Sunday, 17 December 2017

Mobile in 2016: Northstream makes its annual predictions

Northstream
Tuesday 22 December 15

Strategic wireless business consultancy Northstream today announced its predictions for the global mobile telecoms industry in 2016. “In Europe, 2016 will be a “lost year” for investment in the telecoms sector, to the point that the European Commission may be forced to re-evaluate its ‘anti-consolidation’ position in 2017. But we do expect some transformational changes in operating models as operators strive to meet investor expectations. “In our view, Samsung, Apple & co. have one more year to wait until the threat of credible Chinese smartphone competition looms large in developed markets. In 2016, Chinese vendors will be focused on building scale in emerging markets, gaining the experience they need to compete with the global market leaders next year…

Strategic wireless business consultancy Northstream today announced its predictions for the global mobile telecoms industry in 2016.

“In Europe, 2016 will be a “lost year” for investment in the telecoms sector, to the point that the European Commission may be forced to re-evaluate its ‘anti-consolidation’ position in 2017. But we do expect some transformational changes in operating models as operators strive to meet investor expectations.

“In our view, Samsung, Apple & co. have one more year to wait until the threat of credible Chinese smartphone competition looms large in developed markets. In 2016, Chinese vendors will be focused on building scale in emerging markets, gaining the experience they need to compete with the global market leaders next year.

“There are also reasons for some operators to be cheerful about 2016. In terms of service innovation, despite some resistance, dozens of operators will launch large-scale Wi-Fi calling services. In addition, we expect operators to partner with global Cloud providers to launch third-party services.

“Finally, we expect to see the start of ‘IoT prime time’. Consumer services will boom. Enterprise implementations will lag. Innovative start-up companies who’ve developed ground-breaking IoT apps and services will attract the attention of investors and major technology brands, who will throw billions of dollars at them in intense M&A drives to overcome innovation-challenged corporate environments.”

“2016 is set to be an exciting – if not quite vintage – year,” said Bengt Nordstrom, CEO of Northstream.

1. The EC’s negative view and ruling on market consolidation stalls M&A activity
The European Commission has adopted a harder stance against in-market consolidation and indicated that it prefers four-player operator markets. In 2016, this anti-consolidation position will discourage investment in advanced telecoms networks and will send European operators into cautious cost-cutting mode. They’ll reduce CAPEX spending and seek more network sharing, down-sizing and outsourcing. Ultimately, the EC cannot prevent consolidation: it can only delay what is inevitable. Those regions that allow consolidation to go ahead will have a distinct advantage over those that don’t.

2. Operators take operational efficiency to the next level: transformational change is here
Operational excellence has been high on operator agendas for some time, but the scale of the change will reach new proportions in 2016. To sustain margins and ROI, operators will adopt truly transformational change in operating models, streamlining processes to respond to changing market conditions and customer requirements. There will be more network sharing, outsourcing of selected tasks, and divestments of non-core assets. Operators will also go further in deriving synergies between fixed and mobile - both in sales and marketing terms, and in an operational context.

3. Chinese smartphone vendors focus on domestic and emerging markets
Many expect Chinese smartphone vendors such as Huawei, Xiaomi and Lenovo to make a strong push into the western markets in 2016. However, their footprint outside China is still tiny compared to Samsung or Apple – they are not yet ready to challenge the global market leaders. Instead, they will focus on growing market share at home, and emerging markets like India, which offer far more growth potential thanks to the uptake of mobile data among huge customer bases. With a footprint in emerging markets, Chinese vendors will cultivate the necessary brand, scale and experience to launch a serious push into Europe, North America and elsewhere.

4. Wi-Fi calling sees huge increase in service launches
Native Wi-Fi calling allows operators to enhance voice services in areas of poor indoor coverage, improving customer experience, reducing churn and allowing them to stay competitive with OTTs. It also offers cost savings compared to other voice coverage solutions such as indoor cellular. Some operators remain cautious about native Wi-Fi calling, since it reduces their control over voice as a service. Nevertheless, expect to see a wave of new launches of operator Wi-Fi calling in 2016, as the first step to large-scale roll-outs in 2017 in tandem with VoLTE services.

5. Cloud giants and mobile operators partner for third party services
The cloud market is dominated by a small number of large IT players including Amazon, Google, IBM and Microsoft. In 2016, they will gain further market share at the expense of smaller regional providers. Operators will partner with these global players to leverage their data centres for third party cloud-based services. Operators will provide managed services, hosting facilities, and local user data storage that is subject to regional regulatory constraints. Operators will have an opportunity through partnerships with the global IT players to become resellers of their applications and services.

BONUS PREDICTION: The IoT starts walking the talk
2016 will see worldwide consumer uptake of the IoT explode, thanks to exciting offerings in the form of connected cars, connected homes, as well as gaming and augmented reality gadgets. The IoT will experience growth among enterprises, but the speed of adoption will be slowed by a complex value chain and resistance among companies to seriously rethink their business strategies.

M&A activity in the IoT and wider digital sector will also intensify. Internet giants like Facebook and Google will seek to expand their audiences via acquisitions in order to reach specific demographics, geographies and markets. IoT start-ups will also appeal to established technology players with cash-rich balance sheets, but who are experiencing slumps in demand. They will pursue IoT start-up acquisitions as a way to stay competitive and innovative.


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