The goose drank wine

By The Informer

Not content with engineering a large scale merger in the UK with French owned carrier Orange, Deutsche Telekom has now set its sites on some monster consolidation in the US. That’s the rumour, anyway, and as any follower of international soccer-ball knows, you can never discount the Germans.

Word on the street early this week was that the German incumbent, whose mobile arm T-Mobile ranks fourth in the US, could be looking to trade up and acquire third-placed Sprint Nextel. The story came from UK broadsheet the Telegraph. The firm’s problems in the US are not dissimilar to those it has faced in the UK, namely it’s been struggling to compete with stronger players. If consolidation could work in the UK, why not in the US?

The obvious barrier is the hotchpotch of standards that such a merger would involve. T-Mo, in the US as elsewhere, is a GSM carrier. Sprint Nextel, meanwhile is best described as non-committal, with a CDMA network, an iDEN network, and a serious interest in WiMAX burden-carrier Clearwire. Described by analysts as not so much a challenge as a nightmare, the integration of such a portfolio could take forever to complete, even if there’s a common goal of LTE.

Vodafone and Verizon have proven that opposing technological standpoints put a rather effective kybosh on full integration, with the US CDMA carrier a lonely outsider in the Vodafone family. Indeed there was speculation with this week that Vodafone’s 45 per cent stake in Verizon Wireless could be sold to the dominant parent, with journalists seizing on comments made by Vodafone CEO Vittoria Colao at a Goldman Sachs press event in New York. The big man confirmed that the company’s presence in the CDMA carrier was a matter of ongoing consideration, which is probably true of all of its businesses. Even if the sale were to happen, and Verizon has more than once made it known that it would be happy to see this come to pass, the two carriers would still be close colleagues, through their Joint Innovation Lab with China Mobile, Softbank and NTT DoCoMo, and their shared LTE projects.

Suggestions have also surfaced regarding a possible merger of regional US carriers MetroPCS Communications and Leap Wireless International, which have both seen their low-end, unlimited, prepaid service plans copied by larger, national operators. Leap rejected an unsolicited offer from MetroPCS back in 2007. Metro confirmed this week that it, too, is moving to LTE, and expects to be launching services on kit supplied by Ericsson in the second half of next year.

One obstacle to major US consolidation noted by analysts, is the Obama administration. Full of crazy notions like free healthcare for those unable to afford to pay for it, the administration has signalled its intent to be stricter than its predecessor on large-scale M&A activities.

Meddling bureaucrats! Aussie carrier Telstra will no doubt be able to hold forth on the stresses and strains of government intervention, with Australian communications minister Stephen Conroy issuing a call for the multi-play operator to be dismantled. Conroy announced fundamental reforms to existing telecommunications regulations that would prevent Telstra from acquiring additional spectrum for advanced wireless broadband, unless it agrees to a functional separation plan. What Luca Brasi might have delivered as “an offer they can’t refuse”. (Mind you, we all know what happened to him.)

Unless Telstra can come up with a plan of its own to satisfy the G, it will be made to separate its business units from the mother ship, offer more favourable wholesale deals to its competitors, and take a long hard look at interests it has in the Foxtel pay TV network and a hybrid fibre coaxial cable network. Either that or Mr Conroy will end up sleeping with the fishes.

Not having his wings clipped this week was Boris Nemsic, the new CEO of Russian carrier Vimpelcom, who presided over the first expansion of his tenure with the announcement of a move into Laos. Vimplecom has dropped $66m on a 78 per cent stake in Millicom Lao which, under the brand name Tigo, provides service to 280,000 Laotians. The Government holds the remaining 22 per cent.

There are four carriers in Laos, where penetration is 27 per cent and the population is just under seven million. Tigo is the market’s third-ranked player and of interest to Vimpelcom as something of a gap-filler, given its properties in neighbouring Vietnam and Cambodia. Nemsic said the move fitted “perfectly with our strategy of building a solid Southeast Asian cluster”.

As one international relationship begins, so another one ends. NTT DoCoMo, the Japanese mobile pioneer that has always struggled to make good on its potential outside of its home market, has announced that it’s doing the off from Malaysia. And it’s familiar disappointment for DoCoMo, which is walking away from local 3G carrier U Mobile, selling its 16.5 per cent stake for $100m. This is the same amount it bought the stake for, so at least DoCoMo didn’t lose money on it. Unless you count missed interest.

The firm invested in the fledgling carrier two years ago, with Korea’s KTF but the Malaysian outfit has managed to amass just 170,000 users since it launched last summer, according to Informa Telecoms & Media’s WCIS. Penetration in the nation is over 100 per cent, meanwhile.

In other Japanese news, struggling handset vendors in the nation have decided to band together in a bid for survival. Casio, Hitachi and NEC announced merger plans early this week and three is clearly a crowd in branding terms, with the new outfit being christened NEC Casio Mobile Communications.

The name reflects the ownership stakes. When the new firm is inaugurated in April next year, NEC will hold 66 per cent, Casio 17.34 per cent and Hitachi 16.66 per cent. Later in 2010 plans call for the stakes to move to 70, 20 and 9.26 per cent respectively. The new entity will focus on developing WCDMA and LTE handsets based on the Linux operating platform and will likely continue servicing the firms’ existing collective customer base, which shows a heavy bias towards the Japanese market, as well as Verizon Wireless in the US and LG Telecom in South Korea.

In other handset news, Palm has reported heavy losses for the quarter ended August 28, 2009, despite claiming strong sales of its flagship Pre device. On Thursday, the US manufacturer said net loss for the three month period hit $164.m, up from a loss of $41.9m in the same period last year. Revenues reached $68m, down from $366.8m in 2008. In mitigation the company said that, taking into account the strong performance of its new portfolio of devices based on the webOS platform, including the Pre and more recently the Pixi, adjusted net loss for the quarter was only $13.6m.

The Google-led Open Handset Alliance, meanwhile, has brought out the next edition of its Android SDK this week. Named to attract any budding Homer Simpsons out there, it’s called Donut. ‘Version 1.6’ as it is otherwise known includes support for CDMA and additional screen sizes like QVGA and WVG, gesture APIs to support finger gestures in apps, a text-to-speech engine, and a quick search box that can integrate Google Search services within any application.

And on Monday LG Electronics became the latest to join the throng with the announcement of its first Android-based device. The LG-GW620 features a three-inch, full touchscreen and slide out QWERTY hardware keypad but other details are scant. Google said the industry can expect to see devices running Android 1.6 as early as October.

As Google goes after the handset space, Nokia’s going after the service space in return. This week Navteq, which Nokia bought last year for $8.2bn, itself snapped up Acuity Mobile, a location based advertising outfit, for an undisclosed sum. You can see where this one’s going, right? If Nokia can go from making welly boots to becoming the world’s largest and successful manufacturer of mobile phones, then it can once again evolve into a services overlord. The Informer’s not sure about that, but we’ll wait and see.

Finally, a story’s been floating around this week that Warren Buffet, the stock market gazillionaire could have stopped the financial crisis if he’d been able to access his voicemail. The head of Barclays Capital had apparently tapped Buffet up, but Buffet asked for the details to be sent to him. Unfortunately, while he wanted a fax, he got a voicemail, which he was unable to access until eight months later, with the help of a younger family member. It’s like some kind of badly scripted sitcom plot twist, except it involves poverty and despair for millions of people. What a palaver!

If only Buffet had had a Spinvox account. More controversy there, though, with one investor late last week claiming the firm is up for sale and that it has written its investment down by 90 per cent? The Spinvox take? No comment.

Make of that what you will.

Take care

The Informer