Vodafone, France Tel push to regain app edge from Apple

Vodafone Group Plc, France Telecom SA and other phone companies have been eclipsed by Apple, Google and Facebook in one of the most lucrative pieces of the booming smartphone market: services.

Now, they’re trying to claw back lost ground.

Seeking to avoid being just pipes that carried services and applications from Apple, Google and others, operators are starting to go beyond ringtones and links to radio and television channels to offer applications of their own.

Companies like Apple “need our investment to exist, but that’s not enough for us to grow,” France Telecom CEO Stephane Richard said. “We need to find ways to be more useful to our clients, like through mobile banking and electronic health.”

The services tug-of-war will be discussed at the Morgan Stanley Technology, Media & Telecom Conference starting in Barcelona today. The stakes are high. The worldwide market for games, entertainment and workplace tools for mobile devices may balloon to $40 billion by 2014, as agsinst $14.3 billion this year, according to consulting firm Booz & Co

Operators have only a small piece of this pie. Revenues of Facebook, the world’s largest social-networking site, may double to at least $1.4 billion this year. Apple’s revenue from apps sold through its iTunes Store rose 22 per cent in the latest quarter to about $1.2 billion, while Google’s sales surged about 23 per cent to about $7.3 billion.

Smartphone rise
In contrast, many large telecommunication companies’ revenue is stagnant or declining, with Telefonica SA, Europe’s second-largest operator, and AT&T, US’s largest carrier, seeing sales slide by 2.1 per cent and 0.8 per cent, respectively, last year.

Mobile devices have become the fastest-growing piece of the telecom market. Smartphone shipments are set to pass 268 million units this year, as against 122 million reported by Gartner Inc in 2007, when Apple unveiled iPhone .