Mugged in Barcelona

I can’t help feeling the Mobile World Congress has become rather like a juggernaut whose driver has fallen asleep at the wheel. Every year it slams into Barcelona in northern Spain (or Catalonia, if you’re from Barcelona), dragging more delegates and organisers along for a journey that seems to have no clear destination. There was a time when companies would use the event to announce a market-changing deal, or at least unveil an exciting new product. These days it seems to be an expensive post-Christmas distraction from the main business of running a telecoms organisation. ‘Unremarkable’ was the word a number of attendees used to describe this year’s bash.

It’s also gotten too big to be manageable. I found it harder than ever to book suitable accommodation, despite scouring hotels weeks in advance. A PR rep I know had to make do with a dormitory bed in a youth hostel, and ended up sharing the room with five or six other be-suited telecoms executives. Could it soon outgrow Barcelona, just as it spilled out of Cannes in southern France a few years back? OK, that’s unlikely to happen for some time. But I can certainly see a day when the GSM Association, which organises the event, is annexing island states or small countries with the MWC in mind.

I’m probably sour because I was an unlucky victim of crime during my trip. I was enjoying a cold beer in a café near the conference centre – after a hard day of slogging it out on the exhibition floors – when my bag was snatched from under the table. The wily thief got away with a laptop, two recording devices and all my notes from the first two days, rendering a large portion of the event a complete write-off from a personal perspective.

As I understand it, however, I wasn’t the only one. Several journalists had wallets and phones stolen by pickpockets, and one unfortunate soul was mugged near Las Ramblas, the main tourist thoroughfare. While Barcelona has always been a hotspot for petty theft, such crime seems to have spun out of control last week – much like the MWC itself. Sure, the police were sympathetic, but few appeared to be on patrol when all this was happening. If Barcelona is to play host again next year – as we all expect – I’d hope the city authorities do a better job of ensuring it’s relatively safe.

No doubt, despite all my griping, I’ll be there at next year’s conference, hoping somebody says something of interest while keeping a watchful eye on my possessions.

Of Reding and shindigs…

Iain Morris, currently at the GSMA’s Mobile World Congress in Barcelona, has sent in the following report:

Viviane Reding is at it again. Just months after she roped in Europe’s unruly mobile operators over their roaming charges, the EC commissioner istaking aim at the fees they extort from data customers travelling abroad. Disrupting the GSM Association’s official press conference during the Mobile World Congress, Reding told a group of journalists that if operators didn’t significantly improve their pricing behaviour she would be forced to take remedial steps. She’s given them until the summer.

Chances are Reding won’t be invited back next year - at least not as a panellist again. That would be a pity, because her outburst and uncompromising views are exactly what this event needs. Every year, the world’s mobile industry descends on  Barcelona  for its equivalent of the Oscars. Awards are dished out (categories include the catchy-sounding Most Innovative Wireless Device-Centric Technology and Most Innovative Mobile Application in a Vertical Market), champagne is drunk,  and platitudes are exchanged. Behind the scenes some hard deal-making is going on, but very little is actually said of any real substance. Most of the “breaking news” broke the day before.

While Yahoo! turned down Microsoft’s US$44.6bn bid back in Silicon Valley, Microsoft was categorically not answering questions about Yahoo! during its press conference (which, er, would have revealed that Sony Ericsson is to ship smartphones using Windows Mobile if the story hadn’t gone out that morning).  Nokia talked aplenty about Ovi and unveiled handsets that look just like the N95. Rousing stuff.

Several sessions from day two are given over to mobile advertising, but it’s unlikely, that any operator will actually say how it expects to generate significant revenues from advertising when up against the likes of Google and, possibly, Microhoo. Services that attach adverts to incoming text messages sound like a promising lead for operators, but a properly “open” mobile internet would put them at a big disadvantage to the web players.

 Virtually all of this will pass unnoticed to the people that matter the most - the customers. The iPhone’s proud parent, Apple, is nowhere to be seen, having already given away its secrets at its own self-congratulatory shindig. Nokia’s N95 must sound like a postcode to many. The hardest truth most operators must accept is that 3G - for all the recent hype - is far from being a mass-market service. Although data revenues are on the up, they still account for only 20% of total revenues in the most developed markets. And the people nudging them along are all here at MWC, fiddling with their HSPA data cards and USB modems. No wonder they’re so worried about VoIP. 

 

The Intel Factor

  The 350-page Information Economy Report landed on our desks this afternoon, courtesy of UNCTAD. Packed with data, tables and text, this is the latest in a series of worthy tomes which urges the ICT industry - and governments - to do more for the developing world.

Buried in all the facts and figures, however, are some interesting case studies. Take Costa Rica, for example. In 1985, 60% of its exports were perishable products and 3% were electronic products. By 2005, the share of perishable goods had dropped to 24% and electronics had jumped to 30%. The main reason? Intel had decided to make the country one of its main production sites.

In 2005, the direct and indirect effects of Intel accounted for 25% of GDP of the entire manufacturing industry and Intel now accounts for 20% of total exports. It’s also doing good things for wages. A study by the International Labour Organisation last year found that Intel pays its workers an average monthly wage of US$836 while employees in the general manufacturing sector earn an average of $491. 

Good stuff, Intel.

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.

And in third place…

In the bitterly competitive world of PCs, Taiwan’s Acer is suddenly rising up the ranks. According to Gartner, it has squeaked past Lenovo to claim third place behind Hewlett-Packard and Dell, with more than 8% of the global PC market in the third quarter of 2007. And that’s before the sales of newly-acquired Gateway are figured in.

What’s more, the company told a third quarter investors’ conference in Taipei that Acer could secure a 12% share of the global PC market in 2008, putting it within striking distance of Dell, the number two player. I guess the question for 2008 is whether Dell can get its mojo back before it gets aced.

The Big Divide - phones vs the web

The chart above, courtesy of the ITU, shows mobile penetration rates worldwide and for developed and developing regions, between 1994 and 2006. The divide between rich and poor countries is measurably narrowing, which is good news for emerging economies. Take a look at the same data for internet penetration:

The difference is telling. By the end of 2006, just over 10 percent of the world’s population in developing countries were using the Internet, compared to close to 60 percent in the developed world.

Could the key be cheap smart phones with web access?

Holy ringtones

Saudi Arabia has a split personality when it comes to mobile phones. On the one hand, nearly everyone has one - ownership has shot up from 61.4% in 2005 to 96.8% this year. On the other hand, not everyone is happy with how they are used. A Saudi court, we’ve learned, recently banned the use of Qur’anic verses on mobile phones for recreational purposes, such as ringtones. 

A recent poll by the Saudi Gazette showed that Saudis themselves are split by the ruling. Some agree that a phone can go off in disrespectful places - such as a bathroom - and thus the ban is a good idea. Others say the holy ringtones should be allowed if owners remain careful about where they take their phones.

How about allowing the ringtones but instructing the faithful to switch their phones to  silent when entering a less than holy spot?

Y’ello in Africa

Three miles south of Johannesburg’s wealthiest neighbourhoods is the township of Alexandra, one of the city’s poorest communities. The disparity between the two is huge. But, as you can see above, good things are happening. This is a  Y’ello Zone , part of the  MTNaccess project, a nationwide scheme to bring broadband and computing to low-income townships and providing a platform for entrepreneurship. Backed by MTN and the GSM Assocation’s development fund, the Alexandra site just one of seven such pilot projects and hopefully, a sign of better things to come.

But elsewhere in Africa, things are going in exactly the opposite direction. Gabriel Solomon, a director at the GSM Association, recently told Total Telecom Magazine that the new Benin government has suspended the mobile networks of MTN and Atlantique Telecom after they refused to pay US$50m in a one-off fee for a new contract, replacing the one they had paid two years earlier to a previous government. This was a 500% rise from the earlier payment and clearly extortion. 

Despite this kind of despotic behaviour, mobile tariffs in Africa in 2006 were, on average, on a par with other regions, according to the ITU. Just under US$25/month for 100 minutes. When broadband price comparisons look the same, things will really be looking up for Africa.