While it’s difficult nowadays to write about telecoms or the mobile sector without drifting off into other areas of the TMT industry, Zeitgeist spent an evening last month as a guest of Accenture in Cambridge, discussing the successes and failures of the recent Mobile World Congress in Barcelona. It came in the middle of a year so far that has already some significant shifts from mobile companies, in terms of branding, operations and revenue streams.
2013 has seen some interesting news in mobile. The week before last marked, incredibly, the 40th anniversary of the first phone call made from a mobile phone. This year also saw Research in Motion renaming itself to BlackBerry, with shares sliding 8% by the end of the product launch announcement for its eponymous 10 device. It saw Sky acquire Telefonica’s broadband operations, while responding to major complaints about the speed of its own broadband service. It has seen Huawei, which in Q4 of 2012 sold more smartphones than either Nokia, HTC or BlackBerry, come under scrutiny particularly in the US for its lack of transparency. Moreover, after much editorial ink spilled on Facebook’s lack of initiative and innovation in mobile, the release of the ‘super-app’ Chat Heads has piqued interest as it looks to compete with Whatsapp, Viber, iMessage et al., which Ovum reckons cost MNOs $23bn in lost revenue every year. This news mostly pertained to developed markets; JWT Intelligence’s interview with Jana CEO Nathan Eagle features some interesting insights on mobile trends in emerging markets.
Interestingly, 2013 thus far has also been witness to the beginning of more flexible contracts and payments. At the end of March, T-Mobile USA announced it would offer the iPhone to customers for cheaper than its rivals, and customers would not have to sign a contract. It effectively ends handset subsidies – something which Vodafone pledged to do last year and was punished by the stock market when it failed to do so – spreading the full cost of the phone over two years “as a separate line item on the monthly bill”, which may strike many as still quite a commitment. Customers must pay the bill for the phone in full in order to be able to end their tenure with the network. The New York Times elaborates, “Despite T-Mobile’s promise to be more straightforward than other carriers, some consumers might still find it confusing that they have to pay an extra device fee after paying $100 up front for an iPhone.” In the UK, O2 is going a similar route. At the end of last week the company announced similar plans to T-Mobile. While still keeping contracts as an option, the FT explained the company was looking to a plan, dubbed O2 Refresh, “that decoupled the cost of the phone from the cost of calls, texts and data. Customers will be able to buy a phone outright, or pay in instalments over time, and then sign up to a separate service contract that can be cancelled or changed at any time.” Although O2 said in the article that they expected customers to pay the same as they would on a standard contract, the new plans by both network providers will surely add to customer churn. Brands will have to work harder to develop true loyalty rather than relying on the lock-in feeling that adds to switching costs for many customers. Conversely, this added flexibility may make the providers feel less like utilities, creating more choice and differentiation.
At the aforementioned conference Zeitgeist attended last month, Accenture hosted an evening they dubbed “MWC: Fiesta or Siesta?”. It soon became apparent that many of the speakers invited were less than enthused with the conference this year. This was partly because there were no extraordinary leaps in technology or hardware on offer. It was also because of, as one speaker lamented, “the proliferation of suits”. Another speaker complained it was like listening to The Archers: long storylines “that ended up having no conclusion”. The very essence of the conference though is not about trendsetting, or cool new consumer devices. Mobile operators are utilities, the excitement around such an event is not going to be as visceral as that of SXSW or Embedded World. It led some to wonder whether the “real innovation was being developed in such ‘niche’ events, away from the “glitz”. Moreover, perhaps Samsung’s decision not to launch their new S4 handset at the Congress alluded to this lack of excitement, or at least a wish not to be drowned out by other announcements.
Among exciting trends on display at MWC, M2M – something Zeitgeist has written about before – was front and centre at the conference, particularly with regard to cars. Phablets continued to make their foray into the consumer’s view, with bigger screens meaning more data transfer. Zeitgeist wondered whether such a transition would put even more pressure on networks already struggling with large data handling. And although Firefox’s new OS gave some – including those at GigaOm – hope that it could provide more innovation through diversified competition in the marketplace, others, including Tony Milbourn, Executive Chairman of Intelligent Wireless, speaking at the event, thought it “underwhelming” after “lots of hype”. Bendable screens were also to be found at MWC, but those speaking at the Accenture conference like Richard Windsor of Radio Free Mobile said it was early days and much was still to be seen from this new type of phone. Its potential though, he readily conceded, was formidable. Wearable technology was a huge issue at the conference and one that Zeitgeist is particularly interested to see develop, especially as companies like Apple, Sony and Google enter the fray.
It seemed then that the Mobile World Congress failed to reflect what is turning out to be a tumultuous year in telecoms. Not only is there an increasing desire to address consumer needs – in the case of more flexible contracts and more consumer-facing company names – but as economies sputter their way toward ostensible recovery we are also starting to see M&A activity return to the sector. Time will tell whether new technologies, such as M2M or bendable screens can breathe new life into the sector.
After an annual loss of $6.4bn in 2011, Sony has since seen a new CEO come to the fore in the form of Kazuo Hirai, who immediately made it clear that major changes were needed, including significant job cuts, and a renewed focus on, among other sectors, videogames.
Last week at Gamescom, the company fared extremely well, “after unveiling wildly inventive new games for the PS3 and PS Vita, and fleshing out the appeal of its Wonderbook”. The Wonderbook – which consumers in London will get to try out this bank holiday weekend - in particular is of interest as it is a wholly separate device that works with your gaming device, and one of the few platforms that has an proprietary deal with author J.K. Rowling.
Mobile is another one of the significant sectors that Sony will be focussing on. The end of the company’s partnership with Ericsson will only help with this focus. The company tried to integrate gaming and mobile before the end of the partnership in the iteration of Xperia Play, with limited success. Beyond creating their own handset with PlayStation capabilities, they are now branching out. In June, Geek ran an article saying HTC has been given the rights to produce a certified PlayStation phone. Secondly, a company called GameKlip now allows you to play games on your Android phone with a PlayStation controller.
The Geek article talks about the initiative being “part of their attempt to broaden the PlayStation brand and increase total market share”. But since when has PlayStation been suffering as a brand? If you look at the social media fan base, PS has far greater affinity than the Sony brand. Is Sony giving away one of its biggest advantages (be it proprietary content, IP) to its biggest competitors in the mobile space, or is the bigger picture about simply extending the PlayStation brand as far and wide as possible?
Why dominance means nothing if you stop delivering.
Zeitgeist reported recently on the number of high street names issuing profits warnings after an icy December kept shoppers away from their tills.
The encroachment from online retailers onto traditional bricks and mortar stores is only going to increase as once dominant names slowly diminish into also rans, punished by their failure to adapt to progress.
While such a destiny is unfortunate for a lumbering organisation with a physical and costly infrastructure to maintain, for what should be a cutting edge technology company it is unforgivable.
A mere ten years ago, Finnish communications company Nokia dominated the mobile phone market. This rather quaint BBC story from from a decade ago reports that ‘Nokia has strengthened its grip on the world’s mobile phone handset market’ and that ‘for the first time, Nokia has a market share more than double that of its nearest competitor’.
The report concludes with a prediction from Forrester who anticipated that ‘five dominant players would control Europe’s networks by 2015′.
While that prediction may come true, it is questionable whether any of the dominant manufacturers from yesteryear will be among them.
This week’s ‘leaked’ memo from Nokia’s CEO Stephen Elop claimed that the company was ‘standing on a burning platform’ and surrounded by a ‘blazing fire’.
This is not a pleasant place to be. As mobile phones became smartphones an ever increasing importance was placed upon a phones operating system, both in terms of functionality and usability.
Just as the old high street stores threw up websites that weren’t quite as good as the dedicated online retailers Nokia produced Symbian, an operating system that failed to impress anywhere near as much as the ones you’d find on an Apple, Blackberry or Android phone.
Elop’s acknowledgement of the problem has opened the door for a radical change in strategy to try and rescue the problem.
Rumours abound of a partnership with an existing platform.
“It could either be a very bad marriage or a marriage of two players that have not been very effective alone.” commented Magnus Rehle of Greenwich Consulting.
The two likely candidates are Android, which would essentially relegate Nokia to a manufacturer in competition with other Android handset makers, or Microsoft who have also struggled to ship as many copies of their Window Phone 7 operating system as had been hoped.
The former would be a rather bitter pill for a once dominant giant.
The latter, and arguably preferable option, would bring together two massive organisations who have struggled to assert their dominance in the category.
An announcement is imminent, though as Hakim Kriout of Grigsby & Associates points out ‘Very few companies regain their leadership once they’ve lost it.’
Whichever route Nokia go down the lesson is there for brands in every category.
It is infinitely preferable to stay top of the pile than to have to climb back up after a fall.
Regardless of your current dominance, if you fail to keep up with what people want and expect from you, someone else will deliver it and take your crown before you’ve admitted there is a problem. Brands must avoid the complacency that dominance can bring.
If brands assumed that they were surrounded by crocodiles and stayed alert to change and ready to react, they’d be much more likely to avoid getting trapped by ‘blazing fires’.
Which telco is suing which other telco, captured in a lovely graphic from the always-interesting Information is Beautiful.
It would be interesting to note whether any of this activity (which we can assume includes negative press and derogatory remarks about multiple telecoms operators as they sling mud at one another) effects consumer perception, or if it is even on most people’s radars.
From the August Zeitgeist…
Mobile technology’s burgeoning status demands attention, as the medium has already provided some unique branding and interactive advertising opportunities. In this section we’ll examine the rise of netbooks, current moves in mobile and the evolution of the Internet.
Four years ago, someone hit upon the idea of making very cheap laptops available to the poorer regions of the world. These laptops would be scaled‐down physically and technically and it wasn’t too long before this idea was transplanted to the Western market; the netbook was born.
The Economist recently reported on the rise of this new type of laptop, as the market responds to a new paradigm in consumer desires; more mobile than your average laptop, and tripped down for those users who have no need of a computer with massive processing power. Interestingly, Disney has recently announced it will produce a branded netbook, according to eConsultancy.
When it comes to mobile handsets, smarter and softer are certainly the way forward. Although handset sales are predicted to shrink by 4% this year, sales of smartphones will rise an impressive 27%. The market is about to get very crowded; already an ideological battle on the software front is being waged by Apple’s proprietary iPhone operating system, and Google’s open‐source Android. For Android’s part, the upcoming Hero handset from HTC promises to be “more intuitive than the norm… Files [e.g. email, photos, etc.] relating to a particular person can all be accessed quickly through the phone’s contact list, without switching laboriously from one application to another.” This feature hits upon a key desire at the moment: intuitive aggregation of content for ease of access. Consumers will vote with their wallets as to who the victor will be.
Today we have 3G networks and mobile broadband. Now WiFi and WiMax coverage is increasing and 3G networks are soon to be succeeded by 4G. The latter will provide even faster connection speeds, and some companies are worried that this will make the ‘donglers’ of mobile broadband and the wireless routers in your home obsolete. The FT notes that WiMax coverage is extensive in the developing world where previously no telecoms infrastructure existed, but what about the already saturated Western world? As Reuters notes, ‘Is WiMax the Betamax of mobile space?’
Regardless of which technology reigns supreme, it is clear that people increasingly have the desire and the access to sufficient bandwith to participate in engaging mobile experiences, given the right impetus.