So just how many Mobile Networks does a country like Britain need?

Today the Competition and Markets Authority published a letter to the European Commissioner calling for the merger of Three and O2 to be blocked to protect the consumer. I had to check that it was not written ten days ago, the current government believes in the Free Market and the market has shown that the UK is not large enough to support five and now four network owners.

If the CMA wanted to protect the consumer then was BT allowed to buy EE and why was it not forced to spin out Openreach?

The role of Ofcom should be to provide assurance that the market for Mobile Infrastructure is not manipulated by the players in the market and that they are fulfilling the terms of licences granted via spectrum sales by Government.  The failure is not that Overseas Investors can no longer justify investment in an extremely competitive market but rather Regulators are under resourced and qualified.  The 2010 spending review by George Osborne and subsequent budgets has seen the money available to manage Ofcom fall and the remit rise this means that a regulator that had been struggling now is not fit for purpose.  Rather than resource the service correctly we have a Government that is taking others to undertake the role for it.

The second generation of mobile expansion saw just four networks build the industry at the fastest pace, with innovative product launches which the CMA now feels is a risk to the consumer! Alongside the network owners we also have a number of MVNOs that offer services to customers at a range of prices.  We might have fewer retail options on the high street with the demise of a number of independent retailers for the time of mass adoption of mobile but we are unlikely too see price rises as a result of Three buying O2.

I hope that the European Regulator has far more economists than the CMA and Ofcom and realises that the UK consumer is not able to fund adequately four mobile network operators.      

What do we do about O2?

Over the last few days the FT has focused on the potential for regulators to stop the disposal of O2 in the UK by Telefonica. They are now saying that the UK must not drop to just three networks but the market requires four.

This is such a simple belief in competition that you have to ask how much time have they invested understanding why two of the four incumbents courted BT when they signalled a wish to return to the mobile sector?  When former state owned players cannot make the numbers work to operate in one of the largest economies in the world then the market has failed!

The current level of competition means that at a consumer level the numbers are marginal.  The Infrastructure requirements to roll out 4G makes the market subprime. Rather than opt out of regulation Ofcom should seek to acknowledge that the solutions required needs them to take decisive action to improve the cost base whilst raising the quality of the networks.

If the Infrastructure can be improved and better wholesale terms can be achieved then at a retail level we might se more competition.  Over the past 15 years we have seen a decline in the number of retailers offering consumers mobiles as Independent players have gone to the wall and Networks have closed a number of there stores.  The exit of Tesco from the MVNO space can be seen as a warning flag that the consumer might have won on price but has lost on quality.

I would allow Three to buy O2 on the basis that Telefonica is current in a debt reduction cycle rather than investment mode, thus all the while it holds the UK asset it under invests meaning that it falls behind it competitors.  Without Three buying O2 the business would face a slow death.  Once we have consolidated the market to three players we require Ofcom to invest in staff with a deep knowledge of Mobile who are prepared to take action before breakfast, before lunch and after dinner to borrow a phrase from Michael Heseltine. At the dawn of Mobile thirty years ago we had a duopoly that was regulated in such a way that consumers had choice and a number of people became MultiMillionaires serving the consumer.

BT buying a mobile network

Yesterday The Sunday Times ran another story on BT buying a Mobile Network for £10bn.  The story outlined the options faced by the CEO and his team without asking the questions a shareholder might want answered.

If the Mobile sector offers such riches to BT why are the two largest Networks prepared to pull up sticks and exit the market?

How do the Customers of EE or O2 overlap with those of BT and are they likely to remain given a change of ownership?

If BT were to buy either Network what will be the response of OFCOM when it comes to regulation?

After 14 years not managing Mobile Infrastructure Assets does BT have the Management expertise needed to make a return on the Investment given the vast changes over that period?

On the basis of just these questions then the rational response is thanks for the opportunity but I think BT is better served NOT doing the deal. Those likely to benefit from any deal in the short term will be Investment Bankers, Lawyers and Accountants who will be able to charge large fees for the transaction.  In the medium term the beneficiaries are likely to be the rivals of BT.

If the deal were to work for BT it would have to be able to convince the Consumer that buying all your connectivity requirements from a single provider is worth paying a premium for rather than a discount. It would need to hire Executives capable of building and running Mobile Networks and then given them the space and power to do so rather than hamstringing them as a subsidiary of an Operating Unit. Whilst spending vast sums on Marketing and Engineering in the Mobile Business it would need to also do so in the Fixed Business or face Investigation and Sanctions by OFCOM and Politicians.  These challenges are greater than those faced by the Board in the Dot.com era when failure saw the sale of Cellnet.

An act of stupidity by a desperate Prime Minister

I picked up my morning paper and almost tore it in two reading the latest stupid PR stunt from David Cameron. When Ed Miliband made his Conference Speech this September we were told that price controls could not work and were wrong. Yet with his back to the wall Dave has decided that all utility companies need to be told that his government will not accept price rises in the run up to the 2015 election.

This is an act akin to King Canute except the Prime Minister does not understand that he cannot turn back the tide of price increases.

An analysis of the players in the market will show that many are subsidiaries of  overseas businesses rather than British and thus have little loyalty to local politicians. They are in the majority investing in significant infrastructure programs that mean that rather than pay taxes they have losses to cover.

What the Prime Minister should be doing via the offices of the Department of Culture Media and Sport and Ofcom is making sure that telecoms networks are able to deploy high speed broadband to the majority of the population in the majority of places. It is with such a network that the economy will grow and income rise at such a level that people do not feel price rises.

A New Dawn or the beginning of The End for Nokia?

This week we have seen the presentation of results for Nokia and Apple which in headline terms present a change in the fortunes of the leader and a significant challenge at the high end of the market.

In his presentation  Ollli-Pekka Kallasvuo Chief Executive of Nokia said  “In recent weeks the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry. ” 

Apples results show that it sold 13.7m devices in 2008 which is about 1-1.5% of the total worldwide market by volume.  The last quarter saw only 4.4m sold rather than the 5m the market estimated. The key comment made in the Earning Call was that the iPhone performs poorly in non-subsidised markets, indicates that at some point when demand evens out carriers will have more power over the price they pay Apple for the handset. 

With 40% of the handset market and the Integrated model rather than contract manufacturing Nokia has better Economies of scale than its rivals.  Apple is a design house that gets its handset made by Hon Hi as a contract manufacturer.  When you are making Phones in small volumes doing so in someone-else's factory makes sense however is it something that works when you have more than one design and 10% of the market?

Whilst some see the entry of Apple and Google into the handset market as the opening of the ecosystem thanks to the application platforms that they present I have to ask if the economics work?  The Network Operators have made investments in infrastructure, distribution and support over the last 20 years.  Why would they not expect some return on that investment and security over the future customer revenues?

Looking at the history of Mobile I recall that Nokia assumed that with the arrival of Data services in the late 1990's it presented a chance to take control of the consumer with the launch of Club Nokia as the primary Wap bookmark.  The result was a boycott by the networks until they localised devices for each Operator.

Talking to those who work in FMCG I am told that advertising is not about getting someone to switch from Coke to Pepsi but rather to get them to increase the volumes they consume.  The same is true with Handsets most people say that they are a Nokia user, Sony Ericsson person, Blackberry Addict rather than Orange customer, Vodafone Fan, O2 Punter.  This Brand loyalty makes it difficult for new entrants to capture market share the rise of Blackberry and HTC has taken 10 years to achieve.

The presentations at Barcelona next month will be interesting in that we in Europe will get to see the new Palm Pre and perhaps the first Android based handsets from Motorola as well as new handsets from all those in the mainstream.  I hope that we will get to see the first devices that use the Snap Dragon chip which could offer features better than the current smartphones with hopefully better battery life. 

Nokia will innovate devices in the economic downturn.  The conditions hopefully will mean that they cut a number of handsets from the product range in an effort to improve the user experience and quality of the offering.  In light of the downturn will Motorola, Samsung and Sony Ericsson be able to do the same? If they fail to then they will be the ones who lose out to the New Entrants.  Before I see Apple as anything other than an opportunist they will need to offer a range of handsets similar to their iPod or Laptops.

What's wrong with this post?

Smart Parts have a survey of what is available to the consumer when it comes to Mobile Broadband. The biggest problem I have is that Telefonica and France Telecom businesses do not have a product!

At an event last week the head of 3's Handset Group said that he intended to sell 500,000 devices for Mobile Broadband. They will be promoting the device as just the thing to have so that you can get ahead of others by using it on the train whilst you commute. Shows that he drives to work in Maidenhead because if he did he would know that it's standing room only for those who try and travel from London to Reading and would not work on the Chiltern Line that I use when I have to join the rush hour. But he is trying and those that I know that use the service are happy with the ease of use and cost.

But why can I not get the service from Orange who are the main provider of mobile for me? They did provided the service when I was in Spain last month for Mobile World Congress. They will do so later this month when I am in France. But the only way I can get the service in the UK is as a Business customer. Perhaps the new Chief Executive for Orange can get his masters in Paris to stop playing in the fixed broadband market and spend money on a mobile option, the costs should not be that high thanks to a network share agreement with Vodafone?

Before we all start picketing for better mobile broadband though perhaps we need to realise that fixed broadband seems to be something that those of us that live in the cold north of Europe. Mobile is something that is important to Europe because it generates approximately 5% of the GDP which is almost twice of what it should be worth. However what is needed is more than just dumb pipes from the mobile networks and shinny shinny toys from the handset guys.

If we are to develop we have to get all the networks to become involved, Mobile Broadband will not be mainstream in the UK until it is a service that is supplied by Virgin Mobile, Tesco Mobile AND Orange & O2 when that is so we might be able to talk about data services.

New steps in M-Payments

Total Telecom reports that the Italian Post Office's MVNO will have a number of Payment services available in an effort to distinguish itself from it carrier Vodafone.

Thus we finally have a Western European network looking to offer customers replacement of paper money and coins. The Italian Banking environment is still what underdeveloped compared to most with a number of regional banks rather than National banks when it comes to the retail sector and so the Post Office is still a major player when it comes to payments. This makes the target of 2M subscribers look somewhat conservative. Perhaps they need to take a leaf out of Tesco's book and look to grow more aggressively?

I hope that they are successful, and I hope that the GSMA take note and start to back M-Payments for the benefit of the Market rather than a get rich quick scheme as the seem to be with the present remittance based approach. Perhaps if they engaged with consultants that know the payments market rather than Blue Chip accountants they would be more flexible and finally manage to develop Mobile Payments. But that is unlikely and this has all the hallmarks of the dotmobi plan to "get rich quick" rather than aid the market!

Another organisation that could do with some Consulting help is Transport for London who are pushing ahead with a trial of NFC based handsets from Nokia on the O2 network. Whilst I support the movement of my Oyster Card onto my handset I do not think that the use of the UK network with the worst billing system will be an effective proof of concept. The Independent today writes about the trial; something the Guardian did on Monday. This is the second trial that I know of, a very small test took place in the summer with some 200 people using handsets I hope that this one will be bigger. I would also have hopes that they tested on the other networks to see how the billing systems function there both Pre and Post-Paid.

UPDATE: The press release has now been sent out and what 500 lucky O2 customers can now expect is the use of a Nokia handset for the next six months whilst they trial  the system.  Thus we have no great leap forward, rather we can expect another small step.  

I wonder if the move will force the  other networks to open up mobile payments or if we can 
expect to have to wait before we  have open access. The good news is that it's not expected to work on an iPhone!

Looks like I was not the only one that passed on the iPhone

Reading the reports on the launch of the iPhone over the last 24 hours and it does not look like good news for Apple.

In the Telegraph O2 says that they had a great weekend and sold more phones than Carphone Warehouse. The interesting snippet was the spokeman saying that once you get people in the shop they can sell them something.

Over at Dialaphone they have a number of photos of empty CPW shops showing just how the UK wanted an iPhone after a week of wall to wall coverage.

Spoke to a few who might have been iPhone customers and they said that they have gone for the iTouch because it was a smart iPod without a poor phone.

Now I expect to see a new iPhone after Christmas that will improve on the launch handset. Will Steve say sorry to the mugs that bought one before the relaunch with another iTunes voucher? I am not too sure we are a long way from his main market.

What might the new handset have? It needs a better camera, faster radio and a full Bluetooth radio. It also needs a different business model for Europe, I am not the only one saying that the price is too high. Apple needs to realise that the consumer will not pay over £100/€150 for a handset and if they are to "tax" the networks for its iPhone customers it needs to drop the entry price.

The iPhone is coming

This week O2 stepped up the marketing push for the iPhone. The FT ran a story that they expected to sell 200,000 handsets before Christmas. Peter Erskine was on the BBC radio spreading the word prior to launch on Friday.

Now in the run up to Christmas the UK will buy some 3Million handsets and so 200,000 does not look that great. The concern that I have is whilst the Apple store is always busy I just do not see the consumer demand once you have managed to use the phone. I think that a large number of those handsets sold by Carphone Warehouse could be returned by disappointed customers looking to get something that works.

Whilst I agree that O2 is a Consumer Network I do not think that many on the network are happy to pay over £45 per month. I can only see that the iPhone will not drive the business forward, rather it will expose the limited capability of the O2 network. I also do not think that the O2 and Apple brands are aligned. O2 claims that a third of all text messages are sent on its network, the latest figures show that over 1 billion were sent in the UK. As I and others have said the iPhone does not do text very well this is another reason why I say that it will not be the happy event that some are saying.

Watching TV last night and I saw my first iPhone advert and I have to say that I was not overly impressed. This was an advert that showed some of how the handset works.

Just hope that the Google Phone is something that breaks the game open when the covers come off this week.

So tell me again just why you think non voice is the way forward!

The Times has a report of an IT Specialist who managed to burn his way through £950 in just four days thanks to watching Mobile TV for just two hours on his 3G handset. These two quotes just go to show why I fear that convergence is just a Marketing teams pipe dream.

"Our technology has run away from our tariffs and we are taking action,"
said a spokesman from O2!

"There are about 7m 3G phone users in Britain according to Mobileshop.com, an online retailer, but only 10% have tariffs allowing for unlimited downloads."