a week in wireless


Com Vodacom Voda Voda Com Com


On Thursday this week Vodafone achieved a long-held ambition, announcing that it is to assume control of South African headquartered Vodacom. Until this week Vodafone had held a 50 per cent stake in the African player, which has operations in the Democratic Republic of Congo, Lesotho, Mozambique and Tanzania, as well as South Africa.

Vodafone doesn’t like fiddy (per) cent, though, because it doesn’t allow it to call the shots, and the firm’s comparative impotence in the South African JV (incumbent telco Telkom holds the other half) has been a source of frustration for some time.

This week, treating the global credit crunch with the disdain it deserves, Vodafone whacked £1.4bn (ZAR22.5bn) on the table and asked for another 15 per cent – an offer, it would seem, that Telkom couldn’t refuse. The plan is that Telkom will demerge the remaining 35 per cent to its existing shareholders, which include the South African Government.

As with all announcements of this nature, the deal is subject to a variety of conditions, including a 75 per cent approval rating from Telekom’s shareholders, and the Vodacom Group being listed on the JSE. Shareholder approval should be aided by a pledge made by the Government of South Africa and the Public Investment Corporation Ltd - which between them hold 58 per cent of Telkom – to vote in favour of the transaction.

One of the niggles for Vodafone over its holding in the South African firm has been the absence of the Vodafone brand from the markets in which Vodacom operates. As luck would have it, the Informer was chatting to David Wheldon this week, who spends his days as Vodafone’s global director of brand. (Wheldon was on his way to Vodafone HQ for a visit being paid by Lewis Hamilton, heading to Newbury to share some of the glory of Sunday’s Formula One motor racing world championship win with his team’s key sponsor).

Wheldon recalled the bad old days of Vodafone’s brand extension policy, when a new acquisition was first co-branded with Vodafone getting second billing, then after a while co-branded with Vodafone’s name up front before the third and final stage saw the original brand ditched altogether, leaving the Vodafone speech mark in glorious solitude. These days the process is far quicker: The firm’s recent move into India saw only six months elapse between the closing of the transaction and the installation of Vodafone as the new brand, Wheldon reported, with more than 480,000 individual pieces of signage and points of sale being replaced over a three week period. No mean feat.

So will we see the Vodafone brand replacing Vodacom’s? Not according to the firm’s official line. This runs as follows: “Vodafone has agreed with the Government of South Africa, inter alia [which, for the benefit of people like the Informer, who opted to study languages that are still actually in use, means ‘among other things’], that the Vodacom identity will remain visible on the African continent. Vodacom is a very strong brand in the markets in which it operates. Vodafone will look to leverage maximum value from the Vodacom brand and Vodafone’s established international brand.”

That could reasonably be interpreted to mean that some kind of co-brand arrangement is being planned. But such arrangements are only tolerated by the carrier in partnership arrangements where it doesn’t have equity stakes. And it certainly seems unlikely that Vodafone would allow another brand sole jurisdiction in a property where it holds a majority stake. More likely – and in line with Wheldon’s observations about the evolution of the firm’s branding policy – is that the Vodacom brand is set for eventual withdrawal.

This appears all the more probable when you consider that the South African Government has committed to retaining a minimum ten per cent stake in Vodacom only for a 12 month period after the planned JSE listing. Since Vodafone’s official pledge on the brand is made to the government as a shareholder, the Informer reckons things will probably change when that government relinquishes its stake.

Another carrier with brand on the brain is Kuwaiti outfit Zain. You’ll remember, won’t you, readers, that Zain embarked earlier this year on an ambitious rebrand of the African properties it absorbed through its acquisition of Celtel. Over last weekend, Zain hiked its stake in its Iraqi operation from 30 to 62 per cent, which gives it control over the troubled state’s largest mobile operator, which has more than 8.5 million customers.

The Informer supposes it’s a buyers market at the moment – it’s certainly not a seller’s market if you’re US operator Sprint Nextel, which has had as much luck trying to flog its misfit iDEN operation as Sir Clive Sinclair had with his revolutionary C5 urban transport solution.

In light of the lack of interest, Sprint’s decided to stick at it and now plans a rejuvenation of the unit. CEO Dan Hesse offered up this statement: “The iDEN network is a key differentiator for Sprint, as it allows us to offer products and services no other carrier in the industry can match.” How Hesse kept a straight face saying something like that when he’s been trying to offload said ‘key differentiator’ for months is beyond the Informer.

It’s true that one of the defining characteristics of a ‘key differentiator’ is that it’s something that nobody else has. But when nobody else has that something because none of them want it in the slightest, does the description still apply? By that definition, after all, facial herpes could be a ‘key differentiator’.

In truth Sprint would probably far rather be freed up to concentrate solely on its newest key differentiator which is its bright, shiny WiMAX network. In this direction, at least, there were some glad tidings for the US carrier this week. The FCC has given its approval to the New Clearwire Corporation JV that Sprint, Clearwire, Intel, Google, TimeWarner Cable, Comcast and Bright House Networks have established to pump WiMAX into the faces of all Americans.

AT&T Wireless had objected to the proposed venture on the grounds that it had not fully disclosed the amount of spectrum it would be using in the 2.5GHz frequency band, which could have represented an unfair advantage. But the FCC filed this under ‘P’ for ‘Poppycock’ and waved New Clearwire on through.

Not without one or two caveats, however. Sprint Nextel, says the FCC ruling, needs to “comply with a voluntary commitment to phase out its requests for federal high-cost universal service support over a five-year transition period and [enter into] a voluntary commitment to use counties for measuring compliance with the Commission’s wireless E911 location accuracy rules governing handset-based technologies.”

Some people just can’t stand to see others happy, though, and the FCC’s blessing of New Clearwire spurred IPCS, a Sprint affiliate, to step up its legal efforts to block the JV from going ahead on the grounds that it would break a service exclusivity agreement it has with the mobile operator in some regions in the US. IPCS is pursing its litigation efforts against New Clearwire in Illinois where it is expecting the start of a court hearing on 21 November to determine the legality of the New Clearwire JV.

As a shareholder vote on the New Clearwire JV is slated for 20 November by Sprint and Clearwire, a day before the court hearing starts, IPCS has requested a preliminary injunction against the closing of the JV.

IPCS posted a poor set of 3Q 2008 results this week, with year-on-year net profit falling from $7.5m to $2.4m. IPCS revenue fell to $132.1m to 142.1m. And there was renewed speculation among some analysts that Sprint may end up ironing out this little wrinkle by acquiring IPCS in a stock deal. Which may be the IPCS end-game, after all.

Back to the iDEN network, though, and if it’s not good news for Sprint, then it is for US vendor Motorola. As part of the rejuvenation process, Moto will provide enhanced network and infrastructure support, including software upgrades. And that wasn’t all that the firm had to smile about this week, as it claimed on Monday to have completed the industry’s first over-the-air LTE data session in 700MHz spectrum. The tests were carried out using Motorola’s LTE Radio Access Test Network and LTE eNode-B platform with a prototype LTE device at an outdoor location in central Illinois.

Happy days for Motorola, then, just so long as nobody mentions handsets. Oops. According to Strategy Analytics numbers out this week, Motorola has lost second place in the US handset market to Korean outfit Samsung in a development which, let’s face it, will soon be replicated worldwide. Not only that, but Apple has stormed into second place in the global smartphone market, pipping RIM’s Blackberry to the post, according to the number crunchers at Canalys. There’s more on that here.

Anyway, we were talking about 700MHz spectrum, weren’t we? There was disappointing news for wireless lobbyist Dolly Parton this week, as the regulators disregarded her tuneful plea that they keep the US white space spectrum (which sits at 700MHz) reserved for existing users – including singers with wireless microphones – rather than make it available to purveyors of wireless broadband services.

“The judgement of the F-C-C became final today,” sang Parton in a statement, adding: “Martin’s such an S-O-B, he’s taking my white space away. I need my mic and this will be pure H-E double L for me. But there’s no way that I can stop that gosh-darned F-C-C.”

Dolly, no doubt, stands shoulder to shoulder with Austria’s mobile operators, who have regulatory complaints of their own. It turns out they’ve lost a bundle thanks to meddlesome Eurocrat Big Viv Reding and her roaming rate caps. Which sounds a bit like a band that could open for Dolly on tour.

Mobilkom Austria, T-Mobile Austria and Orange Austria took a break from trying to bite each others legs off this week to release a joint study that claims combined EBITDA losses of E81.5m since the introduction of roaming caps last year.

A gentleman named Professor Kruse from the Helmut Schmidt University of Hamburg presented the research, which claims that the EBITDA decline has a direct impact on the investment budgets of the three carriers, which decreased by 41.2 per cent in the first half of 2008 compared to the same period of the previous year.

What’s more, said Prof Kruse, the call volume effects forecasted by the EU did not take place, despite the fact that the average price per roaming minute, for both active and passive calls, decreased by 43 per cent. The three mobile operators only claim increases of 3.7 per cent for active roaming minutes (calls made) and of 10.3 per cent for passive roaming minutes (calls received). Viv’s made of stern stuff, though, and the Informer doubts the research will have softened her stance.

If the EC talked up the prospects for roaming minute increases, then it’s probably only trying to fit into an industry that has been known to bake the odd hype cake. And, according to research house CCS Insight, mobile advertising is the latest sub sector to be running away with itself. CCS poured cold water on the hot air being talked about mobile advertising, suggesting the sector’s near-term potential has been “wildly exaggerated” and calling for a few zeroes to be knocked off some predictions.

By 2010, the firm forecasts that mobile advertising revenue in Europe will total less than E430m – a fraction of the billions devoted to advertising budgets annually.

“The reality is that no one’s making huge sums from mobile advertising in Europe, and this won’t change in the near future,” said Paolo Pescatore, director of applications and content at CCS. “Some analyst houses are predicting we’ll see a massive surge in mobile ad revenue, but our research shows the sums involved are still relatively small. Anyone expecting to become the next Google on the back of mobile advertising is going to be disappointed.” So there.

It wasn’t all bad news, though, and Pescatore sugared the pill thus: “Placing ads at the start of a video or adding them to the results of a mobile search are less intrusive forms of promotion. I think we’ll see people responding well to this kind of ad.”

Whether or not people will respond to an ad that the Informer got sent this week is altogether another matter. It was sent, we suppose, in a delirium of optimism, informing all who read it about a revolutionary new product: Gloves that are part fingerless and part normal, designed to allow for easy operation of touch screen phones in the cold. You can see them here.

Imagine that on Dragon’s Den.

A budding entrepreneur bounds up the spiral staircase, quoting from his own press release.

“Good afternoon Dragons,” he says. “Are you constantly frustrated that normal pairs of gloves keep your hands warm and dry, yet they aren’t compatible with modern touch-screen devices, which only respond to skin-on-screen contact?”

The Dragons look on, any early interest having already given way to bewilderment. “Do you find yourself cursing the good Lord above because their bulkiness and general lack of sensitivity also leads to “fat-fingering” misery when using the tiny keypads of other mobile devices?” our entrepreneur soldiered on.

“I’m out,” barks one Dragon. “Me too,” shouts another.

Undaunted, the entrepreneur takes out his ‘invention’ and proceeds to place it on his hand. It’s a woolly glove, with the tip of the index finger and thumb missing. “Dragons, I give you the Etre Touchy gloves. They’re a stylish, fun and practical way to keep your hands warm and dry while using mobile phones, portable games systems, music players and other electronic devices. They’re £14.99.”

It beggars belief.

The silly thing is that, by including that snippet of daft whimsy, the Informer has used up the space he was planning to fill with news of Alcatel Lucent’s promising results, the prospect of fixed mobile number portability in Hong Kong, and Richard Li’s plans to take PCCW private. But he’s thoughtfully included handy links, so you can nip along to telecoms.com and read all the stories there.

Take care

The Informer


One comment

  1. wimaxed 07/11/2008 @ 2:12 pm

    Great to hear FCC approved the deal. Clearwire and Sprint have been working on this for some time and at some point in time they dropped the deal but I’m glad to hear WiMAX will finally go nation wide.

    http://www.WiMAXED.com

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