IT stories

Is Google a company with large and deep pockets but with too short arms

- and thereby prioritising their profitability higher than their social responsibility?

Around the world there are many ongoing debates regarding how to handle the increasing amount of Internet traffic on the many different Internet providers’ networks.

On the one side we have the Internet providers, that want to prioritise various types of data traffic and differentiate the network products they are selling to their customers, and on the other side we have Google, who believe that operators should give their customers a uniform connection regardless of the type of service being used.

Basically network providers want to charge extra for e.g. video services that offer better video quality than customers will get from a basic connection.

Since this debate started, Google has been extremely clever at moving the focus of the debate over to net-neutrality, in effect thereby succeeding in changing the debate to a debate regarding whether network providers should be allowed to censor the Internet.

Terminal sourcing – a rising risk

The launch of many different types of handset models has resulted in an increasing risk of misjudging a handsets market potential from both the handset manufacturers and mobile operators.

Previously the number of handset models available on the market was relatively limited, which resulted in a relatively modest risk of having surplus stock of outdated mobile handsets. With the significantly increasing number of handset models being manufactured by the handset manufacturers, this risk is however significantly increasing for all the players in the distribution chain of mobile handsets

Which mobile strategy should media companies choose?

The media companies’ presence on the mobile market will become more visible in the future, but the level of their financial engagement will greatly depend on their choice of mobile strategy.

A media company’s investment (CAPEX) in the mobile market increases successively with the above strategies. In other words the financial risk will increase as media companies further develop their mobile strategy.

The importance of the right distribution strategy

The right distribution strategy is a big factor in determining the success of any mobile provider.

Different types of mobile providers have, up to now, used different channels and strategies to attract customers and maintain low distribution costs. But growing competition has caused strategies to change.

Small mobile players key to segmenting the market

It is critical for MNOs to develop product offerings for each customer segment. In the current competitive environment, this is the best way to achieve high market share. But in a market with many segmented mobile providers already, MNOs need to focus on addressing all customer segments.

In doing so, they should exploit the new possibilities that the growing segmentation of the market offers. This includes, among other things, ensuring that as many segments as possible are covered by the mobile providers on the MNO’s network. In doing so, they should exploit the new possibilities that the growing segmentation of the market offers.

MVNEs will pave the way for more niche mobile players

There is a new important market development taking place involving a new breed of mobile player – micro-segmented mobile providers and branded resellers.

These companies will lead to a more interesting mobile experience for many consumers, as well as helping operators to reduce churn.

A key facilitator of this development is the emergence of MNEs (Mobile Network Enablers) and MVNEs (Mobile Virtual Network Enablers). An MVNE functions as a link between MNOs and mobile providers that do not have their own network.

Mobile operators need to wake up – now!

we identify four phases of the MVNO market, all of which have had decisive impact on the mobile market as whole.

· Phase 1 – a market where MNOs do not offer wholesale mobile telephony
· Phase 2 – a market where at least one MNO offers wholesale mobile telephony
· Phase 3 – a market where multiple MNOs offer wholesale mobile telephony
· Phase 4 – a market where multiple MNOs offer both wholesale mobile telephony and develop their own sub-brands.

In most mobile markets, these market phases follow each other in a natural chronological order. This means they can usefully be used as a measure of how mature an individual mo-bile market is. The sooner a market reaches a particular MNO market phase, the more ma-ture it may be considered to be.

VAS-providers are stuck in the past

– is it not time to look forward?

With their so-called CPA model, the Norwegian mobile operators were first to offer content providers revenue sharing from sales of their premium SMS services to the end users. With this revenue sharing model, content providers were offered a share of the revenue that the sales of their premium SMS services generated. The content providers had to purchase their own SMS short-codes, which amongst other things meant that the SMS services could be offered across the mobile operators networks to all the countries mobile users - which gave the content providers the incentive to market their own mobile services.

The hangover from the Single-Portal-Strategy

The lack of success for mobile portals is partly due to the fact that they have not become a consumer success and have left the mobile operators with a large financial hangover.

Some mobile operators still spend large financial resources on their mobile portals, while other mobile operators have seen that this way and strategy is not sustainable, and have on basis of their experiences turned to a new strategy. One of the mobile operators is TeliaSonera who lets all mobile users (incl. non TeliaSonera users) access their portal SurfPort. Telenor is another mobile operator who after a significant bet on their portal djuice, have adjusted their strategy.

The reality for mobile operators on the Western European Markets

Mobile operators have experienced an explosive growth in the number of mobile subscribers throughout the last 8 to 10 years. Globally there is no doubt that this growth will continue with increasing mobile penetration in countries like the USA, China, India and a great number of third world countries.

But from the viewpoint of the Western European mobile operators, the future can only offer a very limited growth in the number of subscribers, as the mobile penetration on most Western European markets is reaching its maximum with penetrations of over 95% in many countries.

On mature markets the competition will change and many mobile operators have not in proper time foreseen this development, and these mobile operators will have to change their strategy to adapt to the new reality to survive in the future mobile universe. At Strand Consult, we have identified 10 mega-trends there will have significant impact on mobile operators business:

Mobile distributors need to grow or get out

The market for distribution of mobile handsets is facing massive structural change.

Changes that are driven by a new reality, which started in Scandinavia, spread to the Netherlands and has now hit Germany. This reality will show its face in the UK and the rest of Europe very soon.

Historically the UK has had a number of national distributors with a healthy business, due to a large home market and operators that have generously subsidised prepaid as well as post-paid products.

The mobile industry is moving towards Open Garden

The mobile industry is very focused on the sales of mobile services because there is an expectation that revenue from sales of mobile services will compensate for the decreasing prices on voice and SMS.

In order that mobile operators can achieve success in the services area, many will have to adjust their current strategy in a number of areas.

It is therefore interesting to take a closer look at why the Open Garden strategy has already been and will be a success in the mobile services area.

Lean and Mean is the way forward for a great many mobile operators

The Lean and Mean strategy will turn many mobile operators business upside down. Mobile operators will move focus away from doing everything themselves, to instead letting external partners handle a great many of the tasks that mobile operators today consider as part of their core business.

For the mobile operator, the level of costs is very important when competing in attracting wholesale customers and outsourcing - and the use of partnerships - is an important part of the mobile operators’ business model and essential in the quest to achieve a more cost-effective operation.

The difference between mobile portals and clients

As mobile services become more advanced and have increased possibilities to show content in new exciting ways, there is a need for new methods whereby mobile services can be delivered and presented.

Mobile portals and mobile clients are two presentation and distribution methods that have attracted a lot of attention. The mobile handset is used as the presentation media and by using these methods one thereby avoids having to use other media outside the mobile universe. One of the reasons why these two presentation and distribution methods have attracted so much attention is that they facilitate impulse purchases to a much greater extent than the current methods used in connection with Premium SMS services, where primarily print media and TV advertising have been the most preferred.

Over time a larger share of the sales of mobile services will be handled via mobile portals or mobile clients, regardless of whether they are controlled by the mobile operators or by third-party companies.

The portal strategies of the future

The use of mobile portals and mobile clients is still in its infancy, but in the near future this area will experience large changes. Amongst other things we will see mobile operators becoming more aware about their strategies in this area and their choice of strategy will have a significant influence on the other players in the mobile value chain.

Consumers will also experience the consequences of the operators’ choice of strategy regarding mobile portals and clients, as their strategy will influence the level of freedom that customers have in connection with purchasing mobile services.

Strand Consult has identified the four different portal-/client strategies that the mobile operators will basically be able to choose between in the future.

E-Plus results - outlook for Germany & the mobile industry

In Germany the KPN owned E-Plus have just published their Q2 results. The base was E-plus market share of one year ago of 14,5%, EBITDA margin of 37%. Looking further back at E-plus they were an operator which fought a good fight but they never gained the upper hand, market shares and the KPI’s never changed. To put it frankly E-plus was a part of KPN that did not contribute much more than being a name of the associated companies.

In the spring of 2005 Stan Miller changed E-plus’s strategy and bet on that a large part of their customers from now on should come in the hands of MVNO’s who targeted different segments in the market, new players like simyo.de, medion mobile, blau.de, base.de, Ay Yildiz and many more brands appeared.

A Hard Part Of Growing Up Is Learning The Ability To Share With Others

– Being Long past Their Childhood Will Mobile Phone Vendors And Dealers Ever Learn Revenue Sharing?

In the mobile industry, the mobile manufacturers, operators and dealers have for a number of years been playing quite well together on the street with the current game rules. But those rules need to be changed now - especially because there are some new kids in the street that also want to join in the mobile game. "The new kids on the block" are e.g. a number of handset manufacturers that did not have any a special market position just three or four years ago, but have quickly expanded to major players. Also the mobile value chain is experiencing a surge of new small mobile providers that want to join the game. Here it is especially at the many No Frills mobile services providers that are springing up and with small effective and innovative organisations are making money on relatively modest customer bases.

There are two very good reasons why there is now a significant trend towards demands for new business models/game rules in the mobile industry.

The battle for domination of the mobile operating system market is over

– but a new war has started…

Many people believe that the future battle on the mobile market will be between the mobile operating systems. Especially Microsoft and Symbian are competing to become the future operating system (OS) on the mobile market, but also PalmSource, Linux based OSs and Java based OSs are trying to win market shares. One of the reasons why the competition is so fierce on the OS market is that many in the business have a naive belief that the winner will take it all and the loser will get nothing - just as has happened in the PC world.

The mobile services platform suppliers do not understand the market

– and that can kill them…

Many mobile platform environment suppliers have primarily chosen to focus on the technical development of their platform and forgotten all about how mobile services will reach the end-users. The focus has been on developing a platform for mobile op-erators and once delivered they have had a naive dream that the mobile traffic and mobile services consumption would take care of themselves.

Instant messaging

- differentiated data traffic prices is the road to success

It is common knowledge that Instant Messaging (IM) has been a very large success on the Internet for quite a while. IM allows real-time messaging and also it is possible to see the availability (online presence) of other users. It is an obvious idea to transfer this success over to the mobile market - not just because of the possibilities on the mobile market, but also because of the dynamic new possibilities that are created with IM when you mix the Internet and the mobile market. There are however large barriers that are standing in the way of a widespread business success for IM on the mobile market.

New opportunities for media companies

increased focus on the mobile telephones user interface is creating exciting new opportunities for media companies

All our research here at Strand Consult points to the mobile market moving towards an increased focus on user interfaces. This increased focus on UIs will lead to changes on the mobile market, especially for new players entering the market. For example media companies will be able to spread across the mobile value chain and offer their content and media in connection with the future mobile handsets UIs.

UIs can basically be divided into 3 types:
1. UIs that contains APIs
2. UIs that run on a VM (Virtual machine)
3. Simple UIs without APIs

Distribution – The Path to Success for Mobile Platform Suppliers

The future business models for Service Platform Environments will be based on revenue sharing – licence sales is history…

The market for Service Platform Environments is still in its infancy, but due to increasing competition this business area will quickly mature. Any transition from infancy to adulthood is something that traditionally requires a change of thought and actions and the service platform environments transition to adulthood will also without a doubt lead to the need for significant changes in business strategies and business processes among the mobile value chain players.

Vodafone exits Japan, Sweden

where next ? ? ?

There has been a lot of press coverage the last few days about Vodafone selling their Japanese operation - this is the second time in just six months that Vodafone have given up and chosen to sell one of their operations having spent a great deal of time and effort trying to make that operation a success.

There are many reasons why Vodafone have chosen to sell off Vodafone in Japan, technological reasons, marketing reasons etc etc. But maybe one should ignore those reasons and examine the fact that Vodafone in Japan have not been able to ensure that a large mobile business - on one of the world's largest mobile markets - has been the success that Vodafone's management and shareholders had dreamed of.

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Managing marketing costs is high priority

- when working with Micro-Segmentation and Sub-Branding

In the "good old days" the handset manufacturers and the mobile operators were like your local grocery store, they could easily handle the marketing needs of their relatively limited selection of goods by advertising in the local newspaper. Today the handset manufacturers and mobile operators are no longer local grocery stores, but are more similar to a number of small shop-in-shops in a department store, with a large selection of goods targeted towards many different customer segments. This development has had a negative effect on the marketing budgets.

In fact it is not that many years ago that the handset manufacturers only announced a relatively few number of new mobile handsets each year and the variation in the design and functionality of the products was somewhat limited and easy to comprehend for mobile customers.

Newton’s ”Third Law Of Motion” in a mobile perspective…

– Mobile Operators react by focusing on minimising CAPEX

“For every action, there is an equal and opposite reaction”.

Maybe one shouldn’t compare Newton's Third Law of Motion and the current paradigm shift in the mobile value chain, but on the other hand there is no doubt that an action in one part of the mobile value chain is certainly resulting in a reaction in another part of the value chain, which again results in new actions, that again results in new reactions, that again..…!

The Mobile Operators Business is turning inside out and upside down

– Outsourcing is one way to minimize OPEX!

Traditionally the mobile operators that have had the all-important role in the mobile value chain - and they never really had any other intention than playing first violin. This is why the mobile operators have constantly try to maximise their controlling position in the value chain by e.g. retaining a great number of different work processes and competencies in-house within their own organisations. The operators have naturally had business partners - but wherever possible the operators have played solo. But now the operators are having to change their tone!

Declining profit margins on basic mobile services

Mobile operators will be forced to launch a number of initiatives to compensate for falling voice and SMS prices

- and experience shows that it can be done.

The mobile value chain is in the middle of a paradigm shift that will result in all the market players having to redefine their position and tasks in the value chain. This will especially hit the mobile operators that will be forced to break away from their traditional way of thinking. And there is no avoiding this - operators are already experiencing continuously decreasing profit margins on sales of voice minutes and SMS messages.

DRM

- an often ignored, but in fact crucially important element in the market for mobile services

There is no doubt that the mobile services market is developing at an astounding speed. But there is also little doubt that if this speed of development is to continue, it is crucial that all players on the market receive a share of the revenue generated by mobile services. But that is not a matter of course, as the historical facts on the Internet have clearly shown.

The media and content industries have extensive experience in using the Internet as a distribution channel. Right from the start, the Internet has been characterised by pirated content. Free music and free films on the Internet emerged in the early days due to the lack of legal possibilities to purchase the content. But the mobile services market is different than the traditional Internet

Is the mobile services market facing massive regulation?

- and if so, what advantages would that give…?

The mobile industry has always been a market characterised by comprehensive regulation from the authorities. This regulation has however not been continued at the same level on the mobile services market - even after many more players have entered the mobile services market. Today there are a number of frightening examples of misuse of e.g. Premium SMS, but the question is whether regulation is the answer, or whether self-regulation is preferable?

The mobile operators role in the future value chain

The convergence between IT, Tele and Media will mean that the mobile operator's role must be redefined in the future mobile value chain

During the coming years, the mobile industry will undergo large changes that will result in a mobile value chain that is much longer and far more complex than today.

For the mobile operators, the changes in the value chain will mean that their role will change as the borders between the telecommunications sector and the Internet sector disappear and as content is delivered on multiple different platforms. Today the mobile operators are the hub of the mobile value chain, but the development in technology and services will lead to the mobile operator's position in the value chain slowly but surely changing significantly.

The question is not whether there will be a market for Location-based services

- the question is which role the operators will choose?

One of the types of services that many have been talking a great deal about and that has been predicted to be one of the big future types of mobile services, is Location-based services. With Location-based services is it is possible to create much more relevant and attractive services for end-users. For example services that use the possibility of constantly updating the position of the handset (tracking), services where the content provider uses the position of the handset to initialise the service (push), or services where the user initialises a service related to the customers current position (pull). Technically there are two different methods for determining the location of a handsets; using GPS or using the mobile network and these two methods are influencing the power balance between different players on the mobile market.

GPS is independent of the mobile network and the location calculation is very precise, basically down to just a few metres. The precision of determining a location using a mobile network depends on the distance between the mobile antennas; so determining a position is much more precise in city areas where mobile antennas are much closer to each other than in thinly populated areas.

"When Less Means More" - Micro Segmentation becomes a Necessity

If You Want To Think Big In The Future Mobile Value Chain.

Children, young people, old people, men and women - everyone has their own mobile telephone and some have more than one. Some mobile users use their mobile telephone a lot, while most only use it a little. Some only use their mobile telephone for private calls while others use them for their work - and some independently of time and place. Mobile telephony has become a mature mass-market product with a non-homogeneous customer mass - where handset manufacturers and mobile operators can no longer survive on the "one size fits all" motto for mobile services and mobile handsets. This is the reason why the players in the mobile value chain are more or less forced to increasingly use micro-segmentation.

In the near future there will be a strong tendency for both handset manufacturers and mobile operators to increasingly focus on micro segmentation of their customer target groups and customer bases.

A Paradigm shift in the Service Platform Environment

will change the market for mobile services

The Service Platform Environment market will undergo radical changes the day it is no longer the mobile operators that implement and use service platform environments. Instead mobile operators will allow all service platform environments access to their mobile customers and this will mean a services market that is much more dynamic and with a much bigger competition between service platform environments - all very positive for the end-users and the operators’ turnover.

The current services platform market is characterised by many mobile operators having chosen to develop or purchase and market their own service platform environments in order to be able to differentiate themselves to their competitors. The mobile operators’ choice of using different service platforms to present, distribute and sell services to their customers has an enormous influence on the mobile industry and its players, as the mobile operators become a kind of taste arbiter, by being able to choose the mobile services that can be sold via the platform.

Ten Mega Trends Will Turn The Mobile Industry Upside Down

– And The Industry will Need To Reboot.

The mobile industry has been characterised by a constant expansion and change ever since the very first mobile calls were placed and the players in the mobile value chain have for the same reasons become used to having to have a positive attitude towards changes and new tendencies.

However the mobile industry has now reached a point where a number of very important market changes are accumulating, something that is making even experienced industry leaders admit that they are having great difficulty remembering anything reminiscent of this situation and how they therefore should proceed.
In other words the mobile industry leaders know that the industry is moving in a completely new direction - but the many changes that are difficult to define mean that the top management is having difficulty working out in precisely which direction the industry is actually moving!

New business models for mobile services

- will decide whether mobile operators be successful

Throughout a large part of the mobile services market’s childhood, there has been only one access route to the customer - through the mobile operator. This has made the services market very inflexible and meant that players on the mobile market have not reached the turnover they had expected that an open market would give. This walled garden model is still being used in a number of regions, but in Western Europe a Paradigm shift is happening and many mobile operators are today using revenue sharing models that give all content providers access to offer SMS/MMS/WAP services to end-users across all mobile networks. The revenue sharing models that are being used are the same as those originally used for Premium SMS services and they are only the first step; the next step will be new and more advanced business models.

It Would Be A First, If Premium SMS can survive

by staying exactly the same!

Some products have managed to stay on the market for decades, generation after generation, but not without constant improvements through product development. It would therefore be an illusion to believe that premium SMS services can continue to be a significant source of income for the mobile industry players, unless those SMS services are continually improved. In other words: it would be a first if Premium SMS could survive by staying exactly the same!!

A look back at GSM World Congress 2006

The 3GSM World Congress is over, 4 fantastic days in Barcelona where 50.000 people that all live and breathe for the mobile universe met with the purpose of exchanging visions, ideas and information about how the mobile markets look and how they expect them to develop in the future. Strand Consult participated with five employees, we followed the conferences, had an enormous amount of meetings and enjoyed having our extensive knowledge supplied and updated with new inspiration about how the universe we are part of is doing today and how it is developing.

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GSM World Congress - a Preview by Strand Consult

In just a few days the GSM World Congress will start and once again over 50.000 people will meet to exchange knowledge, ideas and visions about the mobile future. One could call it the world's largest trade related "get-together party" with the sole purpose of stimulating the mobile development that has over the past years changed billions of people's daily lives.

For many years the conference has been held in Cannes - but has now moved to Barcelona and once again this year Strand Consult will participate, this time with five of our employees. Our aim is to collect knowledge, meet people and talk to our many customers that - like us - are spending five days in Barcelona.

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Paradigm shift in the German Mobile industry

It started in Scandinavia, spread to Benelux and now is happening big-time in Germany - the mobile industry is facing its largest paradigm shift ever!

We never doubted that Scandinavia would be a role model for the other markets and have simply been waiting for one of the larger mobile markets to experience what we already have seen on the much smaller markets. During the past five months we have watched with excitement at what has been happening in Germany and how the different market players have reacted.

Five months ago, E-Plus changed their strategy with the launch of their no-frill discount concept Simyo and with an aggressive service provider/MVNOs strategy, E-Plus have moved focus away from selling expensive phones at cheap prices, to instead selling traffic in their network and they have moved focus away from customers who want cheap mobile phones to customers who want cheap mobile telephony - two different customer segments; the price sensitive and the heavy users.

The retirement of WAP services

The Birth Of The New 3rd Generation Mobile Services Will Hopefully Make Very Proud Grandparents Out Of The Traditional WAP Services.

For grandparents it is a big event in their lives watching their grandchildren arrive in the world and the older generation often hope that the new generation will have better conditions in life than they had themselves. Soon the traditional 1st generation mobile services will become grandparents to the new 3rd generation mobile services and there is a good possibility that the new mobile services will have better growth conditions than the older services had when they originally launched. But there is very good reason for the young and inexperienced to learn from the older generations’ experiences - and mistakes!

Mobile Operators and Mobile Phone Suppliers Have Invested Big-time in 3G

- Why Should Service Providers and End Users Do The Same?

The joy of expectation is often the greatest and there really have been great expectations for a long time for 3G telephony. So now that 3G have become a reality in a number of European countries, one can occasionally miss that feeling of the joy of expectation. Because the real 3G is rather lame compared to what the end-users originally were promised with regard to the fantastic possibilities of 3G.

So it is no wonder that end-users quite rightly can allow themselves to be a little critical and asked the question: "How many new services are being offered over 3G that I did not already know from 2.5G?"

MMS is a Huge success in Norway

So why Are Mobile Operators In Other Countries Standing In The Way Of Their Own Success

It would not have been completely misleading, if SMS had been the abbreviation for "Surprising Messaging Success" – as the success of SMS messages took the mobile operators completely by surprise. Currently mobile operators are hoping that MMS will likewise mean "More Messaging Success" - but apart from the Norwegian operators, there do not seem to be any operators that have learnt anything from previous mistakes or successes and thereby the mobile operators are preventing their own success.

MVNO, CBB Mobil is now going straight for the Gay community

– Micro Segmentation is a must.

Denmark today launched most probably the first ever service provider/MVNO that is directly targeted towards homosexual mobile users.

Even though the new mobile company "Gaymobile" is unique in its choice of primary mobile users, the basic idea in the actual business concept has a long track record in South Korea. The launch of "Gaymobile" is again proof that the mobile companies - using micro segmentation - are trying to create customer loyalty through targeted offerings to narrow segments.

The mobile operators are discriminating against their female mobile users

– and thereby half their customer base

Many mobile operators have focused on launching their own mobile portals, but these mobile portals are usually characterised by having been developed and marketed by men - for men! It's as if the mobile operators have forgotten the rather significant fact that half their mobile users are women that want mobile services that are not targeted towards men.

With the large concentration of mobile services targeted towards especially younger men, the mobile operators can easily be accused of discriminating female mobile users. Women are not offered very many mobile services that focus on the more feminine areas of interest.

The Perfect Mobile Service Delivery Platform Environment is a big puzzle

– the question is, who should put the pieces together and how?

Today, all mobile operators are very aware that an ever increasing share of their total turnover will have to be created through increasing sales of premium rate mobile services - and every Western European mobile operator also knows, that this goal is not easy to achieve. The complexity of this goal is partly due to end-users becoming increasingly more demanding and selective in their choices of mobile services. But also the complexity of selling advanced premium rate mobile services is being caused by the mobile operators facing a significant challenge in connection with establishing a service platform environment, that effectively can distribute exactly the advanced mobile services that modern mobile customers are demanding.

In this connection the mobile operators find themselves in the middle of a paradox. On the one hand there have theoretically never been better technological possibilities to develop and deliver unique mobile services, but on the other hand there has never before been a larger challenge in connection with the practical job of piecing together the mobile operators’ service platform environment, so it can support the unique mobile services technological demands.

To Be - Or Not To Be - A Service Enabler… That Is The Question

A question that many Mobile Operators are asking themselves these days

Many people are talking about the market for mobile services - and especially the mobile operators are taking part in the debate with statements about positive expectations for future sales of mobile services. These positive statements do stand out a bit when you think of the long list of mobile operators that have invested - and lost - millions of euros on starting and running their own mobile content solutions. The question that mobile operators ought to be asking themselves is almost provoking in its simplicity "Should I be a service enabler or not"? -

The mobile operators are not afraid to admit that they have a problem as their current revenue on the one hand is mainly being generated from sales of traditional voice/SMS, that they are constantly being forced to decrease the price of due to competition and on the other hand, that they have still not found an effective model for developing, producing, marketing and selling premium mobile services which are - and will be in the future - extremely important for players in the mobile value chain. Right now far too many mobile operators are simply not discussing which players have to be best suited to actually develop and operate the future services market and how those players are to be paid for the services they deliver.

The size of the future discount MVNO market

- in 16 European countries

On March 10th. easyMobile launched their discount MVNO concept in the UK - one of Europe's largest mobile markets. Before easyMobile launched, UK mobile customers were paying between 15p and 40p pr. voice minute and between 5p and 12p to send an SMS. Weeks later the prices have fallen to only 5 to 6p for a voice minute and between 1.7 and 2p for an SMS. Many in the mobile business are calling this the mobile operators' nightmare - we call it mobile evolution. We have seen exactly this scenario already happen in many other countries and it will continue to happen in more countries after the UK - it is only a question of time.

At the end of 2004 the Western European mobile market had a total of 357 million customers that spent 130 billion Euro pr. year. A big business area with many big players - but also a business area that is looking at a paradigm shift that is best compared to the enormous changes that the airline industry has seen in the past 5 years.!

easyMobile Launch

10th March 2005

Today easyMobile launched in the UK. easyMobile is a joint venture between 4 companies. The first two are TDC and Telmore, TDC being the incumbent operator from the Danish mobile market that bought up the very successful MVNO Telmore from Frank Rasmussen just over 1 year ago.

We believe that the launch of easyMobile in the UK will be a repeat of exactly what we have experienced in e.g. Denmark over the past 4 years.

Indeed, Orange has already created press for easyMobile by suing for them using the colour orange in the mobile world even before easyMobile launched!

John Strand's MVNO Presentation

at GSM World Congress 2005

Every year most of the mobile industry meets at the GSM World Congress and once again this year, John Strand was one of the speakers at the conference. John Strand's topic was "Evaluating the impact of MVNO & Discount Providers on Price and Value Strategies" and his presentation was based on the second edition of his companies report "The Moment of Truth - a portrait of the Discount MVNO/Mobile Operators' success"- a report that has today been sold to over 80 mobile operators world wide and most of the worlds largest MVNO's.

FUll Presentation

A look back at the GSM World Congress 2005

– A fantastic week

The GSM World Congress is over - 4 incredible days where over 34.000 people with one thing in common spent the best part of a week meeting and exchanging visiting cards and thoughts. The 2005 congress was not that much different from the earlier years congresses and could offer everything you would expect a week in Cannes should contain - stories about how fantastic the future will be, showing off the latest technology and announcing the latest alliances within one of the worlds youngest industries.

Outlook for GSM World Congress 2005

The GSM World Congress in Cannes starts in just 4 days. More than 28.000 people from all over the world will converge on a small seaside town in the South of France. Once again a wide range of companies will be showcasing the latest technology, solutions and services, while they talk about their expectations for the future. And once again, many suppliers will be telling us why it will be their solutions that will make the operators ARPU explode.

A Premium Nightmare

- a Critical look at the US Mobile VAS-Industry

The United States is a remarkable country. Still seen by many as the land of opportunities and a symbol of freedom. In other words: The land of the entrepreneurial spirit. A place where a single individual, with enough vision and will, can make it big. Not just in the States, but in the world. Just look at Bill Gates and Microsoft.

The American Dream is a dream shared by many in the Premium VAS industry. Some have already realized that dream. Just look at Jamba, which was sold to VeriSign in 2004 for 273 mill. US dollars.

The Mobile Battle of Britain

TDC, easyGroup and T-Mobile join forces.

November 29th 2004

A new partnership, that many people have been talking about the last months have seen the light of Day.

The Question is not, if this will have influence on the UK mobile market, the question is which influence? Many people have said that easyMobile be the cause of destruction of the price-level in the English market. We at Strand Consult, believe it is not easyMobile alone that will influence the prices, because the prices in the UK mobile market compared to other countries are high, and these prices only have one way to go, DOWN!.

Mobile Service Provider targets cannabis users in Holland

-A new Discount Mobile Service Provider has emerged in Holland that has a rather unusual logo - the hemp plant!

And just to be sure there is no mistaking who they are targeting as their customers - check out their name: "PePtalk - Pep your Addiction"! Maybe it sounds like a bad practical joke - but then again - it's not April Fools day today - and there are an estimated 675.000 cannabis smokers in Holland!

We have already seen Service Providers; start to spring up around Europe, which are targeting certain customer segments, sometimes using the success that a brand name already has built up. Examples of these are the joint venture between Tesco and O2 in the UK - Tesco Mobile that launched in September 2003 and Easyjet's planned mobile venture EasyMobile. Virgin Mobile has been around for while, but not yet achieved the financial success they had hoped for.

Robin Hood is alive and well

- and has taken the form of a discount mobile service provider, but this new Robin Hood comes with a twist. He is open to mergers and acquisitions. At the end of the day, the mobile operators have to pay - to get their customers back...!

The discount mobile service providers are a modern-day Robin Hood - but with a twist. The discount mobile service providers have earned the "Robin Hood"-synonym because they have ensured that mobile users can save a huge bundle on their mobile bill. Because of this the discount mobile service providers in Denmark have - within just a few years - been able to build up substantial customer bases. And many of their customers have come from the established mobile operators. And the twist..? At the end of the day these "Robin Hood"-companies can and will sell the customers they "stole" from the mobile operators back to the mobile operators - at a huge profit! This exact scenario has already happened twice in Denmark.

For a mobile operator it is essential to enter into service provision agreements with those discount mobile service providers that after a while will become successful - as it is those "Robin Hood" companies that, over time, will be most interesting to purchase.

A mobile operator can simply have no choice but to take over a successful discount mobile service provider that the operator already has a service provision agreement with. When TDC Mobil purchased Telmore, TDC Mobil had themselves 1.562.000 mobile customers, while Telmore had a substantial 454.000 customers. In other words, Telmore generated a substantial part of the mobile traffic on TDC's network. Also it was Telmore that clocked in the highest growth rate of the two companies - adding new customers into TDC Mobil's total customer base.

EasyMobile - The inside story

A new partnership in the mobile sector has seen the light of day
- EasyGroup and TDC/Telmore have together created the newest player on the British mobile market.

Shortly after Virgin Mobile completed their IPO and in a time where many are talking about MVNO's and what has been happening on the Danish mobile market, the founder of Easy Jet Stelios Haji-Ioannou has entered into an agreement with the Danish Telecommunications Company TDC to form a British copy of the very successful Danish discount mobile service provider Telmore.

And the name of this new company is EasyMobile.

It is not a coincidence that the founder of Telmore - Frank Rasmussen is right at the top - helping getting EasyMobile underway. His experience from Telmore in Denmark - combined with the very strong Easy brand and the financial backing of TDC - is an excellent combination to help establish and launch EasyMobile. .

Are you prepared to loose many of your prepaid customers?

European mobile operators must take precautions - especially if a large part of their subscriber base consists of prepaid customers. Competition from Discount Mobile Service Providers will without a doubt result in a significant decline in Prepaid-ARPU. Are you ready for this - it's just around the corner!

The worst kept secret in the European mobile sector is that the discount mobile telephony will carve a big chunk out of the mobile operators' revenue - a big chunk! The mobile operators will simply loose a large part of the revenue they have been getting from their customers payment of the monthly mobile subscription (line rental). On top of this the prices for voice minutes and SMS will dive to unheard of lows. Our new report shows how mobile operators not only have to adjust to all the above, but will also see a significant decrease in revenue from their whole prepaid segment.

Just 5-6 years ago the European mobile market was flooded by the prepaid wave.

MVNO's will turn the UK mobile market upside down

Web based MVNO's have great success in Denmark, Norway and Finland and the rest of Europe is soon to follow.

The question is, who is going launch these discount companies. Media companies who have free advertising in their own media or others players.

It's now been confirmed that Stelios Haji-Ioannou and EasyGroup are launching a Discount MVNO, using the Danish discount MVNO concept as model for his newest venture.

Discount MVNO's, are web-based virtual networks that have few cost due to the fact that they do not have any physical stores, but utilize the Internet as sales and distribution channel, and hence offer significantly reduced voice and text prices.

It is happening now Europe, could it happen in South America too?

-Judge for yourself!

Cross Europe, customers are experiencing the price of voice and SMS is falling drastically. In the Nordic countries the price for voice and SMS has fallen between 30 and 60% during the last 12 months. In a country like Denmark the number of prepaid customers has been reduced by 30% in 3 years, and ARPU for a prepaid customer has fallen 50% in the last year.

What makes Denmark & Europe different from South America?

Sales and distribution strategy and channels, of Discount Mobile Service Providers/MVNO's

Discount mobile service providers are invisible in the physical world and they sell immaterial services. How are the discount mobile service providers utilising the web as their powerful central lifeline?
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The mobile discount mobile service providers have revolutionized the Danish mobile market and attracted the attention and business from a great number of customers, simply by offering mobile solutions without any subscription and with prices for "voice minutes" and SMS messages that the traditional mobile operators have had great difficulty in matching. This huge flow of new customers to the discount mobile service providers has all happened without most of the customers having ever been near a mobile discount shop - the discount solutions are actually rarely sold through physical shops!
The discount mobile service providers whole success in business depends a great deal on the quality of their websites, more often than not these websites are the sole channel of sales and distribution and their window to the world.

No String´s Attached !

The Danish mobile market is full of "Pinocchio" customers that are cutting their strings to their "dormant" operator subscriptions that they were tied to - a trend that is now costing the Danish mobile operators 48 - 64 million Euro a year.

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Just like Pinocchio suddenly gains his freedom - the Danish mobile customers are also gaining more and more freedom at the moment, enabling them to freely move between the mobile operators and discount service providers that have the cheapest and best mobile offerings.

The discount mobile customers lust for adventure has become a nightmare for the mobile operators - their customers are simply not loyal to the mobile operator during their mandatory subscription period - the period that is meant to ensure both a close relationship and stable earnings for the mobile operators.

Buy your own "off-the-shelf" discount mobile service provider package - even if you have no knowledge of the mobile industry at all!

Now the "One-Stop-Shop" concept is on its way to the mobile sector!

Just imagine - if you are thinking of starting your own discount mobile service provide - a complete, ready to go discount mobile service provider operation, packaged and put in a carrier bag all ready to take home and set up. All you need to do is to add a strong brand name and off you go! In the future mobile operators will offer the sales and support of "off-the-shelf" discount mobile service provider packages that can be sold to companies that have little or no understanding of the telecommunications market.

Few people will dispute that the discount mobile service providers are here to stay.

Discount mobile service providers will be a great threat to mobile operators and traditional service providers

- but what can threaten the discount mobile service providers themselves?

Two years ago they literally didn't exist - today they are the "talk of the town". From being completely unknown and uninteresting in the minds of the mobile operators, they have progressed in this short space of time to having so much influence on the mobile market that they are directly influencing the mobile operators' business strategies. Who has come so far and achieved so much in just two years? We are talking about the so-called discount mobile service providers.

But despite the really impressive success that the discount mobile services providers have had - especially those that started earliest - these discount mobile service providers are not completely invincible when looking forward. Mobile operators will actively be able to use in their efforts to compete with their fast growing discount counterparts.

The smaller mobile operators need to reorganize

if they are to stand a chance of surviving the increasing competition - which paradoxically could result in a market consolidation and thereby the end of the road - for the small operators.

The small mobile operators in Western Europe will have to start rethinking their businesses. The demand for new innovative thinking is the simple consequence of these smaller mobile operators already having difficulty in achieving a satisfactory financial return that can either ensure or justify their future existence. If the smaller mobile operators choose to just sit back and conduct their business as usual - they will soon be out of business.

Especially the smaller mobile operators have been in the line of fire as competition amongst the mobile operators and other mobile providers has heated up during the past few years in Western Europe.

This exposed position can be explained by the fact that the smaller mobile operators' investments in licenses and infrastructure is usually the same size as the large operators - but in contrast to the large operators, the small operators simply do not have critical mass in the size of their customer bases. Without enough customers, the small operators will never be able to achieve any reasonable return on their investments, as they will simply not be able to generate enough mobile traffic in their network.

Number portability is a huge success - Discount mobile service providers are great with numbers and figures

New customers can pick a new mobile number or they can bring along their old phone number - and thousands of customers are choosing the latter.

Figures do not lie - in under two years the providers of discount mobile telephony in Denmark have attracted so many customers that discount mobile telephony has now become a very serious threat for the large traditional mobile telephony operators that primarily base their business on monthly mobile subscriptions.

That discount mobile telephony has become such a huge success is very much due to that customers are not billed a monthly invoice and on top of that the prices for a "voice" minute and SMS message are much lower than the tariffs the traditional mobile providers have offered so far with a subscription based package.

And the Danish customers have been registering by the thousands with the discount providers. It is very interesting to see that the customers these new discount providers are getting are both customers churning from one of the established operators, but also very much first time customers getting their first mobile phone ever.

Lessons learned from the airline industry

"Mobile Operators and service providers find themselves in rough turbulence and must prepare themselves for a hard landing"

The established European mobile operators and service providers will soon be part of a major aerial dogfight for customers as the discount mobile service providers are ready to take off. They will impact the European Mobile Operators in the same way that the low-cost airlines have crippled the National Airlines.

The competition between airlines has for some time now been fierce, with the established national airlines having difficulty making any kind of profit that can give a return on billions this industry craves in investments. The recent travel recession has lead to lay-offs and forced airlines to reorganize.

But the above account of the troubles of the major airlines could just as easily been about the Western European mobile operators. Tough competition, major losses, billions in investments, lay-offs and reorganizations are also part of a mobile operators everyday life - but up till now at least the mobile operators had been spared from the unbelievable competition from discount companies dumping prices. However, this is about to change.

Good Morning, this is your wake-up call:

"It's time to get up - the discount mobile service providers are coming to town"

The Discount Mobile Service Providers will spread throughout Western Europe and have a huge impact on all the players in the mobile industry - and for some players that impact could be devastating!

"Money makes the world go round" - but will the Discount Mobile Service Providers grab the money from the mobile world? In this business it is the mobile operators money that is making the wheels turn around. For example it is the mobile operators that are paying for the often very expensive mobile licenses that give access to develop and use new mobile infrastructure and technology. It is the mobile operators that are paying the manufactures for all the new expensive equipment they need to build the infrastructure. It is the mobile operators that are the mobile handset manufacturers largest customers. And last but not least the mobile operators are buying all sorts of mobile services from many smaller suppliers and developers.

During the past few years however, mobile operators in Western Europe have had difficulty in making money...

American operators could learn from Norway

- where over 80% of the Norwegian mobile customers use Premium SMS

The Norwegian mobile operators are paving the way for operators all over the world on the right way to stimulate premium mobile services - and get their mobile customers to use them - and the results speak for themselves! Today over 80% of all the Norwegian mobile customers have used premium SMS mobile services.

In America, mobile operators have just launched their first premium SMS services. But why not move right along and create business models for WAP, GPRS and MMS, so they are there and ready from the outset? All the South American operators really have to do is to take a closer look at what has been happening in Norway the past three years - and they will have a complete manual and roadmap on how to ensure the success of their premium mobile services.

The whole way the Norwegian mobile operators have handled mobile services since they first started offering premium SMS services way back in October 1997 has been exceptional.

More Than 80% of the Norwegian mobile population have used Premium SMS

The Norwegian mobile operators are paving the way for operators all over the world on the right way to stimulate premium mobile services - and get their mobile customers to use them - and the results speak for themselves! Today over 80% of all the Norwegian mobile customers have used premium SMS mobile services.

Ever since the launch of WAP, one of the most discussed subjects at mobile conferences across the world has been: Who's responsibility is it to get mobile services launched? The old proverb "Which came first, the chicken or the egg?" has often been used in this connection, when mobile operators have shrugged off suggestions that they are themselves responsible for creating the foundation for premium mobile services.

The whole way the Norwegian mobile operators have handled mobile services since they first started offering premium SMS services way back in October 1997 has been exceptional.

SMS still predominant in the changing World of Premium Mobile Services

In 2002, premium SMS services generated 1.2 billion Euro - 74% of the total
value of the mobile services market. But this monopoly on the services
market will change drastically up to 2005. Even though revenue from SMS
services will increase in 2003 to over 2.8 billion Euro, it will already
have lost 25% of its market share. And from then it is downhill all the way
to 2005 - when premium SMS services will only be able to pull in a meagre
1.5 million Euro - just 7% of the total mobile services revenue in Western
Europe!

Even though there are now many new mobile phones on the market across Europe
offering colour screens and MMS, the success stories are however still
coming from premium SMS services. One sector that is benefiting hugely from
premium SMS are the media companies and in particular TV Broadcasters. Fresh
figures from the Norwegian version of Pop Idol show just how much extra
revenue can be generated from the integration of premium mobile services
with television.

The first 3G sales experiences - from "3"

After all the hype around 3G and "3" and all the services that will be available at high speed over the network - what is the main selling point for a new "3" mobile phone? Unbelievably it is the price of the voice traffic!

Just a few weeks after "3" launched their mobile phones to the public, the first indications of what the consumers first buying experience are have been collected and analysed by Strand Consult. We have visited a number of "3" outlets - both some of their own and some independent retailers.

Norwegian TV show "Idol" hits the Premium SMS jackpot

Premium SMS has become a huge success for media companies and in particular TV Broadcasters. Fresh figures from the Norwegian version of Pop Idol show just how much extra revenue can be generated from the integration of premium mobile services with television. Last year, media companies and TV broadcasters in Europe generated over 85 million Euro in revenue from premium TV voting mobile services.

So how well did Idol do in Norway? In a country with a population of only 4.3 million people - and with the final still to come - Idol had received 2.389.199 SMS votes at 0.6 Euro cent pr. SMS an average of over 183.000 SMS's pr. programme. Last Friday the programme received over 400.000 SMS votes from the 802.000 viewers who watched the programme - a staggering 50% participation marking a new milestone in TV viewer participation.

GPRS prices drop - while ADSL prices try to rise

- will they never learn..

Just as some ISP's start introducing a pay pr. Mb scheme for ADSL - something that all ADSL operators would like to get back to - the prices for GPRS are dropping rapidly, with the first flat rate GPRS subscriptions already now available. Obviously, the mobile world does not know where the whole flat-rate misery came from - if they did they would understand that they do not need to follow in the footsteps of the ADSL providers and make the same mistake by offering flat rate.

GPRS is the backbone for data revenue for mobile operators and the pricing of GPRS will set the standards - and expectations from the consumers - for 3G data pricing in the coming years.

So why did the ADSL operators introduce flat rate?

WLAN will not be a threat to 3G

- in the long run

There is a lot of discussion about WLAN at the moment and how it could affect the 3G business models by simply being a faster and cheaper alternative to transfer data than 3G can offer.

While there is no doubt that WLAN will be a good complementary technology to 2.5G and 3G data transfer, actually stating that it will be able to dilute the 3G business models is very premature and actually does seem more like one of those famous quotes that we all are so familiar with, like: "There is no reason anyone would want a computer in their home." Ken Olsen President, Chairman and founder of Digital, 1977.

Customers with the latest mobile phones are hungering for advanced services

The latest research Strand Consult has done, including interviews with both leading content providers and WASP's (Wireless Application Service Providers) shows that mobile customers who have already invested in the latest multimedia mobile handsets are now starting to demand more advanced services.

This demand seems to be deriving from a number of factors:

Pornography's next digital crusade could well be 3G

The adult entertainment industry has to be one of the most odd businesses in the world. It is all about one of the most natural things in the world between being born and dying yet practically no one wants to admit having any knowledge of ever having been near it and to top it all someone is spending 10's of billions of Euros a year on it.

But when looking at what the adult entertainment industry has done for the Internet, it is not surprising that more and more people in the mobile sector are secretly hoping that adult entertainment can help push the mobile industry forward in the same way.

Nokia N-Gage Launch - Strand Consult viewpoint

Today Nokia is launching their new games platform N-Gage - and the questions on everybodys lips are whether this new platform will play a major role in the mobile evolution and how big will the mobile gaming market really be?

In connection with the launch of Nokia's new terminal N-Gage, many people in the mobile sector have asked us whether we think N-Gage will be a success -and our answer has been a straightforward "Yes - and No"

The answer to many of the worries of the Mobile Operators is at the local supermarket!

Most of us have experienced being in a larger supermarket and unable to find what we are looking for. So we ask a guy filling some shelves with a product and get the surprising answer "I don't know - I don't work here"!! This man is not a compulsive liar and we are not on Candid Camera - the truth is he does not work in that supermarket, he works for the company who supplies the product he is putting on the shelves and when those shelves are full, he will drive on to the next supermarket and fill shelves there.

Today, most larger supermarkets are complex businesses.

Premium SMS revenue will drop from 74% - to 7%!

A historical era in the mobile evolution will be over.

For a number of years, SMS has been the only available type of mobile service that service providers and the mobile operators have been able to offer mobile consumers as Premium Services.

This has understandably made the Premium Services market quite easy to operate in for the different players in the mobile value chain:
-the service providers and content owners have only had to develop one type of mobile service
-the mobile operators have been able to focus on making their systems and revenue sharing models work for SMS
-the end users have had only one type of service to understand and buy - SMS services!

Mobile Games and Entertainment is Serious Business

School children will sit in their break and do it, businessmen and women will sit in an airport lounge and do it. People waiting for the bus, in a train, or waiting in a queue will do it. Almost everyone will be using their mobile phones for entertainment and games.

Today, the major part of the European population have a mobile phone within reach 24 hours a day. Most business people are using the phone to help make their workday more effective, kids are sending SMS's and everyone can be contacted at any time, no matter where they might be. But the mobile phone is also always close by when its owner is bored or needs to be cheered up.

MMS can celebrate its 1.5 year birthday - but the party is in South Korea!

In Europe a new mobile baby has been born, the name of the child has been chosen and there are great expectations and hopes for the future of this new baby. The name of the child? - Premium MMS services. But still unknown to many of the mobile players in the mobile sector, who are praying for the future success of this new child, this is not an only child. This child already has a big brother who is now 1.5 years old and lives in South Korea!

GPRS - Following in the tracks of WAP?

In 1869 the construction of the first transcontinental railroad was completed when the railroad from the East met with the railroad from the West at Promontory Summit - linking the United States from East to West.

But as you can see on the photo, the locomotives were already there, they had been there all through the building of the railway, transporting workers, supplies and material to the front line as the railroad tracks were being laid!

3G - The need for speed

As GPRS slowly starts to find a foothold in the minds of mobile consumers, one question seems to pop up again and again; Why bother with 3G at all - there is hardly any difference! The data speed of 3G, compared to 2.5G, often bares the brunt of the dubious views on 3G, because many seem to think that the speed GPRS can offer will be quite sufficient for 99% of all mobile data applications for many years to come.

Virtual Machine Games In South Korea Has An Advantage Which Is Not Taken Advantage Of.

Both Operators And Content Providers Lose And No One Wins the Wons (Korean Currency)

In South Korea there is a big focus on electronic games of all different kinds and the South Koreans are very active in the development of new games for the Arcade, Console, PC and mobile platforms. Today, 78% of the market value for games in South Korea comes from Arcade games, while mobile games only accounted for 1.2% of the total games market. However, it is the mobile game market that delivers the highest growth figures - here at the end of 2002 the value of the mobile games market will be around $52.3 million - 576% more than the mobile games market made in the year 2000!

Mobile Applications in South Korea open up for much more flexible pricing schemes and flexible pricing schemes open up for more revenue.

In South Korea Mobile Applications have made a big impact on what types of pricing models the mobile operators can offer mobile users - and the new price models have made an impact on the usage of mobile services that are running on the Mobile Applications platform.

The Mobile Applications in South Korea are running on their "Virtual Machine"platform (VM-platform)

A glimpse of the near future can actually be seen by looking at the palm of a South Koreans hand

- but the price of a prediction is just too high

Before now, very few people could tell a story by looking at the palm of another person's hand. Today, more and more people can see a story unfold in the palm of their hand - and many of those people live in South Korea!

This is not because the population of South Korea have all suddenly acquired psychic gifts, but because more and more people out there can put their mobile phone in the palm of their hand and watch video on it using the service "Video on Demand" (VoD).

South Koreas biggest mobile operator SKT launched their CDMA 1X mobile network in late 2000 and were the first in the world to thereby offer their customers download speeds of up to 144 Kbps. In practice the mobile users are getting download speeds of around 70 Kbps

Smartphone "battle of the giants" commences

Strand Consult

Microsoft and Orange launched today the first commercial Smartphone running the Microsoft operating system "Smartphone 2002" and have thereby started on a new chapter in mobile history.

Microsoft's new smartphone - produced by HTC in Taiwan - is a very aggressive product with a long list of features that gives the end-users a very versatile, easy to use, yet advanced mobile phone. We could not help but be impressed when we actually tried the smartphone - and with the price it will retail at, it is a serious competitor to the Sony Ericcson T68i, Nokia 7650, Siemens S55 and the other high-end terminals on the market. In our opinion, it is not a question of whether this product will be a success, but how big the success will be!

Preconfigured mobile phones can boost 2.5G rollout UPDATED

- and use of new mobile services

Letting customers walk out of a shop with a preconfigured 2.5G mobile phone
in their hands where GPRS and WAP is already working, an e-mail application
is ready to go and some other mobile services like multiplayer games or
instant messaging are configured and working, can really make a difference
to the speed of the rollout of 2.5G.

This is what they have done in Korea and in the first two years, over 17 million customers (53% of the total 33 million mobile subscribers) have bought a new preconfigured 2.5G mobile phone and out of them 73% are frequently using mobile services!

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The mobile consumers are still buying mobile phones on their brand name and price

- and walking out of shops with a new 2G phone!

In Europe, over 60% of the customers go into a shop knowing that they want to come out of it with a Nokia mobile phone in their hands and will often buy the cheapest deal they can get. What do they often have in their hands? A Nokia 3310! That was a great phone 2 years ago. Today it has no future revenue possibilities from any 2.5G services - services that many operators hope will bring in 30% of their revenue in a few years time.

The biggest challenge for the mobile operators is to give the customer a reason not to buy a 2G phone. The most logical way of doing that is by creating a demand for services that simply do not work on a 2G phone. You can compare it to buying a PC, nobody today would want to buy a cheap PC if there was no way at all it could connect to the Internet - it would be worthless! People want access to all the content on the Internet from their PC and the PC needs to have some way of connecting to the Internet.

Have the mobile terminal manufactures teamed up and agreed upon a secret strategy

delaying the rollout of colour 2.5G mobile phones in Europe?

One of the many issues holding back the rollout of 2.5 G in Europe the past year, has been the lack of new mobile phones from the terminal manufactures. Without the new mobile phones with larger colour screens and built in GPRS and Java, 2.5G has not really been going anywhere and the mobile operators have been able to sit back and point their fingers at the terminal manufactures.

In the past year, 9 million Korean mobile subscribers have bought new advanced 2.5G mobile phones and 3 million of those phones had colour screens!

If you think hard enough about it, you could get the impression that the terminal manufactures release new generation CDMA 2.5G colour phones in Asia, while at the same time, delaying GPRS 2.5G phones in Europe.

Sub-brands can help European mobile operators become profitable

it's already happened in Korea.

Every company wants to be a household brand name, but not all companies actually benefit from their efforts to market their products under a single brand name.

Many European mobile operators are pushing a single brand strategy, trying to make their name known across Europe. This was actually maybe not a bad idea a few years ago, where almost all mobile consumers simply used their phones to talk on - but today, mobile services are on the rise, the mobile phones are becoming more and more advanced and consumers are becoming more aware of their needs and are not willing to pay for e.g. services they have no use for.

Korea's new sub-brand strategies, the ban on mobile phone susidies and a number of other factors have resulted in over 25% of Korea's mobile subscribers switching to 2.5G mobile phones and services in just the past year!

The consolidation from 5 to 3 mobile operators

and ban on mobile phone subsidies boosted the 2.5G rollout in Korea!

While the European mobile operators all are either trying to cut down on mobile phone subsidies in general, or move them away from pre-paid phones to the much more lucrative post-paid business customers, the Korean mobile operators got hit with a ban against subsidies on mobile phones, that came into effect from June 2000.

The regulative authorities in Korea issued the ban against phone subsidies to help the operators' bottom line, as they faced the investments in 2.5G and the challenge of getting their mobile customers to switch to new 2.5 mobile phones.

Virtual Machine solutions will battle in Europe

and have an important role in the success of 2.5G and 3G

Although little heard of today in Europe, Virtual Machines or VM will play a central role in the success of mobile services on 2.5G and 3G platforms in Europe - and the different existing standards will battle to become the choice of the mobile operators.

In Europe we will probably see different Java (JM2E) VM solutions battle for the attention of the European mobile operators, as they start to focus on their strategies for 2.5G and 3G rollout - a rollout that will not include very many mobile services before the operators have chosen and implemented a VM platform.

There is a killer application for 2.5G - E-mail

but the European operators are not ready for it!

In Korea, the traditional Internet portals that now offer mobile e-mail services are actually making money, as the Korean mobile operators have given them an innovative revenue sharing model. For the Internet portals that offer e-mail services in other parts of the world like Lycos, Yahoo and Hotmail, making money on otherwise free browser based e-mail services would be a welcome change.

According to the detailed report about the little known Korean mobile market "The Korean Mobile market, a window to 3G" from Strand Consult, the Korean 2.5G VM mobile users receive on average 5 e-mails a day and send 1 e-mail from their mobile phones. The Korean mobile operators have differentiated their pricing on 2.5G data traffic, so e-mail is cheaper to send and receive than for example multi-media data - but more expensive than other text based data - allowing the Internet portal a good slice of the cake.

Mobile Operators must differentiate their prices for data-traffic

and stop treating mobile data services like the Internet.

Most mobile operators are still treating GPRS as a sort of mobile Internet.
This not only includes taking the "always on" slogan from the ADSL world and
using it for GPRS, but it also includes having a price pr. Mb for GPRS
usage.

Korea has in only one year converted 25% of their mobile users to 2.5G -
over 9 million subscribers - and nearly 80% of those are regular users of
data services. This is both to the benefit of the mobile operators and the
content owners and service providers - the latter who are getting a 90%
split of the revenue share on the price of the content.

Virtual Machines is the road to higher data revenue for the mobile operators

as seen in Korea.

Although little known or spoke of today, Virtual Machines (VM) in mobile phones will change the way mobile consumers use their phones and thereby how much money they spend on mobile data services.

This is not wishful thinking, but reality in Korea - where there are now over 3 million VM mobile phones in the hands of consumers.

If the European operators want to increase revenue, they will need new mobile services - services that in Korea have meant a dramatic rise in revenue pr. user. In Korea, a mobile 2.5G user without a VM mobile phone spends on average 2.9 EURO pr. month on data traffic, but with a VM enabled phone that figure is 5.1 EURO!

GPRS is as little "Always On" as WAP was the "Mobile Internet"

what can Europe, the USA and Japan learn from this?

There are still only a few GPRS terminals in the hands of the mobile users and most of those users have had difficulty even configuring their new GPRS mobile phone - as they are not delivered pre-configured from the mobile operators. But those few that have now tried GPRS have realised that the GPRS slogan "Always On" is somewhat misleading for the GPRS mobile phones available on the market today.

When you are marketing new technology, one of the major hurdles is to get the potential customers for your new product to actually understand what it is you are offering. Most new technology has the problem that customers either feel they do not have the need for the new technology, or that they do not understand what the new technology can do for them and therefore do not understand why they should invest in it. Basically customers do not care about technology - they care about what personal benefits can be gained from the product.

ARPU - Korea is achieving the impossible!

what can Europe, the USA and Japan learn from this?

In Korea, the ARPU (average revenue pr. user) is on the rise and there are some very good reasons for the astounding results that the Koreans have had over the past year on their ARPU.

ARPU is probably the single most important figure that the mobile operators are looking at today - how much money is each mobile subscriber using on average every month on their mobile phone. In the early mobile days, the ARPU was just the cost of the amount of time customers spent talking on their mobile phones, simply because that was all one could do on the early models - talk.

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Korea is the most advanced mobile market in the world today

will the European mobile operators use the lessons learned in Korea or try to reinvent the wheel themselves?

While the European mobile operators are still wondering how they are going to get their customers to buy new MMS/Java enabled 2.5G terminals and the Americans are only just opening up their SMS market, the Korean mobile operators have quietly worked very hard the last few years and are now 3 - 5 years ahead of the rest of the world!

In the past year, the Korean mobile operators have managed to get 25% of their total subscriber base to buy new 2.5G mobile phones - in all 9 million subscribers! 5 million of those have chosen the even more expensive mobile phones with colour screens!

Because of the 3G compatible transmission speeds, the high penetration rates and the structure of its mobile market South Korea represents the first real 3G lessons in the world and the first real taste of the 3G challenges ahead for European operators, content and services providers.

WAP has been a huge success in Korea

- in stark contrast to Europe.
What made the difference?

While most European mobile operators preferably don't even mention the word WAP any more, WAP has grown to be a huge success in Korea - as described in Strand Consults latest report "The Korean Mobile Market, a window to 3G".

During the past year, mobile Internet revenue in Korea has overtaken overpriced SMS services revenue and is still climbing. However the revenue from overpriced SMS's is still rising, even though it was overtaken by WAP based mobile services at the end of 2001. In other words, the Koreans have opened up a new market of WAP based mobile services - that they are now earning more on than their original overpriced SMS services - which they still also are making money on!

To understand why the Koreans are currently enjoying some of the best mobile success stories in the world, one has to look at the vastly different strategies that the Korean mobile operators and their European counterparts have implemented.

The results are astounding - and for now - still unknown to many European operators. In just over 1 year the Korean mobile operators have - amongst others - achieved the following results:

-25% of the mobile customers have bought 2.5G mobile phones
-Over 9 million 2.5G users in Korea today - 5 million with colour terminals
-A 2G customer spends 1.9 Euro, a 2.5G customer 4.6 Euro and a 2.5G customer with a colour screen 7.6 Euro on wireless internet pr. month
-MOU (minutes of use) has risen 15%
-The new mobile phones were all sold without any subsidisation

Low end colour mobile phones could break the ice for the 2.5G and 3G rollout

The major mobile terminal manufactures are in a bit of a dilemma.

Both the mobile operators and the terminal manufactures are still not quite sure exactly what will trigger the 2.5G and 3G markets, thereby ensuring a smooth and speedy transition. Some mobile operators still do not even have their 2.5G rollout strategy in place, which accounts for the lack of sensible marketing around the launch of new mobile phones, MMS and GPRS - basically the majority of the European mobile consumers still have no idea as to why they should want to upgrade to a new mobile phone sporting these and other new features.

At the same time, the market for PDA's is slowing down. There is undoubtedly a market for smartphones, with built in PDA facilities, but not a mass market and with the price of the recently announced new smartphones - definitely not the type of terminal that young consumers will rush out and buy.

Nokia, Ericsson, Motorola and Siemens must tread warily when planning new marketing campaigns

The major mobile terminal manufactures are in a bit of a dilemma.

On the one hand they must satisfy their own stockholders by making their businesses profitable but at the same time, it is very important that they do not raise the hopes of mobile consumers by e.g. fancy advertising containing peeks in to a mobile future that is not actually available today.

While the mobile operators are working out how to change the behaviour patterns of mobile consumers, so that they will be spending more and more money in the coming years on mobile services - on top of their voice traffic, the marketing departments of the terminal manufactures are facing multiple challenges:

·They must market their new mobile terminals to achieve maximum sales
·They must differentiate their products to the competitors
·They must sell off old 2G terminals to lower stock
·They ought to also take into consideration the status and strategies of the mobile operators

Unfortunately, the manufactures are still pushing mobile phone features, rather than working with the operators as to what those features can be used for - thereby creating a demand for the new terminals.

Distribution of MMS enabled mobile phones:

obstacles in connection with MMS still present a threat strong enough to create a new "WAPergate"

While the mobile operators are crossing their fingers and hoping MMS will be an ever bigger success than SMS has turned out to be - thereby ensuring the success and growth of non-voice mobile traffic - there are major obstacles that still need addressing, before MMS can really take off. At the same time, the MMS marketing guns are already being put in place and being tested.

Before any MMS services are available in any quantity in Europe, the marketing of MMS has already started - primarily by the terminal manufactures, eager to start selling 2.5G mobile phones, thereby getting a head start to the competition.

But there are so many obstacles still not addressed or solved, that marketing MMS right now does seem somewhat premature - especially with the lessons learned from the launch of WAP. Three main obstacles that desperately still need to be both addressed and solved, before MMS really can take off are:

·MMSC has not yet been implemented with all mobile operators
·Mobile operators have yet to present MMS revenue sharing models
·P2P MMS messages will not take off properly before mass penetration of MMS mobile phones is a reality

The mobile content providers have overlooked a million Euro market!

While the market for ringtones and logos in Europe is today worth around Euro 0.5 billion and will continue to earn money in the coming years, content providers who are now making money on these types of SMS services are completely overlooking a huge "new" market - EMS!

So what is EMS? EMS stands for Enhanced Message Service and allows mobile users to attach images, animations, sounds and melodies to SMS messages. Isn't that what we have today? No, today, almost all mobile services available in Europe can only be used on Nokia mobile phones! Nokia has their own system to handle images and audio called Smart Messaging. Most services available today are only compatible with Smart Messaging.

Why would anyone overlook such a huge opportunity with a proven business case valued at Euro 0.5 billion this year?

New Mobile services on stand-by until the mobile operators have their terminal strategy ready.

Now that the first mobile phones sporting MMS and GPRS - and even colour screens and built in cameras are available on the market, one of the big questions is, how will the mobile operators ensure that the mobile consumers start taking an interest in - and buying this new generation of 2.5G mobile phones?

Until there is a reasonable penetration of these new phones, new mobile services based on MMS and GPRS will not take off and open up a whole new market, standing on the shoulders of the success that p2p and premium SMS has enjoyed all over Europe. The operators badly need this new revenue, to help finance their 3G (UMTS) investments.

So even if the content providers create great new mobile services, in the hope that the mobile operators will eventually come up with strategy for a sensible revenue sharing deal, someone still has to have a plan on how to convince the mobile consumers that now is the time to upgrade their mobile phone to a 2.5G MMS/GPRS terminal.

GPRS has so far been a bigger flop than WAP - but nobody knows!

WAP was oversold. Nobody disagrees with that. And of course, nobody in their right mind would like to make the same mistake twice, and expect to keep their job the second time around!

Having agreed that WAP was hyped up more than when the USA put the first man on the moon - the difference being that the USA actually did put a man on the moon and WAP actually wasn't really "The Mobile Internet", how are the mobile operators handling the marketing of GPRS today?

The marketing of GPRS has been almost non-existent to the extent that most mobile phone owners today, have actually no idea whether they should buy a GPRS telephone or what to use it for. Some recent newspaper ads for new GPRS enabled mobile phones do not actually even mention that the phone is a GPRS phone!

WAP could jeopardise MMS - before MMS even gets going!

Following the dismal flop that WAP turned out to be when introduced in the late 90's, WAP now stands a good chance of turning the predicated success of MMS into an even bigger failure!

Why? Because:

·most people never worked out how to configure their WAP mobile phones

·WAP will be the platform that handles the transport of MMS

·MMS mobile phones still need to be configured to use WAP

People in the mobile sector are grinning amongst themselves today, when they talk about how WAP will finally have the success they had hoped for when WAP was first launched in the late 90's. But this time, the success will come without having to promote WAP itself. Simply put, it will be the WAP platform that will be handling and transporting the MMS messages, that will start complementing and replacing SMS based services

New report concludes: South Korea is the most developed market for mobile services in the world

Being the first is not always the same as being the best.
Japan was first to launch a 3G network for mobile services. But South Korea has been by far the best in turning this network technology into a commercial success.

The new report from Strand Consult "The Korean Market for Mobile Services, a window to 3G" shows how South Korea has developed the most advanced market for mobile services in the world. Even the Japanese market, often used as the benchmark, is a distant second compared to the Korean. Anyone looking for mobile Internet success stories should look to South Korea rather than Japan:

- Only 2 out of every 1000 mobile users in Japan owns a FOMA terminal. In South Korea 200 out of every 1000 mobile users own a 1X terminal.

Commercial Television Broadcasters will need to offer new services to their advertisers

or face the consequences of loosing them.

Advertising revenue has been declining on almost all media-platforms, as advertisers cut back on budgets and scramble in their search for the ever more fragmenting consumers.

While television still is a very powerful marketing tool, the ratings for television are being slowly affected by the younger generations take-up of the Internet and game-boxes and advertisers are already looking at how to target their audiences as Internet advertising looses it's momentum.

Interactive Advertising on Digital TV faces new problems

The mobile phone will be the preferred TV return path.

Still shaken after the collapse of ITV Digital in the UK, the DTV industry faces a new threat - mobile services on the mobile telephone.

The Digital TV sector has been, amongst other things, waiting for Interactive Advertising on Digital TV to take off on a large scale, thereby pumping money in to a sector that has had a long and tough uphill haul to attract new digital viewers and start paying back the huge investments in the deployment of Digital Set Top Boxes.

Palm and Handspring are fighting a loosing battle against Microsoft and others

A new report by Strand Consult concludes that neither Palm nor Handspring are likely to survive the convergence of mobile phones and Personal Digital Assistants (PDA).

The market for Smart Handheld Devices is expected to grow rapidly over the next few years, as 2.5G and 3G mobile services become widely available. Making use of these new services will require new terminals.

With almost 10 million units sold in 2000 alone, one should think that PDA producers like Palm and Handspring enjoy a head start in relations to the market for PDA's.

I-mode in Europe

Bringing i-mode to Europe is like importing a Japanese car to a place with no roads.

A new report by Strand Consult concludes that DoCoMo's i-mode is not the success many claim it to be, and rather than trying to adopt i-mode into Europe, European operators should instead concentrate on making it attractive to content providers to develop, and market quality content and services.

European mobile operators are not ready for GPRS

Making a mistake and learning from it, is a sign of intelligence. Making the same mistake twice is a sure sign of incompetence.

Many expect WAP-via-GPRS to save the mobile Internet from the damage done by the failed introduction of WAP-via-GSM. However, European operators are proving themselves not ready for GPRS. In fact, they are making the same mistakes as they did with WAP-via-GSM.

UK: Abysmal sales practices

Abysmal sales practices are hurting UK market for mobile phones

Do you know Chitter Chatter in Kings Road, London? It is probably the best place in the UK to buy a mobile phone. It is one of only a handful of shops who manages to provide good customer service and professional advice.

Retailers of mobile phones are not ready to sell new advanced mobilefones

New Report show that UK retailers of mobile phones are not ready to sell new advanced terminals

Until recently, the mobile phone was used exclusively for talking. Today, its functionality is ever increasing. We send SMS messages and an increasing number of customers use the phone to access the mobile Internet, information and email.

UK retailers are not proving themselves worthy as strategic partners in the project to ensure the success of 3G services

The Smart Handheld Device is the next and natural step in an ongoing evolutionary process.

Like all evolutionary processes, it is one towards greater complexity. It is a process, which offers new possibilities for users, and compound existing problems for mobile operators.