I will just focus on what I believe is a key strategic challenge for Ericsson in the next two years, my trip to Cannes last week reinforced my conviction that this is a real concern to address now.  I will leave the rest of the news for the next issue which will focus on Demo 2000 exhibition in Palm Springs.

VODAFONE-AIRTOUCH-MANNESMANN, OUR NEW COMPETITOR

I have for some time talked about franchising as a business model for operators as well as Internet companies to grow fast and with optimal level of investment. McDonalds is an example of a company that is “on the business, not only in it”.  Against sales royalties and startup fees, it lends its brand and business model for the use of the franchisees who offer their capital and their local market knowledge. McDonald’s offers branding support, training (McDonalds University), administration and planning systems, supply chain pooling benefits (I heard every fifth potato in America is bought by McDonalds.  Perhaps my Argentinian readers can confirm the percentage of Argentinian cattle ending up in a McDonald’s kitchen - the number is impressive.).

Applying business model standardization of this type to the emerging mobile Internet business has enormous benefits. On the bottom there is the need to gain speed and an early mover advantage. Gaining control of an operation through equity investment costs money (or require high market cap) and  it is a slow process with regulatory hurdles. Moreover, growing through franchising enables an operator to drive standards faster. Having just attended the IBC Mobile Billing 2000 conference in Cannes, I learnt how difficult and unresolved the task GPRS roaming is. Within a franchise business model complex billing schemes can be standardized which brings enormous benefit in time-to-market.

I would like to quote a recent issue of Global Mobile (Jan 19, 2000). Here a mobile industry newsletter talks about the very same issue under the title “Vodafone-Airtouch aims for global reach with mobile portal”.

“Even if it stops short of taking equity positions in cellular operators throughout the world, Vodafone Airtouch (VA) may achieve global reach for its services by licensing its mobile portal to third party operators. … For example, VA is only now completing its acquisition of a stake in a Kenyan cellular operator venture, two years after discussions first begun… …In recent weeks, VA officials have also cited India, Russia and China as potential markets for expansion…  …it seems only natural that Bell Atlantic would want to adopt the portal in other markets, for example in Mexico where it controls Iusacell… …VA will license its portal to fixed network ISPs (according to Chris Gent)…”

Since the article Phone.com has been added to the list of VA partners.

The only competitor to VA on a global basis is - Ericsson. With the worldwide customer base of 350 operators, we have a strategic opportunity to far outperform Vodafone Airtouch in fast global penetration of a new mobile Internet business model which makes us money. This is of course what eMode could be a vehicle for. And along with the defnition of franchising, we “would not have to be in the business, instead we could be on it.”

Vodafone Airtouch is trying to reduce us to the role of raising cattle on the pampas in Argentina. Is that what we want?