Ringing in the changes

A long-awaited gold rush in commercial internet services could prove to be the telecoms industry's saviour

Tags: Arabic contentEtisalat International - UAEIPhoneMobily InfoTechNokia CorporationQatarVodafone Qatar
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By  Soren Billing Published  June 24, 2009

Vodafone Qatar, the telco set to break Qtel's monopoly when it launches commercially this month, might not be launching into the best of markets but chief executive Grahame Maher doesn't seem overly concerned.

First, there is the fact that a country's second mobile carrier nearly always gains a solid market share. Second, statistics indicating that the average resident has more than one phone don't necessarily give the full picture.

"The population of Qatar, if you take the number of people coming and leaving, turns over every three or four years," says Maher. "Whether they are white collar or blue collar workers, people are usually on two-year contracts."

Third, there is the elusive surge in revenue from mobile internet-related services; a phenomenon that has been talked about in the industry since the beginning of this decade, but has yet to materialise.

With the rising popularity of smartphones - handsets such as the Blackberry and iPhone that offer advanced, often internet-based capabilities - some industry players believe they are seeing the beginnings of a trend that will be the main source of growth and innovation going forward.

"There's a big demand for things that are global, that are different, that are interesting," Maher explains. "It's not technology, because QTel can buy the same technology we can. It's the services."

His views are echoed by Etisalat's chief executive, Mohammed Omran.

"The number of customers is not the most important thing, it's the money coming from that customer," Omran said in a recent interview with Arabian Business.

"We focus on offering value customers better services and a variety of services. You have already seen us recently introduce the iPhone, and more things will be offered to our customers."

Vodafone's Maher goes one step further. His vision for the future is to make all handsets more like the iPhone, only cheaper. The company's Indian subsidiary is at the forefront of its efforts to develop the technology for this strategy.

"The iPhone issue is, it only works on an iPhone," he notes. "What we're looking at is how you get that experience to everybody in the world regardless of the phone. Some of those types of things are happening in India, because people there will use a hand-me-down handset and not even buy one."

To that end, Vodafone announced the launch of its own application store last month. Customers will be able to download tools and games to their mobile phones; a bid to emulate the success of Apple's iPhone ‘app' store, Nokia's Ovi and Microsoft's Windows Mobile Marketplace.

The site's unique selling point: developers will be able to offer applications to phones running on any software, as long as it's connected to the Vodafone network.

The arrival of the iPhone has fuelled lingering fears of telecom operators becoming little more than "dumb pipes" in the future. Through iTunes, Apple has racked up more than one billion downloads of ‘widgets', applications for everything from games to taxi-finding services, since the service launched last year.

Vodafone, however, might have an advantage when it comes to getting people to pay for their mobile downloads. The company will take a 30 percent cut of the sales on its applications website in return for offering developers access to its 289 million users around the world and, perhaps more crucially, its billing system.

"Vodafone will enable developers to use its direct billing capabilities to permit customers to pay for services wirelessly through their existing Vodafone pre-paid and post-paid accounts rather than having to input sensitive credit card data into multiple application stores," the company said in a statement. "This is expected to give customers a convenient and secure payment option for the different services on offer, and encourage greater take-up."

However, the specifics of what exactly is going to be put in each one of those 289 million handsets to make them compatible with the upcoming applications on offer has yet to be announced.

As a result, industry observers have also suggested that the portal's true number of potential customers may be significantly lower than anticipated.

Guillermo Escofet, a London-based analyst with Informa, says that in the iPhone, mobile phone content developers have found a "pot of gold".

In the past, producing content for operators meant making numerous versions of an application to cater to the hundreds of handsets that mobile carriers distribute, with their different operating systems, browsers, media players, and screen sizes and resolutions.

Then there was the challenge of finding placement for that content on the operators' portals. Most telcos, says Escofet, are realising that the way they work with content and application creators needs to change, and that the application store model is the way forward.

"But operators are still reluctant to give up some of the other elements, such as pricing and communication with users, that they are used to tightly controlling. And they still insist on getting the biggest share of revenue," he says.

Over in Riyadh, Mobily chief executive Khalid Al Kaf numbers among the believers predicting a widget and apps-led rise in revenue. Saudi Arabia's burgeoning young population makes mobile internet a particularly important sector for Mobily.

Al Kaf points out that after years of talk, the fundamentals are finally in place to exploit the commercial potential of mobile internet services.

"Nobody was connected and we started talking about content aggregation, co-hosting and these things, good ideas, but there was no usage pattern," he says, drawing parallels to the development of text messaging, or SMS-based, services.

"We introduced voice services; after that we introduced the SMS; after the SMS we started introducing news alerts through SMS because of the number of users.

"So from peer-to-peer it went on to multipoint: now news broadcasts, content broadcasts and everything comes through SMS. I think the same story can be repeated," he continues.

"We learn from our history. The usage pattern is reaching that tipping point where we can create value out of it."

It won't be about one "killer application" hitting the market but about a flurry of services that will come and go, he adds.

"I think that there will be killer applications for a span of time, then they will die, and then other killer applications will come and then they will die.

"That rapid birth-death cycle will be there and it will depend on the user behaviour," he says.

"The challenge for traditional telcos will be how to culturally and mentally change our way of doing business. It is a completely different business model. If you want to continue that exponential growth over time you need to do that."

Still, with international giants like Apple, Nokia and Vodafone all scrambling to become the ultimate destination for new applications, doesn't that leave a local mobile carrier like Mobily with, well, a network of dumb pipes?

In addition to their existing billing relationships with customers, the fact that operators know where their customers are could allow them to offer location-based apps, Matthew Reed, a Dubai-based telecom analyst at Informa, points out.

Local operators are also likely to get involved in Arabic language content and applications, after the iPhone launched without any Arabic support.

"I'm pretty sure that's one area Mobily would be looking at," he says.

Adapting global applications to the local market by partnering with local media outlets and celebrities could be another growth area, Reed notes.

"The vogue for apps stores boils down to the fact that the success of the Apple store led other handset makers, like Blackberry and Nokia, to follow suit, and now operators are beginning to do the same," he says.

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