Trends in mobile

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We recently returned from the Mobile World Congress in Barcelona, a vast exhibition and discussion forum of all things mobile. Paul McCreadie reflects on the event and some of the current trends in mobile.

The keynote speaker on day one was Mark Zuckerberg, setting out his vision of the future and justifying Facebook’s acquisition of WhatsApp. He sketched out his vision of a connected world and how WhatsApp was a key part of that as its half a billion users could grow to one billion. This scale and growth means that, in Zuckerberg’s view, the instant messaging service is worth more than the $19bn valuation – clearly a bargain!

Watch Mark Zuckerberg discussing Facebook’s acquisition of WhatsApp

Back in the world of mere mortals, the focus of MWC has changed significantly over the 3 years that ECI has attended. It used to be a stage for the unveiling of the latest and coolest consumer devices but the focus is now firmly on the Internet of Things (IoT) and how this can be enabled. This connected vision has been discussed for years but there is now real impetus in the market, as we have seen through our investment in machine to machine managed services provider Wireless Logic. The number of potential applications in IoT is vast and the market is moving so quickly that many small businesses will significantly benefit from this high growth environment. We have struggled to find many businesses of sufficient scale in which to invest in this area, but there will be more as the market grows and matures – we will be extremely interested in investing in businesses providing software and managed services in this space.

The IoT applications unveiled at MWC ranged from the slightly gimmicky connected toothbrush, to connected cars and homes. Qualcomm is connecting homes using Alljoin software in other manufacturer’s hardware which allows the devices to talk in a private environment. The tour of the future home showcased setting off an alarm via the TV, lights and stereo when the wine door fridge was left open, and a talking teddy bear telling you off for using a mobile device after lights out – not yet must-have applications but the direction is exciting.

Consumer wearable tech devices were everywhere. These were mainly wristbands which monitor your movements, control your music, alert you to phone calls, capture your browsing time, gaming time, sleep time, bookmark what music you were listening to when you were in a certain location and much more, then software that allows analysis of all of that data. The Sony band also tracks your sleep pattern and wakes you up close to your alarm time when you’re in the lightest sleep! The opening salvo in the wearable tech war has begun.

The significant growth in data from the development of the IoT will put pressure on the infrastructure of mobile networks around the world. There are a multitude of potential solutions to this, but all require investment. For instance, there were many small cells companies at MWC but none that I talked with had rolled out anything more than successful pilot schemes and all need significant further investment if this is to be the answer to future network capacity issues.

One potential answer, and another key focus at MWC after the IoT, is Network Function Virtualisation (NFV). This is an alternative approach to the installation of physical units that has the potential to significantly change the telco industry, currently reliant on a few large key suppliers of commoditised hardware at uncommoditised prices. Virtualisation of functions could save the carriers significant capex and be undertaken by smaller, more innovative companies which will provide a significant threat to the incumbents, such as Cisco.

Chinese telecoms equipment giant Huawei was one of a number of vendors discussing plans for their NFV offerings at MWC: read more about their thoughts on how NFV will change the network architecture

And what of the networks themselves? They were all present and keen to show they were service providers and not just ‘dumb pipes’. The rollout of 4G presents them with further capacity issues. In South Korea, where 4G has already been rolled out to 100% of the population, carriers have managed to increase their ARPU on the back of consumers doubling their data usage. In the USA ARPUs are also up, although more recent competition is affecting that trend. However, in Europe, with 200 carriers to the dominant 4 in each of Asia and the US, ARPUs continue to decline as 4G is rolled out because of the intense competition in the market. This leaves the carriers with less cash to invest in network capacity and quality. WhatsApp’s announcement of providing voice services in Q2 this year is another example of the carriers only being able to provide connectivity, but if they don’t have the cash to invest in this, what will all the interesting software and OTT providers that line the many halls of MWC do then?

Please contact Paul McCreadie for further information.

About the author

Paul McCreadie

"I have been a member of ECI’s Investment Team since 2008, working with management teams from our initial investment all the way through to when we sell our stake. That means I get to meet great founders and management teams and support them to successfully deliver their vision."

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