white paper Predictions for Mobility in 2014 Managing the Complete Lifecycle of Global Communications

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1 white paper W H I T E PA P E R Predictions for Mobility in 2014 Managing the Complete Lifecycle of Global Communications Tangoe Europe Limited 9-10 Park Square Milton Park Abingdon Oxon OX14 4RR UK Phone: +44 (0)

2 INTRODUCTION Many mobile carriers will consolidate their offerings to stay relevant and competitive, while simultaneously offering larger coverage areas at lower costs. PREDICTIONS At the beginning of a new year, it s always good practice to reflect on trends and patterns from the previous year and project that forward as an industry roadmap for the future. An industry roadmap can help to prepare for upcoming changes to the mobile industry and also to brace for the impact that these changes will have on short and longterm decision making. The following are seven predictions for enterprise mobility in 2014, based on current market research and trends. Prediction #1 Mobile Carrier Consolidation Will Accelerate Over the Next Three Years Many mobile carriers, particularly those that reside outside of the US, have accrued enormous debt from having to purchase mobile frequencies, licensing, and the cost of installing infrastructure. This debt hinders carriers from making necessary investments to make them more competitive in their market, such as installing the latest LTE and 4G technologies. Many European countries do not yet have the licensing to offer 4G service. Countries that do have 4G licensing have an extremely low deployment rate as they lack the necessary infrastructure required to sustain reliable 4G services to their customers. The prediction is that many mobile carriers will consolidate their offerings to stay relevant and competitive, while simultaneously offering larger coverage areas at lower costs. There are a number of underperforming business units of mobility in Europe, particularly in southern Europe. Companies like Vodafone and Telefonica are struggling to make money in these markets because of intense competition and a struggling economy. This puts both the enterprise and consumer spending under immense pressure. Under the circumstances, these markets are now attracting value to organizations that have the ability to borrow money at historically low rates. This provides the opportunity for investors to buy bonds at a reasonable rate, and offers an enticing acquisition price for the foreseeable future. These acquisition prices will most likely be unavailable in the next few years. Another driver of accelerated mobile carrier consolidation is that most carriers outside the US are envious that there are a handful of major mobile providers able to maintain high average revenue per use (ARPU) rate for combined voice and data services. This is simply unavailable outside of the US marketplace. By making strategic acquisitions and investing in networks, companies that are successful in these endeavors will be able to price their products at a premium, which would increase the ARPU rate for new acquisitions. 2

3 Prediction #2 There Will Be at Least One Mega Deal in 2014 It is within reason to believe that there will be at least one Mega Deal in the world of mobility in It is predicted that a deal similar to SoftBank buying Sprint, or Verizon buying out the stake in Vodafone, is on the horizon for One likely outcome is AT&T making a move outside of North America, potentially buying Vodafone s European assets. Vodafone could also increase its stake and acquire full ownership of some of the investments it has made overseas. Alternatively, Softbank has plenty of capital and could follow in the footsteps of Sprint, buying assets outside of Japan. Other possibilities are Telmex and Georgia Telecom making waves. Telmex has been aggressive in the marketplace and has both an excess of capital for investing and the ability to borrow more if needed. Georgia Telecom has acquired more mobile licenses and is experiencing overall growth in their total mobile subscriber base, and are a legitimate candidate primed to make a deal. An informal Tangoe poll of webinar participants revealed that 46 percent of respondents are planning to migrate completely away from BlackBerry handsets and infrastructure, while only 17 percent plan to continue using both the handset and infrastructure in their enterprise. Another factor of this Mega-Deal is the topic of security. Outside of the US there is concern regarding the impact of the NSA and US carriers turning over personal data to such clandestine security operations. If AT&T does in fact make a move for Vodafone, the belief is that it will be heavily scrutinised in terms of how AT&T handles customer data with potentially sensitive implications. Multinational companies need to think about the fact that the European Union has a published agenda in attempt to consolidate Europe down to just a handful of carriers. Currently, Europe has over 120 carriers through the continent, all of which are small in sise and lack the funding to make necessary investments to grow their business. The result of this is a predicted massive consolidation in Europe that will start in 2014, but take several years to come to fruition. Prediction #3 BlackBerry Pulls a Nokia BlackBerry is currently in the midst of a rebuilding process. Their stock shares are down considerably and they are struggling to compete in the current smartphone market. Another major prediction for 2014 is that BlackBerry will pull a Nokia and their handset division will most likely be acquired by another organization. The BlackBerry brand still possesses value, but the handset division is their point of weakness. An informal Tangoe poll of webinar participants revealed that 46 percent of respondents are planning to migrate completely away from BlackBerry handsets and infrastructure, while only 17 percent plan to continue using both the handset and infrastructure in their enterprise. BlackBerry has invested heavily in research and development for these devices, and they are losing the battle in such a competitive market. BlackBerry does, however, provide a legitimate option for cross platform security and encrypted mobile device management software. Some organizations will stick with BlackBerry specifically for these particular services, and BlackBerry will continue to invest in them. 3

4 After acquiring Nokia and offering the ability to connect the entire infrastructure (mobile device, tablet, PC) in a single platform, Microsoft is now on the rise as a viable mobile device in the enterprise. BlackBerry also possesses value in other avenues that extend beyond their devices and enterprise security offerings. They acquired Q&X software, which acts as the brains of automotive infotainment and GPS services in newer model cars. This software works very well, and anchors stable relationships with major automakers, both domestically and abroad. This software provides an asset that potential investors could see as providing long-term value for the future. Finally, while BlackBerry may be struggling, the most valuable part of their business might be their patent portfolio. Intellectual property is a huge part of the company s current value as smartphone patents are high in demand. Whoever acquires these patents will also acquire a strong defense for cross-industry lawsuits, providing protection against potential lawsuits in exchange for patent licensing to other organizations. These patents alone are estimated to be worth between 2-3 billion dollars. This is another factor that leans toward a potential acquisition in Prediction #4 Enterprises Will Embrace Microsoft for Mobility Microsoft s acquisition of Nokia has resulted in a viable enterprise mobile platform, and another prediction for mobility in 2014 is that enterprises will embrace Microsoft as a sustainable enterprise mobile platform. Many organizations rely on Apple as their enterprise mobile platform of choice. Recently, a number of corporate customers have stopped the deployment of Apple devices in their organization because application developers were encountering limitations when using an Apple API (Application Programming Interface) such as limitations on multi-tasking and productivity features. The result is that more developers are moving toward Windows-based platforms where APIs are easier to customise. Additionally, there are many more developers, both domestic and international, who are well-versed in the Windowsbased programming language. Another factor that alludes to enterprises embracing Microsoft for mobility is the presence of an enticing licensing model. Microsoft has the ability to offer Windows-based or Microsoft Office-based apps to be available on multiple devices, instead of licensing them individually. For example, if an employee is using a Windows phone, a Windowstablet, and a Windows desktop or notebook, that user can link these devices with a single license, synching files and documents between all devices in the corporate cloud. The licensing cost is extremely competitive and can be used on multiple devices with ease. In the past, Microsoft devices have been bulky and unattractive to users. After acquiring Nokia and offering the ability to connect the entire infrastructure (mobile device, tablet, PC) in a single platform, Microsoft is now on the rise as a viable mobile device in the enterprise. The initial reviews on Microsoft s Lumina devices are good, and more users are realising the benefits of a Windows-based communications lifecycle in the workplace. This will allow enterprises to be more aggressive in mandating a Microsoft mobility solution. 4

5 The prediction is that Microsoft will increase its market share of enterprise mobility, upwards of a 20 percent increase by the end of Q4 2014, instilling Microsoft as the clear number two enterprise platform behind ios. In a recent informal poll conducted by Tangoe, 46 percent of respondents said they were currently evaluating Windows as a viable mobile platform, aiming to purchase and implement Windows devices into their enterprise within the next year. 6 percent of respondents claimed to be considering completely replacing BlackBerry devices with Windows devices. Prediction #5 Enterprise Roaming Costs Will Decline Sharply This past year, T-Mobile announced an unlimited 2G data roaming plan that is available worldwide, predominantly in countries where enterprise road warriors frequently travel. The result of this announcement is that T-Mobile, who many enterprises did not consider a worthwhile carrier in the past, is now gaining traction in the enterprise mobility space. This offer will have an effect on other carriers as they will need to compete. Another prediction for 2014 is that enterprise roaming costs will see a sharp decline. In a recent informal poll conducted by Tangoe, 46 percent of respondents said they were currently evaluating Windows as a viable mobile platform, aiming to purchase and implement Windows devices into their enterprise within the next year. In response to this, other carriers, such as Verizon and AT&T will have to protect their market share. One possible response is to offer competitive pricing with respect to roaming charges. Another possibility is looking into WiFi offloading, wherein mobile users are off-loaded from cellular networks to WiFi networks. This method is more cost effective as WiFi networks are generally cheaper to run and have less bandwidth issues than cellular networks. AT&T now offers free international hot spots that automatically link to data plans when traveling abroad. Verizon, no longer tied to Vodafone, is now free to strike roaming agreements with carriers in the countries where Vodafone has a presence. This creates competition between carriers, and will most likely result in more competitively priced roaming plans. The European Commission has approved regulations in an attempt to lower charges associated with using mobile phones abroad. This has been legislated to occur in July 2014, but it only applies to European countries, not US based companies who have employees traveling to Europe. This could lead to T-Mobile gaining more enterprise market share and increased adoption in the US, particularly with companies that have a large international traveler footprint. Tangoe s polling of enterprise clients revealed that in regards to this new T-Mobile offer, 31 percent of respondents do not currently use T-Mobile but are seriously considering changing that based on the recent changes to their pricing model. This supports the prediction that enterprise roaming costs will see a decline in the very near future. Prediction #6 Major Toll Free Data Deal Will be Announced Carriers are currently cut out of content subscription fees, but they are responsible for all the cost and the burden of supporting their network for video screening applications like YouTube and Netflix. These applications put a stress on carriers as HD video streaming takes up a huge amount of bandwidth and results in lots of network traffic. Enterprises are now dealing with data caps from companies like Verizon and AT&T, yet they still need to use massive amounts of data on fast networks, complete with affordable pricing. 5

6 There is talk that the hype surrounding BYOD will fade in 2014, and it will evolve into fragmented and hybrid solutions that solve enterprise problems synonymous with individual liable devices. The prediction here is that a content or cloud provider, such as Amazon or Hulu, will strike a toll free deal with a carrier for an exclusive relationship where any data that is downloaded from either the cloud-based app or content provider will not count against the carriers data cap. For example, consider when a user streams live sports from ESPN s video screening application. The concept is that ESPN could strike a deal with the carrier and agree that the content would be available exclusively on the carriers network. The streamed content would not count against the data plan. This would then drive users to ESPN and both parties would share in the advertising revenue stream created by this exclusive relationship. Microsoft could very easily become a Mobile Virtual Network Operator by buying carrier bandwidth from a major provider and offering access to a third platform, where Microsoft data would not count towards the data cap. In 2014, an organization will most likely strike a major toll free data deal. Prediction #7 BYOD Hype Will Fade The BYOD phenomenon has engrained itself into the enterprise. There is talk that the hype surrounding BYOD will fade in 2014, and it will evolve into fragmented and hybrid solutions that solve enterprise problems synonymous with individual liable devices. The reasoning behind this is that BYOD solutions have not delivered the savings that enterprises have expected, and in some cases, these devices have increased costs due to the extra layers of security and device monitoring required by IT. Enterprises are trending towards hybrid solutions. For example, some enterprises determine that certain employees simply do not require a corporate liable device, but if they want to use their own device, they will have to agree to severe device restrictions, including which networks they will have access to, and which applications are approved. Another factor pointing to the BYOD hype fading is that the risk in the enterprise is still not fully understood and is in its initial stages. The prediction is that enterprises will begin to retreat from a full BYOD model to a more hybrid model. The savings and productivity boosts commonly associated with BYOD aren t as impactful as anticipated, and the cost of mitigating security risk, as well as the necessary software and infrastructure involved will outweigh the benefits. Furthermore, signs point to a public BYOD incident in 2014 that will force organizations to re-examine their BYOD policies. While there have been smaller incidents involving a loss of sensitive and corporate data, no major incidents have been reported as of yet. Potential lawsuits involving auto accidents where the at-fault driver is distracted by a corporate mandated conference call is a very real possibility. Organizations are going to have to re-think their policies and make sure that they are secure and defensible, weighing the benefits of BYOD against the potentially disastrous consequences of such an imprecise business model. 6

7 SUMMARY The mobile industry is one of constant growth and change. Analyzing past trends and identifying industry patterns can help to minimise the impact these changes will have on the enterprise in the future. The aforementioned predictions are based on market research and current trends. Geared towards short and long-term decision making, these forecasts can help to formulate an industry roadmap for the future of mobility in 2014 and beyond. ABOUT TANGOE Tangoe (NASDAQ: TNGO) is a leading global provider of Connection Lifecycle Management software and services to a wide range of global enterprises and service providers. The company s Connection Lifecycle Management technology, Matrix, is an on-demand suite of software and services designed to turn on, manage, secure, and support various connections in an enterprise s communications lifecycle, including mobile, fixed, machine, cloud, social, and IT. Additional information about Tangoe can be found at Tangoe is a registered trademark of Tangoe, Inc. 7