'tis the season to go networking with telecoms bigwigs from Turkey and the CIS, it seems. Having not long returned from one industry talking shop in Istanbul, DTW is hoping very much to be able to attend another one later this month.
The conference in question is the 9th annual Caspian Telecoms event, to be held in the city's Hilton Hotel on 28th and 29th April. DevelopingTelecomsWatch is proud to have joined the conference's roster of media partners for the first time this year.
In the coming days, I will take the time to say more about this event and why it may well be worth attending for anyone doing business with telcos, telecoms regulatory agencies and telecoms/IT/information ministries of the countries in this region.
For now, I would simply encourage readers to follow the links in this short introductory note and review the organiser's web site.
Back in January, I wrote about the Eurasia Com conference which the good folks at Informa Telecoms & Media host annually in Istanbul, taking place in either March or April. At the time, I thought it was unlikely that I would be able to attend. Happily, it did turn out to be possible after all, meaning that I am able to report some of what was discussed at the Conrad Hotel on 23rd and 24th March.
For those not familiar with the event or with the wider series of related conference-plus-exhibition events of which it is a part, a few words of explanation:
Informa's Com World Series evolved from what was once known as the GSM (and later GSM>3G) World Series of events. The GSM series was itself a spin-off of the GSM World Congress (now Mobile World Congress), of which Informa was the original founder.
The GSM World Series brought scaled-down versions of the main event to a selection of locations ranged around the world's emerging markets. In each location, the aim was to gather large numbers of decision-makers from the mobile operators of the region around the host city. These locations included cities in Africa, Asia, Latin America and Central and Eastern Europe.
The Com World Series brand was introduced a few years ago to reflect a perceived need to offer meeting points for a broader community than just GSM mobile operators. The organisers were mindful of the idea that the previously quite sharp fixed-mobile distinction was becoming increasingly fuzzy around the world. They thought about what had once been pure play mobile operators offering other kinds of broadband service, either by building new networks (copper, fibre, fixed-wireless) or in partnership with established fixed-line operators. They thought about new mobility propositions from companies whose previous offerings had not been in the cellular space. They thought about incumbent fixed-line operators merging with previously quite separate mobile business units (think in terms of what Deutsche Telekom is doing all over the CEE region).
Throughout this evolution, Informa's series of events has stuck to a pretty successful business model, which is still in place today - operators (and other telecoms service providers) attend for free, with most of the revenue coming from any organisations with products and services to sell into the operator space. This includes the major network technology vendors and all manner of software companies, systems integrators, consultancies etc.
Eurasia Com is a relatively new part of the Com World Series, although this year's iteration was the fourth to take place in Istanbul, having been relocated from Almaty, Kazakhstan, where the event first took place in 2006.
The challenge which the organisers face - and which I feel they met pretty successfully this year - is bringing together a crowd from what are quite diverse markets. A large Turkish contingent (representing the likes of Turk Telekom, Vodafone Turkey, Turkcell, Avea and Koc.net) mixes with delegates from the former Soviet republics of Central Asia and the Caucasus, making it necessary to arrange for everyone to gain from presentations in Turkish, Russian and English. If you attend next year, expect to spend some time wearing a headset which pipes the simultaneous interpretation right into your ears.
That, then, is a little about the event, its origins and how it works on the day. The challenge mentioned above (making the conference relevant for both Turkish delegates and for guests from the CIS) was dealt with this year by having elements of the second day billed specifically as a 'Turkey focus' session, thereby acknowledging that there probably do exist some differences between the concerns of the local audience of those of the visitors from the former Soviet republics where market conditions are quite different.
I am pleased to report that this worked well. As a veteran of more conferences than I care to remember, I have got used to seeing events looking busy on day one and feeling a lot less vibrant on the second day. At Eurasia Com 2010, delegate numbers were, I think, possibly even higher on 24th March than they had been on 23rd.
So, what was discussed during these two days of slideware, panel sessions and offline networking? Well, in the sessions I managed to catch, highlights included:
Informa analyst Gemma Bunting cautioning delegates to remain open minded about real mobile penetration rates across the CIS, noting that multi-SIM usage makes accurate measurement quite difficult and pointing out that in the supposedly saturated Russian market over 20 million subscriptions were added by operators last year.
Informa's Bunting noting that ARPU is declining sharply in some markets - Uzbekistan was given as an example - USD 9/month in 2007, dropping to USD 4/month by 2009.
Gemma Bunting wondering about the impact of Tele2's acquisition of a mobile operation in Kazakhstan and observing that the Swedish group is known for its aggressive pricing.
Ineke Botter, CEO of Azeri cellco Bakcell indicating the a mobile money offering from her company might not be iminent but was certainly "on the roadmap".
Mustafa Kiral of Russian telecoms investment group Altimo indicating that his company is in the market for opportunities to acquire majority stakes in telecoms operators in emerging markets - African markets were mentioned.
Altimo's Kiral sounding lukewarm at best when the conference Chairman asked if Altimo is considering investments in the wireline space.
Mehmet Hasanov of Aztelekom talking up the revenue potential of the wholesale business and wondering why telcos' marketing people are generally so inclined not to get excited about it.
A few snippets about the planned privatisation of Tajiktelecom.
I was not surprised, also, to learn more in offline conversations than I did from listening to presentations. The lesson here, for those few conference veterans who do not already know, is that it's important to get proactive at these gatherings - get among the delegates and speakers, working the room and maximising the opportunity to develop a good number of valuable contacts under one roof.
My guess is that 2009 was at least moderately challenging for conference organisers and that delegate numbers across the events industry may have been negatively affected by financial worries on the part of target audiences. My recent experience in Istanbul, however, just went to confirm that there continues to be no substitute for making face-to-face contact with potential new clients and partners and that events of this type can be a pretty good one-stop-shop for doing so. I would also particularly recommend this and other events in Informa's Com World Series for the way in which they gather crowds from given higher growth regions around the globe.
Doing telco sector business in Turkey, the Caspian region or Central Asia? ......head for Eurasia Com at Istanbul's Conrad Hotel this March.
A belated Happy New Year to all loyal readers of (and occasional visitors to) DevelopingTelecomsWatch.
I daresay some of you will have found 2009 above-averagely challenging and are looking forward hopefully to a more prosperous and settled year ahead.
With this in mind, DTW will soon be evaluating some predictions about what 2010 may have in store for those of us with an interest in the telecoms sector in emerging markets and developing countries worldwide.
In the meantime, we will be using the announcement of the conference agenda for this year's Eurasia Com conference in Istanbul as the inspiration for a look around developments in Turkey, the Transcaucasus region and Central Asia. These are the markets from which the event gathers telecoms sector leaders for two days of discussions and networking.
My guess is that I will not be able to attend the conference - taking place at Istanbul's Conrad Hotel on 23-24 March - but I would definitely recommend it as a useful place to make new contacts and catch up with existing ones if you do business with the telecoms operators of that part of the world. I feel qualified to make this recommendation, having attended two iterations of the event, and having been involved in its development between 2006 and 2009.
This year's speaker panel includes a glittering array of telecoms leaders from both the host country and from numerous CIS markets. Those able to attend will have the opportunity gain a uniquely valuable opportunity to learn from these panellists - and some will doubtless advance their cases for doing business with the speakers' organisations.
While I daresay, however, that many of the presentations and public panel discussions will be somewhat insightful, my experience of attending many conferences has taught me that delegates can learn far more by being above-averagely proactive. This means being a real participant rather than a mere attendee. It means doing more than just scribbling/typing notes during the conference sessions. It means more than downloading the presentation slides.
So, if you make it to the Conrad Hotel in Istanbul, be sure to come prepared with the questions you particularly want answered. Then make the effort to direct those questions to relevant speakers, keeping in mind that however effectively the sessions are moderated, there will not be time for the Chair to deal with everyone who has something to ask. Should your most urgent questions not get dealt with, be sure to be one of those confident people seen springing from a front row seat to shake hands and exchange business cards with the hottest speakers the second the session breaks for strong Turkish coffee. Then might be the time you will finally make your point or extract the answers you're looking for. Or your possibly rather sensitive enquiry might best be handled over that coffee and a piece of sweet, flaky baklava. Failing that, the business card you've gained could be the key to setting up post-event conversations.
Question time: get the answers over coffee and Turkish treats at Eurasia Com
Does this all sounds like advice that's basic to the point of being a bit patronising? I hope not. It is, after all, offered as a result of having watched countless conference delegates fail to maximise the value of the investment their companies had made by paying for them to attend - even with the free tickets for which employees of telecoms operators and service providers are eligible at Eurasia Com and other Com World Series events, some costs are implied, be it plane tickets and hotel bills for out-of-town delegates, or just the cost of being away from the day job.
If you do decide to attend, and do attend on a mission to learn about developments in the region covered by the conference, what questions might you direct to the numerous worthies on the speaker panel?
Given that the CIS markets of Central Asia and the Transcaucasus region were among the first places that Russia's major telecoms players looked for international growth opportunities, you would hope that Eurasia Com is able to offer access to their top management. The event does not disappoint - gracing the stage for the opening Keynote Session will be Mustafa Kiral, Vice President of Altimo and Oleg Raspopov, who heads up the 'Foreign Subsidiaries' Business unit of giant Russian cellco MTS.
Any industry watchers with a strong interest in the latter company, might be tempted to try and squeeze in a question about the operator's hopes for its mobile broadband offering in Moscow, now that 3G services can finally be made available in the Russian capital. A full year after 3G services were offered in other parts of Russia, Muscovites learned last month that the country's military authorties were finally ready to cede control of the necessary spectrum and enable operators to switch on their W-CDMA base stations.
Given Mr Raspopov's responsibilities, however, and given the geographical coverage of the conference agenda, perhaps it might be more germane for delegates to ask the MTS man whether his company has any interest in further extending its CIS footprint. At present, MTS subsidiaries compete in Uzbekistan, Turkmenistan and Armenia. Away from the immediate focus region for this conference, further MTS business units operate in Ukraine and Belarus.
Strikingly absent from the MTS sphere of influence are two of the region's potentially more attractive markets - MTS does not compete in either Kazakhstan or Azerbaijan.
In June last year, MTS CEO Mikhail Shamolintold Reuters that his company was looking at acquisition opportunities in both countries, having decided that the prospects for a start-up operation were not good in either market.
It now appears, however, that the opportunity to make an acquisition in Kazakhstan has now passed. That country's mobile arena is contested by four operators, with the market split as follows, as of end-December 2009, according to the WCIS service offered by the organisers of Eurasia Com, Informa Telecoms & Media:
The two leading mobile operators, then, are controlled by MTS's main rivals in the region and are therefore, surely, extremely unlikely targets for addition to Mr Raspopov's Foreign Subsidiaries Unit. Altel, too, as a rare example of a CDMA operator in the region, strikes me as a company one cannot easily imagine on the MTS shopping list.
Neo, a late entrant GSM operator which went to market in 2007, would be the logical choice for an MTS purchase. A majority stake in this cellco, however, is to be snapped up by Tele2, the Sweden-headquartered pan-European telecoms group. This transaction, as reported in December, involves Tele2 paying around USD 77 million for the 51% stake held by Kazakhstan's incumbent fixed line operator, Kazakhtelecom, which also owns 49% of KCell. According to a Wall Street Journal report, Tele2 has the option to buy the remaining 49% of Neo shares in five years' time from private investment group Asianet Holdings BV.
It will now be interesting to see how much Tele2 makes of the opportunity that MTS has declined to puruse in Kazakhstan. Interesting, too, to see how far the company's usual preference for competing aggressively on price will impact on the Kazakh market.
Speaking on a conference call, Tele2 said that Neo currently has lower prices and lower ARPU than its two larger rivals, so it remains to be seen whether tariffs can be cut further in order to gain market share. According to the WSJ article, a market share of 20% is what Tele2 has in mind.
Of further CIS markets likely to prove attractive to MTS, perhaps only Azerbaijan remain. A June 2009 article here at DTW noted that the Caucasus region country, although quite small with a population of just under 9 million, is oil-rich and relatively prosperous. It is notable, therefore, that of the three groups with footprints across the southernmost CIS markets, only the TeliaSonera-Turkcell joint venture Fintur Holdings has a presence - in the form of market-leading MNO Azercell, none of whose competitors are aligned with a significant multinational telecoms groups. Of these competitors, one will be represented at Eurasia Com by its CEO - Ineke Botter, who heads up Bakcell, is among the speakers. A cheeky question one might direct to Ms. Botter would be to ask whether she feels either her company or the third entrant, Nar Mobile, is a likely acquisition target for MTS or Vimpelcom, which similarly has no presence in Azerbaijan.
With Tele2 having seized the opportunity to move into the Kazakh market, conference delegates may be wondering what impact this may have on the country's telecoms landscape. Questions along these lines can be raised at Eurasia Com, the ideal time for this probably being a morning session on Tuesday 23rd March which deals specifically with the rapid maturation of the Kazakh telecoms market. Fielding the questions will be Kuanysbek Bahytbekovich Yesekeev, Chairman of that Kazakhstan Agency of Information Technologies and Telecommunication, and Maxut Sauranbekov, President of CDMA operator Altel.
A new feature of the conference this year is a day two session focussing specifically on the Turkish market. A very strong line-up of speakers will be on hand to debate the key issues. These include:
Erkan Akdemir, CEO of Avea, the mobile operator in which incumbent wireline telco Turk Telekom holds a controlling interest
Mehmet Toros, Turk Telekom's VP International and Wholesale
Tayfun Cataltepe, the Chief Corporate Strategy & Regulations Officer of market-leading MNO Turkcell
This year's event looks set to be even more useful than previous iterations and I look forward to feedback from colleagues and contacts who are able to attend.
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.
Well, that's if I choose to believe my former colleagues at Informa Telecoms & Media. Informa'stelecoms.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 DeutscheTelekom 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'sIon Vaciu, recorded in February, is an example of that:
Of course, Richard Moat - and DeutscheTelekom - 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:
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 HutchisonWhampoa 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 MNOPartner. 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 DeustcheTelekom 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 DeutscheTelekom 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 DeutscheTelekom 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.
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 DeutscheTelekom-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 Krausebelieves 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:
HutchisonWhampoa may seek a merger for some or all of its money-losing operations in Europe, including 3 UK
The merger talks between BhartiAirtel 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 CeltelInternational'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 DeutscheTelkomwould 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, RenéObermann, 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 satisfactoryacquisitions. 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'sachievements 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 DeutscheTelekom 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 DeutscheTelekom-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?
I am a football addict (translation for US readers: soccer; I don't have anything against the gridiron game, but I don't understand why it's called "football" when only the kicker and punter use their feet). My own team drifted out of contention for any honours this year a long time ago, but I retained an interest at the business end of the 2008-09 season by watching the European Cup final and the FA Cup final in quick succession. The last throes of football fever before a long, dry summer of cricket and other minor irritations.
Football fever in Turkey, however, never seems to die down. I think of myself as a fanatic, but my dedication to my team pales, I think, into insignificance when compared to the mania for the game demonstrated by followers of Istanbul's big three clubs - Beşiktaş, Galatasaray and Fenerbahçe. Thanks to a friendly reader of this blog, I am now aware that the latter two of these footballing powerhouses have entered the mobile services space, thanks to arrangements with Avea, the cellco associated with national incumbent fixed-line operator Türk Telekom.
On visits to Turkey, I'd heard that the time is not yet right for full-blown MVNOs to make their market debut in the country - something to do with how the services would be taxed. So, as confirmed by the friendly Istanbul-based reader of this blog, the two football clubs' offering is based on a reseller business model for now.
Galatsaray's fans, doubtless disappointed with their team finishing 5th in the Turkcell Süper Lig (sponsored by the county's market-leading MNO), might be consoled just a little by the prospect of cheap calls via GSMobile. That said, I'd guess today's appointment of fomer Ajax and AC Milan genius Frank Rijkaard as team manager is probably a bigger deal.
Fenerbahçe followers, meanwhile, probably much not less annoyed at only finishing 4th in the table, can take advantage of the service of Fenercell.
Beşiktaş fans, as far as I understand, do not have a club-branded mobile offering to enjoy. The fact that they won the league title and saw their deadly rivals under-performing probably more than mitigates the disappointment, though.
Each of these clubs has a huge fan base. Access to subscriber data about a very loyal customer base could be a massive advantage to a prospective MVNO. So it will be interesting to see how these enterprises fare.
Wind/solar hybrid powered base station deployed by Avea: pic from Cellular News
By March this year, according to Informa Telecoms & Media, there existed over 4.1 billion mobile subscriptions globally. At the start of this decade, the number of global subs was just 482 million. Ten years earlier than that, there were fewer than 5 million subscriptions worldwide.
I feel proud to be associated with an industry that has grown so impressively, but am mindful of the challenges ahead as mobile operators seek to connect the next billion customers. These prospective subscribers are poor people with very restricted spending power. A popular argument put forward to explain factors responsible for keeping such people locked into poverty can be exemplified thus:
The earning potential of a semi-skilled handyman living in a shanty town on the fringes of a large African city is hampered by his not being able to advertise how he might be contacted by anyone wanting his services. He spends more time walking the streets asking for work than he does working and getting paid.
A farming community lives a largely subsistence lifestyle, growing crops to meet its own needs and selling the surplus to buy other vital goods and services. The farmers routinely fail to get the best price for this surplus because they have no way of finding out at which markets they they will find the highest levels of demand.
A person living in a remote community needs to register a birth or death in the family. The state bureaucracies have no touchpoint in the community so completion of this routine paperwork involves taking time away from productive activities to travel to a bigger population centre.
All of these problems can be resolved through access to telephony and/or the Internet. The handyman can write his mobile number and details of the services he offers on signs, placing these at road junctions or other prominent locations. I saw a lot of this kind of hand-made advertising on my recent trip to Kenya. With (mobile?) Internet access - or even just by making a few calls - the farming community can review market information and send its produce to where the best price can be commanded. In a small, isolated community provided with some form of Internet access, e-government solutions may obviate the need for long, expensive, time-consuming journeys.
Communications services, then, look set to have a vital role in alleviating this poverty. This role has been quite neatly explained by The Next Billion Network, an initiative incubated at the MIT Media Lab. The phrase used in the this group's mission statement is about deploying innovative mobile technologies which help poor people in developing countries to "reduce friction in their local markets from the bottom up". The Next Billion Network's founders believe that these new waves of mobile subscribers will make their voices heard—and connect to the global information network. "This will unleash a wave of entrepreneurship, collaboration and wealth creation, turning the newly connected into a powerful force in the world economy," the founders say, adding that "the kind of world that emerges from this transformation will depend on our ability to recognize it as an opportunity."
For mobile operators to continue to act as a catalyst for developments of this kind, they will need to resolve a number of challenges around keeping the total cost of service ownership low for poorer people in developing countries. These challenges are many and varied. The one referred to in the title of this post is around powering mobile networks in locations lacking reliable electricity grid infrastructure.
In emerging markets, cost-conscious operators have long been concerned about the OPEX implied by running diesel-powered generators to power off-grid base stations. The fuel itself must be bought and operators must also take fuel transportation costs into account - significant costs when fuel must be supplied to remote areas with poor roads
Solar power and wind power look like good alternatives - the power sources themselves are free and inexhaustible. Added to that, CSR-conscious telcos can bask in positive press coverage of their reduced carbon footprint.
In September last year, however, I read that trials of these technologies have largely been quite disappointing. My former Informa Telecoms & Media colleague Matthew Reed, the editor of Middle East and Africa Wireless Analyst, reported disatisfaction on the part of the GSM Association with the trialing of base stations powered by the sun and wind. The GSMA's Development Fund Director Dawn Haig-Thomas said: "There have been a number of trials that have failed, and we've been digging into the reasons," adding that "we've seen trials where the geography hasn't been correctly considered – where solar panels and wind turbines have been placed in inappropriate places, or not in optimum places."
In addition, Matt Reed reports, "many sites are also missing electronic control devices that manage power fluctuations or alert systems that tell operators to switch on backup diesel generators, if the base station is low on power, perhaps because it has not been windy or sunny enough."
Further, Matt writes, a big reason for the lack of take-up of alternative energy sources is that although operating costs might be low, the solar panels and wind turbines have historically been too expensive. In addition, notes Matt, "lots of solar panels were needed to power a base station, which would force operators to buy more land on which to site them." Wind generators, until recently, he notes, "were only manufactured with massive turbines that were more appropriate for wind farms than for small base stations."
Matt observed, however, that better solutions are becoming available. A number of deployments of wind and solar powered base stations have been announced in the month's following Matt's article. I have to assume that these deployments involve solutions to the kinds of problems Matt raised.
The most recent one that I know about is the deployment by Turkish mobile operator Avea of what it claims is the first hybrid wind/solar powered base station in the country - manufactured by Scottish firm Proven Energy. A Cellular News piece on this story this week quotes Erol Barendregt, Director of Turkish reseller GirasolarTürkiye, which installed the equipment: "The hybrid solution is the best option because the sun and wind resources have opposite cycles and intensities during the day. Wind and solar power are understood to be among the best natural alternatives to fuel based electricity generation. By using both in a system that is designed to supplement each other you get a continuous and reliable power supply."
Major telco sector vendors want a piece of the action in this space. In October, Ericsson, for example, unveiled a wind-powered 'Tower Tube' base concept developed in partnership with Vertical Wind and Uppsala University in Sweden. According to a Global Mobile Daily article at the time, vertical rotor blades work silently, minimising the load on the tower during operation.
A more recent announcement by the Swedish vendor, made in February, concerns its involvement in the development of solar-powered base stations. A GMD article dated February 18 notes that the Orange-branded mobile operator in Guinea is to deploy 100 solar powered base stations across the African country, in partnership with Ericsson. The base stations, says the article, make use of Ericsson's energy-efficient hybrid diesel-battery solution and solar panels, which will replace one of a base station site's diesel generators with a bank of specially designed batteries capable of handling a large amount of charging and discharging.
Chinese vendor Huawei also has solar powered solutions on offer. GMD reported in September that the company had deployed Pakistan's first solar powered base station for Warid Telecom, thereby enabling the operator to extend its network reach into remote areas of the country with limited access to the electricity grid.
Sri Lanka's Dialog Telekom has opted for a mix of solar and wind-powered base stations in trials designed to investigate the uses of several forms of equipment from eight different vendors. This was reported by GMD in February.
So there seem to be a few renewable energy developments going on in emerging markets worldwide. I could not comment to what degree these recent deployments and trials have addressed the concerns raised last year by the GSMA.
I was pleased to see confirmation that those to whom I handed over the task of organising this year's annual Eurasia Com conference in Istanbul have found a speaking slot for Cristobal Alonso, Chief Commercial Officer at mmChannel, a technology company dedicated to the development and management of digital entertainment services and platforms on a B2B format.
Cristobal and I have been in contact since mid-2007 without ever having the opportunity to meet face-to-face. This is a shame for me given how much he has to share about boosting the take-up of mobile value-added services. You can get some sense of Cristobal's ideas by having a look at his blog, where I noticed that he and I have something in common - we have both recently had the pleasure of attending a Mobile Monday Istanbul meeting. In January, I gained from the wonderful networking opportunity which Mobile Monday events provide and made a short presentation on the theme of mobile social networking. Cristobal was at the February get-together, and on his blog he reports on that meeting's MVNO-themed discussions. I imagine that was a lively session, given that the mooted market entry of MVNOs in Turkey has been something of a hot topic for a while now. Cristobal is quite right to compliment the MoMo Istanbul organiser Natali Yeşilbahar for the great job she has done to boost attendance and further improve the usefulness of the discussion sessions.
I guess Cristobal maintains a keen interest in whether MVNOs will succeed in emerging markets, given that his blog also mentions the insightful materials on this theme recently prepared by his colleague Carlos Valdecantos. Carlos asks whether there is any realistic prospect for successful MVNOs in Africa, where "most markets are experiencing pent-up demand, customer segmentation has only started to be a buzz word, and capacity is scarce." As Carlos notes, this is a markedly different scenario from that seen in the mature markets where MVNOs have sought to exploit the challenges faced by their host network operators, namely "slowing subscriber growth, lack of consumer segmentation, and excess network capacity."
As well as discussing which MVNO business models might work in an African context, Carlos segments the continent's many markets according to the likelihood of their being able to bear the entry of MVNOs. Carlos believes the high potential markets (good market size/GDP, strong economic liberlisation and a "dynamic" telecoms sector) are Morocco, Algeria, Tunisia, Egypt, Ghana and South Africa:
Assuming the onset of the global economic crisis has not caused him to revise his view, I assume that Peter Boyd, the former CEO of Virgin Mobile South Africa, would agree with this assertion. Back in July 2008, Boyd was quoted in a Middle East and Africa Wireless Analyst article as saying that "if there is one place where consumers need choice, it's Africa." Boyd argued that "you don't need multiple network licenses – that's an inefficient allocation of resources. Having an environment that lets people plug in an MVNO is a much more efficient way to serve consumers."
My former Informa Telecoms & Media colleague Matthew Reed wrote the article, noting that "even in South Africa, MVNOs are technically illegal. The only way for Virgin to introduce one was by forming a joint venture with Cell C, which holds a license to operate." If this and other barriers to MVNO market entry could be overcome, Boyd felt that the MVNO model enables the host network to sell its spare capacity, giving it new income to recoup expenses or invest in extending its coverage. This sounds quite compelling when applied to markets in which MNOs and governments jointly have the aim of extending the availability of services to less affluent prospective subscribers in the under-connected hinterland.
Matt's article noted that Virgin Mobile, then lobbying the Independent Communications Authority of South Africa for reduced interconnection fees, had acquired very few subscribers compared to the more than 40 million subscriptions shared by South Africa's three MNOs. Matt noted that while Virgin Moblile was lagging far behind the MNOs in this regard, "one figure where [it] is ahead of its rivals is ARPU, as a result of targeting higher-spending users rather than the mass market."
Has this situation improved for Virgin Mobile South Africa? It seem the answer is a pretty clear 'no'. Now led by new CEO Steve Bailey, the company has yet to have had a significant impact on the market, according to a more recent MEAWA article. Writing last month, Dario Talmesio notes that although the MVNO still has the highest ARPU in the market, "it had signed up just 600,000 subs by end-2008, and only 200,000 of them were active – giving it a market share of just 0.4%."
Talmesio reminds us that before launch, Virgin Mobile South Africa had hoped to acquire 10% of South Africa's mobile market within five years and asserts that target is now unrealistic. Talmesio feels that the company is unable to differentiate its services other than by using its distinctive branding. 3G services are not an option, notes Talmesio, because host operator Cell C, has not deployed a W-CDMA network. Of the three cellular network operators competing in South Africa, Cell C is alone in not having a 3G offering. Rivals Vodacom (50.98% market share according to WCIS) and MTN (35.55% share) began to sign up 3G subscribers in December 2004 and June 2005 respectively.
Virgin Mobile is also prevented from lowering its prices, Talmesio writes, because of the high interconnection rates it continues to pay. Talmesio also states that the MVNO has a more limited handset portfolio than its rivals.
In contrast to Virgin Mobile's highest ranking ARPU, host network Cell C had the lowest ARPU in the country in 2008, according to Informa Telecoms & Media. Talmesio writes that "from Cell C's perspective, hosting MVNOs makes sense when they can complement Cell C's market position and reach a different segment of the country's customers."
Talmesio seems to feel that Virgin Mobile South Africa has just one unique selling point: "the simplicity of its semiflat tariff" with "VMSA customers pay[ing] a premium rate in return for getting a simplified tariff".
Talmesio also argues that lateness to market may have worked against Virgin Mobile in South Africa, noting that "mobile penetration was already 72% when VMSA launched" and that "by contrast, the UK's penetration was just 40% when Virgin launched [there]". Therefore, he writes, "VMSA had to try to lure users away from incumbents rather than focus on greenfield users, as Virgin Mobile UK did in the late 90s."
If this last point is one of the most important inhibitors to strong growth for Virgin Mobile South Africa, this might suggest that, favourable regulatory regimes permitting, less highly penetrated markets in Africa might prove more fruitful for future MVNOs. Of the countries coloured green on the map above, perhaps Ghana looks the best bet, then. I also wonder whether Nigeria might be a viable environment for new MVNOs.
Whether MVNOs do succeed in Africa, or in other emerging markets, remains to be seen. Writing for Billing World in September, Patrick McGrory of customer care and billing giant Amdocs felt that "new services — Internet access, VoIP, WiMAX — and evolving business models like MVNOs enable cheaper and faster deployment in areas that previously were not viable prospects".
Two companies seemingly not about to launch MVNOs in an emerging market are Ericsson and Nokia. A Total Telecomreport last Friday rubbishes recent rumours that the Scandinavian firms were planning to offer MVNO services in India.
"The speculation is completely incorrect – it's pure nonsense," an Ericsson spokeswoman told Total Telecom.
"Nokia is not planning on offering MVNO services in India," commented a Nokia Siemens Networks spokesman, who added "we provided input and advice to the Telecoms Regulatory Authority of India to help educate them with our experience of providing services to MVNOs, and that was it."
The denials of these two companies notwithstanding, some analysts feel that the Indian market is ripe for exploitation by MVNOs. The Total Telecom article quotes a research note from Ovum which states that "being able to enter a huge market with a population of 1.2 billion people when the mobile penetration rate is extremely low at around 26% is certainly a dream prospect for MVNOs, and many will find it hard to resist." My former Informa Telecoms & Media colleague James Moore is quoted as saying "the MVNO model will be an opportunity for GSM operators without a 3G license to offer WCDMA services."
If Africa continues to be a hostile environment for prospective MVNOs, perhaps it will be India which proves to be the first emerging or middle income market in which virtual wireless operators gain traction and become a large scale phenomenon.
the blogging alter-ego of a globe-trotting Englishman with a professional interest in the telecoms sector in emerging markets and developing countries worldwide.
Assuming the onset of the global economic crisis has not caused him to revise his view, I assume that Peter Boyd, the former CEO of 
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