Smartphone Growth Sparks Investment Call

There will be more mobile connections than people in the world for the first time this year but the rapid proliferation of smartphones and tablets is causing unprecedented strain on global telecoms networks, according to one of the industry's most senior figures.

Franco Bernabè, chief executive of Telecom Italia and chairman of the GSMA, the industry's global lobbying body, delivers a stark appraisal of network outages already occurring around the world as more mobile users demand access to video, media and gaming while on the move using increasingly technologically advanced smartphones.

Mr Bernabè told the Financial Times ahead of the annual Mobile World Congress conference in Barcelona, which attracts more than 60,000 participants, that the industry needed to work in co-operation with companies such as handset makers that use the limited amount of spectrum.

The GSMA estimates that $800bn is needed for investment over the next four years in global mobile networks to meet the growth in demand for mobile broadband services, for both upgrading the physical infrastructure as well as bidding for the spectrum that can carry next-generation technology known as 4G or LTE signals. Despite the huge figure, this investment is within the reach of an industry that generates an annual $1,500bn in revenues, albeit with $200bn already invested each year.

Many mobile operators have a long-held frustration towards companies that generate huge revenues on the back of mobile networks demanding greater investment, ranging from certain handset makers to data-heavy services such as Facebook and YouTube. Mr Bernabè expresses a clear intention to encourage operators to work in co-operation with those that use their networks to solve problems including outages caused by having so many connections.

"The proliferation of smartphones has created problems that we need to address," he says "We need co-operation from a technical point of view and rules that are respectful of everyone. It is creating technical problems for networks." An improved network will be needed, Mr Bernabè says, to provide a global digital infrastructure to support the 9bn mobile connections that the GSMA estimates will be active by 2015. That compares with 6.6bn today, a figure that the industry body this year expects to exceed the 6.8bn global population.

There are now 1bn mobile broadband connections capable of carrying internet based services today, which means that almost a seventh of the world's population now use a smartphone or other connected devices.

This number is estimated to grow to about 2.5bn mobile broadband connections by 2015, which represents huge expansion in a market for phones that did not exist 10 years ago but that has been revolutionised by the introduction of Apple's iPhone and the similar devices now available on rival operating systems such as Android and Windows.

Mobile broadband, says Mr Bernabè, is becoming the most important access route to the internet. "Almost half of the world's population will be connected to mobile broadband," he says.

The next such industry shift will be in connecting machines and services to the internet rather than people. "Everything will be connected," he says, citing applications that would be transformed in areas such as health, education, transport and utilities. Hospitals are already using remote diagnosis, lessons being taught via video conferencing and cars being embedded with chips. He says that the problem with this growth in data for the mobile operators was there was not the same revenue growth as voice calls in the past.

He says part of the solution needed to come from governments, which he says had a tendency to "extract value from the industry" through spectrum auctions and taxation. "I am advocating a lighter touch or at least an understanding that the industry is no longer the cash cow that it was," he says.

One emerging market for the industry would be the creation of payment systems through SIM-based NFC technology services, he says. This creates a mobile phone that acts as much as a wallet, and the mobile phone provider that serves as the means of billing and payment. The GSMA predicts that there will be 1.5bn handsets with the capability to be used for payment purposes in the next three years, resulting in about $50bn in transactions.

The holdup, he says, was waiting for the rest of the retail market to move to recognise such systems, with handset makers and operators now ready to roll out the payments system in many markets of the world with standardised systems for NFC. Mr Bernabè now aims for greater co-operation across the industry to both further the new initiatives such as mobile wallets as well as to carry on the discussions with the services that use its infrastructure. "It is an immense industry that meets in Barcelona," he adds.

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