BlackBerries For All - Up To a Point
By Steve Wallage, Mon Dec 20 08:00:00 GMT 2004

A lot of carriers want to distribute RIM's BlackBerry, and RIM says it wants lots more carrier partners - but it's not all that simple.

Such is the lure of the BlackBerry that even in markets where it isn’t sold, users talk about it in hushed tones. And these are very attractive users for the operators: financial analysts, senior execs and simply people who love to send and receive e-mail with a mobile device. Its addictiveness is legendary, with one nickname for the device being the 'Crackberry'. Some users say they will sit at their desks and use the BlackBerry for e-mail while their desktop computer sits idle.

Despite its fame and stellar recent financial performance, the BlackBerry is still a niche product. Research in Motion (RIM), the manufacturer, has just passed the two million devices mark. Of these, around 80% are in the US, but its popularity continues to accelerate. According to Gartner figures, RIM’s market share of worldwide PDA shipments went from 5.3% in the second quarter of 2003 to 18.6% in the second quarter of 2004. Forrester predicts there will be more than 3 million active BlackBerry users by early 2006, while Merrill Lynch put it at a more upbeat 8.5 million by the middle of 2007.

The Lure For Operators

In simple terms, mobile operators want the BlackBerry because their most lucrative customers and prospects want the device. Although exact numbers are obviously difficult to get and vary widely, something like the top 10-20% of users contribute 80-90% of mobile operator profits. And, for the BlackBerry, users are also willing to churn from rival operators. One particular attraction for operators is that RIM has worked on specific market entry strategies to target the most profitable prospects.

RIM is always at pains to point out that it is not just a hardware company and not just about selling to individuals. With the BlackBerry Enterprise Server, a mobile operator can also use the BlackBerry as a way of selling to the enterprise market, which has typically proven to be a troublesome area. Although RIM has faced some criticism over the lack of software support or a focus on its own proprietary software, it has partnerships with the likes of PeopleSoft, and Siebel.

Mobile operators can also follow the development of RIM into other markets. It has plans to target six vertical applications; finance, government, healthcare, legal, public safety and real estate. A raft of new devices range from the 7100t smartphone to planned handsets optimized for corporate access to far more than e-mail. RIM also plans devices in 2005 that will support Bluetooth, 3G and Wi-Fi.

Finally, RIM also seems a safe partner. Although in its sweetspot of corporate wireless e-mail, it faces competition from vendors such as Seven, Visto and Good Technology, analysts expect it to surge ahead. A Merrill Lynch research note earlier in December suggested that "mindshare, installed base, customer service and carrier commitment represent formidable barriers to RIM's solution." Also, through BlackBerry Connect, a licensing program with third-party handset makers and OS providers, RIM has in the past year forged licensing deals with Nokia, Symbian, Microsoft, PalmSource, Samsung, Sony Ericsson, Siemens and Motorola.

The RIM Strategy

The RIM strategy is BlackBerries for all. It already supports 80 carriers worldwide in around 35 countries through its Carrier Business Unit. It expects to have "approximately 70 carriers in line for launching support over the coming weeks and months." There is a fairly standard service agreement with each individual carrier that does not vary widely by region.

RIM started its international expansion by contacting mobile operators directly, but has now moved to a more reactive model, as it is now typically approached by the carrier. The lure of the BlackBerry brand has meant that even mobile operators in less developed markets have been approaching RIM.

There are no limits to how many mobile operators RIM will support in a country market. For example, all the US and UK network operators supply BlackBerries. RIM expects to have around four partners per European country.

The Mobile Operator Problem

The reality is that being the first mobile operator in a market to offer the BlackBerry can be a huge competitive advantage. Recently in South Africa, both main operators, MTN and Vodacom, were running huge advertising campaigns claiming to be the first to provide the BlackBerry. Despite Vodacom having just launched 3G datacards, there was actually more customer interest in getting hold of a BlackBerry. This was despite most users in South Africa not even being sure how a BlackBerry actually differed from other devices.

The official response from RIM is that both are mobile operator partners. However, Vodacom, being part of the Vodafone network, can also sell the BlackBerry 7100v, which is unique to Vodafone affiliates. It also looks likely to benefit from the clout of its parent with RIM (one of the limited number of examples of an advantage accruing from being part of the Vodafone network).

RIM describes its challenge as “prioritization”. It relies on research from its market intelligence group to assess market opportunity, and then prioritize which mobile operators to work with, and in what order.

One clear beneficiary of this approach is China Mobile, which will start distributing the BlackBerry early in 2005. It is getting a lot of support in targeting high end users. RIM's investors are also watching its success in China very closely to see how much demand, and what sort of ARPU, the BlackBerry can achieve in this market.

So the bottom line for mobile operators is that you will probably be able to sell the BlackBerry, but you go down the queue if your market is not deemed to be an attractive one, or if you are not part of a major group. And, even when you start selling it, you may find all your rivals are already selling the BlackBerry.