The show must go on
Once again, the big one in the mobile communication industry, the Mobile World Congress, is approaching and this time, the nowadays behemoth-sized event is yet again bigger than ever before. As industry professionals across the world are finalizing their preparations for the event, more than 100.000 visitors will soon land in Barcelona and enter the venues. For me, it’s close to the zillionth time I make the journey to MWC in order to discuss industry happenings and meet our clients from around the world. With a record-breaking amount of expected product launches and announcements, it is becoming very hard to prioritize time and focus areas for the fully calendar-booked participants. As me and my Northstream-colleagues arrive at Fira Gran Via we will primarily focus on a certain number of topics that we believe will be at the epicenter of the telecom industry the coming years.
Starting out with the overall industry, we are currently at the very beginning of the next chapter of telecom, which this time happens to have a unique twist. For the first time ever, a new generation of mobile networks will actually be ready ahead of its previously stated timelines. 5G is starting to emerge through many trials around the world in 2018, with the Olympic Games probably being the most high-profile example. While previous generations have been delayed several years, for one or another reason, it appears that this time around the telecom industry will be ready for a full-scale commercial launch of 5G already in 2020. However, the question of when and how operators are going to invest in 5G remains given the diminishing returns of network CAPEX when revenues overall are flat or declining. In a post growth market the primary focus over the last years has been on programs that drives efficiencies and scale in the operations. We expect it also to be the norm for our industry for many years to come. Often this is difficult to achieve due to complex legacy in systems and processes. An increasingly common way to achieve synergies and scale is to pursue consolidation opportunities in domestic markets e.g. Tele2 buying Comhem in Sweden and Vodafone’s and Virgin Media’s ongoing merger discussions. One of the most interesting domestic consolidation announcements came a few weeks ago. The proposed acquisition of TDC by Macquarie, an Australian infrastructure investor who is financing its bid with support from local Danish pension funds is taking consolidation to the next level. By leveraging the long-term and low risk strategy from the pension funds and proposing increased investments into TDC’s network and thereafter opening them up for any interested service provider, Macquarie envisions a future for TDC that isn’t primarily centered around cost-cutting but rather around scale effects. This kind of industry developments has the potential of shifting the focus among policy makers away from only targeting low consumer prices but also include performance, coverage capacities and longer-term sustainability. We know that many other PE firms are closely following what is going on in Denmark and are thinking about in which other markets this model may be applicable.
On the equipment side, we see several interesting developments as well. For the first time in over ten years we see a device vendor, Huawei, that appears able to challenge the market dominants Apple and Samsung without running out of steam on the way (remember HTC and LG). It is close to launch its much-anticipated P20 which on paper in some important aspects, e.g. camera features, is ahead of the market leaders. Huawei has the technical and financial muscles needed to take on the two giants and effectively establish a global three-player market for the top segment in the smartphone industry. However, Apple and Samsung will most definitely not quietly await Huawei’s progress but rather are expected to make several announcements themselves in the nearby future. In addition to Samsung’s upcoming release of the Galaxy S9, there is also some speculations that they might consider accelerating their move into the network business as well. Often when new technical standards such as 5G is launched new competitors try to enter, and Samsung has already demonstrated significant achievements with their LTE networks, such as the world’s largest greenfield LTE network in India together with Jio. Should Huawei, Ericsson, Nokia and ZTE be worried that new competitors will take some of their market shares? Northstream believes not, supply exceeds demand in this industry and the price pressure and low profit margins (if any) effectively eliminates any major interest for new competitors to enter this market, at least beyond the initial launch period.
In addition to the ideas and thoughts above, Northstream recently released its Predictions for the industry’s development in 2018 and we will be on the lookout in MWC for additional signs and proof that they are on track, which we continue to believe that they are. In some cases we’d love to be proven wrong (for the good of the industry) but in either case we live by the belief that constant challenges of status-quo is a must for evolution and that the eco-system as a whole must be nurtured to attract investments and form constructive regulatory policies.
I have not mentioned IoT so far, perhaps the biggest thing aside 5G talked about everywhere. If you want to find out what’s really happening, please join the “Massive & Industrial IoT”-panel that I will moderate on Tuesday 27th at 14:00-15:00. It will be a good opportunity to learn from leading companies that already have come a long way to let IoT be an essential part of their strategies going forward.
Data trading, AR/VR and AI are other priorities for Northstream at MWC and we are seeing several interesting developments taking place. For example, user data sharing between car manufacturer and third parties, AR-based interior design via Ikea’s apps and the rapid improvements of voice enabled assistants where Alexa appears to be leading the race. All of these areas and much more will surely be at the center of the discussions in Barcelona and we hope to discuss these topics with you in two weeks.
Finally, as always, the most important aspect of MWC is clearly the great opportunity to network and meet all of you to discuss the state and the future of our industry. Feel free to reach out to any of us for a coffee/drink/lunch/dinner in order to together figure out what the next disruption, improvement or big thing in telecom will be. We will be seven Northstreamers at MWC ready to pick up on any of these areas or more, so feel free to reach out. My contact details can be found here.
Looking forward to seeing you all soon!
Bengt is the CEO of Northstream