Vendors look to multimedia Messaging to drive sales - World News

CommunicationsWeek International, Feb 4, 2002 by Joanne Taaffe

With the market for handsets near saturation point in many key European markets, mobile equipment vendors like Nokia hope new features and services such as multimedia messaging services (MMS) will persuade subscribers to trade in their old phones.

"We believe that packet-data MMS and color screens will be drivers for replacement in 2002," said Jorma Ollila, chairman and chief executive of Nokia, speaking to analysts about the company's fourth quarter results (see News in Brief, left).

But it was rival Ericsson that drew first blood in the competition for a potentially lucrative market, winning a major contract this month to provide MMS software to the world's biggest mobile operator. Vodafone plc, and its subsidiaries.

Battered in the fixed network infrastructure market, Ericsson, which derives a much smaller percentage of its revenues from handsets than does Nokia, is also counting on MMS to drive mobile infrastructure business.

"The most important lesson may be that Ericsson [and other vendors] are not prepared to let MMS get away from them as they did SMS," said Paul Coster, senior analyst, communications software, at JP Morgan in New York. Specialist software companies such as Logica largely cornered the market for SMS infrastructure software.

Both Ericsson and Motorola foresee the mobile network infrastructure shrinking by 10% in 2002.

But even if infrastructure manufacturers manage to capture the MMS software market over the course of 2002, this does not mean that this year MMS will make much of an impact on hand-set sales or operators' revenues.

"We are somewhat skeptical about the claims being made. This is the year of [MMS] deployment, but in terms of [MMS] end users, it's not going to happen," said Ben Wood. senior analyst at Gartner Inc., based in Egham, England. Neither Gartner nor UBS Warburg believe that MMS services will take off among subscribers before 2003.

Yet, as Nokia's Ollila points out, operators cannot rely on revenue growth coming from voice. "A realization with key operators is that the voice paradigm is coming to transition and this is the year we've really got to make [GPRS, EDGE and handset technologies] happen [with] the color screens and services that support it," he said. "There's urgency and trust and the momentum [among operators]"

In its latest financial results, Vodafone stated that data services like text messaging accounted for 12% of group revenues during the month of December. Vodafone hopes to reap between 20% and 25% of its revenue from data by 2004.

The company said, "greater functionality of MMS will be the starting point of a broader customer experience, which will pave the way for 3G usage."

Other operators have similar ambitions for new services based on MMS. Telecom Italia Mobile (TIM), which has been a driving force behind the GSM Association's m-services initiative, is optimistic that MMS will become available next quarter. "The release two of m-services with MMS is coming in Springtime," said Mauro Sentinelli, managing director of TIM.

Nokia, however, puts the date later and foresees MMS handsets and service becoming available only in the latter half of 2002. "Operators are working on the second half of the year," said Ollila.

This does not mean that Ericsson, Nokia and Motorola will not achieve growth in the handset market. Nokia forecasts sales in 2002 of between 420 million and 440 million devices. Of this total, Ollila said, approximately 46% will be sold in Europe, 18% in Asia Pacific and 35% in the Americas. Motorola estimates a total of 420 million handset shipments in 2002.

Color screens will help win customers, note analysts--even if subscribers do not snap up MMS services as quickly as vendors hope.

And Nokia will continue to ride on its brand. "Nokia may be a little ambitious with how fast these services will take off...but it is still going to do very well," said Gartner's Wood. "It will excel in the market because it is an aspirational brand."

Multimedia messaging service vendors

Network Operator               Vendor    Date

Xfera (Spain)                  Comverse  May 2001

Telenor (Norway)               CMG       July 2001

Sonera (Finland)               Nokia     July 2001

Europolitan Vodafone (Sweden)  Comverse  September 2001 (trial
                                         ongoing, but likely to be
                                         displaced by Ericsson)

Telia (four platforms, to      CMG       August 2001 (trial)
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Denmark, Finland, and Sweden)

Orange (United Kingdom)        Logica    November 2001 (trial)

Vodafone (*)                   Ericsson  January 2002

(*)Vodafone D2 (Germany), Panafon Vodafone (Greece), Eircell Vodafone
(Ireland), Omnitel Vodafone (Italy), Vodafone (formerly Telecel;
Portugal), Airtel Vodafone (Spain), Europolitan Vodafone (sweden)

Source: Gartner Inc.