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Asia's smaller operators, which have typically been competing at a national level, are starting to feel the pressure from global and regional players. More than ever, global operators are using their scale to gain competitive advantage in areas such as roaming agreements, device procurement and access to new content and services.
In response to this trend, five operators have formed the Asia Mobility Initiative (AMI) alliance, with the aim of improving their competitive position. But what can this type of alliance really hope to achieve when so many others have failed to yield tangible benefits? Asia Pacific wireless analyst, Nikki Murrell, considers the issues.
The emergence of an 'über class' of operators
Over the past 12 months, mobile giants, such as Vodafone, Hutchison and SingTel, have focused heavily on exploiting their scale to strengthen their competitive position at national, regional and global levels. As well as adding weight to negotiations with business partners and suppliers, the emergence of global players is also facilitating international interoperability and supporting the development of new services and content for associated operators.
The impact of this is being seen in the international rollout of initiatives such as Vodafone live!, where Vodafone's national operations are benefiting from the considerable framework in place to support the initiative. Without the support of the Vodafone Group, its national subsidiaries could not hope to achieve the economies of scale offered by this standardised approach.
Although the Asia Pacific has typically been a more fragmented market in terms of mobile development, competitors in the region are now trying to find strength in numbers to make sure they're not left behind. Financial pressures do not favour a strategy of investing directly in other operators to achieve greater scale. Indeed, the focus is on spending less not more. This leaves the option of partnering with peers to gain economies of scale that will strengthen the competitive position of all players involved.
The Asia Mobility Initiative (AMI)
Announced in April 2003, the AMI is a non-exclusive alliance between Hong Kong CSL, Maxis (Malaysia), M1 (Singapore), Smart (Philippines) and Telstra (Australia). The main drivers for the AMI initiative are the desire to achieve greater interoperability across networks, platforms and devices, and the wish to share experiences and potentially development costs of new mobile services and applications.
- GPRS roaming is already in place between Hong Kong CSL, Telstra and M1. The formation of this alliance sets the scene for it to be extended across Malaysia and the Philippines, offering wireless data roaming. International roaming has been identified as a key success factor for new wireless data services such as MMS.
- In terms of content, Telstra and its 100%-owned subsidiary Hong Kong CSL have had access to each other's WAP portals for some time already. This privilege will be extended to other members as part of the initiative. Participating operators will be able to share content and applications with partner's networks. A key challenge will be identifying content and applications that are culturally portable.
AMI members claim a combined subscriber base of 20 million users. This is a good start, but fails to compare with the 112.5 million proportionate customers claimed by Vodafone, for example. AMI is, however, a regional initiative, rather than global. It is pitched more strongly against the SingTel Group which has a tight focus on the Asia Pacific region and covers three of the markets in which the five AMI members operate. The SingTel Group had a subscriber base of 35.7 million at the end of 2002.
But strictly speaking this is not a question of competition with the SingTel Group. SingTel's strategy has been based on taking equity stakes in its partners opening the way for integrating or influencing the operator's strategy. In some cases SingTel exercises significant control over the strategic decisions of its subsidiaries. This gives SingTel much greater scope for co-operation with subsidiary partners than AMI could hope to achieve. SingTel has been using this position to gain competitive advantage, for example by securing favourable deals with suppliers off the back of the scale provided by its regional operation.
AMI is an entirely different beast. Although communication between the members of the group will be ongoing, there are no defined goals or timescales for achieving the ambitions of the players. There will be no centralisation of resources, at least in the immediate terms, and co-operation will take place as specific members identify the need or opportunity to work together.
From intentions to actions
We expect co-operation between AMI members to be bi-lateral and piecemeal, at least until the alliance has bedded down. Historically, similar initiatives have struggled to yield tangible results, and the complexity of the Asia Pacific's mobile market will throw up additional challenges peculiar to the region.
Technological diversity
The heterogeneity in mobile network technologies in use across the region will complicate roaming agreements. While all founding AMI members have GSM networks, Telstra also has a CDMA network. Of late, the Australian incumbent has been focusing on developing its CDMA network with a CDMA 1X upgrade, forming the basis of new mobile data services for business and consumer users. Telstra's increasing focus on developing its CDMA network, using technologies such as BREW for wireless data services, seems at odds with facilitating interoperability with partners, all of which are operating GSM/GPRS networks. There are no GSM/GPRS handsets that support BREW at the moment. This highlights just one possible area for complication with the interoperability and portability of mobile data services across AMI members.
Different commercial approaches
Apart from cultural differences, which may affect the extent to which members of the AMI are able to co-operate, there are also some differences in the commercial frameworks that underpin these mobile markets. For example, some of the markets covered by AMI are calling party pays for voice and data services, others aren't. While roaming arrangements for voice have been in place for some time, pricing models for new mobile data services remain up for debate. The negotiation of agreements where operators have different and immature pricing models for mobile data services is likely to be thorny.
Content and culture
While AMI may wish to create the potential to share mobile content and services across networks, it will not be able to escape the fact that cultural differences between markets may restrict the opportunity to do this. Australia, Malaysia, Hong Kong, Singapore and the Philippines have significant differences in terms of language, culture and religion. What may be compelling content in one market, may be entirely inappropriate in others.
For example, Hong Kong is a world leader in wireless gambling with many successful services already on offer. But in Australia, the government has a close eye on the development of interactive gambling services, with gambling highlighted as an issue for concern and tight regulation.
The approach to censorship in each market is also different, as is the respect that these markets have for copyright. In this context, the need for DRM efforts is another area that may cause contention.
Realistic goals?
Progress with AMI is likely to be slow and members should bear in mind that these types of alliances have historically been less than fruitful. The operators involved have taken a sensible approach by highlighting specific areas for co-operation. But we believe that focus should be first and foremost on ensuring interconnection and interoperability for new mobile data services. A standardised approach to this will save significant time and effort as the market develops, and ensure continued growth in revenue opportunities from international roaming.
Success in content and service sharing is likely to be more fragmented for the reasons described above. However, an important ambition of AMI should be to work towards the creation of a cohesive business model and framework for content and applications development, within which local customisation can occur. At present, the wireless data business model varies by operator, and is negotiated on a case by case basis. This is time consuming for operators and confusing for content providers. By contrast operators in South Korea and China have both studied, then modified, DoCoMo's i-mode business model to create a tighter framework for their own operations, even though they had different cultures, networks and technical capabilities.
Other potential benefits for participants of such an initiative might be greater bargaining power for device procurement or access to premium content. However, this would require an level of co-operation and co-ordination that is unlikely to materialise in the short term if at all. Indeed, if SingTel's experiences with its Asian subsidiaries are anything to go by, the tangible benefits of loose alliances such as AWI are unlikely to amount to more than an extension of roaming agreements, with the added advantages of ad-hoc co-operation with friendly peers. While this is a step forward, it is unlikely to have a significant impact on the position of these operators in the regional or global market context.
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