Passing the baton

By The Informer

However much their lawyers would like them to, no two companies can sustain a legal conflict indefinitely and so the industry has evolved to sustain a sort of legal relay race. The last week has seen the baton in the China vs the West event handed over, from Huawei and Motorola, to ZTE and Ericsson.

The joint statement from Huawei and Motorola, detailing the conclusion – with prejudice – of their courtroom tussle, was worded in such a way as to leave the reader in no doubt as to who had taken the moral high ground. The US vendor was all contrition and relief, like a politician apologising to the cameras while holding hands with his wife, after being caught playing leapfrog with a junior aide. “We regret that these disputes have occurred,” said CEO Greg Brown, before looking forward to the “return to our traditional relationship of confidence and trust.”

The Informer got the impression that all is not forgiven, though. Huawei’s rather more sniffy statement carried all the implied retribution that you see in the eyes the long suffering wife in these situations. “Throughout our decade long relationship with Motorola Solutions, Huawei has contributed cutting edge technology… Huawei provided source code and millions of documents. Huawei acted properly and above board at all times.”

They might be smiling for the cameras, but it’s separate bedrooms from here on in. Still, it’s good news for Nokia Siemens Networks, which now has one less obstacle in the path of its acquisition of those Motorola assets that were covered by the dispute.

Meanwhile the scandal’s starting to sizzle for Ericsson and ZTE. With the Swedish firm suing the Chinese last week, ZTE has returned fire, alleging that Ericsson’s Chinese outfit has breached patents on a range of products involving “core networks, GSM infrastructure and 4G infrastructure.” Ericsson had said that talks to settle the dispute broke down last week, leaving it no option but to bring in the legal team. It’s the kids the Informer feels sorry for.

ZTE took solace in the familiarity of its domestic market, announcing a deal with China Unicom that will see the vendor provide HSPA+ infrastructure for deployment in seven Chinese cities, including Changchun, Ningbo and Wuhan.

Huawei’s looking further afield, though. The firm has promised to double the size of its UK workforce over the next three years, recruiting 500 new staff to its British operation. The Informer wonders if Huawei is planning on bringing these staff in from China, in which case it might want to run things by Prime Minister David Cameron, who’s got one or two reservations about immigration.

While we’re on the subject of protectionism, Indian regulator the TRAI has proposed new rules that will require operators source the bulk of their infrastructure locally (whether manufactured by Indian or foreign companies). The rules require that 30 per cent of kit purchased by 2013 be sourced in India, rising to 80 per cent by 2020. In 2010 the figure for locally produced equipment was just 12 – 13 per cent, TRAI said.

Perhaps this will lead to the bolstering of Indian production facilities, as may be about to happen in Brazil, where Taiwanese vendor Foxconn—which assembles Apple’s flagship iPad, -Pod and -Phone products—is looking to invest a whopping $12bn in new facilities over the next five or six years.

Google is another company that’s felt the Chinese burn, but it doesn’t seem to be doing it too much harm. The web giant turned in a healthy set of results for the first quarter of 2011, with net income for the up to $2.3bn from $1.95bn last year, against revenues of $8.6bn, up from $6.7bn last year. But with the company still in growth mode and hiring staff at an incredible rate, there were some concerns over the its high spend.

Investors were unhappy that, during the quarter in which co-founder Larry Page took the CEO’s reins from Eric Schmidt, costs jumped from $4bn to $5.8bn on the back of increased staff acquisition and marketing. Schmidt’s tenure was all about building the company out and making some money, while Page is more of a product and technology innovator, so perhaps a little expenditure is to be expected.

No regrets, that’s the way forward. Or maybe not. Google is backing a group of researchers at Tel Aviv University in Israel who are working on technology that will teach computers to feel ‘regret’ for their decisions. The idea is to allow computers to learn from their mistakes when they’re presented with the same or similar decisions in the future. Google thinks there’s some value in this type of AI for search purposes, but the Informer thinks it brings AI technology one step closer to that of Marvin, Douglas Adams’ famously paranoid android. With the billions of requests Google handles every day, surely the number of unsatisfactory responses returned will start to give the search engine a complex? Eventually it’ll just be slumped dejectedly in a corner: “Wearily I sit here, pain and misery my only companions.”

Could one of Page’s investment projects be a rival to Apple’s iTunes? This week Google announced the acquisition of Canadian startup PushLife. Founded by a former Research in Motion employee by the name of Ray Peddy, the firm develops software that allows users to sync non-Apple devices with the iTunes platform. It also lets operators sync subscribers music services with their own offerings, and PushLife has agreements in place with the UK and Canadian arms of Virgin Mobile.

While we’re on the subject of meshing with operators, Sprint has become the latest US carrier – joining T-Mobile and AT&T – to offer support for Android users who want to charge app purchases to their monthly bills. Google has similar arrangements in place with the Japanese operators NTT DoCoMo, KDDI and SoftBank.

The list of operators involved in this project will shrink by one should AT&T’s proposed acquisition of T-Mobile’s US operation go ahead. The approval process, which will likely be a drawn-out one, began in earnest this week as the FCC announced that its review of the deal is to formally begin. There will be plenty of back and forth on this one, but it remains to be seen whether or not it will escalate into what Sarah Palin might call a “squirmish”.

One of the concerns over the deal is that the decrease in competition it heralds might lead to a rise in prices for consumers. But what do consumers really know about pricing anyway? In the UK at least, not a lot, according to a study released this week. The paper, published by a group of Oxford mathematicians called Billmonitor, studied more than 28,000 UK mobile phone bills and found that 76 per cent of people are paying too much for their service, on average £200 a year more than necessary. This translates into total wastage of £5bn. You can bet Billmonitor aren’t too popular with the UK operators.

The problem, it seems, is that most users overestimate the amount of minutes that they need. The most popular voice allowance in the UK is 600 minutes, but not everyone actually requires this much talk time, meaning that they could be opting for far cheaper tariffs. Presumably the carriers have data on their customers’ usage and how it tallies with what they’re paying for but, for obvious reasons, they’re not shouting about it.

According to Billmonitor, 52 per cent of UK users on the wrong tariff use only a quarter of the allowance they’re paying for. A further 29 per cent are using more than the bundle they’re buying, and in doing so are incurring high penalty fees for excess minutes. Almost £3.5bn is spent annually on services beyond the bundle allowance. £200 a year is a lot of money to be wasting, but whether users will actually modify their selection remains to be seen.

To extrapolate from the study, what it seems to have found is that there are an awful lot of people in the UK who think they’ve got a lot more to say for themselves than is actually the case. With all due respect to Billmonitor, we don’t need mathematicians to tell us that.

Right, in a bid to help out the Serbians: Who wants to buy half of Telekom Srbija? No, not you Telekom Austria, we know you’re up for it. Come on, there must be someone else out there… No? Oh. In the absence of any other suitors, the Serbian Government has given Telekom Austria 15 days in which to improve its offer of €800 – 950m for the company. Now, the Informer’s no wheeler dealer, but given that TA is the sole bidder, he’s not sure it makes sense for the firm to up its offer. In fact, if he may be so bold, surely the temptation is to knock a few tens of millions off. Take it or leave it. The Serbian government, with commendable optimism, is holding out for offers in excess of €1.4bn for a 51 per cent stake in the operator. But it’s not a seller’s market.

Finally this week, there are few places you can escape the modern scourge of advertising these days, but one of them is the humble book. So it was with the kind of sigh you’d expect from Marvin the Android that the Informer saw this week that Amazon is to launch an ad-subsidised model of the kindle that flashes up marketing messages while you’re trying to read your novel. I’m not getting you down at all, am I?

Take care

The Informer