a week in wireless

Parables and Parallels

With London’s 2012 Olympic Games weeks away, The Informer has been taking some time to read up on its history, and it seems that parallels can be drawn in the telecoms industry with the times that the Olympians first battled it out in Ancient Greece.

One legend about the origin of the Olympic Games revolves around Zeus. It was said Zeus fought his father, Kronos, for control of the world, and when he won, the Greeks celebrated by holding a sporting event of the grandest proportions. And this week, with the proposed purchase of Cable and Wireless Worldwide (CWW), Vodafone is also looking to inherit the world.

For the £1bn that the operator is splashing out, it stands to obtain CWW’s fibre network, which covers 56 per cent of the UK population and an international cable network that stretches to more than 150 countries.

Vodafone reckons the deal will enable it to fulfil its international growth ambitions as the firm claims that by acquiring CWW, Vodafone’s Global Enterprise (VGE) unit will increase the scope of services it can offer enterprise customers.

It claims that its tie-up with CWW will create a “leading enterprise-focused operator” in the UK that will would capitalise on the growing opportunity in unified comms and offer UK enterprises the opportunity to purchase comprehensive services from a single service provider.

While it would be unfair to characterise the relationship between  BT and Vodafone as one akin to a father and son, the two share a rich history and BT can be perceived as the king of the UK’s telecoms market. BT recorded revenues of £15.6bn in 2011 – more than twice as much as the leading mobile operator – and is the provider to all of the country’s mobile operators’ fibre, for which it is paid vast sums to lease.

After Zeus defeated his father, a temple and immense statue were built in the valley below to honour him – it is one of the Seven Wonders of the World. The Informer doubts, however, that Vodafone CEO Vittorio Colao will be quite as lucky as that.

Of course, some things have changed drastically over the centuries. In those days, “money” was actually cattle, lambs, goats or pigs – live money that you could actually eat. But just as society moved from using livestock to metal coins and paper notes, it is again evolving to use digital money, and this week was O2UK’s turn to make headlines by announcing a mobile wallet service.

The operator has become the first in the UK market to launch a mobile wallet offering. The service offers price comparison for online shopping, person to person money transfer and allows the user to digitise cards linked to existing bank accounts, or load money onto an O2 stored value account.

It is available as an app for iOS, Android and RIM devices but has not been optimised for the iPad, and is not available for Windows Phone. Mobile and desktop web versions of the service are also on offer.

O2 is establishing partnerships with the UK’s top 120 online retailers (with offers from four available at launch) and will charge those retailers a per transaction fee. P2P money transfer will be free for an initial six-month period but the operator is considering levying a £0.15 transaction fee thereafter.

Latin American operator group América Móvil also launched a mobile money service in Mexico, aimed to serve the nation’s underbanked population. The service, called Transfer, will be launched by a joint venture between the operator and its banking partners: Citibank´s Mexican unit Banamex and local bank Banco Inbursa.

The firms said that their aim is to transform the mobile phone into a payment instrument for carrying out transfers, cash withdrawals and air time purchasing, in real time, 24 hours a day, through SMS messaging. Gemalto´s LinqUs mobile payment platform will underpin Transfer and the firm said it will also be responsible for the service development, support and operation of the service.

Staying with the historical theme, like Shakespeare’s Merchant of Venice, T-Mobile USA is getting its pound of flesh from AT&T, after the FCC approved the transfer of $1bn worth of radio spectrum as part of the break-up fee owed following AT&T’s failed $39bn takeover bid.

This transfer provides T-Mobile with a large package of AWS mobile spectrum in 128 Cellular Market Areas (CMAs), including 12 of the top 20 markets. AT&T is also obliged to give $3bn cash to its fourth-placed rival after the firms agreed to abandon the merger due strong opposition from regulators and competitors.

T-Mobile USA said it plans to use the spectrum to help it upgrade its network for higher-speed data services and has committed to spend $4bn on network modernisation to improve existing voice and data coverage, and to deploy LTE in 2013.

In India, we’ve seen a fable play out that even Aesop would be proud to tell. The telecoms market mired by corruption, is still paying the consequences of its 2008 2G scandal. The regulator TRAI has set a new reserve price for 2G spectrum for when it will be re-auctioned later this year.

The TRAI has now recommended an auction base price of Rs 36.22bn ($687m) for every MHz of nationwide spectrum in the 1800 MHz band. The reserve price is close to ten times more than the reserve price of the Rs 3.8bn paid in 2008, when the country held its initial spectrum sale, and is also more than prices set for the country’s 3G sale.

The announcement led to shares of leading operators falling on fears that the big potential payouts will have major consequences on their profitability. The moral? If a deal seems to ggod to be true, it probably is.

Nigeria’s telecoms market would do well to pay heed to such a tale, as it risks finding itself caught up in a similar corruption scandal, according to local reports.

The Nigerian Senate has opposed the Federal Government’s plans to liquidate Nigerian Telecommunications Limited (Nitel) and Mobile Telecommunications Limited (Mtel).

Director-general of the Bureau of Public Enterprises (BPE), Bolanle Onagoruwa, argued that Nitel/Mtel owes N351bn ($2.2bn) in debt, adding that the organisation has been dormant for over three years and its market share is almost zero.

However, Senator Gbenga Obadara, chairman of the Senate Committee on Privatisation, claimed that government officials have only made public the liabilities of Nitel and Mtel, while not disclosing how much the organisation is worth or the amount of debtors it has. He has accused the government of deliberately undervaluing Nitel and Mtel in order to sell them at discounted prices to personal associates.

Elsewhere, international operator VimpelCom is to exit the Vietnamese mobile market, selling its 49 per cent share of fifth placed mobile operator Gtel Mobile for $45m. VimpelCom, which is headquartered in The Netherlands, said the stake would be bought by Gtel Transmit and Infrastructure, “a related party” of Vimpelcom’s local partner, Gtel.

Meanwhile, Swedish operator group TeliaSonera has said it will begin charging for VoIP services by the end of May. The firm said that changes in customer behaviour and increasing pressure on voice revenues have led to the decision.

Lars Nyberg, president and CEO said that the firm needs to develop its business models and how it charges for services going forward, and there must be a stronger correlation between usage and pricing of data. The policy will be introduced in Spain within a month and in Sweden for new subscriptions during the summer, Nyberg added.

Back to Greek mythology, and King Midas is popularly remembered for his ability to turn everything he touched into gold. He appears to have shared an affinity with Apple, which once again, rather predictably, announced strong results for its quarterly results. Interestingly though, it appears that it has come at the expense of operators’ bottom lines.

Apple’s momentum has not been suppressed and it has once again posted sharp year-on-year increases in revenue and profit in its latest quarterly earnings. The firm’s revenue grew by almost 60 per cent year-on-year, from $24.7bn in 2Q11 to $39.2 in 2Q12. In addition, net profit almost doubled, rising to $11.6bn from the $6bn recorded in the same quarter a year ago.

Analysts said that Apple owes a great deal of its success to the substantial markups that it attaches to its products. David McQueen, principal analyst at Informa Telecoms & Media, told Telecoms.com of operator frustrations at the huge markups they have to pay on iPhone devices. “It costs Apple about $200 to make a single iPhone, but they’re selling to operators at around $600 to $700,” he said.

According to Aristotle, legend held that King Midas died of hunger as a result of his “vain prayer” for the gold touch. Apple’s reign, however, shows no signs of ending anytime soon.

Other firms that posted quarterly results included Ericsson, AT&T, Sprint and Etisalat.

Ericsson’s first quarter sales dropped four per cent to total SEK51bn ($7.55bn). The firm blamed an expected major decline in CDMA sales as well as lower operator network spending in regions with macro-economic or political uncertainty.

The vendor’s net profit, however, doubled to SEK8.8bn due in part to the one-off gain from selling its 50 per cent stake in handset joint venture Sony-Ericsson to Sony.

AT&T saw its consolidated Q1 revenues rise 1.8 per cent to $31.8bn.Operating expenses rose year-on-year to $25.7bn for the quarter, up from the $25.4bn sent in 1Q11 but operating income margin increased to 19.2 per cent from 18.6 per cent. Rival Sprint didn’t perform quite so well, reporting a net loss of $863m, almost double the net loss of $439m it recorded in 1Q11.

UAE-based Etisalat saw its first-quarter revenues increase by two per cent year-on-year to reach AED8.204bn ($2.23bn). Net profit declined by 0.5 per cent, however, to AED1.809bn. The rise in sales was due to an increase in revenue from international operations, which more than offset the decline in revenues from domestic operations.

Chip vendor ST-Ericsson was so disappointed by its quarterly performance, it seems to have chosen the drastic measure of axing a quarter if its workforce, and announcing it will and take a new strategic direction after posting a major drop in revenue and recording a deeper loss in the first quarter of 2012.

The joint venture between STMicroelectronics and Ericsson generated just $290m in net sales in 1Q12, 35 per cent less than the $444m it posted in the same quarter last year. The firm’s net loss for the quarter stood at $312m, which is 75 per cent higher than the loss it made in 1Q11, which totalled $178m.

The firm has now announced new directives to guide its future, which include slashing 1,700 jobs, transferring application processor activities to STMicroelectronics and taking additional measures to accelerate time-to-market.

Nokia has officially been dethroned as the world’s largest handset vendor, after Samsung posted  figures showing that it shipped 93 million devices in the first quarter of 2012, compared to Nokia’s 83 million. It’s the end of an era and can only get tougher at the top.

Finally, web giant Google has launched its long anticipated consumer cloud storage product, Google Drive. Building on its existing offerings, the service lets users create, share, collaborate on and save files in the cloud.

Cloud office software suite Google Docs is built into Google Drive, allowing users to work with others in real time on documents, spreadsheets and presentations. Users can use their Mac or PC to access their cloud storage and can also download the Drive app to their Android phone or tablet. Google said that it is also working on a Drive app for iOS devices.

And that about wraps it up for the week – take care.

The Informer

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