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February 17, 2011 at 5:23 AM

Mobile World: Wireless industry salivates over worldwide potential

This story ran in the print edition of The Seattle Times on Feb. 17, 2011. -Sharon Chan

BARCELONA, Spain — While Americans snap up the latest iPhone and Android smartphones, most people in the world can’t afford them. But countries in Asia and Latin America are slowly getting into smartphones and other mobile broadband devices.

The steady growth outside the U.S. represents the greatest sales opportunity for the mobile industry. Four out of five new subscribers are from a developing country, according to Wireless Intelligence, a research firm in London.

It’s not surprising that all the companies at Mobile World Congress hope to get a piece of the global market.

Carriers here from China and Latin America all expressed optimism about the industry’s future, tempered with concerns about how they are going to keep up with the growth.

China Mobile said Tuesday it has 590 million subscribers, but only 90 million have smartphones. The low percentage of smartphone users represents an opportunity to move them up to more expensive phones and services.

Also, the country still has room to grow by reaching people who don’t have a cellphone.

“We see huge net additions in rural areas, although penetration has passed 100 percent in urban areas,” said China Mobile CEO Wang Jianzhou in a speech.

In all, China has 812 million subscribers total, according Wireless Intelligence. By contrast, Verizon Wireless has 94 million subscribers in the U.S., which has 296 million total subscribers.

Despite their lower smartphone penetration, Chinese phone makers are catching up quickly to those in South Korea and Japan.

On Wednesday, Chinese manufacturer Huawei showed several smartphones and a tablet running Google’s Android operating system.

The phones looked and felt competitive with models made just two years ago from Libertyville, Ill.-based Motorola Mobility and Taiwanese company HTC.

In Latin America, wireless growth has exploded over the past 10 years, going from 6 million subscribers in 2000 to 600 million in 2010. America Movil shared the numbers Tuesday in a speech by director general Daniel Hajj.

One challenge, Hajj noted, is that only a small percentage of subscribers have high-speed 3G service.

“We have to open the door to modernity for big segments of our population,” he said.

Nokia, the phone maker partnering with Microsoft to put Windows Phone 7 on its smartphones, is especially strong in selling phones to developing countries. Nokia Chief Executive Stephen Elop said Wednesday the company is the No. 1 brand among phone makers in China.

Nokia does extensive homework about what each country wants and how it customizes phones, said Will Stofega, analyst at the Framingham, Mass., research firm IDC.

“Nokia really does the research on local markets and understanding the local culture,” he said. “For instance, if you don’t have a flashlight on your phone in India, you’re DOA.”

Nokia’s strength in developing countries could help Microsoft gain a stronger foothold, although it’s unclear whether a Windows Phone would be affordable in lower-income countries.

Competitor Google gives away the Android platform to device makers, while Microsoft licenses its operating system.

The biggest challenge for developing countries is “how to cope with explosive growth in mobile data,” China Mobile’s Wang said in his speech. Upgrading to higher-speed 3G and 4G networks will cost carriers billions of dollars.

The U.S. has started rolling out 4G technologies. Japan lit up a 4G network nationwide in December.

To deal with the growth of mobile Internet use, Wang said, the future networks will probably combine Wi-Fi and mobile broadband technologies like 3G and 4G, with the phone knowing how to detect and toggle between the two.

Vodafone said that while 50 percent of its users are now smartphone users, “this explosion in data has not come with explosion in our network,” said CEO Vittorio Colao.

The carrier has benefited from new ways to manage the network and device software that minimizes data use, such as the Opera Mini mobile browser. The Opera browser competes with Microsoft’s Internet Explorer.

All carriers, in developed and developing countries alike, spoke of the need for open networks. “We are trying to avoid vertically oriented closed systems,” Colao said.

Microsoft CEO Steve Ballmer and Nokia’s Elop have both said several times the mobile world is shifting from a war of devices to a war of ecosystems — Apple, Google and Microsoft.

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