KaiOS shows why it is critical to Africa’s digital ambition

Working in tandem with Vodacom, KaiOS has brought another smart-feature phone to the market, this time in Tanzania for the remarkable price of $20.

With an install base of 80 million already, the alternative operating system is proving to be a very viable and attractive alternative for the development markets. The latest push forward is in Tanzania, with the $20 Smart Kitochi connected-feature phone, which has sold out already. Vodacom said 5,000 devices were sold in the first four days, while the team is waiting for another shipment to land next week.

The device is built on the MediaTek chipset and powered by the KaiOS operating system, enabling 3G and 4G connectivity, access to a new KaiOS app store and many slimmed-down features which we take as commonplace today.

The emergence of KaiOS, and the enthusiasm of the telcos to embrace a new dynamic, is helping the team tackle a major hurdle for shrinking the digital divide in Africa; affordability of internet connected devices.

When you consider the monthly take home salary of an individual in Africa could be as little as $100, the internet becomes an unachievable dream. Who can spare money to invest in a smartphone when you have to pay the rent and feed your family? This is where KaiOS fits into the equation; it has driven the creation of an ecosystem to manufacture feature phones with 3G and 4G connectivity features. It is a compromise. A no-frills device which allows some of the world’s poorest individuals to benefit from the digital economy.

What is worth noting is this is not a direct threat to the dominance of Android in the operating system segment. KaiOS should be seen as complementary to Google’s efforts.

Firstly, what is always worth bearing in mind is that Google is a KaiOS investor. It was one of the four companies which funnelled cash into the business to drive development in the early years.

Secondly, Google services will continue to run on KaiOS devices. The team has no intention to create alternative products in-house, such as mapping or messaging features. Although it is a different operating system, the more successful KaiOS is, the more exposure Google products get.

Finally, the monetization model at KaiOS is completely different to Android. Whereas the Google team drive revenues by placing products as default applications on Android devices, KaiOS generates cash through revenue sharing models and commission earned through in-app purchases.

Like Android, KaiOS is free of license fees for the telcos, an important aspect of the model. As soon as licensing fees are introduced, there is a risk of telcos charging more for the devices, which will lead to a smaller install base for KaiOS. Charging licensing fees would undermine the very concept of the business.

Google has once again invested very intelligently. To drive future revenues, Google needs to gain exposure to more individuals. Unfortunately, Android is a smartphone OS and not entirely applicable to the developing markets. It could be re-imagined, but then again it might be much more efficient to simply invest in a company which can specifically build an OS for smart feature phones. The slimmed down version of Android looks to be living on limited time and it would not be surprising to see the OS culled.

With more and more affordable devices flooding onto the market, more people are taking into the digital economy. If KaiOS continues to grow its user base, Google’s products such as Maps and YouTube, which are installed as default on the devices, are used by more people. By investing in KaiOS, Google has gained an extra 80 million customers, and these are still the early days.

KaiOS has already launched in several markets, though India is the most successful to date. In partnership with Reliance Jio, the Jio phone has proven to be very popular allowing KaiOS to surpass Apple iOS as the second most common OS in the market. There will be launches in the near future, but this all depends on the appetite of the telcos.

KaiOS highlighted during a press conference that it is the telcos who decide future launches, as they have the retail presence to push the smart-feature devices out to the market. Although handing over control to a third-party is not the most comfortable position to be in, there is drive from the telcos.

If the telcos are going to secure additional revenues, they will need more people to be connected. Device affordability is one of the biggest challenges to connect the unconnected, so expect to see some aggressive moves forward with new device launches. Vodacom is a very good partner for KaiOS, with the telco maintaining a presence in 32 African nations.

Connecting the unconnected is still a monumental challenge in African, though the creation and aggressive deployment of new ideas is generating momentum. Underpinning all of this success is the emergence of affordable, internet-connected devices, and an operating system which is perfectly designed for the unique connectivity landscape in Africa. KaiOS has a very bright future and the importance of this business should never be undervalued.

Motorola resurrects the Razr as a foldy smartphone

It was inevitable really, wasn’t it? Motorola is hoping the Razr feature phone brand can be transplanted into the smartphone era.

The Razr was probably the last time Motorola achieved mass market success in the handset market, but that was 15 years ago. Things have moved on a bit since then but if the brand, design and form factor worked before, it can work again, right? That seems to be what Moto is counting on by launching a smartphone based on the original concept.

The defining industrial design tweak is that this one is the first to bring foldy screen technology to the clamshell form factor. The result is essentially a regular modern smartphone that can fold in half. This distinguishes the new Razr from earlier efforts from Samsung and Huawei, because they’re more of an attempt to go in the other direction  and turn a phone into a tablet by unfolding it.

Moto doesn’t seem to have published a press release so you’re spared the generic-yet-hyperbolic canned quote about how this is the best thing since sliced bread. The site created to let you find out more does speak of ‘a design that shatters the status quo’, so that’s something. And there’s both a vid and a GIF, which you can see below.

Verizon seems to have the initial exclusive on the new Razr, and will start flogging it for $1,500 in the new year. A lot of that cost is down to the foldy screen, of course, but punters might have expected a better chip than the Snapdragon 710 for their grand-and-a-half. Maybe the form factor prohibits more powerful chips due to heat considerations and there is a generous 128GB of storage as consolation.

The original Razr sold well mainly because it looked cool and, at a time when handset design has stagnated, that may be all this one needs to take off too. The price will obviously scare most people off though, and having got used to carrying six inch devices around it remains to be seen how much of a USP being able to fold this one in half will be. Still, fair play to Moto for giving it a go.

 

Bringing Internet to the Other Half of the World

According to data published by the International Telecoms Union (ITU), the United Nations agency overseeing the telecoms industry, 3.9 billion people, or 51.2% of the world’s total population, were already connected to the internet by the end of 2018. While the 50% mark was hit half a year earlier than the agency’s previous estimate, it nevertheless means that half of the world’s population remains unconnected.

Here we are sharing the opening section of this Telecoms.com Intelligence special briefing to look at the status of the unconnected and under-connected parts of the world and explores how the industry as well as the public sector can overcome the challenges to bring internet to the half of the world yet to be connected.

The full version of the report is available for free to download here.

Introduction: why half of the world is still unconnected

The low internet penetration is particularly acute in the developing countries. While 81% of the population in the developed world are already using the internet, only 45% in the developing countries can do so. Among them, less than 20% of the population in the 47 least developed countries, defined as “low-income countries that are suffering from long-term impediments to growth”, enjoy this luxury.

Source: ITU

There are three leading factors at play to leave a large part of the world off the grid. The first two are interlinked one way or another, the third is out of the telecoms industry’s remit. The most obvious one is pure economics. Diminishing marginal return or increasing marginal cost, often both at the same time, means operators will be less and less motivated to connect the next subscriber than the last. This could be down to the distribution of population. The more sparsely populated the location is, the less rewarding for the operators to reach them it becomes, because, even if the returns are assumed to be equal, the cost will be higher. This could also be related to the socio-economic status of the people. The less well-off the population is, the less attractive it becomes for operators to make the effort, because, even if the cost could be assumed equal, the return would be lower.

There are also technology barriers. Unfriendly terrains, for example mountainous areas, prove extremely challenging for operators to overcome. Related to the economic factors, these areas are also typically not the most densely populated. Satellite communication could be used as an emergency solution but would be too costly to use as regular internet access mode, or for operators to provide it if there is not a sizeable user base especially business users.

In some cases, the hurdle is simply too high for telecoms alone to clear. High internet penetration in North Korea is highly unlikely to happen in the near future without a fundamental change to the country itself, for example.

With these considerations in mind, this report will address the first two factors affecting internet penetration: economic and technology. Specifically, it will attempt to provide answers to these questions:

  • On the supply side, what technology solutions have been made available to drive down the cost level, therefore to make connecting the unconnected more appealing to telecom operators? What are still debatable or being desired? What business case do they present to operators?
  • On the demand side, what factors need to be in place for the unconnected population to be able to afford the connection, and to be willing to embrace it? And what are the factors beyond cost that may also drive the demand?

——————————-

The rest of this briefing includes sections on:

  • Supply side solutions: OpenRAN, TIP, and all that
  • The drivers for demand: affordability and more
  • What else should be in place?
  • An interview with Thecla Mbongue, Senior Analyst, Ovum

To access the full briefing please click here

Handsets are now the biggest hurdle to adoption in Africa – MTN CEO

Connecting the African continent is always going to be a complicated job, but the availability of handsets is now the biggest challenge according to MTN CEO Rob Schuter.

When most people visit the continent of Africa, they are likely drawn to touristic countries such as Morocco, South Africa or Tunisia, and while some scenes might jar, the picture is misleading. These countries might not be as advanced as those in Europe or North America, but they are not a fair representation of the wider continent either, as Schuter highlighted at AfricaCom 2019.

MTN has roughly 220 million subscribers across the region, though only 87 million are mobile broadband customers. Like traditional banking, only a third of the African continent is connected to the internet. Deployment of connectivity infrastructure might be motoring along, but adoption of these services is not.

There is of course a myriad of reasons for this, but according to Shuter, the affordability of handsets is at the top of the list.

Average monthly earnings in Africa are as little as $100 a month. ARPU is $4, which is perhaps on the steep side, though most entry level smart-feature phones cost $40. This is where it becomes difficult for an individual to take the step into the digital economy; how many individuals can justify 40% of their monthly income to purchase a device?

That said, the situation is not as dire as it used to be. MTN has launched the Smart S device, a hybrid device with the appearance of a feature phone but with some internet services capabilities, Vodacom has launched a number of different alternatives such as the Vibe 4G or the Smart Kicka 3, while Nokia and Alcatel have debuted their own devices as well. But despite the efforts to decrease price, more work needs to be done.

During one of the keynote panel sessions, Shuter’s point was echoed by Schalk Visser, CTO of Cell C, a challenger MNO in South Africa. Visser said there as still a remarkable number of unconnected individuals in the connected areas. Infrastructure has been deployed, addressing one of the key barriers to digital inclusion, though it is clear only a fraction of the problems are being addressed.

But while this is a significant challenge, it should also be noted the African connectivity conundrum is a tapestry of complication.

CHASE is a useful acronym to bear in mind here. Coverage, Handsets, Affordability, Service bundles and Education. The mobile ecosystem cannot exist with infrastructure to provide the coverage, handsets to act as the interface, affordable tariffs, and ecosystem of services and individuals who are educated in the ways and means of the internet economy.

Digital inclusion is of course a significant challenge for anyone based on the African continent, but affordable and reliable handsets are now the top challenge.

US on the verge of signing some kind of trade deal with China

US Commerce Secretary Wilbur Ross has said his country is close to signing a deal with China that could lead to an easing of some trade restrictions.

Ross (pictured) said as much to Bloomberg, with the usual caveats about nothing being set in stone. Many media have been reporting their own conjecture about what this could mean for Huawei as fact, but Ross was keen to stress this deal doesn’t affect the ‘entity list’, which prevents US companies doing business with Huawei.

There was some couched optimism about licenses being granted, that would enable specific companies to conduct specific trade with Huawei, but then again the US has been sitting on a bunch of license applications for a while without apparently granting any. Arguable the biggest of these would be one that allows Google and Huawei to work together, thus enabling the latter to install the full version of Android on its phones.

It’s all very well for Ross to insist the entity list and the trade war are unrelated, but US foot-dragging over granting those licenses implies the contrary. Trade wars are a game of chicken in which each side raises the stakes to give them more weight in negotiations. Putting national champion Huawei in existential danger via the entity list is just too convenient a negotiating chip for its to be plausible that the two issues are unrelated.

 

Vodafone announces strategic virtue-signalling partnership

Operator group Vodafone will be flogging the Fairphone 3 to its European customers from next year.

As the name implies, the Fairphone aspires to be fairer than other phones. “Fairphone builds a deeper understanding between people and their products, driving conversations about what ‘fair’ really means,” explains the company’s website. Those conversations are apparently still ongoing as we could find no definition of the term on the site other than a regular insistence that it’s something everyone should be striving towards.

Nebulous platitudes aside, the substantial differentiator for Fairphones lies in their ecological credentials. There is an emphasis on renewable materials and sourcing, which presumably means the manufacture and distribution of a Fairphone somehow does less damage to the environment than that of regular phones. But this doesn’t seem to be enough for Fairphone, which has also adopted a broader social agenda. “It’s no secret: we’re out to change the world,” declares the website.

Without, for one second, questioning Vodafone’s commitment to fairness and that sort of thing, its newly-announced partnership with Fairphone does provide some rather convenient, off-the-shelf corporte virtue-signalling. Future Vodafone Group presentations will doubtless be replete with photos of happy, healthy, developing world, rare-earth metal miners and idyllic, unspoilt wildernesses.

“This partnership with Fairphone aligns with Vodafone’s purpose to improve the lives of 1 billion people while halving its environmental impact by 2025,” said the press release. “This commitment by Vodafone includes halving its carbon footprint and purchasing all electricity from renewable sources by 2025, and Vodafone has committed to reuse, resell or recycle 100% of its network waste and help customers extend the lives of the devices they already own.”

“At Vodafone, we’re working hard to build a digital future that works for everyone and this strategic partnership between Vodafone and Fairphone brings together our expertise as Europe’s leading and largest converged technology communications company with the recognised expert in sustainable smartphones,” said Vodafone Group Chief Commercial Operations & Strategy Officer Ahmed Essam.

“Fairphone is showing that there is a market for more ethical phones to inspire the rest of the industry to produce more ethically,” said Fairphone CEO, Eva Gouwens. “Working with a large operator such as Vodafone helps to bring sustainable electronics to the mainstream market and therefore this is one of the strongest signals we can send to the rest of the industry.”

Fairphone seems to have its messaging a bit confused. It’s hard to find fault with its eco aspirations, but conflating those with ill-defined, subjective concepts such as ethics and fairness is at best a distraction. The phone itself charges a premium for all this virtue, which is fair enough (see what we did there?), but we doubt many people will decide they’re virtuous enough to pay it.

Apple continues its transition from products to services

Quarterly revenues for gadget giant Apple were up year-on-year but down for the full year, as the company increasingly relies on services.

The headline of Apple’s latest quarterly announcement read: ‘Services Revenue Reaches All-Time High of $12.5 Billion’. This achievement masked the fact iPhone revenues continue to decline, which in turn dragged full year revenues into the red. On the whole, however, these were solid results for Apple and it seems to be managing its strategic transition well.

“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

The services side of things was the focus of the tech press in its analysis. Apparently Apple pay transaction volume overtook that of PayPal in the most recent quarter. A significant initiative that illustrates the symbiosis of the services and hardware side is Apple’s decision to offer interest-free financing of new iPhones through its own credit card. This will also be a significant blow for the postpaid phone contract sector as subscribers will no longer be dependent on operators for handset financing.

The fact that iPhone shipments are declining is not disastrous, so long as Apple maintains the massive iOS installed -base. As the Apple Pay numbers show, Apple’s services are bound to do well so long as there are lots of iPhones in use. The financing initiative implies Apple is worried about that installed-base declining, however, and may not be the last time we see Apple further incentivising people to buy iPhones.

The columns in the table below are as follows: fiscal Q4 2019, Q4 2018, full fiscal year 2019, full year 2018.

Samsung smartphone recovery overshadowed by semiconductor gloom

Samsung’s Q3 2019 numbers show improved performance in the smartphone business, but the semiconductor sector remains weak, which contributed to the 56% decrease in corporate level operating profit.

Overall the company has delivered sequential improvement over Q2. Total revenues stood at KRW 62 trillion ($53 billion), representing a 10% QoQ improvement despite being 5% lower than the same quarter a year ago. The corporate level operating profit of KRW 7.78 trillion ($6.7 billion) was 56% lower than a year ago, albeit registering a growth of 18% over the previous quarter.

The IT & Mobile communications group, which includes the smartphone and mobile network businesses, now the biggest revenue generator of the company, delivered the strongest recovery. Total income from mobile handsets, predominantly smartphones, amounted to KRW 28.1 trillion ($24 billion), a 17% increase over a year ago, and 16% over last quarter.

More impressive was the profit growth: operating profit at the business group level grew by 31.5% year-on-year, and 87% quarter-on-quarter. The company attributed the profit improvement to “a product mix improvement and cost reduction after a lineup transition” including contributing from the new phablet Note 10 as well as the entry level A series. The “extended technology leadership via launch of Galaxy Fold and additional 5G models” also helped. At the last IFA show in September Samsung announced it had already shipped 2 million 5G phones and expected the volume to exceed 4 million by the end of 2019. Samsung is believed to have increased its smartphone market share to 21%, retaining the global leadership.

In contrast to the smartphone business’s recovery was the continued depressed performance of the Device Solutions group, which includes the semiconductors and display panel businesses, and is by far Samsung’s biggest profit generator. To illustrate the importance of this group to Samsung’s overall performance, the group level revenue, KRW 26.64 trillion ($23 billion), represented 43% of the company’s total revenue, but the operating profit, KRW 4.24 trillion ($3.6 billion), accounted for 55% of the total operating profit of Samsung Electronics, at a 16% operating margin. In comparison, the IT & Mobile group’s operating margin was at less than 10%.

The memory chip sector was particularly weak, where the revenues went down by 37% from a year ago to reach $13.26 trillion ($11 billion) although it was an 8% improvement from last quarter. The operating profit collapsed to KRW 3.05 trillion ($2.6 billion), a mere 22% of the level a year ago, and also more than 10% drop from an already weak Q2. This indicated increased demand for shipment but at depressed price levels.

Looking at Q4 and 2020, Samsung believes 5G will have a big impact on the company’s performance. It foresees that the profitability of the smartphone business will continue to be a challenge in Q4 “due to weaker mix from dissipating new model effects of Note 10 and increased marketing cost under strong seasonality”. For 2020 this group will “enhance competitiveness throughout entire lineup and by addressing growing 5G demand; strengthen foundation for further sales growth, mainly driven by foldable; expand sales of premium models and optimize operations for low-end to mid-range models to improve profitability.”

For the semiconductor sector, Samsung expects the demand for memory chips to be solid in Q4 as clients are replenishing inventory again, although it does note “uncertainties likely to linger due to issues in the external environment.” The system large-scale integration (S.LSI) business expects growth in “shipments of 5G 1-Chip SoC and 64Mp & 108Mp high-resolution image sensors”.

Xiaomi goes Suomi for camera research

The Chinese smartphone maker Xiaomi has set up in Finland its largest R&D centre outside of China for imaging technologies.

Xiaomi announced today that it has opened an R&D centre in Tampere, west Finland, to focus on smartphone camera technologies, including camera algorithms, machine learning, signal processing, and image and video processing. This will be Xiaomi’s largest Camera R&D team outside of China, the company says.

“The setup of this R&D team in Finnish city Tampere is a milestone in our global expansion journey. In this journey, not only do we consolidate ourselves in operations and business, but also work with local talents to further improve our products with highly innovative technologies,” said Wang Xiang, Senior Vice President of Xiaomi, adding that “this move all the more highlights our longstanding commitment of ‘innovation for everyone’.”

First reported by the website Suomimobiili.fi, Xiaomi’s local business entity, Xiaomi Finland Oy, was incorporated in May, and has rented an office space for around two-dozen employees at the Hermia Technology Park (Hermia-teknologiapuisto), not far from the University of Tampere’s technology campus, which is rated as one of the leading facilities in imaging related research.

Tampere used to be a key R&D centre for Nokia, giving the Finnish phone maker the leadership in camera phones. As Xiaomi’s press releases acknowledged, Tampere “has been greatly contributing to camera and imaging related innovations of leading smartphone brands since the 1990s.” That legacy is not lost. According to an earlier report by the local newspaper, Aamulehit, Nokia entered into a significant patent licensing agreement with Xiaomi two years ago.

Jarno Nikkanen, one of Xiaomi’s first Finnish employees and the Head of Xiaomi Finland R&D, was a Nokia veteran, with a PhD in signal processing from the Tampere University of Technology (now merged with the University of Tampere). He started his current role in June, according to his LinkedIn profile. “Xiaomi’s philosophy has been innovative and highly engaging. It’s all about empowering the teams and individuals to find solutions on their own. What we’re developing in Tampere will end up in the hands of hundreds of millions of users and Mi Fans around the world. That is really motivating,” said Nikkanen in the press release.

Xiaomi was not the first smartphone company to tap into local talents in Finland following the capitulation of Nokia’s phone business. Huawei set up its first R&D centre in Helsinki in 2012, to conduct new technology research for mobile devices, then a new facility in Tampere in 2016, to focus on camera, audio and imaging technologies for consumer electronics.