Blackberry: Why pay for celebrities?

Research In Motion and Blackberry do not require any celebrity endorsement. Why would they when the biggest celebrity in the world, the single "hero" in the world and in America, is doing it for them and is not charging a single cent. Barrack Obama's penchant for the "Blackberry" has steadily found its way into the press. Whether be the fondness for his Blackberry, or white house security issues or his new Blackberry; RIM has found itself in the headlines with Obama. Thats arguably the greatest endorsement that a brand can dream about. Offcourse, Obama has also used his social networking skills in what has also become an example of where technology can take you if you understand it and use it well. Recession apart, i am sure all the gadget freaks and techie junta and the executive business class crowd will bear Obama and his liking of his Blackberry in mind during their next purchase. Blackberry also another celebrity, Lewis Hamilton, wording his penchant for the Blackberry storm in a TV ad. Interestingly RIM has not had to spend a single penny for him as well, since Vodafone is footing Lewis Hamilton's bill. An enviable position for any Device manufacturer: Having Obama and Lewis rooting for you without paying any bills.

Ath the current rate of ascendance to popularity, Blackberry is on its way to becoming a cult brand sooner! Blackberry seems to be appealing to the more "business minded" sections of the customers well even as I Phone walks away with the "Music/Entertainment" space! The loosers in this deal are players like Nokia, Samsung, Sony Ericsson and Motorola! The Gartner YOY Q3 2008 numbers show Blackberry (81% growth) and I Phone (327% growth) leading growth in the samrtphone market shares in US (11% growth).

Indian Telecom Story (Part II addendum): Whither Customer Loyalty

As discussed earlier in the same blog, Indians have the lowest per minute tariff compared to many other developing countries @ $.02 per minute! Tradionally Telcos have rushed to get the connectivity figures up and the best way to do it was enticing the consumer to pay less and lesser per minute! Today all carriers have plans which are less than 25 paise per minute. Infact apart from, massification as a startegy which has led to erosion of ARPUs, these discounted rates have also been responsible for reducing the ARPU in the industry. In effect, when every player in the market has been playing on low call rates, the product gets severly commoditized. There is nearly nothingt that differentiates any carrier from the other except for the national footprint (which Airtel/Reliance/TATA held so long). With roll outs of other Telcos such as Vodafone, Aircel, even that differentiation is lost. Add to that the meagre 6MHZ spectrum of usage which translates into call breaks and dissatisfied consumers. There is nothing really that separates the horses and the donkeys and the mules (because none of the Telcos are different anyways.)
This translates into churn rates which depend upon which operator gives the least cost plan. Matter of factly, Virgin Mobile took it to the other extreme, when they started paying consumers 10 paise for every incoming call minute.

A few pointers to get consumer loyalty in place:
1. Experience in international markets prove that bundling a handset (with some subsidies for the handset) increases stickiness.
2. The stickiness increases even more if all the members of a family are given a uniform plan and connection. The handset can be included into the plan.
3. Call drops are a reality of life with consumers in India. Can Telcos for instance provide uninterrupted call service to the top x% of the consumers? The ones who get the top 50% or so of the revenue. If such a service can be branded, and consumers see the benefit, there will be less churn and more stickiness.
4. For the branded uninterrupted call service, the Telco must provide a compensation for every broken call. That way the consumer is assured that the Telco will try and keep the call uninterrupted!
5. High ARPU consumers can be given special services. So far as of now, a high ARPU consumer who probably drives a Honda City would still have to stand in a queue behind 6 people in a Telco Counter to pay his monthly bill. Hardly differentiated!
6. High ARPU consumers can be given loyalty points for usage. Something on the lines of Credit card loyalty points which can be redeemed against purchases. I am privy to corporate spends done by officials on credit cards with highest loyalty bonus pay outs.
7. High ARPU consumers, can be for instance given a new handset every year depending upon their usage. Using the handset as a medium to build loyalty is predatory on the handset but as long as it can build loyalty and stickiness, why not?
8. Get your systems in place. I got an SMS from Airtel some days back. It said that if i SMS Sub 46 to a 5 digit number, i could get a bulk SMS package of 200+ SMSs at Rs.46. It was a win for me. I did SMS sub 46 to the required number and all i got was information about I Phone and its where abouts in the Airtel channel. The computer was not programmed for the bulk SMS thing and it was responding on a 7 month old I Phone availability status. Tch! Tch!

It is said that consumers know what they want and take it! I vary on the point. If consumers were to be let free, the world would have been commoditized. Consumers have to be shown the higher value behing least costs. Not many Telco have tread this path. Its Time they did it or they could end up defending their profitabilities.

Indian Telecom Story (Part II): ARPU and Profitability

Exhibit 1
Exhibit 2

The Indian Telcos kept adding 20 million subscribers every quarter of 2008. However, more and more "bottom of the pyramid" numbers have taken a toll on the ARPU. COAI figures on ARPU show that for the Q3, 2008, the ARPU stood at $5.5 per user (GSM). The ARPU for CDMA users was less than $5. The ARPU has been sinking at 10% every year (2005 - 2008 base - Refer to Exhibit 2). Given that the growth rate of mobility has been over 50% per year, the shrinkage has not hurt the Telcos as much. (Not Yet!). Add to that, policy decisions, which have made it possible for Telcos to share infrastructure which hence reduces Capex incurred by the Telcos.

However, growth over 2008 - 2013 is expected to slow down to about 25% CAGR. If ARPUs keep dropping at this levels, TELCO margins could come under a lot of pressure.

Mobile number portability is certain to see the light of the day in mid 2009. Markets where MNP has been implemented had initially seen huge churn in their customer bases. It is expected that the rates would be between 25 - 50% for the Telcos. Most of the consumers who would churn out would be the High and Mid ARPU consumers looking for better service. These consumers are critical to profitability figures. 9% of consumers bring in 29% of revenues and 45% of the margins. (Exhibit 1) That would be a very big chunk to loose with deep impact on the profitabilities.

Finally, there are lot of other players who would enter into the market. Reliance is already aggressive in its GSM roll outs. Then there are international players such as Etisalat and Telenor who are putting things in place for their Indian foray. This combined with MNP would directly impact in terrms of erosion of market shares held by the incumbents.

So far, not much has been seen interms of Telco activity to stand upto this challenge. It will be a hard fought battle as it begins sometime this year.

Nokia CWM: The Inconvenient Truth

Approximately 7 days earlier, i had blogged about Nokia CWM, "Has Nokia got its CWM strategy wrong?". This was published on 13th January 2009. This followed an article on www.uk.gizmodo.com, "Nokia 'Comes with Music', not shaping up as expected".

In 2 days from now, Nokia is going to share its 4th quarter results. Very intriguingly and aptly, i found a release in the UK telegraph yesterday morning which allayed fears that consumers will act responsibly and not abuse "all you can eat music". I would call this a very amateurish attempt to signal press and investors around the world that its CWM startegy is doing fine because Consumers are behaving responsibly. Indeed! The article in Telegraph is sited below:
http://www.telegraph.co.uk/culture/music/4285381/Nokia-Consumers-will-not-abuse-all-you-can-eat-music.html. Not putting stops there, there was another release http://www.electronista.com/articles/09/01/19/nokia.music.to.expand/, where in the mobile giant also hinted roll outs of CWM in Singapore, Australia, Latin America, US and Europe within this year.

All this, with no major operator pledging alliance to CWM. Nokia's CWM has been a "go alone" venture. As is, all ventures start with a good purpose. In this case, bringing music free to consumers for a one time fee on certain Nokia Handsets. The company thus expected a foothold in the Music space, which so long has been Apple's strong hold. In the US, where Nokia would squarely take on Apple on music as a part of convergence, none of its smart phones feature in operator portfolios yet!

Interestingly, the first proponents of CWM in Nokia, Ed Averdieck (MD, Nokia Music) has been fired and Tommi Mustonen (Head of Multimedia, Nokia) has been given a "punishment assignment". Analysts consider the CWM to be "a step too far in Freetardonomics" and "a reckless business move". At $129 one time payment and .70 - .90 cents per download, Nokia could have to pay for heavy downloads through its nose. Nokia has not made public any information on other sources where by it can justify the additional cost/losses in heavy downloads.

Another "unofficial" word from a Nokia Executive (anonymous) explained the motive, i.e the insight, Nokia has been working upon in terms of justifying the CWM. Only 1 out of 5 users uses the service to tyhe full effect. Which means, 4 others forego taking advantages of the service or forget about it altogether after paying $129. Which also means that Nokia, is betting on a self defeating purpose. If only 1 out of 5 users uses the service, isn't it limiting the spread of Nokia CWM?

This insight, that Nokia seems to have is being backed by its offices. Its "sort of" tested in UK. Now Nokia would extend the same logic around across the world. Nokia's success (Not bleeding in loyalty payments) would depend on consumers not "abusing" the service. This could be tested! If it successful, Nokia will get only 1 out of 5 conusmers to use the service effectively and make profits or break even at the cost of usage being low. If Usage is high Nokia may have to pay for the heavy downloads and make losses on the venture.

This at a time, when, OPK announces that profitability is more important than just the sales numbers!

Nokia faces two choices: Either it can shut the service down ( which means it conceedes a defeat in the music space) or it can get more partners (operators) to work on other revenue streams for the CWM business!

Can using Mobile Phones be hazardous for your health?

http://www.linkedin.com/answers/technology/wireless/TCH_WIR/397360-4005495?browseIdx=32&sik=1232277852650&goback=%2Each_TCH*4WIR%2Eabq_4_1232277852650_n_o_TCH*4WIR

1. Electromagnetic Fields (EMF) occur in nature and thus have always been present on earth. Further, with the growth of Mobile Communications population is being exposed to extremely low-level Electromagnetic Fields produced by the base station antennas normally mounted on cellular mobile towers and by handheld mobile telephone sets/radio terminals.

2. It is most important to note that the RF radiations emitted by Mobile Communication Systems lie in the non-ionizing part of the electromagnetic spectrum and thus do not have enough energy to break the bonds that hold molecules in the cells together. Thus, the exposure to EMF Radiations emitted from Mobile Systems cannot produce ionization or cause any genetic damage.

3. Also, the RF emissions from mobile phones and base stations are some 50,000 times lower than the levels at which the first health effects begin to be established. The output power of mobile phones is less than 1 Watt (typically is in the range of 0.2 to 0.6 watts), which is far lower than the emission levels that emanate from the microwave or even the radio.

4.Till date there is no conclusive evidence of any health ailment caused due to electromagnetic radiations emitted from mobile base stations.

5.Epidemiological evidence to date is inadequate for a comprehensive evaluation of risk, and does not support a hypothesis of an association between exposure to radio frequency fields and risk of cancer,reproductive problems, or congenital anomalies.

Prersently NO SCIENTIFIC EVIDENCE proves that usage of mobile phones leads onto adverse health effects in the user.

The list of reference is quite long, but they just prove the point. All material is available is you google these refernces with relevant key words. References

1. World Health Org. reports 2004, 2005, 2006

2 European Commission expert group

3. British Medical Association, January 2005

4. Health Council of the Netherlands, 2004

5. Swedish Radiation Protection Institute

6. International Commission on Non-Ionizing Radiation Protection (ICNIRP), 1998 & 2004

7. French Health and environment safety agency, 2003

8. GSM association website

9. The journal of biometrics, 2006

10. United States general Accounting office

11. USA: Food and Drug Administration, 2005

12. Network and Academic Computing Services, University of California, 2005

13. Royal society of Canada

14. Australian radiation Protection and Nuclear safety agency

15. Australian Committee on Electromagnetic Energy Public Health issues, 2003

16. Malaysian Communications and Multimedia Commission 2001.

17. Malaysian institute of Nuclear technology research, 2003

18. Institure of electrical and electronics engineers

Wireless technologies that will impact India significantly in 2009

(2G,3G, Wimax and WiFi/VoIP: My choice of wireless technologies that will impact Indian telecom scene in 2009. However, more than the technology and its acceptance, I have focused on the stumbling blocks and hence what to expect out of these technologies.)

In 2009, India should see a great deal of activity happening in the telecom sector. 1. 2G would continue its unabated subscriber addition with another 100 million new users.
2. After a few years since its been in the horizon, 3G would finally see the light of the day.
3. Wimax would see some metro action in the second half of the year.
4. Wi Fi/ VoIP would serve the enterprise segment as the most favored data/voice transfer mechanism

However in terms of mass absorption and usage, more than 98% of the consumers will depend on the 2G network and fixed line access for communications and internet. The consumer acceptance and usage rates would directly depend upon the cost of ownership or per unit costs of communication. From a technology, infrastructure and company’s perspective, the government policy structure, licensing fees, USO levies and usage charges need to be more transparent and less inhibiting. 2009 is going to be an election year in the country, which would mean truck loads of populist measures. The exchequer would try and recover the money from the licenses, levies and usage charges in the sectors such as telecom. If that happens, then the roll out of these technologies could be seriously impeded.

Going back to the discussion on technologies:

2G with its rock bottom tariffs would be the choice of the majority who use mobiles for little more than voice and texting. We have been adding close to a 100 million users for last three years in succession and this trend will continue till 2012. All this subscriber addition would happen through the 2G (GSM and CDMA) technologies.

BSNL 3G services would start by the end of Jan – Mar 2009 quarter and over the next 9 months, we would see the 3G roll outs in most of the metros and some mini metros. However, the Rs.4040 crore 3G license is prohibitorily priced. In these days of recession, companies may not want to bid on this price. I do not see a profitable standalone business case for pure 3G services for any operator in India. Evidence from around the world is overwhelmingly against such a 3G business case. From the consumer perspective, there are a limited number of high profile, high ARPU consumers who would buy into the 3G, but that is a significant minority.

Wimax also suffers from similar licensing issues. The services are pegged at a licensing fee of Rs.2020 crores and there isn’t even a proper policy structure in place. Tata and reliance which have bought Wimax states, are currently limiting their efoorts to metros and Class A cities at present.

Wimax offers wireless broadband access to a 30 Kms radius. This is of significant importance in a terrain like India to increase internet connectivity and in the years to come Wimax may be the technology which will enable internet savvy panchayats. It will beat 3G in costs, but will be limited in its coverage compared to 3G which will have a greater carpet area.

Given the state of legislations, it will perhaps be a year or more, towards the mid/end of 2010, that mobile communications will feature in Wimax.

Wi Fi and VoIP will power the enterprise segments and the growth in this segment will be directly proportional to the office space and lap top sales.

The introduction of these technologies is heavily subject to two other factors

Mobile Number portability which would increase churn at the high end of the users. This has a profitability impact for incumbents
The spectrum release by the government. Chronic shortage of spectrum spaces and their interplay with the defense forces will impact launch dates.

Net of all things, 2009 will be a year which will be remembered as the launch of 3G. However, I doubt whether there will be a large scale activity in the Wimax and 3G space. 2010 may turn out to be the year when real time activity on field happens with these new technologies. A pro active government intent and policy could make a lot of difference to the sector. Our policy makers and leader would need to take a out of leaf of the Chinese government which is doing the 3G full Monty, full steam across the country.

As an after thought, I would like to add a comparison and analogy between Wireless technologies and The railway system in India.
2G would be the general railway (the way we know it, serving majority of the nation)
3G would be the Shatabdi and the Rajdhani, for a select few who are discerning.
Wimax would be the Local trains (The electric ones) connecting smaller parts of a geography.
Wi fi would be the metro rail connecting cities and businesses (Enterprise segment)

Indian Telecom Story (Part I): Up Up and Away!

Exhibit 2

Exhibit 1

Exhibit 3

Exhibit 4

In Q 4 , 2007 India became the fastest growing telecom sector in the world leaving China, US, Indonesia and Pkaistan behind. In fact Indian telecom market added a subscriber base that was equal to the new subscribers of China and US combined. The pace of sub adds has not slowed. Refer to exhibit 4 for details.

In the first quarter of 2008, India surpassed US as the second largest wireless market in the world. It eneded the year with354 million mobile subscribers (both GSM and CDMA combined). In penetration terms, mobile penetration is close to 35%. The September 2008 figures for teledensity was 72.5% for urban areas and 12.7% for rural areas. This figure of 354 million would go to 741 million by 2012 (COAI/TRAI estimates). Thus, the telecom market in India is going to steam ahead at 100 million new subscribers for the next 4 years unabated. That is 25% CAGR. Refer to exhibit 3 for details

At $.02 per call, Indian consumers get the lowest mobile tariffs in the world. (Refer to exhibit 2 for details). Incidentally, the minutes of usage is also amongst the highest in the world. (Refer to exhibit 1 for details.)

Only some time back, the market leader in the Telcos, Airtel (33% market share in India) was voted amonst the 25 most valuable telecom service provider brands. If the top 25 list of telco service providers be drawn by subscribers, BSNL, Idea, Vodafone India would also feature in them!

The next 100 million and three more hundred millions would be rural additions. There seems to be no doubt on this fact as far as TRAI, DOT, Ministry of Telecom and the Telcos are concerned. However, all is not pink in this booming industry. In the next part of this blog, we will examine ARPU trends and Infrastructural bottle necks in this sector.