Telefonica is offering 25MB of data usage for €2 to customers roaming within the EU

Telefónica has announced a pan-European data roaming tariff, which it claims is “up to ten times cheaper” than the new price caps approved by the European Parliament this week.

Customers of the firm’s Movistar and O2 networks will be able to use up to 25MB of data each day, anywhere across the 27 European Union member states, for just €2 per day.

“Our European data tariff gives our smartphone customers great value while allowing them to do what really matters – to stay connected wherever they are in a simple and transparent way and with complete peace of mind,”said José María Álvarez-Pallete, chairman and CEO at Telefónica Europe.

The European Union approved legislation earlier this week, ruling that as of 1 July 2012, 1MB data usage should cost no more than 70 Cents – working out at €17.50 for the 25MB Telefónica is offering for just €2. In the EU markets Telefónica does not have its own network, the operator said it is absorbing the cost of connecting with foreign operators.

“This is the exact type of thing that the Commission would have hoped to see happen,” said Matthew Howett, lead analyst at Ovum. “The idea of the regulation isn’t to necessarily decide what the optimum rate for roaming should be but rather prompt operators to come up with new and innovative tariffs.”

He added that, until now, operators have all offered tariffs at or around the cap specified by the EU Parliament, and there has not been evidence of very much innovation or movement below them.

“So this is certainly a welcome move in that direction and it is something which we are likely to see other operators follow.”

Customers will only pay for the days that they choose to use data and customers who exceed the 25 MB limit will be immediately notified. The Pan-European tariff is being launched first in Germany in May and will be available this summer to O2 and Movistar customers in Spain, United Kingdom, Ireland, the Czech Republic and Slovakia.

Telefonica's profit is less than half of what it recorded in the same period a year earlier

Despite seeing stability in revenue over the course of the first quarter of 2012, Telefónica has seen its net income plummet to less than half of what it recorded in the same period last year.

Revenue for the quarter stood at €15.51bn, a 0.5 per cent increase on the €15.44bn generated in the first quarter of 2011, while net income fell 53.9 per cent from €1.62bn to just €748m.

Profitability was impacted by rising expenses across the business, with operating expenses, cost of supplies, personnel expenses, subcontracts, bad debt provisions and taxes all increasing year-on-year.

In addition, the group recorded a €481m loss from its associated businesses, compared with a €16m loss in the same period of 2011. This year-on-year change was mainly the result of the impact of an adjustment of the value of its investment in Telecom Italia, Telefónica said.

However, Telefónica said that its decision to remove handset subsidies for customer acquisition activities in Spain from March 2012 is paying dividends.

“This decision, unprecedented in the market, reflects Telefónica’s strategy for prioritising customer retention as a key lever to regain commercial momentum,” the firm said in its earnings statement.

Chairman César Alierta said that the quarterly results reflect the firm’s strategic priorities set for the year and the success of the company’s shift in commercial strategy, which began in the second half of 2011.

“These results are in line with internal estimates and thus allow us to reiterate our financial and operational guidance announced for 2012,” he said.

Both of these services are accessible to anyone who has a compatible smartphone (iOS for TU Me, with Android on its way, and iOS, Android and RIM for the mobile wallet). As such they represent Telefónica’s first moves to establish over the top relationships with its competitors’ customers—relationships which it will doubtless look to consolidate down the line.

But what really stands out about the announcements is that, in both situations, Telefónica is simultaneously leading collaborative efforts along similar lines with the very companies on which it is attempting to steal a march by being quick to market.

In the UK, project Oscar is a proposed joint venture between O2, Vodafone and Everything Everywhere to create a combination mobile wallet/mobile advertising offering that would enjoy 90 per cent penetration in the market. Oscar is currently being poked and prodded by the EC competition authorities and, although O2’s MD for mobile money recently suggested the EC’s analysis was more of a formality than a fundamental obstacle, the Commission won’t offer up its findings until the end of August.

Meanwhile TU Me looks a lot like an app-based version of what Telefónica, Vodafone, Orange, TIM and T-Mobile announced they would be collaborating on at a network level at MWC this year. The Joyn RCSe initiative aims to replicate in the network the kind of services that OTT players have made popular in app and browser formats. Led by GSMA, Joyn aims to exploit the traditional operator strengths of reach and interoperability.

With both its wallet and TU Me programmes, Telefónica is essentially betting against a successful outcome for the two collaborations. And for all the talk of ‘co-opetition’ I wouldn’t mind placing a bet of my own that Telefónica’s solo efforts don’t sit too well with the other operators involved in Oscar and Joyn.

After all, while Vodafone, Orange et al are still thrashing out the details of projects that are supposed to work to everyone’s benefit, Telefónica’s trying to flog its services to their customers. The fact of the matter is that the longer Oscar and Joyn take to get to the market, the better chance Telefónica has of sowing success for O2 Wallet and TU Me. And if that success starts to materialise, how motivated is Telefónica going to be to put its back into the joint efforts and welcome its competitors to the party?

The Spanish incumbent has emerged as arguably the most dynamic of the big global players in its approach to services and verticals. A high profile reorganisation has structured the company very clearly to innovate in these areas. The creation of Telefónica Digital late last year has given the firm the resources to tun these kind of projects around and fast, while the startup mentality of the unit allows some innovations to fail. Not all operators are going to be able to do this, and not all of them are going to put the same kind of effort into it as Telefónica.

You’ve got to wonder, though, whether Telefónica’s peers are going to start questioning how much of the work that goes into their collaborations is helping the Spanish firm get ahead of them as it goes it alone in precisely the same markets. Joyn and Oscar might be predicated on the notion of One for All—but Telefónica seems more interested in keeping it All for One.

The O2 Wallet home screen

Telefónica subsidiary O2 has become the first operator in the UK market to launch a mobile wallet offering. The service offers price comparison for online shopping, person to person money transfer and allows the user to digitise cards linked to existing bank accounts, or load money onto an O2 stored value account.

The service is available as an app for iOS, Android and RIM devices but has not been optimised for the iPad, and is not available for Windows Phone. Mobile and desktop web versions of the service are also on offer. James Le Brocq, managing director of O2 Money said that the absence of a WP version of the app was  a resource issue and that there was “finite capital” available for development.

Le Brocq categorised the service as “e-commerce on a mobile”, with O2 planning to deploy a contactless payment element to the service at some point in the future.

O2 is establishing partnerships with the UK’s top 120 online retailers (with offers from four available at launch) and will charge those retailers a per transaction fee, a strategy that Fred Huet of Greenwhich Consulting described as “cleverly devised”.

P2P money transfer will be free for an initial six-month period but O2 is considering a £0.15 transaction fee thereafter. The solution allows users to share details of P2P transactions on social networking sites, which Le Brocq suggested would help drive awareness and uptake of the service.

This will be crucial in helping O2 meet one of its goals for the service, which is to drive uptake among users of competitor mobile networks. O2 has stolen a march on the other UK operators, as their proposed mobile money joint venture, Project Oscar, undergoes an “in-depth” investigation by the EC over possible contravention of merger regulations.

Earlier this month the EC said that its initial investigation “revealed that the joint venture and its three parent companies [O2, Everything Everywhere and Vodafone] may have the technical and commercial ability and incentive to block future competitors from offering their own mobile wallet services to customers in the UK, or to degrade the quality of these competing mobile wallets so that they become less attractive.”

Asked about this at the launch of O2 Wallet, Le Brocq dismissed the possibility that the EC’s investigation might prove to be a significant obstacle for Oscar, and said that the project was simply “awaiting approval”. He said that O2’s Wallet did not reflect any internal concern about Oscar’s realisation.

But Ovum analyst Eden Zoller suggested that O2’s early move into the space while its JV remains side-lined by regulatory investigation might create difficulties. “There could be challenges going forward in terms of positioning O2 Wallet alongside the collaborative mobile payments service that O2 is planning with Vodafone and Everything Everywhere,” she said.

Given my whinge yesterday about data roaming charges it was good to hear Montefiore say that they´re too high and they need to come down. Montefiore said that 80 per cent of his customers disable data when overseas, and that´s probably a typical figure for the industry (Informa has put the average at 70 per cent). Too many operators are making too much money to want to rock the boat, he said, but the industry needs to see the wider opportunity. Starhub has a relatively low daily fee for unlimited use and if this can start to bring that 80 per cent down a bit there´ll be a good story to tell.

Unlike very many operators, Starhub hasn´t outsourced its network and Montefiore said he thinks that short term thinking led a lot of MNOs to take the leap in a bid to drive swift cost reductions. But in five or ten years, he said, they may regret the fact that they no longer have the staff, they no longer have the network and they no longer truly own the technology or the roadmap.

He also said that he´s stopped using Facebook – personally – because it´s become too intrusive for him. Mobile operators have access to a wealth of information about their users but are very tightly regulated on what they´re allowed to do with it, he said. The likes of Facebook have no such checks and balances forced on them which ought at least to raise a question mark, he added.

@TelecomsJames met with Panasonic yesterday, which recently announced a return to the European device market. They told him that the reason they exited in the first place was to give Europe a chance to catch up to Japanese levels of handset technology, which is a bold bit of spin. One feature of the firm´s new device is that it´s waterproof; something that´s apparently become necessary in Japan because women like to take their phone into the shower with them. Go figure.

Panasonic had a disrupted day one when chunks started falling off of the Vodafone pavilion next door, meaning both booths had to be evacuated. Panasonic were homeless for five hours and had to cancel all their meetings. They must have been hoping that proximity to Vodafone would be a little more fruitful than that.

I stopped by the Telefonica stand to see Claire Maslen, who´s spent the last seven years working on O2´s UK mobile commerce play. Recent announcements show rewards being reaped but there are key issues that remain to be resolved. Obviously Maslen – likes all operators – wants the application on the SIM but Fred Huet at Greenwich Consulting said that whether or not the banks go for that solution on a wide scale will depend very much on how much the operators charge them for real estate on the SIM card. Maslen made no mention of this as a revenue stream, focusing instead on the value that operators can add for brands and advertisers looking to drive footfall into stores and online purchases.

NFC is a key component of mobile financial services and I heard this morning that a number of operators are actually developing NFC-specific app stores to take advantage of the technology when it starts to get traction. Shishir Gupta, vice chairman of the Industry Collaboration Working Group for the NFC Forum said the industry shipped 60 million NFC-enabled devices in 2011 and forecast that next year the number will rise to 300 million. In 2015 it will hit 600m. But from the NFC community´s perspective it´s not the contactless tech that will drive the mobile wallet, but the mobile wallet that will showcase the opportunities of NFC.

RCSe is a bet operators can’t afford to lose. Unlike the many battles for inclusion in which operators try to enter vertical sectors and adjacent market, RCSe is a battle for relevance.

WhatsApp and Facebook Messenger and other OTT services are set to take almost 4% of their voice and messaging revenues from the mobile operators in 2012. While the operators can afford to lose this money, they can’t afford to lose the relationship they have with their customers.

RCSe is a way for operators to emulate these services and convince customers to stay with them, or rejoin them.
RCSe (Join) is a big gamble. It will succeed only if the business model is inspired by the Internet model where a lot of the good stuff is free. Operators will have to give away more that they are used to.

If operators want RCSe to be successful, they need to offer what the OTT players offer – a compelling user experience with a wow factor is a must, but zero price is also important. This is what people get from OTT players, something cool that costs nothing.
If operators want RCSe to become a mass-market proposition, as they should, then they need to have freemium business models where a lot of what they give comes for free with no catches.

Operators need to know that self-cannibalization of existing revenues is both painful and necessary if they want to keep the relationship with their customers in the Internet era; any attempt to position RCSe as a premium service will inevitably fail in competitive markets. At this stage of mobile Internet maturity, interoperability is not strong enough as a differentiator.

During 2012, there will be many launches of RCSe services in the majority of large European countries. Pricing will be the single most critical element of the service.

Operators will also have to spread their bets as the success of RCEs is far from certain. Offering Internet-like communication services will also have to be done as a pure OTT service as well as in partnership with OTT players.

Fujitsu's Arrow smartphone, launched in Japan earlier this year

Japanese electronics vendor Fujitsu has announced its intention to launch smartphones and tablets into the European market. The firm has a 20 per cent share of the Japanese mobile device market, according to Robert Pryke, director of Fujitsu’s European device business.

Pryke said that the vendor is currently in talks with European operators over potential distribution deals.

“Details of timings and devices that will be made available in European countries will be dependent on the outcome of ongoing negotiations with operators across Europe, including those with a pan-European footprint and those that provide services in just one territory. The company is looking for the right partnerships that will lead to steady and sustained growth,” Pryke said.

Fujitsu’s move comes at a time when the large operator groups are focused on reducing the numbers of device providers they work with, rather than increasing them. Last November, Matthew Key, head of Telefónica Digital announced that the operator is looking to cut its device range in half, while Vodafone’s head of device marketing Peter Becker-Pennrich recently told Telecoms.com that just eight vendors supply 98 per cent of the devices that Vodafone ranges, and that he expects this number to come down “quite a bit”.

Research by Accenture suggests that operators cannot get the best unit price from vendors until volumes rise above half a million.

“The research that we’ve carried out into the prices that manufacturers charge operators shows that, until you hit between 500,000 – 750,000 units, you don’t reach a manufacturer’s best price,” said Dan Adams, a partner at Accenture. “So operators have to set their portfolio so that a good chunk of it gets over that number per device. If they don’t, they’ll be paying more than the competition and, while they might have a better range of handsets that’s more adjusted to the local market, consumers are not going to pay more for a handset they can get cheaper elsewhere.”

The Samsung Galaxy Nexus smartphone is the first to run on Android 4.0

Telefónica’s UK operation O2 has told Telecoms.com that it is not fulfilling orders for the Samsung Galaxy Nexus smartphone until Google and Samsung have fixed a bug that sees the phone spontaneously lose audio, affecting voice calls and audio alerts. The Galaxy Nexus is the first commercially available handset to sport version 4.0 of the Android smartphone OS, which Google has dubbed Ice Cream Sandwich.

An O2 spokesman told Telecoms.com on Monday that: “There is currently an issue with the phone’s volume that Samsung and Google are fixing. We’re currently holding back on sending new Nexus’ until this issue has been resolved. Hopefully this should be in the next few days.”

The problem came to light towards the end of last week, with both Samsung and Google releasing statements that acknowledged the problem, and claiming that a software update would fix it. Samsung’s UK operation posted the following tweet: “Regarding the Galaxy Nexus, we are aware of the volume issue and have developed a fix. We will update devices as soon as possible.”

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Nokia's Lumia is too expensive at €420, according to Simon Lee-Smith

Nokia’s high end smartphones are “too expensive” according to the European general manager for devices at international carrier Telefónica. Simon Lee-Smith told Telecoms.com that Nokia’s premium devices are “not yet at the right price point,” adding: “If Nokia wants to sell in volume, they need to bring out devices which are cost-competitive.”

Lee-Smith said Nokia was “beginning to listen” to its carrier customers and that he expected the Finnish vendor to deliver devices in the new year that are “more commercially effective”. He said the problem related to products that have been available for some time, such as the N8 and N9, as well as the recently announced Lumia800, Nokia’s new flagship WP7-based smartphone.

At Nokia World last month Nokia CEO Stephen Elop said that the Lumia 800 would retail for €420, pre-tax and pre-subsidy.

The vendor also used Nokia World to unveil a rejuvenated emerging market proposition based around feature phones heavy on functionality but low on price. “I hope they’re successful with that,” Lee-Smith said. “They need to be able to subsidise their high end smartphones, because they’re too expensive.”

Device vendors generally have unrealistic expectations of what carriers and consumers will pay for smartphones, Lee-Smith said. “All device manufacturers seem to think that a €400-plus device is the norm. Well, it isn’t. Customers and operators won’t pay that cost for a device which doesn’t differentiate sufficiently.”

Simply improving the specifications of smartphones is not sufficient, he added, saying that operators in general, and Telefónica in particular, won’t pay premiums simply because vendors are delivering phones with bigger screens or higher resolution cameras. “Let’s not let the technology and cost curve ahead of the demand curve,” he said.