Mobile Merger Mania Mystery Tour 2: No Turkish Delight for T-Mobile?

Richard Moat: What's in store for the recently-appointed MD of T-Mobile UK?

We're going a bit off the usual 'emerging markets/developing countries' beat again today, I'm afraid. Bear with me. For a few reasons, this is a story I care about.

Having worried a little, however, about the possible effects of a Vodafone UK-T-Mobile UK merger on the area where I live (the northern bit of London's commuter belt), it now looks as if my fears are not to be realised.

Well, that's if I choose to believe my former colleagues at Informa Telecoms & Media. Informa's telecoms.com news site ran an article on Monday that seems to suggest any buyout of T-Mobile UK now looks unlikely. The article mentions a recent announcement by UK telecoms and media watchdog Ofcom which indicates that the regulator is satisfied with the level of competition in the country's mobile sector. According to analysts, the article contends, this means that the change caused to the UK mobile market by any consolidation would risk drawing regulator attention. One such analyst, Michael Kovacocy, of Daiwa Securities, is quoted: "Assuming rational operator behaviour, we would be inclined to believe that an already weak case for buying T-Mobile has been made weaker for the big three UK mobile players," says Kovacocy.

Although he also features a simular quote from Michael Kovacocy, the tone of an article written on the same day by Dominic White of Mobile News, however, is quite different. Two months ago, White asked whether recently appointed Richard Moat was about to become the shortest-serving MD ever of T-Mobile's UK operation. White feels now that this possibility "seems more likely after it emerged that Deutsche Telekom has hired investment bankers at JP Morgan to explore so-called 'strategic options' for the group." White argues that more often than not, language of this sort is code for putting the business up for sale.

As well as my fears for how a sale of T-Mobile UK might affect my local area (where the cellco has its HQ), I'd also be disappointed to learn of Richard Moat not being given the chance to get stuck into his new job, not least because I found him to be a friendly and helpful contact when I was working more actively in Europe than I am now.

For a long time, I took advantage of my familiarity with Central and Eastern Europe (having lived and worked there in the early-mid 1990s) to organise and host telco sector conferences and networking events in locations such as Prague, Budapest and Bucharest. In the latter, I met Richard Moat for the first time. Richard was then heading up Orange Romania, where, during his four year stint at the helm, revenues grew from from EUR 624 million in 2004 to EUR 1.31 billion in 2008. The cellco also retained its market-leading position, keeping just ahead of Vodafone Romania and dealing with a trading environment made more competitive by the arrival of new entrant in the mobile space RCS&RDS.

While speaking at the 2006 version of the Informa Telecoms & Media CEE region conference in Bucharest did not demand a major time commitment from Richard, I found he was happy to jump on a plane and take a day out of the office when the event moved to Prague the following year. As well as making a great presentation in Prague, Richard made himself available for a chat, during which he shared useful insights about the telecoms sector in Romania and the wider region. My impression is that Richard is the kind of CEO really appreciated by analysts and journalists as well as conference organisers because he is keen to find the time to share his views and contribute to discussions around issues facing the industry. During his stint in Romania, Richard seems to have been similarly generous with his time when talking to local telecoms sector magazine/news portal Comunicatii (which, by the way was always a useful media partner for my events). This interview with Comunicatii's Ion Vaciu, recorded in February, is an example of that:

Of course, Richard Moat - and Deutsche Telekom - may be able to stick rather than twist. As Dominic White of Mobile News notes, Germany's incumbent telco could hold onto its UK mobile business, but he contends that "what is known is that Vodafone has had a peek at the business and is considering making a bid that would prompt a massive shake-up of the UK mobile sector."

White discusses an issue previously raised here at DevelopingTelecomsWatch - that if Vodafone were to try and buy T-Mobile UK, or to merge their UK businesses into a 50:50 joint venture, it would command more than 40% of the UK market, which would be more than enough to attract the attention of the Competition Commission, which typically investigates any deal that gives a company more than 30% of a particular market. White notes, however, that analysts think a deal might get through the hoops, pointing out that in markets such as France and Germany there are operators with more than 40% market share. White also reminds us that the UK is the only major European market with five mobile networks, a throwback to the turn of the millennium when the government raised GBP 22.5 billion selling 3G licences, including one to the new entrant 3, which was mentioned by the telecoms.com article as the only contender for a deal with T-Mobile UK which would not attract a response from the regulators. This point is made, I assume, because of the late entrant having a significantly smaller share of UK mobile subs than any of the other four network operators.

According to WCIS, the UK mobile market is currently split as follows in terms of market share:

1. O2 - 29.27%
2. Vodafone - 21.38%
3. Orange - 21.35%
4. T-Mobile - 21.31%
5. 3 - 6.69%

My feeling is that if 3 UK were somehow to tie-up with T-Mobile UK, it would surely be a case of the latter purchasing the former. I say this because of how much I've read lately about 3's parent company Hutchison Whampoa looking to raise cash rather than spend it. For example, the group has confirmed it is in talks to sell its stake in the Orange-branded Israeli MNO Partner. The group may also sell a stake in 3 Italia to investors from the Middle East, according to a Cellular News story earlier this month.

Dominic White believes that the UK 3G auction held earlier this decade, "and the way it was rigged to generate maximum value for the government" has hamstrung the mobile industry in this country ever since - too many networks and tremendous pressure on each player's profit margins. He notes that Deustche Telekom has already written down the value of T-Mobile UK after a year in which it underperformed the rest of the industry. According to White, Vodafone is considering a bid within the range of GBP 2.5-3.4 billion.

For Michael Kovacocy, these numbers do not look right. In the telecoms.com article, he warns any purchaser against overpaying and argues that only "a bargain basement price" of GBP 1-2 billion makes any sense.

Terry Sinclair of Citigroup, however, likes the idea of Vodafone picking up T-Mobile UK. In Dominic White's article, Sinclair is quoted as saying that the combination could boost Vodafone’s earnings by GBP 200-300 million within three to five years. Needless to say, continues White, that would mean a lot of cost cutting, which is the main reason for the tie-up: "if your revenues aren't growing enough the only way to boost profits is to squeeze your cost base." He feels that Vodafone would also be able to put more customers over one network and would have extra buying power and a greater footprint to roll out new products and services.

If it really is as hard for mobile operators to make good margins in the UK as has been suggested here today, this could provide a rationale for Deutsche Telekom seeking to get out of Britain and into somewhere which offers better prospects and/or a neater complement to the German telco's many operations in Central and Eastern Europe. DTW has previously noted suggestions that a favoured option could be some form of asset swap with Vodafone, whereby Deutsche Telekom would get its hands on Big Red's Turkish operation, which has struggled to compete effectively with market-leading Turkcell.

A fairly wide range of opinions, then, on whether the UK mobile market is about to consolidate. So it remains worth watching.

Mobile Merger Mania Mystery Tour 2: No Turkish Delight for T-Mobile?

Mobile Merger Mania Mystery Tour: calling in Africa, Turkey, the UK and points worldwide

T-Mobile UK campus, Hatfield, Hertfordshire: uncomfortably close to DTW HQ

Late last month, I turned the gaze of DevelopingTelecomsWatch away from the world's developing countries and emerging markets and focused my attention much closer to home.

Getting all self-indulgent, I described the possible effects of a rumoured T-Mobile UK-Vodafone UK merger on the area where I live. This is because I am personally acquainted with a few people who make the pleasantly short commute from here in St Albans to the T-Mobile campus in nearby Hatfield. Without any real numbers to hand, my sense, then, is that the Deutsche Telekom-owned cellco is a pretty significant employer in this part of the world. So, in a town where the unemployment figure has recently surged upwards, albeit from a very low base, a true merger of the two MNOs is unlikely to be warmly received. I think this is the first telecoms story that I've ever heard being discussed by parents waiting for their kids outside my son's nursery school.

Perhaps a more predictable setting for talk of telecoms M&A activity is Investor's Business Daily, whose writer Reinhardt Krause believes that "after slowing to a crawl in the first half of 2009, deal-making among phone companies is bouncing back, a shift that's playing out in developed and fast-growing emerging markets alike." Krause quotes a former colleague of mine, Thomas Wehmeier, an analyst at Informa Telecoms & Media, who says that "the talking that has been continuously ongoing is finally bubbling up to the surface in the form of actual bids and deals."

Krause cites a number of prospective deals:

• Hutchison Whampoa may seek a merger for some or all of its money-losing operations in Europe, including 3 UK
• The merger talks between Bharti Airtel of India and South Africa's MEA mobile group MTN
• China Mobile being "on the prowl for more deals in Asia"
  
• The much-discussed notion of Zain selling its African operations

When asked about the last of these, Wehmeier expressed surprise, but conceded that "Zain is seeing that operating in the African environment is not simply a way to print money, not matter how impressive the rate of subscription growth."

Tom Elliott, an analyst at Strategy Analytics, meanwhile, says that Zain may be tempted by the huge "one-time gain" it would realise by selling its African assets. As Krause's article states, in 2005, Zain acquired Celtel International's African operations for USD 3.4 billion and, if the current rumours are to be believed, is now looking to sell these (plus some other acquired later) for around USD 10 billion. The even larger sum of USD 12 billion has also been mentioned - and for a very interesting discussion on how that a 12 billion dollar valuation could be calculated, I'd heartily recommend a nice article written by Carlos Valdecantos of Spain-based management consulting and advisory firm mmC Group.

The Zain story is certainly the one to which most time has been dedicated here at DTW but, as discussed, the T-Mobile-Vodafone issue is the one whose impact I'd be most likely to feel in day-to-day life here in London's commuter belt.

The last time I looked at this, I briefly raised reasons why such a deal might not be plausible. These included the idea that UK authorities might be concerned about the market power of the merged operation in a consolidated mobile market and the question of why Deutsche Telkom would offload such a significant asset at the bottom of the market.

Paul Rasmussen of FierceWirelessEurope, writing late last week, has an interesting take on these two concerns. Rasmussen has listened to sources who believe that DT may prefer an asset swap to a sale, favouring the acquisition of a "comparable mobile operator in central or eastern Europe" from a group interested in T-Mobile UK.

Rasmussen cites "insiders" who claim that DT's CEO, René Obermann, is keen to avoid a sale of its UK subsidiary, not least because this would create doubts about the company's ambitions to remain a global player. "Early speculation has placed Vodafone Turkey as a possible candidate", writes Rasmussen.

Vodafone's Turkish operation must count among Big Red's least satisfactory acquisitions. No dent, for example, has been made on Turkcell's leading share of the market, currently estimated at 56.40% by WCIS, which is actually slightly higher than it was at the same time last year.

In March, another Informa Telecoms & Media analyst, Dario Talmesio, profiled the performance of Turkcell and, when analysing the competitive environment in the company's home country, asserted that the cellco's achievements were "facilitated by the exceptionally weak state of Vodafone Turkey."

Talmesio wrote that "Turkcell continued to hold a competitive advantage against its British-owned rival... with Vodafone Turkey scoring particularly low compared with Turkcell in key areas, such as quality of network, commercial distribution and customer satisfaction".

On a personal note, I've travelled to Turkey on business a several times and have had the pleasure of making the acquaintance of people working with just about every significant telecoms operator there, as well as many more in the mobile VAS space and with various consultancy firms. There does seem to be a very strong feeling in Istanbul that Turkcell's dominant position is unlikely to be threatened any time soon. I've even heard the suggestion that Turkish consumers can be quite resistant to foreign brands competing with ones perceived to originate from their home country. Even this seemingly quite intangible advantage might weigh heavily in Turkcell's favour. Personally, I have a fairly strong aversion to slugs and snails - almost a phobia - so, Turkcell's use of the latter in its branding does not float my boat. It doesn't seem to put off the majority of Turkish cell phone users, however.

Turkcell's snail: not to my taste, but works just fine for Turkey's mobile users

One can see, then, why Vodafone might look to retreat gracefully from Turkey. Why, though, would Deutsche Telekom be keen to have a crack at all these problems which Vodafone has seemingly failed to handle? Well, as Paul Rasmussen writes, "such a move would nicely complement Greece's OTE", in which DT has been growing its stake since last year and which has a SE Europe footprint, with mobile operations in a number of Balkan countries.

If we're going to ask what is attractive about Vodafone Turkey, we might equally ask why Vodafone would be interested in T-Mobile UK. Beyond the opportunity to jump instantly to a 40% share of the UK mobile market and into a clear leadership position by market share, does the Deutsche Telekom-owned cellco not come with considerable baggage?

As Paul Rasmussen notes, analysts are beginning to question the value of what T-Mobile UK has to offer. He writes that "while the company has around 16 million customers, it is largely made up of an unstable base of prepaid consumers who can switch carriers easily to chase the cheapest or best value plans" and notes that "T-Mobile also generates around 45 per cent of its cash flow from its MNVO deal with Virgin Mobile, a deal that could easily evaporate if a new owner ruffled Virgin's sensitive feathers."

Bearing all of this in mind, you'd have to ask why media speculation abounds about the UK's two other leading mobile operator, O2 and Orange being interested in T-Mobile UK.

One suggestion raised by Paul Rasmussen is that this stems from each operator seeking to "spoil the ambitions of the others", leading to "the winner overpaying while the losers then complain bitterly to the regulator in an effort to confuse and delay the acquisition." Rasmussen argues that "The 'losers' could then attack the unsettled T-Mobile subscriber base with attractive offers and packages. Why so cynical, Paul?

Scary stuff.

Let's keep watching.

Mobile Merger Mania Mystery Tour: calling in Africa, Turkey, the UK and points worldwide

News from islands large and small

More than once, reference has been made here to the idea that some developing countries may well be set to experience consolidation of the mobile sector in the near future. I've quoted luminaries from emerging markets players such as MTN and Zain who contend that in Africa, for example, there currently exists a larger number of mobile operators than the continent's markets should really be able to support. With this in mind, I have often turned the baleful gaze of DevelopingTelecomsWatch towards the hopes and struggles of smaller cellcos competing for a slice of often quite small markets in the face of competition from multinational telecoms groups with far more formidable assets.

This week, however, I've found my thoughts turning to the the prospect of market consolidation much closer to home because here in Britain, Vodafone has declined to comment on a report that it is considering buying the UK operation of T-Mobile International.

For me, this is very close to home. I've been a T-Mobile UK subscriber a number of years. Also, a number of people I know socially make the very short journey every day from St Albans to their jobs at the operator's HQ a few miles away.

I don't know how likely this deal really is. Local reports have made much of whether the UK authorities would welcome the creation of an operator with a market share of 40%. Press articles here have also featured questions about why Deutsche Telekom would offload such a significant asset at the bottom of the market, why Vodafone would take on extra operational costs during a recession and how such a deal would affect 3 UK, with which T-Mobile UK has a network sharing arrangement.

The same reports, however, do remind us that earlier this year, Vodafone CEO Vittorio Colao said that his company was prepared to play an active role in consolidation between operators and that this has already happened in Australia. There, in February, Vodafone and rival cellco 3 Australia announced their merger.

The good people of my home town here in the commuter belt to the north of London will certainly watch this with interest. This is a relatively prosperous place, even by UK standards, but we have certainly not escaped the effects of the recession. A growing amount of retail space stands empty and, albeit from a low base, we have seen a recent surge in the number of people who are unemployed. The T-Mobile campus in nearby Hatfield is one of the larger office complexes in the area and must be one of the more significant providers of decent jobs that do not involve taking the train into Central London. I am therefore struggling to think of how the prospect of a Vodafone-T-Mobile merger could be viewed with anything but apprehension in my neck of the woods.

It's much easier to write dispassionately and remain cool about the human impact of M&A activity when the action is a long way from home. So perhaps it's best if I stick to the emerging markets/developing countries brief of this blog and turn my gaze to distant shores. This will be a far more comfortable expercise than trying to avoid becoming maudlin about friends and neighbours employed by T-Mobile worrying about their jobs.

So I'll pick a really distant shore - about as far from home as I can possibly find. How about Nauru, a tiny island in the Micronesian South Pacific? According to Cellular News, the world's smallest independent republic is finally joining the mobile revolution.

With no existing mobile operator and a population of just 10,000 to serve, you might think that the Nauru might not need a Minister of Telecommunications. Such a post does exist, however, although I get the impression from telecoms research consultancy BuddeComm that the performance of past Ministers has been somewhat underwhelming. The synopsis of the BuddeComm Nauru market profile indicates that up to now the Government has been both regulator and the sole provider of all telecoms services. According to BuddeComm, "the state of telecommunications in Nauru resembles the country’s own economic chaos". Their Nauru profile notes that in 2003 the telephone system collapsed due to equipment failure leaving the island cut off from the rest of the world and that the Government could not afford to have the necessary repairs made. In 2004, apparently, satellite communications were to be shut down for non-payment of subscription fees.

All this looks set to change rather dramatically - the current Minister, Sprent Dabwido announced this week that Government of Nauru has awarded Digicel a license to operate a GSM network.

Can any company make a profit from operating in such a tiny market? Well, while Nauru might be an extreme case, Digicel does have a track record of establishing operations in very small territories and is therefore probably better suited than any other company to a challenge of this kind. Digicel provides mobile services in 26 countries and territories throughout the Caribbean, Central America and the South Pacific. In the latter region, operations have been set up in markets including Vanuatu (pop. 216,000) Samoa (pop. 189,000), Tonga (pop 112,000). Small territories, then, seem to hold no fear for Digicel.

The company will presumably have been buoyed by being able to report its first net profit since its launch in 2001. According to a TeleGeography report earlier this month, Digicel recorded a net profit of USD 41 million in the twelve months to 31 March 2009, compared to a loss of USD 74 million in the previous year. EBITDA reached USD 680 million, a 34% increase year-on-year. Revenues rose by 11% to USD 1.73 billion, while the company's subscriber base was up 34% to 9.2 million. The company’s net debt at the end of March was USD 2.7 billion.

Digicel said that the subscriber growth in subscribers was helped by successful rollouts in El Salvador (where it now has about a million customers), Trinidad & Tobago and Suriname. Other new additions to the footprint are Honduras and Panama, both added in late 2008. According to Digicel, 1.1 million new subscribers were signed up across these two new operations in their first five months of operation. According to a Cellular News article the month, the operator is now planning to extend its reach to Costa Rica, breaking the monopoly currently enjoyed by that country's incumbent telco Instituto Costarricense de Electricidad (ICE).

Meanwhile, across the sun-drenched Caribbean islands where Digicel first established operations (before expanding into Central America and the Pacific), the company faces a potentially interesting new competitor.

According to a TeleGeography report, Lycamobile is looking to make the transition from its prepaid MVNO model to becoming a full MNO in the Caribbean, starting in St Kitts and Nevis and following on across six other islands. Since 2006 Lycamobile has launched its prepaid brand in eight European countries, where it offers very low tariffs and claims to have around four million customers. My understanding is that the focus of its market efforts tends to be the diaspora populations of African and Asian countries who are working in Europe and looking for good deals on calls home:

Quite what has prompted the company to look to the Caribbean and to setting up physical networks I don't yet know, but given that we started with worries about job losses in the satellite towns around London, St Kitts and Nevis just seems like a pleasant place to end this meandering tour through the world's island markets large and small.

News from islands large and small

Protectionism and unfair competition in Europe's mobile markets?

As someone used to spending a busy week doing business at the Mobile World Congress, I have spent a little time this week wondering what opportunities I might be missing by not attending this year. Given that I am writing this on a pleasant South Florida morning, looking out at a swimming pool, a line of trees and the St. Lucie River beyond them, it might seem odd that I would spend even a second missing the harsh lighting and the long slog around Barcelona's Fira. Two reports from Spain, however, seem to vindicate my decision to use this short hiatus between one job and another to enjoy a family holiday.

The first comes from Dean Bubley of Disruptive Wireless. Dean highlights a few things he's taking away from this year's MWC, of which I was most interested in the idea of "CTO-to-CFO friction" within mobile operators resulting in revived HSPA+ plans and LTE deployment timelines "being pushed out a bit". Dean also reports detecting less overall pessimism about the economy than he had expected but wonders if that might be "because the real doom-mongers all had their travel expenses cut this year." Interesting though these observations are, the part which made me feel really good about taking a vacation during the cellular sector's annual get-together was Dean awarding a "villains of the year" gong to "the GSMA Stasi demanding photo ID to get into the Fira precincts in the morning." While I daresay I will throw myself back into the MWC fray again in 2010, this is the kind of thing I don't miss.

The other MWC report reaching me here in sunny Palm City, Fla. is the ever-amusing Week in Wireless, penned by the mysterious 'Informer' who observes that attendance was noticeably down on previous years. The Informer’s straw poll of a score or so of exhibitors puts the contraction at an estimated 20-25 per cent. The Informer was intrigued to notice that this year there was no sign of exhibition staff scanning badges at hall entrances, something which has been done in recent years to gauge footfall. The Informer wonders if this was a cost-cutting exercise and reserves judgement about the suggestion made by "one naughty cynic" that not measuring traffic in the exhibition halls simply removes any obligation on the part of the GSMA to report exact figures to exhibitors "in a year where those figures might not have encouraged onsite rebooking." The Informer is quite right to label this a cynical suggestion.

This stuff, as the Informer says, is for the conspiriacy theorists. More important than this, the Informer feels that there was also a lot less news than in years past. This is what makes me feel OK about missing out this time. I daresay the next time I attend the old buzz I know and love will be back.

In my most recent post, I was reflecting on the large population of Polish migrant workers in the UK, something which came up in the context of discussing mobile international money remittance services worldwide. The Informer reports remarks made in Barcelona this week by Chris Bannister, CEO of P4/Play, Poland's newest mobile operator, which has been in business for around two years. Mindful of the significance of this large Polish presence in the UK for his international business, Bannister complained about the serious problems caused by failing to get a roaming agreement with Telefónica-owned O2 UK until only three months ago.

According to the Informer, Bannister also has to contend with mobile number portability taking a whopping 51 days in Poland. The Play CEO says that 15% of his subscribers are former customers of the operator's longer-established rivals. Bannister suggests this figure could double if more effective MNP was introduced. The Informer writes that "the incumbent players, Vodafone (Polkomtel), Orange and T-Mobile (PTC), have no interest in seeing this happen", according to Bannister, who also discussed data roaming rates: he can get Eur 3.75 from T-Mobile (I assume this means T-Mobile Germany) whereas E-Plus will do it for Eur 0.25.

Play is one of the core members of the Mobile Challengers Group, an alliance of third and fourth placed competitors in various European cellular markets. The aim of the group is to challenge the competitive environment of the European mobile industry. One of this association's stated intentions is to create a level playing field for all operators and to provide greater choice and better conditions for consumers.

The Informer writes that five CEOs from the Mobile Challengers Group were on hand in Barcelona to raise their grievances about what they see as the protectionist activities of incumbent carriers. The Informer feels that "the existence of this group reflects the power structure of the GSMA, which is controlled by the largest players" and was told by one employee of one of the member companies, when asked about the Mobile Challengers Group's relations with the GSMA: "they hate us."

The Informer observes that "some might view the challengers’ complaints as sour grapes from carriers that lack the scale to compete with more successful players", but feels that 51 days for MNP in Poland and Mr. Bannister's reported discrepancy in wholesale roaming rates does indeed smack of protectionism.

In addition to all of this, I noticed a few WiMAX stories emanating from Barcelona, some of which have a bearing on the question of how far that technology is set to succeed in emerging markets. I will turn my attention to that next time. For now, I really should get on with enjoying my holiday.

Protectionism and unfair competition in Europe's mobile markets?

Delays notwithstanding, 3G to outpace WiMAX in India

On Friday I spotted an article in the Economic Times which quoted a familiar name: Kunal Bajaj, the India MD of BDA, a consultancy business which originated as an advisory firm specializing in China's telecommunications, media and technology sector. Kunal was a very useful contributor to one of the first Com World Series events it was my pleasure to host while working with Informa Telecoms & Media - the COAI-endorsed GSM>3G India 2007 conference and exhibition in Mumbai.

This event, now known as India & South Asia Com was, in those days, a useful place for telecoms tech vendors to mingle with a large, senior and diverse crowd drawn from India's numerous mobile operators. The event has since become rather more than that, having grown simultaneously in two directions.

One of these directions, in common with all the equivalent Com World Series shows in other regions, is about extending the appeal of the conference beyond the cellular sector and into the wider telecoms world. At any Com World Series event now, you can expect to meet representatives of a very broad range of telcos: MNOs, incumbent and challenger wireline operators, cable MSOs and all kinds of broadband service providers. While it is true that the mix varies depending on the relative value of each of these segments in the part of the world concerned, I am ending my involvement in the Series with a sense that the team are doing an ever better job of providing the exhibitors and sponsors (largely tech vendors: network equipment, OSS/BSS etc.) with high-value one-stop-shops of potential customers from across huge regions. The tricky part is ensuring that the conference element is genuinely useful for the telcos' delegates, i.e. providing them with meaningful peer networking opportunities and insightful presentation material from genuinely influential speakers. I believe the Com World Series team pull off this trick remarkably well.

In the case of the Mumbai event, the other change which I was responsible for driving was to do with marketing the conference to delegates from India's neighbours across the rest of South Asia, namely the Maldives, Bhutan, Nepal, Sri Lanka, Bangladesh and Pakistan.

Securing speakers and delegates from the last of these is not without challenges. One scarcely needs to be an especially diligent student of South Asian affairs to be aware of the tensions between Pakistan and India, two countries which have gone to war with each other three times since the partition of India in 1947. In terms of how these tensions have affected my work in that part of the world, I remember our team assisting the then-CEO of Pakistan's Ufone GSM, Mubashir Naqvi, whose participation we had secured as one of the key speakers. It was clear that the paperwork and delays around arranging a visit to India were rather more arduous for Pakistanis than for citizens of any other country. Along the way, I also realised that roaming agreements did not exist between mobile operators in the two countries, meaning that Pakistani visitors to the Mumbai conference would need to go to some trouble in order to keep in touch with colleagues and families back home.

These difficulties notwithstanding, I am convinced that Pakistani delegates can be attracted to the India & South Asia Com World Series event, even in the context of tensions raised yet higher by the November terrorist attacks on Mumbai. I noted in my end-of-year post on my former Com World Series blog that the timing of this terrible incident made a postponement of the India & South Asia Com 2009 unavoidable. The event was set to go ahead in January, and is now rescheduled for mid-May.

The main reason for my feeling sure that the Mumbai conference can successfully gather participants from all over South Asia is what I learned when I travelled to Bangladesh in July 2007 with the specific intention of gauging the appetite for a whole-region event. My trip to Dhaka took in a meeting of the South Asian GSM Forum and a conference which Informa Telecoms & Media ran in conjunction with Singapore-based colleagues at sister company IBC Asia. Dubbed Mobile South Asia, this event had previously been held in Sri Lanka and Pakistan as well as Bangladesh. The 2007 iteration, which I attended, seemed to be well-received by delegates from the operators, but it did prove rather harder to persuade sponsors that any of these venues would work well. That was part of why it seemed attractive for us to merge the Dhaka event into the Mumbai conference in 2008 and beyond. The Mumbai audience, when polled on site, were actively supportive of the move, but I travelled to Bangladesh less sure of whether the Mobile South Asia crowd would welcome being bundled together with their Indian colleagues. Again, I conducted a poll on site and came away feeling sure that the combined event would be successful. I would like to think that in my new role I will be able to attend this gathering, if not this year then at least in the not-too-distant future. I expect to see it evolving positively.

The article in which Kunal Bajaj's name cropped up concerns the idea that India's telecoms operators are worried that the further delay of 3G and WiMAX auctions (which I was writing about here on Friday) will significantly dampen the development of services. Kunal and his colleagues at BDA seem to be more optimistic. A report which they have prepared, in conjunction with the Federation of Indian Chambers of Commerce and Industry (FICCI), predicts that by 2011, 25% of 3G revenues will come from non-voice services, a half of which will be data access. Kunal Bajaj says "while this seems like a modest estimate, it is to be noted that data comprises less than 1% of present 2G revenues."

I suppose BDA's estimate only appears modest to those who did not adjust their expectations down to realistic levels in the wake of relatively lacklustre 3G debuts in markets around the world. I remember a very good article written in 2006 by Neil Montefiore, who recently stood down as CEO of Singaporean cellco M1 after a stint of nearly thirteen years at the helm. Writing for the Informa Telecoms & Media Global Mobile fortnightly research service, Montefiore argued that "the basic problem with all technology lies in its marketing." He observed that "clever stuff is developed and launched and sometimes catches the imagination of the masses without too much effort from the marketing experts," and that "it's when the clever stuff gets complicated that the marketing becomes the catalyst for success, or the point of failure." Montefiore argued that when compared to products such as the iPod, SMS or mobile voice, "3G is a complex proposition... [requiring] new technology and new handsets [and enabling] the mobilization of familiar experiences." Montefiore noted that most operators had targeted 3G launches at the mass market, "focusing on expensive, high-profile content downloads and mobile TV", had spent significant sums on mass-media advertising, and had offered "huge voice-tariff incentives for people to switch to 3G." He observed that handset makers had launched wide "ranges of cheaper handsets in an effort to fire up the market, losing sight of the fact that the success of 3G is based on the sale of the service itself." This last point is surely familiar territory for us all. How many of us are currently using anything like the full range of functionalities offered by the mobile devices in our pockets? Perhaps it's even more pertinent to ask about the handsets in the pockets of our friends and family members who do not earn a living in the mobile sector.

Writing in 2006, Montefiore argued that "the results have been mixed, the adoption rate is slow and there is no mass-market take-up... because the mass market believes the hype and assumes the service will be as good as the advertising says it is." He insisted that "when the experience doesn't live up to the expectation, the momentum quickly dissipates" and that "ultimately, the marketers are trying to sell the service to the wrong people."

Montefiore argued that "as an industry, we need to relaunch 3G. We need to communicate specifically with early adopters and develop targeted marketing propositions to cater to their expectations. That means thinking outside the box in terms of media, looking at ways of reaching our target markets in a structured rather than scatter gun approach. It means treating 3G as a niche market with identifiable and quantifiable applications that have a value and purpose. We need to turn our perception of 3G on its head, stop treating it as the cure-all for falling ARPU by assuming that every user out there actually wants streaming video, and revert to proper, old-fashioned marketing by building a proper business case for its adoption."

My feeling is that these lessons have been learned in the two-and-a-half years since Neil Montefiore levelled his criticisms at operators and handset vendors. We are, finally, living in a mobile data market showing clear signs of explosive growth after years of slower progress. The Informa Telecoms & Media report, Mobile Networks Forecasts: Future Mobile Traffic, Base Stations and Revenues (published June 2008), quotes network vendor Ericsson as stating "that on the W-CDMA networks it has deployed worldwide, total data traffic overtook total voice traffic in May 2007" and that "by December 2007 total data traffic was 3.7 times the level of voice traffic."

In his article, Neil Montefiore argued that "the way to build a market for a new technology is surely to focus on the people who understand the way that technology evolves, who are excited by its potential and who are forgiving of its teething problems." He said that computing, Internet services, DVD, VCR, MP3 "all started as expensive, complicated, sometimes unreliable technologies, but the mass markets they enjoy today have been built on the belief and understanding of those early adopters who disregarded the hype and focused on the capabilities."

To me, drawing on my daily experiences of living in the UK, it seems intuitive to believe that the remarkable growth in data traffic reported by Ericsson has been driven more by tech-savvy/time poor business users of HSPA dongles than by trendy consumers playing with funky phones. Beyond people working in the industry, I still seem to know very few people with 3G handsets and even fewer who are using them to do anything very bandwidth-hungry. However, for MNOs looking for a return on their 3G network investments, we possibly should not suppose that the mobile phone form factor and consumer services will always contribute less than dongles and corporate data subscriptions. The Informa Telecoms & Media Non-SMS Data report (published June 2008) notes that even the 2G version of the iPhone has significantly boosted the take-up of mobile Internet browsing, citing the case of T-Mobile's German operation, which announced in 1Q08 that average mobile data consumption, mostly for mobile Internet browsing, was up to 30 times more than for users of other handsets. Maybe a disruptive player shaking up the devices market is one of the more significant factors moving us towards the tipping point for mass-market mobile data use.

Devices also get a mention in the Economic Times article in which we saw Kunal Bajaj being relatively bullish about mobile data in India. The article flags up doubts about the practicality of 3G arising from "the unaffordability of 3G-enabled devices in the market and the costs involved in setting up a 3G network." In the same piece, these concerns are swiftly dashed by COAI supremo T.V. Ramachandran: "Even though most 3G enabled phones in India today are priced above Rs.8000, LG has launched a $100 phone which is enabled for 3G services but does not have any multimedia capabilities. These will flood the Indian market for 3G voice services [once the spectrum auctions are concluded]." Ramachandran continues: "nearly all of the existing telecom networks, which have been set up in the past two years, are 3G enabled."

According to the article, Kunal Bajaj estimates it will take only six months to deal with the need to build the additional capacity building to run commercial 3G services on these networks.

The thrust of the Economic Times article is that the prospects for 3G in India are rather better than for WiMAX, hence the title of my blog entry. Remember that the spectrum issues which have delayed the onset of the 3G era in India have also affected those seeking to deploy WiMAX, so I would not expect to see a situation similar to the one I've heard described in the Russian Federation. There, the three leading mobile operators (MTS, Vimplecom and MegaFon) have rolled out 3G services in major cities but not in the nation's capital. As recently as December 12th, Global Mobile Daily was reporting that the rollout of commercial 3G services in Moscow faces further delay because the Russian military has not yet freed up UMTS frequencies. I have heard the argument that this frustrating 3G launch delay in the country's most lucrative market has created a window of opportunity for broadband providers offering WiMAX-enabled services and has been the catalyst for some fairly enthusiastic hyping of the prospects for WiMAX in Russia.

Not only will prospective Indian WiMAX deployers not gain from any significant first-mover advantage, Friday's Economic Times article also makes the case for how 3G enjoys two advantages over the rival access technology, one of which is probably true worldwide, the other of which has to do with the specifics of the Indian market.

The first of these points in favour of 3G is that "there is no such truly affordable counterpart [of the above-mentioned low-cost 3G phones] available for accessing WiMAX." The second concerns market maturity. "National penetration of mobile telephony," the article states, "is expected to cross 50% through 3G in 2011, thrice as fast as it would with 2G, as the capacity of a 3G network is thrice more than that of a 2G equivalent." The argument goes that whereas in developed countries 3G was developed only when 2G penetration was saturated and telcos wanted to grow their revenues through more value added services (VAS), the case is very different in India. Says Kunal Bajaj: "In India, we are already on a 2.5G platform in terms of technology; but our services are still poorly developed owing to spectrum constraints. In this context, 3G will definitely mean better voice services and data access for the first time in many segments, rather than increase in other VAS."

This is not to suggest there is no business case for WiMAX in India. I think I understand from the Economic Times article that Government policy has a place for WiMAX, favouring the technology as a provider of data access, particularly for last mile connectivity in rural areas. Additionally, the BDA report says that "WiMAX is expected to be used for fixed residential and enterprise broadband access in cities."

This all makes it sound as if there is a reasonable case for WiMAX and a stronger one for 3G in India. Let's see.

Delays notwithstanding, 3G to outpace WiMAX in India