a week in wireless


Thank you for the music

“Mother said I was a dancer before I could walk,” sang one of the ladies from Abba, although the Informer doesn’t know if it was the demure blonde, or the slightly intimidating brunette. Even as an infant, the Informer found this statement a little hard to take in. You can’t dance before you can walk, just like you can’t run before you can walk, although this industry’s certainly tried that a few times – not least with music services.

Music was front and centre this week, in the UK at least, as Nokia and Vodafone went toe to toe with their new service launches. The Nokia Music Store is what might politely be described as an homage to Apple’s iTunes. Tracks are £0.80 and albums are £8.00. With Nokia’s solution, as with Apple’s, tracks can be downloaded to a personal computer (it’s Windows XP or Vista only, surprise surprise) but out and about, they’ll only download to, or play on, the Finn’s phones.

And at launch, only two models are compatible, the N81 and the 8GB N95. Downloaders own what they buy, but woe betide the user if they switch to a competitor handset, because they’ll have to carry their laptop around with them if they want to listen to music on the hop.

Vodafone’s service, Music Station, is based on the platform from Omnifone that Telenor launched in June this year. Payment is by subscription, at £1.99 per week. There are no limitations on the number of tracks downloaded straight to the handset and there is no data transfer charge for downloads. Music from the catalogues of BMG, EMI Music and Warner Music is available and all downloads are stored on a central server, with only the most favoured playlists living on the handset. The storage model means that if a user changes their handset, or if it’s stolen, the content will not be lost.

But here’s the catch – and you may remember we’ve discussed this before: If you stop paying your weekly sub, or if you move to another carrier, then – poof! – everything you’ve paid for is lost.

There aren’t any teenagers at the Informer’s office, thank God. He couldn’t be doing with all that sulking and skulking. But he’d like to know what they make of the idea, because Music Station is clearly being pointed in their direction. The 20- and 30-something hoarders with which the Informer is surrounded were aghast at the idea of paying for something that you lose if you change mobile provider.

But one of them suggested thinking about it “with a young mind”. In many ways, the Informer’s about as juvenile as they come but, try as he might, he couldn’t get comfortable with the idea. Whether or not The Kids are going to be happy to pay a weekly rental for just the music they want right at this moment remains to be seen.

If you have any teenagers in your life, ask them about the idea and let the Informer know what they think on his blog. You can even let him know your own thoughts, if you want. He’ll be in the pub, raising a glass of snakebite and black to the memory of the limited edition double album on blue vinyl, with gatefold cover.

What the Nokia and Vodafone offerings have in common is that they’re trying to turn music into a loyalty tool. It would be better if Vodafone’s service was run independently by Omnifone, with all operators signed up. Then you could move between them and never lose your music collection. And the Informer wouldn’t be surprised if that’s exactly what Omifone has in mind for the future – once its pesky exclusivity deal with Vodafone expires.

At the launch of the service, Vodafone exposed unsuspecting journalists to a live show from Girls Aloud, a quintet of spindly, foundation-caked squawkers born out of some hellish reality show. Elsewhere this week, it was dealing with other, more mobile operatorly issues

The Bombay High Court has given its government the go-ahead to chase Voda down for what it claims is $2bn in unpaid capital gains tax following the $11bn purchase of Indian carrier Essar in May this year. Vodafone reckons it’s going to slip the punch, though.

Back on its home turf, Vodafone unveiled its second MVNO in as many weeks, partnering with Lebara Mobile to launch a SIM-only service targeted at the UK’s resident immigrant and migrant worker market. Official estimates suggest that 8 per cent of the UK workforce falls into this category, and Vodafone itself estimates that the market is in the region of 1.5 million users.

Lebara’s no newcomer – it already operates in Sweden, Denmark, the Netherlands, Switzerland, Norway and Spain. The two firms have yet to release the pricing strategy for the UK operation, which will support its customers with own-language after sales service. But Vodafone already offers a prepay rate of £0.05 per minute to landlines in China, Croatia, Czech Republic, Hong Kong, Hungary, India, Lithuania, Latvia, Nigeria, Pakistan, Poland, Romania, Russia, Slovakia, Thailand and Turkey, so the Lebara price will have to compete on a similar level.

Carphone Warehouse runs a similar MVNO – Mobile World – on T-Mobile’s network and, last week, Vodafone and CPW announced a no-frills MVNO collaboration as well.

A few years’ back, the prevailing thinking around MVNOs was that they would enable countless non-telecoms brands to enter the market – fizzy drinks firms, clothing labels and football teams would all have their own operations. But it hasn’t quite worked out like that, with a number of big brand MVNOs enduring public failure. Now it seems like the MVNO is far more of a strategic tool for the operator, and close involvement between host and passenger appears critical to success.

The importance of collaboration was demonstrated pretty effectively in Serbia this week, when m-payments outfit Upaid launched a new SMS top up service. VP for commercial operations, Terry Trench, told the Informer a while back that the service was “pretty boring”. After all, it simply enables users to top up their prepaid account – 80 per cent of Serbs opt for up front payment – from their handset, putting the payment directly onto their Visa card. Handy, but not particularly inspiring.

What really seems remarkable about the service, though, is that Upaid has signed up every operator in the country, 16 banks and two card payment organisations. Discussions are underway with the nation’s utility firms in the hope that bill payment will be the next addition to the service. That sort of collective motivation is a rare find and it took Upaid three years from signing up the first operator, to signing up the final bank. It’s a project worth keeping an eye on.

Right, it’s Bad News O’Clock, and this is not a good time to be the CFO of a large kit vendor. Much like Ericsson’s Karl-Henrik Sundstrom last week, Alcatel Lucent’s CFO Jean-Pascal Beaufret gave it the heroic “Go on! Save yourselves! I’ll only slow you down” speech this week as the Franco US joint venture mirrored relations between the two countries by not doing very well at all.

At the sharp end, another 4,000 jobs will have gone on the block by the end of next year, bringing the total number of redundancies since the two firms merged to 16,500. Q3 saw AL lose EUR258m – it’s third quarterly loss on the trot – compared with a profit of EUR532m for the same period in 2006. Revenues were down 7.8 per cent year on year to EUR4.35bn.

And while CEO Patricia Russo clung onto her job, the CFO got it in the neck. His position is to be filled by Hubert de Pesquidoux, up until now the man in charge of AL’s Enterprise Group.

The Informer found himself wondering why it should be that, in the cases of both Ericsson and Alcatel Lucent, it was the head bean counter that should take the fall and not the CEO who, after all, is responsible for company strategy. So he nipped downstairs into Informer Towers’ Dickensian basement to see his own CFO, who was busy shouting at one of his minions for putting another lump of coal on the fire.

“It’s fair enough,” said the Informer’s CFO, idly toying with his abacus, “that CFOs carry the can if it is clear that they have not managed expectations very well.” Thus, a surprise downturn, like Ericsson’s last week, means that the markets had not been kept sufficiently informed of impending peril. But it seems a bit unfair on Beaufret, because everybody knew that Alcatel Lucent has been having a shocker since its inception. Then again, he’s presumably getting a whacking great payout, so we don’t need a sympathy whip-round just yet.

“These are difficult but necessary decisions, and we will manage these reductions with care,” said Russo, eenie-meenie-minie-mowing her way down the company’s employment register. “With this plan, the company is targeting gross margins in the high 30s and operating margins of ten per cent or better in the post integration phase beginning 2010.” And relax.

Russo introduced a hasty reorganisation of the upper echelons, with two new regional structures and a seven-strong management committee/buffer zone put in place. Still, the cake tastes the same, whichever way you cut it.

Elsewhere, BT’s still doing its bit to keep the wifi dream alive, launching a range of prepaid vouchers for business travellers. Pitching wifi against costly cellular roaming charges, BT’s international wifi vouchers offer 500 minutes of access – for web or VoIP use – for £28 in the US and £40 in Europe. The carrier also announced a deal with internet provider iBahn, which goes live this month, that will see an extra 1,200 hotels added to the existing 9.600 where BT Openzone customers can already access international wifi.

While we’re on the subject of VoIP, the UK’s 3 launched a Skype phone this week, which the two firms developed in partnership with Qualcomm. The phone uses the Californian money machine’s Brew platform.

Skype’s popular with users because it’s free, of course. But because it’s free, it doesn’t make any money, which is slightly frustrating. Just ask eBay. But 3 is making a bold move and banking on the lure of minimal-cost internet calling as a powerful attractant in the run up to Christmas and beyond.

Thinking-house Ovum’s John Delaney wasn’t so sure, suggesting that while users could be drawn in, projects like the Skype phone and the X-Series, which comes with low cost all-you-can-eat tariffs, could create problems for 3 if it gets relegated to pipe status. Doubtless the offering will put pressure on 3’s competitors, though.

Some of those competitors are involved in a massive investment plan in sub-Saharan Africa, it was announced this week. A group of operators, including Orange, Vodacom and Middle Eastern carrier Zain are to plough more than $50bn into the region in a concerted bid to extend mobile coverage to over 90 per cent of the population.

As well as spreading coverage, the project will look to sign up as many as 350 million sub-Saharan Africans who are within existing carrier footprints but who are not yet connected.

Maybe it’s not necessarily a rich man’s world, after all.


2 comments

  1. Sean O Sullivan 02/11/2007 @ 2:39 pm

    I think that Vodafone have the approach right. A weekly sub that’s priced below the price of a sandwich puts it firmly in the “impulse try” zone, and I think they’ll get a lot of people hooked on the service. At that price point, I think people won’t mind the “move and lose” effect – they’ll accept that’s a factor in the pricing.

    As for Nokia – well, I’d offer an opinion on their store if I could browse it – but it rejects the Firefox browser on Mac. Doh! Doesn’t bode well :-)

  2. Fraser King 05/11/2007 @ 11:13 am

    I beleive that all digital media will eventually move to a subscription model. With the rise of torrents, and P2P sites making almost any movie or song available for the cost of a high speed internet connection, combined with consumers becoming more tech savvy the market for £0.80/song downloads or £15CD’s is a market that can not be sustained.

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