Mobile World Congress 2011 - Report

Barcelona, Spain - February 18, 2011

Download as PDF.

The Mobile World Congress was held for the sixth time in Barcelona, Spain from February 14 to 17, 2011. The attendance was excellent (a record 60,000 visitors from across the mobile ecosystem), the weather uncharacteristically rainy and the chief non-telecom related speculations revolved around the venue for the coming years. Crime was becoming an even more serious theme putting the future of Barcelona as the venue in jeopardy. In this update, we cover the hottest topics that dominated proceedings at the show and are likely to make a major impact this year. The major highlights included the Windows/Nokia deal, the proliferation of tablets, processor technology leaps, LTE, NFC, 3D, location based services, cloud computing and mobile VoIP.

A much debated marriage and the OS market: Following the announcement of a much debated strategic partnership with Nokia, Steve Ballmer’s keynote provided insights into Microsoft’s mobile strategy. While lacking the brutal directness of Mr. Elop’s leaked memo to his Nokia employees, Mr. Ballmer’s focus on design and multi-tasking did have an undertone of wanting to catch up with competition. Windows Phone 7 is a much improved platform with a slick UI and collaborative / social networking features. Still, it has a long way to go if has to catch up with the iOS as well as and the fastest growing (and now the biggest) platform in the market, Android. Android’s stand was a big draw at the show (not least because of the excellent smoothies served.) There are signs that RIM could make a strong comeback in the market. We discovered that in Spain and other markets, the penetration of Blackberry is increasing among the young and the hip driven by the popularity of the BB Messenger. However, the increasing penetration of smartphones has its own challenges as fewer people know how to handle the devices. This is where start-ups such as self-help provider Qelp are coming in keeping customer support costs for operators to a minimum.

Microsoft’s platform faces challenges the consumer and enterprise fronts. Its 8000 odd applications compare poorly to over 350,000 apps for the Apple iOS and over 150,000 apps for Android, making it far less attractive for consumers. Further, Microsoft’s new platform lacks appeal to the enterprise, with device management and security features still in their infancy. Mobile device management vendors such as ubitexx and Mobile Iron would require more features from Microsoft to truly secure this platform for enterprise use. Yet, with its marketing muscle and a sweet deal with Nokia, Microsoft could still make an impact.

Nokia, being squeezed in the high end of the market by Android and iOS and in the lower end by Chinese and Indian players in recent years, needed to act fast. However, given the new strategy, they have become even more of a hardware play (with the desperate intent to go after services) in days where controlling the software is vital. The co-existence of Nokia phones on WindowsPhone 7, Symbian and MeeGo presents a challenge. Symbian’s development has basically stopped in the high-end segment and the future of MeeGo seems to be very uncertain as well given that Intel is upset with Nokia’s move. Overall, the market will still remain fragmented keeping the cross-platform app vendors such as Service2Media, Mobile Distillery and Geniem busy.

2011, a year of tablets: The sheer number of MWC visitors and exhibitors with iPads and other tablet devices was staggering. Within 9 months of its launch, Apple sold almost 15 million iPads, yet again opening up a brand new market. Samsung unveiled Galaxy Tab’s successor Galaxy Tab 10.1 based on Android’s avatar for tablets: Honeycomb. LG, HP, HTC, Motorola, RIM, Lenovo and Toshiba all announced devices at the MWC 2011. RIM plans to release Playbook’s WiFi version late in Q1 2011, and HSPA+ and LTE capability in H2 2011. Playbook would support multitasking OS, along with Flash, HTML5 and open internet standards. Expect the very cool, top of the market Playbook to appeal to corporate users with its (optionally) bigger screen and office software capabilities. HP also unveiled Touchpad, a webOS based tablet, with ex-Apple senior vice president Jon Rubinstein at the helm of the project. The Chinese vendor ZTE, which shipped around 90 million smart phones in 2010, will accelerate its expansion on smart devices by launching light weight tablets based on Honeycomb due in Q3 2011. Accordingly to Strategy Analytics, a research firm, more than 700 tablets have been announced until now. While Apple is clearly ahead of the pack, it is certain to lose market share quickly to a multitude of players. Experts also expect a number of traditional consumer electronics firms to play a key role in this burgeoning market. Further, component vendors such as those who provide touch screens will benefit from the boom. Vendors such as FlatFrog, Stantum, TPK and Neonode are expected to make major advances. Undoubtedly, 2011 is going to be the year of tablets, all thing things that go into making them and all apps that run on them.

Moore’s (mobile) law: Chips are getting increasingly powerful, enabling high performance on smartphones and tablets. There is now a very high proportion of chips out there based on processors of 1 GHz or higher. 45% of the processors on MIDs are expected to be multi-code by 2014, according to Strategy Analytics. ARM’s dominance in both the tablet and the smartphone market has been phenomenal. By some estimates, 98% of all tablets deploy ARM today. Intel, which dominates the server, laptops, and PC segment, has struggled to match the better power consumption characteristics of ARM. Their latest generation of chips, Metfield, met with limited enthusiasm. Qualcomm also unveiled new generation of Snapdragon chipsets at MWC. Krait, the new processor offers a speed up to 2.5GHz per core to deliver 150% improvement in performance and 65% reduction in power consumption as compared with other currently ARM based CPU cores. These chipsets will support multi-mode LTE, WiFi, GPS, Bluetooth, FM connectivity, NFC support and 3D video capability. Interestingly, Qualcomm is the initial and sole supplier of chipsets for Windows Phone 7.

LTE, the big deal of 2011: The buzz around LTE was hard to miss at the show. Data rates north of 50 Mbps will be commonplace eventually, even if a lot of these numbers are for marketing purposes at present. Wireless Intelligence, a market research firm, forecasts that LTE connections will rise from 4.2 million across 24 countries by the end of this year to almost 300 million connections across 55 countries by 2015. LTE was therefore a central theme for operators and device manufacturers. Major operators such as Verizon, Sprint and Deutsche Telekom announced their plans to roll out LTE. On the other hand, LG, HTC and Samsung showcased models for Voice over LTE (VoLTE). With Deutsche Telekom ditching the competing VoLGA (Voice over LTE via Generic Access), a decisive blow has been dealt in favour of VoLTE.

Although we see LTE gaining momentum, we remain cautiously optimistic on the near-term world-wide rollout. Government / regulations support is imperative for successful rollout and is a notorious root of delays for such projects. Further, HSPA+ offers a strong short-term substitute. There are 341 live HSPA networks across 132 countries. HSPA has recently surpassed 400 million connections and continues to add 17 million new connections every month with most smart phones supporting HSPA today. Further, HSPA can be upgraded to HSPA+ enabling peak speeds between 21 Mbps and 42 Mbps. A case in point could be Deutsche Telekom’s mobile broadband strategy to roll out HSPA+ for existing US operations.

NFC, a field of opportunities: Last year, we predicted that m-payment will finally take off (and it probably did for virtual items and games!). We think that NFC could finally gain momentum towards the tail end of the year. We saw Google announcing Nexus S with NFC support. Nokia, RIM and Apple all plan to introduce phones with NFC capabilities later this year. In November 2010, ATT, T-Mobile and Verizon Wireless announced formation of Isis, a joint venture to support NFC for shopping and payments. Orange announced it would deploy NFC supported SIM cards and handsets for mobile contactless services to serve 500,000 customers in France by end of year 2011. NXP, a semiconductor player and Giesecke & Devrient, a SIM card manufacturer, announced the availability of the software for NFC for the rapidly growing Android platform. According to analysts Frost & Sullivan, payments through NFC could reach €111 billion by 2015.

3D goes mobile: In 2010, 3D entered our living rooms. At this year’s event, we saw the first signs that it will enter our pockets too. LG unveiled Optimus 3D, claiming to offer the world first full 3D experience on a smartphone. The technology allows for recording, viewing and sharing of 3D content. Interestingly, LG also launched also the world’s first tablet with a 3D camera. DoCoMo showcased two new Sharp phones with 3D displays and interactivity. Certainly, these companies recognize the value of the perfect UI experience as a key success factor. In December 2010, RIM had snapped up TAT (The Astonishing Tribe) to enhance user experience on its devices. Players, such as SPB Software and Rightware, who provide 3D visualization and UI solutions will certainly benefit from this trend and TAT going off the market should help as well. On the other hand, Augmented Reality was becoming even more ubiquitous as metaio/junaio and Layar showed lots of presence at many vendors’ booths who wanted to demonstrate the new 3D world order. While the final verdict may yet lie in consumers’ hands, it is worth mentioning that with proliferation of dual core processors, advances in stereoscopic technology and launch of LTE networks, the technology for offering an immersive multimedia experience is certainly around.

Location Based Services (LBS): Location awareness and hyper local advertising remains a social mantra for 2011. With APIs from Facebook, Twitter and Gowalla, integrating social networks and location awareness is an easier proposition. The recent launch of Facebook Places and automated check-in by Google Latitude is an encouraging trend for location based services start-ups. Dennis Crowley’s (co-founder and CEO of Foursquare) excitement was evident when he described how small merchants and high street chains were leveraging Foursquare badges for special offers and loyalty programs. Adding over 5 million users in just over six months, Foursquare has plans to take its services to other markets. As location based fever catches up, it’s fair to expect a lot of start up activity in the field. Netherlands-based Whatser, an innovative post check-in location based search and recommendation API integrating the best of Facebook, Twitter and Foursquare. Mobile will play a key role in Groupon like services, making them increasingly location based. Players in the mobile advertising space such as Smaato, madvertise, Out There Media and MADS (besides the larger players such as AdMob) will benefit heavily from this trend. Watch out for major action in this space.

Cloud and apps to the rescue: With advent of 4G technologies, mobile broadband speeds will soon match DSL speeds. 4G speed of access combined with existing billing relationships offers operators a unique opportunity to offer new services and generate revenue streams. Although innovation has been slow, an increasing number of operators are now offering services, many of which are cloud based. Ericsson, a leading vendor that serves multiple operators, unveiled a strategic alliance with internet giant Akmai to bring mobile cloud acceleration solutions to market. NEC announced its new ‘Cloud in your pocket’ service, providing connected and non-connected users access to their cloud environment. Operators such as Swisscom are offering automated cloud backup services to their consumers, leveraging embedded technology from innovators such as Diino. Music has already made it to the cloud with Spotify and WiMP making waves in the European market in cooperation with operators. With more services moving to the cloud, monitoring players such as op5 from Sweden should benefit tremendously. The WAC (Wholesale Applications Community), announced at last year’s show, now counts 68 members including many tier-1 operators and has announced its intent to launch a commercial offering. As the year advances, we expect to see more mobile cloud services entering the market and being offered by the smart gatekeeper (as opposed to the dumb bit pipe), the operator.

The year of mobile VoIP: Skype’s presence at this year’s event was substantial and it marked a key inflection point in the industry. Most operators now realize that VoIP is a fundamental part of the ecosystem. Since VoIP will be a key technology with LTE, operators will leverage the technology themselves at the access level. According to market researcher Juniper Research, mobile VoIP minutes will jump from 15 billion in 2010 to 471 billion by 2015. Stakeholders will do well to forge agreements, make acquisitions (a là Telefonica / Jajah) and ensure that they have the missing pieces in the puzzle to offer high quality and reliable voice service over. Start-ups such as VoipFUTURE, IPTEGO and C2Call have excellent solutions in this area and are likely to see major traction going forward.

Wrapping up: At the MWC, the industry showed a high degree of innovation amidst a highly dynamic phase. Capital markets are back to levels where firms are less apprehensive about making major investments. All of this augurs rather well for the mobile industry and we expect a great environment for new investments, M&A and venture capital financings in a market driven by rapid change.