12/16/2010 12:18:00 PM
2010: the year that transformed mobile
With up to 80% of mobile customers expected to adopt smartphones in the coming months, 2010 really was a year of innovation.
Apple’s iPhone 4 launched in the summer, while HTC has taken the market by storm with a plethora of devices across all price points.
Meanwhile, Nokia came under increasing pressure from its rivals as RIM made it into the top five manufacturers.
Tablets also started to emerge during 2010, led by Apple’s iPad, which launched in May. The Samsung Galaxy Tab arrived in November, when both Orange and Three announced they would be subsidising iPads for £199 on £25 per month contracts.
More tablets are set to launch next year, across all price points. Some are questioning whether lower price point tablets will damage the market. CCS Insight analyst Ben Wood says: ‘Android tablets are so bad they will do damage. There is not a proven market for tablets yet.’
He adds: ‘We are tablet sceptics. There are not going to be hundreds of millions of sales. Maybe in three years’ time you can have them instead of a computer, and maybe if operators change their models with single subscriptions – but I’m not sure if people want to spend an extra £25 per month.’
Strategy Analytics analyst Neil Mawston agrees. He says: ‘2010 was obviously the year of the smartphone and the plan is for 2011 to be the year of the tablet.
'The question is whether people should slash the price of tablets. It could speed up adoption, but it could also devalue them.’
Meanwhile, the overall subsidy model still hasn’t disappeared as some predicted it would in 2010. An operator source says: ‘It’s too competitive a market – we are still on short-term [customer] wins. We will start to see long-term policies in place, which began with unlimited data [removed by operators in 2010].
Quality problems were also an issue in 2010, as Apple suffered its first major setback with 'Antennagate’. Wood says: ‘This year we saw several high-profile issues with mobile phones. The pace of innovation has got so fast and manufacturers are pushing out new handsets so frequently that we are seeing problems. We think this will be a risk next year.’
The data crunch
Data became mainstream this year – largely due to the iPhone – as the so-called ‘data’ crunch’ put the networks under increasing strain.
As a result, operators are spending over a £1m per day upgrading their 3G networks as smartphone use surges.
In 2010 it emerged that around 3% of smartphone owners were using 98% of bandwidth, putting a real strain on the networks.
‘We are shifting into a new phase where data is important – those who were good at 2G aren’t so good at data,’ says one operator source.
Wood adds: ‘Data traffic is becoming a major issue. Operators are in a major panic – it’s a real rock and a hard place. They want money for data and they have to expand their infrastructure.’
And success creates problems. ‘O2’s success in gaining customers comes at a price as it is now struggling with its network. We think people will shift to using the quality of their network as a differentiator,’ says Wood.
The distribution landscape underwent a seismic shift in 2010, partly fuelled by network operators turning their attention to b2b and unified comms as they sought new forms of income in the face of falling revenues.
2010 saw Vodafone and Orange following O2’s example, bedding in the newly overhauled Vodafone Partner Programme and Orange’s Principal Partner schemes to challenge O2’s Centre of Excellence programme.
The introduction of revenue share for operators’ b2b partners under these programmes also triggered a fundamental shift in the mobile reseller market. Revenue share gave mobile dealers the assets to become saleable concerns – an attractive opportunity in the face of increasing competition from IT and fixed-line resellers in the unified comms space.
This consolidating telecoms market witnessed an acquisition feeding frenzy in 2010 with service providers such as Daisy and SpiriTel eating up smaller companies like crazed Pacmen. In November Daisy finally turned its attention to acquisition rival SpiriTel, snapping it up for over £27m.
The recent flurry of acquisitions shows no sign of letting up in 2011, with a rising number of equity investors such as Zeuss Private Equity and ECI Partners circling the telecoms market in search of the next SpiriTel or Daisy to invest in.
Operator retail stores continued to flourish in 2010, despite some commentators suggesting they are not worth the investment.
This was made all the more obvious when Everything Everywhere (the T-Mobile and Orange store estate) announced it would expand, rather than downsize. The operator giant also launched the first of its dual-branded stores this year.
Although online retail is also rocketing, ‘people still want to touch and feel’, an operator source tells Mobile.
Meanwhile, smartphones have made the in-store experience even more important and 2010 saw the rise of the ‘tech expert’ in store, allowing customers to walk out with a fully functioning phone.
Concessions were also big news this year. Plans for Phones 4u in Currys stores were rolled out, with concessions expected to find their way into every Currys high street store in the UK. O2 took the plunge with a Sainsbury’s concession, while Orange expanded its HMV partnership to include content, with more concessions to boot.
Supermarkets really upped their game in 2010. While Asda announced the launch of ‘Phone Centres’ to rival Tesco Phone Shops, Tesco launched an ambitious assault to steal Carphone’s customers.
Asda formed a surprise partnership with Shebang to roll out its Phone Centres, after the distributor pulled out of a similar deal with Tesco.
2011 is gearing up for more of the same as supermarkets look to cash in on the lucrative mobile market.
OS becomes the differentiator
Who would have thought consumers would be walking into stores and choosing a phone based on its operating system? As confirmed by several operator chiefs this year, customers are asking for Android phones and could soon be demanding Windows Phone 7 or even MeeGo next year.
And this trend is only set to grow. Operating systems are becoming brands – as demonstrated by Android’s robot – and customers are just as interested in what a phone can do as the actual phone itself.
Mawston says: ‘Android was the killer OS this year – it was Symbian before that. There is the element that it has helped to sub-brand software providers and it has raised the awareness of operating systems.’
This year saw the big five operators reduced to four as T-Mobile and Orange officially merged in July.
Job losses were also a recurring theme in 2010, as Vodafone slashed call centre staff and Everything Everywhere reduced duplication. O2 also announced it would be making redundancies from January 2011.
It was a good year for Three, which completed phase one of its £400m 3G network upgrade. Meanwhile, the operator landscape became more competitive as each network was granted iPhone distribution.
But as mobile becomes a utility and termination rates are cut by Ofcom (another coup for Three and its ‘Terminate the Rate’ campaign) the networks are struggling to make money from traditional voice and text.
This has led to expansion into areas such as health, with O2 even labeling itself as a ‘services company’ beyond just mobile.
Operators also pushed wholesale deals as the MVNA ‘aggregator’ model became more