Multimedia messaging wars intensify

A $380m multimedia messaging contract awarded to Ericsson by Vodafone could prove less valuable to the Swedish mobile equipment company.

Melissa Stimpson of Vodafone said: “We may consider an alternative supplier in order to deliver multimedia messaging (MMS) services to customers on time. Progress with Ericsson to date suggests it would be prudent to do so.”

At issue is whether Ericsson's software will be ready by the middle of this year when Vodafone wants to introduce MMS software, which will allow premium-rate messages to be sent over mobile networks including combinations of pictures, music and sounds. But what is bad news for Ericsson could be good news for the leading suppliers of short message services (SMS), the current generation of mobile messaging.

In a recent research note, ABN Amro said it expects a number of Vodafone's overseas operators to go back to their current messaging suppliers for systems integration work and even software. In particular, it says German operator Mannesmann is pressurising Vodafone to make changes to its MMS plans. ABN Amro expects CMG, Mannesmann's existing messaging supplier, to benefit if the contract comes up for re-tender.

CMG won a major contract with third-generation mobile licence holder Hutchison in February. Tony Richards of CMG said then: “This year we should generate about £50m from our (next generation) GPRS and 3G products. The bulk of that will come from this contract. This is our biggest-ever contract in our telecoms business.”

Other suppliers which have won MMS contracts this year include Logica, which has won two MMS contracts but cannot yet name the customers, and Nasdaq-listed Comverse Technology, which won an MMS contract from Bouygues Telecom in February. MMS technology from Comverse is already in use at Europolitan Vodafone in Sweden, which is carrying out a customer trial.

Operators are keen to start generating new revenues by offering MMS for which they will be able to charge around 30p as compared to the usual price of around 10p for a text message. Vodafone made a big announcement about awarding its entire MMS contract to Ericsson, which supplies most of the equipment for its mobile network, in January.

Shares in CMG and Logica fell when the Vodafone announcement was made in January. But Paul Rogers, director of market development at Logica, believes that MMS today is a bit like the early days of Wap [Wireless application protocol, a form of mobile internet access].

“There's a whole lot of hype about it,” he says “and suppliers are jostling for position. But until most people have new handsets which can display good colour graphics, and most networks have installed MMS, no operator is going to be making much money from it.

“Moreover,” he adds “a lot of these MMS contracts are not set in stone. Operators are indicating who they want as suppliers, but if the time comes for them to implement MMS and their chosen supplier is not ready, they will have left themselves the room for manoeuvre to buy from someone else.”

ABN Amro does not expect Vodafone to carry out a formal re-tendering process as this would involve some loss of face. It may just quietly award the contracts to the second-placed vendors from the original tender, it says. Vodafone was keen to point out that: “There's absolutely no change to the Ericsson contract.”

However, a research note from investment bank JP Morgan on Monday said fears that infrastructure vendors like Ericsson and Nokia would elbow out the incumbent messaging suppliers now seem overdone. It put both Logica and CMG on buy ratings and said a survey it had done of global wireless operators showed that 88 per cent were already procuring MMS software or will begin procurement this calendar year.

It put the value of the MMS centre market at £7.5m and said 21 per cent of respondents to its survey cited CMG as a probable or possible supplier; 16 per cent cent mentioned Ericsson or Comverse; 12 per cent mentioned Logica; and 10 per cent mentioned Nokia.

News in brief

Regulating premium-rate SMS

ICSTIS, the UK premium-rate call regulator, has received a number of complaints and enquiries about reverse-charge SMS - where a mobile user pays a premium rate to receive text messages rather than send them.

“Typical concerns,” according to ICSTIS deputy director Paul Whiteing “include the unsolicited and often misleading nature of promotional messages, inappropriate promotions sent to children, high bills, unclear instructions on how to unsubscribe from services, and a general lack of awareness among consumers of how these services should operate.”

It has issued a draft guideline on regulating reverse-charge SMSes - on www.icstis.org.uk - and invites comments from the industry.

Mobiles surpass fixed line

“The year 2002 will be remembered as the one when mobiles surpassed fixed lines,” according to Yoshio Utsumi, secretary-general of the International Telecommunication Union.

Speaking at the ITU's development conference in Istanbul, he said: “Currently, 97 countries have more mobile users than fixed-lines and almost one in six people on the planet have mobiles.”

The ITU also proposed new targets of 50 per cent household penetration for internet access in developed nations and 90 per cent coverage by mobile service in developing ones. Mr Utsumi believes effective regulation backed by governments is the key to encouraging inward investment into the telecoms sector in the Least Developed Countries and to making prices affordable.

From just 13 countries in 1990, some 115 countries, or over 60 per cent of the ITU's member states now have telecoms regulators.

Cisco wins MTU contractAcantho, an Italian internet service provider, which is planning to provide fibre over the last mile into multi-tenanted units, has ordered Cisco's Ethernet in the First Mile technology. Owned by a consortium of utility companies in the Emilia-Romagna region, Acantho is forging a new model, which does not rely on existing legacy copper infrastructure in the last mile. The service provider uses the existing rights of way owned by the utility company consortium to lay fibre-optic cable from its network edge direct to customers' buildings. The network infrastructure provides end-to-end Ethernet at speeds of 10mbps (million bits per second) to 100mbps right up to the socket in the customer's apartment or office.

Video over IP set to soar

Video conferencing over internet protocol (IP) networks will dominate over ISDN video calls by 2004, according to a report from US-based researchers Frost & Sullivan to be published next month. It predicts that this will pave the way for a substantial new customer base, including broadening revenues from the small and medium-sized enterprises and increased demand from the lower echelons of management. Melville Wallace, research analyst at Frost & Sullivan, expects more telecoms carriers to offer video conferencing as an additional service to their IP virtual private network customers. For example, the carrier KPNQwest and video conferencing specialist Global Videocom have teamed up to provide a hosted IP video conferencing solution.

Mobile bills will fall for US

The US will see continued growth in wireless consumer adoption while experiencing a fall in consumer average revenue per user (Arpu), according to a report from iGillottResearch. Realising the Full Potential of the Wireless market predicts that from 2001 to 2006, consumer Arpu will decrease 13 percent from $41.82 to $36.22 per month, in part driven by aggressive pricing and new consumers who have much lower Arpus than current subscribers.

In 2002, new consumer subscribers will average revenues of $33.04 per month but by 2006, these average revenues will fall to only $25.01 per month.

The US business market unit growth will gradually slow as the available market is penetrated, although business Arpu will continue to rise, says iGillottResearch.