a week in wireless

The disappeared

What with the internet destroying our brains, the Baby Boomers and Gen X and Yers of this world can only expect more ‘senior moments’ to befall them and for more stuff to randomly go missing. There’s been a lot of stuff going missing in the wireless world this week too.

The Informer thought he was having a senior moment on Thursday when news broke that US wholesale player LightSquared has tapped Sprint Nextel to deploy an LTE network on its behalf. It’s an interesting one: LightSquared will pay Sprint up to $11bn in cash over an 15-year period to deploy and operate a nationwide LTE network using L-band spectrum, but as a wholesale only player, LightSquared will then sell the capacity back to US operators, including Sprint.

But what becomes of the $7bn deal LightSquared made with Nokia Siemens Networks in July of last year? LightSquared had approved an eight-year deal with NSN to deploy, install, operate and maintain the nationwide 4G network amounting to around 40,000 cellular base stations.

The actual details are a bit hard to verify. The Informer is sure he remembers a press release that came out on July 20, 2010, yet it does not appear to be on either the NSN or LightSquared websites. Perhaps it’s a senior moment. But then the Ministry of Truth appears to have been at other parts of the LightSquared site as well. A few days ago the network info page harped on about an “agreement, the largest of its kind for the U.S. wireless industry,” with NSN, but today that same page reads quite differently, only mentioning Sprint.

At the time, Martin Harriman, EVP at LightSquared told the Informer: “It’s an extraordinarily complex deal as we try and capture an eight-year partnership that pretty much does everything. We’ll get there, but it’s a big, big deal, both for us and for NSN.”

Not any more. NSN confirmed that it would no longer be involved in the running of LightSquared’s radio access network, with that now in the hands of Sprint Nextel, which will “use its own vendors.”

However, an NSN spokesperson assured the Informer it was still involved with LightSquared through a new deal for the design, installation, testing and systems integration of the core network. But the value of this latest contract has not been publicised and the suggestion is that NSN might be significantly out of pocket over the reversal. That’s gotta hurt.

But the Informer feels for the 2,000 staff a little further north, which have gone missing from Canadian firm RIM’s roster. The company is to slash more than ten per cent of its workforce, as “a prudent and necessary step for the long-term success of the company.” The firm’s flagship tablet product, the Playbook, was launched to a mixed reception earlier this year and is not exactly starting fires in the market.

The BlackBerry maker said its workforce has quadrupled over the past five years as the company has enjoyed rapid growth, but since RIM has been faring less well it’s time to trim some of the bloat. During the second quarter, net income came down to $695m from $934m for the same quarter in 2010. The costs of the 2,000 redundancies will not be revealed until September 15th.

People have been disappearing at UK network operator Everything Everywhere too, but this time they’re on the customer side. Although the joint venture, which runs the Orange and T-Mobile network, increased its contract subscriber base during the second quarter, it still lost 390,000 users during the year to end-June as fickle prepay users took their leave. As a result, revenue took a slight dive from £1.7bn last year to £1.6bn in the second quarter of this year. Not bad going and the company seems to be cutting dead weight. The Informer recently met with Andy Sutton, chief network architect at Everything Everywhere who mentioned that when the company started capping data usage, it lost around 2,000 subscribers instantly. But those 2,000 subscribers were responsible for something like seven per cent of network data traffic. Good riddance, he probably thought.

There might also be some chicanery going on in Greece too, where second and third placed operators Vodafone and Wind Hellas have been put at risk of losing their 900MHz spectrum.

The country’s national regulator, the EETT, has issued a proposal for the re-auctioning of GSM spectrum licenses, which are due to expire in 2012. The move is controversial because it is an unusual renewal process, but also because the authority has set reserve prices at more than double the European average.

The obvious conclusion is that the Greek Government wants to use the auction to squeeze as much cash as possible out of the market’s operators in a bid to dig the country out of its financial black hole. A reserve price of €46.6m for each 5MHz block in the 900MHz GSM frequency band has been called “excessive” by one operator.

But one person close to the situation told the Informer there are machinations at work to ensure ex-state owned incumbent Cosmote – seen as the only nationalistic choice by Greek citizens whose alternatives are Vodafone and Weather owned Wind – gets its hands on some valuable 900MHz spectrum.

As it stands Cosmote owns 25MHz of 1800MHz spectrum, while Vodafone and Wind hold 20MHz apiece of 900MHz spectrum. It is this 900MHz spectrum that will go under the hammer first. The reallocated spectrum would also be awarded on a technology neutral basis, giving operators the opportunity to deploy 3G or any other technology in the 900 band.

It has been suggested by Stefan Zehle, CEO of spectrum auction specialist Coleago Consulting, that the operators could boycott the auction and choose not to bid in order to protest against the pricing. A similar situation arose during the French 3G allocation in 2001 when, the G fixed the price at a high level, based on the amounts that were paid for 3G licences in the UK and Germany. While SFR and France Telecom bought a 3G licence, Bouygues Telecom refused. As the government wanted to preserve at least three operators in France, it was forced to substantially reduce the price of the 3G spectrum licence.

In Greece, there is, theoretically at least, the potential for new entrants to come into play during the auction process, although the state of the country’s economy should be enough of a deterrent.

On the other side of the scale, Vodafone’s economy is doing better, £2.8bn better in fact, after the operator received its first windfall from its 45 per cent stake in Verizon Wireless since 2005. Head honcho Vittorio Colao was on hand to say that the money would be used to pay a sizeable dividend to shareholders, while the company speculated that it could get an annual payout of a similar sum from its investment. Vindication at last for Voda’s dogged resistance to offloading the Verizon stake.

The Big V was also on hand this week to announce a partnership with social butterfly Facebook, introducing the world’s first ‘official’ Facebook phone targeted specifically at the prepay market. At a London press conference, the Informer got to chat with Vodafone’s group terminals director, Patrick Chomet, who explained that the device, which is manufactured by Alcatel (the French vendor’s brand was acquired by Chinese vendor TCT Mobile in 2004) and runs a proprietary OS, took an in house team a year to develop.

In dedicating this level of resource to the programme, the operator clearly expects a strong return on its investment. Chomet pointed to Vodafone’s second quarter results, announced last week, which revealed that data revenue grew by 24.5 per cent year on year to £1.5bn, representing 13.7 per cent of group service revenue. More importantly, this growth brought about an inflection point where income from data services for the first time offset the decline in voice revenues.

In a bid to harness this trend, the Facebook phone will be used to capitalise on the opportunity afforded by data usage in the prepay sector, by deeply integrating the social networking experience with the device. Upon activation, users are presented with the option to either sign up or sign into a Facebook account, after which the user’s Facebook friends list becomes integrated with the phonebook. Automatic updating is user definable at a granular level enabling users to keep costs down, which for Vodafone delivers an opportunity to cash in on data usage from a relatively untapped sector, and for Facebook opens up the opportunity to increase its user base in rural, emerging markets where fixed line internet is nonexistent.

Kumar Ramanathan, chief marketing officer for Vodafone Essar, flew in from India to give his perspective on the device launch in his market, which he believes will be an easy pitch for both urban and rural areas due to Facebook’s popularity in the Indian market. “We have 60 million mobile internet users in the country and around 40 per cent of those use Facebook on mobile. We have a huge number of young people and social networking will drive growth in the mobile space,” said Ramanathan.

Speaking of emerging markets, Swedish giant Ericsson, no doubt gloating over NSN’s US mishap, has scored a major deal from Bharti Airtel, through a five year managed services contract for its African operations. Under its first multi-country managed services deal in Africa, Ericsson will manage and optimise Airtel’s mobile networks across 16 countries in the region, while under a separate two year agreement, Ericsson will also modernise and upgrade Airtel’s mobile networks for 3G.

Bharti bought Zain’s African operations for $10.7bn in 2010 and rebranded, making Airtel the master brand for all the group’s 19 operations in Asia and Africa covering over 200 million customers. In its second quarter results announced last week, Ericsson said managed services sales were down for the first time ever, compared to the second quarter 2010. Managed services sales decreased by 16 per cent year-over-year to SEK4.7bn and were down four per cent sequentially. Yet “The underlying fundamental growth drivers for the services business remain and customer interest is high,” the company said.

There’s a couple of other developments before the Informer toddles off on his holidays. Taking a leaf out of Google’s Chrome-book, Mozilla has unveiled plans for a web-based operating system of its own that will be targeted at mobile and portable devices. Oh joy, just what we need, another Linux-based OS.

Boot to Gecko (B2G) is designed to be a “complete, standalone operating system for the open web,” and will be based on the lowest level elements of the Android platform – the kernel and device drivers. However, the dev team will use as little of the actual Android code base as possible and the finished platform will not run Android compatible apps. For now though, this vague reference is all you get, although the team referenced recent work done on the development of HTML5, which goes towards making it a superset of PDF, and added: “We want to take a bigger step now, and find the gaps that keep web developers from being able to build apps that are — in every way — the equals of native apps built for the iPhone, Android, and WP7.”

Meanwhile, UK operator BT has been charged with the seemingly insurmountable task of policing the internet for copyrighted material. As many people feared, a high court judge has ruled that BT must block all access to Newzbin 2, a link aggregation forum which provides many links to pirated material. While the intention is sound, BT will be forced to use CleanFeed, the inspection software it currently uses to sniff out child abuse sites. But as the Internet Service Providers’ Association notes, at present CleanFeed is policing a rural road in Scotland, turning it onto its new task would be like policing a major motorway – something the software was not designed to do. That, and Newzbin 2 has threatened to sabotage CleanFeed if it is used against it.

But more worrying is the ruling, which seemingly makes network operators responsible for hunting down illegal content. It’s a slippery slope…

But not as slippery as the one that Zhang Chunjiang, a former deputy general manager at China Mobile, is on. Zhang has been sentenced to death by the Chinese state, having been found guilty of corruption. The bribes he confessed to having received amounted to $1.16m in between 1994 and 2009 when he held senior positions at the Liaoning Provincial Postal Administration, China Netcom and lastly China Mobile. That’s $77,000 per year. It doesn’t seem worth it to the Informer. On the bright side however, the death sentence is suspended for two years and may be commuted to life imprisonment pending good behaviour, because Zhang confessed to the crimes, and the money was returned. Death, or life in a Chinese prison. Crime certainly doesn’t pay.

Righto, that’s it for this week. The Informer is off on his holidays now and wishes all those of you following suit a safe trip.

See you in September,

The Informer.

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