By The Informer

The UK LTE spectrum auction concluded this week, with much of the focus on the fact that—as a revenue generating exercise—it was a bit of a flop. Chancellor George Osborne had been hoping for £3.5bn for his purse; what he actually got was £2.34bn.

It was hardly surprising; during the auction UK LTE pioneer EE cut its prices and 3UK announced that it wouldn’t be pricing its new network services at a premium to existing offers. Clearly UK operators are wary of the investments required for LTE and a little more realistic about returns on those investments than they were when they spent ten times the amount on WCDMA spectrum just before the bubble burst.

Vodafone was the big spender this time out, getting 20MHz at 800MHz, 40MHz at 2.6GHz and 25MHz of 2k6GHz TDD for £790.8m. 3UK, which already has 1800MHz spectrum for LTE spent just £225m for  10MHz at 800MHz. EE took the same amount at 800MHz but got 70MHz at 2.6GHz, spending £588.9m while O2 dropped £550m on 20MHz at 800MHz.

BT’s Niche Spectrum Ventures got the remainder—30MHz of 2.6FDD and 20MHz of 2.6TDD—for £186.5m. It all got too hot for MLL Telecom and Hong Kong’s PCCW, which left empty handed.

What struck the Informer about the allocations was the challenge ahead of O2. With nothing at the high end for capacity it’s going to have to get busy re-farming some of its 2.1GHz if it wants to compete with the others in the cities.

Farming is something that O2 is about to become very familiar with, as its 800MHz allocation is the lot that comes laden with Ofcom’s coverage obligation. O2 has to provide indoor mobile broadband to 98 per cent of the UK population (and 95 per cent for each of the four nations within) by the end of 2017. The network must cover 99 per cent of the population when outdoors.

Perhaps that differential takes into account the oft-overlooked homeless mobile broadband market segment. Or perhaps it simply deems it acceptable that one per cent of the population—those in the most remote rural areas—still have to go outside to make a phone call. That shouldn’t faze them; they probably still have to go outside to use the toilet.

It won’t just be Ofcom on O2’s back, checking progress on its obligations, because the UK’s Countryside Alliance has weighed into the debate. The Countryside Alliance is a lobby group formed in 1997 in opposition to the UK government’s plan to outlaw bloodsports and describes itself on its website as: Promoting Hunting, Promoting Shooting, Promoting Rural Life—a strapline which rather suggests that rural life consists only of hunting and shooting.

It certainly doesn’t consist of mobile broadband, if the Alliance is to be believed, and the group has called for a “clear and swift” schedule for delivery on the coverage obligation “amidst fears the city markets will be served first”. Picture O2 CEO Ronan Dunne skittering through the English woodland in a furry fox costume, a pack of hounds snapping at his heels, the thundering of horse’s hooves shaking the very ground beneath him and the huntsman’s horn sounding its note of doom. He’d better get that network up and running pretty damn quick!

“The countryside has been lagging behind urban areas for far too long when it comes to mobile signal, not only disadvantaging them socially, but economically,” the Alliance said, neatly blaming the UK comms sector for its problems rather than, say, the industrial revolution. “We now look to the mobile operators to deliver a service that ensures rural communities will no longer be left behind in this digital age.” The Alliance clearly wants progress a la carte; look out for live streaming of foxy dismemberment on YouTube.

It’s not just the UK rural communities that are behind the curve, though, it’s the whole country. Over in Japan NTTDoCoMo has just announced the sign-up of its ten millionth LTE customer, up from 3.3 million at the halfway point in last year (going by Informa’s WCISPlus). It marked the occasion by commissioning Nokia Siemens Networks and Panasonic to begin development of its LTE-Advanced network.

It also announced that it had successfully connected an active antenna to its live LTE network, another step towards LTE-A.

In other LTE news, ZTE has begun deployment of an LTE network for German operator E-Plus, while NSN is doing the same for Telefónica in Chile. The Spanish incumbent, which has staked its game on Latin America, came something of a cropper in the region when it lost a bundle on a Venezuelan currency devaluation.

Spain’s Telefónica said late last Friday that the Venezuelan Government’s decision to devalue its currency would result in a charge of €438m against its full year earnings for 2012. Earlier this month the South American nation reset the exchange rate from 4.3 bolivars to the dollar to 6.3 bolivars.

In a filing to the US SEC Telefónica added that its net assets in Venezuela will decrease in value by roughly €1bn. This is particularly bad news for Telefónica at a time when it is looking to Latin America for a positive balance to the difficulties it is enduring in its domestic and European markets, as it seeks to reduce its debt burden.

In November last year the operator reported that its Latin American revenues outstripped European revenues in the nine months to end September 2012, for the first time in the country’s history. The region generated €22.58bn in revenues for the nine  month period, up 5.9 per cent year on year.

Venezuela accounted for €2.3bn of this amount, Telefónica said in November, with year on year growth of of 26.9 per cent.

Sticking in the region for a moment longer, Brazilian operator Claro signed an M2M deal this week with JasperWireless. Jasper also announced this week that it had 2,500 enterprises operating on its M2M platform through its mobile operator partners.

Telefónica wasn’t the only European heavyweight taking a punch this week as France Telecom reported that its net income had dropped by 79 per cent year-on-year to €820m for the full year 2012. The firm’s profit was substantially impacted by an impairment charge of €1.84bn on units in Poland, Egypt and Romania.

There were some minor positives for the firm; mobile unit Orange had 230.7 million customers at 31 December 2012, an increase of three per cent year on year. In Africa and the Middle East the firm saw seven million net additions and now it has 81.6 million customers in those markets. The group also launched LTE services in six countries.

These were trifles, though, and the overall narrative is not a happy one, according to Emeka Obiodu, principal analyst at research firm Ovum.

“In France where the entry of Iliad’s Free Mobile has triggered intense price competition, revenues have fallen by five per cent on a comparable basis,” he said. “This matters a lot as France Telecom makes about half of its revenues from its home market. Sadly, better performance in smaller overseas markets is not going to be enough to offset such a big challenge at home. An impairment charge in Poland compounded the gloom and the performance of Everything Everywhere in the UK leaves much to be desired”.

EE posted a drop in revenue for to £5.95bn 2012, a period it described as a transformational year, in which it launched a new brand, a new network and purchased new retail estate. It posted a net loss of £191m, compared to £104m for the previous year. The firm did see 752,000 net postpaid additions in 2012 though, with a net postpaid increase of 201,000 in Q4, as well as a 20 per cent year on year increase in postpaid renewals in H2.

Orange also announced this week that it is working with Japanese manufacturer Fujitsu on devices for the ‘rapidly growing senior market’. Presumably these phones will be enormous, to cater for the huge fingers of all those rapidly growing seniors. Most old people shrink as they age; where are these freaks of nature Orange hopes to serve?

A colleague of the Informer’s had to go and get his passport renewed this week ahead of MWC. When asked by the passport authorities where he was going he told them Barcelona. The passport officer then said: “Not going to Mobile World Congress are you? Pickpocket’s paradise, that is.” Apparently lots of people lose their passports at MWC to pickpockets, which can’t be helped by the fact that so many people have to carry their passports round with them just to get in and out of the event.

Anyway, you can expect a fair amount of discussion around the GSMA’s Joyn rich services initiative during the show, which was teed up this week by SK Telecom’s announcement that it has signed up one million users to its Joyn deployment in the first 50 days of operation. There was no information on usage; hopefully we’ll hear more about that next week, as well as feedback from the Spanish pioneers Movistar, Orange and Vodafone.

Some ex-Vodafone heads popped up in the news this week, including former CEO Arun Sarin. Sarin, has joined the board of Devicescape a wifi offload specialist that claims to be the curator of the world’s largest wifi network. Devicescape offers a rolling curator service that verifies the quality of more than 12 million public and amenity (in-store, shopping mall, etc) wifi hotpsots based on feedback from user devices.

The guiding principle is that cellular operators will be able to guarantee service quality to users as they offload to wifi networks and the Informer is off to check them out during the event next week. Keep an eye out for some feedback.

Meanwhile Michel Combes, once head of Vodafone in Europe and more recently CEO of French operator SFR, has been announced as the new CEO of Alcatel Lucent, after Ben Verwaayen revealed his abdication with the firm’s latest set of financial results.

That’s about it this week. The Informer hopes you all have a good time at the show next week, and he hopes to see some of you while he’s there.

Keep an eye on your passport

The Informer