FreeMove offers international products and services

Roaming partnership the FreeMove Alliance has expanded into southern and Eastern Europe with the addition of Cosmote in Greece and Globul in Bulgaria, which join existing members Deutsche Telekom, France Telecom Orange, TeliaSonera and Telecom Italia.

Founded in 2003, FreeMove currently spans 38 countries across Europe, the USA, Russia and Brazil. Both Cosmote and Globul are part of the OTE group and will add around 10 million more subscribers to the FreeMove network.

The partnership works on the development of international alliance member services and roaming benefits, particularly for enterprise customers, by “taking the guesswork out of cost control, with clearer, harmonised tariffs on voice calls and transparent, cost-effective data bundles,” FreeMove said.

By allowing consumers to negotiate a separate roaming contract to use mobile services while abroad in the EU from the one they have for mobile services at home – while keeping the same number – the EC has freed consumers to seek the best available deal in the market.

And by granting this freedom from their home network operators the EC will, if the proposals become law, create a whole new market for operators offering EU-only service packages, thereby injecting a whole new impetus of competition in the area of roaming. By effectively broadening the market for mobile services in Europe from one country to all 27 the EC has made Europe a much more attractive market for new types of companies to sell mobile services accessible when visiting any member state.

The steps announced today are the logical culmination of the EC’s long held goal of narrowing the gap between how much it costs to use mobile services at home and while travelling the European Union. As such, they should come as no surprise to the European mobile industry, which, despite some exceptions, have been unwilling to reduce EU roaming rates in line with the Commission’s expectations.

Impact:

The impact of these proposals, if they are put into effect, will be felt most by the large European mobile operators. This is because they generate more revenue from roaming than smaller operators as they have more contracts with large corporations to provide mobile services for employees travelling in the EU.

European operators have been reluctant to stimulate the market for consumer roaming in the EU largely to protect the rates they charge their corporate customers, which, unlike the consumer, are much less price sensitive as they have a much greater need to stay connected when they travel abroad.

With the new proposals to allow consumers to negotiate a separate contract from the one with their home operator European operators will be forced not just to offer roaming rates at or slightly below the new regulated retail prices, but to compete in the new market for EU roaming services that the EC wants to create. As such, European operators’ roaming revenues will come under increasing pressure.

Outlook:

It remains to be seen how much more the regular consumer will use his or her mobile when they travel in the EU. The mobile industry remains unclear about how price elastic mobile roaming services are and still doesn’t have a clear view on how much additional usage is created when lower prices are in place. This is because the vast majority of European operators have resisted lowering their roaming rates with significant reductions until 2009-2010, and which is the very reason for the heavy regulation from the EC.

The coming years will provide a much clearer view on how much increased usage the lower prices bring about. The burden is now on mobile operators to aggressively market competitively priced roaming services to try and sign up the highest number of mobile users who use their mobile the most while travelling in the EU.

France Telecom and Deutsche Telekom have announced a joint procurement initiative

Deutsche Telekom and France Telecom/Orange have put months of rumours to rest with an announcement that they will combine procurement activities in an effort to save €400-900m over the next three years.

The non-binding agreement, which will form the basis for contracts to be signed in the coming weeks, is an extension of the “smart industry” partnership announced by the pair in February this year. Under that arrangement, Deutsche Telekom and France Telecom agreed to work together to identify common ground on wifi roaming, M2M services, and RAN sharing, among other things. In 2009, the pair agreed to merge their UK-based mobile phone units.

Following today’s announcement, four pilot projects will see the two telcos jointly-procuring handsets, network kit, service platforms and other IT infrastructure. The jointly-owned and operated project will have units in both Bonn and Paris.

Deautsche Telkom CTO, Edward Kozel, said that, with operators increasingly expected to invest more in networks and infrastructure, the venture was an opportunity to achieve “economies of scale as well as customer benefits in technology harmonisation.” As operators come under increased pressure to keep pace with changing technologies and a growth in demand for mobile data services, there has been an increased trend towards collaborative initiatives between them. Last year, Deutsche Telekom and France Telecom were among five European carriers that met to discuss collaboration possibilities to deal with increased challenges in the wireless network space.

Operator partnerships of this type are typically and justifiably met with some scepticism, but on the surface the deal appears well thought-out, clearly structured and highly focused. The greatest risk to the success of the joint venture lies in its execution, but with both partners highly committed to the partnership and sharing well-matched motivations, those risks appear to have been recognised and mitigated.

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“Nothing motivates like money and the goal of securing €1.3 billion in annualised savings by 2014 will certainly give strong impetus to the joint venture. What is more, the procurement plans announced today only cover the one-third of the two groups’ combined annual spend of around €40 billion that is deemed “immediately accessible”, a sure sign that there is scope for additional synergies further down the line,” said Thomas Wehmeier, principal analyst at Informa Telecoms & Media.

The deal is very much a sign of the times. Europe’s largest operators have been cosying up to one another more and more as they seek to strengthen their hands at a time when competitive pressures have emerged from an increasingly diverse range of players, most notably from players based out of Silicon Valley and China. As they roll out smart networks, distribute smartphones to the users, this type of smart industry cooperation can only help to strengthen the negotiating hand when dealing with suppliers that in many cases are also deemed competitive threats to their business.

With FT and DT now sharing networks in some markets, carrying out joint procurement across their entire footprint and constantly talking up the benefit of scale, the question of what’s next must be asked. As the industry grows up and as operators make the migration to LTE, it’s inevitable that further consolidation of operators will take place in Europe. Whilst huge corporate mergers are off the table for now, the prospect of rational consolidation on a market-by-market basis is likely to be very much on the table as discussions take place.

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Roaming hubs can increase the number of roaming services and destinations operators can market to

International carrier services collaboration BICS, which is formed of Belgacom, Swisscom and MTN, has pooled roaming resources with Vodafone Roaming Services to connect their respective roaming hubs. The move will initially simplify the administration of roaming traffic between the Belgacom, MTN, and Vodafone networks but will eventually expand to handle all operator members of both hubs.

As well as decreasing the administrative and technical tasks associated with roaming, the move will enable all operators on both roaming hubs to increase the number of roaming services and destinations they can market to, the firms said.

Whereas roaming agreements can be struck in a bilateral manner between two operators, creating more complexities and paperwork with each agreement, roaming hubbing seeks to improve the process by allowing operators to join hubs and have the hubs strike interconnect deals with other hubs.

“This cooperation is a major step for the mobile industry to guarantee seamless roaming for all mobile users when they cross national borders, and is a direct response to the expansion of the mobile environment globally in terms of subscribers, networks, technologies and applications”, said Daniel Kurgan, CEO of BICS.

European Commissioner for the Digital Agenda, Neelie Kroes, blasted roaming costs as an “outdated concept"

Following in the footsteps of her predecessor, Viviane Reding, European Commissioner for the Digital Agenda, Neelie Kroes, on Thursday blasted roaming costs as an “outdated concept”.

With that view in mind, Kroes then proposed that the creation of a single market within the 27-member bloc would require the gap between roaming and domestic prices to approach zero.

“A true digital market is a market where effective competition ensures that citizens, customers and businesses do not experience substantially different services or costs when they pass a border,” Kroes said.

Informa Telecoms & Media believes Europe is an important market for roaming services, with the largest number of roaming users worldwide. This region needs to connect a significant number of different countries and cultures, which makes it a leader in terms of innovative business models, regulation and technology.

Informa found that Western Europe will remain the largest roaming market delivering approximately 41 per cent of roaming revenues by 2015, followed by Asia Pacific with approximately 18 per cent and North America with approximately 10 per cent.

The global roaming market is expected to grow 86 per cent over the next five years

The global roaming market is expected to grow 86 per cent over the next five years, delivering revenues of $67bn by 2015, or 6.3% per cent of total mobile service revenues worldwide.

The figures come from Informa Telecoms & Media, which predicted a slowdown until at least 2012 as a result of the economic downturn and customer cost saving initiatives, but also forecasts a marked upturn from this point onwards as markets recover and as mobile data roaming becomes increasingly prevalent.

“Data roaming, new pricing models and technologies, as well as regulation are just some of the forces that will transform the roaming market over the next five years,” said Paul Merry, senior analyst at Informa. “Bill shock remains a major issue for mobile roaming users in those markets where pricing regulation has not been implemented. Moreover, the legacy of bill shock is such that even in regulated markets there is a perception that mobile data roaming is expensive. Overcoming this sensitivity will take time but is critical.”

EU regulations presently limit roaming spend to €50 per trip and Informa believes such measures are a step in the right direction, but also states that €50 remains a very high amount for the majority of users, especially leisure users.

However, Merry believes that mobile data roaming is expected to show substantial growth due to the popularity of app stores and the ongoing success of smartphones, delivering a 28 per cent CAGR or a 246 per cent increase over the five year period.

View Informa’s research on global roaming

Enterprise segments currently generate around 65 per cent of total roaming revenue, and are highly price inelastic segments, compared to consumers, which are an underpenetrated roaming segment and are highly price elastic. Therefore enterprise customers will be more resilient to the economic downturn, seeing a CAGR of 17 per cent compared with just 5 per cent for leisure users over the forecast period.

Informa found that Western Europe will remain the largest roaming market delivering approximately 41 per cent of roaming revenues by 2015, followed by Asia Pacific with approximately 18 per cent and North America with approximately 10 per cent.

The drive behind the project is to provide Starcomms’ more than three million prepaid CDMA customers with access to international mobile roaming on GSM networks

Nigerian mobile operators Starcomms claimed a world first, with the announcement that it has completed a prepaid inter-standard roaming call between GSM and CDMA networks.

Running a CDMA network, Starcomms is one of the smaller mobile operators in Nigeria with 1.77 million subscribers at the end of June, however the company also provides fixed wireless services and has a total user base of around 3.2 million. The market leaders are MTN with 35 million, Globacom with 18 million and Zain with 15 million subscribers.

But the drive behind this latest project is to provide Starcomms’ more than three million prepaid CDMA customers with access to international mobile roaming on GSM networks, expanding Starcomms’ international network coverage.

The Nigerian carrier contracted OSS/BSS vendor Mach and roaming solutions provider Accuris Networks to deliver the platform, which made the prepaid inter-standard roaming call on to an international GSM network possible.

“More than 90 per cent of mobile subscriptions in the CDMA world today (excluding the USA) are pre-paid and typically these subscribers cannot and do not normally roam,” said Guy Dubois, president and CEO of Mach. “By successfully demonstrating the first pre-paid roaming call across two wholly disparate technologies, CDMA and GSM, we have taken the first step towards opening up this vast untapped market for mobile operators.”

Informa Telecoms & Media’s own statistics estimate that around 184 million of the world’s 475 million CDMA users were on prepaid tariffs at the end of June and agree on the difficulties with roaming described by Dubois.

The XT WCDMA service has superseded the EVDO and CDMA roaming offerings

New Zealand’s incumbent carrier, Telecom, has announced that it will cease operation of two of its CDMA services in the final quarter of this year. The WorldMode Roaming service will shut down on October 28th while the 3G EVDO data service will be switched off on November 30th. The firm will close down its CDMA voice network altogether in mid-2012.

Over the past year Telecom has been migrating mobile data customers onto its XT WCDMA network, which was launched commercially on May 29th 2009.

“The XT Network offers our customers a considerably better experience while both roaming overseas and using mobile broadband here in New Zealand,” said Gemma Roper, head of network operations for Telecom. “This has resulted in many customers of [WorldMode and EVDO] moving over to XT already.”

WorldMode had attracted only a relatively small number of customers in any case, Roper said, while WCDMA roaming is available in 70 more destinations than the CDMA-based service. While CDMA handsets will continue to offer voice and data services until the entire network is powered down in 2012, they will not be able to roam overseas in the majority of destinations with the service and data speeds will be limited to 2G performance.

Operators lose battle against roaming price caps

Four of Europe’s largest mobile operators – Vodafone, Telefónica O2, T-Mobile and Orange – lost their battle with European authorities on Tuesday, after the European Court of Justice ruled that roaming caps can stick.

The Roaming Regulation established maximum prices that can be charged by mobile operators for calls received and made by a user outside their home network, and is based on 2007 proposals seeking to reduce roaming charges by up to 70 per cent. But in 2009, the four carriers challenged the validity of the EC’s Roaming Regulation before the High Court of England and Wales. This court then asked the Court of Justice whether the EC’s regulation was in fact legal.

As it turns out, not only is the regulation legal, “it is proportionate essentially to the objective of protecting consumers against high charges and is justified on grounds of subsidiarity”.

The Court pointed out that before the Commission proposed the regulation, it carried out an exhaustive study of alternatives and evaluated the economic impact of various types of regulation. “The average retail charge for a roaming call in the Community at the time the regulation was adopted was high (€ 1.15 per minute, which was more than five times higher than the actual cost of providing the wholesale service) and the relationship between costs and prices was not such as should have prevailed in fully competitive markets,” the Court said. “The tariff provided for in the regulation is significantly below that average charge and is set in relation to the ceilings for the corresponding wholesale charges, so that the retail charges reflect more accurately the costs incurred by providers.”

Zain expands One network into Egypt

Middle East and African operator Zain said Wednesday that it is expanding its pioneering One Network to Egypt via a strategic partnership with Mobinil.

The deal means over 27 million Zain customers in Bahrain, Iraq, Jordan, Kuwait, Saudi Arabia and Sudan can benefit from One Network services – effectively being treated as local customers -  when visiting Egypt, while Mobinil’s 24 million customers will benefit from similar treatment when visiting any of these Zain countries.

The One platform allows subscribers to make calls, send SMS and access the data services at local rates of the visited country and to receive incoming calls from their home country at free or minimal charge.

Middle East and African carriers are known for their innovation in the face of falling ARPUs, rising competition and the recession  – something which has attracted many investors but also dissuaded them from moving into Africa markets. In Zain’s case, the company’s soaring ambition and presentational verve has not yet been matched by the performance of its operations in sub-Saharan Africa, where many of its units are loss-making.

This week Zain reported that net profit for the nine months to the end of September fell 17 per cent year on year to KWD195.7m ($677m), although revenues for the period were up 24 per cent year on year to KWD1.78bn. But Africa is causing much of the company’s financial pressure. The vast and capital intensive expansion of Zain’s network in key operations such as Nigeria, Zambia, Sudan, and Iraq, has resulted in increases in fixed costs from depreciation and amortization, with the company being further burdened by increases in financing costs.

In late September, confusion reigned as a consortium of buyers that included Indian operators BSNL and MTNL were thought to be carrying out due diligence on Zain in a bid to acquire some or all of Zain Africa. But nothing came of the supposed interest and at the recent Africa Com 2009 event in Cape Town, South Africa, Chris Gabriel, CEO of Zain Africa repeated a number of times that “Zain Africa is not for sale. We are focused on our objective to become a top ten player by 2011 and we still have an appetite for expansion,” he said.

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