Business Watch: MWC points to robust 2012


Dominic White reckons Mobile World Congress showed this year promises to be as good as 2011 for the industry, however some in attendance were sceptical about a new initiative from network operators

This year’s Mobile World Congress saw Chinese handset makers on the rise, Nokia in fightback mode, network operators contemplating how to stop so-called ‘over-the-top’ players from stealing their revenues, and one notable absentee.

The annual bunfight in Barcelona is a litmus test of the industry’s health and if the stats are anything to go by, it’s in fine form.

More than 60,000 delegates from 200 different countries and over 1,400 exhibitors showed their wares at the Fira de Barcelona.

They learned that, despite ongoing global economic uncertainty, this year promises to be an even better year than last for the industry.

Global smartphone sales soared from 297 million to 472 million last year, according to research firm Garter.

And usage of those phones for all manner of video, email, games and apps is surging ahead.

The big question, however, was which companies are going to enjoy the benefits of this ongoing boom.

It was a question that troubled one of the keynote speakers, Rene Obermann, chief executive of Deutsche Telekom, which owns T-Mobile.

Obermann complained that over-the-top players such as Google and Facebook are benefiting from the mobile web without having to make the huge investment that the networks do.

One such ‘OTT player’ had said to him “You make the investments and I take the profits”. Obermann said he didn’t like that.

RCS strategy
As part of their fightback, the network operators announced a new initiative. Called the Rich Communications Suite (RCS), it aims to standardise services such as video calls and instant messaging between the operators.

It is designed to lure back the traffic the networks have lost to the likes of free-calls service Skype and What’s App, the free messaging app which has grabbed the public’s imagination in a big way.

It’s not the first time the operators have tried this sort of thing and its chances of success look slim to me.

I recall a very similar effort being announced in Barcelona six years ago, when fifteen of the largest networks, including Vodafone, Orange, T-Mobile and China Mobile, signed letters of intent to use a single standard for their instant messaging services.

The initiative was barely heard of again as far as I can remember, or at least it clearly wasn’t successful, otherwise they wouldn’t be announcing this new initiative half a dozen years later.

The network operators’ problem is that they are competing, as huge bureaucracies, with nimble start-ups that can move much faster to invent cool apps.

And the upstarts don’t have any revenue to protect, whereas for the networks there is a risk that they will cannibalise revenues if they push free messaging services too hard.

But the networks have seen what happened to KPN in Holland and have decided something needs to be done.

The Dutch operator was unique in that its plans offered very small bundles of texts, which meant that its users were consistently busting their plans and paying top dollar for the privilege.

It’s little wonder therefore that the customers got very excited about What’s App when it came along.

Fortunately for the UK operators they already offer tons of free texts in their bundles so they are less likely to be affected, even though the number of text messages sent by phones is decreasing.

Ben Wood of CCS Insight (pictured), who is sceptical that RCS will have any meaningful impact on the situation, predicted that the networks will have to focus even more on ‘one-price-fits-all’ bundles for voice, data, text and instant messaging. Less transparency is good for their business, he pointed out to me on the sidelines of the event.

Wood said he was more impressed this year by some of the new handsets, in particular the world’s fastest smartphone, which was unveiled by Huawei, the Chinese manufacturer.

Huawei is trying to shake off its cheap and cheerful roots to go upmarket and its efforts are finally getting some attention.

Fresh from unveiling the Ascend P1 S, the world’s slimmest smartphone, at the Consumer Electronics Show in Las Vegas, it announced what it claimed was the world’s fastest smartphone in the Ascend D.

But what will have really got the attention of its competitors in Barcelona was the revelation at the press conference that the company plans to nearly triple its smartphone sales in 2012.

Wan Biao, the chief executive of Huawei’s devices unit said Huawei aims to sell 50 million to 60 million smart devices, up from 20 million last year and just three million in 2010.

And to show how much it wants to hit the target, the company said it will more than double its marketing budget to between four per cent and five per cent of sales, compared with two per cent in 2011.

Apple absence
Those figures will have caught the attention of the biggest absentee from Barcelona, Apple.

The Californian company continues to dominate the industry in terms of profitability, even though it is on a par with the other biggest player, Samsung, in terms of smartphone sales.

Apple will also have paid close attention to a keynote speech by Facebook’s chief technology officer Bret Taylor.

Taylor fired a warning shot at both Apple and Google, whose Android operating system powers 40 per cent of the world’s smartphones, with a move to help application developers bypass Apple and Google’s app stores.

For Facebook, and for the network operators, this would be good news if it worked.

At present most people download apps through the native app stores on Apple’s iPhones or handsets that use Google’s Android OS.

That’s because developers have to use different iterations of the HTML 5 web standard every time they want to write an app for a different device that could be downloaded straight from the mobile web without the use of an app store.

Facebook wants to stop having to shell out fees to Apple and Google and have a stronger direct relationship with its 425 million mobile users.

So it’s a smart move. The question is, however, is it too little too late?