Opera cleans up from carrier contracts
Opera Software sees operators such as Vodafone Group bringing in more revenue as carriers seek to wrest a piece of the $226 billion market for mobile services away from Apple, Google and Nokia.
The Norwegian maker of desktop and mobile-phone Web browsers is building service platforms with 12 of the world’s 30 biggest carriers, including AT&T. and Vodafone, chief executive officer Lars Boilesen, 43, said in an interview.
“There’s a battle going on between the brand manufacturers and the operators, and we may be betting a little more on the operators,” Boilesen said. “We’re going for all of them.”
Apple, Google and Nokia have built software and media download shops to capture customers’ cash and loyalty, frustrating operators who want to expand services beyond ringtones and screen wallpapers. Some operators are using Opera’s software to fight back as new mobile broadband networks in countries such as Russia and India make it easier for customers to load their phones with extras.
Phone companies use the Opera Mini browser to present content and applications on cheaper handsets, paying the Oslo- based company between 1 euro ($1.31) and 3 euros per active user a year, Boilesen said. Operators generated more than 30 percent of Opera’s 168.9 million kroner ($27.7 million) in sales in the second quarter and are set to increase.
The Opera Mini versions developed with carriers have grown from almost no users at the start of the year to 5.2 million revenue-generating users at midyear, according to the company.
‘Cup of Tea’
Vodafone turned to Opera to get customers in Egypt, South Africa and Turkey to use e-mail and look at job advertisements. Compression technology lets the browsers run fast on older devices and 2G networks.
“Opera provides full Internet access to a customer whose mobile phone may be his only access to the Internet,” said Jonathan Bill, head of markets for Vodafone Internet Services. The cost is “typically the price of a cup of tea in whatever market we’re in.”
The global mobile value-added service market is set to grow to $340 billion in 2014 from $200 billion last year and $226 billion this year, led by China, India and Indonesia, according to a July report from researcher Informa Telecoms & Media. The figures include revenue to handset vendors and other content providers for services accessed over mobile networks.
“The operator needs to be convinced the incremental revenue will be more than they’re paying Opera,” said Peder Strand, an Oslo-based analyst at SEB Enskilda Bank, who has a “buy” recommendation on Opera.
Spun off in 1994 from Telenor, the Nordic region’s largest phone company, Opera sold shares in 2004. The stock has risen 36 percent this year, giving the company a market value of 3.26 billion kroner.
The biggest markets for Opera Mini are Russia, where it works with Mobile Telesystems OJSC, OAO MegaFon and Tele2; India, where it partners with Virgin Mobile, Vodafone and Tata Communications Ltd.; and Indonesia, where it works with Telekomunikasi Selular PT. It’s also working with Millicom International Cellular SA’s Tigo brand in Latin America.
Taiwan’s MediaTek, maker of one of the fastest-growing low-end phone platforms, has begun loading Opera onto its chipsets, which gets it onto handsets from new vendors such as India’s Micromax Informatics Ltd.
Although Opera browsers can be used with higher-end smartphones, its edge comes from working on basic phones, which account for a majority of emerging markets devices. As bandwidth increases and more smartphones are sold, Opera may see its opportunities shrink.
“They seem to be the best choice for low-bandwidth countries,” said Andre Adolfsen, an Oslo-based analyst at Nordea Markets. “When improved bandwidth and smartphones penetrate these markets as well I believe Opera will struggle to compete with major original equipment makers such as Google, Apple, Microsoft and maybe Nokia.”
Nokia, which still works with Opera, is equipping its own mobile phone browser with compression technology from Novarra, which it acquired earlier this year. It’s also got joint applications stores with China Mobile and with Orange in the U.K. and France.
Enskilda’s Strand sees license revenue from phone companies as a better bet than customizing software for handset makers. “We expect significant pickup in profits over the next year,” he said.
--Editors: Vidya Root, Robert Valpuesta
To contact the reporter on this story: Diana ben-Aaron in Helsinki at [email protected]; Meera Bhatia at [email protected]
To contact the editor responsible for this story: Vidya Root in Paris at [email protected]loomberg.net