Make them an offer they can't refuse

By The Informer

Scalado sounds like the name of a character from Goodfellas, the film based on the life of mobster-turned-informant Henry Hill, who died this week. Tony “Eraser” Scalado. If you want someone rubbed out, he’s the man. In fact, Scalado is a Swedish imaging company whose technology can be found in the handsets of all of the top five vendors.

Interestingly enough, the firm’s most recent announcement concerned a new capability that lets users delete unwanted objects from photos. So the Goodfellas vibe isn’t altogether inappropriate.

Scalado made the news this week when it was acquired by Nokia. CEO Stephen Elop may be tempted to use Scalado’s technology to edit a few of the team photos; as the imaging acquisition was the solitary rose in an otherwise very thorny series of announcements for the one time handset market leader.

The ropes are being cut on some 10,000 Nokia employees as Elop tries to keep the Nokia balloon in the air. This latest round of cuts hits close to home, as the manufacturing facility in Salo – where Nokia is one of the largest regional employers – will be shut down. R&D sites in Germany and Canada are also set to be padlocked and Nokia said its IT, corporate and support functions will also be scrutinised for trimmable fat.

Perhaps with an eye on keeping the motherland happy, Elop reshuffled his cabinet, promoting a couple of Finns to senior positions. Executives on the way up include Juha Putkiranta as EVP Operations; Timo Toikkanen as EVP Mobile Phones; Chris Weber as EVP Sales and Marketing; Tuula Rytila as SVP Marketing and CMO; and Susan Sheehan as SVP Communications.

Some long serving, high ranking suits have made way for the new blood, most notably Niklas Savander, EVP Markets and Mary McDowell, EVP Mobile Phones. Savander has been with Nokia for 16 years, in that time managing the Mobile Devices unit, Enterprise Solutions and Technology Platforms. McDowell, meanwhile, joined Nokia to head the Enterprise unit in 2004.

Nokia also said that it will “broaden” the price range of its Lumia handsets in a bid to improve sales. By “broaden” Nokia means “cut”, presumably, as the firm probably wouldn’t have much success simulating sales by broadening the price range upwards.

Besides, Nokia’s not interested in selling expensive phones any more, as evidenced by its decision to offload Vertu, its more-money-than-sense luxury phone brand, to a VC group. Who wants a 3110 covered in diamonds, anyway.

The Scalado buy shows Nokia’s enthusiasm for imaging as a differentiator and the firm is also looking to leverage its mapping assets outside of the mobile space. Whether Nokia’s competitors will carry on buying Scalado technology when the money is going into Nokia’s coffers remains to be seen.

Mapping tech reared its head at the launch of iOS6 this week, as Apple announced that it’s ditching Google’s map software; something that has been a popular feature of the iPhone since launch. Drawing a line in the sand, Apple has created its own mapping app, with 3D views and turn-by-turn navigation. Knowing Apple, the nav function will work beautifully, but will exercise veto over your choice of destination.

It’s more bad news for the operators, according to Ovum’s Nick Dillon. “This won’t be a good thing for operators, they haven’t got a lot of opportunity to influence Apple devices heavily, they’re very locked down and Apple has a lot of control over its platforms,” explained Dillon. “But this will be a further step, removing any chance of them selling extra services on top of iOS devices.” Dillon said this would make Apple “less popular” with operators—although it’s hard to imagine Apple being any less popular among that particular group.

Especially  now that Apple has enabled FaceTime for use on cellular networks.

Like Google cares about being dumped, anyways. Kantar Worldpanel ComTech reported this week that Android has grown its smartphone market share in the five biggest European markets from 38.8 last year to 60 per cent this year. In Germany it has 69 per cent and, in Spain, 79 per cent. Clearly Europe’s economic woes are playing into Android’s hands; the budget Galaxy Mini from Samsung is the most popular smartphone in Spain, Kantar found.

Android has grown, in part at least, at the expense of that other troubled handset vendor, Research in Motion. This week the Canadian vendor brought its BB10 OS roadshow to London to give us a look at the platform upon which it has staked all hopes of a revival. The firm insisted at this week’s event that BB10 is for “mobile computers” rather than smartphones or tablets.

What most people think RIM needs to do is get back to serving the enterprise market but Vivek Bhardwaj, head of software for RIM in EMEA didn’t want to concede that this was the strategy. Instead, he said the devices would be aimed at “people who want to be successful in whatever they do”. Right. That rules out everyone who specifically sets out to fail, then.

Perhaps Bhardwaj has been taking nonsense lessons from the brazen, buttock-faced PR man who currently runs Great Britain. When asked a particularly awkward question about the inappropriate nature of his relationship with Rupert Murdoch’s NewsCorp at the Leveson enquiry this week, David Cameron responded: “I don’t want to give you an answer which may be incorrect,” and left it at that.

BB10 may be a great platform, said Informa analyst Malik Saadi, but RIM should get out of the hardware game altogether, and focus on licensing its software to the likes of LG or HTC. He also questioned RIM’s ability to get devices to market quickly enough, and the level of patience that will be displayed by RIM’s investors.

Speaking of investors, the world’s richest man, Carlos Slim, is making inroads to the European carrier market, buying up lumps of Telekom Austria and Dutch incumbent KPN.

Slim’s Latin American powerhouse America Movil nabbed 21 per cent in Telekom Austria, taking its stake to just shy of 23 per cent, for an undisclosed sum. Movil described the deal has part of its “geographic diversification strategy”, which was already in evidence through its bid to increase its Dutch holding.

Last month Movil announced a plan to increase its stake in KPN from 4.8 per cent to 28 per cent through an unsolicited $3.25bn bid for shares. KPN advised shareholders not to take the deal as it undervalued the company. You’d bet on Slim getting what he wants in the end, though. You don’t build a $69bn personal fortune by giving up easily.

The state of the European economy has aroused the acquisitive nature of a number of thriving emerging market players, according to Ovum’s Angel Dobardziev. “With growth rates double or treble that of mature markets, and in some cases their appreciating currencies, emerging players’ firepower is only going to get stronger,” he said. “Hence, we expect this to be just the initial trickle of a growing number of deals where other leading European telcos become the target of emerging market buyers.”

Moving in the other direction, Spanish incumbent Telefónica jettisoned half of its holding in China Unicom, cashing in to the tune of $1.4bn in a bid to soothe angry shareholders who questioned the strategic value of the stake. Telefónica is left with a nibble over five per cent and has promised Unicom—which bought back the shares—that it won’t offload any more for the next year.

Telefónica has struggled financially in 2012 so far. In its 1Q12 results, it revealed that net income dropped to less than half of what it recorded in the same period of 2011. Although revenue for the quarter grew 0.5 per cent year-on-year to €15.51bn, profit fell 53.9 per cent from €1.62bn to just €748m. Times is hard.

Telefónica’s decision echoes a move made in September 2010 by Vodafone, which made an exit from the market by selling its 3.2 per cent stake in China Mobile for a sizeable $6.5bn return.

Onto Chinese vendors Huawei and ZTE now, and the pair have yet again come up against obstacles in an overseas market. Reports in the Algerian press revealed that the North African country has banned the two vendors from bidding for public contracts; the first time that the state has made such a move. Local courts have prosecuted and jailed the former CEO of Algeria Telecom for fraud, Mohamed Boukari and issued warrants for the arrest of three Chinese officials.

But ZTE and Huawei had cause for celebration as well this week, with Strategy Analytics reporting that the two firms enjoy a clear lead in the mobile broadband modem market. Huawei took 47 per cent of the market in 2011, with ZTE bagging the next 30 per cent.

Back to Vodafone briefly and Big Red was thrilled this week to be told that it will get to keep almost £4.8bn that it had been accused of owing the Treasury in back taxes.

The dispute originated with the acquisition of Mannesmann in 2000. By 2010 Vodafone was looking at a tax bill of £6bn, but had only set aside £2.2bn. Not all of the information about this is in the public domain, but Vodafone somehow agreed to pay HM Revenue & Customs only £1.25bn in settlement.

Naturally, the UK was up in arms about this and in December last year the National Audit Office (NAO) was called in to look at the deal. The results of the investigation were published this week and make unhappy reading for anyone expecting Vodafone to have to cough up the difference.

The NAO was assisted in its review by Sir Andrew Park, who concluded that HMRC were “right” to settle the dispute with Vodafone at £1.25bn “because, if the case had not been settled, it would have gone to litigation. If this had happened, there was a substantial risk that the Department [HMRC] would have received nothing.”

Essentially it would have cost too much to take Vodafone to court over this, so the revenue boys took what they could. Like the man said, if you owe the bank $1,000 it’s your problem. If you owe the bank $1,000,000 it’s the bank’s problem.

Vodafone also pointed out that it has given around £6.7bn to shareholders this year “who include virtually every major investment fund relied upon by millions of UK pensioners and savers”. So if you don’t belong in this demographic, more fool you.

After a round of high-fives in the boardroom, Vodafone group chief financial officer Andy Halford said: ” We welcome this vindication. Vodafone has always been a responsible company with a strong commitment to managing our affairs properly and diligently within the law and with full disclosure to all relevant tax authorities.”

Vodafone is now free to return to the important business of umbrellas that improve your phone reception. This is from the Vodafone blog:

“The Vodafone Booster Brolly uses a clever combination of high gain antenna and low power signal repeater to catch radio waves from a Vodafone transmitter, before dispersing a very low intensity signal, creating a small “signal shower”, just above users’ heads. It connects their phones to the network, and even boosts the signal of other Vodafone customers around them.”

The umbrella also has solar panels that generate enough power to charge your phone. Unless it’s raining, of course, which is when most people use an umbrella. And what about in-building penetration? Vodafone has failed to take into account the fact that it’s bad luck to put up umbrellas indoors.

In more sensible news, Vodafone has followed Telefónica’s lead and launched a new European roaming tariff ahead of EU legislation on pricing that comes into effect in July. Vodafone UK customers can get full voice and data service for £3/day in Europe.

“For example, a pay monthly customer using Vodafone EuroTraveller to make three 10 minutes calls and send ten text messages back to the UK and using 5MB of mobile internet whilst surfing will pay £3 plus their UK home price plan instead of over £17.00 on our previous standard roaming prices,” the operator explained in a statement, without batting an eyelid at the ludicrous disparity.

Telefónica is offering £1.99/day for 25MB of data, while 3UK this week responded with an unlimited offering for £5/day.

Finally the Informer will be able to update his Facebook page during his summer holidays.

Take care

The Informer