Tuesday, November 21, 2006
To begin with 3 was one of those who bid and bought 3G spectrum in Europe at bloated prices in late 1990s on top of it 3 was new entrant with plans to build pan European 3G only network .Basic Idea being that they thought that 3G and its services is going to be real killer and its worth investing huge capital to roll out the network and service. Of course it is true that all other mobile operators like Vodofone, Orange, and T-Mobile also banked on 3G while bidding for spectrum along with 3 but one major and crucial difference between 3 and others is that 3 is pure 3G operator while others are dominant 2G players with already successful 2G business. So what happened between late 1990,s and till now 2006 as it is evident now is that other than 3 other operators after the tech bust downgraded their 3G expectation and tried to concentrate on 2G at the same time rolling out 3G in much more conservative way. But 3 which had relied on 3G had to rollout network and services in more aggressive way like bundling huge voice minutes in their basic 3G plans and also trying to lure customers with its own data services .As it turned out that all these actions didn’t help their bottom line and their own 3G services uptake being low and forced to improve their financials fast they were forced to think differently to lure customers and one important initiative in that direction is X-series launch.
Today most of the mobile operators who have launched data services have launched data plans which is based on the concept of charging users based on how much traffic they generate.(i.e. users have to pay a fixed price per MB of data they send or receive )similar to early days of fixed broadband plans. Basic Idea or strategy is that operators would like to offer their own services at fixed price per service which would include data costs example: In US Cingular, Nextel and other have launched mobile phone based navigation service which cost user 6-9 $ per month which includes data costs, By using this strategy they would like to control the services that are delivered to consumers and also have good margins. In short in future as and when most of the mobile services including voice are going to be delivered on packet network they wouldn’t like to be like end up like Internet service providers (ISP) just providing data pipes at fixed cost. So this is a kind of common strategy the entire mobile industry agrees and adopts including 3 till recently.
Due to the reasons mentioned earlier as 3 was forced to change their strategy they launched X-series .which basically provides unlimited data access to consumers at fixed price, ofcourse 3 is also bundling some of common internet services by partnering with Google, Yahoo, Skype and other big internet brand name so that these partnered services work seamlessly out of box. But the crucial thing from consumer perspective is it is unlimited data meaning that consumers can pick and choose their own service and even replace some of the rebounded service at no extra cost .So basically allowing access to internet same way as we do with fixed broadband believe me its big change compared to the present state .
Finally if this service is successful it will bring down 3 margins further but at the same time it increases its revenue and customer base to which if it is innovative can provide its own services and make margins.
Most importantly if it successes then it force other operators at least in Europe to offer similar services meaning forcing them to abandon walled garden approach to data and embrace open internet approach to data. It is also beneficial for handset vendors like Nokia who have invested in open mobile SW platform like S60 and smart phone development as it is most likely that smart phones would be the phone of choice for consumers using unlimited data plans. Most importantly it gives consumers freedom and choice to services.
Sunday, November 19, 2006
Motorola last week announced that it will use QUALCOMM chipsets for its 3G phones, Its already using Qualcomm chipset for its CDMA portfolio both 2G and 3G but this announcement extends it to using QUALCOMM chipsets for WCDMA (European or GSM evolution to 3G) phones .This is significant development for overall 3G handset market and in particular to Nokia . This posting tries to explore the reasons and its implication of this deal.
Today 3G phone markets is dominated by Nokia because of its technology leadership in WCDMA and also its scale which translates into its ability to produce cheapest 3G phone which in turn translates into great market share and margins.Nokia uses its own radio modem chipset and Texas instruments (TI) Application processor in its 3G phones and also collaborated with TI to design one of the world’s first single chip WCDMA chipset i.e. both radio modem and application processor sits in a single silicon .Which translates to smaller and cheaper phones giving Nokia further edge against Motorola in WCDMA handset space. On the other hand Motorola nearly 2 years back spun of its Chipset business into separate company called Free Scale. This was recently bought over by private equity investors moving Freescale further way from Motorola. Motorola was cornered and had to look out for external silicon partner to have any chance to fight Nokia in 3G phone market.
Qualcomm a wireless technology provide rose to fame and made most of its money from selling its CDMA chipsets and licensing its CDMA Intellectual property Rights (IPR) .When its come to CDMA it has most dominant position both in terms of IPR and CDMA chipset market share As discussed earlier as CDMA technology market share dwindles and CDMA camps 3G technology only dominant in US, it needs to expand into GSM and UMTS space .WCDMA the radio technology used in UMTS is built on basics of CDMA technology which means some of the basic IPR of CDMA is also relevant for WCDMA and which gives a logical edge for QUALCOMM because of its strength in CDMA.Which it would like to use to generate its second wave of revenue stream .Precisely this issue has landed them in confrontation with Nokia. Nokia claims to have maximum number of essential IPR in WCDMA space and would like to get license revenue for it from Qualcomm same way as it pays to license CDMA IPR from QUALCOMM for its CDMA phones. But QUALCOMM as it tries to enter into WCDMA space with its chipsets claims that its IPR portfolio is superior to Nokia and it doesn’t have to pay anything. This conformation between Nokia and QUALCOMM has not yet concluded the result of which has profound impact on Qualcomm ability to make cost effective WCDMA chipset which has impact on its ability to take market share in UMTS handset market .
As I tried to explain earlier this agreement between Motorola and Qualcomm looks like a logical alliance to fight against a common enemy Nokia .From Nokia perspective this is the strongest challenge that they may face in its race for 3G handset market leadership positions.
Sunday, November 12, 2006
Lets start analyzing this company and its model from checking who are its founders .It is started by none other then former Nokia president Pekka Ala-Pietilä ,which is one of the main reasons which makes me feel that this is serious company and not a dot com kind of company trying to ride the advertisement based success of Google. The company as not disclosed many details except that its services are free and revenue model is based on advertisement so it leaves people like me to speculate on what kind of model and services it can be. To begin with my primary assumption is that this doable the reasons for this are
- Blyk is MVNO meaning that they don’t have to build capital intensive network and bid of scare and costly spectrum they lease network from exiting operators at whole sale price .so which means they don’t have much of fixed cost and can easily expand as customer base grows .Of course European regulations regarding MVNO also help them
- Most important thing is if advertisements are delivered in a non intrusive way this medium (i.e. mobile advertisement) has potential to be most important and effective medium for advertisers even better then internet PPC (pay per Click model) .Because this not only delivers all goodies of internet based advertisement but has potential to take it better level in terms of targeted and timely advertisement using both mobility and location metrics and tools .So in short it has potential that advertisers may shell out more money then in pure internet model. This means that theoretically Blyk potential revenue opportunity is enormous.
So after going through things in favour of Blyk let’s see some potential huge problems
- Most importantly these kinds of free services have been tried out unsuccessfully in 1998-99 in South Korea .Recently Xero an new American MVNO with 300 million $ funding plans to start partial advertisement based services where consumers by seeing or listening to advertisement can accumulate free voice minutes. This service seems not to have picked up so in past none of these kind of services have picked up. So based on history Blyk chances look bleak but again it might be Blyk chance to create history.
- Another big hurdle is typically for this kind of service to work there needs to be decent number of customers ideally in millions and definitely not in thousands because as discussed earlier more the customers lesser would be cost per minute and also most importantly from revenue generation side advertisers are not attracted by small numbers as their cost of producing mobile specific advertisement content may not work out .So in short from both cost of operation and revenue generation side it is absolutely must that this kind service gather quickly good number of customers to keep it rolling .which is typically very hard thing to do .But again you may never know the real power of free service .
Sony Ericsson (SE) announced that it is buying UIQ.For those of you who are not aware of UIQ its subsidiary of Symbian providing UI layer on top of symbian OS.UIQ is the UI layer that runs in SonyEricsson popular P900 series smartphone.offcourse no financial details were disclosed about the transaction by both parties .I will try to put my thoughts why did SE buy UIQ and what is the future looks like
To answer the question why did they buy lets try to discuss about symbian ecosystem.Symbian is the dominant Smartphone OS with more than 70% market share.Symbian similar to Linux world doesn’t provide its own UI layer but there are many options available for mobile manufactures like S60 Nokia’s own layer on top of symbian, UIQ from UIQ technology which is subsidiary of Symbian ltd and MOAP which is UI layer by NTTDocomo.But if you look closely which of these UI layer ,its Nokia S60 devices that accounts nearly 60% of generic Smartphone market share and close to 80% of symbian devices market share .Rest 20% of symbian devices are dominated by MOAP in Japanese mkt and also UIQ devices whose biggest customer is SE.Now Symbian itself is privately owned company with Nokia being the biggest owner with 47.9% followed by Ericson and SE combined together hold 28% and rest is owned by Panasonic(10%) ,Siemens (9%) and Samsung(4.5%).As you can see Nokia is not only the biggest share holder but also the biggest customer of symbian .It also as S60 layer on top of symbian which it licenses to other symbian phone manufacturers like Samsung,LG etc and UIQ is direct competitor to it .UIQ as mentioned earlier is a subsidiary of Symbian and had SE has its major customer .In this environment it is oblivious that Symbian shareholders would not be interested in pouring symbian money into UIQ development in long run so my guess is that since SE was dependent on UIQ was forced to buy UIQ and continues it development same way as Nokia does S60 and in process making symbian as pure OS vendor .
Now lets try to predict the future of this acquisition.SE for now as said that it would like to keep UIQ has separate company and not only develop it further but try to license it to other symbian phone manufactures meaning that they would like to place it as alternative to S60.Ok that’s what SE aims to do but would it be able to do lets put this way that I am little bit pessimistic. Reasons are straight fwd
- Today’s symbian volumes are coming from Nokia and its S60 devices they are not going to license UIQ
- To develop and maintain SW platforms is very expensive with low volumes it becomes much more difficult .so with SE present volumes it may become difficult to develop and sustain UIQ.
- UIQ will try to get other license but most other major symbian license like Samsung are already S60 licensee
So in short my thinking is that in market for symbian phones there is space for only on UI platform and that at this moment seems to be clearly S60 so future of UIQ looks bleak but again who knows SE may become biggest Smartphone vendor which gives the volumes to sustain platform development cost .:)
Mobile email or Push email (i.e. technology that enables access of email in your wireless devices like mobile phone PDA etc) is pioneered by blackberry devices (RIM).As the technology matured the other mainstream Mobile device vendors like Nokia, Motorola etc started offering similar services in there portfolio and even started producing devices similar in form factor to blackberry (Nokia E61 and E62, Motorola’s Q).around same time there started popping up device independent pure wireless email SW solution vendors like Intellisync,Good Technology,Visto,Seven to name a few noted vendors .Device vendors like Nokia ,Motorola typically provide support to many email solutions in their devices .But at the same time both Nokia and Motorola started to diversify into Enterprise Solution business in which email solution is first and import segment which enterprises are embracing now So they had to develop or buy companies with this technology .So Nokia acquired intellisynch and Motorola on Friday bought Good technology. Now life for independent Mobile email solution vendors like Visto and seven is tougher of course right now they are concentrating on