You will come into some money…

By The Informer

The Informer received an email this week from a man called Russell Grant who, for those of you not from these shores, is a has-been British TV psychic. A chubby, beaming, clammy kind of chap in ruffled paisley shirts, Grant was once a stalwart of the kind of daytime television that requires its viewers to be devout consumers of prescription drugs designed to desensitise the patient to the pain of modern life. His delivery and persona failed to keep up with the zeitgeist, however, and his disappearance had led the Informer to believe that his days of fleecing money from the desperate, the easily led and the pre-noon sherry drinkers had come to a deserved conclusion.

Apparently not. Grant, it seems, has decided to target the SME space. Following the received wisdom that the money’s in the corporate market, Grant is turning the guiding light of his gift on the enterprise. In his email Grant seemed a touch surprised that the nature of the calls that he fields has started to change as the credit crunch has taken hold. But surely he should have seen that coming?  Surely, in fact, he should have seen the credit crunch coming and started targeting the business market in advance of the downturn, thus really proving his worth. He’s missed the opportunity to silence once and for all those mealy-mouthed nay-sayers who have him down as nothing but a fat charlatan.

Anyway, the Informer wondered if any companies in this industry have ever turned to psychics and mystics in a bid to best build their strategies. Did the Chinese government seek other-worldly advice, for example, before deciding to set its sights on getting a 20 per cent share of the world 3G market for its home-grown TD-SCDMA cellular standard? It certainly sounds like a strategy based on the sort of rampant over-promising that you’d expect from an end-of-the-pier crystal ball gazer.

This is actually from last week, but it only filtered down to the Informer’s consciousness the day before yesterday. A report on Chinese tech news site Interfax revealed that the Chinese MIIT has plans for its standard, and those plans involve it getting one fifth of the world’s 3G users. And this doesn’t include the millions of Chinese that will be using it if the MIIT achieves its domestic aspiration of 50 per cent market share.

It sounds daft at first but then you realise that the entire strategy will almost certainly revolve around enormous subsidies being granted to emerging market carriers from the Chinese government, probably through the likes of Huawei and ZTE, which have been granted elephantine credit facilities from the state banks. Still, 20 per cent is a big ask.

Proof of the “money talks” concept was to be found in two contract announcements this week. “Huawei will continue to support Etisalat’s global expansion in the future,” read a statement from the Chinese vendor, in which “support” can be reasonably understood to mean “fund”. The UAE-based carrier is probably not the most hard-up of Huawei’s customers but you don’t look a gift horse in the mouth. The two firms also announced that they are launching an Application Innovation centre.

Meanwhile, ZTE revealed on Tuesday that it has struck a deal with Vietnamese carrier Viettel to work on the operator’s UMTS network. The vendor bagged 20 per cent of the contract and will be providing the Software Defined Radio element of the kit.

If there’s one story that the Informer might consider consulting Russell Grant on, though, it’s the suggestion this week that aspiring global carrier Zain could be looking to sell its entire African portfolio. This goes against pretty much every noise the firm has ever made about its strategic ambitions.

Headquartered in Kuwait, the firm acquired African player Celtel in 2005 for $3.36bn, and has continued to invest and acquire in the region ever since – most recently exploring opportunities in Morocco in March this year. It has also broken ground internationally by establishing a pan-regional network, the use of which incurs no roaming charges for end users. The African portfolio was central to that strategy.

Last August the firm paid out for a major rebrand, that saw all of its African properties rebadged with the Zain colours, and it has always pitched its MEA empire building as the second step in a process that will ultimately see it expand across the globe.

The carrier has never had any trouble raising money in the past, but even the wealth of the Middle East is not immune to a global financial crisis and, more recently, the firm has been laying off staff, hatching outsourcing plans with kit vendors and launching various cost management initiatives. The figure being touted for the firm’s African portfolio is $12bn, and the buyer, say reports, is an unnamed French player.

Thecla Mbongue, a senior analyst at Informa Telecoms & Media (ITM) was as bemused as the Informer by these reports, although she did reveal that at a recent ITM event in Africa she had conversations with Zain executives who were grumbling about governance problems in certain African nations and the difficulties these created for firms doing business there. She also suggested that perhaps the firm is struggling with the low margins on offer in many of its African markets.

Other analysts were divided. One who has been tracking Zain closely and preferred not to be named described some kind of sale as “extremely probable”, adding: “Word has it that [Zain] have been trying to sell off properties. How many we don’t know but there is good reason to believe that this will happen. Zain is highly leveraged and financially constrained so there is a strong likelihood it will happen.”

Meanwhile Angel Dobardziev, an analyst at Ovum, said he believed it to be unlikely. “Africa is very strategic to Zain,” he said, “and it doesn’t look like it needs to make the sale. Zain does have a high level of debt, but it also has a lot of cash and, if you look at current asset prices, this is not a great time for a seller. But,” he added, “sometimes there are things that we don’t know about that are happening internally, and everything has its price.”

Zain itself played down the speculation, without actually ruling anything out. A spokesman for the firm said he was unaware of any strategic plan to divest the African operations (which is his job, of course), but pointed out that, in the current climate, anything is possible. He said, though, that such a move would not sit comfortably with “our stated plans to be a top ten global mobile operator by 2011”.

Senior Zain executives have told the Informer in the past that the firm is constantly running M&A simulations and is often in discussions that progress no further than the verbal. The firm’s spokesman did dangle a hint in front of the Informer, though, saying: “Attaining a top ten position does include forming strategic partnerships, which alludes to future possibilities…”

So if not a sale, then perhaps some kind of tie-up, equity based or otherwise, that will be designed to help the firm keep pace with Zain’s African competitor MTN. MTN, you’ll remember, recently restarted talks with Indian carrier Bharti that are designed to build the two carriers’ scale yet further. We’ll have to see.

One product that will no doubt be pointed squarely at Africa – and something else that needs light shining on it – is Korean vendor Samsung’s new solar powered phone. The firm launched the unit, which is called the Crest, in India this week. Solar-powered handsets have long been in development, but this is the first to launch commercially. The technology still isn’t quite there, as Samsung has conceded, given that an hour’s solar charge will only give enough power for a five- to ten-minute phone call. Still, that will almost certainly improve with time and the Informer reckons Samsung deserves a big green pat on the back for an important first step.

In other handset news, in case you haven’t heard, there’s a new Apple iPhone on the block and it looks a lot like the old one. It was the vendor’s Worldwide Developers Conference this week, and the iPhone 3G S was given its first outing. The ‘S’ stands for speed, Apple said with the device boasting enhanced memory and processor power to give a faster performance in applications and on the web.

In terms of hardware enhancements, the 3G S also features longer battery life, a 3 megapixel autofocus camera, which happily allows video recording, hands free voice control and a digital compass that complements the onboard GPS to reorient maps to the direction you are facing.

One of the most interesting features was support for tethering, allowing the phone to be used as a modem. This did not win universal support from carriers, though, with several moving swiftly to make this usage model for the phone prohibitively expensive. AT&T, the exclusive iPhone carrier in the US, won’t be allowing tethering at all, while Telefonica’s UK operation, O2, will charge a princely sum for the privilege.

O2 UK users will have to buy a Bolt On (the firm’s name for its modular tariff units) to use the service, paying an extra £14.68 per month on top of their iPhone tariff to get 3GB of tethering data, or £29.36 per month for 10GB. An extra GB costs a further £4.89. Other carriers that will allow tethering, for various prices, include Bharti Airtel, Telefonica, TIM, Optus, Orange, TeliaSonera, Maxis, Rogers, Chunghwa Telecom, Telkomsel and Telenor.

Comeback Kid Palm this week unveiled a new CEO, who himself used to work at Apple. Jon Rubenstein was the man behind the original iPod, which is pretty much all you’d need on a CV; he probably doesn’t bother including that he enjoys squash and going to the movies. He actually joined Palm in 2007 as executive chairman but today he assumes the role of CEO.

He replaces Ed Colligan, who has led Palm for the last 16 years, and now plans to take some time off before joining Elevation Partners, a private equity fund (at which Rubinstein also holds a position) that invested in Palm in 2007. Rubenstein’s first, rather tall order, is to oversee the introduction of the phone that Palm hopes is going to put it back in the game; the Pre.

In other handset news, INQ, the interesting little venture nurtured by Hutchison, is reporting success for its low-cost, social networking-based 3G handset gambit. The firm, which provides phones to Hutch’s 3UK, released figures this week which suggest that consumers are happy using social networking tools as well as mobile email and instant messaging (IM) on fairly low end devices.

3 UK says it has shifted about 700,000 handsets of the INQ1 model and its predecessor, the Skypephone, since November 2007. Of these users around 65 per cent, or 455,000, use Facebook – the main application pushed by the INQ1 – on an almost daily basis. Moreover, around 30 per cent of users are regularly using email, and this is on a slider form factor device with a standard non-QWERTY keypad. These are stats of which other vendors would be envious.

Around half of INQ1 owners use Windows Live Messenger and around 19 per cent are regular users of Skype.

3UK, which had a subscriber base of around 5 million at the end of March 2009, said that its strategy of close integration of applications and a friendly UI means that consumers using an entry level handset, often on a prepay tariff, are keen to access data services at levels typically reserved for much more expensive smartphones. And for the operator this means higher margins and ARPU because it is paired with lower subsidy and network load costs.

Sticking in the UK, figures out this week suggest that there is a yawning gap between the headline data speeds that carriers advertise and the reality of throughput that users receive. Who’da thunk it?

Orange, O2 and 3UK each advertised potential top speeds of 3.6Mbps, while T-Mobile claimed 4.5Mbps and Vodafone 7.2Mbps. But a five-month research project by customer experience management specialist Epitiro found the reality was, on average, only 24 per cent of those rates. At less than 1Mbps, the average mobile broadband speed is 34 per cent slower than average speeds achieved on ADSL connections, the firm said.

There aren’t many industries that can advertise something like this that is only achievable under very specific circumstances that will almost certainly never occur in real life. It’s a bit like an auto manufacture advertising a top speed but then telling you the car will only go that fast if you strip out everything from the inside apart from the driver’s seat and you drive down a steep hill that’s five miles long with no other traffic on the road. Oh, and the driver can’t weigh any more than six stone.

Anyway, the research was based on data taken from Epitiro’s handset-based ‘Isposure’ application, which was installed on more than 1,300 handsets across the UK, between the beginning of December last year and the beginning of May this year. More than 1.4 million test results were recorded. The fastest 20 agents (the word used by Epitiro to describe host devices for its measurement application) averaged just 1.8Mbps over the test period.

Mobile broadband is touted by carriers as a viable alternative to a fixed connection. Indeed recent research from Berg Insight noted that HSPA connections accounted for 11.6 per cent of the total number of European broadband connections at the end of 2008, up 74 per cent on the previous year. The majority of those connections – which include smarthpones and dongles – are in the UK, Germany and Italy, which together account for 60 per cent of the total figure of 14.6 million.

Espirito noted that there was, on average, a 20 per cent drop in performance on TCP peak throughput speeds during the peak usage time of 6pm to midnight.

There was positive news, though, with the firm noting that average TCP download speeds improved by more than 11 per cent during the five-month project. However, improvement was not equal across the carriers tested, with Espirito recording that. “variances among mobile broadband ISPs are significant in terms of TCP and HTTP speed as well as Pin and DNS look up times.”

Finally this week, the science fiction idea of wireless electricity inched closer to science fact this week as Finnish handset giant Nokia made progress in using ambient radio waves as a power source. Just imagine what will happen when the anti-mast mob hear about this…

Boffins at the Nokia Research Centre have been using the electromagnetic radiation emitted from wifi transmitters, mobile phone antennas, TV masts and the like to harvest 3-5 milliwatts using current prototypes test circuits in the lab. The target is to hit 50 milliwatts, which would be enough to eventually re-juice a phone that has run its battery flat.

If Nokia is successful, and that’s a big ‘if’, the technology could find its way into mobile devices that would charge themselves wherever they are in your home. However the company is keen to point out that this research project is still in the early stages and the end game may be very difficult or impossible to achieve.

They should save themselves wasted time by asking Russell Grant if it will ever happen.

Take care

The Informer