Software Defined People: How it Shapes Strategy (and us)

We've just published a new research paper 'Software Defined People: How it Shapes Strategy (and us)' Much of what we need to know, do or get, can now be delivered through software, pretty much at any place at any time via mobile. It is a key tool, and how we use it increasingly shapes our lives, businesses, work and identities. Why are telcos missing out, and what do businesses of all types need to do about it?

You can read an excerpt of the report here We'll also be exploring the implications at the OnFuture EMEA Brainstorm, 11-12 June in London. Email or call +44 207 247 5003 to find out more.

Click the image for more details: | 02-Apr-2014 12:00

Facing Up to the Software-Defined Operator

We've just published a new research paper 'Facing Up to the Software-Defined Operator' In this report we see five major trends leading towards the overall picture of the 'software defined operator' - an operator whose boundaries and structure can be set and controlled through software. This presents threats as well as opportunities for industry players selling and wanting to sell to telcos.

You can read an excerpt of the report here We'll also be exploring the implications at the OnFuture EMEA Brainstorm, 11-12 June in London. Email or call +44 207 247 5003 to find out more.

Extract Chart from Report | 28-Mar-2014 12:18

Telefonica's digital re-structure - summary and review of analyst webinar held 12th March 2014

Eduardo Navarro, until recently Group Chief Strategy & Alliances Officer at Telefonica and since March this year its new 'Chief Commercial Digital Officer', held a webinar for analysts yesterday (12th March) to describe the reasons for the re-structure of Telefonica's digital activities and the closing of Telefonica Digital (TEF Digital) as a separate Business Unit. Eduardo led the establishment of TEF Digital two and half years ago. Below is a summary of what he said and our initial analysis.

The "light bulb" at TEF Digital; have the lights gone out?

He said that "nothing had changed in terms of the vision and strategy". The reason for the change was to "remove the barriers to moving fast".

In particular he said that a year ago he decided that the company needed to bring 'digital' activities much closer to the Operating Businesses (Europe, LATAM, Spain) and now they have implemented that plan.

He said that TEF Digital had been a success in terms of growing revenues, increasing value to the company and helping to create a 'digital DNA' across the company. However, now is the time to embed this more deeply in the main organisation.

In practice it means the following:

  • There is a re-structure of the whole Telefonica organisation. Eduardo will be in charge of revenue growth. A new Chief Global Resources Officer will be in charge of cost efficiencies, global platforms and procurement (with an objective to create 1.5 bn Euros of savings).
  • The previous activities of Telefónica Digital, Telefónica Europe and Telefónica Latam will move into the Global Corporate Centre with global leaders for Consumer, Enterprise and New Digital business.
  • Video will move into the Consumer group led by Michael Duncan, M2M/Cloud/Security will move into Enterprise (to give them more powerful go-to-market support), and all other digital activities (advertising, health, home, financial service etc) will stay in a New Digital group run by Stephen Shurrock.
  • A bigger focus on:
    • 'Big Data' and business intelligence/customer data, TEF acting as a custodian of personal data for its consumers and applying the principles [espoused by the World Economic Forum] in terms of enabling trust, transparency, value and control for the consumer.
    • IP Communications: a 'key battleground for telcos', important to 'protect the core'. TEF will leverage the skills and experience developed by TuGo, Topbox, Jajah etc.
  • No offices will be closed - the digital activity will 'align close to where the customers are and where the talent is'. Product 'Centres of Excellence' will be based around the world.

Measurement will change: since many digital products will be bundled with the core products, 'digital' will be measured against its impact to the overall company's revenues rather than always on an individual product basis.

The operating model will change: TEF will try to execute on the model of 'Discover, Disrupt, Deliver' - applying a different operating model to projects and products that fit into different categories (eg. M2M in the 'deliver' category, since it is s closer to core telco; Big data in the 'discover' category; IP Comms in the 'disrupt' bucket).

Eduardo started the analyst webinar by saying that there was a huge opportunity for telcos to win in the next phase of the 'digital revolution', especially as it moves beyond apps, games social media and search to more 'vital' services related to security and trust (healthcare, financial services, etc).

Our Initial Analysis of this announcement
  • It is a clear attempt to bring the 'Digital' activities closer to the Spanish power base and, implicitly, an indication that that the Telefonica Digital business unit was not performing as well as management would have liked.
  • It is also an indication that Telefonica Digital's 'smorgasbord' approach to service development and delivery was not working. The business unit covered everything from core Telco services such as hosting, cloud and enterprise communications to non-Telco digital activities such as OTT communications, financial services, health, advertising, OTT content etc. Everything in the middle - security, IPTV, customer data etc. was also part of Telefonica Digital's remit. The result, STL believes, was:
    • A lack of focus. Too much going on, too many priorities.
    • A culture clash. The core telco services require traditional infrastructure skills, partnerships, metrics whereas the digital services require new software and marketing skills, new partners and opex- rather than capex-based metrics. Putting the two areas together in Telefonica Digital meant that the business unit was not, quite frankly, digital enough.

By spinning off more traditional telco services into the operating businesses (both consumer and enterprise), Telefonica has reduced the Digital unit's scope and, despite management's protestations that this is about integrating digital into the rest of Telefonica, it is clear that the true digital services are being ring-fenced within Eduardo Navarro's organisation under Stephen Shurrock. This will give them what they need and what they lacked before: protection from the Telco 1.0 culture.

NOTE: A full report, How SingTel and Telefonica are making their 'Digital Business Units' more digital (and innovative) will be published next week on the Telco 2.0 Research site. This will cover the shortcomings of existing 'Digital Business Units' together with an appraisal of how SingTel, and now, Telefonica are addressing these issues with recent moves. Contact us for more information. | 13-Mar-2014 17:28

Self-Disruption: How Sprint Blew It

Our latest research 'Self-Disruption: How Sprint Blew It' shows how Sprint's necessary shutdown of Nextel turned into a commercial disaster, losing valuable customers, reputation, and market share. Our analysis shows that amidst the drama of the Softbank deal and the complexity of a major network upgrade, SMB customer needs were neglected, and its competitors (VZW, AT&T and T-Mobile) stepped smartly in.

We'll be discussing the US market further at the Onfuture America 2014 Brainstorm (May 20-21, Mountain View) including insights on from the Telco 2.0 Transformation Index research on AT&T, Verizon, and the overall CSP Benchmarking study.

Extract Chart from Report | 19-Feb-2014 14:42

NFC v BLE v SIM v Cloud: the Mobile Marketing and Commerce technology battle

We'ce recently published a new report that will help digital commerce players assess some tough technology and strategy choices in the on-going mobile marketing and commerce battle.

The report addresses questions such as:

  • Will bricks and mortar merchants embrace NFC or Bluetooth Low Energy (BLE) or cloud-based solutions?
  • If NFC does take off, will SIM cards or trusted execution environments be used to secure services?
  • Should digital commerce brokers use SMS, in-app notifications or IP-based messaging services to interact with consumers?
  • What are the big players backing, and what will be the key indicators that a specific technology is likely to win?

You can read an excerpt of the report here and we'll also be covering Mobile Marketing and Commerce at the Onfuture America 2014 Brainstorm (May 20-21, Mountain View) and OnFuture EMEA 2014 (June 10-11, London) - email us at to apply to participate.

Chart Excerpt from Mobile Commerce Technology Battle Report | 18-Feb-2014 11:16

CSPs / Telcos: Join our Enterprise Mobility Programme

If you work on behalf of a Communications Service Provider (CSP) in marketing, strategy, technology, IT or product development/management, we would like to ask you to join and participate in a strategic research programme we are undertaking on Enterprise Mobility.

This programme will conduct and produce research to help key decision makers define and evaluate their Enterprise Mobility strategy. As part of the programme we will share a report detailing Enterprise customers' needs and challenges in successfully deploying Enterprise Mobility solutions and, also, benchmark CSPs' current offerings against those needs on a regional (non-player specific) basis. Having identified any gaps between customers' needs and telco activities, this research will define a strategy for CSPs to establish a stronger foothold in the enterprise mobility market.

To participate and receive the research in full, please complete this anonymised 4-minute survey focused on your current Enterprise Mobility offering and portfolio. (NB It does not require you to reveal competitive or strategic information).

The survey can be found here

We'll also be exploring Enterprise Mobility in further depth in our research and our executive brainstorms in Silicon Valley (May 20-12) and London (June 10-11).

For those who would like to know more, below is an introduction to some of the hypotheses that STL Partners is investigating:

  1. In pursuit of agility, efficiency, new revenue sources and closer customer relationships, enterprises are turning to mobility to transform the way employees work with engaging mobile apps that harness device-specific functions and capabilities. These apps generally need to connect to and exchange data with back-office systems, many of which pre-date the mobile era. As a result, organisations are looking to partners to provide the tools, technologies and skills to customise and develop apps, do the heavy lifting of deployment and lifecycle management, and accelerate business value.
  2. Telcos need to identify alternative ways to grow revenues from enterprise customers. These include:
    • Monetising the growth in data creation and consumption to offset the inevitable decline in voice services (from consumer and enterprise markets)
    • Pursuing new service offerings such as Machine-to-Machine (M2M), Cloud Services, and real-time insight from the cellular network
    • Providing infrastructure and technology services that offer flexibility and economies of scale, allowing enterprises to focus on exploring new technologies instead of maintaining and managing existing ones.

Telcos have a timely opening to take an enterprise mobility proposition to market. However, to date, deployments have been niche and opportunistic rather than part of a long-term strategy.

In our recent report: The 50bn Enterprise Mobility Opportunity: four steps for Telco to take today, STL Partners identified a four-step structured approach that telcos can embark on today, and gain competence and confidence as they move up the enterprise mobility stack to higher value offerings. The four levels of evolution involve:

  • Level 1 - mobilising their own operations and internal processes

  • Level 2 - offering a managed environment to enterprises for their apps, whether on premise or in the cloud

  • Level 3 - providing hosted mobility together with off-the-shelf enterprise apps, with the option to add "last mile" customisation to the enterprise's specific requirements and provide an enterprise app store

  • Level 4 - providing hosted mobility and developing bespoke, highly differentiated apps that solve customers' unique business challenges

However, building out these capabilities will require substantial commitment and investment - not only in platforms and tools but also in people, via a transfusion of talent from related industries.
STL Partners is inviting telcos to participate in a study to explore their appetite for and inhibitors to establishing a foothold in the enterprise mobility market, the findings of which will be revealed in a forthcoming report.

Access the survey here for a complementary copy of our next in-depth study on Enterprise Mobility

The survey is split into two sections and explores CSPs' internal and external Enterprise Mobility strategy, ambition and implementation challenges. | 05-Feb-2014 17:12

Telco 2.0 Transformation Index: SingTel, Telefonica lead AT&T, VZ and Ooredoo (but all need more)

SingTel and Telefonica: Great Telco 2.0 vision and leading the charge, but still behind where they need to be

The Telco 2.0 Transformation Index, launched today, gives an overall comparative benchmark and in-depth analysis of the progress of five leading telcos (AT&T, Verizon, Telefonica, SingTel and Ooredoo) in terms of transforming their operations and building new 'Telco 2.0' business models. Overall, it shows that SingTel and Telefonica have made more progress than AT&T, Verizon and Ooredoo, but that all are still at a relatively early stage of maturity and have much still to do.

In the disruptive context of a $400bn 'digital hunger gap', and core revenues shrinking by 20-30%, the Telco 2.0 Transformation Index provides the first definitive benchmark of how well telecoms operators are equipped to survive, compete and thrive.

Figure 1 below, taken from the overall benchmarking report, shows the headline output from the Telco 2.0 Transformation Index:

Figure 1: Telco 2.0 Transformation Index Summary Scores

The score is based on both the telcos' capabilities and the challenges they face, and a score of 75 (the red dotted line in the chart) would show that a telco has started to deliver significant value through new business models. SingTel and Telefonica, at 60 and 57 respectively, have therefore made a good start relative to their peers but must continue to push forward with their new business models. Verizon (47), Ooredoo (44) and AT&T (39) perform less well overall but nonetheless do well in certain dimensions.

To see how this is captured by the Telco 2.0 Transformation Index, its methodology must first be understood.

The Telco 2.0 Transformation Index is an integrated and comprehensive evaluation system for CSPs covering internal and external parameters

The Telco 2.0 Transformation Index analyses five core domains covering both a CSP's external environment and its internal structures and performance:

  1. Marketplace: the context in which the CSP operates. It consists of the regulatory environment and the alternate service offerings offered by competitors.
  2. Service Offering: what the CSP delivers to customers in particular market segments. It is defined by the CSP's corporate and services strategy.
  3. Value Network: the way the CSP organises itself to deliver service offerings. It includes both the internal structure and processes and external partnerships.
  4. Technology: the technical architecture and functionality that a CSP uses to deliver service offerings
  5. Finance: describes the way the CSP generates a return from its investments and service offerings. It also measures the CSP's success in generating returns.
The overall Telco 2.0 Transformation score for each CSP is based on scorings for these five domains, which are in turn built up from 'Level 1' and 'Level 2' scores. A maximum of 34 independent parameters are analysed and scored for each CSP.

This framework is summarised graphically by Figure 2 below:

Figure 2: The Telco 2.0 Transformation Index builds up from underlying data and analysis

Armed with this knowledge it is now possible to gain an initial understanding of the CSPs' relative strengths and weaknesses. Figure 3 provides the details:

Figure 3: Breakdown of the Telco 2.0 Transformation Index Summary Scores

Two key results are as follows:
  1. The Value Network is the key differentiator between CSPs: Telefonica and SingTel, having both made bold organisational changes, score highly here. However, this has not yet been reflected in the quality of their service offerings.
  2. Verizon, AT&T and Ooredoo are strong in very different domains: Verizon performs well in the Service Offering and Value Network, AT&T performs well in the Service Offering, whilst Ooredoo is strong in both the Marketplace and Technology domains.

These, however, are only the results: they can tell us the 'what' but not the 'why'.

The Telco 2.0 Transformation Index also allows the reader to drill down and look at the rationale behind each score in increasing levels of detail. Headline output and analysis, contained within a 230+ slide benchmarking report is reinforced by five 140+ slide 'deep-dive' reports for each CSP which are each in turn accompanied by a data pack detailing every numerical input to the CSP's score.

It therefore provides a unique opportunity for strategists within CSPs and the vendors and investors they deal with to gain both strategic, contextual knowledge of the industry and dedicated, idiosyncratic knowledge of individual CSPs.

"If you do not change direction, you may end up where you are heading." - Lao Tzu
Traditional ('core') revenues continue to shrink and markets are becoming increasingly saturated with OTT competition. However, by changing direction and moving into 'Telco 2.0' services (e.g. cloud, digital commerce) top-line revenue growth can be assured in the long-term.

With the telecommunications landscape changing at an unprecedented rate, telcos, vendors and investors have never been under so much pressure to understand both how telcos can adapt and thrive in this new environment and how well they are doing. There are invaluable lessons to be learned from the experiences and aspirations of leading CSPs to date. These are what the Telco 2.0 Transformation Index provides: click here to find out more. | 27-Jan-2014 18:37

How Telcos can add 50% share value: lessons from Google and Unilever's business models

Transformation can be hugely valuable for telcos if they can grow platform and product innovation revenues to add to their core services. In this post previewing some of the findings from the new Telco 2.0 Transformation Index to be published next week (w/c 20th January) we show how this could work.

[Ed. For more on the Index, please email or join us at OnFuture America 2014 in Silicon Valley, May 20-21, where we'll be sharing some of the findings.]

'Platform' and 'product innovation' business models produce higher returns on capital

Telcos predominantly sell three undifferentiated services to downstream customers: voice, messaging and connectivity. This amounts to an infrastructure-led business model (Telco 1.0). Infrastructure businesses (e.g. Vodafone) are highly capital intensive (high EBITDA margins), and show low innovation (its few products are tied to the capital investment - the network) with relatively low returns on capital.

The operational and financial business models of both Google and Unilever, however, are very different to that of a Telco. Platform businesses (e.g. Google) require a mixture of capex (to build and maintain the platform) and opex (to run and market it), generate strong innovation, utilise a lot of brands (predominantly from other companies) and enjoy high returns on capital. Product innovation business (e.g. Unilever) have relatively high operating expenses (low EBITDA margins), but these operating expenses generate strong innovation and high returns on capital.

These differences are summarised in Figure 1 below.

Figure 1: Mapping the financial/operational differences between Vodafone, Google and Unilever

The table shows just how much higher the cash return on invested capital (CROIC) is at Google (18%) and Unilever (68%) as opposed to Vodafone (6%). This is naturally reflected in the price to book ratio: Google and Unilever have ratios 2.5 and 4 times higher than Vodafone respectively.

So if a CSP were to expand so that 15% of its operations are platform-based, that should (in theory at least) lead to a 45% increase in share price. Here's how: suppose an infrastructure-led CSP has a book value of $85m. Figure 1 suggests a price to book ratio of 1.6, implying a total share valuation of ($85m × 1.6) = $136m.

Now suppose the CSP added a platform business to its existing infrastructure such that 15% of its revenues came from here. Its total share valuation is now ($85m × 1.6) + ($15m × 4.1) = $197.5m - 45% larger than $136m and, since the number of shares has not changed, its share price would also be 45% higher.

If a CSP were to expand so that 5% of its operations are product innovation based, this should lead to a 22% increase in share price (using the above methodology and the data on Unilever from Figure 1.)

Telcos need new approaches to generate new value

Historically, being a good CSP has involved making effective capital investment decisions and operating an efficient network. The internet has changed everything. It has fractured the integration between network and services so that voice and messaging are no longer the sole domain of the CSP. Enter the disruptors - such as Google, Apple and Facebook.

Inspired by the success of these internet giants, companies of all sizes are rethinking how they do business. They are creating and embracing diverse ecosystems, partnerships and innovation through a culture supportive of collaboration, rapid development and emerging technologies. This new approach is based on a two-sided business model (or platform model) that bridges between upstream customers (sometimes called 'merchants') and downstream customers (or 'end-users'). In For example, in Google's case, the upstream customers are advertisers, and the downstream customers those that view and click on adverts.

The story does not end here, however: telcos must also learn from the 'differentiators'. As well as adopting a two-sided business model, Telcos must also implement innovation designed for both sides of the market at the core of their infrastructure. Unilever, for example, has thousands of brands sold in over 150 countries; two billion people use Unilever's products every day. The consumer goods market is extremely competitive, and Unilever remains ahead of the game by making product innovation supreme.

In previous research, such as A Practical Guide to Implementing Telco 2.0 and The Roadmap to New Telco 2.0 Business Models, we have described the strategies and types of products and services that could generate both types of revenue for telcos.

The skills demanded by the new and existing business models are described by Figure 2 below:

Figure 2: The skills needed to move to Telco 2.0

The Telco 2.0 Transformation Index benchmarks how well Telcos are managing this transformation

The Telco 2.0 Transformation Index - released next week (commencing 20th January) - is designed to support companies throughout the industry as they undertake this journey of transformation. It provides a fast, comprehensive, and high impact strategic reality-check and forward outlook to help Telcos, their partners and investors improve returns on strategic investments and activities. It assesses current market performance and positioning, new services, transformative strategies, and future competitive and collaborative abilities of key Telcos/CSPs against their potential and 'best-in-class' peers.

For example, Figure 3 below, which is taken from the Telco 2.0 Transformation Index benchmarking report, shows where the five Telcos included in the first tranche of deep-dive analyses - Telefonica, SingTel, AT&T, Verizon and Ooredoo - are positioned along the inverse relationship between operating costs and capital expenditure. This is directly related with the movement from an infrastructure-led business model (high capex, low opex; Telco 1.0), to a platform-based, product-innovation-driven business model (low capex, high opex; Telco 2.0).

Figure 3: The inverse relationship between capital expenditure and operating costs
[Ed. For more on the Telco 2.0 Transformation Index , please email or join us at OnFuture America 2014 in Silicon Valley, May 20-21, where we'll be sharing some of the findings.] | 15-Jan-2014 19:02

Mobile and Data Driven Services: The Third Wave of Disruption

A new wave of highly disruptive change is starting to roll through the digital economy, centred on the mass impact of new mobile devices and the data they generate. The key changes are underway in digital and mobile marketing and commerce, how people consume many products and services, and how they will work in the future.

Companies and individuals will need to adapt to these changes or find themselves out-competed in the digital economy. Helping them achieve this will be a major focus for our Research and Executive Brainstorm Programmes in 2014. The agenda for OnFuture America 2014, Silicon Valley, May 2014 is now available here, and there is more on OnFuture EMEA 2014, London in June, Digital Arabia in Dubai in November, and Digial Asia in Bali in December here. To enquire about participation in any of these events, please email us at

So what's new in mobile?

There has recently been much talk of the 'battle for mobile', meaning different things to different people and serving various agendas. It was back in 2010 when Google's Eric Schmidt told the GSMA World Congress that everything was now 'mobile first', and he was far from first to talk up mobile.

But what is 'mobile' really all about now that smartphone penetration is becoming commonplace in many economies? Is it all tech hype and huff or just a statement of the obvious? Well, yes there's certainly some of that, but we believe that a collection of factors is leading to mobile being a driver of huge and highly disruptive changes in the digital economy.

These change-enabling factors are:

  • Mobile Marketing and Commerce - an increasing momentum in the development of convenient and effective enablers to buying and selling via mobile devices (e.g. ISIS, Weve, iBeacon, NFC etc.);

  • Cloud and Big Data - a massive increase in data and availability of processing power and highly sophisticated analytics on demand, and major developments in approaches to regulation and legislation in the use of data;

  • Entertainment and Content - high familiarity with and use of mobile devices for media and content consumption (in younger generations in particular);

  • The Internet of Things - increasing availability of a broader range of connected devices (e.g. wearables, connected scales, health monitors, etc.);

  • Enterprise Mobility - Increasing availability of comprehensive and integrated mobile enterprise applications to improve productivity;

  • Telco 2.0 Transformation - significant strategic activation in telcos and other industries to transform and deliver new digital services.

Sum of the Parts = Disruption

We believe that these trends are collectively changing the digital economy in profound ways that that are inter-related and reach beyond any single factor. Bringing these insights to bear for strategists and decision makers in an actionable way is a core objective for our Research and Executive Brainstorm Programmes in 2014.

Our latest research Digital Commerce 2.0: New $50bn Disruptive Opportunities for Telcos, Banks and Technology Players shows that mobile marketing and commerce need to be seen in a very different way than the traditional 'siloed' perspectives on 'mobile advertising', 'big data' and 'M-Commerce'. We see these as component parts of the 'wheel of digital commerce'.

Source: STL Partners Digital Commerce Report

We're also delighted to be in partnership with mCordis, specialists in mobile marketing, in the design and delivery of our 2014 Brainstorms. mCordis share our vision in this area and bring both deep knowledge of mobile marketing and extensive senior level contacts within the mobile marketing elite across the digital economy.

To reflect these insights, our OnFuture America 2014 Brainstorm in Silicon Valley will bring together 250 senior strategists and decision makers from telecoms, retail, finance, tech and media to brainstorm and work together on the following agenda.


  • Best Mobile and Digital Transformation Strategies

  • Omni-channel breakthroughs: Strategies for managing customer experience

  • Reflecting What a World of Connected Devices and the Internet of Things Means To You and Your Business

  • The Telco Transformation Index - Reviewing New Benchmarks for Future Business Models

  • Content is King: Consumer Engagement Through Content & Social Media

  • Strategies for Leveraging The Value of Data and Creating a Sustainable Competitive Advantage

  • Big Data, Personal Data, Customer Data: New ways of monetisation


  • Mobile & The New Customer Journey

  • PITCH ME! Innovation Showcase - Demo Sessions and 1-2-1 Networking Meetings of the best in Mobile Marketing

  • Deep Dive Workshops:

  • Advertising & Marketing: Through & With Mobile

  • Mobile Commerce: On device & In Store is Driving Revenue & Customer Satisfaction

  • Measuring for Success: Creating Actionable Insight from Information

  • Customer Love: Loyalty, Service Delivery & Advocacy

  • Mobile Marketing Innovation Road Mapping

For more detail on the agenda please see here, and for information on how to participate please email or call +44 (0) 207 247 5003.

The Aftermath of The First Two Waves of Mobile and Data Led Disruption

The first wave of mobile and data centred disruption comprised the rise of the smartphones, quickly followed by the second wave of mobile applications. Both of these waves were highly visible through the magpie-eye lens of the media with its unerring taste for beguiling sparkling images of status enhancing technology, and stories of wealth creation beyond dreams for a select few.

Following these waves have been further massive changes in human and organisational behaviours which are perhaps less visible and glamorous but potentially much more profound. As a simple and well known example, mobile phones are now used far more as devices for something else (emails, social media, reading, watching films, playing games) than talking to someone. This has brought with it massive opportunities for some (e.g. social media platforms) - and also dire threats for others (e.g. 'traditional' media).

The initial changes were largely adaptive - people just started doing new things because the technology enabled it. They hadn't planned out the new stuff particularly, they just played with apps and stuck with the ones they liked, and many in industry continued in adaptive mode - "let's try a few things out and see what happens".

Telcos for their part were focused on the land-grab of smart phone market share and accompanying ARPU, and then the realisation that the new smartphone players (particularly Apple) suddenly wielded massive power and reach in their markets. Occupying telcos' attention was also the seesaw of anxiety and hope over the prospects of massive data growth, which was thought to lead to either massive new costs or revenues but for the most part lead to little growth, some increased network efficiency and the explosion of WiFi.

Then services like Whatsapp provided consumers with an economic reason to do something different, providing significant savings on text costs in some markets and making it worth getting a different phone and getting the app. Unfortunately for them, not all telcos reacted swiftly and effectively to this threat, and in some markets Whatsapp and other so-called 'Over The Top' (OTT) Services now have very high penetration and usage.

Our recent report on The Future Value of Voice and Messaging details these dynamics in depth, and also strategies and lessons in defence against similar disruptive attacks that we will also explore further at our brainstorms and in our research that are relevant not just to telcos but to all digital players.

In the meantime, major disruptive US tech giants (such as Google, Apple, Facebook, and Microsoft) have been manouvering for several years for new positions of power in the highly interlinked digital economy, and their progress and the rise and fall of other key players will also be a key feature of our analysis.

Overall though, this third wave of disruption is more complex and nuanced than what has gone before, yet in some ways less surprising. Providing, of course, you are prepared for it. | 09-Jan-2014 07:34

$172bn Telecoms revenue threat: disruptive defence strategies and growth opportunities

Our latest report The Future of Voice and Messaging shows that telcos could lose up to $172bn from core revenues in five years, but also how they could make dramatic improvements to their voice and messaging strategies worth as much as $80bn.

Whether you work for a telco or a business that serves telcos, we believe there are three fundamental ways in which the insights in the report can add value to your business:

  • Optimise your strategy - there's $80bn to play for
  • Base your business on more realistic forecasts and deeper insights
  • Learn how to compete with disruption

Covering each in turn, the key points are as follows.

1 Optimise your strategy - there's $80bn to play for

All is not yet lost, and there are very few areas in which telcos can make a difference to the scale of $80bn, much of which is highly profitable, marginal revenue. Whether you are a telco or a key partner, investing in benchmarking your plans against the best in the market could produce major returns.

The report shows how telcos can fight to reduce this loss by $80Bn through intelligent optimisation of prices and bundles, service enablement, exploiting new standards such as WebRTC and VoLTE, creative approaches to own brand OTT services, and a greater focus on enterprise communications.

2 Base your business on more realistic forecasts and deeper insights.

Our forecasts have been the most prescient, aggressive, and sadly the most accurate, in the market. Even if you don't particularly like what we are saying, how much better would your strategy and investment decisions be if your plans were based on an independent, expert view of the market?

The report contains an in-depth analysis of the changing needs of both consumer and enterprise markets, and detailed mobile and fixed voice and messaging forecasts for US, Canada, Singapore, Taiwan, UK, Germany, France, Italy, and Spain.

3 Learn how to compete with disruption

Invaluable lessons in how to compete with disruptive competition can be found in our analysis of the successes and failures of telcos to deal with the incursion of such services into their heartland revenues. The report contains 'OTT' case studies on e.g. Whatsapp, KakaoTalk, and 'Telco OTT' plays such as TuGo.

The report comprises a concise executive summary, and totals 260 pages and 163 figures. Further details here. | 11-Dec-2013 19:05

Telcos could lose up to $172bn from core revenues in 5 years

Our latest major report The Future Value of Voice and Messaging shows that telcos could lose up to $172bn from core revenues in five years if they don't make dramatic improvements to their voice and messaging strategies.

The declines are due to so-called 'Over The Top' (OTT) competition, vulnerable pricing structures, economic pressures and societal changes. The research shows how Telcos can fight to reduce this loss by $80bn and improve their relevance to customers through intelligent optimisation of prices and bundles, service enablement, exploiting new standards such as WebRTC and VoLTE, creative approaches to own brand OTT services, and a greater focus on enterprise communications.

It includes detailed forecasts for 9 major developed markets (US, Canada, France, Germany, Spain, UK, Italy, Singapore, Taiwan), in which the total decline is forecast between $92bn (-25%) and $172bn (-46%) on a $375bn base between 2012 and 2018, giving telcos an $80bn opportunity to fight for.

The report also shows impacts and implications for other technology players including vendors and partners, and general lessons for competing with disruptive players in all markets.

One of the most surprising things the report shows is how effective some telco strategies have been in defending against disruptive competitors like WhatsApp. Then again, there are some markets, such as Spain, where the combination of telco pricing and economic conditions have played right into the hands of the so-called 'OTT Players'.

Equally, there are some great opportunities for telcos to build new value, particularly in the Enterprise market, where some of the more traditional technology companies like Cisco face increasingly disruptive competition from players like Google and Microsoft.

More on the report

This report provides an independent and holistic view of voice and messaging market, looking in detail at trends, drivers and detailed forecasts, the latest developments, and the opportunities for all players involved. The analysis will save valuable time, effort and money by providing realistic forecasts of future potential, and a fast-track to developing and / or benchmarking a leading-edge strategy and approach in digital communications.

It contains:

  • Our independent, external market-level forecasts of voice and messaging in 9 selected markets (US, Canada, France, Germany, Spain, UK, Italy, Singapore, and Taiwan).
  • Best practice and leading-edge strategies in the design and delivery of new voice and messaging services (leading to higher customer satisfaction and lower churn).
  • The factors that will drive best and worst case performance.
  • The intentions, strategies, strengths and weaknesses of formerly adjacent players now taking an active role in the Voice & Messaging market (e.g. Google & Microsoft).
  • Case studies of Enterprise Voice applications including Tropo, Twilio and Unified Communications solutions such as Microsoft Office 365.
  • Case studies of Telco OTT & enterprise Voice and Messaging services such as Telefonica's TuGo and Vodafone One Net.
  • Lessons from case studies of leading-edge new voice and messaging applications globally such as WhatsApp, KakaoTalk and other so-called 'Over The Top' (OTT) Players.
It comprises a concise executive summary, and contains 260 pages and 163 figures.

A summary of the report can be found here. | 29-Nov-2013 09:14

The Future Value of Voice and Messaging: >$80 billion to play for

Our latest strategy report The Future Value of Voice and Messaging shows how telcos can slow the decline of voice and messaging revenues and build new communications services to maximise revenues and relevance with both consumer and enterprise customers. It includes detailed forecasts for 9 markets, in which the total decline is forecast between -25% and -46% on a $375bn base between 2012 and 2018, giving telcos an $80bn opportunity to fight for.

It also shows impacts and implications for other technology players including vendors and partners, and general lessons for competing with disruptive players in all markets. It looks at the impact of so-called OTT competition, market trends and drivers, bundling strategies, operators developing their own Telco-OTT apps, advanced Enterprise Communications services, and the opportunities to exploit new standards such as RCS, WebRTC and VoLTE (more here). | 20-Nov-2013 23:36

Innovation Souq! - 6 Demos in 42 Minutes

The Innovation Souq session at our Digital Arabia event is a new format in our events that we're hoping to roll out more broadly. Each participant pitches their innovation for 7 minutes, and when all of them are done, the delegates can wander around the souq and meet them informally.

Etisalat's demo combines mobile payments, advertising, and augmented reality. You can point a mobile device camera at products to see more detail and perhaps offers, and then pay for them using their m-payments service, while the merchant sees this on their POS terminal. The detail we liked, though, was that the AR element doesn't have to be projected over something physical - it could also be registered against scenes in a TV broadcast, opening up a lot of new possibilities for advertising and commerce. Not just those, of course - it also creates some new possibilities for media in general.

Smartpipe wants to dig into your CDRs and generate advertising opportunities based on insights from them.

Tmob, a Vodafone-linked mobile payments startup, is using the proximity features that arrived in iOS 7 and Android 4.x to implement location-based offers and surprises. Apple call it iBeacon, and you should probably expect to see more of this.

Zangbezang is a rather impressive solution that lets you set up offers with geographical and demographic targeting and then redeem them. The transactions element of the cycle is based on QR codes and the smartphone camera, so there's no need for either NFC or a Square-like credit card dongle as all the financial processing happens via a website. There's quite a bit of richness to explore in the targeting and recommendations process.

NPTV is a cloud platform for producing richer, interactive video with multiple camera options, AR overlays, and the like that the viewers control. Think telemetry or the driver view camera in a F1 race, or the reverse angle camera in a football match. The rendering happens in the cloud, unloading a lot of computing demand from the user's device or your Web servers. As usual with the cloud, there's quite a bit of innovation in the infrastructure that's hidden from the user, including a new chip.

Telkom Indonesia and EBay are cooperating on a mobile commerce platform for small businesses - the facts that stick with us, though, are that there are 5.7 million blogs in Indonesia and it's the world's second biggest userbase for Opera Mini. That's quite a mobile Web market. | 13-Nov-2013 06:59

Innovations: Customer Experience, Analytics, Smart Grid, M-Commerce and Monetising Content

The Innovation Souq! at Digital Arabia in Dubai next week (11th-13th November) has a fascinating line up of demos of innovations by innovators from across the digital ecosystem. We're really looking forward to seeing these short, sharp demonstrations - the rules are that they have to be real innovations that can be applied now. We've also got a fantastic group of participants lined up to see them. [Ed: If you haven't booked yet there are a few spaces left - email or call +44 20 7247 5003 ASAP. ]

There's such a broad range of innovations on display that it's hard to categorise without doing some a dis-service as many cover more than one area of innovation. However, the main themes we anticipate are:

  • Customer Experience: Accenture will show 'Call Centre 2.0', showing analytics in action enhancing real time customer experience; Intel are showing Communications-Enabled Video Conferencing, enhancing conferencing with APIs; and ZangBeZang are demoing 'Customer Engagement 2.0'.
  • Building on the Data Analytics and Smartgrid themes, IBM are demonstrating city traffic data analysis, and Ericsson 'Enabling the Smart Grid', enabling enterprises such as utilities to use network capabilities to drive third-party innovations.
  • In M-Commerce, Etisalat are demo-ing Mobile-Id-as-a-Service, and Mobile 'Point of Sale' (M-Pos) innovations, while 5th Tier's CEO Tanya Field (ex-O2) is showing Mobile Advertising and Mobile-Id-as-a-Service. Turkey's Tmob are showing Mobile Wallet 2.0, Minutrade 'mobile as a loyalty currency', and Mastercard in-content web payments.
  • Relating to Monetising Content, Etisalat are also showing 'TV Monetisation 2.0', and ex-Rovio COO (Angry Bird, also ex-CEO Tele2 and C-level in Sonera, TeliaSonera and Wataniya) Harri Koponen is demonstrating NPTV's cloud-based real-time interactive video.
So join us for the Innovation Souq!, the Digital Commerce and Digital Entertainment workshops, and the Digital Economy brainstorm. See you there - or get in touch if you'd like to participate in future innovation demos - email or call +44 20 7247 5003). | 06-Nov-2013 14:23

Digital Commerce 2.0: Disrupting the Californian Giants

Amazon, Google, Apple, eBay/PayPal and Facebook are the big five brokers of digital commerce. But the disruption caused by the rise of mass-market smartphones, and the personal data they generate, means the medium-term leadership of these California-based companies is not assured. Each of them has weaknesses that could hinder their progress towards securing a strong strategic position in the new Digital Commerce 2.0 marketplace, and render them potentially vulnerable to competition from telcos, banks and/or start-ups.

Read an excerpt from our new briefing Digital Commerce 2.0: Disrupting the Californian Giants here, and join us at Digital Arabia, 11-13th November, Dubai to explore digital commerce opportunities in the MENA region. | 29-Oct-2013 09:30

Cloud 2.0: Securing Trust to Survive the 'One-In-Five' CSP Shake-Out

The Cloud market is on the verge of the next wave of market penetration, yet it's likely that only one in five Cloud Service Providers (CSPs) in today's marketplace will still be around by 2018, as providers fail or are swallowed up by aggressive competitors. So what do CSPs need to do to survive and prosper? Download our latest free research briefing here.

Drivers of Cloud Adoption | 23-Oct-2013 10:46

Telcos can grow total revenues +5% in 5 Years with 'Digital Commerce 2.0'

Our major new report Digital Commerce 2.0: New $Bn Disruptive Opportunities for Telcos, Banks and Technology Players shows that if telcos fully commit to taking new roles as 'intermediaries' and 'enablers' in Mobile Commerce (advertising, marketing, payments, loyalty) and Personal Cloud, they could grow new revenues amounting to 5% of today's core revenues in 5 years.

Using a unique business model analysis framework, and dissecting the strategies of leading players (including Google, Facebook, Apple, Visa, Amazon, Weve, Isis), the report provides the world's first comprehensive strategic guide for players looking to disrupt markets and deliver new growth within the digital commerce space.

It also includes evaluations of the related strategic opportunities of 'raw big data', professional data services, and internal data use, and a detailed strategy (including proposition, organisation design and business modelling) substantiating how telcos could achieve this growth. More here on our research portal, and join us at Digital Arabia, 11-13 November, Dubai. | 10-Oct-2013 16:56

Do you work for AT&T, Axiata, Etisalat, Ooredoo, Singtel, Telefonica, Verizon or Vodafone?

If so, and you work in technology, IT, product development/management or strategy we would very much like you to contribute to a unique research programme about business model transformation.

Your input would be to complete a 20-minute survey focused on technology transformation and we would give you the results of the survey in return.

The survey and full details can be found here.

For those not ready to click, more details follow below...

STL Partners is conducting a global survey with 8 major Communications Services Provides (CSPs) to explore technology transformation as part of a wider benchmarking of business model transformation. The 8 CSPs we are exploring initially are AT&T, Verizon, Telefonica, Vodafone, Etisalat, Ooredoo, Axiata and SingTel . You can see some initial analysis on Telefonica's marketplace and competitive position here.

We would very much like to access the 'wisdom of crowds' in the technology survey rather than get input from one or two senior folks (though it would be great if they take the survey). It will take around 20 minutes to complete and participants will get a free copy of the results which should be fascinating and insightful.

Again, you can access the survey here.

It covers 3 core technology areas:

  1. Existing technological capabilities

  2. The technology changes needed to develop and deliver new 'Telco 2.0' business models

  3. How well each CSP is doing in making these required changes.

Responses will be aggregated and each CSP will be benchmarked so you can see how your company is doing against its peers. | 03-Oct-2013 09:53

Operator Opportunites in the "New Mobile Web"

We've just published a new research report showing that the emergence of the New Mobile Web will challenge native ecosystems as the primary format for delivering content and apps to mobile devices. This shift will create new opportunities for operators seeking to re(enter) the digital marketplace.

STL Partners define the "New Mobile Web" as the culmination of technological advances that have transformed the level of functionality of the mobile Web, creating a user experience that now rivals PC browsing and native applications.

Register and download the full report free from our research portal here.

The Mobile Web's coming of Age

The 'old' mobile web was only as strong as its weakest link; often websites were not optimised for mobile devices and network connectivity was slow (not to mention expensive), leading to a poor user experience. This tarnished and diminished the use of mobile browsing and hence native apps have come to dominate - they provided more intuitive and engaging ways to access mobile content and services.

However, we are now coming to the stage where market and technical developments are creating a more consistent and widespread mobile experience that rivals PC browsing and native apps.

  • The HTML5 standard is maturing and being further refined and improved (the W3C plans to finalize the HTML5 standard by July 2014 ). It now offers improved functionality within web-apps, including the ability to access and harness the resource capabilities of devices as well as working offline.

  • Network connectivity has improved significantly - the launch of 4G networks provides users with ultra-fast, reliable connectivity.

  • Better mobile devices - devices are now more powerful and are better optimised to display web content.

  • Improved browsers - the majority of mobile browsers now support the HTML5 feature set.

It is not just the improvements in a single technology that is causing this transformation in mobile, but rather the culmination of these technologies that is strengthening the 'chinks in the armour' of the mobile web. STL Partners define this culmination of technologies and enhanced user experience as the "New Mobile Web."

A bumpy transition to the New Mobile Web

One obvious question to ask is, 'even if the New Mobile Web can deliver a similar user experience to native apps, why will a transition occur?' Native apps already deliver a great user experience and are a popular and established format for users and enterprises.

Indeed, STL's recent research in this area (Figure 1) highlights the importance of this question. The app ecosystems are ingrained in the mind-sets and processes of mobile users. Furthermore the key players in the app economy are keen to preserve the status quo - they have built and now benefit from a marketplace that provides discovery and distribution of apps and content. They will not relinquish this easily.

Figure 1 - Barriers to the Success of HTML5
Source: STL Partners research interviews June 2013

Despite this inertia, the transition to the New Mobile Web will occur. The New Mobile Web is disruptive - it will prove to be the cheaper and more-efficient solution for delivering content and apps to mobile devices.

Gaining access to Apple and Android's 'walled ecosystems' requires a major cost and investment by app developers and enterprises - the fragmentation of the ecosystems also forces enterprises to develop a number of apps in order to provide functionality across the different platforms and devices, which can be costly. Furthermore, these native ecosystems can produce significant delays in getting to market as the apps may have to go through rigorous checks before they are approved. HTML5 web-apps only need to be developed once for all operating systems and devices and can be rolled out directly to market. This is a much cheaper and easier long-run solution for enterprises.

Indeed the issue may be even more fundamental; the pure Web and standalone apps are inherently different beasts. The sheer scope of the Web means that it can represent and deliver much more content than apps. Business and organisations that provide information and engage customers/users over the web often find it hard to justify the investment in producing and maintaining an app; it may not be suitable for their business or organisation and it may be relatively costly. They will however still maintain an active presence on the web and with the rise of the smart phone, engagement is now even more important for mobile. Therefore they embrace a single service that allows users to effectively access their content on mobile devices as well as PCs. The New Mobile Web offers this.

This trend towards the 'mobilificaiton' of web content will drive users towards the New Mobile Web, helping to break the app-first mind-set and lead to a shift in the balance of power away from the native app ecosystems.

A word of caution, STL does not believe that this shift will destroy the app world. It will simply rebalance the marketplace so that it more fully reflects the key strengths of both delivery formats. Apps will still play a significant role; their continued advantage is that they are able to offer greater cutting-edge functionality - this is particularly useful for games and other sophisticated software.

How can operators capitalise on this transition?

As previously stated, the pieces of the puzzle are now coming together. The technology has now evolved to a stage where mobile web functionality is approaching that of apps and PC browsing. STL believes that it is not a question of 'if this transition will happen' but a question of 'when and by how much'.

This transition will create opportunities for innovative players. STL's research has indicated that the main opportunities in the New Mobile Web are around Monetisation, Discovery, Distribution and Loyalty .

Telecom operators should look to capitalise on this rebalancing and the opportunities it presents. Many operators are looking to digital for growth (and many have struggled due to the dominance of the native ecosystems). This shift presents a new arena for them to compete in. Operators are placed to succeed here - they have the requisite assets and capabilities (e.g. experience in billing, loyalty, customer data, device and network management etc.) and the desire to (re)build their presence in digital.

STL have recently published a free research report outlining the opportunities for operators in the New Mobile Web and the different strategies they could implement in order to succeed (which can be found here). The emergence of the New Mobile Web is going to create opportunities for innovative players. Operators should therefore look to ride this wave of digital disruption rather than again remaining marginalised in another power shift. | 18-Sep-2013 17:56

MEF Launches Annual Meffy's Awards in Silicon Valley: Deadline 23rd Sept

MEF, the Global Community for Mobile Content and Commerce, have launched their 10th annual Meffy's awards in San Francisco.This year there are 14 award categories recognizing the best in mobile content & commerce with four Innovation categories that focus on the innovation of the product or service, rather than proven success in the market.


Winners will be announced at a gala dinner on 14th November 2013 at the InterContinental San Francisco. The celebrations are just one of the highlights of the two-day event connecting global mobile leaders. Confirmed speakers include senior executives from Shazam, Evernote, Silicon Valley Bank, Visa, Mozilla plus many more.

Get $400 off MEF Global Forum tickets with the early bird discount until 23rd September. The MEF is an official Event Partner of Digital Arabia 2013.

More details can be found at and | 17-Sep-2013 11:56

Verizon vs. Vodafone: who's best off after the $130bn 'amicable' VZW split?

Breaking up is always hard to do, but there are some things that make it easier. In this case, the partners' interests have drifted apart, there are no kids, and the financial settlement looks like a reasonably good deal for everyone. Vodafone wants the funds for a mixture of transformation and diversification in Europe and other markets; Verizon wants to consolidate using the control and cash flow of Verizon Wireless (VZW), and is betting big on the continued growth of mobile in the US market. But will they both be better off after the split?

[NB. We will soon be publishing further in-depth analysis of both Vodafone and Verizon in the Telco 2.0 Transformation Index, the first benchmark of future telecoms business models. Also covered are Telefonica, AT&T, Singtel, Etisalat, Ooredoo (formerly Qtel), and Axiata. Email to find out more, and join us at our Executive Brainstorms in Arabia, Asia, Silicon Valley, and Europe.]

Selling Verizon Wireless: a big deal

In the third largest corporate transaction in history, it was announced on Monday 2nd September 2013 that Vodafone has sold its 45% stake in Verizon Wireless to Verizon Communications for $130bn.

This has been a long time coming. In 2004, there was the AT&T affair, when Verizon almost succeeded in buying out Vodafone's stake in Verizon Wireless. Vodafone had agreed to sell VZW should it win a bid for AT&T Wireless, but this (and therefore the original deal) fell through. Autumn 2012 saw talk of marriage - discussions of a full-blown merger, but Verizon got cold feet over Europe's prospects. In April of this year Verizon was contemplating a $100bn bid, but Vodafone's advisers said this was an undervaluation - with the true value closer to $120bn. It was not until this summer's anticipated interest rate hikes and a falling stock price that Verizon "finally got serious about paying a full price", as Vittorio Colao (CEO of Vodafone) put it.

The $130bn settlement, expected to complete in Q1 2014, can be broken down as follows.

Figure 1: The deal broken down, $ Billions

Of particular note is the sheer level of debt Verizon has agreed to take on: it has raised $61bn via a bridge loan, which is split roughly 50/50 between bank and public bonds - making it the largest bridge loan in history. So Verizon certainly cannot be accused of a lack of commitment to gaining ownership of VZW given the level of debt it is prepared to take on to remove Vodafone's name from the register. As part of the sort-out of the couple's record collection, Verizon has also returned its 23% stake in Vodafone Italy.

Vodafone has announced that it will return all of the shares and $23.9bn in cash directly to shareholders, which equates to an overall $84.1bn or 65% of the total consideration. This should make its shareholders happy in the near term at least. Indeed in many ways, Voda's shareholders are the biggest clear winners, benefiting from a better valuation than the stock market had placed on the VZW stake, including some in cash and some in Verizon shares so that they can carry on their relationships with Verizon if they want to.

This may be a key lesson for CSPs holding minority strategic stakes in quoted groups: sell out when you can get the best valuation, and above all keep the shareholders happy.

Although impressive in its scale, this must not overshadow a more basic question: what does this all mean for Verizon and Vodafone?

Verizon: betting big on continued growth of the US wireless market

In its presentation to investors, Verizon identified two key strategic benefits of the deal: access to all of Verizon Wireless' cash flows and the US wireless marketplace being in a growth phase. These tell an interesting story of the rationale behind (and prospects for) the deal.

Verizon Wireless is the 'superstar' operating segment of Verizon. It has enjoyed year-on-year revenue growth since 2010 at an annualised rate of 9.4%, whilst its other operating segment, Wireline, has contracted year-on-year at an annualised rate of 1.8%. Unsurprisingly, Verizon would have had access to an additional $5.3bn in free cash flow in 2012 - had it owned all of Verizon Wireless.

Although cash-augmenting in the long run, Verizon has leveraged itself heavily in the short run. Its borrowing of over $60bn to fund the deal will lead to a large increase in interest payments which, for the near future, will crowd out funds available for capital expenditure. Verizon will also need to allocate most of this cash to paying down the debt in the short term should it wish to return to a more normal debt level. Its step-change in leverage is demonstrated by STL Partners' analysis of Net Debt/EBITDA before and after the deal.

Figure 2: Net Debt/EBITDA pre- and post-deal

This will have the worrisome effect of leaving Verizon more vulnerable to shifts in the US wireless landscape. With such a stretched balance sheet it is not preparing for strategic investment should the need arise.

Risks include disruption from Sprint Mobile after its merger with SoftBank, intensifying competition from OTT players in voice and messaging, and a slowing of US wireless growth. Indeed, the IMF, for example, recently revised downwards its growth forecast for the US economy. Any of these or other disruptive events might leave Verizon needing to spend without the means.

Verizon has therefore made a $130bn bet on status quo in the US wireless industry. It has made itself larger but also less manoeuvrable. In one sense this is conservative, since it is 'sticking to its knitting' and has not invested in non-core revenue sources, but the sustainability of growth in core services - and therefore the ability of these to make the deal self-financing - is uncertain, and the highly leveraged bet is not without risk.

Vodafone: funding transformation to regain lost momentum

Although Vodafone remains either the largest or second-largest operator in eight of its nine Western European markets, its prospects have soured in recent years. Service revenue might have grown 0.3% during FY2011/12, but it then fell 4.5% during FY2012/13, and this has been compounded further by a quarterly fall of 3.5% in their most recent release. It is also facing increasing competition from cable companies offering bundled packages in many of their core markets.

It is therefore of little surprise that Vodafone has chosen now to sell its stake in Verizon Wireless. With a 'war chest' to both pay down much of its debt and expand its offerings in core services, Vodafone hopes to reverse - or at least stop - this turning tide. By contrast with Verizon, therefore, the deal makes Vodafone financially more manoeuvrable. Colao told reporters that the deal will "enable the company to be very robust and take opportunities if they arise." He might be "super committed" to the next chapter in Vodafone's development, but how will this chapter read?

One clue lies in Vodafone's announcement of 'Project Spring', a $9.4bn organic investment programme over the next three years to build out and modernise their core services - particularly 4G LTE and fibre. This is significant: FY2012/13 saw capital expenditure of $9.8bn. So, assuming that 'base' capital expenditure remains unchanged and that Project Spring is spread equally over the next three years, it represents a yearly increase in capex of 32%. Ironically, by separating itself from Verizon it is now able to adopt an aggressive network-expansion programme reminiscent of Verizon's own during the last few years.

The following is a breakdown taken from its investor presentation.

Figure 3: Vodafone's 'Project Spring' broken down

Though substantial, the question remains whether Project Spring is sufficient to change Vodafone's fortunes. In the long run, Vodafone will also have less in the way of interest expenses which should enable it to look beyond organic investment: it intends to use some of Verizon's cash to help pay for its takeover of Kabel Deutschland and, once this deal has completed, expects to have reduced net debt to approximately 1.0× EBITDA. Vodafone could look to pursue further in-market inorganic investment or even expand its footprint in emerging markets. Given the discouraging prospects for much of Europe - the IMF has also revised downwards its growth forecast for the Euro Area - investment in non-core services or emerging markets appears increasingly necessary.

There is of course the question of the value that Vodafone is now choosing to give up: the significant growth it has received from VZW. We imagine that Vodafone's internal views of growth prospects in the US wireless market are not as positive as Verizon's. But since the days of the pin-stripe suited and red-braced Chris 'City' Gent, Vodafone has long had a reputation as a shrewd financial operator, and given the valuation they have extracted from Verizon, we doubt they let this colour the negotiations.

Indeed, a difference of opinion over such matters, however much it was communicated during negotiations, is likely to have been a driver of the timing of the decision. When shareholders start to hold diverging views of this nature it can often be a good sign that the time is coming to part ways, as it is difficult to operate together effectively strategically and commercially with such differences.

So in summary, we think Vodafone has struck a good deal, although despite the clear benefits of the injection of funds it will receive, Vodafone's prospects after the deal are also not without risk. It has given itself the opportunity to expand and diversify its offerings in both core and non-core services and markets, but the question of how it chooses to use this opportunity remains.

As with Verizon and the USA, the prospects of Europe and the emerging markets will play a substantial role in determining the return on Vodafone's investment - and whether it was right to return its stake in Verizon Wireless. However, Vodafone has more of its destiny in its own hands than Verizon, as it has new money to invest, and neither its existing nor potential new assets are tied to the prospects of just one marketplace.

The cynical old joke runs as follows: "Why is divorce so expensive? Because it's worth it." For Vodafone and Verizon, the ultimate worth of this split will depend on what they do, and what else happens next. As with the aftermath of any split, we'll be watching with interest to see who is back in the market first.

For more on the strategies of Vodafone and Verizon, please see the Telco 2.0 Transformation Index, and join us at our Executive Brainstorms in Arabia, Asia, Silicon Valley, and Europe. | 10-Sep-2013 10:08

A different commitment: how Online Retail & Telecom can Innovate Together

This is a guest post by Peter Briscoe, Executive Director of Innovation, Business Unit Support Solutions at Ericsson, on the opportunities for telcos and retailers to innovate together.

Currently there is a strong drive within the telecom's industry to define future service models and the focus on digital services has never been stronger. The recent New Digital Economics Brainstorm in London was a welcomed opportunity to not only discuss and debate the future among colleagues, but also to discover alternative points of view from banking, online retail, web service and other sectors.

By looking at existing online retail models we can see some challenging areas with fundamental differences that Communication Service Providers (CSP) will need to address, including zero future commitment and short duration services.

Until recently, only a small number of CSPs used payment models based on zero future commitment, where there is no recurring component and involve no additional cost for the consumer after the initial purchase. In most cases, this model is based on pay-before-delivery.

In contrast, most non-retail services, including utilities and telecommunication services, involve a minimum commitment - usually more than one day and in many cases months or years. It is therefore interesting to see how a CSP could adapt this alternative approach and address the challenges it can bring.

This lower level of commitment drives a new breed of short-duration services. With care, these service can provide higher margins and compensate for declining revenue streams elsewhere. People are willing to pay more for a short-duration service if it can be delivered in an immediate, efficient and simple way such as watching a downloaded film.

For short-duration services, greater real-time service enablement will necessitate additional partnerships and introduce new methods that do not require the same level of device pre-configuration and network configuration as required today.

The ability to bring all of these different views together will be the balancing act that many operators will attempt, and centre stage to this approach is how to create the right service enablement platform that can meet all of these demands and drive new business.

For us at Ericsson, the brainstorm was also a great opportunity to hear how companies are looking at new ways in which they can experiment and innovate on top of these new service enablement platforms. Mobily's Head of Innovation, Gaurav Basra, provided a great example of this. He explained not only how they enable internal innovation but bring gamification to the process with a virtual internal stock market for employee ideas.

Mixing retail and telecommunication companies shows that there are great benefits to be found in better understanding the existing online models and exploring how we can enrich them together. With this combination, I believe it will spark the next transformation in both markets.

Background on Author

Peter Briscoe is executive director of innovation, Business Unit Support Solutions at Ericsson. He directs new programs intended to address evolving priorities in telecom software operations platforms. Briscoe has spent more than 19 years working in telecom operations support, with experience in consulting and software creation spanning fault management, service fulfillment and planning. He has worked on several large deployments around the world, specializing in new network technologies and equipment. | 28-Aug-2013 18:09

Gold iPhone; Kindle by satellite; China Mobile LTE contracts; exit Ballmer - Telco 2.0 News Review

Digital Arabia is coming to Dubai on the 12th-13th of November.

Any iPhone you like as long as it's gold; Amazon looks at satellite Kindles

The Apple rumour machine is operating at nominal capacity this week, and the pick is probably the suggestion that the new iPhone will be gold. Of course, Apple would no doubt come up with some sort of elegant champagne hue, but would they really indulge in Vertu-style bling?

A bit more seriously, Apple Store staff have apparently been briefed about a new trade-in program for old iPhones as an effort to increase the proportion of the devices that sell through Apple's own retail channel. We note that they've been in an investment phase in retail for some time.

It's suggested that the frame-rate might be dramatically increased.

And Apple has patented the "silent disco", a recent trend according to TechCrunch but one we remember happening in Waterloo Station as long ago as 2005.

Amazon's next lot of Kindles may use Globalstar's satellite network for their Internet connectivity rather than the cellular operator partners in Whispernet. If they do go ahead with this, it suggests that they're more than ever convinced that the devices are about receiving and consuming content and their general-purpose features are secondary - the latency would make browsing very sporky, but then if you're browsing the web on a Kindle you're probably desperate.

As predicted, the Ubuntu Edge didn't get to its crowdfunding target. On the other hand, Jolla has apparently sold all the pre-order gadgets.

China Mobile LTE contracts are out, and the lucky winner is...

The mother of all infrastructure contracts is here: China Mobile announced the first $3bn in a $7bn rollout of TD-LTE, including some 200,000 eNodeBs. Unsurprisingly, the biggest winners were Huawei and ZTE, who each got 25% of the job. The other half of the contract was divvied up between Ericsson, Alcatel-Lucent, and Nokia. China Mobile may yet spend as much as $18bn in CAPEX this year over and above what it's spent already, so there's plenty more to play for.

We shall see whether the share-out is enough to prevent a trade dispute between China and the European Union - the EU trade commissioner has been sitting on a complaint, waiting for the result of the China Mobile deal. Now the result is in.

China's .cn DNS root was the target of the biggest ever DDOS attack over the weekend.

AT&T, meanwhile, promised to add another 50 LTE coverage areas by the end of the year. FierceWireless has a good overview of US LTE deployment - even with the new deployments, Verizon Wireless is still well ahead.

AT&T also opened another of their "Foundry" innovation centres this week, in Atlanta:

VZW stopped offering unlimited data plans in 2011, but had to "grandfather in" the existing customers who insisted on their right to renew the contracts. They're now trying to persuade them to give up the sought-after contracts by offering them more shiny, via their "Edge" get-a-phone-quicker program.

Turkcell's long-running ownership dispute, between the local investor Cukurova and Russian telecoms group Altimo, got so bad lately that there weren't enough board members to sign the Q2 results. They've now had two neutral members imposed by the regulator, and as a result, we know the company's profits were up 4.1%.

Telefonica, meanwhile, upped its bid for E-Plus quite substantially, and scored the approval of Carlos Slim in his effort to acquire its owner, KPN. The deal would give Telefonica control of E-Plus and merge it into O2 Germany, while also leaving KPN with 20% of the combined company as well as the €8.5bn in cash.

Slim also OK'd Telekom Austria's plan to issue €500m of new stock. America Movil owns 24% of the operator, second only to the Austrian government's 28%.

The recent surge of emerging markets angst has shaken up some operators. Telkom in Indonesia, for example, responded to the slide in markets and a request from the government by offering to buy back stock. In India, Reliance is talking about selling a stake in its submarine cables, but then it has been for the last 12 months.

Orange, meanwhile, is planning a visit to South Africa, where it intends to start an MVNO and also to join a joint venture operating WLAN hotspots. Benoit Felten looks at some options for the Aussie NBN.

And meet the people worried about BT turning off dial-up service because they can't get broadband. In Uzbekistan, meanwhile, where the government ordered MTS out of the country a while back, they still can't find a buyer for the operator, and now mysterious new billboards are appearing. Detergent? Green tea? Or...a new mobile operator?

VMWare and Savvis roll out hybrid cloud; The Data Centre as a Computer , 2.0

VMWare held its annual shindig this week and Ars Technica was there. Major announcements include a new (ish) SDN solution, "NSX", which claims to provide a full networking stack in software from Layer 2 to Layer 7, more detail on their hybrid cloud service, and the new version of the core virtual machine, vSphere.

Savvis will be providing data centres and connectivity for the new cloud product. China Telecom, meanwhile, has been building what it claims is "Asia's largest cloud computing base" on the grasslands of Inner Mongolia, where (among other things) the wind power is cheap.

Update your local buzzword cache: welcome to Fog Computing, which is what Cisco calls a view of the cloud that moves more processing to the edge, closer to the user, and emphasises M2M and mobility.

Here's a half-hour talk on how Reddit scaled up.

And Google has published the second, completely revised edition of the classic The Data Centre as a Computer, the paper that launched the cloud. You can download it here, free.

RingCentral is go for IPO, Calliflower gets refreshed

Chetan Sharma notes that voice and messaging revenue fell year-on-year in 21 different Vodafone markets.

The good news: RingCentral, a cloud-based unicomms product for SMBs, is going for an IPO at $100 million. Or, a valuation equal to last year's sales...

Voice on the Web reviews the refreshed Calliflower, including its new look and feel, its WebRTC support, and its use of the Opus HD voice codec.

Chris Kranky argues that Rogers Wireless' OneNumber FMC product is a buggy mess and should probably have been built in WebRTC to begin with.

DialDrive is a comprehensive marketing and virtual call centre tool based on Twilio's WebRTC client.

A Balancing Act talks to the Microsoft exec responsible for Office Online, the communications module for Office 365, and hears that it "just works" whenever latency is better than 250ms - which includes more of Africa than you might think.

Ballmer exits Microsoft; a fly on the wall at Yahoo!

Steve Ballmer leaves Microsoft, saying that he didn't want to be IBM and that there is no real enterprise/customer distinction. We'll remember him for "developers, developers, developers" - something Apple and Google grasped and Nokia never did.

Here's a form guide to the potential candidates for the succession.

Here's a deep profile of Marissa Mayer.

Mark Zuckerberg explains, which turns out to be much like

Baidu has a new HTML5 app store that is designed to save you downloading apps you only use once.

And it's time to kill Windows XP before it comes for you. | 27-Aug-2013 12:56

Location Insight Services (LIS): Monetising an $11bn Resource

We've just published a free new research report, Making Money from Location Insights that provides a detailed analysis of the $11Bn Location Insight Services opportunity, with specific use cases and an explanation of both why and how operators are uniquely placed to secure a significant share of this exciting new market.

Although the market has been quick to capitalise on 'location' by developing a range of Location Based Services (LBS), which some analysts say is already worth nearly $10bn, there is a growing conviction among operators that a wider opportunity exists in Location Insight Services (LIS). These, as opposed to LBS, do not necessarily require real-time data.

Location Insight Services have a simple premise: by leveraging the aggregated and anonymised data asset derived from connected consumers' mobile location data, Telcos can identify patterns in location activity over time. This not only enables a much deeper understanding of the consumer in terms of behaviour and motivation, but also builds a clearer picture of the visitor profile of the location itself.

LIS could be worth $11bn globally by 2016

Following consultation with key stakeholders within the emerging ecosystem, STL Partners has developed a detailed market taxonomy framework to help operators identify and prioritise the potential demand sources for LIS. Of particular note is the scale of the LIS opportunity in both retail and sales & marketing. An illustrative use case at the intersection of these is advertising evaluation:

  • Problem: "I know that advertising has an impact on sales, but how effective are my promotions in generating store traffic?"

  • Solution: LIS groups sites and catchments by promoted and non-promoted, and enables calculation of relative uplift (broken down by audience profile).

  • Value: Improvement in advertising attribution and media efficiency.

For more, please visit our research portal to register and download the report here.

Report Background

This analysis was independently conducted and written by STL Partners and kindly sponsored by JDSU. The following interview with Tim Davis of STL Partners and Dr Michael Flanagan, CTO of Arieso, a JDSU mobility solution, gives further insight and background.

. | 27-Aug-2013 11:00

Telco 2.0 Transformation Index: Understanding Telefonica's Markets and Market Position

Over on our research portal we've just published an extract from the Telco 2.0 Transformation Index that shows our analysis of Telefonica's markets and market position, including economic and digital market maturity, regulation, customers, competition and pricing.

It is one part of our overall analysis of Telefonica's progress towards transformation to the Telco 2.0 business model. The other parts of the Telefonica analysis are: Service Proposition, Finances, Technology, Value Network, and an overall summary. Telefonica is one of the companies analysed and compared in the first tranche of analysis that also addresses Vodafone, AT&T, Verizon, Axiata, SingTel, Etisalat and Ooredoo (formerly Qtel).

There will be also a world first preview of highlights from the Telco 2.0 Transformation Index at our Digital Arabia Executive Brainstorm in Dubai on 11-13th November 2013. To find out more about any of these services please email or call +44 (0) 207 247 5003. | 16-Aug-2013 20:03

5-Minute Survey Invitation: Can Telcos fight back in digital commerce?

Click here to participate and receive our complementary report

The growth of the internet giants and their associated success with appstores has resulted in many telcos being marginalised from the provision of digital services to customers. We are now conducting research to explore if recent market and technology developments could result in a shift from the native (Android, Apple) 'app economy' to a new mobile web experience.

Such developments include:

  • More powerful smartphones with larger screens capable of delivering a good mobile web experience

  • Faster (3G and 4G) networks that can deliver rich web-based content to mobile devices

  • Momentum building around the latest incarnation of HTML, built specifically with mobile in mind

  • Stronger web discovery capabilities on mobile devices

These developments beg the question whether mobile operators can play a bigger role in the digital commerce value chain?

As part of the research into this topic, STL Partners is conducting a survey with industry participants. It will take only 5 minutes to complete and the report resulting from this and other analysis will be sent to all participants.

Click here to participate and receive our complementary report | 16-Jul-2013 16:19

Can HTML5 trigger a telco comeback in digital commerce?

The growth of the internet giants and their associated success in mobile with appstores has resulted in telcos being largely shut out of consumer digital services and digital commerce.

STL Partners is conducting research with Buongiorno! to explore whether recent technological developments will result in a shift in power away from the 'app economy'.

Such developments include:

  • More powerful smartphones with larger screens capable of delivering a good mobile web experience

  • Faster (3G and 4G) networks that can deliver web content to mobile devices

  • The latest incarnation of HTML being built specifically for the mobile

  • Stronger web search capabilities on mobile devices

If the internet on mobile begins to more closely resemble that on fixed networks and devices, it begs the question whether mobile operators can play a bigger role in the digital commerce value chain?

As part of the research into this topic, STL Partners is conducting a survey with industry participants. It will take only 5 minutes to complete and the report resulting from this and other analysis will be sent to all participants.

Click here to participate. | 01-Jul-2013 14:35

Google Enhanced Campaigns - An inflexion point for HTML5?

There has been much anticipation and commentary around HTML5 and how it will alter the mobile "app" landscape (see Telco2.0 posts on this for more background). Many believe the web standard is not yet mature enough to deliver on its promises. However, recent STL Partners' research suggests that we could be reaching an inflexion point in HTML5 adoption and that this could create new opportunities for telcos in the mobile web & apps value chain.

In this blog post, we argue that we shouldn't consider pure HTML5 "apps" as a direct competitor to native apps (e.g. from Apple's appstore and Android Play). Firstly, we point to the next-generation of Google's Adwords as both a driver and indicator of HTML5's progress.

Google Adwords - Enhanced Campaigns

Google Enhanced Campaigns is more than a minor upgrade to Adwords. It will have a major impact on the world of search advertising. Google is bringing a host of improvements to its ad platform and also some smaller yet significant changes. One of these relates to the way that advertisers can determine which devices their ads appear on. Today, marketers & merchants can decide to only advertise to PC browsers (this makes sense if the website is not designed for other devices and many advertisers choose not to place sponsored links to smartphones). However, from the 22nd July, desktop and tablet bids will be forced to be the same as mobile bids, creating a new, unified device targeting functionality.

Website owners who have not sought to build a good mobile user experience will face a predicament. Although not the only solution, HTML5 offers developers a way out as (amongst other things) it is intended to deliver a much better user experience on all devices. It also allows for more functionality to be supported "off-line" in the browser allowing developers to create feature-rich app-like webpages that can be saved as icons on devices.

If a website offers a poor mobile experience, then it is unlikely that the owner will want to pay to drive mobile traffic to it. However, as Google Adwords is removing the option to distinguish between desktops/tablets and mobile users, this provides incentives for the rapid uptake of mobile friendly content. Mobile browsing (increasingly HTML5 content) is expected to receive a boost from this. It is unlikely that Google would do something that would upset a significant proportion of customers, so this is also an indication that Google has confidence that the vast majority of its adwords customers will be ready for the change; many using HTML5.

Don't compare pure HTML5 "apps" with Native apps

Industry commentators are focussing too heavily on a "contest" between pure HTML5 "apps" and native apps. HTML5 is a fast and cost-effective way to create a better mobile web experience using app-like interfaces, but this does not necessarily mean it competes directly with Native apps. For example, smaller companies that do not have the resources to create and maintain a native app (or multiple versions across the different OSs) can use HTML5 to deliver both a desktop and mobile experience that work on any mobile device. It can be developed once and it will run on many different platforms, making it cheaper and easier to maintain.

What is telcos' role in the growth of HTML5?

STL Partners has recently undertaken research into HTML5 and the opportunities, rewards and challenges that its growth can bring for Telcos. Our findings suggest that there is a real chance for Telcos to secure a role in an emerging content and apps value chain, especially as the growth of HTML5 creates needs around monetisation, discovery and distribution (since HTML5 apps do not have to be sourced though a traditional native app ecosystem, such as Apple's appstore or Google Play).

Complete our survey and receive a complimentary copy of our research report

What is your perspective on HTML5? We'd like to hear from you through our online survey, whether you are from a Telco or non-Telco. The survey will take approximately 5 minutes to complete and we will send a complimentary copy of our research report for your participation. Please use the following link to complete the form. | 25-Jun-2013 16:27

Cloud 2.0: Surviving the Commoditisation Crunch

We're currently researching the current drivers and barriers to the adoption of cloud services in the enterprise market, and will be sharing some of the initial findings tomorrow at the EMEA Brainstorm in London. Here's a preview from Bob Brace, Senior Analyst Telco 2.0, who leads our Cloud 2.0 Programme, and who is the lead author on our research report series Cloud 2.0: Telco Strategies in the Cloud. (NB We also run Cloud 2.0 Strategy Workshops - please email for more.)

Enterprises of all sizes have started a journey to cloud, but there is no single path that will suit all organisations. Some will stay with "in-house" solutions; others will look to cloud brokers. We are interested in what the "end game" might look like for enterprise cloud adoption and identifying some of the steps along the way or options that service providers might take to accelerate adoption.

One of our hypotheses is that Cloud Service Providers who are able to best help their enterprise customers to move more activities, more quickly, into cloud services will have a survival advantage when the inevitable commoditisation "Cloud Crunch" takes place as the market matures.

Enterprises moving to cloud are facing a number of issues; there may already be a degree of cloud adoption within their workforce as users adopt seemingly harmless external services such as Evernote, Google Drive, etc. They are also faced with a number of inter-related technology decisions that could have a major impact on how they manage and grow their business in the future. Decisions taken now may impact or influence future service roll out or the ability to offer seamlessly integrated services to their users. But what are the key drivers and barriers?

STL is undertaking research with Cloud Service Providers and Enterprises into the forces and trends that are shaping cloud service adoption. We are seeking answers to a number of key questions such as:

  • What sort of cloud services will enterprises finally adopt (Private Cloud, Virtual Private Cloud, IaaS, PaaS, SaaS... and various hybrid)?

  • And perhaps of more importance, how will they get there and who can help them?

In exploring the "Cloud End Game" we have identified the three following potential scenarios that apply both to individual Enterprises and the wider industry. Each scenario corresponds to a "type" of cloud provider model.

1. Global Platforms. In this scenario, any given enterprise has adopted the cloud services from one or more of the big global providers (Google, Microsoft, Salesforce etc) and has either their own private cloud or a virtual private cloud from a cloud service provider. They are in effect doing their own integration between the external services and their own and are competent to provide their own support and manage multiple billing relationships. They are also confident that their data is secure and cannot be accessed by other companies who use the big global providers services. Enterprises that buy their horizontal business enablers as SaaS direct from Microsoft (or Google) have a billing relationship with Microsoft and in addition, the standard Microsoft or Google solution stores all their user data (files). The enterprise may also use Microsoft Dynamics or for CRM and this will mean yet another billing and technology relationship. Vertical applications such as Finance, HR, stock control etc are candidates to be hosted by a Cloud Service Provider. At this point we see the enterprise with at least 3 billing relationships, multiple locations for data storage plus security concerns over data location and access and more than one place to go to get support issues resolved.

2. Bespoke Cloud. In this scenario, System Integrators provide enterprises with Cloud services much as data centres' services and hosting were the past. Services running on this infrastructure are "built to spec". Although such a tailored approach has its merits, it does not deliver the full promise of cloud services. However, unless specifically paid for on an exclusive basis, the infrastructure is virtualised and shared with other public users. Generally data is not encrypted and platforms are multi-tenant. Enterprises must be confident that the CSP has adequate controls and systems to protect their data.

3. Service Brokerage. In this scenario, enterprises work with Cloud Service Providers who provide a brokerage service. Cloud service brokers aggregate, integrate and customise multiple cloud services as well as provide (ideally their own) secure data storage and connectivity. Combining multiple best-in-class SaaS services with single sign-on, billing, support, compliance and end-to-end security, we see cloud service brokerage as a potential sweet spot for the Cloud Service Provider (CSP). By offering what is effectively a brokerage solution, the CSP could manage the other providers, provide support and even host and secure the data stores providing encryption and migration tools.

We anticipate that these three scenarios will continue to co-exist for many years along with in-house IT. This hybrid scenario is most likely to persist for some time (physical, virtual, cloud in combination) and managing the data across these boundaries, with consistent security policies/management, will be the biggest challenge.

However, as stated above, we believe that the third scenario offers the best potential for addressing the needs and overcoming potential concerns of most enterprises. Furthermore, this scenario offers the best prospective outcome for many Cloud Service Providers (CSPs) including those originating from telecoms and hosting as it allows them to provide clear differentiation and USP's.

However, to succeed, these CSPs must convince their customers that they have overcome the key concerns of moving to the cloud:

  • Security

  • Migration

  • Support

  • Billing

Although some CSPs are already doing so, most still need to rethink their approach to security and their associated capabilities to successfully sell and deliver Cloud Brokerage. Rather than limiting security to a functional sign-off step in product development, some of the more advanced CSPs are putting security into the very core of their proposition and building the capabilities to deliver this: encryption, policy enforcement, migration assurance and auditability, for example.

Like all emerging and new technologies the Cloud is going through a hype cycle and before the end game is reached, we expect many CSPs to either fail or be subsumed by more successful rivals. The survivors will be those that have set out their stall and focused on delivering services that meet their customers' needs and overcome the biggest barriers to adoption.

These and other initial findings from this ongoing research programme will be shared by Bob Brace of STL Partners and Rik Fergusson of Trend Micro (that has kindly sponsored part of this independent research) at our New Digital Economics Event in London tomorrow (June 5th), and we will be publishing our full findings from this research in June. | 04-Jun-2013 19:52

Telefonica UK's new vision and the role of Customer Data

Here's a presentation from James Morgan, Telefonica UK's head of information strategy for business intelligence. It's well worth a few minutes of your time, especially if you're interested in how to define the policies and terms of business around the re-use of customer data.

The most interesting thing, though, is Telefonica UK's articulation of its new 'vision': "To be The Most Trusted Provider of Brilliant Digital Experiences". This is very much in line with Orange Group's proposition and a direction that most mobile operators are heading towards, as their businesses evolve.

In the presentation James says:

"We are on a Transformation journey and arguably, our customer data is as big an asset as our brand. Our biggest opportunity to grow our business is to leverage information to delight our customers, putting them at the heart of everything we do."
Readers of Telco 2.0 will know that for the last 4 years we've been saying operators should be focusing on just this. So, it's nice to see them starting to do so...

The slides are available here. Don't worry - they're not all like this one. | 29-May-2013 11:51

SDN, NFV, Elastic Networks: Big Deal for Business or Just 'Buzzword Bingo'?

There are a lot of new concepts bubbling under in the world of Digital Infrastructure, Cloud and Networks: Software Defined Networking (SDN), Network Functions Virtualisation (NFV), and Elastic Networks to name but a few. But what does it all mean at a business level?

Next week at the EMEA Brainstorm in London, 5-6 June, Cisco's Paolo Campoli joins peers from Telco 2.0, Amazon, Verizon, Trend Micro, Tekelec, plus representatives from other leading EMEA telcos and tech players, to explore the business benefits and opportunities that could and should be driven by the latest developments in Digital Infrastructure (email for more). This guest post by Paolo's colleagues lays out the four key themes of Cisco's vision of future networks.

There aren't many people who question whether or not networks need to become more programmable. Software Defined Networks (SDN) will bring many new technologies. Cisco is actively driving the concept of SDN across broad industry efforts in forums, standards bodies and opensource communities, like Open Networking Foundation (ONF), OpenStack, Network Function Virtualization (NFV), IEEE, IETF, ITU, OpenDaylight and many others. The bigger issue however is about what people want to be able to do on programmable networks and how we make that happen.

"Saving Money" and "Making Money" are the primary motivations. As discussed at the previous events by STL Partners, "The Hunger Gap" forces SPs to streamline operations to make networks more efficient. There are many new tools and technologies that achieve just that. However, the next step is to break out of that gap. SPs are looking for capabilities that help to monetize their network services and assets in new ways that are dictated by the new digital economy. The key objective here is to "Bring the Network to Applications". Service Providers need to harvest the intelligence in their networks, which today is untapped to a very large extent. We outlined the requirements and opportunities that the "Internet of Everything" brings to service providers networks in a recent blog by Sanjeev Mervana, Cisco's Senior Director of Marketing for Service Provider Business "Programmable Networks Will Power the Internet of Everything)".

The essence is that the Internet of Everything is not just built upon a single technology or domain. It is about a future that is highly interconnected where everything is intertwined and sharing data creating entirely new business opportunities, applications and services. The Cisco ONE vision looks at programmability in a very broad manner to maximize its value and impact. There are four key elements to this vision.

1. "Programmability" is more than just being able to program networks. It's also about the ability to extract useful information from the network itself and making it available to applications to use in real-time. We call this a "dynamic feedback loop". Applications and the network work much better when they can work together and this means being able to share information in both directions.

2. There are a number of technologies proposed in the industry that enable programmability: APIs, controllers and agents and virtualization. The Cisco ONE vision sees a tremendous value in developing and deploying all of these together in a single concerted effort to fully unleash the potential of network programmability, rather than just using one or the other. We call this the "Power of AND".

3. A key aspect that Cisco ONE is pioneering is "multilayer programmability". Service Provider networks, like Wide Area Networks (WAN), are very different from the network that you will find as part of the data center. Rather than being fully meshed with unlimited bandwidth, service provider networks and WANs are very complex, layered and segmented and bandwidth is the most precious resource therein. In an early blog Cisco's CTO and Chief Architect David Ward discussed this as just one of many technical details as to why service provider networks are different from Data Centers. You can find more on this in his blog: "Software Defined Networking for Service Providers: Data Center Fabric Analogies breakdown in the WAN".

4. The fourth objective of Cisco's ONE vision is for programmable networks to achieve full "Cross Domain Support" across mobility, video and cloud. Today's applications are running in the cloud, leveraging all assets. Programmable networks need to be built for this from the very start.

The CISCO ONE vision combines elements from Software Defined Networking (SDN) and increments this suite of capabilities with multi-plane programmability, analytics, orchestration, automation, platform APIs and many more to deliver a more comprehensive solution that helps service providers realize more value from their networks.

To explore Cisco's and other approaches, network with peers, discover new potential opportunities, and develop action plans to address them, join us at the EMEA Brainstorm, London, June 5-6 (please email for more). | 28-May-2013 20:25

Customer Experience: Is it Time for the Mobile CDN?

Changing consumer behaviours and the transition to 4G are likely to bring about a fresh surge of video traffic on many networks. Fortunately, mobile content delivery networks (CDNs), which should deliver both better customer experience and lower costs, are now potentially an option for carriers using a combination of technical advances and new strategic approaches to network design.

Our new research briefing Customer Experience: Is it Time for the Mobile CDN? examines why, how, and what operators should do, and includes lessons from Akamai, Level 3, Amazon, and Google. We'll also be discussing the latest opportunities in Digital Infrastructure at our EMEA Brainstorm, June 5-6, London. | 24-May-2013 16:39

Software Defined Networking (SDN): A Potential 'Game Changer'

Software Defined Networking (SDN) is a technological approach to designing and managing networks that has the potential to increase operator agility, lower costs, and disrupt the vendor landscape. Its initial impact has been within leading-edge data centres, but it also has the potential to spread into many other network areas, including core public telecoms networks.

Our latest briefing analyses its potential benefits and use cases, outlines strategic scenarios and key action plans for telcos, summarises key vendor positions, and why it is so important for both the telco and vendor communities to adopt and exploit SDN capabilities now. We'll also be discussing SDN at the EMEA Brainstorm, 5-6 June in London. Email to find out more.

Potential Telco SDN/NFV Deployment Phases | 16-May-2013 12:27

Cloud, SDN: Disruptive Innovation & Supply Side Disintermediation

Cloud and Software Defined Networking (SDN - on which we're also about to publish a new report) are increasingly important topics that will be covered at the EMEA Brainstorm, 5-6th June, London. As part of our preparations, Telco 2.0 spoke to Alex Jinivizian, Head of Enterprise Strategy, Verizon, who's joining us to discuss some of the latest developments and opportunities in these areas. Alex told us he'd just posted a piece on disruptive innovation on the Verizon site - here's a teaser...

"Disruption is occurring on both the supply and demand side: the value chain is shifting, and new business models are emerging resulting in value creation, and value destruction..."

Worth a read - and why not also network and explore the issues with Alex, Telco 2.0 analysts, and other senior execs at the brainstorm? (Please email for more.) | 06-May-2013 13:17

Mobile Wallets: Time for a Rethink

The 'Mobile/Digital Wallet' needs to evolve to support authentication, search and discovery, as well as payments, vouchers, tickets and loyalty programmes. Moreover, consumers will want to be able to tailor the functionality of this "commerce assistant" or "commerce agent" to fit with their own interests and preferences.

This was a key finding of the Digital Commerce 2.0 Executive Brainstorm, 20 March 2013, part of the New Digital Economics Silicon Valley event - our full report and analysis can be found here. We'll be looking further at the practical actions needed to make M-Commerce a reality at the EMEA Brainstorm in London, 5th-6th June 2013. Please email or call +44 207 247 5003 for more. | 02-May-2013 08:36

Softbank-Dish Round 2: Smartphone Samurai vs Satellite Cowboy

Since we published our Sprint-Softbank: how it will disrupt the US market analyst's note, a fair few things have changed. Everything has been slower and more complicated than it seemed. The minority investors in Clearwire have been troublesome, something we pointed out as an issue. (NB We'll be discussing Disruptive strategies further at the EMEA Brainstorm in London, June 5th-6th).

But the real surprise was the intervention of satellite TV operator, DISH Network, which as regular readers of our news review will know, has tried to muscle-in on the deal with a rival bid for the whole thing. There's some more detail here, for background.

And the soap opera continues, with the latest gripping instalment. Softbank has issued an unusually combative response, in a presentation from CEO Masayoshi Son which describes DISH's proposal as "inferior", "incomplete", "inefficient", and "illusory", and asserts that Softbank's is "superior" no fewer than 7 times in 46 slides not counting front-matter. Clearly someone's read, marked, learned, and inwardly digested the bit of their Big Book of Behavioural Marketing where it says "If you do not repeat, you won't compete."

Son's presentation also goes after Charlie Ergen, DISH CEO, personally, endeavouring to scare the shareholders with the prospect of a company substantially controlled by Ergen personally (he would speak for 85% of the combined company, although he would only own 36%). Here's the action replay:

"I just deliver the results, instead of big-mouthing about the future," Son said. "Do you want to attach a satellite dish to your smartphone? It's going to become much heavier. I don't see any real meaningful value that he can offer to the smartphone customers."...."He himself admits he's an amateur to our mobile industry," Son said at the Tokyo event. "He does not have any history in our industry. So he's a newcomer -- totally, totally a newcomer."

There's certainly a bit of needle here - Son is punching upwards at Ergen, No.100 in the Fortune 500 with $10.6bn as against Son's No.128 with $8.6bn. Like Iron Mike in the streets of Brooklyn. Or something. Certainly, this is shaping up to be the most personal and embittered merger in telecoms since Vodafone-Mannesmann or perhaps the feud between the Ambali brothers at Reliance.

The ego wars besides, Softbank has some valid points.

A Cunning Plan?

Operationally, DISH's strategic concept can be described as "wireless quad-play". DISH's satellite TV network mostly serves rural or exurban customers who can't get decent broadband or cable thanks to long DSL copper runs and sparsity. DISH proposes to add a fixed-wireless broadband product - essentially Clearwire - to their TV product and then round it off with a mobile product, essentially Sprint mainline. And Charlie Ergen is talking about selling advertising across all three channels.

They have their reasons - subscriber growth in their satellite business has slowed to a crawl, and therefore they're looking for an upsell that would add some juice to their ARPU and margins. Son's presentation put it this way:

In the original, this appears next to Softbank's global subscriber numbers, which isn't really a fair comparison - why would Japanese UMTS subscriber growth tell you anything about US satellite TV? But who said this was a fair fight?

On paper, or rather slides, it makes a sort of sense - the idea of pushing TV alongside broadband is fairly standard. DISH has looked at the idea of broadcast-broadband integration before, cooperating with Verizon Wireless to develop a CPE device with a high-gain external antenna (the so-called "cantenna") that would get its TV from satellite broadcast and everything else from VZW's 700MHz LTE network, benefiting from the low frequency and the less demanding form-factor.

Tale of the Tape...

But this is slideware. Vendors love to tell you that LTE is the new DSL, but Sprint's spectrum position is massively skewed towards the higher frequencies. They have some 800MHz, but this is mostly earmarked for voice, and they recently had to swap some of it for 1900MHz space. They have quite a bit of 1900, but the mainline network and the growing LTE deployment lives in there, and 1900 is high for rural anyway. And of course there's the massive 2.5GHz Clearwire block.

Here's a Sprint graphic explaining their future plans for the spectrum:

DISH controls 45MHz of spectrum, but it's in a satellite service band at 2GHz, which makes it precisely non-standard for anything mobile. Note that the DISH contribution fits in where they don't really need it - up between the 1900 and the 2500, well in the "urban high-capacity" bracket, while the DISH-Sprint concept could really do with more 800MHz spectrum. Of course, you can always add more cells, but more cells mean more costs, and they also require getting permission for each one.

And although there is no such thing as a good LTE spectrum option - they all seem dreadful in subtly different ways - 2.5GHz looks more promising than 2GHz, simply because other people are using it. In our previous note, we pointed out that Sprint has suffered hugely from getting diverted off the LTE development path, and that Softbank's spectacular performance in Japan after 2008 was very much because they were the only pure UMTS operator in town (rather than FOMA), therefore benefiting from the iPhone 3G and cheaper equipment. Sprint shareholders and managers would be very unwise to get involved in another freak deployment, especially given the epic pain it's been closing down the old iDEN network.

Further, the whole LightSquared saga ought to be an awful warning for anyone who has the idea of trying to repurpose US satellite spectrum for cellular use.

Barclaycard? This man's in no state to go shopping!

Sprint has always had partner-network relationships, and they were a source of endless and expensive trouble during the Nextel merger. The consolidation of Clearwire is going the same way - in the courts again this week. The main reason for putting up with all this trouble was to raise capital outside Sprint itself. So, does it really make sense to do a deal that involves borrowing quite so much money? DISH, a much smaller company, plans to finance the transaction almost entirely by leveraging up. Specifically, they're borrowing most of the money from Barclays' Bank.

The Bear Blows First

Another of Softbank's objections is speed. Changing course now will mean more delay. Obviously this is self-serving, but there's a point here.

In our note, we pointed out that one of the biggest risks to Sprint-Softbank was that T-Mobile USA might get its act together and launch the disruption first, before the deal closed. And, well, that's happened. T-Mobile has tied up the funding from Deutsche Telekom, turned up LTE service, closed the acquisition of MetroPCS, secured a supply of iPhones, and initiated a new strategy based on no-lock-in, low-cost plans where you either bring your own phone, or else pay for a new one in instalments.

Our readers will no doubt recognise this as Softbank's old strategy. It's currently the cheapest way to acquire an iPhone 5 without breaking the law, so it should be no surprise that T-Mo has had customers queuing out of the doors and has registered net subscriber growth for the first time in years during Q1.

Meanwhile, although Sprint mainline added 351,000 net subscribers in Q1, and upped its service revenue to boot, it wasn't anywhere near enough to compensate for the loss of Nextel iDEN subscribers - another 771,000 left in the quarter. The iDEN-ers are leaving at rather more than twice the rate mainline is picking up subscribers. Perhaps killing off the first voice application developer community ever wasn't such a good idea.


The Softbank strategy for Sprint is simply to manage Sprint better as a pureplay mobile operator, making full use of the spectrum and the procurement efficiencies it brings with it and setting a disruptive price-point to reset the market. This basically implements the Happy Pipe option. The problem, though, is that T-Mobile USA is already in the field with this strategy.

DISH's proposal is far more ambitious, combining a challenge to the incumbents' carrier business with (yet another) attempt at the telecoms-as-media strategy. But it depends on pushing the limits of current LTE radio technology and working around a structurally deeply problematic spectrum position. It probably won't work.

Whatever happens, either Softbank-Sprint or T-Mobile or both are determined to smash the US price premium. From our Softbank-Sprint note, here's a (typically aggressive) Softbank chart that illustrates the point.

Softbank sees this as illustrating an "increasing trend" in their ARPU. But the decrease in everyone else's is far more dramatic. The worry for the other US operators is that Son's strategy to win this fight may drag his opponents' ARPUs down to SoftBank's level. | 01-May-2013 19:14

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