This was possibly the most important Nokia World event ever. Nokia had to demonstrate that it can deliver against its plans. In February 2011, Nokia communicated its intention to team up with Microsoft to develop its new platform and to “entrust” its Symbian operating system to Accenture. In total, 3,000 visitors from 70 countries attended Nokia World 2011 in London to hear and see what the “new Nokia” looks like.
In essence, it was clear what Nokia World 2011 would be all about before the actual event had even started. Nokia had to produce a device that can take on the iPhone and the Galaxy. At the event, Nokia announced the launch of the first “real Windows phone” in the form of the Lumia 800. The result is an impressive device that certainly secured Nokia a seat at the table of the tripartite of leading smartphones platforms.
At a price point of €420, the Lumia 800 impresses through a very intuitive and refreshing interface. And yes, the choice of Microsoft as a partner has certainly produced the best ever Nokia device. It will give Apple and Samsung a run for their money. It was all the more noticeable that Microsoft was absent during the key note address. Nokia also unveiled its emerging market flagship "Asha" device series, which sits somewhere between feature and smartphones. The Asha family comprises four models that target the youth segment in emerging markets. These devices are priced between €60 to €115, feature touch and QWERTY, games like Angry Birds, and one of them is also dual SIM.
In recent weeks, Sprint’s shares have been hammered. The share price has fallen by 40% since the beginning of the year, reflecting investors’ concerns about the long-term position of Sprint in the US wireless market. Not surprisingly, Sprint has been the most vocal opponent of the planned $39B acquisition of T-Mobile US by AT&T, which was announced in March 2011. Sprint argues that the deal would manifest itself in a loss of competition in the US wireless market if the fourth- and second-largest wireless carriers in the US merge (Sprint is No. 3). The US Department of Justice (DoJ) seems to share this concern and blocked the acquisition in August 2011 in order to preserve a vibrant and competitive marketplace.
Despite the DoJ’s opposition, most observers expected some form of compromise to emerge, even if it took a court fight to do so. Both AT&T and Deutsche Telekom (DT) reiterated their eagerness to pursue the deal as the DoJ announced its decision. However, in our view, Sprint’s challenging situation increases the likelihood that the deal will not go through as planned: Sprint looks weaker now than several months ago. Its announcement in October 2011 that it will take on additional debt to fund the rollout of its LTE network only increases liquidity concerns. This will sway the DOJ’s position further toward rejecting the deal for good in an effort to support a healthy US wireless market.
It’s easy to bash incumbent telcos, to count them as being among the losers in the digital revolution. Cloud services players are taking business from telcos in the storage and server capacity space. Over-the-top providers are free-riding on the telco infrastructure. Software firms are eating into the communication business. Regulators are pressing for further price reductions. And to top this scenario, telcos are continuing to undercut each other in price wars.
During a round of executive discussions with Forrester, Orange Business Services (OBS) has shown that against these odds, it keeps a pretty even keel regarding the most hyped topics in ICT, most notably cloud and mobility. OBS is selective in its cloud offerings, focusing on UCaaS and IaaS. UCaaS is a natural extension of its communication business and thus falls into OBS’ home turf. All telcos should see communication services from the cloud as a natural extension of what they have always done.
OBS’ drive into IaaS, meanwhile, looks like a less convincing pitch. Its IaaS offering essentially comprises a virtual data centre offering with virtual firewalls and load balancing. The question is: How OBS can compete against the dominant cloud players in the storage and server space? In the short term, such an approach is conceivable. However, OBS will need to provide a much broader range of virtual infrastructure choices to avoid slipping into a low-margin market segment.