Why partnership is key to success

Indra Gunawan, Telecommunications analyst, Jakarta

After expanding about 71 percent from 1999 to 2000, the local wireless market experienced a substantial plunge last year, with sales volume down to 385 million handsets from 412 million the previous year.

Are 2001's figures a bad sign for the future of both cellular manufacturers and operators in a market with such huge potential?

Like it or not, most stocks of IT-related businesses worldwide, including telecommunications firms in Asia, have lost popularity.

To survive, operators are offering a variety of new services, on top of the usual voice and SMS facilities, to subscribers in an effort to raise their Average Revenue Per User (ARPU). Many are now working hard to introduce their new products, such as General Packet Radio Service (GPRS), Unified Messaging Service (UMS) and Multimedia Messaging Service (MMS).

But this technology will do little for the ARPU if not supported with adequate applications and content. A provisioning service makes customer more comfortable, as they no longer need to set parameters, like Wireless Application Protocol (WAP), MMS, Java and so on.

Operator also can create a new brand for their services by cooperating with a strongly branded company to make a Mobile Virtual Network Operator (MVNO). With the new brand, they can easily reach different market segments.

A new product also can be created through cooperation with a strong brand service provider. ICQ, a big company and a strong brand, with 135 million members around the world, is a promising company in terms of cooperation. By teaming with ICQ, the brand of an operator would be strengthened.

If we look at all the products available on the market, we will see that all mobile device manufacturers are coming up with nice products that are small, handy and stylish. On the other hand, those products that cannot fill these requirements will be abandoned by users.

Most users in Asia, especially in Indonesia, have a unique characteristic. Quite a number prefer the trendiest cellular phones equipped with the latest technology. They feel a kind of pride in carrying them around, although most of them never make proper use of the state-of-the-art technology.

Remember Wireless Application Protocol technology? When it was introduced everyone wanted to use mobile phones with WAP. Today, it is similar with GPRS -- providing high-speed access to data, the latest reason for users to replace their handsets.

But the question is, can technology actually boost sales volume for mobile phone manufacturers? Data from the marketplace is pretty clear. Technology is no longer the main issue. The types of cellular phones that are favored and are currently enjoying high sales are not cluttered with every bit of sophisticated technology. Apart from their trendy designs, they are simply "conventional" cellulars with basic features like SMS and some entertaining games. Most importantly, the price should be in the middle range.

Technology does not seem to be a strong point if customers do not understand its real advantages, meaning useful application is more advantageous than the technology itself. The manufactures, of course, are aware that technology will be useless if it is not used frequently. Therefore they concentrate on providing not a mere communications device, but also completing it with advanced entertainment facilities, such as a radio terminal, color display, polyphonic sound, digital camera, long SMS, Java enabled, etc.

To satisfy their subscribers' demands, operators also provide interoperable facilities, so they can communicate with each other even if they use different brands.

Many users probably get a headache at the mention of "GPRS", but once its various benefits are clearly spelled out, like the easy access to a wide range of information, sending e-mails, downloading and changing the logo or ringtones, using the cellular phone as a modem to access the Internet via a laptop, etc., only then will the message get across.

One of the keys to success for the i-mode services provided by NTT DoCoMo is application. i-mode would not be enjoying its current 32 million subscribers -- roughly a quarter of Japan's population -- if they were just offering limited and boring content to subscribers.

With around 50,000 sites on the Internet it is the market leader in Japan, and now its services have started luring cellular users outside Japan.

Strategic alliances for i-mode are being formed with an eye on third-generation mobile phone services. The European version of the i-mode service was launched in March 2002 in Germany by E- Plus, and in April in the Netherlands by KPN Mobile. The i-mode service is also planned for Belgium through BASE (formerly KPN Orange) and Taiwan through KGT.

The availability of applications is another key to success, so application developers and content providers have to enrich their services and create more interesting content. With the existing amicable relations between cellular operators and content providers, developers will be interested in making many applications.

To support a more complex application, Third Generation (3G) cellulars will transfer data at a very high speed, theoretically up to 2 Mbps.

NTT DoCoMo gives 91 percent of application revenue to content providers, because as the network provider NTT DoCoMo also gets its income from packet transmission charges.

The problem in Indonesia is that even though many talented developers exist they are not interested in working as developers, because they are worried about their future. They worry they will not make any money from the applications they make.

Today very few providers are able to offer the entire range of services, which is why partnership is the key to success. It is really up to the operators to come up with the appropriate charging system, otherwise all this expensive technology will remain untapped with subscribers getting no advantages from it.

However, the future is not that bleak.

Apart from the numerous products enhanced with the most sophisticated features that keep entering the market, other factors necessary to wake up the dozing market are appropriate rates from operators, an amicable relationship between operators and application developers and, most importantly, "loudly and clearly" communicating all these for the benefit of customers.