MWC 2015 welcomed a record number of visitors and exhibitors through its doors. The event has morphed from a mobile industry congress to a broader ICT–TMT–mobility fair at which telecoms meets digital media, IT, and entertainment. The extent to which the telecoms industry is part of this broader technology and entertainment landscape is a moot point.
With such a diverse collection of companies and individuals in attendance it is not easy to draw out dominant trends. However, the composition of the exhibition itself – which companies were there and which chose not to attend – tells us something about the mobile telecoms industry. For example, there was surprisingly little focus on services for the consumer market; cloud services, IoT, enterprise mobility, and ICT services more broadly were the biggest service categories. TV and mobile video were largely conspicuous by their absence, and payments was arguably the most prominent consumer service category.
Relatively few major announcements were made during or before the event, although the US Federal Communication Commission’s ruling on net neutrality was a recurring theme. It caused particular concern among those operators and technology companies that view deep packet inspection, policy, prioritization, and partnering as the best way for them to regain relevance in the consumer services markets.
We are at a tipping point in terms of the network and IT vendors that shape the telecoms technology landscape. A number of the companies that came into existence during the mobile industry boom between 1990 and 2005 are now seeing their revenues flatline. The CEO of one BSS vendor told Ovum that he had had a number of meetings with other vendors that were interested in selling their businesses to him.
The new industry players are grounded in software and offer their services via the cloud. Their core market is the enterprise business, but they see rich promise in the telecoms sector. Telco capex has slowed dramatically over the last couple of years, and opex reduction has become an obsession for many. However, these cloud service vendors believe that the $400bn telco capex market is ripe for disruption.
Ovum’s five key takeaways and trends from MWC 2015 are listed below. They are, of course, restricted by the fragmented nature of the event and the limited number of meetings and conference sessions it was possible to attend over an intense four-day period.
The focus of mobile operators – in terms of opportunities for growth – is shifting to the enterprise market
Two to three years ago telecoms operators started to talk about opportunities to expand into adjacent markets and to develop digital services. At the time they were thinking about both the consumer and enterprise markets. In 2015, however, the focus is very much the enterprise market – more specifically, cloud services and M2M/IoT. Operator strategies in the consumer market are now evolving toward B2B2C and partnership models.
Consolidation in the telecoms–technology sector is inevitable
Many of the technology vendors whose business has largely involved enabling mobile operators to develop services and capabilities such as messaging, VAS, and roaming are now desperately seeking new strategies and business models. Some are trying to develop new lines of business by selling directly to the enterprise rather than via the operator. Others are developing new service capabilities – around big data analytics, for example. However, these new markets are extremely competitive, and have traditionally offered lower margins than telecoms.
Operators’ visions around virtualized networks are starting to crystallize
A number of large operator groups, including AT&T, Telefonica, and Deutsche Telekom, unveiled their technology and service visions for virtualizing their networks at MWC 2015. For many years now, European operator groups in particular have struggled to leverage their multi-market footprints in terms of cost or revenue benefits. They are seizing on network virtualization as an opportunity to drive economies of scale and, wherever possible, to centralize platforms and technology. However, they remain vague about potential cost savings and how quickly they will be able to shut down existing legacy networks and functions.
5G is increasingly being seen as a network platform for IoT
Network vendors and operators are increasingly seeing 5G as a network for IoT. As such, the key requirements for 5G are starting to focus more on the ability to support (hundreds of millions of) connections and offer millisecond latency rather than pure speed.
The relationships between OTT players and operators are becoming stronger
Over-the-top (OTT) players have come to understand that by partnering with operators they can significantly increase usage of their services. Rather than waiting for operators to reach out to them, they are now themselves reaching out to those operators and trying to persuade them to strike deals around zero-rated content and bundling. The bulk of this activity is in emerging markets, where OTT services tend to have lower usage levels, and where operators have strong brands and are trying to build a demand for data services. The preferred model for OTT players is to strike deals where no money changes hands and where both sides see benefits, although there are examples of operators demanding (and receiving) payment.
Mark Newman, Chief Research Officer, Ovum Telecoms