a week in wireless

A very important day

July 27th, 2012 – a date that will live gilded in our memories forever. The eyes of the world are on London, a historic city bristling with pride at being chosen to host this momentous event. It is the culmination of years’ of hard work, dedication and belief. The crowds have gathered in celebration and the flags are flying high. Let the ceremony begin because, Ladies and Gentlemen, this is the 500th edition of A Week in Wireless.

Now, as it happens, the 500th edition of A Week in Wireless shares a date with something a lot more attention-seeking and a lot less convenient; the opening of the London 2012 Olympics. There are some parallels: Producing 500 episodes of AWIW has been a relay and it’s been a marathon. And more than a few times it’s looked as if the Informer’s been for the high jump. On the flip side, AWIW is untroubled by aggressive, controlling sponsors. In fact, AWIW is untroubled by sponsors of any kind.

There was apparently no need for an official Friday-based email newsletter focused on the global mobile communications industry for the London 2012 Games but The Informer likes to think that, had there been, AWIW would have been a shoe-in.

As the opening ceremony approaches, London is a city holding its breath. It’s not clear yet whether a whimper, a cheer or a howl of rage will follow – but the city is about to be given the sternest of tests. While the transport infrastructure will probably have the highest profile, the mobile networks will be under very nearly as much scrutiny.

One thing that this scrutiny will not reveal, of course, is LTE. We’re not so much backward compatible as just plain backward in this country, when it comes to LTE. But this week UK regulator Ofcom set out its plans for LTE spectrum allocation, which will happen next year.

There’s a lot of noise being made about the UK – historically an early mover in mobile technology – being relatively late to the LTE party. Industry execs have bemoaned a perceived loss of status and much has been made of the consumers who are missing out on the benefits.

The government blames the operators for constantly challenging Ofcom’s plans (lawyers’ fees are cheaper than LTE deployment; although probably not by much) while the operators blame the government for dragging its heels.

But maybe someone else is to blame… Some while back it was suggested to the Informer by a senior UK industry exec that the “Olympic movement”, and chief among it the 2012 organisers LOCOG and the IOC itself, have been opposed to the deployment of any “new technology” from the outset, for fear of disrupting the whole shebang with unproven solutions. “That would apply to LTE,” the exec said.

While spectrum clearing has been quite important in the timing of LTE bandwidth allocation, “not far behind that is the willingness of the Olympic movement to take on risk,” he said.

So there you have it; the reason we don’t have any LTE in this country, the reason all those poor, simple country folk are languishing in the dark ages like shoeless hobbits, with nothing but hoops and sticks to entertain them is because of the stupid Olympics. These people don’t deserve mobile broadband, not until they’ve danced among the sheep in the opening ceremony for the amusement of Lord (of the rings) Coe.

If we did have LTE, it would probably only be available to the sponsors anyway, the networks carved up like the roads to give priority to the most important people of all.

Actually, the Informer doesn’t think another year without LTE is going to hurt. What is ‘leadership’ really worth in this instance? The multinational operators that serve the UK market are developing their LTE expertise elsewhere, not missing out on the learning altogether, and the device ecosystem for the new tech is far from fully formed.

There are benefits to launching at a more stable, mature stage in the lifecycle of the technology. That would certainly have been better with 3G. And is it all about the network anyway? At the back end of 2007, who was having the most cutting edge mobile experience: people on the 3G network or people who had the first iPhone? Launching an LTE network with a compatible iPhone, as an example, would give an operator a much better story.

Meanwhile UK operators are still in the process of positioning themselves for deployment. None of them think there’s mileage in deploying an entire LTE network apiece; more likely we’ll see a joint effort from the Everything Everywhere/3UK camp deployed by MBNL, and another from Vodafone and O2. The latter pairing will doubtless appreciate a bit of extra time to settle into their new sharing relationship before they’ve got to deploy a whole new network.

While operators seem increasingly to be convinced that shared rollout is the only economically viable option for LTE, Ofcom is not so sure. The regulator wants four licensees, and has clearly indicated its expectation that 3UK will pony up for spectrum of its own. Bandwidth is being reserved for a fourth player and all that player will have to do is hit the reserve price to get it. The message is clear; if 3 doesn’t want it, Ofcom will seek out someone else that does.

For a supposedly light touch regulator, this seems a little heavy handed. The UK market doesn’t need and can’t sustain four LTE networks. Operators are under enough pressure as it is; LTE deployment has to make sense for them financially if the service is going to make a difference for UK users. The Informer reckons that, from a consumer perspective, Ofcom would have been better off applying coverage clauses to all of the spectrum, rather than just one of the licences, instead of trying to force four networks into existence; four networks that would inevitably consolidate down the line, anyway.

But the operators have long been aware of the tension between their aims and Ofcom’s. Recently one of the market’s most senior operator executives told the Informer “collaboration is likely to be restricted by clauses in the spectrum licences”.

Anyway, the operators have had enough to do just getting ready for the Olympics. Not that they can talk about it; they’ve have had their lips stapled shut by LOCOG and the IOC, as none of them are part of the corporate sponsorship juggernaut thundering and plundering its way through the city, devoid of all remorse. They’re not allowed to talk on the record about any of the preparations they’ve made, despite having spent millions beefing out capacity in the various sporting venues to cope with the expected spike in demand.

Perhaps the central question is whether or not the UK operators – and they have worked in collaboration on this project from the outset – will be positive and optimise for maximum revenue, or be cautious and optimise for QoS.

The second option will involve far greater reliance on wifi offload, something that operators in the wider world are increasingly keen to implement. But, according to a study from Ovum, the vendor community is not yet delivering solutions that meet the operators’ needs.

Over half of mobile operators polled by the analyst said they want session continuity for customers moving between wifi and cellular networks. Meanwhile more than 90 per cent of them are looking for a device-based policy solution that selects the best network – be it 3G, 4G or wifi – based on cost, performance, and other policy-driven features.

Times have changed, apparently, and operators are happy to work with any other hotspot providers, including “untrusted” networks like those found in hotels and libraries.

Over in India they’re still working on the reallocation of second generation spectrum, with an auction due later this year for bandwidth that was judged to have been sold under value in 2008. This week a group of government bigwigs calling themselves the Empowered Group of Ministers (EGoM), proposed to lower the reserve price for the new auction, which had been set by the Indian regulator, the TRAI.

The EGoM, which was set up to dilute power from just one minister following the 2G scandal (former telecoms minister A Raja is currently on bail, awaiting trial), has now proposed that the reserve price is lowered to between Rs140bn and Rs160bn, following several complaints from industry stakeholders that the high price would have an adverse impact on the sector.

GSMA said that while the price range recommended by the EGoM was fairer than that recommended by the TRAI, it was still “prohibitive”. Anne Bouverot, director general at GSMA said the group “remains concerned that over the long term it will hamper the delivery of high quality, affordable and innovative mobile services across the country.”

Sticking with matters regulatory, and Brazilian telecoms watchdog Anatel has barred three of the market’s four largest mobile operators from signing up new customers in light of a wave of complaints from consumers about the quality of service these operators provide. TIM Brasil, America Movil’s Claro and homegrown outfit Oi were all suspended from customer acquisition in certain states from the beginning of this week.

Anatel is giving them 30 days to come up with a plan that shows how they will improve their services. Plans also have to be delivered by Vivo, Sercomtel and CTBC, although none of these have been banned from acquisition. For their part the operators have long been demanding that Anatel raise the 80MHz spectrum cap, according to Informa Telecoms and Media, which is making it difficult for them to deliver quality of service as customer numbers and demand for data services increases.

The continued absence of the long-awaited LTE iPhone impacted Apple’s quarterly results this week as consumers held off upgrades in anticipation of the next iteration of the iconic handset. Analysts were disappointed that Apple only managed to score profit of $8.8bn from revenues of $35bn for the quarter, up from $7.3bn and $28.6bn for the same period last year.

Meanwhile there was genuine reason for disappointment at Alcatel Lucent, which posted a net loss of €254m for the second quarter and promptly announced plans to cut 5,000 jobs. The idea is to cut costs by €750m by the end of 2013, in addition to a previously targeted saving of €500m.

“Despite having demonstrated our ability to deliver operational profitability, it is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation,” said CEO Ben Verwaayen. “These times demand firm actions.”

My, but it’s tough in the infrastructure market. Tier one in this space arguably only has room for two, with everyone else relegated to the chasing pack. The also-RANs, if you like.

Chinese vendor Huawei had some happier numbers to report. It announced that first half revenue increased 5.1 per cent year-on-year to reach CNY102.7bn, while operating profit grew 20.3 per cent to reach CNY8.79bn.

In the device space, the firm made progress in the high-end smartphone market, and said that its flagship models, the Ascend P1 and Ascend D1, have sold well in China, Western Europe, Japan, Australia and Canada. The firm now holds 12.16 per cent market share for smartphones in China, ranking second in the market, according to Analysys International.

On the operator side, AT&T increased its quarterly revenues by 0.3 per cent to $31.6bn. It also reported its best-ever wireless service margins, which it attributed to improved operating efficiencies, fewer handset upgrades and further revenue gains from its 43 million high-value smartphone subscribers.

The firm sold 501 million smartphones, with more than one-third of all postpaid smartphone subscribers now using 4G-capable devices, and postpaid wireless subscriber ARPU increased 1.7 per cent year-on-year to $64.93.

Everything Everywhere, the company formed by the merger of T-Mobile and Orange in the UK, went for the half yearly, rather than quarterly results. Service revenue stood at £2.99bn, marking a 1.8 per cent decline on 1H11, and EBITDA fell 1.3 per cent to £673m. In 2Q12, postpaid churn stood at 1.2 per cent, 0.1 per cent higher than 2Q11.

Two of Europe’s biggest operators, Telefónica and France Telecom, reported declines in net profit, this week, as they continue to battle with market conditions in the region. Telefónica saw its net profit fall by 34.4 per cent year-on-year for the half-year, to reach €2.08bn, despite the operator’s consolidated first-half revenues totalling €30.98bn; a 0.3 per cent increase year-on-year.

As a result of the performance, the firm has cancelled its plans to pay a dividend to shareholders in 2012, enforced pay cuts on senior management and updated its revenue guidance and now expects to deliver “flat to positive” revenue growth for the year.

The firm will resume its shareholder remuneration in 2013 by paying a dividend of 0.75 Euros per share. In addition, top managers’ total compensation will be slashed by 30 per cent, and board members have agreed to take a 20 per cent pay cut.

France Telecom suffered a similar plight as it also saw an 8.9 per cent drop to post net profit €1.9bn, down from €2.1bn in the same period of 2011. Like Telefonica, consolidated revenue remained relatively flat, with the firm seeing a 0.1 per cent year-on-year decline to generate €21.84bn for the half, down from €22.57bn.

And that’s about the size of it for this week, and indeed for the next month. The Informer is off on his summer break. With official burger, fries and sugary soft drink in hand he will sit in front of the television (ticketless as he is) for the next four weeks watching people run and jump and throw, emerging a month later in perfect shape to personify the legacy of the 2012 Olympics, which apparently has something to do with health and activity.

No doubt the games will go off with a bang (hopefully not from the ground to air missiles they’ve put on blocks of flats in East London) and will be largely gaffe-free. Let’s not dwell on the fact that, in one of the official football matches that preceded the opening ceremony this week, LOCOG displayed a South Korean flag on the big screens at a match featuring the North Korean team. The North Korean team promptly marched off the field, and didn’t come back for an hour.

It’ll be fine. Really.

Take care,

The Informer

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