Mobile Point View by Paul Ruppert

25 million Chinese mobile time-bombs in India

25 million mobile handsets may turn into paper weights in India on April 15, 2009.

Chinese handset manufacturers have flooded the Indian market with over 25 million handsets over the last few years and these phones do not have IMEIs.  What is an IMEI you say?

An IMEI is a unique 15-digit code that identifies the handset. Each time a call is made, the mobile network operator uses the IMEI to identify the caller via a universal registry of phones. If a phone lacks an IMEI, the telecommunications company can still route the number to the destination, but it does not know which phone is making the call. Therein, rests the problem: India's Department of Telecommunications in the Ministry of Communications and I.T. believes these anonymous IMEI phones could be used by terrorists of any stripe or color.

India's Dept of Telecomm relayed to mobile operators in India that in " the interest of national security, all Indian telecom operators should focus on implementing checks of IMEI within two months."  That was in October 2008. Now April 15 is the deadline. Wireless service providers in India are expected to disconnect mobile phones that lack IMEI on April 15.

While Indian mobile phone users can verify their own IMEI numbers by pressing *#06# on their handsets, what if the consumer is among the unlucky  25 million who are holding one of these 25 million handsets lacking an IMEI? The DoT estimates the 25 million phones lacking IMEI in India account for about 10% of the total phones used in the country.

Indian users are clearly concerned.

And what of the Chinese mobile phone manufacturers, are they inclined to remedy this? Indeed, where is the responsible action from the Indian operators in the first place? Seems nothing at the moment for or from both.

And the ripple effect could spread to financial markets: consider both Vodafone and Airtel could have their stock price effected if suddently these phones turn into bricks. Considering that it is likely these phones are used more by bottom of the pyramid consumers than top, to get these users back, the mobile operators will have to subsidize ever more new phone purchases. A continuing drag could develop.

Wonder what tomorrow will bring?

One Year in my Blog Life: Keeping Score at Mobile Point View

Readers from 128 Countries

Journalistic cycles  are often driven by calender milestones so today I celebrate my first anniversary as a blogger--albeit it slightly tardy. 

I started Mobile Point View in April of 2007 primarily to frame and define my "personal brand", project and shape awareness of my industry perspective and "thought leadership", enabling me to keep my eye focused on the mobile industry and global business trends through a discipline to discuss my views.

Along the journey I found it also fed internal motivations such as a love/hate relationship with writing, and my wanderlust for "Adventure Roads" and "Adventure Capitalism."

Plus, it feeds my spirit to learn more about other cultures and keep my skills sharp in making connections--both technical and human.  I've been told I've got a combinatorial world view which my blogging reflects, being part travelogue, wireless industry and global commerce analysis, pus a passionate interest in high growth markets such as China, Africa, and the Middle East.

Recognitions & Connections

An unexpected turn along the path has been the recognition of my views and writings by technoscenti like Om Malik of DigOm, Gerry Purdee of Forrester Research and mobilista Rudy De Waele. A surprising approach by Mobile Messaging 2.0 to contribute to that corporate sponsored blog has led to additional "thought leadership" and recently my being tapped to be the Managing Editor of Mobile Messaging 2.0. So now I'm a "professional" journalist, meaning my meanderings put some coin in my pocket.

Another unexpected consequence of having a cyberspace billboard has been the people I've become acquainted with--gratifyingly in other countries--who have graciously shared their time, interests and expertise with me by reaching out and establishing a personal connection as result of my views, especially Lars in Tokyo, Ben in Beijing, Mikki in Hong Kong, Tarek in Egypt, Feng in Beijing, James in London, and Mohammed in Iraq.

Reflecting a modicum of success, the connectedness of the mobile industry and power of the internet, the number of others who I have met at conferences who entered a conversation with "I know you, I've read your blog!" has been surprising and energizing.

What I'm most proud of is being relevant and interesting to readers from 128 countries.   

After a year of blogging, I've got a slurry of mixed metrics on total visits (over 100,000 ), page views, time on blog, google juice, etc., but the one which I'm most proud of is the reflection of my reach and global view point.   Having readers from so many countries reflects my purpose, passion and pursuits to illuminate the power of mobile communications to consumers and its fundamentally global characteristics. 

Interesting Quirks of Where My Readers Are 

Some interesting aspects of my readership include:  9,600 visits from readers in India, 900 visits from readers in Pakistan, 30 visits from readers in Myanmar, over 740 visits from readers in Iran, and 400 visits from readers in Nepal. I've got one regular reader in Foggaret el Arab, the dead middle of Algeria with a population of 4,300. The snowiest reader must be in Bathurst Inlet, Nunavut, Canada--probably someone visiting the Lodge.

I guess that reflects the power of the web, the strength of interest in mobile communications, and once in a while my ability to strike a chord which resonates with a variety of people in diverse international locations. 

Here's a tally of reader countries as of June 2008

A Year in the Blog Life
	Visitors from 128 Countires
Americas (25)	Europe (40)	Asia (26)	Middle East (11)	Africa (26)
US	UK	Australia	Afghanistan	Algeria
Barbados	Andorra	Bangladesh	Bahrain	Botswana
Bolivia	Aserbaijian	Brunei	Egypt	Cameroon
Brazil	Austria	Cambodia	Iran	Canary Islands
Canada	Azores	China	Iraq	Cote D'Ivoire
Cayman Islands	Belgium	Fiji	Israel	Djibouti
Chile	Bosnia	Guam	Jordan	Ethopia
Columbia	Bulgaria	Hong Kong	Kuwait	Gambia
Costa Rica	Czech Republic	India	Oman	Ghana
Dominican Republic	Denmark	Indonesia	Qatar	Libya
Ecuador	Estonia	Japan	UAE	Madagasacar
Grenada	Faeroe  Islands	Kazakhsatan	Yemen	Mali
Guatemala	Finland	Korea		Mauritius
Haiti	France	Laos		Moambique
Honduras	Georgia	Malaysia		Moldova
icaragua	Germany	Marutius		Morocco
Jamiaca	Gibraltar	Myanmar		Mutitania
Martinique	Greece	Nepal		Nigeria
Mexico	Iceland	New Zealand		S. Africa
Paraguay	Ireand	Pakistan		Senegal
Peru	Italy	Philippines		Sudan
Puerto Rico	Latvia	Singapore		Swaziland
St. Vincent	Lichtenstein	Taiwan		Tanzania
Trinidad	Lithuania	Tajikistan		Togo
Urguay	Luxemburg	Thailand		Tunisia
Venezuela	Macedonia	Uzbekistan		Uganda
	Mallorca	Vietnam		Zaire
	Malta
	Monaco
	Netherlands
	Norway
	Poland
	Portugal
	Romania
	Russia
	Serbia
	Spain
	Sweden
	Switzerland
	Turkey
	Ukraine

Mobile Carriers of the Dragon & Elephant: Global CapEx & Rev Leaders

Infonetics Research reports that worldwide service provider capex (capital expenditures) totaled $248.8 billion in 2007, a 7% increase from 2006. Infonetics' report projects a spike in worldwide carrier capex in 2008, followed by a plateau in 2010 and a decline in 2011, and emphasizes that the weak US dollar is inflating current growth rates in Brazil, Canada, China, Europe, India, and Japan.

Their analysis indicates that the mobile industry is in the fourth year of an investment phase, and we may be reaching the plateau this year in both North America and Europe, where large service providers' capital intensity (the ratio of capex to revenue) will likely be as low as 12%.

But the hyper growth economies of China and India will drive a significant jump in carrier capex in 2008 as a result of network construction projects combined with currency appreciation against the US dollar, meaning the Chinese RMB and Indian Rupee are buying much more these days. "Both countries are still posting double-digit revenue growth in their native currencies, which, converted in US dollars creates a big spike in worldwide carrier revenue as well," said Stéphane Téral, principal analyst at Infonetics Research.

Interesting Aspects of the report include:

Telecom service providers earned a combined $1.5 trillion in annual worldwide revenue in 2007, up 10% from 2006, with currency appreciation making up the bulk of the growth, while the rest came from wireless services.
Carriers are increasingly investing in application software (vs. hardware) for media rich applications such as content, storage, and security for broadband based wireline and wireless services
Current investment drivers for carrier spending: convergence between IT, media, Internet, and telecom, which is adding new competitive pressures to carriers, and the shift from legacy TDM to next generation IP networks
The world's 10 largest service providers (ranked by 2007 revenue) are AT&T, Verizon, NTT, Deutsche Telekom, France Télécom, Vodafone, Telefónica, China Mobile, BT, and Sprint.
The next largest service providers include Telecom Italia, Comcast, and KDDI, which, according to their most recent growth rates, are poised to join the top 10.

The Asia Pacific telecom industry is squeezed between 2 opposite market forces: a saturated market made of Australia, Hong Kong, Japan, South Korea, Singapore, and Taiwan characterized by flat to decreasing capex, and a fast growing market driven by China and India, characterized by double digit growth for both capex and revenue

Caribbean and Latin America (CALA) service provider revenue jumped 29% between 2006 and 2007
Mobile infrastructure makes up the bulk of total equipment capex in 2007, accounting for about 20%, followed by voice infrastructure, optical equipment, and broadband aggregation equipment

WiMAX equipment spending by service providers as a portion of total carrier capex has roughly doubled each year since 2004, and will continue to increase its share in the near term, driven by major WiMAX projects in the US, India, and Latin America.

Notwithstanding the constant barrage of negative coverage of the price of oil, rising inflation, and the bursting of the housing bubble in the US, UK, Spain and elsewhere, the mobile industry still reflects people's needs to communicate.

Bharti Bears down on MTN

MTN succumbing to a Bharti full take over

Bharti and MTN are closing their deal according to Friday reports, with financial terms coming soon according to global press speculation. The acquisition deal may be a two part play comprised of a n a 50:50 cash/shares agreement, creating a fully-merged company. Dow Jones, quoting sources close to the situation, relays that Bharti has set a maximum transaction value of US$45 billion, while MTN is seeking US$50 billion for the full show. Both valuations represent a significant premium on MTN's current market cap of US$38 billion. Bharti originally posited a partial takeover, offering US$19 billion for a 51 percent controlling stake in the South African-based operator. Now they want full control.

Office Curtains & Iranian Loopholes

To reflect the depth and stage of this engagement, discussions have begun regarding who will sit on the NewCo's board. Akin to discussing the curtains in a the new office, I would say this deal is done. India's Business Standard reports that Bharti's Sunil Mittal would be deputy chairman and CEO of the NewCo (new company) while MTN chairman MC Ramaphosa could become new group chairman. The report also notes a number of other hurdles that the companies must overcome to make a deal, including the Indian government's 74 percent cap on foreign ownership and the sanctions in some countries where MTN operates (such as Iran, Liberia and Syria), which could make it difficult for US-based investment banks to fund the deal.

BTW, there are loopholes regarding trade with Iran and the restrictions on companies operating in Iran--I know because I've successfully sold into Iran for a US company. It isn't a complete embargo as is Cuba. There are ways....

Looks like this deal is Done!

Emirate's Arabian Oryx closing on the Lion?

Etisalat eying South Africa's MTN

The saga surrounding the MTN acquisition continues with today's report that the UAE's Emirates Telecommunications (Etisalat) is the latest operator to be linked to activity surrounding the future of South Africa's MTN.

3 Suitors within a Week

"We are always looking for expansion in Africa," Reuters reports Etisalat chairman Mohammed Omran as telling reporters at the ITU Africa 2008 event in Cairo today. "We are evaluating MTN, among other companies." As we've been following this effort over the last two weeks with "Now the Dragon eyes the Lion" and "Poaching in Africa: Bharti's Hunting MTN"  and the kick off "India Eyes Africa: Bharti target's MTN" there are now 3 potential suitors, Bharti, China Mobile and Etisalat.

Government-owned Etisalat, which operates in 16 countries and has 51 million customers, has been on a four-year, US$5 billion spending spree, setting up mobile operations in Egypt and Saudi Arabia as well as buying a stake in a Pakistani unit. In December last year it said it would buy 16 percent of PT Excelcomindo Pratama Tbk to enter Indonesia, the world's fourth most populous country. It is also started an operator in Nigeria. Clearly this gulf based operation is leveraging it's wealth accrued during this oil and mobile-coms boom.

Meanwhile, Vodafone remains on the side lines and emphasizes it has no plans to make a bid for MTN, despite reports in the UK press over weekend to the contrary.

Arab & State Owned likely in South Africa?

Given the clear state ownership of Etisilat, I'm not sure that one of South Africa's crown economic jewels would be likely to fall into foreign state owned hands. After all MTN happens to be one of the six largest advertising spends in S. Africa, with estimates putting their branding efforts as close to $600 million. It's one thing to have a non-controlling interest, it is another to have outright ownership by a foreign state. Stay tuned. It continues to be interesting.

$17 billion off shore gets no respect in the US

Of course, I haven't seen a peep in any US media outlets mentioning a $17 billion acquisition in the mobile telecommunications space is about to come down. The closest I've seen is "Calling Across the Indian Ocean" a piece in this week's Economist, a British publication.

Now the Dragon eyes the Lion

Is China Mobile in the MTN hunt?

China Mobile has publicly admitted that it is interested in the South African mobile market but has not yet formalized an offer for MTN, the subject of takeover interest by India's Bharti--see my "Poaching in Africa: Bharti's Hunting MTN."

"China Mobile has not joined the MTN bidding, but we are interested in the South African market and we are looking at various opportunities for entering that market," China Mobile CEO Wang Jianzhou stated today after the company's annual meeting. Earlier this week I relayed that Bharti's approach could spark a bidding war for MTN, citing a UBS report that suggested China Mobile, among others, could be interested in bidding for the operator.

Godzilla chasing Bambi?

According to the GSMA's Wireless Intelligence, China Mobile dominates its domestic market with approximately 385 million subscribers as of end first-quarter 2008. This is almost THREE TIMES the  combined customer base of both India's Bharti and MTN's multiple operators. Reuters notes that China Mobile has a mixed track record of acquisitions, stating that it came close to buying emerging-markets operator Millicom International Cellular in 2006 before pulling the plug on the deal. In May 2007 it made its first and only overseas acquisition to date, buying Pakistan’s Paktel Ltd from Millicom for US$460 million.

China Mobile was also rumored last year to be eying MTN, but denied at the time that a deal was being considered. In February, China Mobile opened an EMEA headquarters in London, stating that emerging markets in Africa and the Middle East are priorities for the operator this year. We're now in the deny and chaos stage of takeovers. Given China's presence in throughout Africa and it's growing need for core resources it is a natural strategy to purse. 

There are probably two more iterations in this dance, one feigned interest in MTN by a conglomerate, then either admission or escalation regarding a another bid for MTN by Bharti. Too bad all the action is thousands of miles away from the good ol' USA.

Poaching in Africa: Bharti's hunting MTN

Remember "India Eyes Africa" where I covered a possible takeover of MTN by Bharti?

Well, we've got market action in "the Bush"--both financial and commercial--indicating that MTN is in the cross hairs of Bharti.  Bharti, which operates India's Airtel as well as being a massive conglomerate, has a bid reported at US$19 billion for a 51 percent stake in the Johannesburg SA based MTN.

Shares in MTN surged to a two-and-a-half year high yesterday after both companies confirmed that an offer had been tabled following weeks of speculation. The bid, which reportedly includes US$12 billion in financing from investment banks Goldman Sachs and Standard Chartered, values MTN at US$37 billion.

India: The new source of Global Conglomerates--Is China on Deck?

If Bharti is successful, this would be the high water mark for an overseas acquisition by an Indian company. True to the stages of "M&A dance" Bharti continues to deny, issuing a statement yesterday relaying that "discussions are still at an early stage, are exploratory in nature and may or may not lead to any transaction."  Yea, right.  The champagne is already being chilled in the offices of speculators in London and Jo'burg. Did you buy MTN as a result of my last post? Obviously, we both should have!

Bloomberg is reporting any confirmation from Bharti could spark a bidding battle for MTN, citing a UBS report that suggests Vodafone, India's other industrial conglomerate Reliance and China Mobile, one of the highest market cap companies in the world, could ALL be interested in bidding for the operator--that would be the story of the year in the industry. Bloomberg also notes a report from Citigroup that claims that Singtel, which owns 30.5 percent of Bharti, may be "directly" involved in the MTN bid--I already covered that four days ago, gents...MTN has 68.2 million mobile subscribers covering 21 markets across Africa and the Middle East.  Bharti would be spending US$542.52 per sub in a region where the average ARPU (average revenue per user per month) is less than US$5.

Stay tuned. Only fools think that you can't make money in the low ARPU, high growth areas of Africa, and Bharti is not run by fools.

Speaking of fools, anyone besides me wondering why there are no American operators in this game of global investment and consolidation within the mobile industry? After all ATT's CEO stated earlier this year they wanted to expand internationally including India. Why not Africa? Oh, and don't forget T Mobile--from UberDeutchland--is looking at Sprint. And for that matter what would Verizon do with a GSM operator anywhere anyhow? Right. Don't hold your breath for the American operators.

The tanking dollar prohibits these big plays. Plus, the core American operators are too parochial to have a global vision, with most execs believing that the US market is big enough--of course that begs the question what about share value when the US reaches 100% mobile penetration in the next few years? Reverting back to classique Bell Head mentality. Takes a global vision, awareness of differences, creativity and a propensity for action to claim value around the globe these days. Seems the Indian operators have the fortitude for the fight....Look to see MTN falling into the hands of Bharti before the US Independence Day.

India Eyes Africa: Bharti targets MTN

India's Bharti Airtel is considering making a bid to acquire South Africa-based MTN Group, in a move that would be valued at around US$17 billion and make the Indian operator among the largest in the world according to the Financial Times.

Notwithstanding the usual posturing of such acquisitions---deny, announce, rejoice--Bharti's founder and chairman, Sunil Mittal, denied that the operator's board had met to look at making a formal approach for MTN, adding that no decision had been made. "We talk to people all the time and don't preclude anything," Mittal was quoted as saying. "I do not want to be compromised by ruling anything out for months." Akhil Gupta, joint managing director of Bharti added: "There is nothing on the table as of now."  Clearly, we're in deny phase.

Africa is where it's At!
Africa's mobile markets are ripe for international investors thanks to low penetration levels (24% against 30% across Africa), fast-growing population , and regulatory regimes encouraging competition. Analysts at Informa Telecoms and Media forecast that the market will reach 158 million mobile subscriptions by 2012 - a 78% growth.

In this context, international investors are entering the market aggressively, Middle Eastern groups invested in new licenses (Etisalat, Comium, HiTs Telecom, and Warid Telecom), and other operator groups like Bharti are making the region an integral part of the global expansion strategy. This is the case for Orange, which launched new operations in four countries in 2007/2008 (Central African Republic, and the three Guineas), and for Zain, whose Celtel operations in the regions are scheduled to re-brand to Zain by the end of 2008.

MTN has the largest footprint in the region's markets, including the three leading markets (Nigeria, Ghana and Ivory Coast) and an expanding portfolio of ISPs. It is no wonder then that the group is attracting the attention of outside investors looking for a way into one of the world's most promising telecommunications markets.

No Means Yes?
MTN has relayed in the past that it would be open to evaluate an offer from a global player, though it issued a vanilla statement that it "receives tentative approaches from time to time, which are always evaluated." It added that "the board of MTN has not received any specific proposal, and if and when there is anything specific to report, the market will be notified." I'm sure the bankers have been busy in the background especially given the credit crunch for such large transactions. If its in the public press then its on. These things are usually started via a phone call, not a formal offer.

MTN has a solid reputation in the operator community reflecting its ability to grow and profitably prosper in low ARPU markets in across Africa. MTN is an obvious target for major investors looking to increase their presence in high-growth emerging markets. MTN had a total subscription base of 68.2 million at end-1Q08, according to the operator, up from 58.6 million at end-4Q07, while Bharti is known to be eager to pursue an aggressive M&A strategy to spur growth and apply some of the growing capital and power accruing to global Indian brands. Any initial bid for MTN from Bharti would most likely be a partial tender offer for 51% of the group.

MTN by the Numbers
MTN, which has operations in 21 countries, is 76.9% publicly traded on the Johannesburg Stock Exchange, so Bharti or any other would-be buyer would have to make an offer to institutional and private investors to acquire a majority stake in the company. It has a market capitalization of US$33 billion, so a 51% stake in the company would cost US$16.83 billion at current values.

MTN's US$5.5 billion acquisition of Investcom in 2006 expanded its footprint outside South Africa, but many of the markets in which it operates have relatively low penetration rates, making it a prime candidate for an acquisition approach.

Bharti is benefiting from very strong growth. It had the second-highest number of net additions in 4Q07 in Asia Pacific, with 6.28 million, and India remains the world's fastest-growing country in terms of net adds, with 23.9 million in 4Q07, ahead of even China, which had 23.3 million.

To the Bankers Please
Standard and Chartered is reported to be advising Bharti on its options, and SingTel, which owns 35% of Bharti, is thought to be supportive of a bid for MTN.

Mobile Transactions at MWC Bharti Telesoft

Mobile Payments, Mobile Transactions, mCommerce, Pay by Mobile, Mobile Money Transfer, mMoney, however you call it is becoming a very crowded space  and it all comes down to the Mobile Financial Services Market .

I've written about  it in the past in "Mobile Payments: Top 10 Issues between Banks & Operators" and "Mobile Payments Tipping Point" and "Text M for Money" and "$1.1 Billion passed in Chinese Mobile Payments" and "Hawala Money"...well you get the picture, this is a space I'm sharpening my perspectives on. 

Clash of the Titans--and the under-card-- Rumble of the Developed & Emerging Economies

At the Mobile World Congress there was huge attention to the Mobile Payments market. The GSMA's Pay by Mobile and Mobile Money Transfer briefings were oversubscribed by 5x !  Beyond the obvious titantic clash between MNOs vs. FIs, there is the conflict between technologies such as simple SMS vs. other bearer access points such as USSD, GPRS or even IVR in the mobile transactions space. Of course the really big conflict is going to be services already becoming available in emerging markets affecting the development of mobile transactions in developed markets. Who will lead and shape this space, the unbanked or the overly banked?

Some quick data points picked up in Barcelona:

• Mobile payment usage via a mobile enabled payment mechanism is expected to be used by 1.4 billion people by 2015, or 26% of the user base
• In a survey by EDC, mobile money transfers is considered to be the most strategically important mobile financial service in the future
• By 2012 it is estimated that 12% of subs in developed markets and 9% in developing markets will  use domestic money transfers, which translates into 504 million users globally.
• SMS is viewed as the preferred channel for mobile money exchanges                                                                                                                                My friend, and emerging markets mobile payments specialist, Michele Scanlon suggested I take a look at Bharti Telesoft, so I cornered a conversation with Kresh Goomany, Vice President of Bharti Telesoft's Africa Region.

Bharti Telesoft's Mobiquity platform embraces the mobile phone as a convenient payment   and transaction medium. They have open APIs to both banking and credit card gateways enabling operator services providing a high level of security, making it highly a flexible service delivery platform utilizing a multi-bearer access utilizing SMS, USSD, GPRS or IRV platforms. The Mobiquity platform is a swiss army knife of mobile banking initiatives covering mobile banking, ticketing, money transfer, bill payments, pre-paid airtime top-up, micro-credit transactions, credit card interfaces. Seems to do it all...although from a US centric perspective, I've yet to see any of these presentations which cover the mobile as a "gift cards" mechanism.

Listen to my podcast with Bharti Telesoft's Kresh Goomany (9 mins)

The value proposition of Bharti Telesoft is their genetics and the geography they're focusing on. Bharti Telesoft is a spin off of Airtel with roughly 40 million subscribers in India, providing value added services for the Indian market for some years. Now they are moving into the high growth, low ARPU, unbanked markets in middle Asia and Africa for the mobile transactions business. They open with their "Pre Top" (pre-paid top off) services for operators, and then move up the value chain to FIs or operators offering Roaming Re-charges, Mobile Banking such as balance queries and alerts, money transfers such as domestic or international remittances as well as mobile payments covering utility bills. Clearly they have the right strategy in entering the emerging markets, especially Africa which Kresh covers their market strategy in depth in the podcast. If Bharti Telesoft is defining the development of the mobile financial services markets in developing economies, what's next?

Bharti Telesoft: Big player to follow in the Mobile Payments / Mobile Transactions space.

 What do you think of Bharti Telesoft's prospects? Why aren't any western vendors of this size so well positioned as Bharti Telesoft? Will they eventually control the mobile payments play globally or is this likely to be a market structured along regional differences? Tell me what you think.