By The Informer

The arctic winds of the global credit crunch have yet to ease and some (in)firms clearly can’t afford their heating bills. Nortel became the first of the big names to scurry for shelter, filing for Chapter 11 bankruptcy protection on Wednesday. This is no surprise; the firm warned of such a development before Christmas and has been struggling for a number of years.

While Nortel still has a cool $1bn in cash reserves, it’s saddled with rising debts estimated at $4.5bn. As you might expect, statements of gritty determination accompanied the news, with CEO and president Mike Zafirovski proclaiming that “Nortel must be put on a sound financial footing once and for all,” and that: “the actions we’re announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success.”

Those actions look likely to centre around a process of good, old fashioned, asset stripping. The firm started selling off ‘non-core’ assets at the end of 2008 and the first order of the day for Nortel brass and the firm’s administrators will be to sit down with a stock list and a dictionary and work out a new definition of the word ‘core’ as it applies to Nortel’s business.

For example, it can mean the central, most essential part of something. It’s heart; it’s very vitality. Then again, if it’s an apple you’re talking about, the core’s the nasty bit you jettison after gobbling up all the decent, juicy stuff that surrounds it. Of course, it’s also the bit that contains the life-giving seeds. Oh the bitter-sweet paradox.

While Motorola hasn’t quite got to this stage yet, board members in the company hot air balloon this week sawed through another 4,000 ballast lines in a bid to gain some much-needed altitude. Dangling at the end of three quarters of those lines were employees of the firm’s ailing handset unit, while the rest occupy central corporate posts or populate other business units.

Motorola reckons the cuts – which are to take effect without delay – will save it $700m this year, taking the total 2009 savings (including those reaped by previously announced measures) to $1.5bn. In Q4 2008 the vendor announced 3,000 job cuts.

The handset unit is clearly the place to rationalise headcount, as the axe-wielders like to say. According to co-CEO Sanjay Jha (co-CEO? They’re in this much trouble and they need two CEOs? There’s a cost saving right there, surely) Motorola’s handset shipments for Q408 for 19m, a whopping 25 per cent slide year on year.

Total sales for the fourth quarter are expected to be in the range of $7bn to $7.2bn, with the company expecting a net loss from continuing operations in the range of $0.07 to $0.08 per share. Motorola will announce its fourth quarter results on February 3, but warned that the preliminary results announced today do not include any charges related to the cost-reduction actions announced this week.

Meanwhile, investment bank Daiwa Securities has downgraded Vodafone, partly attributing its decision to the current macro-economic climate. Daiwa reckons you should sell Vodafone stock if you’ve got it, arguing that the mobile sector is “wide-open to downside risks due to a combination of variable-based revenue, market maturity, adverse regulatory trends and enhanced competition, especially from MVNOs which can “feed” off of current macroeconomic weakness,” and that “the impact of structural change in the European mobile industry marks Vodafone as the most exposed player in our coverage universe.”

Vodafone itself, meanwhile, preferred to focus on its HSPA+ trials this week, reporting mobile broadband speeds of up to 16Mbps. The trials were held on Vodafone’s Spanish network, using kit supplied by Ericsson and Qualcomm. The Big V now said it plans to trial mobile broadband data connections with peak rates of up to 21Mbps early in 2009 using HSPA+ MIMO functionality.

All those network advancements Vodafone’s making could prove of benefit to its competitors, if Ovum‘s opinions are anything to go by. The analyst firm reckons that the problem of declining voice revenues – exacerbated by the credit crunch – further strengthens the case for network sharing among the EU operator community.

However, the firm warned that regulatory leadership is necessary for sharing to progress. “What is needed is a coherent EU-wide directive on network sharing by regulators. It should be clear to MNOs that the same conditions will prevail across the region whenever and wherever they want to share their networks. Most licences were issued with coverage stipulations, and now that the mobile network is already ubiquitous those coverage demands for every MNO ought to be relaxed, especially in the 2G domain,” said Ovum’s Emeka Obiodu.

Given these kind of trends, and given the financial situation, you might think it an inopportune time for a mature market to attempt the launch of a new 3G operating licence. And yet that looks to be what’s going on in France. A fourth 3G licence has been on the cards in France for some time, with existing licences already held by Orange, SFR and Bouygues.

At a press conference earlier this week, French Prime Minister Francois Fillon said that the fourth licence will be split into three 5MHz tranches, with one reserved for a new entrant. The two will be available to all comers, including existing players. It isn’t yet clear how the licence will be allocated. Will it be an auction? A beauty contest? Or will it come free with a pack of those little rectangular cakes you see in the supermarché? It might have to.

The Informer has been polling industry observers for their take on the credit crunch and its likely impact on the mobile sector and they seem to be more or less in agreement that mature markets in Western Europe tend to have too many carriers at the moment. One beneficial outcome of the crunch, they suggest, could be in-country consolidation to reduce the number of players to a more manageable count.

There have to be question marks over whether or not France needs a fourth 3G licensee, or indeed whether or not there will prove to be any takers. When the licences were first offered in 2001, only France Telecom and SFR took the bait. Bouygues followed suit in 2002. There was interest in the fourth licence from broadband player Iliad in 2006 and 2007, but that came to nought, as Iliad was unprepared to meet the financial terms. Why now is felt to be the right time to try this again is not clear.

Maybe the French have been eyeing the Iranian market, where a third licence has just been claimed by UAE-based Etisalat despite the global economic crisis. Perhaps the credit crunch is one of those phenomena that occur everywhere in the world expect Iran. Either way, Etisalat now owns 49 per cent of an Iranian mobile operator, the rest being held by local firm Taameen. The licence cost $300m.

Etisalat currently operates in 17 international markets with combined total population of 1.6 billion people and has more than 74 million subscribers. In Iran, Etisalat will compete against TCI with 29.8 million subscribers, and Irancell with 15.5 million subscribers at end-2008. The country also supports a couple of provincial GSM operators as well – MTCE and RIC.

Sticking with the Middle East, the Lebanese Government has struck deals with Egypt’s Orascom and Kuwaiti carrier Zain to manage the nation’s two mobile operations. Orascom will be managing Alfa and, under the terms of the deal, has one year to grow the carrier’s customer base by two thirds, from 600,000 at the end of 2008 to one million by the close of this year. Gulp. Zain, meanwhile, is to take over the management of the state’s other carrier MTC Touch.

Contracts of a different but no less optimistic kind were awarded by Nordic carrier TeliaSonera this week, which struck deals with Sweden’s Ericsson and China’s Huawei for the supply of LTE kit. Ericsson said it has already started the rollout in Stockholm, Sweden and is set for commercial launch 2010. Meanwhile, Chinese vendor Huawei is to deploy an LTE network in Oslo, Norway.

Economic gloom does not appear to have dampened operator enthusiasm for LTE, with analysts this week forecasting more than $8.6bn to be spent on the technology over the next five years.

Across the great divide from LTE is the WiMAX camp, of course, and this week it got a gold star and a smiley face from US analyst house Senza Fili Consulting. The firm’s president, Monica Paolini, ran her own drive test on the ‘Clear’ network in Portland, Oregon, owned by the consortium led by Sprint and Clearwire.

In outdoor and indoor locations, as well in mobile scenarios, the performance of the ‘Clear’ mobile WiMAX network in Portland was “consistently good”, typically achieving over 3Mbps on the downlink and between 350 and 450Kbps on the uplink, she said. In mobile scenarios (using the Portland streetcar) the median throughput on the downlink was just over 3Mbps. The peak mobile downlink speed recorded by Paolini was just over 5Mbps (425Kbps on the uplink). On one part of the streetcar route was the signal lost through lack of coverage, but otherwise the handoffs worked well, she said.

On its youth-oriented prepaid operation Boost, meanwhile, Sprint has launched an unlimited use tariff for just $50, sparking fears that a price war will erupt in the fiercely competitive US market.

That’s just what we need.

Take care

The Informer