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At the beginning of the year, the Wireless Intelligence team confidently predicted how the mobile industry would unfold in 2011. Our analysts have now revisited their specific predictions to find out what we got right and what we got wrong in what turned out to be a rollercoaster of a year in mobile. See our original predictions in full here or read on to find out how we think we did.
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AT&T’s seemingly doomed US$39 billion acquisition of T-Mobile USA is a ‘local’ (rather than multinational) deal, but it is exactly the kind of “mega-merger” I predicted could run into regulatory problems. In-country consolidation was a trend in 2011 – there are deals on the table in both Austria and Greece, for example – but those that succeed usually concern tier-two players joining forces rather than the market leader strengthening its position (as is the case with AT&T). Meanwhile, many multinational operator groups have continued to either take full control of shared assets or offload those they deem not central to their plans. Witness the case of Vodafone, which this year sold-off minority assets in China, France and Poland, but took full control in India. Orange is pursuing a similar strategy in Europe, looking to bail-out of markets such as Switzerland, Austria and Portugal. While these moves were in line with expectations, the operators concerned have yet to use the proceeds from such divestitures to push into new markets; this is arguably a consequence of another turbulent year in the financial markets, which has seen many operators shelve ambitious expansion plans.
The severity of the economic turmoil that descended upon most developed economies in 2011 put most thoughts of deal-making on hold as operator groups based in developed markets, like many other businesses, decided to focus on their existing operations rather than look for expansion opportunities. The paralysis among political leaders in both Europe and the US in tackling the debt-fuelled economic crisis limited the funding available for large transactions and, often more importantly for even well-funded operator groups, the ability of management to countenance major deals – especially those with perceived higher levels of risk. France Telecom proved to be the only major operator group with the fortitude to expand its footprint in developing markets in 2011 with the purchase of a 20 percent indirect stake in Korek Telecom Iraq and the planned full acquisition of Congo Chine Telecom in DR Congo. The low growth rates in mature markets are not likely to disappear, especially with the prolonged subdued economic outlook, and once economic conditions stabilise the higher growth rates in emerging markets will continue to have a strong appeal. France Telecom may find its frontier market acquisitions in 2011 astutely timed if it turns out they coincide with the bottom of the economic cycle.
In January, I confidently predicted that Amazon’s (yet to be launched) Android app store would gain in popularity so quickly, it would overtake Google’s native Android Market, primarily due to the company’s vast experience in selling digital goods. Despite the few days left this year, it’s probably not a prediction we’re going to see come true in 2011. Luckily, however, Amazon did have a trick up its sleeve with the Kindle Fire. According to whispers from the company, the tablet has seen fantastic seasonal sales – for an Android device with no preloaded Google software at all. As an all-round media device with ties to media, movie, music and app stores, I stand by my prediction, but Amazon’s digital content strategy will take a little longer to come to fruition. The company now needs to play its integrated approach against Android’s fragmentation, offering a unified package in a market where devices are left unsupported just months after release.
In January, I said that “2011 will see a number of flies in the Android ointment,” which has undoubtedly proved true – although not necessarily the ones I was anticipating. Certainly the platform has failed to impress in the tablet space, despite its adoption by a number of tier-one vendors. Fragmentation also appears less of a concern than it may have been – although there were reports early in the year that Google had started playing hardball with vendors to prevent this happening. But two bigger themes also emerged. Firstly, Android has become a hotbed of patent litigation, with all of the tier-one vendors drawn into the battle, and a number of significant actions set to continue into 2012. And secondly, with Google set to buy Motorola Mobility, the platform provider is set to start competing with its customers.
The tablet market in 2011 could largely be split into two camps: Apple and “others.” While the former continued to ride high on the back of the iPad 2 launch, for everyone else “average” was perhaps too optimistic. Samsung had a bumpy ride, largely due to a number of legal battles with Apple. The raft of Android devices announced early in the year by vendors including HTC, LG and Motorola failed to raise more than a flicker of interest. But the highest profile failure was RIM, which saw its Playbook delayed, ship without many core features, price cuts, and a US$485 million charge related to this business. With the recent launch of Amazon’s Kindle Fire set to show the potential of an integrated device, application and content ecosystem, and Android 4.0 (Ice Cream Sandwich) closing the gap between the smartphone and tablet Android platforms, the early part of 2012 could see the “others” posing more of a challenge to the iPad.
Last January, I predicted that mobile broadband pricing will be a critical trend to watch in 2011 assuming that LTE operators will look towards tiered pricing to differentiate their data offers. As anticipated, most LTE operators are migrating from ‘all-you-can-eat’ data plans to tiered pricing, mirroring consumption or speed-based data tariffs as adopted by US-based Verizon Wireless. Pioneering LTE operators have been ‘testing’ the market, targeting high-value consumer segments – including the enterprise segment – with high-end LTE devices and premium monthly data subscriptions while betting on heavy subsidies to shift volume. Forty LTE networks commercially launched between 2009 and 2011 across 24 countries. As expected, the initial adoption of LTE services is a data-only play as 20 vendors are currently competing to deliver LTE USB dongles while only five have so far announced LTE-capable handsets – mainly led by Samsung. The high level of spectrum fragmentation globally has hindered the development of LTE smartphones and related economies of scale. This phenomenon has nuked our previous prediction that all top handset vendors will have at least one LTE handset ready in their portfolios by year-end. But, as correctly predicted, Android remains the dominant operating system in LTE handset portfolios so far.
While the number of tower deals announced during 2011 was subdued, the pressure on operators to offload tower assets continued to grow. Bharti Airtel’s CEO of international operations, Manoj Kohli, revealed to the Business Standard in June that competitors were eager to share infrastructure to reduce costs and that operational costs in Africa remained far higher than in India. “In some cases, the costs are 50 percent higher, in some cases double and in some cases more than double”. The limited number of tower deals in 2011 reflected the paucity of funding brought about by the global economic downturn. However, there are signs that the funding market for African infrastructure assets may be beginning to thaw. Last month the Financial Times reported that IHS is planning to raise funds to double the size of its tower business next year. And just last week it was announced that American Tower is forming a joint-venture with MTN to acquire all of MTN’s towers in Uganda. With Orange Uganda also looking to offload its tower assets and Etisalat Group aiming to dispose of towers in a number of countries, it appears that the flurry of expected deals has simply been postponed to 2012. Watch this space.
This was an easy one to predict. Mobile payments has been a case of “two steps forward, one step back” for years and 2011 was no exception. On the plus side, NFC has now established itself as the ubiquitous solution for contactless mobile payments with most of the world’s largest operators and device-makers lining up behind it. There were several instances of rival operators collaborating to deliver national NFC-based schemes (especially in Europe) and there are now some 25 NFC-enabled handset models available in the marketplace (although NFC support was notably absent in some high-profile device launches this year, notably the iPhone 4S and the new Nokia Windows Phones). And yet, for most end-consumers, NFC services remain a concept rather than a mass-market proposition. The situation in the US is a good example of the problems inherent in bringing NFC to market. The Isis m-payments JV between three of the four national operators spent the year signing up banking and merchant partners but has still yet to launch, and found itself beaten to market by Google’s own effort – Google Wallet – which soft-launched in October. Tensions between operators and the OTT players are already evident (Isis member Verizon allegedly asked for Google Wallet to be removed from its devices) and the battle between their respective NFC offerings is set to be a key theme in 2012.
Riding on the coattails of 2010, 2011 has been another hit year for social networking. Facebook passed one trillion page views, records were smashed for ‘tweets,’ ‘likes’ and ‘check-ins’ per second and Google launched its long-rumoured social network, Google+. In January, I highlighted a “coming of age” for social integration in apps and their rapid growth. Indeed, Google+ became the fastest-growing network ever, garnering 10 million users in 16 days (compared with 780 days for Twitter and 852 for Facebook). Social features found their most natural home in the media; reading tools such as Instatpaper, Flipboard and the newly released Google Currents gained significantly in popularity. I also hinted that location-based services would become hot property; Facebook’s acquisition of Gowalla last week is the latest reminder of the value of users’ geographical data. It was, however, a year over-shadowed by privacy arguments. With more niche apps (such as Path) actively promoting ‘private’ social networks (through friend caps and more relevant, personal content), this is one trend we won’t see fading away.
I predicted that ‘regulators around the globe will be watching competition levels closely in 2011’ – and so they did. Out of the 13 countries where I expected mobile number portability (MNP) to be introduced this year, nine went ahead as planned while four have been delayed to early next year. Compulsory SIM registration has been implemented as predicted in six markets – mainly in Africa – and regulators have indeed awarded at least one new licence in 13 countries to spur competition. I correctly anticipated the introduction of MVNOs in Israel and South Korea, as well as in Brazil which has awarded MVNO licences and awaits commercial launches soon. And I was also proved right in my prediction that regulatory initiatives will radically transform cellular markets in four African countries, namely Cameroon, Sudan, Malawi and Zimbabwe. Last January, I said that such markets still had room for connections growth but were showing signs of increasing levels of market concentration which was limiting competition. Consequently, local authorities intervened during the year to boost competition by awarding licences to new entrants, allowing fixed line operators to offer mobile services, and introducing MNP or prepaid SIM registration. Lastly, I emphasised the critical role that regulators will play in LTE adoption globally as they auction required additional spectrum in the IMT-extension (2.6GHz) and digital dividend (700/800MHz) bands, as well as exploring spectrum re-farming options.
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