MELBOURNE, AUSTRALIA: Ovum has released a new report ‘Mobile broadband traffic management and QoS prioritisation,’ which reveals these will be the essential tools to help mobile broadband operators’ sure-up the mobile broadband business case, differentiate with new service offerings and optimise end-user experience.
A few years ago mobile operators were seeking to drive data traffic onto their networks. Now the game has changed. “The current challenge of mobile broadband provision is how to deliver enough capacity at the right times and in the right places while providing the best possible user experience, efficiently and profitably”, said Nathan Burley, Analyst based in Melbourne.
A variety of tools are being deployed and further developed to deliver this capacity. These include high-profile solutions such as HSPA upgrades and LTE, as well as femtocells or Wi-Fi where traffic is off-loaded from the macro network.
However, operators can also manage capacity better, especially in times of congestion. Through mobile traffic management and QoS operators can potentially reduce peak usage and improve user experience. We believe operators will implement such solutions and the days of all traffic being delivered on a best-effort basis will be over.
QoS provides differentiation for mobile broadband service offerings
To date, mobile broadband service packages have been differentiated predominately by speed and data volume (often flat rate). However, mobile broadband is increasingly difficult to differentiate in an ever more competitive market.
QoS, prioritisation and ‘nominal bit rates’ provide potential ways to differentiate service offerings, and we expect new price plans based on QoS that support new business models to emerge.
“Over time, it will become increasingly crucial for operators to implement these solutions to provide innovation in service offerings and to compete effectively”, Nathan Burley adds. “Additionally, implementing QoS will improve the competitive offering by enhancing end-user experience”.
Some mobile broadband users will be prepared to pay for preferential network access. Such users potentially include gamers, those in the public safety domain, high-value corporates and others with critical applications. Conversely, some users will be prepared to pay less for lower priority.
One of the best propositions for QoS prioritisation is using it as a ‘soft-value’ differentiator to deal with heavy mobile broadband users in conjunction with a fair-usage policy. Instead of, or in addition to, throttling to a pre-determined low speed or charging for additional usage after exceeding a data volume allocation, a user is downgraded in QoS priority.
Lowering the priority rating of heavy users prevents such users from consuming a disproportionate share of resources in times of congestion. Peak traffic demand is also managed, which may delay the need for network investments.
When including QoS features in service offerings, operators must be careful not to overcomplicate packages. To this end, some operators will relegate traffic management and QoS solutions to certain segments, or the fine print of terms and conditions.
QoS also opens up numerous other strategic options including launching a lower-priority service sub-brand, or prioritising different services or applications. For example, an operator could opt to favour realtime applications such as VoIP or video so they function in an optimal way, while de-prioritising applications such as peer-to-peer (P2P) – especially in times of congestion.
Application-based QoS also opens up potential for emerging business models where application vendors or third parties pay for higher priority delivery of their data, service or application.
However, QoS ratings for certain traffic, users or applications may raise net neutrality concerns and have regulatory implications in some markets. Operators are acutely aware that this is a sensitive subject in some markets and that they must tread carefully. Some have even implemented solutions, but kept them under wraps. However, we question this strategy and believe the best approach is to be open with end users.
Showing posts with label Ovum. Show all posts
Showing posts with label Ovum. Show all posts
Thursday, October 1, 2009
Tuesday, September 8, 2009
T-Mobile and Orange move to upset UK status quo
Emeka Obiodu and Steven Hartley, senior analysts with Ovum
UK: UK mobile network operators T-Mobile and Orange have announced exclusive negotiations to combine their UK operations into a 50:50 joint venture. Based on December 2008 figures, the combined entity would have 28 million subscribers and 37 percent market share.
Creating a new market leader
The first thing to note about today’s announcement is that it is for exclusive negotiations. The deal is unlikely to be signed until the end of October, with completion expected in the first half of next year.
Furthermore, on this morning’s briefing call both parties were keen to stress that the two brands would operate separately for a further 18 months, with a new brand not expected to launch until 2012 (maybe not the best idea when the Olympics come to London and global branding efforts to thousands of roamers are undermined). Therefore, there is still a long way to go and in the short term the deal will change very little.
However, assuming the deal goes through without a hitch, it does realign the UK competitive landscape. To date the two separate operators have struggled to close the gap on Vodafone and O2. The combined entity would not only become the clear market leader, but the synergies (through network integration, marketing and distribution, and other efficiencies) are promised to be £620 million by 2014, thereby improving profitability immensely.
It is important to remember too that Orange’s fixed broadband assets are also included in the deal, so the combination would enable T-Mobile customers to receive integrated offerings. This should not be overstated, but for T-Mobile the lack of a fixed strategy was leaving it somewhat exposed to future trends in the UK.
Huge challenges for Vodafone and 3
The T-Mobile/Orange merger sets the stage for a total transformation of the UK mobile market and poses the question of the response from Vodafone, O2 and 3. Unsurprisingly, 3 will be the most affected as the merger cuts it adrift in the market.
With a market share of less than 6 percent it would become too small to compete realistically and would have to reconsider its presence in the UK, either by becoming an MVNO or exiting the market.
For Vodafone, this merger is a blow as it relegates it to third in its domestic market. This will dent the group’s ego, and Vodafone must take steps to ameliorate it. Even a takeover of 3 will not be sufficient. However, given the recent cosiness between Vodafone and BT, this might just become the prompt for Vodafone to tie-up with BT and take the initiative in its domestic market as an integrated telco.
O2 and Virgin Mobile will be less impacted. O2 will lose its market leadership, but it has successfully challenged the market leader before, both in the UK and Germany. Therefore we do not see any drastic response from it. Virgin Mobile’s involvement will be limited to where its wholesale deal resides. If regulators compel T-Mobile/Orange to spin off the deal, then Virgin Mobile will get ready to work with a new partner.
Ovum expects regulators to approve deal
While the 37 percent market share of the combined Orange/T-Mobile business looks big, comparisons with Europe make it look reasonable. Market leaders in Belgium, France, Germany, Italy, the Netherlands, Spain and Portugal have similar shares. Indeed, regulators will look at a broader definition of dominance when approving the deal.
Regulators will have to look at the Virgin Mobile wholesale deal with T-Mobile and T-Mobile’s network-sharing deal with 3. We expect the Virgin Mobile deal to be decoupled –- Orange/T-Mobile tacitly suggested this by separating out Virgin Mobile’s customers in their subscriber data.
Regulators will likely encourage the continuation of T-Mobile’s network-sharing deal with 3, unless 3 becomes a takeover target itself. Finally, negotiations about spectrum re-farming are unlikely to be solved with this merger and the expected government plan should still materialise.
Ultimately, as long as regulators impose the necessary safeguards, we do not believe the deal is bad for consumers. Competition is good for consumers, but with five major players the UK operators were competing themselves to death and badly needed to consolidate.
The UK’s operators face many challenges, including recouping the billions invested in 3G; expanding and upgrading network coverage; and getting ready for 4G –- and all this without seeking any government subsidy. Therefore, something needed to be done.
UK: UK mobile network operators T-Mobile and Orange have announced exclusive negotiations to combine their UK operations into a 50:50 joint venture. Based on December 2008 figures, the combined entity would have 28 million subscribers and 37 percent market share.
Creating a new market leader
The first thing to note about today’s announcement is that it is for exclusive negotiations. The deal is unlikely to be signed until the end of October, with completion expected in the first half of next year.
Furthermore, on this morning’s briefing call both parties were keen to stress that the two brands would operate separately for a further 18 months, with a new brand not expected to launch until 2012 (maybe not the best idea when the Olympics come to London and global branding efforts to thousands of roamers are undermined). Therefore, there is still a long way to go and in the short term the deal will change very little.
However, assuming the deal goes through without a hitch, it does realign the UK competitive landscape. To date the two separate operators have struggled to close the gap on Vodafone and O2. The combined entity would not only become the clear market leader, but the synergies (through network integration, marketing and distribution, and other efficiencies) are promised to be £620 million by 2014, thereby improving profitability immensely.
It is important to remember too that Orange’s fixed broadband assets are also included in the deal, so the combination would enable T-Mobile customers to receive integrated offerings. This should not be overstated, but for T-Mobile the lack of a fixed strategy was leaving it somewhat exposed to future trends in the UK.
Huge challenges for Vodafone and 3
The T-Mobile/Orange merger sets the stage for a total transformation of the UK mobile market and poses the question of the response from Vodafone, O2 and 3. Unsurprisingly, 3 will be the most affected as the merger cuts it adrift in the market.
With a market share of less than 6 percent it would become too small to compete realistically and would have to reconsider its presence in the UK, either by becoming an MVNO or exiting the market.
For Vodafone, this merger is a blow as it relegates it to third in its domestic market. This will dent the group’s ego, and Vodafone must take steps to ameliorate it. Even a takeover of 3 will not be sufficient. However, given the recent cosiness between Vodafone and BT, this might just become the prompt for Vodafone to tie-up with BT and take the initiative in its domestic market as an integrated telco.
O2 and Virgin Mobile will be less impacted. O2 will lose its market leadership, but it has successfully challenged the market leader before, both in the UK and Germany. Therefore we do not see any drastic response from it. Virgin Mobile’s involvement will be limited to where its wholesale deal resides. If regulators compel T-Mobile/Orange to spin off the deal, then Virgin Mobile will get ready to work with a new partner.
Ovum expects regulators to approve deal
While the 37 percent market share of the combined Orange/T-Mobile business looks big, comparisons with Europe make it look reasonable. Market leaders in Belgium, France, Germany, Italy, the Netherlands, Spain and Portugal have similar shares. Indeed, regulators will look at a broader definition of dominance when approving the deal.
Regulators will have to look at the Virgin Mobile wholesale deal with T-Mobile and T-Mobile’s network-sharing deal with 3. We expect the Virgin Mobile deal to be decoupled –- Orange/T-Mobile tacitly suggested this by separating out Virgin Mobile’s customers in their subscriber data.
Regulators will likely encourage the continuation of T-Mobile’s network-sharing deal with 3, unless 3 becomes a takeover target itself. Finally, negotiations about spectrum re-farming are unlikely to be solved with this merger and the expected government plan should still materialise.
Ultimately, as long as regulators impose the necessary safeguards, we do not believe the deal is bad for consumers. Competition is good for consumers, but with five major players the UK operators were competing themselves to death and badly needed to consolidate.
The UK’s operators face many challenges, including recouping the billions invested in 3G; expanding and upgrading network coverage; and getting ready for 4G –- and all this without seeking any government subsidy. Therefore, something needed to be done.
NGN funding gap
Craig Skinner, Senior Consultant, Ovum
UK: The dilemma facing both fixed and mobile next generation network builders is the current and foreseeable gap between network costs and the revenues that can be captured by the network business.
Even in the absence of regulation, the shift to IP based networks has seen an increasing commoditisation of network services. New services are being enabled, but the benefits are largely being captured either by end customers or the retail service providers.
The traditional bulwark of telecoms revenues, voice, is also progressively becoming a commodity service provided over the network rather than from within the network. The response by operators is to supplement and eventually largely replace voice revenues with a combination of commodity bandwidth services and, where possible, value added services.
In an antithesis of the IP network vs services separation philosophy, standards and technology such as IMS seek to re-embed service functionality into the network core.
Most operators are attempting to delay the inevitable for as long as possible, with the non-approval of the Google Voice application being a recent high-profile example.
Video, whether live streaming or stored content, has long been hyped as a next generation service. While video over IP does require high bandwidth to deliver customer expectations on quality and hence justifies building higher bandwidth networks, the revenue model has proven more challenging.
With viewers typically not willing to cover the costs of most video viewing, the traditional broadcasting industry model is to source the revenue gap from advertising. The question for network providers is whether they can capture any of this revenue source.
The standard approach to regulating next generation networks (predominantly fixed) in a number of countries looks like it will focus on creating wholesale only networks.
While there are sound economic arguments to separate the network infrastructure from the services delivery to promote services competition, it should be understood that a strict retail-wholesale separation will also separate the retail revenues from the wholesale network costs, exacerbating the cost-revenue funding gap.
A lot of the debate about the value of next generation networks seems to confuse this retail-wholesale distinction, with analysts talking up retail services and revenues that will not be accessible to the wholesale network provider.
One solution to this cost-revenue funding gap is for government subsidy of the network infrastructure costs, diverting money from other infrastructure budgets where benefits from greater use of telecoms network services can lead to potential infrastructure cost savings, such as in transport infrastructure.
UK: The dilemma facing both fixed and mobile next generation network builders is the current and foreseeable gap between network costs and the revenues that can be captured by the network business.
Even in the absence of regulation, the shift to IP based networks has seen an increasing commoditisation of network services. New services are being enabled, but the benefits are largely being captured either by end customers or the retail service providers.
The traditional bulwark of telecoms revenues, voice, is also progressively becoming a commodity service provided over the network rather than from within the network. The response by operators is to supplement and eventually largely replace voice revenues with a combination of commodity bandwidth services and, where possible, value added services.
In an antithesis of the IP network vs services separation philosophy, standards and technology such as IMS seek to re-embed service functionality into the network core.
Most operators are attempting to delay the inevitable for as long as possible, with the non-approval of the Google Voice application being a recent high-profile example.
Video, whether live streaming or stored content, has long been hyped as a next generation service. While video over IP does require high bandwidth to deliver customer expectations on quality and hence justifies building higher bandwidth networks, the revenue model has proven more challenging.
With viewers typically not willing to cover the costs of most video viewing, the traditional broadcasting industry model is to source the revenue gap from advertising. The question for network providers is whether they can capture any of this revenue source.
The standard approach to regulating next generation networks (predominantly fixed) in a number of countries looks like it will focus on creating wholesale only networks.
While there are sound economic arguments to separate the network infrastructure from the services delivery to promote services competition, it should be understood that a strict retail-wholesale separation will also separate the retail revenues from the wholesale network costs, exacerbating the cost-revenue funding gap.
A lot of the debate about the value of next generation networks seems to confuse this retail-wholesale distinction, with analysts talking up retail services and revenues that will not be accessible to the wholesale network provider.
One solution to this cost-revenue funding gap is for government subsidy of the network infrastructure costs, diverting money from other infrastructure budgets where benefits from greater use of telecoms network services can lead to potential infrastructure cost savings, such as in transport infrastructure.
Friday, September 4, 2009
Mobile operators stand to gain little from unified communications revolution
MELBOURNE, AUSTRALIA: The market for Unified Communications (UC) is likely to grow significantly in the next five years. Even in the midst of the economic downturn, Ovum estimates over 16 million enterprise-owned mobile devices will be connected to UC platforms by 2014.
Fixed telecoms operators, IT services providers, UC technology vendors and specialists are all jostling to take a share. In the midst of this, Ovum has identified a significant opportunity for mobile network operators (MNOs) to influence and profit from UC.
Ovum interviewed a number of global wireless operators and UC platform providers. While many operators were aware of the opportunity UC provided, most were holding back from launching services in a market which is poised for dramatic growth. Based on feedback from enterprises large and small, Ovum has identified a gap in service provision which should be filled by mobile operators.
Evan Kirchheimer, Principal Analyst, comments: “Connecting enterprise mobile devices to a UC platform may be undertaken by enterprise IP telephony vendors, by large SIs, local IT-oriented VARs, device manufacturers, or by small independent middleware vendors which enable fixed-mobile convergence”.
“With such a varied array of players, Ovum has found that MNOs are not in the driving seat when it comes to mobile UC market development. There have been some early UC service launches, but for the most part many operators have held back,” he adds.
Kirchheimer believes the key for hesitant mobile operators is to focus on SMEs. MNOs have a natural advantage in their strong relationships with SMEs. In contrast, larger businesses most often have complex and varied fixed Private Branch Exchange (PBX) estates, and PBX vendors and large SIs will be in a more natural position to extend UC functionality to mobile devices via the PBX than will MNOs.
SMEs will not benefit from such high-end attention, and will be attracted to simpler solution bundles on simple terms. Several operators indicated that they plan to base their UC solutions for SMEs on mobile centrex services, thereby eventually aiming to fully displace fixed handsets with mobile devices in many smaller businesses.
However, continues Kirchheimer, “Centrex-based solutions will not appeal to all, especially larger enterprises with significant fixed investments”. “To attack this base of prospects, mobile operators should develop partnerships with some of those very firms they may one day compete against: IP telephony vendors, local value-added resellers and messaging software vendors (e.g., Microsoft).”
The report highlights that mobile providers should not be distracted by the buzz about mobilizing enterprise applications. Our recent survey of 2000 SME telecoms buyers indicated that most SMEs express much greater interest in core UC features (directory, presence, unified messaging) than in horizontal applications like mobile field force automation or fleet management.
“However, mobile operators do face major challenges in this market. UC is not a connection, but a service”, Kirchheimer adds. “A major obstacle for MNOs will be developing tariffs which accommodate device-independent employee behaviour, application management, and flat-rate bundled voice and data.
“The transition to UC will have significant implications for billing systems and internal cost allocations. Building a service infrastructure will be essential for MNOs, as they offer and support SLAs that involve elements in which typical operators will not have any expertise.”
Kirchheimer continues: “If mobile operators craft the right strategies and execute well, then UC could be the first application which enables them to provide more than just voice minutes, email and SMS to a large number of enterprises, and in particular, to small businesses.”
Fixed telecoms operators, IT services providers, UC technology vendors and specialists are all jostling to take a share. In the midst of this, Ovum has identified a significant opportunity for mobile network operators (MNOs) to influence and profit from UC.
Ovum interviewed a number of global wireless operators and UC platform providers. While many operators were aware of the opportunity UC provided, most were holding back from launching services in a market which is poised for dramatic growth. Based on feedback from enterprises large and small, Ovum has identified a gap in service provision which should be filled by mobile operators.
Evan Kirchheimer, Principal Analyst, comments: “Connecting enterprise mobile devices to a UC platform may be undertaken by enterprise IP telephony vendors, by large SIs, local IT-oriented VARs, device manufacturers, or by small independent middleware vendors which enable fixed-mobile convergence”.
“With such a varied array of players, Ovum has found that MNOs are not in the driving seat when it comes to mobile UC market development. There have been some early UC service launches, but for the most part many operators have held back,” he adds.
Kirchheimer believes the key for hesitant mobile operators is to focus on SMEs. MNOs have a natural advantage in their strong relationships with SMEs. In contrast, larger businesses most often have complex and varied fixed Private Branch Exchange (PBX) estates, and PBX vendors and large SIs will be in a more natural position to extend UC functionality to mobile devices via the PBX than will MNOs.
SMEs will not benefit from such high-end attention, and will be attracted to simpler solution bundles on simple terms. Several operators indicated that they plan to base their UC solutions for SMEs on mobile centrex services, thereby eventually aiming to fully displace fixed handsets with mobile devices in many smaller businesses.
However, continues Kirchheimer, “Centrex-based solutions will not appeal to all, especially larger enterprises with significant fixed investments”. “To attack this base of prospects, mobile operators should develop partnerships with some of those very firms they may one day compete against: IP telephony vendors, local value-added resellers and messaging software vendors (e.g., Microsoft).”
The report highlights that mobile providers should not be distracted by the buzz about mobilizing enterprise applications. Our recent survey of 2000 SME telecoms buyers indicated that most SMEs express much greater interest in core UC features (directory, presence, unified messaging) than in horizontal applications like mobile field force automation or fleet management.
“However, mobile operators do face major challenges in this market. UC is not a connection, but a service”, Kirchheimer adds. “A major obstacle for MNOs will be developing tariffs which accommodate device-independent employee behaviour, application management, and flat-rate bundled voice and data.
“The transition to UC will have significant implications for billing systems and internal cost allocations. Building a service infrastructure will be essential for MNOs, as they offer and support SLAs that involve elements in which typical operators will not have any expertise.”
Kirchheimer continues: “If mobile operators craft the right strategies and execute well, then UC could be the first application which enables them to provide more than just voice minutes, email and SMS to a large number of enterprises, and in particular, to small businesses.”
Thursday, September 3, 2009
Service providers need to focus on the channel
MELBOURNE, AUSTRALIA: Back in the late 90s when the telecoms industry first developed broadband technologies such as DSL, it was the wealth of opportunities that the technology would create that really excited service providers.
Over the past two decades broadband access has provided a good revenue source and has been highly profitable for many, but service providers have never really been able to take full advantage of the other opportunities broadband access provides.
IPTV and VoD have been a success for some, but certainly from a profitability point of view, will not be an option for all. Many of the other opportunities often highlighted, such as online music, gaming, and even technical support and content back up have also been taken up by other players and therefore have become fiercely competitive markets.
Michael Philpott, Practice Leader, says: “One issue that service providers will have to tackle if they are to get back in the game, is a more prominent marketing channel into the consumer home”.
“Often the main points of customer contact for the broadband service provider is when the customer first signs up from the broadband service, and when something goes wrong -– with only the odd e-mail flyer in-between,” says Philpott, based in London.
“Operators can try and do take advantage of these main points of contact, but to be really successful, they need to be looking for innovative and eye-catching ways of opening up more consistent communication channels with their customer base.”
Ovum is pleased to see that such innovation is starting to enter the market. Those few service providers that still have a successful Internet portal, are starting to innovate around that as a way of entertaining, helping, communication with and up-selling services to existing clients.
Others, who do not have a very successful portal, are starting to experiment with free services, to gain the initial traction, and then looking for ways to further up sell services on top of the initial offering.
One such pilot by a tier one player in the US found that such a strategy increased its marketing success rate over traditional methods by 200 percent, as well as gaining:
* A significant increase in VAS awareness –- 615 percent increase in web traffic for the music service.
* An increase in service uptake –- 55 percent increase in new security subscriptions.
* A decrease in service churn –- 20 percent decrease in security service churn.
Such innovation has been a long time in coming, but it is certainly not too late, and operators will need to continue to innovate in both the services and applications they offer, and in how they market and deliver those services, if they are to successfully grow consumer revenues in the long term.
Over the past two decades broadband access has provided a good revenue source and has been highly profitable for many, but service providers have never really been able to take full advantage of the other opportunities broadband access provides.
IPTV and VoD have been a success for some, but certainly from a profitability point of view, will not be an option for all. Many of the other opportunities often highlighted, such as online music, gaming, and even technical support and content back up have also been taken up by other players and therefore have become fiercely competitive markets.
Michael Philpott, Practice Leader, says: “One issue that service providers will have to tackle if they are to get back in the game, is a more prominent marketing channel into the consumer home”.
“Often the main points of customer contact for the broadband service provider is when the customer first signs up from the broadband service, and when something goes wrong -– with only the odd e-mail flyer in-between,” says Philpott, based in London.
“Operators can try and do take advantage of these main points of contact, but to be really successful, they need to be looking for innovative and eye-catching ways of opening up more consistent communication channels with their customer base.”
Ovum is pleased to see that such innovation is starting to enter the market. Those few service providers that still have a successful Internet portal, are starting to innovate around that as a way of entertaining, helping, communication with and up-selling services to existing clients.
Others, who do not have a very successful portal, are starting to experiment with free services, to gain the initial traction, and then looking for ways to further up sell services on top of the initial offering.
One such pilot by a tier one player in the US found that such a strategy increased its marketing success rate over traditional methods by 200 percent, as well as gaining:
* A significant increase in VAS awareness –- 615 percent increase in web traffic for the music service.
* An increase in service uptake –- 55 percent increase in new security subscriptions.
* A decrease in service churn –- 20 percent decrease in security service churn.
Such innovation has been a long time in coming, but it is certainly not too late, and operators will need to continue to innovate in both the services and applications they offer, and in how they market and deliver those services, if they are to successfully grow consumer revenues in the long term.
Wednesday, September 2, 2009
Can BSNL and MTNL be turned around?
Amit Gupta, Principal Analyst, Ovum
UK: While the Indian telecom industry is experiencing high growth and private sector operators are posting impressive results, performance of the two state owned operators -– namely, BSNL and MTNL -– continues to decline.
As state owned entities, these two operators get preferential treatment from the government. Nevertheless, they fail to take advantage of such a treatment. One of the recent examples is dismal uptake of 3G service launched by these two, despite being the only operators in India with 3G spectrum.
Speculations around divestment in these companies and their merger have been rife for many years. While the current government has not expressed any intention to further divest in MTNL, it has renewed its efforts to divest 10% stake in BSNL. The government plans to explore a possibility of merging BSNL and MTNL after divestment in the former is completed.
BSNL’s management and the government believe that divestment will help the company raise capital required for its long-term growth and turn around. BSNL has also laid-out a strategy to reverse the company’s declining performance. However, cure of these companies’ malaise require different medicine.
Political intervention, a bureaucratic culture and pre-liberalization mindset are the root causes for BSNL and MTNL’s poor performance. The inadequacy of a divestment solution to address these weaknesses is evidenced in the case of MTNL, which has been a listed company for many years but nonetheless continues to see declining performance.
Potential investors would need control over management and decision-making in order to turn these companies around, which is impossible while the government owns a majority stake.
Privatization will provide potential investors the required control. Even with such a control, the challenge to transform BSNL and MTNL from state owned sick companies into customer centric service providers will be daunting. Due to the size and complexity of these companies, it won’t be possible for an outsider to manage change without the cooperation of the existing employees.
At the same time, investors will have to cut the flab from a bloated workforce. Employees of these companies are likely to be strongly entrenched with a keen sense of internal loyalty, so achieving both objectives will require time as well as efforts.
Despite these challenges, privatization is the only economically viable option. Competition in the Indian telecom industry will become more intense. With their culture and mindset, along with the political baggage they come with, BSNL and MTNL as state-owned companies cannot face such a competition.
The realities of coalition politics will prohibit the Indian government from taking the radical and unpopular decision of privatizing these companies. However, if political will is there, it is still possible to save these companies from their eventual demise.
UK: While the Indian telecom industry is experiencing high growth and private sector operators are posting impressive results, performance of the two state owned operators -– namely, BSNL and MTNL -– continues to decline.
As state owned entities, these two operators get preferential treatment from the government. Nevertheless, they fail to take advantage of such a treatment. One of the recent examples is dismal uptake of 3G service launched by these two, despite being the only operators in India with 3G spectrum.
Speculations around divestment in these companies and their merger have been rife for many years. While the current government has not expressed any intention to further divest in MTNL, it has renewed its efforts to divest 10% stake in BSNL. The government plans to explore a possibility of merging BSNL and MTNL after divestment in the former is completed.
BSNL’s management and the government believe that divestment will help the company raise capital required for its long-term growth and turn around. BSNL has also laid-out a strategy to reverse the company’s declining performance. However, cure of these companies’ malaise require different medicine.
Political intervention, a bureaucratic culture and pre-liberalization mindset are the root causes for BSNL and MTNL’s poor performance. The inadequacy of a divestment solution to address these weaknesses is evidenced in the case of MTNL, which has been a listed company for many years but nonetheless continues to see declining performance.
Potential investors would need control over management and decision-making in order to turn these companies around, which is impossible while the government owns a majority stake.
Privatization will provide potential investors the required control. Even with such a control, the challenge to transform BSNL and MTNL from state owned sick companies into customer centric service providers will be daunting. Due to the size and complexity of these companies, it won’t be possible for an outsider to manage change without the cooperation of the existing employees.
At the same time, investors will have to cut the flab from a bloated workforce. Employees of these companies are likely to be strongly entrenched with a keen sense of internal loyalty, so achieving both objectives will require time as well as efforts.
Despite these challenges, privatization is the only economically viable option. Competition in the Indian telecom industry will become more intense. With their culture and mindset, along with the political baggage they come with, BSNL and MTNL as state-owned companies cannot face such a competition.
The realities of coalition politics will prohibit the Indian government from taking the radical and unpopular decision of privatizing these companies. However, if political will is there, it is still possible to save these companies from their eventual demise.
Friday, August 28, 2009
China Telecom 1H09: promising growth in the mobile market, but pressures remain
CHINA: China Telecom, the country’s biggest fixed operator, demonstrated strong growth in the mobile market in 1H09. The 3G licence it was granted in early 2009 has provided it with an opportunity to enter the mobile market just as fixed-to-mobile substitution is beginning to accelerate its fixed subscriber losses.
Its mobile subscriber numbers are now beginning to grow. It averaged almost 2 million monthly net additions in 1H09, and saw strong growth in its mobile net addition market share.
In contrast, the largest mobile operator, China Mobile, is losing its dominant share of net subscriber additions, with a share of 66 percent in 1H09, down from 85 percent in 1H08.
Ovum expects China Telecom’s strong mobile growth to continue in the second half of 2009 for two reasons:
* China Telecom is leading the way on 3G network deployment. Currently, it has the largest coverage of any of the Chinese operators, with 342 cities and more than 2,000 counties covered by its CDMA EV-DO rollout as of July 2009. In contrast, China Unicom has only deployed WCDMA in just over 100 cities, and China Mobile’s TD-SCDMA networks will only cover 238 cities by the end of 2009.
* Bundling will help China Telecom continue its strong growth. The bundling of mobile and fixed services is leading to the rapid expansion of its mobile subscriber base.
China Telecom announced that in the first half of 2009, the penetration of bundled among its mobile subscribers was 48 percent. China Telecom’s dominance in the fixed and broadband markets should promote further growth in the mobile market.
Evidence from July 2009 bears this out, with China Telecom gaining 2.45 million new subscribers –- its highest monthly growth to date.
But there are difficulties to overcome
Despite the potential for further growth, China Telecom needs to address several issues if it is to remain competitive with China Unicom and China Mobile:
* Poor choice of handsets for 3G customers. Although China Telecom has been heavily advertising its 3G brand in the market, the lack of handset choice is likely to become a limiting factor for further growth of its 3G services. It needs to expand the range of handsets available soon in order to maintain its current rate of growth.
* Weak show in rural markets. China Telecom has made great progress in urban markets, but it needs to take action to win new customers in rural areas too. China Mobile is dominant in rural markets and China Unicom has recently announced its rural strategies. With mobile penetration only around 20 percent in these markets, there is huge potential for growth in rural regions.
* Over-reliance on heavy subsidies. Although the use of heavy subsidies has been a successful competitive strategy for the three operators in the 3G market, these subsidies have become a drag on financial results. China Telecom should consider targeting niche markets and enhancing its bundled offerings to reduce reliance on subsidies.
Its mobile subscriber numbers are now beginning to grow. It averaged almost 2 million monthly net additions in 1H09, and saw strong growth in its mobile net addition market share.
In contrast, the largest mobile operator, China Mobile, is losing its dominant share of net subscriber additions, with a share of 66 percent in 1H09, down from 85 percent in 1H08.
Ovum expects China Telecom’s strong mobile growth to continue in the second half of 2009 for two reasons:
* China Telecom is leading the way on 3G network deployment. Currently, it has the largest coverage of any of the Chinese operators, with 342 cities and more than 2,000 counties covered by its CDMA EV-DO rollout as of July 2009. In contrast, China Unicom has only deployed WCDMA in just over 100 cities, and China Mobile’s TD-SCDMA networks will only cover 238 cities by the end of 2009.
* Bundling will help China Telecom continue its strong growth. The bundling of mobile and fixed services is leading to the rapid expansion of its mobile subscriber base.
China Telecom announced that in the first half of 2009, the penetration of bundled among its mobile subscribers was 48 percent. China Telecom’s dominance in the fixed and broadband markets should promote further growth in the mobile market.
Evidence from July 2009 bears this out, with China Telecom gaining 2.45 million new subscribers –- its highest monthly growth to date.
But there are difficulties to overcome
Despite the potential for further growth, China Telecom needs to address several issues if it is to remain competitive with China Unicom and China Mobile:
* Poor choice of handsets for 3G customers. Although China Telecom has been heavily advertising its 3G brand in the market, the lack of handset choice is likely to become a limiting factor for further growth of its 3G services. It needs to expand the range of handsets available soon in order to maintain its current rate of growth.
* Weak show in rural markets. China Telecom has made great progress in urban markets, but it needs to take action to win new customers in rural areas too. China Mobile is dominant in rural markets and China Unicom has recently announced its rural strategies. With mobile penetration only around 20 percent in these markets, there is huge potential for growth in rural regions.
* Over-reliance on heavy subsidies. Although the use of heavy subsidies has been a successful competitive strategy for the three operators in the 3G market, these subsidies have become a drag on financial results. China Telecom should consider targeting niche markets and enhancing its bundled offerings to reduce reliance on subsidies.
Thursday, August 13, 2009
Undersea outages in Asia -– again!
UK: ral news outlets have reported multiple undersea cable breaks around Southeast Asia occurring on 12 August 2009. Due to the depths of the water and the fact that -– according to various reports and quoted cable operators -- multiple cables have been affected, the most likely cause is undersea seismic activity (i.e. earthquakes).
Cable damage due to fishing activity tends to be in shallow water, and usually affects one cable at a time. Yesterday’s disruptions, then, are puzzling. The only Asia region earthquakes logged in this timeframe by the US Geological Survey (USGS) –- usually a reliable source –- are located far from the reported breaks. Assuming the breaks did occur at the reported locations, then, several explanations are possible.
One is that the USGS log simply missed one or more underwater earthquakes responsible for the breaks. The measurement process is not flawless, especially underwater, and the risk of errors would seem to be higher during bad weather –- which Typhoon Morakot clearly represents.
The USGS did log a magnitude 5.6 quake around Mindanao, Philippines at 4am today (local time, in the Philippines); if a similar quake a day earlier went unrecorded, this would explain some of the reported outages.
Another possibility is that the outages actually stem from terrestrial hardware or fiber network failures; these are less common but not unheard of. Deliberate sabotage of either the undersea cables or the cable terminating stations on shore is another explanation.
This is in theory a big risk, as cable stations are not always well secured, and it is impossible to safeguard thousands of kilometers of cable deep underwater. But again, this is unlikely, and -– as far as the public knows –- this has not happened yet outside of imaginative novels.
Hopefully these issues will resolve themselves over the next few days. Given that there is no single authority managing or monitoring the world’s undersea cable networks, uncertainty is inevitable, and it takes time to learn the hard facts.
We would note, though, that the real story here may be how much progress Asia’s international network connectivity has made in just the last few years. With the installation of the Transpacific Express, the Asia America Gateway, several smaller intra-Asia projects and cables linking Europe and Asia through India and the Middle East (not all complete), the region’s cable systems are now much more meshed and resilient, and less prone to catastrophic failures.
With progress comes higher expectations, though, so we look forward to learning from this recent outage how to improve performance going forward; after all, undersea cable networks play central, underappreciated roles in global commerce.
Cable damage due to fishing activity tends to be in shallow water, and usually affects one cable at a time. Yesterday’s disruptions, then, are puzzling. The only Asia region earthquakes logged in this timeframe by the US Geological Survey (USGS) –- usually a reliable source –- are located far from the reported breaks. Assuming the breaks did occur at the reported locations, then, several explanations are possible.
One is that the USGS log simply missed one or more underwater earthquakes responsible for the breaks. The measurement process is not flawless, especially underwater, and the risk of errors would seem to be higher during bad weather –- which Typhoon Morakot clearly represents.
The USGS did log a magnitude 5.6 quake around Mindanao, Philippines at 4am today (local time, in the Philippines); if a similar quake a day earlier went unrecorded, this would explain some of the reported outages.
Another possibility is that the outages actually stem from terrestrial hardware or fiber network failures; these are less common but not unheard of. Deliberate sabotage of either the undersea cables or the cable terminating stations on shore is another explanation.
This is in theory a big risk, as cable stations are not always well secured, and it is impossible to safeguard thousands of kilometers of cable deep underwater. But again, this is unlikely, and -– as far as the public knows –- this has not happened yet outside of imaginative novels.
Hopefully these issues will resolve themselves over the next few days. Given that there is no single authority managing or monitoring the world’s undersea cable networks, uncertainty is inevitable, and it takes time to learn the hard facts.
We would note, though, that the real story here may be how much progress Asia’s international network connectivity has made in just the last few years. With the installation of the Transpacific Express, the Asia America Gateway, several smaller intra-Asia projects and cables linking Europe and Asia through India and the Middle East (not all complete), the region’s cable systems are now much more meshed and resilient, and less prone to catastrophic failures.
With progress comes higher expectations, though, so we look forward to learning from this recent outage how to improve performance going forward; after all, undersea cable networks play central, underappreciated roles in global commerce.
Tuesday, August 11, 2009
Spending in China propels Huawei to near tie with Alcatel-Lucent
UK: Ovum today announced its preliminary 2Q09 results for global optical equipment networking vendors. The global optical networking (ON) market, led by strength in Asia-Pacific markets, was $3.9 billion, up 11 percent sequentially, but down 9 percent compared with 2Q08.
“This marks the third consecutive quarter that the ON market has shrunk compared with the year-ago quarter, but given the global economic conditions we were not surprised,” remarked Ron Kline, Ovum’s Research Director, Optical Networking.
“Spending in Asia-Pacific remained surprisingly strong, driven by 3G network builds in China. The level of spending we’re seeing in China has disproportionally benefitted Huawei and ZTE, adding over a share point each to their market positions, and has brought Huawei to the verge of market leadership, an event we think very likely for 3Q09.”
Top 10 ON vendor share
Of the top 10 vendors, only Huawei and ZTE posted both sequential and year-over-year revenue gains, reflecting the surge in spending in their home market.
Alcatel-Lucent and Ericsson posted sequential revenue gains but were still off 22 percent and 18 percent from the year-ago period, while Ciena, Fujitsu, NEC, Nokia Siemens, Nortel, and Tellabs all declined sequentially and year over year. Huawei and ZTE grew revenues by 21 percent and 62 percent, respectively, over 2Q08 due to 3G mobile-related aggregation spending in China.
“Alcatel-Lucent held on to the market lead with 20.7 percent annualized share, but Huawei picked up 1.4 percentage points to come within just 0.2 points of the market leader at 20.5 percent share,” said Kline.
“Given the continued strength of spending in China where Huawei is strong, favorable exchange rates, light exposure to North America, and access to capital, it’s only a matter of time before we have a new market leader.”
“This marks the third consecutive quarter that the ON market has shrunk compared with the year-ago quarter, but given the global economic conditions we were not surprised,” remarked Ron Kline, Ovum’s Research Director, Optical Networking.
“Spending in Asia-Pacific remained surprisingly strong, driven by 3G network builds in China. The level of spending we’re seeing in China has disproportionally benefitted Huawei and ZTE, adding over a share point each to their market positions, and has brought Huawei to the verge of market leadership, an event we think very likely for 3Q09.”
Top 10 ON vendor share
Of the top 10 vendors, only Huawei and ZTE posted both sequential and year-over-year revenue gains, reflecting the surge in spending in their home market.
Alcatel-Lucent and Ericsson posted sequential revenue gains but were still off 22 percent and 18 percent from the year-ago period, while Ciena, Fujitsu, NEC, Nokia Siemens, Nortel, and Tellabs all declined sequentially and year over year. Huawei and ZTE grew revenues by 21 percent and 62 percent, respectively, over 2Q08 due to 3G mobile-related aggregation spending in China.
“Alcatel-Lucent held on to the market lead with 20.7 percent annualized share, but Huawei picked up 1.4 percentage points to come within just 0.2 points of the market leader at 20.5 percent share,” said Kline.
“Given the continued strength of spending in China where Huawei is strong, favorable exchange rates, light exposure to North America, and access to capital, it’s only a matter of time before we have a new market leader.”
Wednesday, August 5, 2009
EU finally frees up 900MHz band for other uses
UK: Comment from Marcela Sirio, analyst at Ovum:
Running votes in parallel will mean benefits can be realised sooner
Following the European Parliament, the EU Council of Ministers approved the European Commission’s GSM Directive, which allows the 900MHz frequency band to be used by technologies other than GSM and GPRS, as previously established by the GSM Directive of 1987.
The final version of the updated directive and new guidelines setting out technical measures to allow the co-existence of GSM (2G) and UMTS (3G) systems on the 900MHz frequency band are expected to be released by September 2009; after that the EU member countries will have six months to implement the new directive. The directive will also facilitate the use of 4G high-speed broadband technologies to be deployed in the 900MHz band in the longer term.
Until now, the implementation of the new directive has been delayed because it was part of the ongoing framework review, which was held up because of controversy over the reinstatement of an amendment to the review.
By taking the decision to separate the vote from the telecoms package, the EC has avoided further delays to a process that is expected to bring savings of up to €1.6 billion through more efficient management of the radio spectrum.
A helping hand to digital strategies around Europe
The renewed directive has the potential to expand the rollout of wireless broadband services and give European countries an extra ‘push’ to elaborate on their existing spectrum re-farming plans.
The expansion of mobile broadband coverage is a topic that has been much discussed by the EU member countries, particularly the subject of widening the Universal Service Obligation (USO) to include broadband.
Wireless solutions would fit ideally with the desired expansion of broadband access in rural areas and EU policy targets of having ‘broadband for all Europeans by 2010’ and ‘high-speed Internet broadband for all Europeans by 2013’.
Because of the ongoing delays to the spectrum re-farming process, most countries in Europe have already developed their spectrum re-farming plans -– although with this development regulators should spring into action.
Measure adds difficulty to UK’s unequal spectrum holding issue, but at the same time gives it a deadline
The new directive comes at a good time for countries such as Finland, France, Germany and the UK, adding more clarity to their recently launched digital strategy plans.
However, at the moment the release of spectrum is probably much more relevant to the UK than to other European countries. Since 2007 the country has been trying to solve the problem of unequal spectrum holding between its operators.
While regulator Ofcom is not obliged by the directive to consider these factors, it does have an obligation to promote the interests of consumers. Currently, Vodafone and O2 hold the entire 900MHz spectrum band, and if the spectrum is liberalised simply in the hands of the incumbent operators then Orange, T-Mobile and 3 UK could potentially be left at a serious competitive disadvantage.
As a result of Digital Britain, the Department for Business, Enterprise & Regulatory Reform (BERR) will provide directions to Ofcom on how to act in regards to the spectrum holding.
The good news is that progress has been made, with the independent spectrum broker’s proposal to establish spectrum caps to solve the inequality of holdings. With this renewed sense of urgency and extra push, the UK’s long-running saga may finally come to an end.
Running votes in parallel will mean benefits can be realised sooner
Following the European Parliament, the EU Council of Ministers approved the European Commission’s GSM Directive, which allows the 900MHz frequency band to be used by technologies other than GSM and GPRS, as previously established by the GSM Directive of 1987.
The final version of the updated directive and new guidelines setting out technical measures to allow the co-existence of GSM (2G) and UMTS (3G) systems on the 900MHz frequency band are expected to be released by September 2009; after that the EU member countries will have six months to implement the new directive. The directive will also facilitate the use of 4G high-speed broadband technologies to be deployed in the 900MHz band in the longer term.
Until now, the implementation of the new directive has been delayed because it was part of the ongoing framework review, which was held up because of controversy over the reinstatement of an amendment to the review.
By taking the decision to separate the vote from the telecoms package, the EC has avoided further delays to a process that is expected to bring savings of up to €1.6 billion through more efficient management of the radio spectrum.
A helping hand to digital strategies around Europe
The renewed directive has the potential to expand the rollout of wireless broadband services and give European countries an extra ‘push’ to elaborate on their existing spectrum re-farming plans.
The expansion of mobile broadband coverage is a topic that has been much discussed by the EU member countries, particularly the subject of widening the Universal Service Obligation (USO) to include broadband.
Wireless solutions would fit ideally with the desired expansion of broadband access in rural areas and EU policy targets of having ‘broadband for all Europeans by 2010’ and ‘high-speed Internet broadband for all Europeans by 2013’.
Because of the ongoing delays to the spectrum re-farming process, most countries in Europe have already developed their spectrum re-farming plans -– although with this development regulators should spring into action.
Measure adds difficulty to UK’s unequal spectrum holding issue, but at the same time gives it a deadline
The new directive comes at a good time for countries such as Finland, France, Germany and the UK, adding more clarity to their recently launched digital strategy plans.
However, at the moment the release of spectrum is probably much more relevant to the UK than to other European countries. Since 2007 the country has been trying to solve the problem of unequal spectrum holding between its operators.
While regulator Ofcom is not obliged by the directive to consider these factors, it does have an obligation to promote the interests of consumers. Currently, Vodafone and O2 hold the entire 900MHz spectrum band, and if the spectrum is liberalised simply in the hands of the incumbent operators then Orange, T-Mobile and 3 UK could potentially be left at a serious competitive disadvantage.
As a result of Digital Britain, the Department for Business, Enterprise & Regulatory Reform (BERR) will provide directions to Ofcom on how to act in regards to the spectrum holding.
The good news is that progress has been made, with the independent spectrum broker’s proposal to establish spectrum caps to solve the inequality of holdings. With this renewed sense of urgency and extra push, the UK’s long-running saga may finally come to an end.
Smartphone capability tracker: what’s hot and what’s not
UK: Tim Renowden, analyst at Ovum, comments:
GPS and WiFi are hot
Ovum’s data (collated from DeviceMine and Ovum research) identified 77 smartphone models released by key manufacturers in the sample period. Of these, 59 handsets had GPS capability and 49 had WiFi, indicating that these technologies are now key features across nearly all smartphones, not just high-end models.
Some operators still have a reluctance to admit WiFi-equipped handsets onto their networks, but Ovum believes consumers now expect WiFi to be present in smartphones.
The widespread availability of GPS (across all of the major smartphone platforms) is great news for developers wishing to deploy location-based applications and services, but so far few developers have taken advantage of this beyond basic navigation products.
Ovum’s smartphone capability tracker showed much lower penetration for TV-out capability, although this was of little surprise as it is only recently that most platforms have really possessed the multimedia abilities required to justify its inclusion.
Only the iPhone, Symbian and Windows Mobile platforms produced devices with TV-out, with Samsung in particular being proactive in supporting the feature. Ovum expects TV-out to grow in popularity among media-centric smartphones, along with increasing processing power and screen resolutions.
On the processor front, most smartphones are currently based on ARM11 architecture, but Ovum expects some ARM Cortex A8-based chipsets to appear in devices within the next update, and platforms like Qualcomm’s Snapdragon or Nvidia’s Tegra to emerge later in 2009 as manufacturers seek to add greater multimedia functionality to devices.
Devices based on the ARM Cortex A9 multi-core architecture are expected in 2010.
RIAs and widget frameworks are not
Widgets are another buzzword in the industry, but the tracker shows that only around 10 percent of smartphones support Internet widget frameworks. This is another area where we expect rapid growth in adoption through 2009/10.
Ovum has previously discussed the potential for rich Internet application (RIA) frameworks as application platforms in mobile handsets, but the tracker shows how little impact RIAs have so far made on smartphones.
Adobe’s Flash and Flash Lite have achieved the best penetration, with 41 smartphone models supporting Flash. Symbian dominates this figure: 25 are Symbian-based (all except one of the Symbian handsets released support Flash).
Windows Mobile has patchy support for Flash (manufacturers even support it inconsistently across their Windows Mobile portfolios), and iPhone OS and Android currently do not support it at all.
Of the other RIA frameworks tracked (Adobe AIR and Microsoft Silverlight), penetration is zero, indicating that usefulness of these platforms for application developers is still some way off.
App stores are cooking unevenly
One of the biggest talking points in the industry in the last 12 months has been the rise of on-device application stores. Despite the limitless hype, for the sample period very few devices were released with pre-installed app store clients. Apple’s iPhone, HTC’s Android devices and several Nokia handsets (featuring Nokia’s Download! client, not the newer Ovi Store) were the only devices with app stores pre-installed.
We expect a big change in this area in the next version of the smartphone tracker, as platform owners and manufacturers have now begun to respond in earnest to the app store buzz. On-device app stores have launched on BlackBerry and Palm’s WebOS, Nokia now has Ovi Store, Windows Mobile 6.5 will feature an app store, and a greater proportion of new handsets will feature these clients in the next version of the tracker.
GPS and WiFi are hot
Ovum’s data (collated from DeviceMine and Ovum research) identified 77 smartphone models released by key manufacturers in the sample period. Of these, 59 handsets had GPS capability and 49 had WiFi, indicating that these technologies are now key features across nearly all smartphones, not just high-end models.
Some operators still have a reluctance to admit WiFi-equipped handsets onto their networks, but Ovum believes consumers now expect WiFi to be present in smartphones.
The widespread availability of GPS (across all of the major smartphone platforms) is great news for developers wishing to deploy location-based applications and services, but so far few developers have taken advantage of this beyond basic navigation products.
Ovum’s smartphone capability tracker showed much lower penetration for TV-out capability, although this was of little surprise as it is only recently that most platforms have really possessed the multimedia abilities required to justify its inclusion.
Only the iPhone, Symbian and Windows Mobile platforms produced devices with TV-out, with Samsung in particular being proactive in supporting the feature. Ovum expects TV-out to grow in popularity among media-centric smartphones, along with increasing processing power and screen resolutions.
On the processor front, most smartphones are currently based on ARM11 architecture, but Ovum expects some ARM Cortex A8-based chipsets to appear in devices within the next update, and platforms like Qualcomm’s Snapdragon or Nvidia’s Tegra to emerge later in 2009 as manufacturers seek to add greater multimedia functionality to devices.
Devices based on the ARM Cortex A9 multi-core architecture are expected in 2010.
RIAs and widget frameworks are not
Widgets are another buzzword in the industry, but the tracker shows that only around 10 percent of smartphones support Internet widget frameworks. This is another area where we expect rapid growth in adoption through 2009/10.
Ovum has previously discussed the potential for rich Internet application (RIA) frameworks as application platforms in mobile handsets, but the tracker shows how little impact RIAs have so far made on smartphones.
Adobe’s Flash and Flash Lite have achieved the best penetration, with 41 smartphone models supporting Flash. Symbian dominates this figure: 25 are Symbian-based (all except one of the Symbian handsets released support Flash).
Windows Mobile has patchy support for Flash (manufacturers even support it inconsistently across their Windows Mobile portfolios), and iPhone OS and Android currently do not support it at all.
Of the other RIA frameworks tracked (Adobe AIR and Microsoft Silverlight), penetration is zero, indicating that usefulness of these platforms for application developers is still some way off.
App stores are cooking unevenly
One of the biggest talking points in the industry in the last 12 months has been the rise of on-device application stores. Despite the limitless hype, for the sample period very few devices were released with pre-installed app store clients. Apple’s iPhone, HTC’s Android devices and several Nokia handsets (featuring Nokia’s Download! client, not the newer Ovi Store) were the only devices with app stores pre-installed.
We expect a big change in this area in the next version of the smartphone tracker, as platform owners and manufacturers have now begun to respond in earnest to the app store buzz. On-device app stores have launched on BlackBerry and Palm’s WebOS, Nokia now has Ovi Store, Windows Mobile 6.5 will feature an app store, and a greater proportion of new handsets will feature these clients in the next version of the tracker.
Tuesday, August 4, 2009
Hopes of upturn in 2Q09 telecom financial deal flow despite unfriendly public markets
MELBOURNE, AUSTRALIA: According to a new study from Ovum, the global analyst and consulting company, telecom sector financial deal activity in 2Q09 reflects a modest, but tangible, increase in confidence among the major players: carriers, vendors, their financial and legal advisors, and the investment institutions looking for reasons to pull their money off the sidelines.
Based on Ovum’s report, titled Financial Deals Industry Insight -– Telecommunications (2Q09 edition), public stock offerings remain nearly nonexistent even as market volatility lowers, and venture capital (VC) investments in telecom continue in similar volumes but at a much lower average deal size: from $13.0M per deal in 2Q08, the 2Q08 average was $9.8M.
However, the private placement market -– issuance of debt securities for fundraising –- has actually picked up nicely as public markets have fallen: 19 deals in 2Q09, in line with the quarterly average since 4Q07 –- but the total deal value increased again, nearly double 1Q09 to $18.0B, up from $3.6B in 2Q08.
One significant deal as of yet unclosed –- South Africa-based MTN’s pending merger with Indian carrier Bharti Airtel (partly funded by a separate private placement deal) –- does sway the average upwards, but there were three other closed deals above $1B in 2Q09: Qtel, Crown Castle, and Cricket/Leap.
Matt Walker, Ovum principal analyst and author of the report, noted that there is also promising news from the world of mergers and acquisitions: “We are starting to see more big, complex deals; these often entail long negotiation cycles and carry regulatory uncertainties. In late 2008 the financial market’s volatility killed interest in such transactions.”
For 1H09 overall, M&A deal count in telecom was 315, down significantly from the 391 deals announced or closed in 1H08. But total deal value for 2Q09 was roughly $35B, or twice the average seen in the previous three quarters.
Watching the announced but not yet closed deals will also help gauge market stability, especially MTN-Bharti, but also Verizon’s sales of select assets to (in separate deals) Frontier and AT&T; Greece’s sale of a 5 percent stake in OTE to DT; and Russia-based Rostelecom’s sale of a 40 percent stake in itself to two separate investment entities.
In addition, Walker noted that governments and deep-pocketed vendors are helping to close the gap as public markets remain tough. Governments are doing this by directly funding broadband infrastructure buildouts, licensing new wireless spectrum at favourable terms, subsidizing private sector R&D (e.g. at the European Investment Bank), and lending money in special cases, as when Export Development Canada offered NSN $300M for its initial bid on Nortel’s CDMA and LTE assets.
As for vendors, Cisco is one example: it is using its Cisco Capital unit to leverage its notoriously rich cash horde -- over $33B of cash and short-term investments on the balance sheet -- to offer financing to customers and channel partners. In 1H-FY09, it was responsible for $2.1B in lease and long-term loan arrangements.
In addition, Chinese vendors ZTE and Huawei both have billions of dollars in either explicit or implicit credit lines with various Chinese banks: the China Development Bank, the Export-Import Bank, and the Bank of China.
Walker said: “This subsidized financing helps these Chinese vendors’ carrier customers expand more easily and quickly, which also facilitates deal activity (e.g. cross-border M&As to grow wireless footprint).”
On net, Walker concluded that, while the outlook remains cloudy, steps taken in 2Q09 by vendors, governments, and private financiers to compensate for weakness in the macroeconomy and public equity markets bode well for the remainder of the year in telecom.
Based on Ovum’s report, titled Financial Deals Industry Insight -– Telecommunications (2Q09 edition), public stock offerings remain nearly nonexistent even as market volatility lowers, and venture capital (VC) investments in telecom continue in similar volumes but at a much lower average deal size: from $13.0M per deal in 2Q08, the 2Q08 average was $9.8M.
However, the private placement market -– issuance of debt securities for fundraising –- has actually picked up nicely as public markets have fallen: 19 deals in 2Q09, in line with the quarterly average since 4Q07 –- but the total deal value increased again, nearly double 1Q09 to $18.0B, up from $3.6B in 2Q08.
One significant deal as of yet unclosed –- South Africa-based MTN’s pending merger with Indian carrier Bharti Airtel (partly funded by a separate private placement deal) –- does sway the average upwards, but there were three other closed deals above $1B in 2Q09: Qtel, Crown Castle, and Cricket/Leap.
Matt Walker, Ovum principal analyst and author of the report, noted that there is also promising news from the world of mergers and acquisitions: “We are starting to see more big, complex deals; these often entail long negotiation cycles and carry regulatory uncertainties. In late 2008 the financial market’s volatility killed interest in such transactions.”
For 1H09 overall, M&A deal count in telecom was 315, down significantly from the 391 deals announced or closed in 1H08. But total deal value for 2Q09 was roughly $35B, or twice the average seen in the previous three quarters.
Watching the announced but not yet closed deals will also help gauge market stability, especially MTN-Bharti, but also Verizon’s sales of select assets to (in separate deals) Frontier and AT&T; Greece’s sale of a 5 percent stake in OTE to DT; and Russia-based Rostelecom’s sale of a 40 percent stake in itself to two separate investment entities.
In addition, Walker noted that governments and deep-pocketed vendors are helping to close the gap as public markets remain tough. Governments are doing this by directly funding broadband infrastructure buildouts, licensing new wireless spectrum at favourable terms, subsidizing private sector R&D (e.g. at the European Investment Bank), and lending money in special cases, as when Export Development Canada offered NSN $300M for its initial bid on Nortel’s CDMA and LTE assets.
As for vendors, Cisco is one example: it is using its Cisco Capital unit to leverage its notoriously rich cash horde -- over $33B of cash and short-term investments on the balance sheet -- to offer financing to customers and channel partners. In 1H-FY09, it was responsible for $2.1B in lease and long-term loan arrangements.
In addition, Chinese vendors ZTE and Huawei both have billions of dollars in either explicit or implicit credit lines with various Chinese banks: the China Development Bank, the Export-Import Bank, and the Bank of China.
Walker said: “This subsidized financing helps these Chinese vendors’ carrier customers expand more easily and quickly, which also facilitates deal activity (e.g. cross-border M&As to grow wireless footprint).”
On net, Walker concluded that, while the outlook remains cloudy, steps taken in 2Q09 by vendors, governments, and private financiers to compensate for weakness in the macroeconomy and public equity markets bode well for the remainder of the year in telecom.
Friday, July 31, 2009
Telcos localise SaaS for the SME market
Comment by Claudio Castelli, Senior Analyst at Ovum
UK: National and regional telcos are increasingly picking applications with localised content to cement existing relationships with SMEs and differentiate from the global software-as-a-service (SaaS) providers.
The goal is to be the preferred ‘one-stop shop’ for ICT services for SMEs, combining applications and services from local developers and global providers. However, some of these partners will eventually also be competitors.
Administrative applications high on the agenda
With software delivered as a service from virtually anywhere, telcos entering the SaaS game will increasingly face competition from global players in their own backyards.
With much smaller scale, telcos will need to be creative in finding ways to differentiate in their marketplace. Existing customer relations and good knowledge of their particular needs will be key to telcos' ambitions to maintain a broader role in the value chain and avoid the risk of becoming only connectivity providers.
An increasing number of telcos are launching services focusing on SMEs' local needs. Telstra, for example, launched its SaaS proposition in April, with offerings including Workforce Guardian, an HR service that helps SMEs in Australia to create compliant employment contracts.
It has now announced Xero, a hosted accounting tool that provides SMEs with access to bank transactions, invoicing reports and tax data. In both cases, applications will run based on local requirements. This is expected to provide a competitive advantage against global players.
Telcos want to be a ‘one-stop shop’ for SMEs
Having a single ICT provider is on the majority of SMEs’ wish-lists. Ovum research shows that 65 percent of SMEs globally prefer to purchase all their fixed and mobile services from a single provider. Telcos are listening to their demands.
An important value that telcos can add is integrating multiple services into end-to-end offerings. They normally have relationships with the majority of small business customers, which in many cases extend beyond billing. Their reach and understanding of SME pain points might attract the right ISV partners.
However, some of these partners might eventually become competitors. Telstra will also offer Microsoft Online Services through its SaaS platform T-Suite. Although not broadly promoted, Microsoft also offers applications online directly to customers. We think there is potential conflict in the future.
SingTel is another operator that is working hard to build an end-to-end ICT proposition for SMEs in Singapore. The operator released a range of ICT packages for SMEs, and recently launched an Innovation Exchange programme to bring application developers into the service provider’s SaaS offerings.
The aim is to combine solutions from global players such as Microsoft, Google and Salesforce.com with local ISVs. Like Telstra, SingTel included HR applications in these initial offerings.
Other telcos are also rolling out their SME plans. AT&T has just re-launched its small business portal; AT&T Small Business InSite now provides a library of practical ‘how to’ articles, podcasts and video resources to help small companies integrate technology into their business, with a strong emphasis on mobile solutions, remote access and wireless applications.
UK: National and regional telcos are increasingly picking applications with localised content to cement existing relationships with SMEs and differentiate from the global software-as-a-service (SaaS) providers.
The goal is to be the preferred ‘one-stop shop’ for ICT services for SMEs, combining applications and services from local developers and global providers. However, some of these partners will eventually also be competitors.
Administrative applications high on the agenda
With software delivered as a service from virtually anywhere, telcos entering the SaaS game will increasingly face competition from global players in their own backyards.
With much smaller scale, telcos will need to be creative in finding ways to differentiate in their marketplace. Existing customer relations and good knowledge of their particular needs will be key to telcos' ambitions to maintain a broader role in the value chain and avoid the risk of becoming only connectivity providers.
An increasing number of telcos are launching services focusing on SMEs' local needs. Telstra, for example, launched its SaaS proposition in April, with offerings including Workforce Guardian, an HR service that helps SMEs in Australia to create compliant employment contracts.
It has now announced Xero, a hosted accounting tool that provides SMEs with access to bank transactions, invoicing reports and tax data. In both cases, applications will run based on local requirements. This is expected to provide a competitive advantage against global players.
Telcos want to be a ‘one-stop shop’ for SMEs
Having a single ICT provider is on the majority of SMEs’ wish-lists. Ovum research shows that 65 percent of SMEs globally prefer to purchase all their fixed and mobile services from a single provider. Telcos are listening to their demands.
An important value that telcos can add is integrating multiple services into end-to-end offerings. They normally have relationships with the majority of small business customers, which in many cases extend beyond billing. Their reach and understanding of SME pain points might attract the right ISV partners.
However, some of these partners might eventually become competitors. Telstra will also offer Microsoft Online Services through its SaaS platform T-Suite. Although not broadly promoted, Microsoft also offers applications online directly to customers. We think there is potential conflict in the future.
SingTel is another operator that is working hard to build an end-to-end ICT proposition for SMEs in Singapore. The operator released a range of ICT packages for SMEs, and recently launched an Innovation Exchange programme to bring application developers into the service provider’s SaaS offerings.
The aim is to combine solutions from global players such as Microsoft, Google and Salesforce.com with local ISVs. Like Telstra, SingTel included HR applications in these initial offerings.
Other telcos are also rolling out their SME plans. AT&T has just re-launched its small business portal; AT&T Small Business InSite now provides a library of practical ‘how to’ articles, podcasts and video resources to help small companies integrate technology into their business, with a strong emphasis on mobile solutions, remote access and wireless applications.
European telcos tread carefully in enterprise services business
Comment from Richard Mahony and David Molony, analysts at Ovum
UK: BT Global Services has reported a 4 percent increase in revenues to £2,079 million in the three months to the end of June, the first quarter in its current financial year, 2010. However, its EBITDA was squeezed further to £62 million and the division ended with an operating loss of £124 million.
Orange Business Services, the enterprise division of France Telecom, has reported revenues down 1.7 percent on a like-for-like basis to €3,836 million in the first six months, but its EBITDA margin was up at 20.4 percent.
Both companies cited the impact of exchange rates on their outcomes, but while BT’s sterling numbers were adversely affected, France Telecom said that exchange rates had worked in its favour.
Orange Business Services reported steady if unexciting progress overall, but the numbers are going in the right direction. Revenues from advanced and extended services -– the next generation of IP and value-added services -– increased 4.9 percent and 5.9 percent, respectively on a like-for-like basis.
Operators make the best of mobile
Orange Business Services’ subscriber numbers for managed services are at new higher levels. The worldwide total for IP VPN users increased to 324,000. Managed mobile service Business Everywhere increased end users to a new high of 718,000.
Mobile network capability is only one advantage that Orange Business Services enjoys over BT Global Services. The French service provider’s numbers also count revenues from SMEs in France, Poland, the UK and Spain.
BT Group keeps its SME services in the Retail division under BT Business. As we have pointed out previously, this is a key contributor to its margin. BT also improvises well with MVNO-based mobility services, although it did not break out revenues this time.
Equally, there is no sign that France Telecom thinks this is the time to try and take advantage of any perceived weakness at BT with a major expansion programme. Capex in the enterprise business was reduced by 12.1 percent to €138 million.
At the MNC level, it is less obvious that Orange Business Services has found the magic bullet for profitability; it does not break out margins for MNC contracts versus SME business.
However, the order book at Orange Business Services has been filled with a series of strong contract renewals this year, among them Fairchild Semiconductor, Total and Zurich Financial. These have all included new service features in the extended contracts.
For example, WAN optimization for Total has helped to raise the new contract value to €100 million. Zurich Financial’s IP outsourcing contract is being extended to include managed BlackBerry mobile services and HD videoconferencing.
BT clings to prospects for MNCs
Despite its setbacks, BT Global Services is maintaining a strong win rate in comparison with its competitors, and maintaining its regional strength within Europe. We also see that the business has a strong order book, with some profitable contracts. The latest performance has been largely down to some unprofitable deals.
However, in spite of its shaky financial performance, customer sentiment remains largely positive and the BT Global Services sales machine continues to win business at a rate that outstrips it competition in Europe.
The BT Global Services order book comprises some of the largest contracts, and it continues add to it, with £1.4 billion for the quarter. A key contract for the quarter was the extension of the DFTS contract through the UK Ministry of Defence (MoD) as the business considers how to proceed with its future core network strategy.
The Fiat Group renewed its contract, worth €325 million (£278 million) over the next five years, presumably as a result of BT’s previous acquisition of Atlanet.
Whilst it is dangerous to make direct comparisons, assuming that this deal is of a similar scope to the one that BT signed five years ago, BT is not generating the same revenues -– the original contract was signed for €450 million (£303 million) in 2005.
UK: BT Global Services has reported a 4 percent increase in revenues to £2,079 million in the three months to the end of June, the first quarter in its current financial year, 2010. However, its EBITDA was squeezed further to £62 million and the division ended with an operating loss of £124 million.
Orange Business Services, the enterprise division of France Telecom, has reported revenues down 1.7 percent on a like-for-like basis to €3,836 million in the first six months, but its EBITDA margin was up at 20.4 percent.
Both companies cited the impact of exchange rates on their outcomes, but while BT’s sterling numbers were adversely affected, France Telecom said that exchange rates had worked in its favour.
Orange Business Services reported steady if unexciting progress overall, but the numbers are going in the right direction. Revenues from advanced and extended services -– the next generation of IP and value-added services -– increased 4.9 percent and 5.9 percent, respectively on a like-for-like basis.
Operators make the best of mobile
Orange Business Services’ subscriber numbers for managed services are at new higher levels. The worldwide total for IP VPN users increased to 324,000. Managed mobile service Business Everywhere increased end users to a new high of 718,000.
Mobile network capability is only one advantage that Orange Business Services enjoys over BT Global Services. The French service provider’s numbers also count revenues from SMEs in France, Poland, the UK and Spain.
BT Group keeps its SME services in the Retail division under BT Business. As we have pointed out previously, this is a key contributor to its margin. BT also improvises well with MVNO-based mobility services, although it did not break out revenues this time.
Equally, there is no sign that France Telecom thinks this is the time to try and take advantage of any perceived weakness at BT with a major expansion programme. Capex in the enterprise business was reduced by 12.1 percent to €138 million.
At the MNC level, it is less obvious that Orange Business Services has found the magic bullet for profitability; it does not break out margins for MNC contracts versus SME business.
However, the order book at Orange Business Services has been filled with a series of strong contract renewals this year, among them Fairchild Semiconductor, Total and Zurich Financial. These have all included new service features in the extended contracts.
For example, WAN optimization for Total has helped to raise the new contract value to €100 million. Zurich Financial’s IP outsourcing contract is being extended to include managed BlackBerry mobile services and HD videoconferencing.
BT clings to prospects for MNCs
Despite its setbacks, BT Global Services is maintaining a strong win rate in comparison with its competitors, and maintaining its regional strength within Europe. We also see that the business has a strong order book, with some profitable contracts. The latest performance has been largely down to some unprofitable deals.
However, in spite of its shaky financial performance, customer sentiment remains largely positive and the BT Global Services sales machine continues to win business at a rate that outstrips it competition in Europe.
The BT Global Services order book comprises some of the largest contracts, and it continues add to it, with £1.4 billion for the quarter. A key contract for the quarter was the extension of the DFTS contract through the UK Ministry of Defence (MoD) as the business considers how to proceed with its future core network strategy.
The Fiat Group renewed its contract, worth €325 million (£278 million) over the next five years, presumably as a result of BT’s previous acquisition of Atlanet.
Whilst it is dangerous to make direct comparisons, assuming that this deal is of a similar scope to the one that BT signed five years ago, BT is not generating the same revenues -– the original contract was signed for €450 million (£303 million) in 2005.
Wednesday, July 29, 2009
Mobile money in emerging markets still fragile, but ready to become a mass-market service by 2014
LONDON, UK: A new report from global consulting and advisory firm Ovum, reveals activity in mobile payment services (and more broadly mobile money services) is accelerating in many emerging markets.
The report titled, “Mobile money in emerging markets”, finds the market is still in its infancy, yet it has the potential to become a mass-market service, penetrating one-third of all mobile users in emerging markets in five years’ time.
However, much will hinge on how well the industry addresses various market barriers, and its ability to nurture user demand with clear, simple and attractive propositions.
The mobile money market has accelerated in the last two years in emerging markets, mostly in more mature markets. “The success of Vodafone’s Kenya subsidiary Safaricom with its mobile money service M-Pesa has underlined the potential for mobile money services,” says Angel Dobardziev, Emerging Markets practice leader and co-author of the report.
Yet, despite more than 100 launches of mobile money services by both service providers and banks globally the marketremains in a fragile state with few well-established services.
Whilst there is a range of alternative scenarios, Ovum predicts that the most likely scenario will be a market where service penetration reaches between 30 percent and 40 percent of the emerging market’s mobile users in 2014.
Where the industry resolves the market barriers more quickly than envisaged, an optimistic scenario is possible where strong user demand propels mobile money services to penetrate between 60 percent and 70 percent of the mobile users in the emerging market by 2014.
One of the key factors influencing market uptake of mobile money services is the relatively low penetration of access to financial services compared to higher (and fast-growing) penetration of mobile services.
Service providers along with banks will need to target unbanked and connected customers as they are the key demand driver for the market today, says the report. “Recruitment, training, incentivising and support of networks of mobile money agents will be key to service providers’ mobile money strategies, particularly when it comes to targeting unbanked customers”, says Dobardziev.
“Without access to an extensive distribution network for the users to deposit and withdraw cash as they make use of the service, users will be prevented from making the most of the service.”
In order to ensure early user disappointments do not extinguish the market, services providers must get the basics of the service right. “This means not losing sight of the fact that telecoms and banking have very different volume, size, margin and error tolerances on their core transactions.
As the two worlds draw closer with mobile banking, this will mean a different mindset and approach to service provision, reliability and security,” Dobardziev concludes.
The report titled, “Mobile money in emerging markets”, finds the market is still in its infancy, yet it has the potential to become a mass-market service, penetrating one-third of all mobile users in emerging markets in five years’ time.
However, much will hinge on how well the industry addresses various market barriers, and its ability to nurture user demand with clear, simple and attractive propositions.
The mobile money market has accelerated in the last two years in emerging markets, mostly in more mature markets. “The success of Vodafone’s Kenya subsidiary Safaricom with its mobile money service M-Pesa has underlined the potential for mobile money services,” says Angel Dobardziev, Emerging Markets practice leader and co-author of the report.
Yet, despite more than 100 launches of mobile money services by both service providers and banks globally the marketremains in a fragile state with few well-established services.
Whilst there is a range of alternative scenarios, Ovum predicts that the most likely scenario will be a market where service penetration reaches between 30 percent and 40 percent of the emerging market’s mobile users in 2014.
Where the industry resolves the market barriers more quickly than envisaged, an optimistic scenario is possible where strong user demand propels mobile money services to penetrate between 60 percent and 70 percent of the mobile users in the emerging market by 2014.
One of the key factors influencing market uptake of mobile money services is the relatively low penetration of access to financial services compared to higher (and fast-growing) penetration of mobile services.
Service providers along with banks will need to target unbanked and connected customers as they are the key demand driver for the market today, says the report. “Recruitment, training, incentivising and support of networks of mobile money agents will be key to service providers’ mobile money strategies, particularly when it comes to targeting unbanked customers”, says Dobardziev.
“Without access to an extensive distribution network for the users to deposit and withdraw cash as they make use of the service, users will be prevented from making the most of the service.”
In order to ensure early user disappointments do not extinguish the market, services providers must get the basics of the service right. “This means not losing sight of the fact that telecoms and banking have very different volume, size, margin and error tolerances on their core transactions.
As the two worlds draw closer with mobile banking, this will mean a different mindset and approach to service provision, reliability and security,” Dobardziev concludes.
Thursday, July 23, 2009
SMEs in India: Opportunities in credit crunch
MELBOURNE, AUSTRALIA: According to Ovum, SMEs in India are highly price sensitive, less exposed to the global market, and confident about spending in the current economic climate. They are keen to move to managed services, although reluctant to increase the proportion of expenditure on mobile services.
India has a broad diversity of suppliers and is a highly competitive market place. There is no single dominant player across the country for telecommunication services and the competition is greater than in most of the Asian markets. The number of options for mobile service is greater than on the fixed services.
“As a result, in order to get the best of breed, the majority of SMEs prefers not to have single provider for multiple services”, says Claudio Castelli, Senior Analyst at Ovum and author of this report. “The common strategy of bundling services, deployed by service providers in many other places, is less likely to be effective in this market,”
SMEs in India are looking at ways of reducing unnecessary up-front capital investment. Castelli adds, “Seventy one percent of the companies surveyed prefer to have a predictable monthly recurring charge per user for telecoms equipment and services.”
The high interest in opex-based models for telecoms equipment and services in this market is reflected in the SMEs mature views on managed services. A few SMEs are already using managed services and many others are planning to do so in the future.
“They are most keen to adopt managed audio/video conferencing, PBX/IP PBX, security and specialist business software applications”, says Claudio, based in Melbourne.
In addition, the share of mobile workers is growing; 43 percent of SMEs' employees have some degree of mobility. “However this isn’t reflected in the budget allocated for mobile services”, says Claudio. “Unsurprisingly, controlling the cost of mobility is a high priority amongst the SMEs.”
Like in many other Asian countries, the majority of the companies does not provide wireless devices to employees needing mobility for business purposes. This is a clear indication that users are generally providing and supporting their own personal mobile devices when at work.
Ovum believes this practice is dangerous and might result in business risks. For example, if a salesperson goes to a competitor, their customers will continue to contact him at that number.
Overall, players taking the managed services path will have higher chances to succeed with SMEs in this market. At Ovum, we expect the software as a service (SaaS) approach to be a good opportunity for services providers and solution vendors.
India has a broad diversity of suppliers and is a highly competitive market place. There is no single dominant player across the country for telecommunication services and the competition is greater than in most of the Asian markets. The number of options for mobile service is greater than on the fixed services.
“As a result, in order to get the best of breed, the majority of SMEs prefers not to have single provider for multiple services”, says Claudio Castelli, Senior Analyst at Ovum and author of this report. “The common strategy of bundling services, deployed by service providers in many other places, is less likely to be effective in this market,”
SMEs in India are looking at ways of reducing unnecessary up-front capital investment. Castelli adds, “Seventy one percent of the companies surveyed prefer to have a predictable monthly recurring charge per user for telecoms equipment and services.”
The high interest in opex-based models for telecoms equipment and services in this market is reflected in the SMEs mature views on managed services. A few SMEs are already using managed services and many others are planning to do so in the future.
“They are most keen to adopt managed audio/video conferencing, PBX/IP PBX, security and specialist business software applications”, says Claudio, based in Melbourne.
In addition, the share of mobile workers is growing; 43 percent of SMEs' employees have some degree of mobility. “However this isn’t reflected in the budget allocated for mobile services”, says Claudio. “Unsurprisingly, controlling the cost of mobility is a high priority amongst the SMEs.”
Like in many other Asian countries, the majority of the companies does not provide wireless devices to employees needing mobility for business purposes. This is a clear indication that users are generally providing and supporting their own personal mobile devices when at work.
Ovum believes this practice is dangerous and might result in business risks. For example, if a salesperson goes to a competitor, their customers will continue to contact him at that number.
Overall, players taking the managed services path will have higher chances to succeed with SMEs in this market. At Ovum, we expect the software as a service (SaaS) approach to be a good opportunity for services providers and solution vendors.
Friday, July 17, 2009
Network service providers running IP networks ‘hotter’
John Mazur, principal analyst for Network Infrastructure at Ovum
Router spending is down, IP traffic is up
UK: Global service provider switching and routing spending is falling, and we haven’t seen the bottom.
The service provider switching and routing market fell 20% in 1Q09 compared with 1Q08 and will likely continue to decline. Yet carriers continue to report robust IP traffic growth, and this is only the tip of the upcoming video tsunami. Cisco’s recent Visual Networking Index predicts IP traffic will increase fivefold from 2008–13, with the largest growth segment being consumer Internet.
We attribute some of the recent router market decline to recession-induced postponement of strategic IP transformation projects, but service providers are also delaying short-term investment to shore up financial results. The result is that operators are running IP networks hotter.
There are no standards for carrier router loading, but service providers typically run networks at 40–50 percent utilization. They are comfortable that core routers can run without incident at 60–70 percent loading, but once average loading reaches 80 percent capacity upgrades are needed to ensure high availability.
Edge router loading is harder to quantify as high subscription rates are typical, as overloading will have more localized but equally detrimental effects.
The IP network won’t break, but you may think it has
IP traffic continues to grow by all measures, but many network operators are postponing capacity upgrades and thus running IP networks hotter, which means they are increasing traffic throughput without upgrading equipment.
There is no need to worry that telecom wire centers will burn, as survivability is ‘baked in’ to the DNA of IP packet network routers. However, performance does suffer during traffic peaks, and those peaks occur more often as router traffic loading increases.
In addition to dropped packets, other performance impairments include delay or jitter (variable delays) and out-of-order packet delivery. In response, end-user devices retransmit data (or unintelligible conversations for VoIP), adding further congestion over a longer period of time and extending traffic peaks.
The net result is a degraded quality of experience (QoE) for end users, be they man or machine. Forecasts for booming Internet traffic growth rarely consider the impact of degraded service levels due to overburdened, packet-dropping core or edge routers.
This becomes more of an issue as most regulators side with net neutrality proponents, unconcerned about funding infrastructure upgrades because Internet service levels haven’t historically been a problem beyond the access bottleneck.
Are regulators in for a rude awakening when VoIP or over-the-top (OTT) video providers can’t do business over the Internet due to its unpredictable performance?
Savvy enterprise network administrators who have experienced distributed denial-of-service attacks on their IP networks know just how disruptive such overloading can be to their business and have spent millions to protect against such attacks.
Will running IP networks hotter cross a similar usability ‘tipping point’? What happens if one of many routers fails during a traffic peak? Router software is equipped to route around failures, but no one really knows the impact on end-users.
We could find out soon, however, if the current trend continues. Our advice is to not trust your mission critical applications to the best effort Internet. Nor to expect Application Acceleration or WAN Optimization gear to ‘fix’ a poorly performing, non-deterministic, best effort Internet. Instead, invest in higher quality services.
When is ‘best effort’ just not good enough?
We don’t believe service providers will allow serious service degradation to occur for their premium IP services. But we do believe public Internet–based services are at risk of suffering from service degradation, with the result that end users’ quality of experience may plummet -– particularly in North America with its intense competition and minimal regulation.
More centrally controlled countries such as Japan, South Korea, and France have higher-performance Internet networks mainly due to greater regulatory oversight. But North American ISPs don’t want greater regulatory oversight so they find themselves on a slippery slope.
One encouraging sign for higher investment levels is that residential broadband prices have stopped their decline and are starting to increase, but it is not clear if they have reached an acceptable profitability level for North American ISPs.
Our advice is to watch just how hot ISPs can go and monitor the impact on Internet performance -– and to not put too much faith in the Internet, as past performance is no guarantee of future results!
Router spending is down, IP traffic is up
UK: Global service provider switching and routing spending is falling, and we haven’t seen the bottom.
The service provider switching and routing market fell 20% in 1Q09 compared with 1Q08 and will likely continue to decline. Yet carriers continue to report robust IP traffic growth, and this is only the tip of the upcoming video tsunami. Cisco’s recent Visual Networking Index predicts IP traffic will increase fivefold from 2008–13, with the largest growth segment being consumer Internet.
We attribute some of the recent router market decline to recession-induced postponement of strategic IP transformation projects, but service providers are also delaying short-term investment to shore up financial results. The result is that operators are running IP networks hotter.
There are no standards for carrier router loading, but service providers typically run networks at 40–50 percent utilization. They are comfortable that core routers can run without incident at 60–70 percent loading, but once average loading reaches 80 percent capacity upgrades are needed to ensure high availability.
Edge router loading is harder to quantify as high subscription rates are typical, as overloading will have more localized but equally detrimental effects.
The IP network won’t break, but you may think it has
IP traffic continues to grow by all measures, but many network operators are postponing capacity upgrades and thus running IP networks hotter, which means they are increasing traffic throughput without upgrading equipment.
There is no need to worry that telecom wire centers will burn, as survivability is ‘baked in’ to the DNA of IP packet network routers. However, performance does suffer during traffic peaks, and those peaks occur more often as router traffic loading increases.
In addition to dropped packets, other performance impairments include delay or jitter (variable delays) and out-of-order packet delivery. In response, end-user devices retransmit data (or unintelligible conversations for VoIP), adding further congestion over a longer period of time and extending traffic peaks.
The net result is a degraded quality of experience (QoE) for end users, be they man or machine. Forecasts for booming Internet traffic growth rarely consider the impact of degraded service levels due to overburdened, packet-dropping core or edge routers.
This becomes more of an issue as most regulators side with net neutrality proponents, unconcerned about funding infrastructure upgrades because Internet service levels haven’t historically been a problem beyond the access bottleneck.
Are regulators in for a rude awakening when VoIP or over-the-top (OTT) video providers can’t do business over the Internet due to its unpredictable performance?
Savvy enterprise network administrators who have experienced distributed denial-of-service attacks on their IP networks know just how disruptive such overloading can be to their business and have spent millions to protect against such attacks.
Will running IP networks hotter cross a similar usability ‘tipping point’? What happens if one of many routers fails during a traffic peak? Router software is equipped to route around failures, but no one really knows the impact on end-users.
We could find out soon, however, if the current trend continues. Our advice is to not trust your mission critical applications to the best effort Internet. Nor to expect Application Acceleration or WAN Optimization gear to ‘fix’ a poorly performing, non-deterministic, best effort Internet. Instead, invest in higher quality services.
When is ‘best effort’ just not good enough?
We don’t believe service providers will allow serious service degradation to occur for their premium IP services. But we do believe public Internet–based services are at risk of suffering from service degradation, with the result that end users’ quality of experience may plummet -– particularly in North America with its intense competition and minimal regulation.
More centrally controlled countries such as Japan, South Korea, and France have higher-performance Internet networks mainly due to greater regulatory oversight. But North American ISPs don’t want greater regulatory oversight so they find themselves on a slippery slope.
One encouraging sign for higher investment levels is that residential broadband prices have stopped their decline and are starting to increase, but it is not clear if they have reached an acceptable profitability level for North American ISPs.
Our advice is to watch just how hot ISPs can go and monitor the impact on Internet performance -– and to not put too much faith in the Internet, as past performance is no guarantee of future results!
Thursday, July 9, 2009
Emphasis shifts to fibre to the home
MELBOURNE, AUSTRALIA: In countries such as Korea and Japan, the rapid take-up of FTTH/B and subsequent decline of ADSL technologies is nothing new. However, this network evolution is now spreading outside of Asia, and a number of western countries will start to see a rapid increase in FTTH/B, and thus a decline in ADSL over the next couple of years.
Most notable examples are the US, Sweden, Denmark, Finland and the Netherlands. Fig. 1 depicts the ‘global residential fixed broadband access forecasts 2006-2014’.
Fig. 1: Global Residential Broadband Access Forecasts, 2006-14
Source: Ovum
Access-fibre deployment is not just confined to ‘developed countries’. A number of emerging markets such as China and Malaysia also have very ambitious FTTH/B projects. “Even if we take into account an element of government and vendor hype for these markets, Ovum still forecasts a rapid take-up of advanced broadband services in those countries,” Michael Philpott, Practice Leader of Ovum’s Consumer team.
This take-up of next-generation access technologies such as FTTH and FTTB will see traditional DSL technologies saturate at around 320 million lines in the residential market by 2014, with FTTH/B still growing fast at over 160 million lines by the end of the same year. In Asia-Pacific, the move to FTTH/B will be even more pronounced, with FTTH/B connections overtaking DSL to be the leading technology in 2014.
It’s not all bad news for DSL vendors
Although the worldwide market for at least ADSL technology will slow over the next five years, there are still significant opportunities for DSL vendors.
Not all countries have yet announced FTTH/B initiatives and so will see significant growth in DSL over Ovum’s forecast period. “Eastern Europe, South and Central America, and Middle East and Africa will still be good growth regions for DSL operators, and thus vendors, for some years to come,” adds Philpott, based in London.
Secondly, not all NGA developments are pure FTTH/B. A number, such as Japan, are actually a good mix of NGA technologies, with the advanced DSL technology VDSL2 often being used in the final few hundred meters to connect apartments and individual homes to the fibre network. Other NGA developments, such as in Belgium and the UK, will be predominantly fibre to the cabinet and then again VDSL2 in the final mile.
Such NGA deployments are actually good news for DSL-based vendors as they signify the upgrade of millions of homes from ADSL line cards located in local exchanges to VDSL line cards located in street cabinets.
Thirdly, although worldwide growth will come to a standstill, there will still be over 360 million DSL lines (including business lines) in operation in 2014, with maintenance contracts running for many years to come beyond that. In Asia-Pacific however DSL connections peak in 2011.
Mobile broadband also applies pressure
The migration to FTTH/B is not the only phenomenon to stall DSL growth. By the end of 2014 worldwide consumer fixed broadband penetration will have reached only 34 percent of households. In theory there should therefore be plenty of growth opportunity for all fixed broadband technologies including FTTH/B.
However, a large percentage of these remaining households do not have a fixed line, and whereas at one time it would have been assumed that investment in broadband would have pushed fixed lines out further, with mobile broadband devices and services becoming more readily available and affordable this will no longer be the case –- at least in the medium term.
Mobile broadband has in effect set a lower ceiling for fixed broadband than what would have been predicted only 12 months ago. Whether this ceiling is permanent or not is yet to be seen.
Although mobile broadband impacts fixed broadband in emerging markets more, it is not completely restricted to such countries. Western Europe, Austria, Finland, Italy and the Netherlands will all saturate at 65 percent of households or lower.
In Asia-Pacific, CAGR of consumer fixed broadband connections are as follows:
Most notable examples are the US, Sweden, Denmark, Finland and the Netherlands. Fig. 1 depicts the ‘global residential fixed broadband access forecasts 2006-2014’.
Fig. 1: Global Residential Broadband Access Forecasts, 2006-14
Source: Ovum Access-fibre deployment is not just confined to ‘developed countries’. A number of emerging markets such as China and Malaysia also have very ambitious FTTH/B projects. “Even if we take into account an element of government and vendor hype for these markets, Ovum still forecasts a rapid take-up of advanced broadband services in those countries,” Michael Philpott, Practice Leader of Ovum’s Consumer team.
This take-up of next-generation access technologies such as FTTH and FTTB will see traditional DSL technologies saturate at around 320 million lines in the residential market by 2014, with FTTH/B still growing fast at over 160 million lines by the end of the same year. In Asia-Pacific, the move to FTTH/B will be even more pronounced, with FTTH/B connections overtaking DSL to be the leading technology in 2014.
It’s not all bad news for DSL vendors
Although the worldwide market for at least ADSL technology will slow over the next five years, there are still significant opportunities for DSL vendors.
Not all countries have yet announced FTTH/B initiatives and so will see significant growth in DSL over Ovum’s forecast period. “Eastern Europe, South and Central America, and Middle East and Africa will still be good growth regions for DSL operators, and thus vendors, for some years to come,” adds Philpott, based in London.
Secondly, not all NGA developments are pure FTTH/B. A number, such as Japan, are actually a good mix of NGA technologies, with the advanced DSL technology VDSL2 often being used in the final few hundred meters to connect apartments and individual homes to the fibre network. Other NGA developments, such as in Belgium and the UK, will be predominantly fibre to the cabinet and then again VDSL2 in the final mile.
Such NGA deployments are actually good news for DSL-based vendors as they signify the upgrade of millions of homes from ADSL line cards located in local exchanges to VDSL line cards located in street cabinets.
Thirdly, although worldwide growth will come to a standstill, there will still be over 360 million DSL lines (including business lines) in operation in 2014, with maintenance contracts running for many years to come beyond that. In Asia-Pacific however DSL connections peak in 2011.
Mobile broadband also applies pressure
The migration to FTTH/B is not the only phenomenon to stall DSL growth. By the end of 2014 worldwide consumer fixed broadband penetration will have reached only 34 percent of households. In theory there should therefore be plenty of growth opportunity for all fixed broadband technologies including FTTH/B.
However, a large percentage of these remaining households do not have a fixed line, and whereas at one time it would have been assumed that investment in broadband would have pushed fixed lines out further, with mobile broadband devices and services becoming more readily available and affordable this will no longer be the case –- at least in the medium term.
Mobile broadband has in effect set a lower ceiling for fixed broadband than what would have been predicted only 12 months ago. Whether this ceiling is permanent or not is yet to be seen.
Although mobile broadband impacts fixed broadband in emerging markets more, it is not completely restricted to such countries. Western Europe, Austria, Finland, Italy and the Netherlands will all saturate at 65 percent of households or lower.
In Asia-Pacific, CAGR of consumer fixed broadband connections are as follows:
Diverging incentives emerge in Australia's NBN
David Kennedy, Research Director at Ovum
AUSTRALIA: The Australian government announced in April 2009 that it was abandoning its tender for the construction of an FTTN network, and would instead pursue an FTTH access network to reach 90 percent of the market within eight years.
The accompanying discussion paper sought recommendations for regulatory change both in the short term and in the long term. After the publication of the submissions on 12 June, the expectation was that the government would digest the submissions and develop draft policy proposals.
In fact, the relevant Minister issued a press release last Friday 3 July, seeking industry input on several specific issues related to the NBN:
* The optimal access regime for the NBN, including, for example, the legislative obligations that should be required to ensure the NBN company operates on a wholesale-only, open-access basis; the process for identifying services to be offered; how the prices and non-price terms and conditions of those services should be set, and for how long; and the role of the Australian Competition and Consumer Commission.
* The appropriate equivalence obligation for the company and the services it offers, and how this would operate in practice.
* The nature of ownership restrictions applied to private-sector investors to protect the government’s equivalence objective for the wholesale-only network.
* Arrangements for the government to sell its stake in the network in the future.
* Any other rights and obligations to be conferred on the company.
These are all very good questions, but why are they being asked now, and in this manner?
Diverging incentives
When the industry submissions were released on 12 June, it became apparent that most industry operators, particularly Telstra’s competitors, were focused on the short-term structural separation of Telstra’s copper access network. In contrast, scant attention was paid to the regulatory requirements for an NBN. This is why the government has been forced to seek further input.
We believe that this reflects a gap between the industry and the government. While the government is committed to the long-term goal of building an FTTH access network in Australia, Telstra’s competitors have far more interest in the regulation of the existing copper access network than in an FTTH network that will take years to build.
So far, this is mere short-termism and therefore unsurprising. However, there are deeper forces at work that are setting the government and Telstra’s competitors more seriously at odds.
Telstra’s competitors are currently abandoning DSL resale and are generating good operating margins on their installed DSLAMs. The NBN threatens this arrangement because it will ultimately force them off regulated ULLS into the uncertainty of a wholesale fibre network, where wholesale pricing and their ability to differentiate may be less favourable.
We think these fears are well-founded, because the NBN will be far more viable if ULLS is actually cut off as FTTH is rolled out, avoiding revenue fragmentation and reducing the need for government subsidy of the NBN.
There is also a real prospect that the current de-averaged prices for ULLS access, with lower prices in the cities, will give way to uniform national wholesale pricing and push up access seekers’ costs in their key markets.
Transition management will be key
This problem underlines how tricky the transition from copper to NGN will be. In fact, the policy challenge can be summed up as a complex process of transition management.
The apparently minor incident of a press release points to the more substantial reality: that the government, Telstra’s competitors and Telstra itself do not have the same incentives in this process. As a result, the Minister cannot assume that he will have the automatic support of either side of the industry for the government’s NBN objectives.
AUSTRALIA: The Australian government announced in April 2009 that it was abandoning its tender for the construction of an FTTN network, and would instead pursue an FTTH access network to reach 90 percent of the market within eight years.
The accompanying discussion paper sought recommendations for regulatory change both in the short term and in the long term. After the publication of the submissions on 12 June, the expectation was that the government would digest the submissions and develop draft policy proposals.
In fact, the relevant Minister issued a press release last Friday 3 July, seeking industry input on several specific issues related to the NBN:
* The optimal access regime for the NBN, including, for example, the legislative obligations that should be required to ensure the NBN company operates on a wholesale-only, open-access basis; the process for identifying services to be offered; how the prices and non-price terms and conditions of those services should be set, and for how long; and the role of the Australian Competition and Consumer Commission.
* The appropriate equivalence obligation for the company and the services it offers, and how this would operate in practice.
* The nature of ownership restrictions applied to private-sector investors to protect the government’s equivalence objective for the wholesale-only network.
* Arrangements for the government to sell its stake in the network in the future.
* Any other rights and obligations to be conferred on the company.
These are all very good questions, but why are they being asked now, and in this manner?
Diverging incentives
When the industry submissions were released on 12 June, it became apparent that most industry operators, particularly Telstra’s competitors, were focused on the short-term structural separation of Telstra’s copper access network. In contrast, scant attention was paid to the regulatory requirements for an NBN. This is why the government has been forced to seek further input.
We believe that this reflects a gap between the industry and the government. While the government is committed to the long-term goal of building an FTTH access network in Australia, Telstra’s competitors have far more interest in the regulation of the existing copper access network than in an FTTH network that will take years to build.
So far, this is mere short-termism and therefore unsurprising. However, there are deeper forces at work that are setting the government and Telstra’s competitors more seriously at odds.
Telstra’s competitors are currently abandoning DSL resale and are generating good operating margins on their installed DSLAMs. The NBN threatens this arrangement because it will ultimately force them off regulated ULLS into the uncertainty of a wholesale fibre network, where wholesale pricing and their ability to differentiate may be less favourable.
We think these fears are well-founded, because the NBN will be far more viable if ULLS is actually cut off as FTTH is rolled out, avoiding revenue fragmentation and reducing the need for government subsidy of the NBN.
There is also a real prospect that the current de-averaged prices for ULLS access, with lower prices in the cities, will give way to uniform national wholesale pricing and push up access seekers’ costs in their key markets.
Transition management will be key
This problem underlines how tricky the transition from copper to NGN will be. In fact, the policy challenge can be summed up as a complex process of transition management.
The apparently minor incident of a press release points to the more substantial reality: that the government, Telstra’s competitors and Telstra itself do not have the same incentives in this process. As a result, the Minister cannot assume that he will have the automatic support of either side of the industry for the government’s NBN objectives.
Friday, July 3, 2009
Asia Pacific drives global mobile revenue growth
UK: Ovum's latest Mobile forecasts to 2014 predict slower revenue growth for operators in the short term as the recession impacts.
However, connections continue to grow. The result will be downward pressure on ARPU, leading to an increasing need for network efficiency.
Global operator service revenues will breach $1 trillion and $290 billion in Asia-Pacific in 2011
Ovum previously predicted that global mobile services revenues would breach $1 trillion in 2010. Due to macro-economic conditions Ovum now expects this barrier to be broken in 2011.
The greatest impact of recessionary forces is seen in the short term. In Asia-Pacific, Ovum has revised its revenue growth forecasts for 2009 down to 8% from 10% in previously published figures. Yet, projected CAGR from 2008 to 2013 remains relatively stable at 6.6 percent.
“The recessionary impact on mobile in Asia, will be relatively muted, and led by China and India, mobile service revenue will continue to grow”, says Nathan Burley, Analyst at Ovum. “By 2014 Ovum expects total Asia-Pacific mobile operator service revenues to reach $326 billion.”
Voice will continue to be the largest revenue generator worldwide, accounting for 69% of revenues on a global basis and 66% in Asia-Pacific. As a result, voice will continue to be mobile’s ‘killer app’. Operators must not ignore this fact in the race for data revenues.
Emerging markets to continue their inexorable connections growth
By the end of 2014 Ovum forecasts 6.42 billion connections, up 59 percent from 2008, and a CAGR of 8 percent. Asia-Pacific will grow at 10 percent CAGR, with penetration reaching 78 percent, highlighting potential for further growth.
In developed markets (and some emerging markets), mobile penetration will well exceed 100%, but further growth will still be possible from multiple SIM ownership and through uptake of data-centric devices. As such, population penetration is ceasing to be a useful indicator.
China and India will dominate connections and will account for 30 percent of total worldwide connections by 2014. However, the countries’ penetration rates will be just 76 percent and 69 percent, respectively, by 2014. Massive population growth will continue to fuel mobile demand as new, unconnected users join the market.
The enormous growth in connections has financial implications for Asia-Pacific mobile operators as they are expected to grow by 80 percent from 2008 to 2014, while revenues grow by 40 percent. Furthermore, Asia-Pacific mobile outgoing minutes of usage are set to rise 155% between 2008 and 2014, but voice revenues will rise just 26 percent.
“Both comparisons highlight the influx of ever-lower ARPU customers from emerging markets and price erosion in mature markets, even for data services. Therefore, efficient networks, enabling competitive pricing, will be critical in both highly saturated mature markets and low-ARPU emerging markets”, explains Steven Hartley, Senior Analyst.
However, connections continue to grow. The result will be downward pressure on ARPU, leading to an increasing need for network efficiency.
Global operator service revenues will breach $1 trillion and $290 billion in Asia-Pacific in 2011
Ovum previously predicted that global mobile services revenues would breach $1 trillion in 2010. Due to macro-economic conditions Ovum now expects this barrier to be broken in 2011.
The greatest impact of recessionary forces is seen in the short term. In Asia-Pacific, Ovum has revised its revenue growth forecasts for 2009 down to 8% from 10% in previously published figures. Yet, projected CAGR from 2008 to 2013 remains relatively stable at 6.6 percent.
“The recessionary impact on mobile in Asia, will be relatively muted, and led by China and India, mobile service revenue will continue to grow”, says Nathan Burley, Analyst at Ovum. “By 2014 Ovum expects total Asia-Pacific mobile operator service revenues to reach $326 billion.”
Voice will continue to be the largest revenue generator worldwide, accounting for 69% of revenues on a global basis and 66% in Asia-Pacific. As a result, voice will continue to be mobile’s ‘killer app’. Operators must not ignore this fact in the race for data revenues.
Emerging markets to continue their inexorable connections growth
By the end of 2014 Ovum forecasts 6.42 billion connections, up 59 percent from 2008, and a CAGR of 8 percent. Asia-Pacific will grow at 10 percent CAGR, with penetration reaching 78 percent, highlighting potential for further growth.
In developed markets (and some emerging markets), mobile penetration will well exceed 100%, but further growth will still be possible from multiple SIM ownership and through uptake of data-centric devices. As such, population penetration is ceasing to be a useful indicator.
China and India will dominate connections and will account for 30 percent of total worldwide connections by 2014. However, the countries’ penetration rates will be just 76 percent and 69 percent, respectively, by 2014. Massive population growth will continue to fuel mobile demand as new, unconnected users join the market.
The enormous growth in connections has financial implications for Asia-Pacific mobile operators as they are expected to grow by 80 percent from 2008 to 2014, while revenues grow by 40 percent. Furthermore, Asia-Pacific mobile outgoing minutes of usage are set to rise 155% between 2008 and 2014, but voice revenues will rise just 26 percent.
“Both comparisons highlight the influx of ever-lower ARPU customers from emerging markets and price erosion in mature markets, even for data services. Therefore, efficient networks, enabling competitive pricing, will be critical in both highly saturated mature markets and low-ARPU emerging markets”, explains Steven Hartley, Senior Analyst.
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