The evolving relationship between MNOs and handset manufacturers.
Now that the 3G auction has finally taken place these will be exciting times for Pakistanis, and fortunately the key drivers required to establish a 3G ecosystem in the country are gaining momentum and will hopefully accelerate the adoption process. Perhaps the greatest enabler of this technological shift is the penetration of 3G-enabled handsets which are being critically looked at by both mobile network operators (MNOs) and the device industry. As a result, the MNO-handset manufacturer partnership, which has already seen a great deal of evolution, will now further solidify and become more strategic and synergised.
Over the last eight years, this partnership has evolved over three distinct phases.
1. Extremely niche, top of the pyramid, BlackBerry focused
The first solid footprint of the MNO-handset manufacturer relationship can be traced to 2006 when Research in Motion (RIM) signed a two-year exclusive partnership with Mobilink to introduce BlackBerry in Pakistan. The campaign’s theme ‘Email on the go’ clicked with an audience of high net worth customers and gave Indigo, Mobilink’s post paid brand, new equity. After two years RIM appointed a distributor (EMS) and the BlackBerry was then made available to customers of Ufone and other operators. Until 2011, BlackBerry remained the handset of choice for high value post paid and corporate customers and the initial partnership with Mobilink is a main reason why the company still has the largest base of corporate accounts in Pakistan. However, while this was a pioneering step in establishing partnerships between the two industries, very few people knew how difficult it was to churn out this campaign in the market. RIM, as a monopolistic market player was extremely dominant in its relationships with MNOs worldwide and enforced stringent rules of engagement. For example, not a single operator led piece of advertising could go into print without prior approval by RIM headquarters. Furthermore, operators had to adhere to ‘minimum order quantity’ (i.e. they had to pre-order the devices) months prior to any new launch. This phase was dominated by a single handset manufacturer and the relationship was imbalanced. Later, as a tactical move Mobilink introduced the Motorola Razor, which turned out to be a ‘blockbuster’ handset. In those days ‘introduction’ meant that the device was ‘available’ at the MNOs service centres; beyond this there was no value added proposition for the customer.
2. Mass market penetration
Ufone decided to focus on low cost feature phones as a way to further increase penetration by introducing bundling with Nokia Pakistan. An industry first, the idea was to bundle free minutes with new Nokia handsets to not only increase the customer base of Ufone users, but also further Nokia’s footprint in the feature phones segment. At that time, Nokia’s share in the sale of new devices was over 90%. However, although the campaign that followed was extremely innovative, it lacked marketing dollars. Nevertheless, it was instrumental in pushing MNOs towards bundling, a concept which remains the biggest synergy proposition between operators and handset manufacturers. The real game-changer was Ufone’s introduction of low end devices with free balance, minutes and SMS bundled with a new SIM. This ‘all in one telecom pack’ was an instant hit and drove volume at rates not seen before. The move helped Ufone penetrate the low end market and justified the decision to opt for low cost devices. Huawei was Ufone’s handset partner in this initiative, although it was not a big device manufacturer at that time. The campaign itself was a great hit and some handset manufacturers used its success as a benchmark, amending their product portfolios by listing ultra low end devices in their sales forecasts.
3. Internet for everyone
Next came the data or internet phase and MNOs started leveraging ‘hero’ smartphone device (‘hero’ is an industry term for when a MNO focuses the advertising and marketing on a particular device) launches in partnerships. The aim was to grow the mobile internet market by increasing data subscribers and usage. Nokia was the first handset manufacturer to realise the potential of bringing MNOs on board as strategic partners and introduced dedicated operator account managers whose job descriptions were totally focused on nurturing relationships with different MNOs. Taking a step in value proposition from regular voice, SMS and data bundles, Nokia partnered with Telenor Pakistan to introduce a youth-focused multi-variant offering. This partnership was innovative because the user interface of any given handset was enriched when a Telenor SIM was inserted into it. The project also opened up new revenue streams for MNOs.
Along with these developments, Pakistan experienced a significant change in smartphone preference. Android-based devices overtook BlackBerry, Nokia and even iPhone in terms of sales volume. Extremely aggressive competition among HTC, Huawei, LG, QMobile, Samsung and Voice exponentially expanded this category segment and brought affordable smartphones in the $100-200 range into the market. The competition created a snowball effect and brought new joint smartphone focused propositions to the market. QMobile, once considered to be the poor man’s Nokia, solidified its brand equity and turned into a volume driver in the smartphone category, attracting a much larger pool of customers with its sub $100 Noir series. Responding to this, MNOs had to change their handset manufacturer preference and collaborated with QMobile to leverage on its new smartphone sales volumes.
Before the rise of smartphones, mobile device manufacturers were the primary drivers of software and content innovation, as well as of new hardware development. However, with the rise of different mobile operating systems (OS) such as Android, Windows 8 and iOS, original equipment manufacturers (OEMs) found it difficult to differentiate themselves in terms of hardware functionality. Therefore, instead of just focusing on handset manufacturers, MNOs now need to give due importance to the other players in the value chain, including over the top (OTT) content, content providers and social networking sites.
In the 3G era the mobile internet is at the heart of a dynamic ecosystem of innovation, going beyond MNOs. Device manufacturers, including the OS developers, are driving innovation in the race to differentiate themselves and make smartphones faster, lighter and more intuitive to use. MNOs are responding to the demand for efficiencies as they seek to support the network demands of tomorrow at lower price points. Content providers are harnessing new hardware and software innovations and promoting the growth of developer communities to deliver their own innovative services and products to the consumer over mobile.
Khurram Mahboob is a telecom professional in Pakistan. email@example.com