1. The EC’s negative view and ruling on market consolidation stalls M&A activity

Northstream unfortunately believes that during 2016, regulators will continue their hard and negative stance against market consolidation in the European mobile telecoms market. As a result, the potential mergers between Three/O2 in the UK and Three/Wind in Italy will not be approved. As a reaction to the negative ruling, operators across Europe will stall M&A activity and instead investigate alternative ways of cutting costs. Measures we will see are reduced CAPEX, even more network sharing, streamlining and out-sourcing.

Despite cost cutting, it’s only the top two or three players that have credible and solid business cases with which to deliver meaningful revenues and profits. The desire for M&A activity, therefore, is simply a natural evolution of the market. In the end, the EC will be forced to realize the new reality of the industry and re-evaluate their stance on in-market consolidation. As a result, 2016 will be a lost year for investments in Europe. By 2018, at the very latest, the current stance will change. Meanwhile, the regions that understand that consolidation is inevitable will be able to attract investment and gain an advantage.

2. Huawei must respond to Nokia and Ericsson moves

While the EC may be keen to prevent operator consolidation it has less jurisdiction over telecoms vendors. 2015 saw a lot of M&A activity in that space, with Nokia’s acquisition of Alcatel-Lucent the headline event. The broad thinking behind the move is to combine Nokia’s mobile strengths with A-Lu’s in fixed networks and that seems to have got their competitors thinking. Ericsson decided to take a more cautious approach by partnering with Cisco, but Huawei has so far made no significant M&A moves.

Huawei may believe its existing capabilities are more than enough to see off its augmented competitors but Telecoms.com wouldn’t be surprised to see the Chinese giant do a bit of shopping to bolster its position. Of course there’s no point in buying just for the sake of it, so much will depend on what, if any, strategic vulnerabilities the company might think it has. Will it look at fixed networking to counter Nokia or maybe address the enterprise comms strength anticipated by the Ericsson Cisco partnership? Time will tell but the smart money must be on Huawei looking to make a statement in 2016.

3. Chinese smartphone vendors are rising, not as fast as you would think, but don’t be fooled…

Northstream predicts that the Chinese vendors are not yet ready to challenge the dominant players in the West and they will continue to focus on growing/competing domestically in 2016. However, we do foresee that the Chinese vendors will be able to flood the emerging markets with their ”best bang for the buck” products, as soon as the ongoing developments of mobile infrastructure in these countries unlock the huge market potential.

Then they will have built the brand, capacity and competence to move-in big time in Europe and the US, among other places. The current market leaders should watch out, and perhaps revisit the reasons why another once-dominant market leader failed to differentiate itself and eventually spiraled into non-existence.

4. Someone will finally demonstrate the point of smart watches

The global wearables market exploded in 2015, tripling in size thanks largely to Apple and Xiaomi entering the market. While it was inevitable that these two consumer tech giants would be able to call upon millions of loyal fans to buy their latest shiny things, there is little evidence that people are using them for anything special.

What is the point of a smart watch? Is it just a dumb peripheral that primarily serves to spare you the hassle of having to put your hand in your pocket to get your smartphone out? Is it a standalone smart device that will supplant the smartphone and have us all talking to our wrists like something out of a 60s science fiction TV show? Is it nothing more than a glorified fitness band?

Telecoms.com is predicting, albeit with little confidence, that somebody will definitively answer these questions by coming up with a genuinely compelling use for them. For us the biggest obstacle is the UI. You can’t type on them and voice UIs such as Siri still haven’t caught on as much as expected. Maybe it will be some kind of gesture UI, allowing you to write by waving your hand around, or maybe it will be IoT cleverness to do with ticketing or retail. Let’s see.

5. Wi-Fi calling sees huge increase in service launches

Northstream expects that voice can take the same route as data and over time the majority of indoor voice traffic can be served by Wi-Fi. A positive consequence will be that operators can free up and re-farm more spectrum in the 2G and 3G bands that is currently used for voice. In order to provide seamless transition between cellular and Wi-Fi calls, operators need also to support VoLTE, which will boost the use case for VoLTE. In addition Wi-Fi calling can have positive effect on IMS deployments and use cases.

Native Wi-Fi calling raises some strategic questions though. Operators need to closely assess the impact on the enterprise segment, the perceived quality and value of their voice services, as well as what role to play in the provision of Wi-Fi infrastructure. Native Wi-Fi calling is one more step towards the separation of access and service. Wi-Fi can also increasingly be seen as the main competitor to 5G, particularly for indoor voice and data coverage in the future.

Not surprisingly, some operators are cautious to surrender control over the quality of their voice service to a device that now can choose between cellular and Wi-Fi. But overall, we believe that Wi-Fi calling offers more attractive benefits than challenges and we will see a rapid growth of launches in 2016 and 2017.

6. Multiplay will continue to grow in importance

As CSPs continue to feel the pinch from shrinking ARPUs, OTT competition and all the other usual CSP sob-story suspects they will continue to look for solutions offering ever more comprehensive bundles to their target markets.

2015 saw some big consolidation moves with the aim of creating a compelling fixed/mobile/content play to entice digital consumers. The combination of the UK’s dominant fixed line player – BT – with its biggest MNO – EE – is set to make things very awkward for their competitors, especially when you factor in BT’s content investments, such as premium sport. The same pattern can be seen across the world, most recently in Canada.

Telecoms.com expects this trend to continue throughout 2016, with some surprisingly big and counter-intuitive acquisitions. Content is likely to take on even greater importance to counter the perennial ‘dumb pipe’ dilemma, so look for unlikely partnerships between telecoms and media companies along the lines of Verizon’s acquisition of AOL.

7. Cloud giants and mobile operators partner for third party services

The telecom operators’ service offerings are focusing specifically around reliability of service and high security, although it is unclear what of these aspects is not already provided by the current global IT players in the space. Due to regulatory demands on localizing sensitive user data, IT players are setting up local data centers and partnering with local players for storing and managing sensitive user data.

When it comes to the PaaS and IaaS market, the leading OTTs (Google, Amazon & Microsoft) are adding so much capability to their platforms through heavy R&D they are gaining distance on the more local and regionalised players. At Northstram we therefore predict that operators will increase collaboration with these players, offering Managed Services and infrastructure services, and acting as resellers, rather than competing head to head. Due to regulations and local customer requirements, these global players will need local partners and connectivity, and managed connectivity is of course the core of the operators business.

8. NFV will come to life

2016 will see NFV continue to move from a presentation slide to the real world. 2015 saw 30 rollouts of NFV in the field from 15 operators, which demonstrated success mainly by virtualizing the LTE core network (evolve packet core) and customer premises equipment, helping telcos develop new enterprise services and offerings.

The plethora of proof of concept trials demonstrated at the ETSI NFV group over recent years indicate that there exists enormous potential for a variety of additional use-cases for NFV, and 2016 will see a number of Tier 1 operators and other early adopters of the technology begin to move more aggressively towards more sophisticated, virtualized infrastructure.

Telecoms.com also expects a wider majority of telcos who are yet to begin take-up start developing and rolling out solutions targeting the easy NFV wins, with industry vendors now more experienced in deploying live virtualized functions on the network.

In the long term, operators expect NFV-enabled infrastructures to change the enterprise service delivery landscape, and 2016 will see the early stages of this evolution as operators begin to benefit from the increased agility and flexibility with which they are able to deliver new services to their customers.

9. IoT starts walking the talk

As projected in Northstream’s predictions last year, IoT consumer demand has really started to take off. Northstream believes that in 2016, we will see continued strong growth. This will be stimulated by an increasing number of exciting offerings reaching the market in important and well established segments such as connected cars, connected homes and gaming/augmented reality gadgets.

All global ICT vendors in the world are focusing heavily on IoT as one of the key areas for future growth, but it is through innovative startup companies they will learn which applications and services that will best address consumer and enterprise needs. Innovation will spring from the startup arena – yet these players will be primarily dependent on established players to succeed in the market. Therefore, Northstream believes that 2016 will be the year when the IoT M&A wave truly hits the industry.

10. The foundations of 5G will become clear

Although the next major generation of wireless technology was still considered to be five years away from becoming a reality, 5G was still a dominant theme at Mobile World Congress earlier this year and is bound to be so once again in February 2016.

Telecoms.com expects the big difference one year on to be a lot more substance and granularity to all this 5G talk, with specific technologies, standards and use-cases being discussed with greater confidence as likely components to the eventual 5G standard.

In a running poll on the Telecoms.com home page readers were asked what they think will be the most important 5G technology. The clear winner was ‘IoT support’, but specific technologies such as SON, massive MIMO and full duplexing also featured strongly. Meanwhile in our Future of Mobile Networks survey the most important single technological feature of 5G was thought to be spectral efficiency.

All of these are likely to play a part, but by the end of 2016 we should have a good sense of exactly what the key component parts of the 5G standard will be.

Telecoms.com