms
of security, portability of contacts, and ease
of portability of devices across networks,”
Conway said, as loyal, hard-working SIM cards
the world over began to feel a little uneasy. “As
our industry moves from connecting phones
to connecting a wide range of devices, it is
apparent that the embedded SIM could deliver
even greater flexibility. The embedded SIM will
provide assured levels of security and portability
for consumers, as well as provide additional
functionality for enabling new services such as
e-Wallet and NFC applications,” Conway added.
The task force comprises brainiacs from
leading operators, including including AT&T,
28
28_MCI168.indd 28
China Mobile, Deutsche Telekom, France
Telecom Orange, KT, NTT DoCoMo, SK Telecom,
Telecom Italia, Telefonica, Verizon Wireless and
Vodafone. Its stated aim is to deliver a technical
solution as an evolution of the current SIM
provisioning mechanisms, which will include
programmable SIM card capabilities to enable
remote activation. A complete analysis of market
requirements is scheduled to be complete by
January 2011, the GSMA said, with
devices featuring the new SIM
activation capability expected to
appear in 2012.
As you can imagine, readers,
the manufacturers of SIM cards are
none-too pleased. Through their own
industry mouthpiece, the SIM Alliance,
they made forceful expressions of
concern, urging us all to remember
the benefits of the removable SIM. The
first three words of the statement, for
the Informer at least, only added to
the sense of foreboding.
“These last days,” said the
Alliance’s statement, which the
Informer couldn’t help but hear in the
voice of Winston Churchill, “we have seen in the
Press numerous articles mentioning a new way to
distribute smart phones that would be activated
on selected Mobile Network Operators using a
remote download to an embedded (U)SIM.” If this
had been a statement delivered to some huddled
masses, there would have been a collective intake
of breath at this point. But it wasn’t.
“As this would change dramatically the
business model,” the Alliance said “[we] would
like to remind end-users and the ecosystem
they Key Benefits of a User Removable (U)SIM
Card in Personal Mobile Communications.” They
capitalised the whole of that last bit in their
statement to underline just how serious this is.
And, indeed, there are obvious benefits.
Security, freedom of movement between
handsets and operators, portability of data;
all were held up by the Alliance as positives
that ought to guarantee the future of the SIM
card with which we are all familiar. “In order
to maintain the aforementioned key benefits,
the SIM Alliance considers that (U)SIM Card
removability and accessibility by the end user is
mandatory for personal mobile communications
usage,” the group thundered in crescendo.
Mobile Communications International | First for news, best for business
Stirring stuff. But the Informer can’t help
but feel that the SIM Alliance is either with
the GSMA, or against it. It’s probably a case of
evolve or die. n
Join the debate
A round up of recent reader comments from
our industry-leading website Telecoms.com.
Get involved in the discussion at
www.telecoms.com/join-the-debate/
I think telstra should use 700MHz and
1.8GHz for 4g lte and shut down GSM on
the 1.8GHz band and use it as a fill in when
the 700 mhz channels are used up in busy
time on the network and i don’t think
australia should use 2.5 or 2.6GHz and it
would not work in our citys it’s bad enough
for most networks in australia to use 3G
on 2.1GHz and i found that 1.8GHz works
better then 2.1GHz
Sean Zappulla on Telstra trialling LTE in the
1800MHz band
A cloud based MDM solution is an
enticing solution for enterprises as it not
only provides complete visibility of their
devices, both personal and corporate
liable, but also quickly configures them
for enterprise access and apply a few high
value policies. Here is an another article
which further exemplifies why the cloud
based MDM solutions will be the popular
choice among enterprises for managing
their mobile devices
Pragati Jain on HP’s release of a cloud-
based mobile device management platform
Clearly there will be differences
between the “4G” technologies, but those
differences will drastically vary from
user to user, moment to moment and
location to location just like they do now.
Ultimately it will come down to which
carrier has the best handsets, customer
service and prices. (Pick your order)
Ron Fell on the ongoing LTE vs WiMAX
technology debates
06/12/2010 17:01
 AP_ad2_MCI_204x277_op.ai 1 18/11/2010 6:42 PM

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