Corporate finance network

The breakneck growth days may be over, stock values may not be what they were, and 3G may not be the one-way bet it once seemed, but despite the sober outlook the mobile sector is still the best game in town.

If it has problems they are ones the rest of the comms and IT industry wouldn't mind sharing. Mobile is still the "it" sector in the telecom firmament.

Consider the alternatives: over on the fixed network voice revenues are actually shrinking; broadband access is being rolled out but the margins are nothing to email home about. In the core network, persistent bandwidth overcapacity continues to dog the many players lining up to stage a revival.

The good news is that there are ways for fixed network operators, service providers, applications developers and entrepreneurs to dip in to add some value to (and extract some profits from) the mobile industry--with or without its support. We list mobile business segments that are attracting attention.

Adopt it

Outsourcing represents the biggest opportunity. The mobile sector, say observers, is an industry that no longer wants to run and control everything itself.

Outsourcing, is not just a good idea, it's an inevitable process as the mobile industry matures and becomes more competitive.

One of the most ambitious outsourcing efforts is Telecom New Zealand's contracting out of its TDMA mobile network operations and maintenance to Ericsson. The advantage is that TCNZ can focus on its services, while the vendor can leverage its technology strengths. More important, TCNZ doesn't have to invest more in TDMA technology and expertise after having made a strategic shift to CDMA.

The other form of mobile outsourcing is the mobile virtual network operator (MVNO) concept, which in some places such as Hong Kong has been even codified into the 3G license conditions.

But fixed networks could be another opportunity, especially as the increase in mobile data puts pressure on the backhaul for cellular carriers. There is no reason why mobile network operators need to have their own fixed networks to join everything up--especially as they move to 3G and those heavy data applications. Observers say that established mobile network operators may be good at building radio access networks and running voice applications, but are naturally less experienced on the data side. Existing fixed networks, looking for more business, are the ideal platform. The infrastructure wheel doesn't need to be reinvented.

Clear it

Originally mobile operators--often incumbent-owned--designed their networks and business models with the old fixed line network in mind: traffic which must pass between mobile networks is therefore carefully counted and exchanged with an accompanying settlement payment, just like in the fixed network world. To get to that point, though, mobile operators have to negotiate dozens of bilateral deals with other networks to agree on terms and conditions. This was just about workable when there were just a few dozen mobile networks but as the number of players world-wide has exploded, arranging and managing all the bilaterals has become a costly exercise, especially for a small mobile network operator.

Enter the clearinghouse, which is set up to manage all or some of the commercial agreements between as many players as it can. It then aggregates all the payments in and out into settlements. One such is United Clearing, which has offices in Hong Kong Florida and London and handles roaming, voice, data and m-commerce services.

Measure it

First generation mobile services, if they competed at all, competed on coverage and network quality. Things have moved on, but quality is an important hygiene factor. AUK company, M-pie, is setting out to build a business benchmarking QoS on mobile networks, thus enabling customers to make informed purchase and usage decisions. In-house quality measures, it says, are not trusted by customers.

The company says it will test services on a representative sample of routes and locations. These include motorway and train journeys as well as city-center and ad hoc tests. The resulting data will enable comparison of the main networks in terms of voice quality, network availability and reliability, billing accuracy and data transmission performance for GPRS services

Design it

Outsourcing product assembly has a long and well-understood history in the IT industry. What hasn't shown up so clearly on the radar so far in the mobile handset market, is the increasing practice of outsourcing the input side--the actual technology development.

According to Swedish mobile market research specialist Northstream, the growth of ODM (original design manufacturing) is rocketing, from around 7% of the handset market in 2002 to at least 40% of the market by 2005.

Northstream points out that popular handsets like Motorola's T191 or C300 were actually developed and produced by Taiwan-based BenQ, while Sony Ericsson's T200 and R600 were developed by another Taiwan specialist, GVC.

Northstream says that big handset brands are able to offer a full product range without extending risk, stretching R&D budgets or falling behind in the race to market.

The rise of ODM may also mean that the handset market will fundamentally change. Now you don't actually need to be a traditional mobile player to produce your own handsets. Microsoft, for instance, is already using ODMs to introduce customers to Microsoft-powered handsets and it will no doubt be joined by others.

Steal it

If you can't actually break into the mobile market nicely, then there's always an alternative approach. Today mobile phones are increasingly being used as fixed line replacements, which means that many users want to make regular international calls from them seeing they have no other service to use.

Their ability to do so at a reasonable price, however, is dependent upon the regulations governing mobile operators in their jurisdiction and even in more liberal environments, the right to preselect your international carrier of choice is not yet usually available on mobile networks, but prefix code dialing options sometimes are. As in the fixed market, the problem here is that access codes are messy and introduce another supplier and yet another bill to pay for the customer.

One cunning trick gets rid of the billing problem for both supplier and customer by marrying non-geographical service number ranges to international calling. Such services are alive and kicking in the UK, although it's uncertain how much market share they're taking. The mobile user dials a specific premium service access number designated to the country he or she wants to call. The per-minute cost of that service is individually assigned and adjusted according to the rate the service provider is getting to the country destination. Once connected to the service, the user punches in the specific number to connect the call, paying for a per-minute premium service at lower than the international rates available from the mobile network operator. The big advantage for the user is that there is no direct relationship with the service provider and no messy billing to be dealt with--calls will just show up on the conventional mobile bill as premium service calls.

Synchronize it

Synchronization is a service or capability to allow busy people to solve the "I've put that appointment in my other diary" problem. If we were all highly organized, of course, we'd keep everything coherent. But we're not and we need help in our multi-gadget world.

Synchro services are supposed to be the answer, marrying our fixed and mobile information repositories (i.e. PCs mobiles, laptops and PDAs), and keeping them all up-to-date. This is a contested market with all sorts of slightly differently flavored approaches vying for attention.

Claiming the leadership position is Swedish company Mobeon, and its Mobile Personal Information Management (mPIM) system. The idea is to have a standard way of exchanging information so that the calendar and contact database on your mobile phone or PDA is easily synchronized with fixed network 'master' repositories, such as Microsoft Exchange.

But mobile network operators aren't that keen on seeing the synchronization market develop separately from the network. For a start, synchronization is something that can be charged for, and if anyone's going to do any significant charging, network operators think it should be them. Secondly, there are obvious long-term threats for network operators from successful underlying synchronization architecture.