Qualcomm and Teleepoch
Enter Into a 3G CDMA Subscriber Unit License Agreement, October
6, 2007
MTN chooses Cambridge Broadband
Networks for multi-service wireless network in Rwanda, October 6,
2007
Brazilian government to
publish 3G bidding rules soon, October 6, 2007
KTF 3G service suffers
from technical problems, October 6, 2007
Argentina’s Personal
lunches 3G service in Rosario, October 6, 2007
Russia has it's first 3G
network, October 6, 2007
AT&T could drop Alcatel-Lucent
as 3G mobile network supplier, October 6, 2007
Enea Extends License Agreement
with ZTE for 3G Handsets, October 2, 2007
LG to unveil premium handsets
in Brazil, October 2, 2007
KTF 3G subscribers doubled
in less than 3 months, October 2, 2007
3G policy in India will
be non-uniform, October 2, 2007
- previous news
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European mobile operators must get their handset strategies right - report
August 16, 2003
The handset has long been a critical component of the service offering
of mobile network operators (MNOs). There is no shortage of anecdotal
evidence suggesting consumers are far more wedded to their handset, and
the handset brand, than they are to the MNO and its brand.
Although handset choice has always been an important issue, it is now
growing in significance. This is because MNOs are desperate to encourage
adoption of their mobile data services. To achieve high penetration rates
for data, they must convince more customers to purchase new handsets that
have improved data capabilities.
In most European countries this means the traditional practice of subsidizing
the retail price of the handset will continue. Handset subsidization will
remain a major expense for MNOs. Some MNOs have sought to reduce this
by sourcing more handsets from unknown or emerging vendors, which will
typically offer their products at lower unit prices than those available
from the leading vendors such as Nokia and Motorola. However, this strategy
carries risks.
In this research note, we examine some of those risks and assess the
handset strategies available to MNOs. We begin by examining some key trends
surrounding handset supply in Europe:
- Data services generated 11 percent of MNO revenue in EMEA during 2002.
This will increase to 26 percent by 2007. The MNOs understand that to
achieve their ambitious targets for data services, they must ensure that
customers have access to the most sophisticated handsets available. They
also understand that ease-of-use is the most important factor for success
in mobile data. For this reason, MNOs must only offer data services on
phones that will optimize the user experience.
- More MNOs are sourcing customized handsets from unknown or emerging
handset manufacturers. Vodafone and Orange are two high-profile examples.
For its Vodafone Live! service launch, Vodafone used Sharp and Panasonic
handsets. These are well-known consumer electronics brands, but they had
little presence in the European mobile handset market. Similarly, Orange
worked with HTC to build the SPV phone. Other MNOs such as Telefonica
Moviles are also sourcing handsets from unknown brands and are benefiting
from lower wholesale prices.
- Despite the trend toward using unknown brands, European MNOs continue
to work with the leading phone vendors. They understand that many customers
will continue to demand phones with brands and features that are instantly
recognizable.
- The high level of handset subsidization is an inescapable feature of
the European wireless marketplace. This places a huge financial burden
on the MNOs by driving higher acquisition costs, particularly for postpaid
customers. This, in turn, drives their desire to reduce wholesale prices,
and their willingness to take a chance with unknown brands.
Trend Impact
The effect of these trends creates some clear strategic choices for MNOs.
They can choose to:
- Source a higher proportion of their handsets from emerging vendors,
or continue to source most handsets from the established manufacturers.
- Demand more customized handsets, which make it easy for the customer
to access an MNO’s data portal, or offer a wider range of handsets that
have little or no customization.
- Insist on the use of the MNO’s brand on all phones, or continue to
use dual-branding (vendor and MNO) or vendor-only branding.
- Take more direct responsibility for the design of handset user interfaces
(UIs) and the positioning of application icons on phone screens, or continue
to rely on the handset vendors to provide optimized UIs.
MNO Recommendations
- Despite the attractiveness of lower wholesale prices, MNOs should continue
to work with the brands with which their customers have an affiliation.
This does not mean there is no scope for MNOs to work selectively with
lesser-known manufacturers. They can certainly do this where the potential
savings on handset prices combined with the higher level of customization
will outweigh the risk of launching a product that lacks a major brand
name. In general, however, while major vendors like Nokia, Motorola, Samsung,
and Siemens continue to produce phones (and brands) that customers want,
the MNOs should continue to work with them.
- MNOs should not play a more active role in handset UI design. In theory,
it might sound like a good idea. However, in practice MNOs do not have
the expertise to produce designs that will improve the user experience.
Instead, they should work with the major vendors, to influence their designs
where appropriate, and to ask for customization where it will have a direct
and positive impact on the customer’s experience. Overall, MNOs should
allow the vendors do what they do best i.e. design good phones.
Handset Vendor Recommendations
- The leading vendors must respond to the reality of today’s market.
They should offer customized products where the MNO demands it and where
it will not jeopardize the vendor’s brand. The current fashion is for
MNOs to demand more customization. However, the smart ones will not sever
their relationships with the leading phone brands. If the leading vendors
can bend a little at this delicate time in the evolution of data services,
they will avoid breaking later on when the MNOs become even more selective
about their choice of handset partners.
- The lesser-known vendors should continue to focus on their primary
areas of differentiation--product customization and low unit prices. As
long as they do not try to build market awareness of their own brands,
these companies should be able to maintain a lead over the major vendors
in cost,and unit prices. Despite their need to achieve the lowest possible
production costs, smaller vendors must not lose sight of the market’s
requirement for user-friendly devices. Ultimately, the end user will decide
which manufacturers will succeed and which will fail. If customers don’t
like a product, it will not sell--regardless of how attractive the price
might be.
The Yankee Group (www.yankeegroup.com)
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3G Motorola A920
