a week in wireless

Shakes to Sheikas

‘DT’ can stand for Different Things. In this industry it usually stands for Deutsche Telekom, for example, but in other circles it can stand for Delirium Tremens. And these two have more than initials in common, given that they’re both a bit on the shaky side.

The German incumbent looks to be waist deep in the stinky stuff, with results this week making good on last week’s profit warning. First quarter losses at DT hit €1.12bn, compared to a profit of €924m for the same period in 2008, although revenues were up by €1bn to €15.9bn. Fingers and whispers pointed to the carrier’s UK and US mobile operations as the most problematic operations, with the carrier announcing a goodwill write-down of €1.8bn on T-Mobile UK. The US operation, meanwhile, has suffered from diminishing roaming revenues as consumers travel less, while still having to fund the rising costs of its 3G network.

With five carriers and penetration at nearly 130 per cent, the UK market is crowded, and consolidation has long been mooted. T-Mobile- the wobbly tooth in Deutsche Telekom’s mouth – could just be the catalyst. The German incumbent has to make up its mind over what to do with its UK mobile player. While it’s an international carrier, T-Mobile doesn’t have a Western Europe footprint like Vodafone or Orange. The UK aside its portfolio generally lies further east, meaning that T-Mobile UK is less of a strategic property.

And T-Mobile has always struggled the hardest of the four UK GSM licensees. The Informer remembers years ago hearing a plummy-toned senior exec from Vodafone or Cellnet (as O2 once was known) dismissing the One2One strategy (as T-Mobile UK was called at the time) as “chasing after Johnny White-Socks”. The point was valid, if unctuously made; One2One went in at the bottom end of the market and the carrier – whatever its name – has been dealing with that legacy ever since.

If consolidation is to come, the Informer reckons it would most likely be through a tie-up with Hutchison’s 3UK, as the WCDMA carrier and T-Mobile already have a JV that operates the 3G network infrastructure they share. Furthermore, 3 – with a little over five million subscribers – could combine with T-Mobile and still not exceed market leader O2’s tally of 22.4 million. Were T-Mobile to coalesce with any other UK carrier, the resulting customer base would be in excess of 32 million at the very least, quite possibly generating cause for concern among competition watchdogs.

But it’s believed in some quarters that Hutch may be looking to offload 3UK itself and this is not the best time, even for the relatively well positioned players, to be making acquisitions. In a sunnier financial climate, T-Mobile might be an attractive proposition for further flung players that have made noises for years now about expanding into mature Western markets. China Mobile, India’s Bharti Airtel and Kuwait-headquartered Zain might all be considered contenders.

Zain for one, though, has had to adapt its plans for growth, this week announcing a cost cutting plan that will see a workforce reduction of 13 per cent – or 2,000 staff. The firm’s CEO, Saad Al Barrak, believes the plan will improve the carrier’s operating margin by five per cent within a year. “This will be achieved through a combination of managed outsourcing, centralisation and leveraging capabilities, as well as training and development for our personnel, all of which will improve our operating efficiencies,” he said.

On the heels of this announcement, Zain reported Q1 profits of $260.5m, up 3.3 per cent year on year, and a customer base across its footprint of 64.7 million.

T-Mobile UK has also unveiled its new managing director, Richard Moat, who joins the firm from Orange Romania. Which means, the Informer supposes, that anyone wishing to take over T-Mobile UK will first have to negotiate the Moat. Bet he hasn’t heard that one before.

Sticking with troubled operators and bodies of water, let’s hop over the pond and visit Sprint Nextel, which reported worsening Q1 losses of $594m, compared to a negative $505m for the same period last year. CEO Dan Hesse claimed improved financial stability and “the largest sequential improvement in overall gross adds and net adds in Sprint Nextel history.” It’s all about spin, isn’t it, because the firm still recorded a net loss in customer numbers of 200,000, taking it to 49.1 million.

Also continuing to lose money is Franco-US JV vendor Alcatel Lucent, which reported Q1 losses of €402m, up from €181m for Q108. Revenues for the period also decreased 6.9 per cent year on year from €3.86bn in 2008 to €3.59bn in 2009.

The company said that while revenues at the Carrier and Enterprise unit declined at double digit rates year on year, reflecting capital constraints in fixed and mobile access, revenues from the Services division grew in the high teens.

So far the company has eliminated 290 management positions out of the 1,000 planned, while the number of contractors has been reduced by about 770 out of the 5,000 planned. Alcatel-Lucent said it still expects that, by the fourth quarter, it should achieve total cost and expense savings of €750m. The company is also seeking potential co-sourcing partners, to help optimise its efficiency in areas such as IS/IT, finance, HR and R&D.

Meanwhile, the planned sale of the firm’s 20.8 per cent stake in defence firm Thales to Dassault Aviation for €1.6bn has been approved by all relevant regulatory authorities.

Alcatel Lucent competes with Ubiquisys for supremacy in the femtocell space, which is a piece of information whose use is restricted to linking to this next story. Ubiquisys has banded together with software firm Intrinsyc to create a handset interface for Google’s Android platform that changes according to the user’s location – specifically when they come within range of a home or office femtocell.

‘UX-Zone’ incorporates femtocell presence triggers from the Ubiquisys FemtoApps initiative and switches over to the Android desktop when the handset automatically switches over from the outside network to the femtocell. The femto-themed home screen could display new icons for high bandwidth entertainment services like video streaming, social networking and home network integration, which would not be present when the user is on the macro network.

Ubiquisys also said that the UX-Zone application could be adopted by enterprises or businesses to provide a customised or themed home screen on Android gadgets when on campus or within a certain building or even a store.

Leaning on research released on behalf of the Femto Forum last month, backers of the technology claim that, even with conservative assumptions, the lifetime value of a femtocell user could be as much as 125 per cent more than a non-femto using customer.

Speaking of applications, Microsoft this week published the dos, don’ts, wills and won’ts that it intends to apply to its Windows Marketplace mobile application store. It will leave you unsurprised, perhaps, to learn that the firm is erring on the side of proscription.

On the list of prohibited application types are those that enable VoIP over the mobile network, which suggests VoIP over wifi is fine; apps that sell or promote mobile voice plans or replace or modify the default dialler and messaging interfaces; apps that change the default web browser, search client or media player or run outside of Microsoft runtimes; and apps that publish user data or location information without permission.

But the big no-no is any application that promotes or features rival app stores, which might put operators in something of a predicament if they want to give access to their own app stores.

European carriers will be no happier with the European Commission, which has yet to tire of its pricing crusade and is seeking to cut the cost of mobile phone calls yet further by imposing new caps on termination rates.

Mobile termination in the EU average around €0.085 per minute, or about ten times higher than fixed termination rates. The EC’s latest recommendation would bring termination rates down to approximately €0.015 – €0.03 per minute by the end of 2012. Reducing these charges would lower consumer prices to the tune of €2bn between 2009 and 2012, the authority said.

“Despite efforts by some national regulators to bring termination rates closer to their real costs, they remain very disparate across the EU, with large gaps between fixed and mobile termination rates. This is not in line with the increasing convergence between fixed and mobile telephony and can lead to serious distortions of competition between Member States and operators,” said Viviane Reding, EU telecoms commissioner, to a chorus of hisses and boos from the carrier community. “The Commission decided to intervene today against these distortions of competition in the Single Market, which deter investment into upgrading fixed networks to fibre and for which in the end consumers are paying the price.”

The EC’s guidance is in the form of a “Recommendation” that national regulators are obliged to take “the utmost account” of, and should apply by the end of 2012. Oooohhh.

Now let’s go somewhere we don’t often go, more’s the pity – to New Zealand. Here a running dispute between carriers Vodafone and Telecom New Zealand has been brought to a conclusion without the need to resort to violence, which is always good to see. The firms were locking horns over the impending launch of Telecom’s new WCDMA network, which it has dubbed XT and for which, strangely, it is using UK TV ‘personality’ Richard Hammond as an advertising vehicle. Perhaps it’s because he’s about the same size as a hobbit.

Vodafone launched a legal action against Telecom earlier this month, claiming that its new network was interfering with the one Vodafone already has in place, an accusation that was dismissed by Telecom CEO Paul Reynolds as “a piece of aggressive behaviour that betrays Vodafone’s insecurities about competition from Telecom’s new XT mobile network, just 13 days away from launch.”

This week the firms announced that Vodafone has dropped its law suit and that Telecom has agreed to extend its network filter installation programme in order to help resolve the interference issues identified as impacting Vodafone mobile customers. That’s what it says on Telecom’s website, which suggests that perhaps Vodafone had a point after all.

The XT network will go live by the end of May, Telecom said, a slight delay from its original launch date of May 13th. The firm also reported revenues for January – March of US$830m, a slight improvement year on year. Net profits rose 13.6 per cent to US$94.2m.

Vodafone had happy financial news of its own, many miles away in Qatar. The IPO of its operation in the Gulf state raised $1bn, indicating that Qatar is less affected by the global financial crisis than some other places. According to Vodafone, this was the largest IPO of the year in the world so far. Never mind financial quarters, it was hind quarters that Vodafone was interested in afterwards, puckering up to give those belonging to certain dignitaries a big wet smooch.

“Vodafone is very fortunate to be here and I want to reinforce my sincere gratitude to Her Highness Sheika Mozah Bint Nasser Al Missned of Qatar Foundation, ictQatar and the Government of Qatar for their support and trust,” said Grahame Maher, CEO of Vodafone Qatar, gushing like the black gold that goes most of the way to explaining Qatar’s resilience to recession.

He could have said:

“Sheika, you’re money maker.”

Take care

The Informer

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