opinion


Informa’s MWC Round Up – Day Two

mont

Thomas Wehmeier, Principal Analyst at Informa Telecoms & Media comments on all the major news from day two of Mobile World Congress.

Neelie calls Vittorio’s bluff as war of words between operators and regulators intensifies

Neelie Kroes today issued a stern warning to Vittorio Colao, Vodafone and the wider European operator community with an unexpectedly personal riposte to Vodafone complaints about “auto-pilot regulation” in the European telecoms marketplace. Vittorio Colao used his presentation during yesterday’s keynote session to deliver strong criticism of the European regulatory approach and followed up with a clear threat to withhold future investment without greater clarity and predictability from regulators.

Colao’s comments will have resonated amongst the operator-dominated audience at Mobile World Congress, but it is hard to sympathise with the operators whilst data roaming prices continue at their current levels. Kroes response was to call the operators’ bluff. She promises to deliver much-demanded spectrum, but only if operators move faster to align roaming prices with the levels that prevail in domestic markets.

It’s clear that Kroes has grown tired and frustrated at waiting for the operators to act and has now publicly revealed her hand. The regulation of wholesale rates that operators imposed by Kroes have helped to lower prices, the price of using data overseas remains excessively high and consumers perception remains very much that data pricing is extortion.
There is a distinct irony that whilst data prices have lowered at glacial speeds in the roaming market, the operators have dropped allowed domestic data pricing to drop too quickly and too sharply. The stark contrast between the price of a megabyte at home and abroad only serves to intensify customer frustration.

Same old, same old

The focus of the morning’s keynotes switched to emerging markets with a session involving senior executives from Bharti Airtel, Telenor and Telefonica. The microscope may have moved away from developed markets today, but the operators’ messages remained very much in line with those from yesterday. There’s a huge appetite for data, but operators are struggling to meet the demand because they don’t have not enough spectrum and they suffer from unpredictable regulation.

In contrast to yesterday’s session though, there was more insight to keep the audience engaged today. In fact, there was a refreshing degree of honesty in the session as the operators underscored the challenges of operating in ultra-low ARPU markets. Most interestingly, the CEO of Bharti Airtel, Sunil Mittal, laid bare the difficulties it has faced in making a success of its acquisition of Zain’s African subsidiaries. The acquisition had been built on the promise of transposing Bharti’s industry-leading cost base from India into Africa, but it has found that the practice is much harder than the theory. The unique characteristics of operating in the tough African environment inflate OPEX and African markets have not typically seen the expansion of the middle class that has so helped to fuel growth in India. The operators has also struggled with price inelasticity meaning that even when prices have dropped, there’s been little or no resultant increase in usage. Any costs saving made from falling prices is not spent on additional voice minutes, but on the more basic necessity of putting food in mouths, Mittal explained.

“We have to be able to tax the highways”

The announcement of a partnership between Telenor and Wikipedia is just the latest in a growing list of partnerships between operators and high-profile content players, but today’s keynote also highlighted the fact that relationships between industry giants are still fraught. In a repeat of discussions from the past couple of years, Mittal raised the prospect of a “Google Tax”. The quote speaks for itself: “If we have to build the highways, we have to be able to tax the highways”. What form such a “tax” would take and how it would be implemented was not clearly articulated, but the discussion itself leaves us all in no doubt that the operator community still hasn’t fully got its head around how best to build balanced relationships with large content players.

We want (really) cheap smartphones

The emerging markets players also used the platform of the keynote session to issue a call to arms to the GSMA to proactively accelerate the decline in smartphone costs by resurrecting the ultra low-cost handset initiatives of previous years for the smartphone market. Smartphone penetration may be approaching the 50% in the US and developed European markets, but in India and across many African markets, it’s lagging far behind. Indeed, 5% penetration was the level mentioned by the operator panel. The operators believe that whilst the networks are ready and deployed to support future smartphone growth, the device prices are still too high. To general agreement from fellow panellists, Bharti outlined the fact that whilst smartphone prices are indeed falling, it’s not happening nearly quickly enough to drive rapid smartphone adoption. According to Qualcomm, every $10 drop in the price of smartphones can open up an addressable market of 100 million new potential smartphone users and it’s exactly that sort of market opportunity that’s likely to attract a lot of potential bidders to any new tender the GSMA may initiate on the operators’ behalf.

Tags:

Leave a comment

Your email address will not be published. Required fields are marked *

Polls

What is your name?

Loading ... Loading ...