Smart cooperation

As the telecoms industry weathers turbulent times, this year’s Mobile World Congress focussed on both opportunities and risks for the year ahead. Hot topics included mobile broadband, application stores, the new financial environment, and smart cooperation. Value Partners’ Santino Saguto explains

Santino Saguto, partner and managing director of Value Partners Dubai

More than ever, this year’s Mobile World Congress was an important test of the mood of an industry starting to feel the pinch of the economic downturn. However, despite the general gloom, the mobile industry showed many reasons for optimism. A few chief executives, including Vittorio Colao, CEO of Vodafone, pleaded for government action or a lift of “regulatory activism”, to encourage investment in networks and help the telecoms industry to help pull countries out of recession.

Historically, the telecoms industry has proven very resilient to economic downturns. The industry seems well-placed today with the relatively robust financial position of operators, strong cash flow generation, and multiplier effect of telecoms on the overall economy. In addition, there have been significant growth prospects from emerging markets and from mobile broadband deployments to provide greater capacity, speed and services. Today, customers do much more compared to 10 years ago when mobile phones were used for voice and SMS only.

However this does not limit the risks and challenges ahead. Price decline, regulatory “activism”, service commoditisation, and, most importantly, the challenge to monetise services, are key concerns for the industry. For this reason, it is imperative for telecoms players with the mobile ecosystem to move towards increasing collaboration in order to extract maximum value from this sector. Such a development will also help identify the right model that balances interests among all players.

Key investment areas for telecoms
As part of a recovery strategy, infrastructure investment is the best route out of the current crisis, giving those telecoms players that do invest an edge over competitors. Investment in Long-Term Evolution (LTE), the shift to an open mobile ecosystem, and proliferation of mobile entertainment, advertising and other value-added services, application stores, are all possible opportunities to follow.

Mobile broadband
The general consensus at the Congress was that the tipping point for mobile broadband was during H208, witnessing a five-fold increase in data traffic on major networks during that period. Driven by changes in consumption and increased take up of mobile social networks, widgets and wider adoption of smart phones; the growth of mobile broadband has significantly outpaced its fixed counterpart. There are now parallels drawn between the mobile networks in 2009 and the fixed network in the late 90s, with data traffic overtaking and eventually dwarfing, voice traffic.

Backhaul is the next frontier
With high growth in the volume of network traffic, the next big investment area is the backhaul network, which will gradually be replaced by flexible Ethernet backhaul or multi-platform solutions including more advanced technologies such as fibre optics or DSL. This will allow traffic to flow more easily.

Mobile money transfer
Mobile payments were discussed a great deal at the Mobile World Congress. In particular, strong emphasis was placed on Mobile Money Transfer, as a means of providing “unbanked” customers with typical consumer financial services. The upside potential is huge: approximately one billion people plus do not have a bank account but own a mobile phone. This provides a significant opportunity for mobile operators to bring mobile financial services to this consumer base.

The need for more industry collaboration
Despite this proliferation of initiatives and investments in advanced technology, there has been a growing need for further collaboration within the mobile industry in order to optimise costs and share risks without hindering innovation. This can be achieved through the development of a common technology roadmap, sharing of joint investments and smart cooperation within the industry.