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The mobile industry faces a potentially pivotal year in 2011. The first major commercial LTE networks are being rolled out and smartphones are poised to become a genuinely mass market proposition. This is set to be a catalyst for rapid development in areas such as mobile payments, mobile apps and other new next-generation services.
Operators, vendors, content players and regulators will all need to adapt to this fast-changing environment. Wireless Intelligence and Mobile Business Briefing will be tracking industry developments as they happen throughout the year. In no particular order, here are our key predictions for how things will unfold in 2011 and the key themes and trends to look out for.
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As we enter 2011, two of the biggest operator M&A deals from last year – VimpelCom/Orascom and Eitisalat/Zain – still hang in the balance and could yet come to nothing. This reflects the fact that there are very few genuine multinational deals left to make on this scale that aren’t fraught with problems. Instead, expect operator M&A activity in 2011 to happen on a smaller scale with operators spinning off or merging units with local rivals to keep competitive (as happened with Orange and T-Mobile’s Everything Everywhere JV in the UK last year) or offloading minority stakes and ‘non-core’ assets (Vodafone is one international player we expect to trim some fat in 2011). Consolidation will therefore take place at a national level – with the overcrowded Indian mobile market certain to see some deals. While ‘mega mergers’ are unlikely, many large operator groups will continue to acquire assets on a piecemeal basis, with the focus mainly on emerging markets; France Telecom, Qtel, MTN and China Mobile are among the ones to watch in this regard. In mature markets, we could also see some significant trading in spectrum as operators jostle to prepare for 4G. This will be evident in the US where the T-Mobile USA and Clearwire/Sprint issues still need to be resolved. (Matt Ablott)
Recently emerging markets have attracted a huge amount of attention in both the telecom and the financial worlds due to their high growth rates. However, in 2011 soaring asset prices in the advanced emerging markets will see those operator groups seeking growth outside of their existing mature markets having to look further afield. This will be spurred on by continuing low growth in developed markets and an increased appetite for risk as the global economy continues to recover. This will spark a flurry of deals in secondary emerging markets and the frontier markets beyond. Clearly not all of these deals will be a success. As seasoned investors know, assets offering high growth come with higher risks but also potentially huge rewards. In 2010 Bharti Airtel, a group that knows a thing or two about emerging markets, pulled off a transformational expansion by acquiring most of Zain’s African assets. Those operator groups that are brave enough to follow in 2011 will define where they will stand amongst the leading global mobile super players in the years to come. And who knows, they may even learn a few things that they can take back to increase growth in their more mature markets. (Jon Groves)
In 2010, the ‘app’ truly cemented itself into daily life, yet serious monetisation remained an elusive buzzword among developers. 2011 will be the year that in-app advertising takes off with a majority of paid-for apps migrating to a ‘freemium’ model – a free version supported by ads, complementing existing paid-for copies. With its recently upgraded developer tools, Apple’s iAd platform will become easier to use but Apple will need to loosen the reins on both the creative and budget constraints enforced on ad agencies in order to see faster adoption. Google’s AdMob acquisition will ensure it takes the lion’s share of the market with popular developers such as Rovio already on board. That said, paid app distribution on Android Market will remain hindered by Google Checkout and in particular the number of countries in which billing is supported. Some of Android’s most popular apps such as Angry Birds and Swype gained success through third-party distribution or operator-bundling. However, we expect these shortcomings to be plugged by Amazon and its recently announced Appstore. Amazon’s vast experience in selling digital goods, its more robust worldwide commerce agreements and optional-DRM requirements (satisfying open source developers) will see it overtake Google’s native store in popularity. (Will Croft)
Undoubtedly, 2010 was the year of Google’s Android platform. With Samsung shifting ten million units of its Galaxy S alone, and the platform working its way through the portfolios of vendors including HTC, LG Electronics, Motorola and Sony Ericsson, Android has cemented its position among the tier-one suppliers, and it has also gained the attention of ambitious upstarts such as ZTE, and a number of regional focused players targeting China and India. But 2011 will see a number of flies in the Android ointment. The use of the platform in low-cost devices with low-cost hardware (both tablets and smartphones) will lead to a poor user experience for first time users. It will become apparent that the current version of the OS is not well suited to tablets, despite its use in these products by a number of vendors. And manufacturers will struggle to differentiate products using the OS, leading to a number of bespoke customisations that will lead to fragmentation for the app developer community to address. (Steve Costello)
Tablet devices seem to have something of a polarising effect. Some observers seem to think they are the saviour of mobile computing, while others are claiming they will be something of a flash-in-the-pan. The truth is likely to be somewhere in between. For a market that hardly existed 12 months ago, there is little doubt that the success of the tablet in 2010, driven by Apple’s iPad, was astounding. But it is also worth noting that previous attempts at tablets have failed, and it is currently unclear how big the market is beyond the early adopters. For a specific group of users, the tablet will prove to be the perfect tool, mixing portability and computing power in an attractive package. However, as with the netbook that preceded it, many users will find that the tablet just is not up to any “real” computing use. And with the rapid growth of smartphones, many users will find that this offers enough computing power to keep in touch when on the move, but with far more portability and in a more “personal” form factor. Tablets are a niche product which vendors are attempting to take to the mainstream. (Steve Costello)
2011 marks the beginning of LTE rollouts worldwide and the start of further technology migrations. Europe will lead in terms of network deployments with 31 operators expected to commercially launch LTE by year-end, compared to nine in Asia Pacific and six in North America. All three regions will account for just over 1 million LTE connections each by the end of the year, comprising 95 percent of the global total. Pioneering operators will test the market with innovative LTE data offers based on tiered pricing – TeliaSonera has been testing LTE pricing segmentation since 2009. Pricing will be a critical trend to watch in 2011 since it will indicate how operators differentiate their mobile broadband services and manage the migration from HSPA. Using tiered pricing, operators will initially target high-value consumers with premium LTE data offers thus limiting initial LTE adoption to early adopters and the enterprise segment with a view to generating substantial revenues from data roaming via HSPA/LTE USB dongles. Devices will add to the mix as we expect all top handset vendors to have at least one LTE handset ready in their portfolios by year-end with the Android operating system dominant. With regards to infrastructure vendors, we expect that Huawei will remain aggressive and secure additional LTE contracts in Europe, facing strong competition from Ericsson. (Joss Gillet)
The offloading of tower assets to third-party passive infrastructure companies to manage through leasing deals is well established in markets such as India where it has been driven by low ARPUs and fierce competition as a means of improving profitability and extracting value. Africa has yet to see substantial tower leasing activity due to operators’ reluctance to share towers with rivals and risk losing their competitive advantage. However, last year witnessed several operators testing the waters by striking deals with emerging African tower companies such as Eaton, Helios, ihs and SWAP, along with established global players including American Tower. 2011 will see the floodgates open for tower deals in Africa where the demand for new sites remains high as extensive network rollouts aim to satisfy increasing capacity requirements, 3G network launches and rural expansion. The entry of Bharti Airtel into Africa in 2010 will accelerate this trend as it looks to transfer its low cost model to its new markets. Rival operators will be forced to act in 2011 by competitive pressures to cut operating costs or risk being left with a higher cost base than their competitors. (Jon Groves)
Mobile payment services have been “the next big thing” in the industry for at least a decade, but recent developments have raised hopes that 2011 could finally be the year when m-payments go mainstream. This is due mainly to the raft of big industry vendors that have hinted at supporting the NFC standard in future devices (notably Nokia, RIM and Apple) or have done so already (Google’s new Nexus S). Operators are doing their bit too; three of the four largest US operators have clubbed together to form the NFC-based Isis venture, while Orange is planning to rollout NFC on an unprecedented scale in Europe later this year. The industry’s backing of a single mobile payments standard (NFC) is encouraging, but it does not necessarily mean that a cross-platform solution will emerge. If the next version of the iPhone does embrace NFC, it’ll be a huge fillip for the technology – and no doubt great for consumers – but it is highly unlikely it’ll be compatible with the new NFC-enabled ‘Gingerbread’ Android platform. And the ecosystem will require substantial buy-in from merchants and financial institutions to make it all worthwhile. 2011 will see more consumers than ever before use their phones to make payments, but the holy grail of a ubiquitous m-payments solution will remain elusive. (Matt Ablott)
Embedding social- and location-awareness into apps is easier than ever, thanks to robust APIs from the likes of Twitter, Gowalla and Facebook’s own Facebook Platform. 2010 saw runaway successes in tying these services together with consumer interests – such as the wildly popular Instagram – adding socio-location to photography and garnering a million users in ten weeks (Twitter itself took two years to reach this milestone). Location-based services have long been a poster child of the industry, but we finally expect local search to gain significant traction in 2011, driven (of course) by Google. Its success will arrive on the back of mobile advertising, which – backed by users’ social connections – will offer the insight ad agencies have desired for decades. Its influence will also migrate ‘social’ from a bandwagon set of technologies to a natural feature for a majority of apps. Finally, and sadly, augmented reality will remain a niche app focus, but as always, we expect a handful of truly innovative uses to arise. (Will Croft)
As markets mature, regulators around the globe will be watching competition levels closely in 2011. We anticipate that regulatory initiatives will radically transform the mobile markets in at least four African markets this year: Cameroon, Sudan, Malawi and Zimbabwe. Such markets still have room for connections growth but are showing increasing levels of market concentration which is limiting competition. We also predict that mobile number portability (MNP) will affect mobile operator growth in 13 countries around the globe, whilst compulsory SIM card registration will be introduced in almost as many countries as last year (six) – mainly in Africa. China is also looking to introduce MNP following the recent proposal for a large-scale SIM card registration programme. Such initiatives are expected to boost competition in China – especially in the 3G segment – and break China Mobile’s dominance. Furthermore, we anticipate that regulators in 13 markets will award at least one new mobile licence per market to spur competition. Similarly, market dynamics will change in South Korea, Brazil and Israel as regulators look to introduce MVNOs. Regulators will also play a critical role in LTE as many will be auctioning additional spectrum in the 2.6GHz and digital dividend bands, as well as exploring spectrum re-farming. (Joss Gillet)
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