Orascom invades North Korea

Take a  look at this photo. It’s a from an official North Korean site and if you look closely, you’ll see that no one in this photo is using a mobile phone. That’s because no one in North Korea has one. Not yet, anyway. The North Koreans may be lacking in the basics, like food and fuel, but it appears that they will soon be able to buy a mobile - and a 3G phone to boot.

According to an announcement today from Orascom Telecom, the Egyptian group has been granted the first license to provide mobile services in the Democratic People’s Republic of Korea. The license is for providing a service using WCDMA (3G) technology.

Although not exactly. This access was, in fact, given to a new JV company, CHEO Technology, which is 75% controlled by Orascom and 25% owned by the state-owned Korea Post and Telecommunications Corp. The terms of the license will allow CHEO to offer services throughout the country. The duration of the license is 25 years with an exclusivity period of just four years.

Still, Orascom says it will spend up to US$400m in network infrastructure and fees over the first three years in order to build a network which will offer voice, data and value added services at “accessible prices to the Korean people”.  Given that North Korea’s GDP per capita in US$1400 a person, those are going to have to be mighty low prices.

In case you were wondering, there are 23m North Koreans. While Orascom is no stranger to difficult markets - it has operations in Algeria, Pakistan, and Bangladesh - it pulled out of a license battle in Iraq at the end of last year. Now we know why.

Broadband blues

AT&T and Verizon may have provided early  evidence that an economic slump is having a knock-on effect on the telecoms sector. Despite posting pretty stellar results, on the whole, both reported weaker broadband growth than expected. AT&T saw a rise in access line losses during December, and a fall in the rate of broadband adoption. And Verizon, which announced its quarterly results today, witnessed virtually no DSL growth at all, according to bankers at JP Morgan.

 

As a household service, broadband was always going to be vulnerable to a slowdown in the housing market. Luckily for AT&T, only 18% of revenues come from consumer wireline, and other parts of its business seem to be holding up well, including wireless. It seems perfectly reasonable to expect continued growth here. Cell phones have fast become a necessity in developed and emerging markets. The economic setback will probably just accelerate the trend of fixed-mobile substitution, whereby customers ditch their fixed-line phones to save money and rely even more on their mobiles.

 

It’s all bad news for companies dependent on broadband growth for their long-term prosperity. Operators without a wireless business look very exposed in the current climate.

The iPhone divide

Apple was in typical self-congratulatory spirits this week, boasting sales of 4m iPhones since they hit the stores last summer. Having surpassed all expectations, CEO Steve Jobs will no doubt feel satisfied to have proved his detractors wrong.

Before he gets too carried away, though, he might reflect on just how lopsided those sales look. Around 3.4m went to AT&T customers in the US, leaving just 600,000 to split between O2 UK, France Telecom and Germany’s T-Mobile, the European distributors.

Sure, the iPhone was introduced to the US four months before it went on sale in Europe. And yes, the US is more populous than the UK, France and Germany combined. No one could realistically expect parity. But the gulf between the two regions seems to have widened over the Christmas period.

It’s no surprise, really. Americans are used to splurging their savings on the latest gizmos. Europeans, on the other hand, are used to getting the newest and most stylish handsets at heavy discounts. Chances are most can’t quite believe how much their service providers want for the iPhone.

That’s not all. The iPhone has had a lot of bad press because it doesn’t work on Europe’s fastest mobile networks. Customers have to use WiFi – a short-range wireless technology – to get maximum value from it, and WiFi coverage is not pervasive. The alternative is frustratingly slow and costly.

This is no different in the US, but AT&T’s highest-speed mobile network is unavailable across much of the country. Most customers don’t miss it because they’ve never used it, and so they’re happier to make do with the occasional bout of WiFi.

Of course, the quicker development of mobile technology in Europe also means the region has more iPhone rivals. Vodafone UK launched some new handsets over the Christmas period that allow fast web surfing and data downloads across most of the country. SFR did the same in France. Both providers are offering competitive monthly deals, charging for mobile data usage at flat rates.

Amusingly, the Financial Times, a UK newspaper, recently published a letter from a disgruntled iPhone customer that lampooned some of O2’s optimism about the device:

“I would dearly love to use my phone more for surfing the internet away from WiFi,” wrote the customer, “but frankly the current costs are prohibitive. From O2’s point of view, I am afraid the iPhone is nothing more than a temporary blip in the usage charts.”

Clearly, an iPhone that works on the fastest, most cost-efficient mobile networks is needed essentially on one side of the Atlantic. Apple should provide more guidance on when this will become available. But other measures need to be taken. Apple should drop its pompous claim to a share of airtime revenues – which turns the whole net neutrality argument on its head – and give its European partners the financial freedom to subsidise handsets. Only then will it realise the true international potential of the iPhone.