Service providers need to look ahead

Companies should invest in technologies relevant for future even if these seem irrelevant in current times, notes panel of industry players at Mobile World Congress 2011.
Written by Liau Yun Qing, Contributor

BARCELONA--Service providers need to invest in technologies to bring them into the future even if it is not obvious now that these will help them win the race, urge a panel of speakers who identify mobile Internet as a high growth area.

During his keynote at the Mobile World Congress 2011 here Wednesday, Cisco Systems Chairman and CEO John Chambers said service providers need to look forward and place their bets on technologies relevant for the future, even though its advantages might not be obvious now.

"You have to be willing to place your investments [on technologies] three to five years before they are obvious," he said. "You have to be willing to ride through short-term criticisms and not be distracted by where you are taking your company."

Chambers believes the future will be dominated by mobile Internet and video.

"People used to talk about these as separate categories. In my opinion, these will be the characteristics of all fundamental innovation and business change for the next ten years," he said.

Masayoshi Son, chairman and CEO of Japanese telecommunications company, Softbank, pointed to his own organization as an example to underscore the importance of staying ahead of the curve. He described the company's 2006 acquisition of Vodafone Japan as a "crazy bet" at that time because the US$20 billion deal was transacted in cash and used mostly to pay off debts.

Moreover, Softbank was losing US$1 billion a year, brought on by the dot.com bust at the turn of the millennium and its share price dipped 60 percent following the announcement of the acquisition.

The bet, however, paid off, Son said, noting that Softbank managed to increased in value despite the telecom market's flat revenue growth and increasing CAPEX (capital expenditure). This was driven by the growth of its market share as well as the increase of total ARPU (average revenue per user), he said.

The company's gamble on data services also played a role in boosting ARPU, which helped to offset the drop in ARPU for voice services, he added.

Today, all Softbank customers are 3G subscribers compared to the world average of 22 percent, and 85 percent of new subscribers are smartphone users, he said. The mobile operator is Japan's third-largest.

Son projected that data traffic increased 1,200 times per user in the past 10 years and this is set to grow even more, particularly as content such as video become richer. This is the reason why mobile Internet will continue to be a big bet for the company, he said.

Liau Yun Qing of ZDNet Asia reported from Mobile World Congress 2011 in Barcelona, Spain.

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