July 27, 2010 / 12:35 PM / in 8 years

UPDATE 1-Telecom software groups merge in app store battle

* Telco software groups WAC and JIL merge

* Goal is to harmonise software for mobile applications

* First phones with new software to be shown in Feb 2011

(Adds analyst, comments)

By Tarmo Virki, European technology correspondent

HELSINKI, July 27 (Reuters) - Two telecom operator-backed software groups are merging to counter increasing competition from new rivals Google (GOOG.O) and Apple (AAPL.O) for mobile phone applications.

Uniting the two groups — smaller, more-established JIL and wider application alliance WAC — will let software developers reach a large share of their telecom operator members’ 3 billion customers with just one version of software.

The merged group will act as a wholesaler, distributing software from multiple developers to individual operators.

For most small development houses it would be too costly to create dozens of versions of the software to reach each operators’ online apps store separately.

Apple’s App Store, launched in June 2008, created a market for mobile applications, or small programmes, worth $4.1 billion last year, according to research firm Chetan Sharma.

WAC — whose founding members include AT&T (T.N), China Mobile (0941.HK), Telefonica (TEF.MC) and Vodafone (VOD.L) — aims for the first stores using WAC software to open before February 2011.

“WAC, by sheer scale, will have dominance in the market,” Daniel Gurrola, vice president for strategy from France Telecom’s FTE.PA mobile Orange arm, told a conference call with analysts and journalists.

But with consumers mostly choosing to download free applications, some analysts questioned a plan to build a massive new store to battle dozens of similar existing stores.

“If you want to battle Apple you don’t have to build the world’s largest app store, you need a more focused one. They need to create services consumers are willing to pay for,” said John Strand, founder and chief executive of Danish telecoms consultancy Strand Consult.

“Operators are now investing heavily into something which does not generate any cash — they are destroying shareholder value,” he said.

Strand Consult estimates the average price of an application distributed through the Apple App Store at just $0.26.

LONG ROAD AHEAD

Major telecom operators formed the WAC alliance in February to build an open platform that will deliver applications to all mobile phone users, but analysts have been sceptical whether so many operators could work together efficiently. [ID:nLDE61E1NX]

“The growing challenge for developers is not only fragmentation at a software platform level, but also the channel to market,” said Geoff Blaber, analyst at British telecoms consultancy CCS Insight.

“WAC has a long and challenging road ahead but it’s responding swiftly to the key factors that are critical to developers,” Blaber said.

Bharti Airtel (BRTI.BO), MTN Group (MTNJ.J), NTT DoCoMo (9437.T), Orange and Orascom Telecom ORTE.CA are also among the founding members of the WAC alliance.

The alliance is supported also by three of the world’s largest phone makers — LG Electronics (066570.KS), Samsung (005930.KS) and Sony Ericsson (6758.T) (ERICb.ST).

The first phone models using new WAC software would be shown at the Mobile World Congress wireless trade show in February 2011 and reach the market around May 2011, WAC said.

JIL groups China Mobile, Softbank (9984.T), Vodafone and Verizon Wireless (VZ.N) — all of which also founded WAC.

Additional reporting by Paul Sandle and Kate Holton in London; Editing by Michael Shields and Erica Billingham

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