BuddeBlog

The first signs of increased competition in the mobile market are starting to emerge. They revolve around three key trends:

- Increase in pre-paid promotions

- Roaming arrangements

- Drop in call charges through new packaged deals

In trying to control the erosion of the ARPU (Average Revenue Per Users), the three incumbent operators have only reluctantly introduced pre-paid services. In countries with more competition pre-paid is now delivering 50% to 80% of all new customers to the network operators.

We predicted in 1997 that the ARPU would have dropped to around $650 by now. However, we had not foreseen that it would take so long for the new competitors to establish themselves in the market. The triopoly was therefore able to maintain an ARPU of around $800 for the 1998/1999 period. It is only in the last few months that we see the ARPU dropping to $700-$750. The reason for this is not only pre-paid. The carriers are increasingly introducing new pricing packages, varying from per-second charging to free calls within the same network during particular periods. All of this is resulting in a discount of around 20%-30%.

As a result we see a significant increase in the number of calls and the minutes spent on the network. This has given a revenue increase of between 15%-20%. This is in line with our predictions that over the next few years it will become more and more difficult for the mobile operators to maintain their current revenue levels. We haven’t even seen competition from companies such as Hutchison and One.Tel – and this is where the roaming arrangements will come in.

In an unprecedented way, especially in the case of Telstra, (without court cases and/or regulatory intervention) we are seeing companies establishing roaming agreements. What this will do to competition is to basically turn mobile into a commodity, since there will be few differences to promote – by the time the newcomers have arrived it won’t matter any more which company you select for your mobile operator as they all will, in one way or another, be able to offer services from the various players. The focus will then clearly turn to customer service, value-added services, data communications and so on.

So far the big roaming winner has been One.Tel. They have arrangements in place with Telstra and Optus, as well as having their own network. Add to this the company’s marketing focus and it will become a formidable force in the market.

I still have reservations about Hutchison. For one thing, they will only have a CDMA network and it will be damn difficult to move customers to this new technology; furthermore they will only be able to roam with Telstra, who at the same time is their biggest competitor and who has, unlike themselves, a nationwide network.

While I agree that their future is in wireless local loop (WLL), they will have to come up with more appealing pricing and service offerings. While both One.Tel and Hutchison will start offering services in early to mid-2000, they won’t have their full networks in place till well into 2002. The big question by that time will be the return on investment (ROI), as prices will by then have dropped by 50%-80%.

I hope that all newcomers, including AAPT, will have built new data technologies into their networks (WAP, EDGE, GPRS) as by that time e-mobile will have been well and truly introduced by the three incumbents. This would provide them with the much-needed platforms to generate new revenues.

By that time 3G will either have started to become available or will shortly become available. The question then will be if the newcomers will have enough oomph to participate in this next round.

With e-mobile becoming a more prominent feature of wireless communication we will see, as we have seen with current Internet developments, that e-mobile services will be developed by content providers (publishers, financial institutions, travel, tourism, retail, etc). This further underlines my previously expressed views that all mobile operators, like fixed voice operators will be forced back into wholesale positions, rather than retail.

This trend will of course favour the incumbent national operators and Telstra and Optus will, by dint of their early moves into the roaming market, reap the benefits of this.

Vodafone is a big unknown here. So far they have not signed any roaming arrangement and on a previous occasion its CEO has even argued for regulatory intervention to prevent the establishment of virtual mobile operators. Such a restrictive vision doesn’t, of course, assist in the progress of this fast-moving and rapidly changing market.

Oki has unveiled a new IP telephony at Telecom 99 in Geneva system which facilitates speech, data and image transfer over Internet Protocol (IP) networks.

Compliant with the ITU-T H.323 V.2 international standard, the new Oki system provides corporate users with new capabilities such as desktop conferencing, distributed office communication and reduced total cost of ownership.

A national advisory council has been appointed, made up of representatives from the Australian government, industry and user groups, which will report to the Government on electronic authentication and e-commerce issues.

The National Electronic Authentication Council (NEAC) is comprised of 13 members – including officials from the National Office for the Information Economy, the Office for Government Online, the Attorney-General’s Department, the Certification Forum of Australia, the Australian Information Industries Association, the Australian Bankers Association and the Australian Consumers Association.

As well as its advisory role, NEAC will oversee the development of a national framework for electronic authentication of online communications. The framework is designed to give a focus to the development and interoperability of different systems being developed in Australia.

Telia in Sweden has launched a campaign aimed at selling mobile phones to children aged between 7 and 12 years old. The phone is made by the French company Sagem and has specially designed buttons that will make the use of the phone very suitable to children.

Round-up travel news from Europe

Below are some news snippets of various important developments that occurred in the European market travelling through Europe (Netherlands, Germany, Switzerland and Italy).

- The first news from this continent was the merger between the two German utility giant Verba and Viag. These two companies are amongst the most successful electricity companies around the world operating in the telecoms market. The merger is the largest in German history – the combined revenue of the companies is around US$30 billion. The companies intend to sell their non-core businesses over the next 2-3 years.

- On our arrival in Milan all the Italian newspapers had headlines on the dramatic fall in the share price of Italian telecommunications companies related to Telecom Italia. The restructuring plans that were foreshadowed were not implemented according to the original plans and it looked as though the new plans had more to do with financial juggling than with the telecommunications business.

- On arrival in the Netherlands the news on the radio told us about a gigantic telephone card fraud. Criminals in 122 locations in Germany and the Netherlands had been arrested. They had developed a computer system that allowed them to reload empty phone cards. The total damage to telephone companies was expected to be around DM10 million.

- In Germany, Deutsche Telekom is still very much in acquisition mode. After its failed bid for Telecom Italia, the company is continuing with its plans to establish itself as the leader of telecommunications in Europe. While I was there the company acquired a 35% stake in Hrvatska (Croatia) Telekomminikacija. It is clear that the telecommunication borders in Europe are disappearing like snow in the sun. France Telecom acquired a 17.25% share in the German mobile operator E-Plus Mobilfunk, replacing Vodafone Airtouch’s shareholding in the company.

- Following the proposed WorldCom–Sprint merger, there were a few interesting comments. Deutsche Telecom, being a partner in Global One, had apparently also had talks regarding the takeover of Sprint, but they never really entered the game, as the price was far too high for them. Further comment came from KPN (Netherlands) who said that this merger was another sign that sooner or later this company would be involved in a takeover bid. Once the Americans have sorted out their home market, they will move into Europe. On the other hand, the big European telcos have to move quickly as well or the market will start to squeeze them out.

- US-based, PSINet indicated that it is now ready to bypass the copper networks from the national PTTs to deliver high-speed Internet access and other data services to its customers in Europe. The company, as well as its competitors such as Frontier, Qwest and Global Crossings, have been frustrated with the slow progress in interconnect agreements with the 50 or so incumbent PTTs in Europe. Furthermore, most incumbents have been very slow in upgrading their networks to deliver high-speed services. PSINet is now also deploying LMDS technologies to be able to quickly build networks as customers are ‘screaming for more bandwidth’.

- In a surprise move US-based Global Crossing emerged as the winner in a bid to acquire Racal Telecommunications, a new telco that has built a 7,000Km fibre optic network along railway line in the UK. The front-runner in the bid was Energis in the UK, but the company was outbid by the Americans. It is yet another example of the aggressive move of the new American telcos in Europe, filling the gap left by the incumbent telcos as well as by a lack of venture capital available in Europe to develop its own strong new telcos.

- The two Scandinavian telcos, Telia (Sweden) and Telenor (Norway), are one step closer to their merger. There have been some severe setbacks during the past year but they have been able to keep the merger on track. In May 2000 the companies hope to float the new entity. You may remember that when the announcement was first made we predicted that this was a sign of things to come. The small- and middle-sized telcos (under US$30 billion revenue) will find it very difficult to survive on their own. The first ones to feel the squeeze will be the European telcos, especially those which are privatised. From there on the scene will move to the Asia-Pacific region, with Australia and New Zealand as early targets.

- Shell announced that it had signed an agreement with ISP World Online to develop an e-commerce network for its customers. The company has a unique position in the distribution market and will use this to play a key role in new business opportunities that will evolve from e-commerce. They have 11,000 petrol stations in Europe and these outlets will form the nucleus of this operation. The service is called ‘1-2 Move’. Goods ordered via the Internet can be collected at the petrol station – this will eventually also include groceries. In the Netherlands alone the Shell petrol stations receive around 2 million customers a week.

- The Dutch Federal police have formed a special unit to address crime on the Internet. In all 15 cybercops are now employed to check out criminal activities, amongst the 2.5 million members of the cyber community in the Netherlands. In a trial in 1998 the Dutch police force was instrumental in exposing ten child pornography networks, six in the USA and four in the Netherlands. The cybercops are also involved in investigating fraudulent activities in relation to e-commerce and other Internet transactions. Illegal drugs and medicines will also be addressed, as well as criminal behaviour by hooligans, neo-Nazis and other groups that use the Internet through hate-sites and chat circles. A special liaison activity involves the cooperation of ISPs.

- The Gothenburg (Sweden) transport authorities have launched a service that allows its customers to check when the next bus arrives. Buses and trains are equipped with transmitters that broadcast their information. Mobile phones are equipped with a GPS chip and communicate with the buses and the trains. The system knows where the commuter is and transmits the relevant info from the next bus to his/her mobile phone. The Swedish telco Telia have developed the system in conjunction with Oracle. At Telecom 99 Oracle launched an Internet service that allows mobile phone users to access Internet-based info in the format relevant for mobile phones.