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3GSM: Mobile's Fear Factor

BARCELONA -- 3GSM World Congress -- Mobile operators and vendors are in danger of having the rug pulled out from under their feet unless they learn to collaborate more and speed up developments, Vodafone Group plc (NYSE: VOD) CEO Arun Sarin told a packed keynote audience here yesterday.

Sarin cut through the almost tangible air of self congratulation at 3GSM by warning that the good times will disappear unless heads are knocked together and developments speeded up.

"It takes us too long to deliver a new service. We have been talking about things like mobile payments for years. It's time to stop talking and deliver," he said.

Sarin went on to note the pace of development among new services companies. "Other companies are entering our market, such as Microsoft Corp. (Nasdaq: MSFT) and Yahoo Inc. (Nasdaq: YHOO). And look at how quickly YouTube Inc. grew –- from nothing to 20 million users in 18 months."

Next-generation mobile infrastructure developments are advancing at a slow pace by contrast, Sarin said. LTE (long-term evolution), or 4G for GSM players, is still being deliberated by standards bodies, while WiMax is already commercially available.

The GSM Association (GSMA) (GSMA), an industry body that represents the world's GSM mobile operators, and the organizer of the 3GSM event, "needs to influence the ecosystem to ensure something does happen. If we don't react faster to the needs of operators, this industry will be marginalized," Sarin said.

Only minutes earlier, GSMA chairman Rob Conway had been promoting to the same audience a new mobile payments initiative in India. He also touted the GSM sector's importance to the global economy, and its overall health.

So what can mobile operators do to defend themselves against the threat of the alternative service providers? Join them.

"We need to adopt online models, the Web 2.0 model, and adapt our business model to make the services available. We need to occupy this space before someone else occupies it. Our knowledge of mobile customers is the key to success here," said Sarin.

In that sense, Vodafone has been leading the way with a string of partnerships announced during the past week with some of the leading names in online and IT services. (See Vodafone Takes MySpace Mobile, V'fone, Yahoo Extend Partnership, V'fone, MSFT Team on IM, Vodafone, Google Partner, Vodafone Offers Mobile YouTube, and Vodafone Takes EBay Mobile .)

The wireless carriers also need to push on with developing new revenue streams, Sarin added. Mobile is good, but "adding entertainment and content is better. And we need to compete in adjacent markets, such as fixed broadband. We need to pull more minutes away from the fixed line [carriers]," with services such as fixed/mobile convergence in people's homes.

Vodafone is one of several major carriers, including Orange SA (London/Paris: OGE) and Telecom Italia Mobile SpA (Milan: TIM), that have launched such services. Sarin said Vodafone has more than 2 million users of its converged Zuhause (Homezone) service in Germany.

"We also need to grasp new opportunities, such as mobile advertising, payments, and mobile TV. The mobile model is perfect for advertisers," Sarin said, noting carriers can target the adverts to specific customers via non-obtrusive, opt-in services. As he was speaking, Yahoo announced a major mobile advertising initiative. (See Yahoo Moves on Mobile Ads.)

Sarin also noted that the GSM carriers globally "have more than 2 billion users, and we can monetize that. But we need to build our [wireless] broadband networks to achieve this, or this opportunity will be taken away from us."

To make mobile advertising work, Sarin said the industry needs standards, such as the size of a banner advert for mobile phones, the specifications for video adverts, and a standardized way of reporting back to the advertisers. "If we have fragmentation, it will kill off the opportunity."

Sarin also commented on his excitement at becoming part of the Indian mobile market through the acquisition of a controlling stake in Hutchison Essar . (See Vodafone Wins Battle to Buy Essar.)

"India is a fabulous opportunity. The penetration today is only 13 percent, with 150 million subscribers. That's going to increase to 40 percent in a few short years. And only 40 percent of the population has mobile coverage today, and that will increase.

"The Indian government has good regulation that promotes network buildout. We are moving into the rural areas, too -– people there like to talk! We will take low-cost handsets and services such as mobile banking to the rural areas."

— Ray Le Maistre, International News Editor, Light Reading

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