Earlier this year, US carrier Verizon Wireless (VZW) was suing its competitor Alltel over false advertising. Relations were decidedly frosty. Now, as if in the telecoms version of seminal rom-com When Harry Met Sally, they've gone and got it together, after Alltel faked a noisy orgasm in a restaurant. Vodafone - which holds a 45 per cent stake in VZW - confirmed the acquisition on Thursday, which will see VZW gobble up Alltel and its 13 million subscribers for $28.1bn.

June 6, 2008

9 Min Read
It had to be you

By The Informer

Earlier this year, US carrier Verizon Wireless (VZW) was suing its competitor Alltel over false advertising. Relations were decidedly frosty. Now, as if in the telecoms version of seminal rom-com When Harry Met Sally, they’ve gone and got it together, after Alltel faked a noisy orgasm in a restaurant. Vodafone – which holds a 45 per cent stake in VZW – confirmed the acquisition on Thursday, which will see VZW gobble up Alltel and its 13 million subscribers for $28.1bn.

Assuming no obstacles, the move will enable Verizon to reclaim its position as the largest US carrier, which it ceded to AT&T following that firm’s merger with Cingular in 2005. Arun Sarin, whose time at Vodafone is coming to a close at the end of next month, was chipper about the acquisition: “We expect the acquisition of Alltel to significantly increase the value of our 45 per cent interest in VZW through the realisation of substantial in-market synergies and to reinforce its leading position in the world’s largest mobile market by revenues. Whilst VZW’s free cash flows will initially be deployed in reducing net debt, the VZW Board has agreed to conduct an annual dividend review process and to the payment of enhanced tax distributions.”

More than once Sarin has faced calls to dispose of its VZW stake in light of Verizon’s unwillingness to yield to Vodafone’s MO of ownership rather than partnership. Perhaps he’ll feel that this latest manoeuvre is further proof of concept, even though an expected dividend from VZW will be unlikely to go Vodafone’s way any time soon, now that the acquisition has been announced.

There was less success for France Telecom in its bid to acquire Baltic specialist TeliaSonera this week. The Swedo-Finnish JV flipped FT the bird in umbrage at the French firm’s assessment of its value, with the offer pitched at EUR27bn and change.

“TeliaSonera is a strong business with excellent growth prospects in its own right,” said a bristling Tom von Weymarn, chairman of TeliaSonera. “The board and management are focused on developing the company to its full potential, driving strong and sustainable earnings growth and maximising value for all shareholders. The indicative price of SEK56.225 per share significantly undervalues this potential,” he concluded. Which suggests the firm may be open to an improved offer.

Meanwhile, it’s really annoying, isn’t it, when you get a song stuck in your head? Even a really good song gets tiresome in the end. So you can imagine how the Informer’s been feeling this week, he just can’t get rid of the Rockwell classic Somebody’s Watching Me: “I’m just an average guy with an average life. I work from nine to five, hey hell I pay the price.”

We’re not so much sleepwalking into a surveillance society, as being accompanied by a marching band. This week the news broke that 100,000 EU citizens have had their movements tracked in the name of research. The analysts logged the location of the nearest base station every time a call or text was sent or received by their guinea pigs and arrived at the earth-shattering conclusion that, guess what, people tend to go to the same places day after day. Most people don’t travel very far, although some people do. The research doesn’t prove that they ate some food at lunchtime and slept all night, but the Informer is willing to bet most people surveyed did.

If you missed out on all the surveillance fun, fear not, for those bastions of personal data collection, MySpace, Facebook and Bebo, are offering social networkers the opportunity to Sniff their friends. It’s the LBS equivalent of poking. Sniff stands for Social Network Integrated Friend Finder, and is not even remotely a new idea, but the social networks are getting behind it, so perhaps it stands a better chance of punters’ buy-in than previously launched friend finder services. Although, apparently each Sniff will cost 50p. Which is considerably more than a text or indeed a call, which is the mode of friend-finding the Informer generally prefers. It’s faster, cheaper and much more accurate.

The social networks will be hoping that the Informer’s assessment regarding the likely chances of success of Sniffing are wide of the mark. Particularly in light of the revelations of a recent eMarketer report UK Social Network Marketing: Ad Spending and Usage which reckons ad spend is not as high as anticipated. The report says £65m was spent on social network advertising in 2007 and this will have increased to £115m by the end of this year. It might sound like a fortune to the average Joe, but speaking to UK newspaper the Guardian Kirs Oser, director of strategic communications at eMarketer, described the amounts as “tiny”.

If Oser thinks that the spend in social network advertising is tiny, the Informer shudders to think what he’d make of mobile advertising. The analysts here at Informa Towers reckon the big brands are yet to transfer more than 0.5 per cent of their advertising budget onto mobile. It’s not all bad news though, Informa Telecoms & Media, forecasts that the global mobile advertising market will rocket from $1.72bn in 2008 to $12.09bn by 2013.

If the operators want to get their hands on the folding money they’re going to have to become service enablers according to research house Analysys Mason. The advice to operators has a familiar ring. They’ve long resisted becoming bit pipes, but there is clear trend towards open mobile internet access and all you can eat tariffs.

“Mobile operators are best placed to become service enablers in the content value chain by exploiting their unique assets, which focus on transmission, billing and consumer insight,” said Mike Grant, analyst with Analysys Mason. “These assets are essential to the success of content providers in the MME (mobile media and entertainment) market, and the ‘service enabler’ revenue streams (including traffic, billing and advertising revenue) appear to be the most sustainable for mobile network operators in the long term.”

Along with opportunities, though, come threats. And the operator community has plenty of those in the shape of the vendors. This week Microsoft announced its intention to have another crack at the mobile services market. The Redmond Giant has unveiled something it’s calling the Connected Services Accelerator Program – a collaboration with independent software vendors, developers and operators.

“Our mission for the industry is to drive the transition to Telco 2.0, a new era of communications where service providers are delivering hundreds if not thousands of new services,” said Martha Bejar, corporate vice president for the Communications Sector at Microsoft.

A separate mission for the firm is to try and convince everybody that Windows Mobile devices are better than iPhones, ahead of the widely anticipated unveiling of the 3G version of Apple’s handset next week. One of the firm’s marketing folk emailed the Informer this week with a long list of reasons why Windows Mobile handsets are superior, including security, price, battery life, variety and developer access.

These may all be genuine benefits, but it just makes it sound as if Microsoft is running a bit scared of Apple in the mobile device space. Besides, Apple’s principal marketing hook is that the iPhone is cool – after all a rubbish camera and anachronistic access technology didn’t harm sales of the first model.

Meanwhile, industry analyst Strategy Analytics has said that Nokia, RIM and Apple are the first handset vendors to realise that global handset revenues are approaching a peak and fresh growth streams must be found in mobile services.

Gartner, though, thinks otherwise. It’s changed its mind (a bit) regarding the potential for laptops embedded with 3G capability. The analyst maintains that, to date, embedded 3G capabilities for laptops has been difficult for enterprises to justify because of upfront purchase prices, monthly running costs and asset protection. But the firm concedes that with new pricing plans and technology evolution, the tide is turning. Sadly, built in 3G capability will kill the need for dongles, and the English language will lose one its more agreeable recent additions.

Gartner’s change of heart is fine though, the Informer recognises that sometimes the goalposts move. Then again, sometimes the goalposts are bricked up completely, and nowhere more so than in the UAE. The Informer isn’t sure whether he has many readers in Dubai, since he sometimes says things that the region’s rulers might not like. Censorship is far from unknown in the region. But if you are reading this in Dubai you can always call the Informer up, taking advantage of Du’s new cheap international calling tariffs. You’ll have to use those tariffs, because the pesky operator has followed in the footsteps of Etisalat by blocking Skype services.

Taking advantage of a filter that was put in place to protect residents from pornographic or offensive material, according to local reports, Du now prevents users from accessing cheaper mobile VoIP services.

The residents of Russia though will have no such problems. Open wifi champion Fon has signed a deal to expand into the country that seems to have turned its back on state-controlled Big Brother in favour of his more flamboyant, no more agreeable sibling Rampant Consumerism. (Dubai seems to manage both systems simultaneously). Comstar said it plans to establish 30,000 wifi access points in Moscow in 2008-2009 before expanding to other regions.

Fon’s business model is described by the firm as ‘social routing’. Subscribers connect the Fon device to their own broadband connection and then choose whether to share and share alike their wifi with other Fon users or charge others for access (sharing the spoils with Fon). It would be fair to say that the idea has yet to really take off. The Informer was sent a Fon hotspot to try and he can confirm it makes an admirable door stop.

It’s shake-up time at Orange UK as new CEO Tom Alexander has announced plans for an overhaul. The firm will be divided into to principal segments – Consumer and Business – both of which will be supported by a new Sales & Loyalty layer. He’s also created a New Business, Wholesale and Strategy team.

The upshot is bad news for middle management, with 450 jobs up for the chop. But there’ll be a net increase in headcount (if not wage costs) as Orange plans to employ 500 new, customer facing staff by the end of the year. It’s vowed also to open 60 new high street stores and shift its off-shore customer service teams back to the UK, as well as deploy a further 450 GSM cell sites and accelerate its HSPA deployment strategy. Promises, promises.

Take care

The Informer

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