Parallel universe

By The Informer

Today the Informer feels like he has woken up in a parallel universe; one in which Apple is being vilified for its quarterly financial performance, while Nokia recorded an actual profit.

It’s a testament to the job Apple has done in the smartphone market in recent years that a company that has managed to make $13.1bn in just three months could draw the criticism it has. $13.1 bn – that’s over a billion dollars each week for the quarter; more than enough to buy 13 Instagrams.

Nonetheless, the performance missed analysts’ expectations and wiped $50bn off the company’s valuation – the firm’s share price dropped to$450.66; it peaked in 2012 at $702.10.

Sure enough, the naysaying began. “Apple’s products have begun to lose their “innovative” top luster,” said Andy Castonguay, principal analyst at Informa Telecoms and Media.

“The market has disconnected itself with Apple,” Jack de Gan, chief investment officer at Harbor Advisory Corp told news agency Reuters.

“It’s going to call into question Apple’s dominance in the space,” added Sterne Agee analyst Shaw Wu.

But Apple has plans to bounce back from this tragic news. Again, this is the news that it made £13.1bn in 13 weeks.

The firm will add another 36 networks to the selection of carriers that are permitted to offer the iPhone 5 with LTE support enabled, next week. CEO Tim Cook made the revelation as part of the company’s earnings call earlier this week. However, the expanded list does not extend to carriers in parts of Asia and Russia.

“Next week, we’re adding 36 more carriers for LTE support. These carriers will be in countries that we are not currently supporting LTE. So the LTE coverage now, as of next week is in Italy, Denmark, Finland, Switzerland, Philippines, also several Middle Eastern countries.” The Informer still can’t get his head round the idea of a handset vendor talking about “LTE coverage”. The LTE coverage was already there!

These networks have a total of 300 million subscribers combined, noted Cook. But that’s not the only way Apple is looking to push forward. On the same call, chief financial officer Peter Oppenheimer added that Apple expects to spend “about $10bn” in capex this year, just under $2bn more than the firm reinvested  last year. The firm appears keen to preserve its culture of innovation and push the boundaries further than just ensuring the next iPhones and iPads are just taller, slimmer and faster.

Meanwhile, one could be forgiven for seeing the headline “Nokia records quarterly profit” and assuming it is an article from the archives, circa 1990. But no, this week, Nokia recorded an actual profit for 4Q12. An actual €439m profit in fact, up from a loss of €954m recorded in the same quarter of 2011.

Unfortunately for Stephen Elop and co, this doesn’t necessarily mean that Nokia is making a comeback to compete in the same league as big boys like Apple. Despite the turnaround, the Finnish firm saw quarterly sales drop year-on-year from €10bn to €8.04bn, while net sales for the year stood at €30.2bn, down from the €38.7bn recorded in 2011. The operating loss made by the firm in 2012 was more than twice as deep as that recorded a year earlier; down to €2.3bn from €1.1bn.

Victor Basta, managing director of M&A advisors to the technology industry Magister Advisors, dismissed Nokia’s result as “irrelevant” in the long term.

“Margins and prices for devices are eroding for all players. Unfortunately for Nokia the potential software value is now Microsoft’s, which has gained a key channel for Windows into the mobile channel without having to buy Nokia and its problems,” he said.

Still, given the troubles the company has had in recent years, it should serve as encouragement for Nokia.

Much of Apple and Nokia’s worries come in the form of a robust South Korean juggernaut, seemingly going from strength to strength.

Samsung announced net profits of 7.04tn won ($6.5bn) for the fourth quarter of 2012, with strong sales from its mobile division making a significant contribution. The firm’s profit was up 76 per cent on the same period in 2011, when the firm netted 4.01tn won.

Mobile sales for the three-month period reaped 27.3tn won, almost half of the firm’s overall revenue for the quarter of 56tn won. Operating profit for the IT and mobile division, which includes handsets and tablets, was 5.4tn won, up from 2.56tn won in 2011.

Samsung said sales of its SIII and Galaxy Note II devices had been particularly strong. These devices were more popular than their predecessors, Samsung said, setting new records for the speed and volume of sales. But smartphone demand in developed markets is likely slow in the first quarter of 2013, the firm acknowledged – and this is largely due to the threat from manufacturers of lower-cost devices.

“The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition compounded by a slew of new products,” said Samsung. “In the first quarter, demand for smartphones in developed countries is expected to decelerate, while their emerging counterparts will see their markets escalate with the introduction of more affordable smartphones and a bigger appetite for tablet PCs throughout the year.”

Meanwhile, UK regulator Ofcom has announced that bidding for the 4G spectrum is underway. Seven firms have qualified to bid for spectrum auction and they will be competing for 28 lots of spectrum in two separate bands – 800MHz and 2.6GHz.

The regulator said that bids are being placed online over secure connections, using software that has been developed specifically for the auction.

The bidding will continue over several rounds and it is expected to be a number of weeks until the final winners are known. No updates on bidding activity will be provided until the conclusion of the auction. According to Ofcom, 4G services will be launched by a range of providers from late spring/summer 2013.

Efficient use of spectrum is becoming increasingly important in the UK – the country’s Ministry of Defence announced late last year that it will auction off around 200MHz of the radio spectrum it owns and now a research centre focused on developing white space technology has been opened at Strathclyde University in Glasgow, Scotland. The centre aims to work with players in the industry such as Microsoft, BT, the BBC and the UK government to develop technology that will tap into the unused white space spectrum.

Elsewhere, Swedish equipment manufacturer Ericsson has announced its intention to acquire the IT services capabilities of the Devoteam Telecom & Media operation in France. The deal will see 400 France-based IT services professionals join Ericsson, including the company’s TV SmartVision operations, which is in line with Ericsson’s strategy of being a ‘one stop’ shop.

Devoteam’s main competences are in the areas of consulting and systems integration for operations and business support systems, service delivery platforms and applications, IP Multimedia Subsystems, IP and radio networks and TV.

Also in the news this week, we’re all getting slower – at least in terms of broadband speeds. Despite the continuing roll-out of high-speed networks around the world, average and peak connection speeds actually declined by seven per cent between the second and third quarters of 2012 to 2.8Mbps, according to Akamai’slatest State of the Internet report. Despite the slight quarter-over-quarter decline, global average connection speed enjoyed healthy 11 per cent growth year over year.

The report, based on data from the Akamai Intelligent Platform, found that South Korea remains top of the pile for speed, with an average connection of 14.7Mbps, followed by Japan with 10.7Mbps and Hong Kong with 8.9Mbps.

Over in the Middle East, Saudi operator Mobily inked a partnership with enterprise cloud software and Infrastructure-as-a-Service (IaaS) provider Virtustream to offer cloud services to enterprises and small-to-medium businesses. Under the terms of the deal, Mobily will use Virtustream’s xStream cloud management software to run its public and hybrid clouds.

The deal means that businesses in Saudi will be able to move mission-critical applications, including legacy software, to the cloud, according to Virtustream. This would include applications such as those provided by SAP, Microsoft and Oracle, without needing to rewrite the software, the firm added.

Spanish operator group Telefónica has been particularly busy this week – the firm revealed plans to invest more in its fibre broadband networks in major cities such as Madrid and Barcelona this year, and also increase its fibre footprint in smaller cities like Bilbao and Seville.

In Madrid, the telco plans to extend its fibre-to-the-home (FTTH) network to new areas of the city like Alcorcón, Las Rozas, Boadilla del Monte, Villaviciosa de Odón, Torrelodones, Galapagar, Algete, Coslada, Valdemoro and Torrejón de Ardoz

Furthermore, El Tel announced it is looking to facilitate direct operator billing for customers in mobile app stores. The firm’s Telefónica Digital unit, which is tasked with “seizing opportunities in the digital world” and delivering new growth for the operator, has signed a global framework agreement with mobile payments and analytics company Bango. The two companies will partner globally to create an enhanced operator payment experience for app stores.

Seizing further opportunities in the digital world, Telefónica Digital also unveiled a web-based platform for the connectivity, management and control of M2M communications.

Smart M2M features real time monitoring of traffic type, volume and current consumption, technical supervision of lines including maps of connected devices, diagnostics and localisation. It also offers fraud detection functionalities, including the ability to restrict communications between a list of given devices or the possibility to establish traffic caps.

At the end of last year, Telecoms.com invited readers to complete its inaugural Telecoms.com Intelligence Industry Survey. Almost 2,000 of you did so, including 600 operator employees from 260 different operators worldwide. The Informer has had a sneak peek at the results of the survey and they provide very interesting reading indeed.

One of the interesting points the research discovered is that almost two thirds of the industry believes that greater consolidation is needed among mobile operators, with support emerging for the concept of single network markets.

64.6 per cent of respondents believe that further consolidation is needed in the mobile operator community. In line with this, when asked to rate a number of priorities for national telecoms regulators, respondents marked maintaining the number of mobile networks in the market as the least important. Less than ten per cent of respondents felt that this should be regualtors’ highest priority.

The survey also found that price remains by far the biggest influencer on operators’ selection of network vendors, more important even than technical performance of the equipment purchased. While technical performance was a close second to price, vendor attributes such as market share and legacy relationship were rated by respondents from across the telecoms industry as significantly less important to operators.

Price was ranked as very important by 43 per cent of respondents and as important by a further 41.8 per cent. Technical performance was a long way behind in terms of the number of respondents who felt it very important (24.6 per cent) although it was ranked as important by a larger number (47.7 per cent).

Despite the efforts being made in the automotive market towards enabling connectivity in vehicles, connected cars currently present the least potential service revenue opportunities for mobile operators, according to data from the Telecoms.com Intelligence Industry Survey 2013.

When asked to rate non-telco sectors on the potential service revenue opportunities they offer to mobile operators, 63.3 per cent of respondents rated the automotive sector as offering very low to average opportunity.

Conversely, 76.1 per cent of respondents saw high to very high opportunity in the payment/banking sector, and 71.7 per cent did so in the media content space.

The full results of the Telecoms.com Intelligence Industry Survey 2013 will be published on February 18th.

That’s about all for this week – take care.

The Informer