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“Battle of the Brands” Mobile operators and handset manufacturers vie for consumer mindshare

Madanmohan Rao logs in from the World Handset Forum in Amsterdam

As mobile operators continue to seek increased influence over the design and branding of handsets, manufacturers of these handsets are faced with a new challenge in the turbulent world of mobile communications. How can handset manufacturers continue to maintain the value of their hardware brand?

This in turn leads to other interesting questions. What is the role of handset manufacturers in the overall brand relationship? Will the industry continue to support the same number of major brands or will there only be room for four or five ‘super brands’ in a few years’ time? How will new contract manufacturers move into this space, and what does this imply for the leading branded manufacturers?

Intriguing questions indeed, and this “battle of the mobile brands” formed a key focus of the recent World Handset Forum, hosted by IBC Telecoms in Amsterdam.

Trends on the handset front which transformed the Japanese wireless industry a few years ago are now appearing in other regions like Europe as well. In Japan, wireless operators like NTT DoCoMo exercise tight control on features and branding of the handsets manufactured by companies like NEC. Now, in Europe, wireless operator brands such as Vodafone and Orange are extending their brand strength beyond the consumer service to the wireless device itself – for instance, via “signature phones.”

Network operators around the world are increasingly specifying everything from the hardware to the applications and services included on the mobile handsets they sell. Manufacturers therefore need to effectively support these requirements and personalise devices for individual operators, advised Martin Keogh, Vice President, Global Product Management, Global Brand, Marketing and Products, Orange.

Orange has lined up a range of manufacturers for its signature handsets – including Nokia, Sony Ericsson, LG and Samsung. “Every six months, we give product manufacturers an updated three-year roadmap of product requirements,” said Keogh.

Handsets which meet these specifications – the “signature phones” – offer consistent, simple and compelling brand value. Orange released 1 million signature phones in 2003. “Our signature phones delivered almost double ARPU as compared to normal cellphones,” claimed Keogh.

Companies like Nokia are developing the smartphone market through open operating system technologies and industry partnerships which align Nokia’s brand strengths in domains like gaming with operator concern over business realities like ARPU. Opportunities are opening up for network operators, handset manufacturers and developers to benefit from an open platform standard, said Antti Vasara, Vice President, Technology Marketing & Sales, Nokia Technology Platforms. “The days of hypergrowth are over in the mobile business,” admitted Vasara.

The rise of contract manufacturers is sparking new business models in terminal design and production. Such developments in the mobile handset value chain are seriously challenging the conventional wisdom of the tradition handset business model and yielding viable but disruptive alternatives, according to Don Levy, head of strategic development at Bellwave, a South Korean handset manufacturer with offices in Shanghai, Beijing and San Diego.

Innovations in handset manufacturing and supply chain configuration have led to the rise of new kinds of players: ODMs (original design manufacturers, like BenQ), OEMs (original equipment manufacturers) and ODEs (original design and engineering firms, like Bellwave).

OEMs are increasingly outsourcing handset design and production to companies who in turn set up design and production facilities in manufacturing powerhouses like China, said Levy.

“We are witnessing the rise of OEMs in China who are using the huge domestic market for growth,” observed Levy, who traced the evolution of Chinese manufacturers like Bird and TCL right across the value chain from distribution and assembly to manufacturing and design. Within a few years, at least a couple of Chinese OEMs will become global OEMs, predicted Levy.

Recently, China slapped heavy import duties on handsets, thus forcing foreign handset manufacturers to set up domestic production facilities. Korean ODMs focused on the huge China market are now going global.

ODEs are more flexible than ODMs, and can thus be viewed as “the mouse between charging elephants” like Nokia and Siemens, joked Levy. And while much of the “battle of the brands” has focused on the tussle between operators and major handset brands, a significant role can be played by OEMs and ODMs who can now approach operators directly for lucrative handset orders.

Many of these manufacturers do not intend to slug it out on the marketing and consumer branding front with the likes of superbrands like Nokia, but can still eat away significant market share by striking deals with aggressive operators more intent on promoting their own mobile brands. And such agreements and financing issues are undoubtedly going to impact mobile fortunes as attention focuses on the “next billion” mobile subscribers, especially those in the emerging economies of the world.

“May you live in interesting times” is a famous Chinese curse. And the times are indeed getting interesting, especially for handset superbrands and the upstart OEMs/ODMs in China…..



Madanmohan Rao is the co-editor of “Asia Unplugged: The Wireless and Mobile Media Boom in the Asia-Pacific”

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