Telcos battle as Net brands go mobile

By Niclas Mika - Analysis

BARCELONA (Reuters) - Internet brands are eyeing the 3 billion mobile phone users worldwide as an audience and carriers must fight to get a slice of the profit, executives at the wireless industry's main trade show in Barcelona said.

The threat of Google (GOOG.O), Yahoo (YHOO.O), social networking site Facebook and other Internet brands going mobile looms large over telecoms operators, who want their customers to surf the Web on the go but also want to generate revenue beyond charging for voice and data.

Bit by bit, carriers are losing control.

Apple's (AAPL.O) iPhone is so popular that operators have to surrender part of their revenue to be able to sell it, the world's top handset maker Nokia (NOK1V.HE) is pushing into music and gaming, and Internet access on phones gives customers options for finding free content, bypassing paid-for services.

Vodafone (VOD.L) Chief Executive Arun Sarin said carriers should not sit back and allow themselves to be reduced to mere transporters of data, "dumb pipes" in the industry jargon.

"Customers want social networking, email, SMS, instant messaging, voice -- you name it," Sarin said in a keynote address to the Mobile World Congress. "Communication is our core business. We have to be in all of these spaces."

Executives are keenly aware of the backlash that could follow any attempt to target subscribers too obviously or allow ads to become intrusive, but they argued that existing relationships mean they know a lot more about their customers than Internet companies do.

"They are constantly guessing, they are constantly sending you stuff, Internet advertising that is relevant part of the time and irrelevant most of the time," Sarin said.

"We can target advertising really well. As an industry, this can become a very important source of revenue without giving up the privacy bond that we have with customers."

Carriers still have a lot to learn, however, said Timo Ahopelto, head of strategy of Helsinki-based Blyk, which offers 16 to 24-year-olds free calls and text messages in exchange for accepting advertising.

"They are not very good at compiling the user data that they actually have and providing that to advertisers for targeting and to gain insight," he told Reuters.

BUSINESS PARTNERS BEWARE

The head of TeliaSonera's (TLSN.ST) mobile business, Kenneth Karlberg, urged carriers to be cautious in making deals with Internet companies or handset makers such as Nokia.

Carriers run the risk of getting sucked into a business model that does not benefit them, Karlberg told Reuters.

"We're not selling handsets, we're not selling clicks on Google sites, we have to find our own business," he said.