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Mobile World Congress 2012 Report from Barcelona

by Dr. Mehmet Unsoy Mobile World Congress (MWC) 2012 was held for the seventh time in Barcelona, Spain, during February 27 - March 1, 2012. According to the organizers, attendance was over 60,000, a record. Nice sunny weather added to the up-beat mood at the conference. However, some local labor disputes and student protests in Barcelona limited participation in some of the afterhour activities. We as mSolve, participated in meetings with well over 100 companies, several hundred executives, from 40+ countries. It sure was a very busy week! How is the industry doing? Obviously there are major economic problems around the world, especially in the Euro-zone. Despite this, the $1.9 trillion mobile industry is doing very well. It is true that consumer spending as well as operator Capex will be at best flat in Europe in 2012. However, there is growth in North America and the rest of the world that will propel the industry forward. The mobile subscriber base has crossed 5.3 Billion globally, covering almost 77% of the world population. The growth is being driven by demand in the developing world, India (850 million subs) and China (973 million subs) in particular. China is expected to surpass the 1 Billion subscriber mark within this year, which is a significant achievement on its own! Mobile industry is in the forefront of the evolution of other industries as an "innovation enabler", sometimes bringing major disruptions to those industries. We have seen major impacts of mobile technology in the digital media, such as music, movies, and the news industries. Content delivery as well as the business models in digital media have gone through a major transition, thanks to mobile technology. In addition, mobile technologies' impact on the finance sector, including banking, payments, money remittances and e-commerce were very obvious during MWC 2012. There were major announcements, partnerships (e.g., with Visa and MasterCard) as well as several innovative companies in the mobile money space, exhibiting at MWC. Also affected are the transportation industry, energy sector, and most interestingly the healthcare sector, with large number of innovations and start-ups leveraging mobile technology to re-invent the corresponding vertical industries. For example, at a keynote speech, Ford's CEO was inviting mobile technology companies to develop auto related services, saying that cars are the "great untapped opportunity" for mobile, stressing intelligent cars and transport systems. There is a wide recognition that mobile technology has become a "major change agent" for the global economy. Mobile Broadband is especially important for developing countries. That is why LTE makes more sense in some of these emerging markets than in developed markets. The World Bank estimates that a 10% increase in broadband penetration in a country (e.g. through LTE), may enable additional 1.3% GDP growth in that country. The ubiquitous mobile broadband is becoming as critical as water or electricity to economic development of these countries. Over-the-Top (OTT) players' role in the mobile industry was a major topic for debate. Mobile operators are making huge investments especially with mobile broadband and LTE. If they turn into bit pipes and provide these super-highways to Over the Top (OTT) players to monetize, then it would be difficult to justify building out these LTE networks in the first place. On the other hand, if the mobile operators put in some speed-bumps for OTT, then we have the 'net neutrality'

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problem. One way forward is for the mobile operators to offer their own services over LTE, like VoLTE (Voice over LTE), mobile video, RCS (Rich Communications Services) as soon and as aggressively as possible. More on this later. During MWC 2012, GSMA Chairman (also Chairman of Telecom Italia) raised serious concerns about the OTT players, asking them to bring real value to the eco-system. He indicated that the industry (mostly mobile operators) will invest $800 billion in Capex in the next 4 years, as well as contribute $2.7 trillion to public funding worldwide. OTT companies should be making similar investments and contributions to participate in the growth of this industry. Interestingly, Starhub's CEO was suggesting that the mobile operators could become OTTs themselves and/or establish partnerships with them. Policy management technologies could provide mobile operators with such flexibility. LTE deployments and commercial services are now a reality. In fact, LTE is the fastest developing mobile technology, primarily driven by the demand for mobile Internet access. Today, there are about 50 live LTE networks, across 30 countries, with about 10 million LTE users. It is forecast that by 2016, there will be 200 live LTE networks across more than 70 countries, with about 500 million LTE users. Not only has there been a very large number of operators deploying LTE commercial service, but also the handset manufacturers have been much faster in coming up with LTE enabled handsets. This sure was not the case with 2G, 2.5G or 3G handsets in the past. According to Wireless Intelligence, LTE devices are expected to be 20% of the handsets rolled-out next year, growing to 33% in 2014, and 50% by 2015. During MWC 2012, there were a lot of LTE related announcements. NSN claims the most number of commercial LTE deployments so far (52 networks), but others are not far behind. It is now expected that South Korea will have at least half of their subscribers using LTE by 2014, becoming the first country to reach such penetration levels. For voice services, VoLTE (Voice over LTE) interoperability with 3G / WCDMA was demonstrated by Ericsson, which is critical for the voice fall-back from LTE to 3G networks. It is expected that VoLTE compatible networks and devices will be launched later this year. Conversational video is a potential killer app for LTE, however the end-to-end quality assurance will be very critical for this service to take off. For LTE infrastructure, the focus is on small-cell technology. Several manufacturers, including Alcatel-Lucent ( LightRadio Cube), Ericsson (multi-standard pico with Wi-Fi), Huawei (Atom Cell) and NSN (Flexi Zone) had new demonstrations of small-cell base-stations. According to research, 90% of all base stations in 2016, will be for small cells. Network Optimization is hot again! With mobile Internet demand on the rise, there is an increasing gap between supply and demand on bandwidth. Most operators are struggling to find adequate solutions to meeting the ever increasing demand. Obviously, building out more infrastructure is one potential solution. Another is optimization of the existing infrastructure. The industry is moving toward Self-Organizing Networks (SON) for optimization of mobile networks. There were several leading companies in this regard at MWC. Another major initiative is Wi-Fi Offload, leveraging Wi-Fi networks to offload some of the data traffic and thus better utilize the cellular network. Recently, Ericsson acquired BelAir, and the whole Wi-Fi offload space attracted even more attention during MWC. We met with at least four companies with value propositions in this "new" eco-system. SmartPhone sales in 2011 reached around 480 Million, with about 49% of it captured by Android devices. This is overwhelming growth for Google's Android operating system, which also captured about 29% of the tablet market. Apple's iOS is number two in operating systems, but sold a staggering 49 Million iPhones just in Q4 of 2011, capturing 24% of the market-share in that quarter. Most interestingly, Apple is the profit leader with $33 billion in 2011, as the mobile industry transitions from the feature phones to SmartPhones. Quad-core SmartPhones and Tablets were the "new thing" in MWC 2012. HTC (One X), Huawei (Ascend), LG (Optimus 4X), ZTE (Era) were example of quad-core SmartPhones announced and displayed at the show. Huawei's Ascend claims to be the fastest Smartphone in the world, and it is rumored to be one of the cheapest in its class, as well! Microsoft Windows Phone, especially with Nokia handsets, such as Lumia models, was the t"alk of the town" as well, with very attractive features. One of the new Nokia handsets, Lumia 610 is expected to be the cheapest Windows Phone, at about 150 euros in Europe. WP is now the 3rd major operating system for SmartPhones, after iOS and Android. Windows 8, to be released later this year, was the center of some expectations. To make SmartPhones more widely available around the world, several major operators such as Airtel, VimpelCom and Telefonica Latin America called for sub-$50 SmartPhones, similar to the recent GSMA initiative of sub-$30 feature phones a few years ago. These lower cost

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SmartPhones would definitely increase the mobile Internet traffic in emerging markets, especially with LTE networks being deployed in those countries. Mobile Messaging and RCS were newsworthy again. GSMA launched a consumer facing RCS (Rich Communication Services) brand called 'joyn". This brand will be used by mobile operators to have a common service, especially to compete more effectively with OTT players. The Spanish arms of Orange, Telefonica and Vodafone have started rolling out RCS and are due to launch services this summer. Operators in France, Germany, Italy and South Korea also committed to start RCS service this year. Several companies announced RCS clients for SmartPhones and Tablets. Mobile Money is a new buzz word! M-payments, m-commerce, and other aspects of mobile money were very hot items at this MWC 2012. Near Field Communication (NFC) is at center stage of the discussions and debates. Companies like Paypal (who says they will do $7 Billion mobile payments this year!) are challenging the need for NFC, while several major players like Apple may be coming up with their own solutions for m-payments. NFC might be ideally suited for commuters getting onto trains or buses, but may not be necessary or practical for other mobile money transactions, as the argument goes. However, there were several major related announcements such as Visa certifying a set of SmartPhones to be NFC compliant and ready to use the Visa card. Handset manufacturers are submitting their new NFC-capable handsets to Visa to get them certified. It was announced that there are commercial NFC deployments underway in France, Japan, Korea, Turkey and the UK, with trials in many other countries around the world. There are several "interim" NFC approaches around the industry, such as stickers, micro SD cards, software based solutions, but the solution promoted by GSMA is the SIM card based approach. Incidentally, NFC is more like an enabling technology and may not be limited to just mobile money, but will also be used for mobile marketing, access control to offices, parking lots, and even opening the doors of your car. Another question discussed at MWC was what will Apple do for NFC, especially with iPhone 5, expected later this year. There is a good chance that iPhone's approach will not be tied to the SIM cards or mobile operators, but rather to iTunes! Apple iTunes users already have a credit-card relationship, and Apple may leverage this for a wide range of mobile money transactions, thus offering another OTT solution. Mobile Wallets were also hot at MWC 2012. In addition to Google Wallet, Isis was present at MWC 2012. Isis is a joint venture of AT&T, T-Mobile and Verizon, and has announced several major partnerships with plans to start NFC-based trials in two locations in the U.S. this summer. On the App Development environment eco-system, the most debated question seems to be whether HTML5 is the answer to everything. Obviously it is not, and there are still lots of benefits of native apps, and they are not going to be replaced by HTML5, at least not in the near future. One of the major themes at MWC 2012 was "Connected Future" or "Networked Society". In a keynote speech, Ericsson CEO stressed again the 50 Billion connected devices by 2020, and the challenges and opportunities associated with it. GSMA with Machina Research, released a study that shows connected devices market to be worth $4.5 trillion by 2020. The top application in this sector would be "connected car", worth about $600 billion (that's why Ford CEO was at MWC), and the next two apps were healthcare related and collectively worth about $620 billion! So, mobile healthcare and transportation might be the biggest markets for Internet of Things in the coming years! As a spectrum to use for Internet of Things, we have got White Space TV spectrum, and several companies are leading in developing solutions around White Space. Finally, some of the major GSMA awards given during MWC 2012 were Best Mobile App for Consumers: Rovio Entertainment Ltd. for Angry Birds Rio Best Mobile App for Enterprise: Citrix Systems for Citrix Receiver Judges' Choice - Best Overall Mobile App: WhatsApp Most Innovative Mobile App (technical advances in apps): SwiftKey Best Enterprise Mobile Service: Fiberlink for MaaS360 Best Network Product or Solution: Turkcell for TiklaKonus Best Mobile Health Innovation: Etisalat, Qualcomm, D-Tree International and Great Connection Inc. for Etisalat Mobile Baby Best SmartPhone: Samsung Galaxy S II Device Manufacturer of the Year: Samsung Best Mobile Tablet: Apple iPad 2

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Best New Mobile Handset, Device or Tablet at Mobile World Congress 2012: Nokia 808 Pure View Best Embedded Mobile Device (Non-Handsets): AT&T for Garmin GTU 10 Best Cloud Based Technology: Appcelerator for Titanium Integrated Development Platform

Next year, MWC 2013 will be held Feb 25-28, in Barcelona again, but in a different venue, Fira de Barcelona Grand Via, which is promised to be a much bigger, and better place for the Mobile World Congress. See you there.
Best regards, Mehmet

Dr. Mehmet Unsoy is Managing Partner at mSolve Partners and can be reached at Mehmet@msolvepartners.com Steve Gaynor also contributed to this newsletter. Steve is Managing Partner at mSolve Partners and can be reached at Steve@msolvepartners.com mSolve Partners LLC is an advisory firm that offers corporate and business development advice to companies in the mobile sector. We work with entrepreneurs, investors, and leaders of major corporations in the mobile sector to assist them in achieving their most important strategic and financial goals. mSolve has a team of seventeen professionals and twenty advisors distributed in major markets around the globe.

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