Getting out of Dodge

By The Informer

The Informer doesn’t like goodbyes, but sometimes they’ve got to be said, a fact proven this week as big names have been bidding farewell to parts of their operations overseas.

Getting out of Dodge has been a recurring theme; corruption in India is beginning to take its toll on overseas investors, in Greece, the country’s financial woes are making foreign firms think twice about their business sustainability there, Nokia is scaling back operations in Hungary, Mexico and Finland. On these shores, meanwhile, disagreements over the justice system have seen the England football team’s Italian manager pack his suitcases.

It could all still work out, but that’s looking less and less likely, particularly in England’s case.

The fallout from India’s 2G scandal in 2008 is now beginning to claim victims. Bahraini carrier Batelco has made its move out of India, selling its stake in Indian operator STel. The Middle Eastern operator said that it had been looking for a buyer for its share in the Indian carrier long before the Supreme Court of India’s ruling last week to cancel 122 spectrum licences awarded in a 2008 spectrum sale. With the mess the Indian telecoms market finds itself in, for which former telecoms minister A. Raja is currently in jail awaiting trial, Batelco is selling its 42.7 per cent equity in STel for BD65.8m ($174.5m) to its Indian partner Sky City Foundation. The Bahraini firm seems to have gotten itself a good deal, selling its stake for the same amount that it bought it for. The operator hasn’t closed the door to India entirely though, and said that it intends to re-enter the Indian market after the sale and that it is open to other opportunities later down the line.

Another Middle East operator, UAE’s Etisalat, is also feeling the repercussions of the Indian Supreme Court ruling, and has announced that it is writing down the value of its Indian assets. The company owns a 45 per cent stake in Etisalat DB (formerly Swan Telecom), which is one of the companies that has had its 2G licences revoked.

The company said that it will recognise an impairment charge in its 2011 financial statements of AED3.04bn ($827m) before tax, and the net impact of the charge on the company’s profits will be AED1.02bn.

But Telenor, which has also been hit by the scandal through its Indian JV Uninor, aims to do what it can to remain in India.

The Nordic operator has a lot to lose from the corruption scandal, as it had pledged a commitment of NOK20bn, ($3.43bn) investment in India and has spent around two-thirds of that already on setting up the joint-venture, spectrum licences and infrastructure and loan guarantees. It has not ruled out bidding for more licences in next the 2G spectrum auction to reassign the licences, due to be held in July 2012.

“We will do what we can to operate in India. Currently, everything is an option,” Tor Odland, VP for group communications for mobile at Telenor told Telecoms.com.

Meanwhile, the financial crisis in Greece has the country in a state of disarray, with mass unemployment and riots in the streets. Vodafone has decided that it will hold tight and not pursue plans its plans to merge with local operator Wind Hellas. The carrier cited the uncertainty around the Greek market as the key reason.  The Informer understands that regulatory environment in Greece also played a part in the company’s decision to scale back its operations in the Hellenic Republic.

“We have ceased discussions with Wind Hellas,” a spokesperson from Vodafone told Telecoms.com. He added that the operator is still committed to the Greek market though, as last year it purchased additional spectrum and said that its performance in the smartphone and enterprise markets in Greece is still strong.

It’s no secret that Finnish handset giant Nokia has been struggling to keep up with the pack in the smartphone market for quite a while now. While it seems to be making a concerted effort through its Lumia devices to get itself back onto the smartphone map, it’s still looking to cut costs to back up the revenues.  Its latest move sees the company cutting 4,000 jobs in Hungary, Mexico and Finland, as it looks to move smartphone manufacturing to Asia.

Niklas Savander, Nokia executive vice president, Markets, said that by shifting device assembly to Asia Nokia hopes to improve its time to market and ultimately be more competitive.

In the UK, O2’s staff have been testing how feasible it is to get themselves out of the English town of Slough. (Sometimes it’s not a matter of feasibility, it’s a matter of necessity! Ed.) The operator heldwhat it claims was the “biggest flexible working initiative of its kind” as 3,000 employees worked remotely on Wednesday.

The experiment was aimed to test the effectiveness of its plans to avoid the expected travel disruption caused by this summer’s Olympic Games in London. The Informer has made a few visits to Slough in his time and was very surprised to hear about this trial; not because of the idea to test out remote working capabilities but more because the offices didn’t get broken into.

On the topic of travel disruption, Catalan transport workers unions have gotten wise to the value of the upcoming Mobile World Congress, and are threatening to bring down the Metro underground system during the event, which begins later this month. They’ve voted to strike for the duration of MWC over the issue of pay, and to demonstrate outside the Fira, meaning that the giant taxi queue by the main exit could become quite the gathering.

The GSMA said that it is working with the Barcelona authorities on contingency plans,but the Informer suspects the unions might get their way on this one. The traffic is bad enough around the Fira and if attendees are unable to take advantage of the metro it will be a nightmare for everyone – except the pickpockets and muggers who operate with such gleeful abandon during the event.

Meanwhile, Google has been busy getting into things rather than out of them.  The company used to be known as a “search engine giant” but that label seems outdated, since it now offers a host of services, as well as developing its own Chrome books, web browsers and mobile ecosystem. It is now spreading its wings further and has started building its Google Fibre network in Kansas, USA.

The company states that it has now developed a comprehensive set of detailed engineering plans for the project, after sending out engineers to measure utility poles, study maps and survey neighbourhoods.

Now, this column has regularly mentioned ongoing patent disputes between device manufacturers, and quite frankly, The Informer is getting bored with the whole thing. Nonetheless, he fis duty-bound to mention the fact that in Germany, Apple was forced to stop selling its iPhone 3GS, iPhone 4 and iPad in its German online store this week – if only for a couple of hours.

This was due to Motorola Mobility enforcing an injunction preventing the sale of these devices last December, but only enforcing that ban on Monday this week. Later that day, Apple went to court and was able to overturn that injunction. More time and money wasted.

Better news for those in Deutschland: Vodafone’s German arm Vodafone D2, has revealed that it will soon have an LTE ready smartphone from HTC available on its network. The HTC Velocity 4G will be coming to market soon, according to reports, though the exact launch date and pricing has not been confirmed.

While on the topic of patents, the UK Government announced that it will soon close its consultation on the Patent Box draft legislation due to come into force on April 1 2013. The legislation aims to reduce corporation tax from 26 per cent to ten per cent for profits made on patented technologies. By offering this tax break, the aim is to increase high-tech manufacturing innovation in the UK and to encourage more telecom companies to set up on these shores and increase investment.

And this week has also seen operators counting their cash and telling the world how much money they’ve made, or lost, over the past three months.

In the US, Sprint Nextel posted disappointing full-year results. For its fourth quarter of 2011, the company recorded a staggering $1.3bn loss – an even greater loss than the $929m the managed to make in the same quarter of 2010. This was despite net operating revenue reaching $8.7bn, higher than the $8.3bn recorded in the same period of 2010.

For the full year, the operator posted a $2.9bn, which, to be fair, is an improvement on the $3.4bn loss made in 2010.

The boldly optimistic Sprint CEO Dan Hesse called this a “strong fourth quarter performance”. He was, however,  referring to the total net subscriber additions of 1.6 million during the quarter; its strongest quarterly subscriber growth in six years, and in his statement, which accompanied the earnings result announcement, did not once refer to the loss made.

“Our performance illustrates the power of matching iconic devices like the iPhone with our simple, unlimited plans and industry-leading customer experience,” is what he said.

Vodafone Group, meanwhile, posted a 2.3 per cent drop in group revenue for the quarter ending December 31, 2012, to see sales total £11.6bn ($18.4bn). The group blamed economic conditions in southern Europe for the decline in revenue it saw in Italy and Spain, where revenues dropped by 4.9 per cent and 8.8 per cent respectively.

There was progress in Germany and the UK though, where revenues increased modestly; by 0.7 per cent and 1.1 per cent respectively. However, in India, the company reported strong service revenue growth of 20 per cent, and in Turkey it saw a 23.5 per cent growth.

The group’s South African subsidiary, Vodacom, also posted an increase in service revenue of 8 per cent, up from the 6.7 per cent growth it saw in Q2. The firm attributed this to faster growth in Vodacom’s markets outside of South Africa. In South Africa growth remained stable at 4.9 per cent.

And Australian operator Telstra also posted its earnings results for its second quarter of the fiscal year, which ended December 31, 2011. The Australian operator saw its revenue increase by a modest 1.1 per cent to reach AU$12.4bn (US$13.4bn), while net profit jumped by 22.9 per cent, or AU$274m to AU$1.47bn.

And Groupon surprised the industry by posting a $42.7m loss. The popular discount coupon service was fully expected by all to post a profit, as it more than doubled its revenues from $172.2m to $506.5m in fourth quarter of 2011. It attributed the shock loss to its rapid expansion into new markets, and the costs associated with setting up its new HQ in Switzerland, for which it had to pay a tax bill of $34.9m, higher than it had anticipated.

That’s all for this week.

Take care

The Informer