a week in wireless


Bump

It’s coming up to that time of year again readers, if it wasn’t for the News of the World scandal keeping the papers busy we’d all have to survive on a diet of the Beckhams’ latest offspring and volatile potato vodka. But it’s money that keeps the world going round and the subject of filthy lucre is still hot property in the mobile market.

PayPal owner eBay has really been stepping up its game recently, making two announcements this week, the first of which sees Android users with NFC-enabled phones able to send money to each other just by bumping the handsets together. The feature builds on functionality developed by Bump Technologies and at present is only available to users in the US and then only on the Samsung Nexus S phone, but as NFC terminals become commonplace, expect to see more of this kind of activity.

PayPal bolstered its play with the $240m acquisition of Zong, a transaction firm with strong ties to Facebook and expertise in carrier billing and David Marcus, CEO and founder of Zong, put the company’s initiative into words: “Most of e-commerce will shortly become m-commerce, and I genuinely believe that PayPal, hand-in-hand with wireless carriers around the world will win in a big way.” Through this deal, Zong gets its hands on PayPal’s eight million merchants, brand power and financial stability, while Paypal/eBay gets Zong’s direct carrier payments network and billing technology, catering to around 250 carriers worldwide.

A sizeable transaction was also made by games giant Electronic Arts, which picked up mobile games developed PopCap, maker of Bejewelled and Plants vs Zombies, for a total of $1.3bn, including a performance payout of $550m over the next three years. Mobile gaming is another growth market, as illustrated by EA’s purchase last year of Chillingo, publisher of the smash hit Angry Birds. Someone told the Informer this week that over 125 years of Angry Birds has been played, probably by people experiencing 125 years of solitude.

Not the Informer, he’s been pretty social this week. Now that summer party season is kicking off, he’s been hob-nobbing with Google, Telefónica O2 and ZTE, which might explain his three day headache.

With beautiful, long-legged fashion models, pre-noon bubbly and millionaire literary figures, it was a typical Thursday morning for the Informer. The only difference was that he was at a press conference. And it was a press conference straight out of the old school; big on construct and frippery—glitzy and lavish in equal measure. How long is it since you heard about a press conference where they give out mojitos at ten o’clock in the morning? (The Informer went for the booze-free cocktail, but he crumbled when the prosecco came round.)

And who was behind all this gaudy decadence? Why, it was O2 of course. The firm’s UK arm was unveiling its location-based customer retention programme, Priority Moments. It’s signed up 30 retail and leisure brands as partners and is offering its customers discounted products and services from all of them, based on their location. The smartphone app (there’s a WAP site for the gammas) lists the offers by proximity to the user and the user needs only to show the offer on the phone screen to redeem it. No print-out required.

Fashion retailer Harvey Nichols, Italian restaurant chain Zizzi’s, high street cinema Odeon and bookseller WHSmith were the partners in attendance at the event that saw the press gently herded through a series of rooms themed by each partner. So we had a catwalk show from Harvey Nics, then some food from Zizzi, a reading from author Ken Follett, representing Smiths, before finishing up in a mini-cinema, watching trailers for forthcoming blockbusters. It was surreal, like a press conference concocted by David Lynch. It just needed a backwards-talking dwarf.

The project is overseen by Sally Cowdry, O2UK’s marketing and consumer director, who was on hand to say “trust” and “loyalty” a lot. She proved herself remarkably game by deadpanning, to a room full of professional cynics, that: “In a world that doesn’t have a lot of good news, we just want to make life easier and more enjoyable for all our customers.”

So what can O2’s customers get? Discounts on food and wine, cinema tickets. A free tote bag when you drop £25 at Harvey Nics, which is probably the amount of money you’d need to spend for a Harvey Nics tote bag anyway—that sort of thing. WHSmith has undertaken to offer all O2 customers its books of the week for half price, every week.

Once upon a time location was going to make mobile operators very big money indeed. But it never happened. GPS relegated the network to the role of assistant in terms of location fixes and third parties began databasing cell towers and wifi nodes, negating the need for network feeds altogether. Location, like a lot else, has become the domain of the OTT players, and operators are wondering how to get back into the game.

It was interesting that two of the partners at the event, Odeon and WHSmith face similar issues to the mobile operators. Both have products that are increasingly being consumed on other platforms, and provided by other players. And both put up speakers who said they really need to drive more footfall into their premises. “We need to get people coming back into cinemas,” said the Odeon bod. “We’ve got to get people into these stores,” said Mr Smiths.

Alanis Morissette, had she been present, might have been moved to note that it’s a bit ironic that a mobile network operator, which delivers products that consumers can use to bypass the likes of Odeon and WHSmith, might now be helping those firms bring people back to the fold. Instead of Morissette, though, we had cuddly Ken Follett reading to us about some pre-World War One pit miners. It was an odd choice of passage, but perhaps O2 wanted to symbolise its presence at the LBS coal face, or something.

The Informer found himself wondering if there are any kickbacks going in either direction. Are the partner firms paying for inclusion in some way? Or is O2 subsidising the freebies that the partners are dishing out? O2 might claim that all it wants to do is make life easier for people, but obviously what it wants to do is make more money. The whole thing will have establishment and management costs, and there’s no direct return, save a hoped-for improvement to what Sally Chowdry said were the firm’s market-leading retention and churn metrics.

She said that the existing Priority programme, which has seen O2 sell its customers 600,000 gig tickets over the past two years, has increased the carrier’s “brand consideration” by ten per cent. But that could mean just about anything.

Still, it was a diverting morning. Unfortunately the whole thing was irremediably ruined for the Informer by the fact that there was a copy of Alan Sugar’s autobiography in the party bag. Alan bloody Sugar.

Red hot with rage at this presumption, the Informer went to cool his heels at London’s Ice Bar, where Chinese firm ZTE, best known – or perhapss unknown outside the industry – as a white label handset manufacturer, is stepping out of the shadows and pushing its own brand. Through a deal with distributor Brightpoint, ZTE will have its own-label handsets on UK shelves later this year as it seeks to replicate the model that has proved so successful for Taiwanese rival HTC. According to stats from Gartner, ZTE just edged out HTC with 2.3 per cent market share in 1Q11, compared to HTC’s 2.2 per cent, putting it hot on the heels of RIM. With a focus on own-brand smartphones, ZTE said it expects to ship more than 80 million handsets this year, up from 60 million units in 2010.

It might also turn out to be a nice little money spinner. As ZTE typically delivers operator-branded devices to its customers, by reallocating its manufacturing resources for its own label units, the company could cause a shortfall in those available to its customers. In that case the carriers would be forced to stock the vendor branded devices or buy them through distribution channels at greater expense and rebadge them at their own cost. Whichever way it goes, it’s a win-win for ZTE.

Also winning this week, and not in a Charlie Sheen way, was behemoth Google, which recorded revenues of $6.92bn and a 36 per cent year on year rise in profits to $2.51bn. As Ovum analyst Mike Davis pointed out: The posting of results which are a third better than for the same period last year, would be good at anytime. When that happens as a lack of confidence around the world in sovereign debt is driving stock markets down, it is very reassuring.”

Android is reported as being used on 135 million devices worldwide, which is approximately a fifth of ‘challenger’ Facebook’s user base, and Google+, which recently launched gained ten million users in less than a week, which highlights the multi-front strategy put in place by Eric Schmidt and aims to ensure that Google stays as ‘the next big thing’.

The next big thing, according to the GSMA, is LTE, and you would be well advised to adopt it, the organisation says, patting the cheek of Taiwan’s government in a slightly menacing fashion. The Association suggested to the government of Taiwan this week that the country should move away from WiMAX and focus instead on LTE, in order to take advantage of the economies of scale provided by the now mainstream next generation mobile standard.

Taiwan has been a big backer of WiMAX technology, predominantly due to the backing of global computer chip maker Intel. The country has no less than six WiMAX operators: FarEasTone, Fitel, Global Mobile, Tatung, Vee Telecom, and VMAX Telecom. But local confidence in the technology has been shaken since Intel closed its Taiwanese WiMAX office in 2010.

Confidence in Sony Ericsson was looking somewhat shaky as the firm plunged back into the red with a net loss of €50m in the second quarter, compared to a profit of €12m in the same quarter last year. Supply chain issues following the earthquake and tsunami in Japan were to blame, the company said, estimating that it had a shortfall of about 1.5 million units as a result.

With so much focus on phone hacking at present the Informer wonders what troubles lay in the future as operators allow, and in this case encourage, more device types to be introduced to the network. Some enterprising technology hackers have reverse engineered the Linux operating system on a Vodafone femtocell and made some tweaks with very interesting results.

First they’ve unlocked the femto from the network and boosted the signal, effectively turning it into a mini base station that could be used by anyone as well as breaking the restrictions on users associated with the device. This opens up more interesting possibilities. The femto hooks back into Vodafone’s core network, so not only can the owner of the hacked femtocell intercept voice and data messages travelling via the device, they can also masquerade as other Vodafone accounts and place fraudulent calls and data sessions.

With a VPN tunnel back to the core, it’s also possible to take the femtocell elsewhere, say another country, plug it into an internet connection and make unbilled calls over it from anywhere in the world. That would probably be quite useful were the proposals announced by the European Commission (EC) the other day not to end the European Union mobile roaming market as it stands.

By requiring operators to open their networks to any mobile service provider based on regulated wholesale rates, the EC has consigned to history the bi-lateral approach to striking roaming wholesale agreements which has been in place since the advent of GSM. And by allowing consumers to negotiate a separate roaming contract to use mobile services while abroad in the EU from the one they have for mobile services at home – on the same number – the EC has freed consumers to seek the best available deal in the market.

Put your money where your mouth is,

Take care

The Informer

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2 comments

  1. Avatar Bennet Bayer 15/07/2011 @ 4:11 pm

    Above the usual high-standard for the Informer…news, analysis and projected results. Such an interesting weekly read.

  2. Avatar Sean Jackson 15/07/2011 @ 5:32 pm

    We’re hoping it’s a win-win for ZTE and UK consumers alike. To help celebrate ZTE’s arrival as a consumer brand we’re giving away five ZTE Blades over the next five weeks – follow @ZTE_UK for more information on how to win.

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