Better to have a smartphone and dumb pipe

At the start of December, Arab Advisors Group held its inaugural Smart Handheld Summit in Dubai. The event drew some of the most influential players in the regional telecom arena, and while the opportunity raised by increased computing power on mobile devices is widely acknowledged, how to monetise such opportunities remains less certain

Arab Advisors hosted the Smart Handheld Summit, which considered ways in which Arab operators could benefit from the changing mobile data ecosystem

Osman Sultan, CEO of UAE telco Du said he does not believe that it is practical for individual operators in a given market to build their own app stores, despite the allure of generating incremental revenue through the sale of such applications. Sultan said the industry was still looking to figure out the most effective way for new applications to be purchased and used over mobile channels, with network operators gaining a reasonable share of the revenues. “Vodafone live!, Orange World and Vodafone 360 are examples of operators trying to develop their own app stores, and I don’t think they have been so successful,” Sultan said. “Social networking is what made data communications successful, and I believe aggregation is what is needed in the Arab world where a partnership between over-the-top (OTT ) players and mobile operators is established,” he added.

Sultan believes telcos need to consider ways to claim a share of advertising based revenues from data applications and further reiterated the requirement for cooperation amongst operators in order to achieve this.

Etisalat’s chief marketing officer, Matthew Willsher is of the opinion that the current mobile data and applications ecosystem is not really working in this region as well as in other markets and that there is a kind of creative energy missing. “I think we do basic things very well, which enable other, more complex things to take place,” he commented. Willsher also believes that in certain respects telcos are selling access too simply and more creative ways in which to bundle access offerings could be beneficial to telcos with respect to monetising the increased data traffic their networks are experiencing.

Paul Doany, former CEO of Turk Telecom, and current chairman and co-founder of Timar Ventures, an early-to-expansion stage venture capital fund, said the improvement of operational efficiency is the key value-determining aspect of telcos today. “The cost of telco growth was hidden during the boom,” Doany said. “So as an investor, if I heard a telco company saying it is focussing on innovation with plans to take on Apple, I would not invest,” he added. Doany made the point that it is non-telecom companies such as Google, Facebook andTwitter that have been driving data growth rather than traditional telco vendors or even operators for that matter.

“I believe this question of telcos fearing becoming a dumb pipe is an overstated one because I would rather have a dumb pipe and a smart phone rather than the other way around. And if I can make money from the dumb pipe, I would be happy,” Doany said.

Smartphone shipments increase by 42 per cent year-on-year in Q311, according to Gartner

Smartphone sales to end users reached 115 million units in the third quarter of 2011, up 42 per cent from the third quarter of 2010.

Sequentially, smartphone sales slowed to seven per cent growth from the second quarter of 2011 to the third quarter of 2011. Smartphone sales accounted for 26 per cent of all mobile phone sales, growing only marginally from 25 per cent in the previous quarter.

Samsung became the No. 1 smartphone manufacturer worldwide as sales to end users tripled year-over-year to reach 24 million. Samsung was the No. 1 smartphone manufacturer for the first time, ahead of Nokia in Western Europe and Asia. Gartner attributes this to the strong performance of Samsung’s Galaxy smartphones, which now cover a broad range of prices, and a weaker competitive market. Analysts expect more competition in the fourth quarter of 2011, not least because sales of the iPhone 4S, 4 and 3GS will capture share from Android manufacturers.

Apple shipped 17 million iPhones, an annual increase of 21 per cent, but down nearly three million units from the second quarter of 2011 because of Apple’s new device announcement in October. Gartner believes Apple will bounce back in the fourth quarter because of its strongest ever pre-orders for the iPhone 4S in the first weekend after its announcement.

Markets such as Brazil, Mexico, Russia and China are becoming more important to Apple, representing 16 per cent of overall sales and showing that the iPhone has a place in emerging markets, especially now that the 3GS and 4 have received price cuts.

The Android OS accounted for 52.5 per cent of smartphone sales to end users in the third quarter of 2011, more than doubling its market share from the third quarter of 2010.