Bad reputation

By The Informer

Anyone reading the news will have seen plenty of reputations on the line this week. For one, a US House Intelligence Committee report levelled more allegations at Chinese infrastructure vendors ZTE and Huawei than USADA has at Lance Armstrong.

The findings advise US carriers against trusting the Chinese vendors, which have seen stellar growth over the years and now find themselves competing with the big boys, but have long contended with claims that they pose a threat to national security.

Armstrong has always repeated the mantra: “I never tested positive for doping,” something a cynical observer might take to mean as an admission that he took drugs but never got caught. Cleverly leaving the burden of proof with his accusers. And when David Dai Shu, ZTE’s director of global public affairs, spoke to Telecoms.com in the middle of the US night time, he said that the only way to truly protect US equipment and US national security was to extend the investigation to include every company making equipment in China, including the Western vendors, a statement which the cynical observer might also interpret in a certain light.

Perhaps the suggestion is that security risks in network infrastructure are like pro cyclists doping in the late 90s, everyone was doing it. Who knows?

Anyhow, Dai Shu argued, and perhaps not unreasonably, that the committee responsible for the report had not given enough consideration to the vendor’s proposed solution, known as a Trusted Delivery Model, whereby the vendor identifies an independent third party to review the firm’s equipment and software ahead of any network project, in order to ensure that it poses no threat to national security.

“From the report we found that the committee noticed ZTE’s efforts regarding the solution. But it doesn’t seem that it paid serious attention to how we proposed to solve this problem. It’s a pity really — we believe that solving the problem is more important than making allegations,” he said.

The “threat” is mostly academic anyway, as the company has not been involved in any US national network construction, having already been forbidden from bidding to build Sprint’s network in 2010. Moreover, while the firm generated around $400m in revenue in the country last year, only around $30m was from its infrastructure business. “That means that more than 90 per cent of ZTE’s business is based on handsets and devices in the US. This report has very limited influence on ZTE’s business in the US,” Dai Shu said.

Over in the Nordics, CEO of Swedish operator group TeliaSonera Lars Nyberg, saw his reputation teetering on the edge, saved perhaps by a vote of confidence from the firm’s board, amid allegations of corruption and bribery.

The Committee on Industry and Trade of the Swedish Parliament is currently investigating TeliaSonera’s purchase of a telecom license in Uzbekistan from Gibraltar-based company Takilant. The firm served as the operator’s local partner when the Nordic telecom firm established operations in 2007, despite been alleged to have close ties with the daughter of Uzbekistan’s dictator Islam Karimov.

The allegations are particularly serious given that TeliaSonera is partly owned by the Swedish government. There are rumours circulating in Sweden that Nyberg would be forced to leave TeliaSonera earlier than planned. His current contracted expires in December 2013, and while the board has no plans to extend that contract, Anders Narvinger, TeliaSonera’s chairman said he has full confidence in the CEO.

The timing is particularly inopportune for TeliaSonera, which saw Håkan Dahlström, president of mobility services, ousted from his role at the operator in September, although the firm assures its investors that his departure was in no way related to these allegations.

Just next door, Norwegian operator group Telenor finally reached an agreement with its Indian partner Unitech to settle all disputes regarding their failed joint venture in India, Uninor.

Unitech has agreed to dispose of its shareholding in Uninor for a nominal amount, signalling an end to the long-running saga, while Uninor will morph into a new entity, called NewCo (imaginative huh?), which will be owned by Telenor. The operator group said that it is making preparations for the upcoming 2G spectrum auction, although a final decision on whether NewCo will participate will be made at a later date.

In its domestic market Telenor launched LTE in 11 towns and cities in the country and said it would continue to rollout across Norway “at a rapid pace”, pledging to have one third of the Norwegian population covered by LTE before the end of the year.

The Norwegian player also joined forces with Spanish group Telefónica to create a shared network API platform, offering operator partners and developers an opportunity to build and market apps to 460 million customers.

Telenor has signed up to become an equal partner on Telefónica’s API platform, BlueVia, which allows developers to build apps and mobile web services that will run on its infrastructure and share the resultant revenue. The platform will focus initially on the area of mobile payments, enabling operators to charge apps and content to mobile customers directly through their bill when they make a purchase. Earlier this year, Telefónica announced that it had signed global, framework agreements with Facebook, Google, Microsoft and RIM to offer direct billing payments. In Germany, where Telefónica has already rolled out direct to bill payments, more than 400,000 customers on average per month are being charged via this capability.

The UK arm of the operator group, O2, this week outlined plans to cut the margin on its direct operator billing offering, meaning that participating merchants get a greater share of the revenue. The move is designed to stimulate uptake, with O2 having seen some merchant revenue increase by over 200 per cent where mobile billing has been supported as an additional payment option.

The rumour mill this week was grinding away on a supposed acquisition of Swisscom by Mexican billionaire Carlos Slim’s America Movil, although the Swiss government is understandably upset at the idea of losing a national asset and is looking at ways to keep the company afloat by boosting loyalty with bundled services.

US carrier Sprint Nextel is also in the frame, with Japanese carrier Softbank believed to be in talks with the firm about the potential acquisition of a ‘substantial’ stake in the company. Sprint is weighed down by debt and a contract to buy so many billion dollars worth of iPhones off Apple, so the investment news was welcomed by shareholders.

Swedish kit giant Ericsson was picking up a bit of investment of its own, having signed a loan agreement with the European Investment Bank (EIB) to the tune of €500m. The loan is intended to support Ericsson’s R&D activities in what is rapidly becoming a patent race. Ericsson invested some SEK32.6bn in R&D in 2011, including restructuring charges and now owns 30,000+ patents.

Which is more than can be said for Ericsson’s offspring and embattled chipset firm ST-Ericsson, which has agreed to transfer its R&D division based in Linköping, Sweden, to local IT consultancy Cybercom. The move follows recent speculation regarding the future of ST-Ericsson, the 50/50 joint venture between Ericsson and STMicroelectronics, as the company battles worsening losses.

Earlier this year the company said it foresees a global workforce reduction of 1,700 employees worldwide, from approximately 6,700, with changes to be complete by the end of 2013. The agreement with Cybercom will only see the transfer of 27 R&D employees from ST-Ericsson to Cybercom, joining a team of 75 consultants offering connectivity engineering and security services to clients mainly in the industry segment in the region. It puts the parent company’s expenditure on R&D in perspective somewhat. When ST-Ericsson Sweden’s team goes on a coffee break, productivity in R&D must drop by 50 per cent.

And what does productivity make? Patents, that’s what.

Take care

The Informer