REGULATORY: Pan operator efforts attract EC suspicion
March 22, 2012
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Following the joyn launch (see seperate report), it emerged that the European Commission (EC) is looking into the activities of the ‘E5′ group (the five largest European mobile players) from an antitrust standpoint, in a move that might not only stymy the inter-operator efforts on RCS development, but also threaten other joint initiatives, such as Deutsche Telekom’s mobile wallet collaboration efforts with rivals (now seeking EC approval).
The Financial Times reported that the EC has demanded information from the GSM Association (GSMA) for the probe, and outlined concerns at a ‘tense and previously undisclosed face-to-face meeting in February [2012]‘. The investigation is said to have commenced in 2011, with an initial focus on the E5 grouping, but moved its attention to the GSMA after January 2012, when the E5 is said to have been disbanded and shifted activity to the association.
The newspaper said the probe’s focus is on whether the operators colluded “to the detriment of third parties and consumers”, not only in service development, but also in discussion of long-mooted bandwidth charges for content providers (Deutsche Telekomwatch, passim).
Stephane Richard, Chief Executive of France Télécom, issued an angry response to the investigation, saying a lawyer attended the operators’ meetings, and notes shared with the Commission. “I find it scandalous that today someone dares to demand an account of these meetings”, he said.
Nevertheless, while it would be astonishing if the E5 grouping has left itself wide open to antitrust investigators, it has for years been blatantly obvious that major mobile players have been synchronising standpoints and thinly-coded messages regarding key industry themes and concerns, as frequently evidenced by chummy keynotes, briefings and announcements at gatherings like Mobile World Congress (MWC).
However, this behaviour is not necessarily anti-competitive, and, in recent years, has been astonishingly ineffective, with little or no progress achieved by increasingly desperate calls to tackle the power of device vendors and activist regulators, or to get internet players to contribute more for data. Recent joint initiatives, such as the Wholesale Applications Community and others that are often fronted by the GSMA, have been most notable by their lack of success. Together, this leads many third parties to mock, rather than fear, operator collaboration and influence — with a gathering of tier-one operator chief executives now seen almost inevitably to mire and doom any joint initiative. Indeed, the prospects for the industry-led RCS and joyn have already been widely derided, while the more nostalgic commentators harp back to the long-ago successes like GSM and SMS, which were often aided by a then more supportive and activist EC.
Assertiveness by the EC might reflect impatience at operators’ constant carping against regulators (repeated remorselessly at nearly every MWC keynote), rather than acceptance of new realities of a mood and industry that has moved on. The Commission could also seek to raise pressure on operators to modernise decaying and disjointed voice and messaging revenue-led business models, to IP-centric, technology- and service- neutral data models.
[Further reference: Telecoms antitrust probe details revealed -- Financial Times, 18 March 2012.]
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Deutsche Telekomwatch Report #8 February-March 2012 Executive Brief
March 22, 2012
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- Q4 FY11: Deutsche Telekom’s financial report for the three months to end-December 2011 showed improved headline performance trends, but did little to dispel the image of a Group corralled by competitive and economic pressures in most of its markets. DT offered an uninspiring forecast for the current and coming financial years, dropping an ambition to return its Europe operating area to growth during FY13. The Group has no choice but to continue to “operate frugally”, said Chief Executive René Obermann. [pp.4-11.]
- While overall spending remains constrained, the results presentation saw executives detail a five-point, investment-led turnaround programme at T-Mobile USA, following the failure of the Group’s attempt to offload the challenged OpCo (and its “investment overhang”) to AT&T. This kicked off further speculation regarding how DT will fund TMUS’ plans, with sales of European assets and TMUS’ infrastructure again both mooted. [pp.12, 61-63.]
- GROUP: Reshuffling of DT’s senior hierarchy continued, following the recent exit of Chief Technology and Innovation Officer Edward Kozel, with reports indicating that Chief Technology Officer, Olivier Baujard, has also now departed the Group, and that DT has appointed a new Chief Information Officer to handle its consolidating IT operations. Obermann confirmed plans to personally take a more direct role in DT’s growth initiatives, after adopting its Products and Innovation function at the start of 2012. [pp.9, 10, 13, 14.]
- The spring 2012 CeBIT and Mobile World Congress trade shows saw DT and operator rivals continue efforts to dampen over-the-top cannibalisation — in both the consumer and enterprise segments. CEBIT saw DT flag plans to roll out a Business Marketplace of third-party cloud applications; while MWC witnessed the Group pledge support for Mozilla’s new Open Web Devices mobile platform, and the high-profile cross-operator rich communications service joyn. DT’s T-Venture investment arm also bought into “free messaging” application developer Pinger, which should provide a good source of intelligence in the OTT battle. [pp.15-17, 19, 20, 22, 23.]
- DT trumpeted global partnership efforts in the machine-to-machine communications space, talking up the importance of ties with innovative niche vendors at MWC, and with partners preparing a pilot of international M2M deployments via UK joint venture Everything Everywhere and US vendor RACO Wireless. [pp.22, 58.]
- GERMANY: DT signalled cost-cutting will remain high on the agenda for Telekom Deutschland in the near- to medium-term, after the rate of decline in the home market OpCo’s sales worsened to 6% in Q4, and the Group said it expects TDE to shed further revenue in the next two financial years. The OpCo’s core profit slipped only slightly across FY11, due to margin-preservation efforts, and DT said its focus will remain on “stringent cost management and long-term process optimisation”. [pp.25-27.]
- Germany’s lukewarm competition around Long Term Evolution service rollout appeared set to heat up, with TDE and rivals highlighting further expansion in urban areas, and finally extending their LTE device families beyond mobile and fixed modems. In TDE’s case, this saw the addition of Samsung’s Galaxy Tab 8.9 tablet computer to LTE data packages for business customers. [pp.24, 28.]
- It was again indicated that TDE could face legal hurdles if it seeks Bundesliga broadcast and cable distribution rights, the bidding for which is set to kick off between 15 companies. TDE has mooted a push for expanded Bundesliga coverage to support its DSL/satellite Entertain pay-television offering, which boosted customers by 177, 000 to 1.6 million in the last three months of 2011, but it could face complications relating to its minority government ownership. [p.31.]
- TDE’s recent assault on cable operators’ heartland of housing association contracts appears to be causing jitters, with Germany’s largest cableco Kabel Deutschland questioning TDE’s potential to compete in the space. [p.32.]
- EUROPE: The Eurozone crisis remained a heavy drag on Group performance and outlook, with the Europe operating segment seeing the sharpest sales drop (-10.2%) across FY11, and every regional OpCo reporting a decline in revenue. Largest unit OTE continued to play down the prospect that it will need a refinancing bail-out by DT, despite settlement of large chunks of debt looming, and the Greek group’s operations featuring prominently in the multiple write-downs announced by DT at end-FY11 [pp.33-36, 38, 40-42, 45, 46, 49, 50, 52, 53, 55, 56.]
- State competition and intervention continued to add to the Europe division’s headaches in eastern European markets — notably in Croatia and Hungary, where “crisis” taxes are sapping cash flow, and Hrvatski Telekom and Magyar Telekom are threatened by government expansion into the private sector. HT hit out a plan by national postal operator Hrvatska Pošta to enter Croatia’s pay-TV market, while MT proved unsuccessful in an appeal against the regulator’s decision to allow a new, state-controlled mobile player. Wider competitive pressures also remained a large burden in Europe, with Cosmote Greece seeing its hopes dashed for a duopoly-created merger between smaller rivals Vodafone Greece and Wind Hellas. [pp.37, 43, 46, 47.]
- T-Mobile Czech Republic is to decommission its time division duplex 3G fixed wireless service, having superseded the offering with expansion and enhancement of its main WCDMA/HSPA infrastructure. [p.39.]
- Everything Everywhere is shortly to start its second large trial of LTE services, with a pilot in Bristol — and indicated ambition to commercially release the technology by the end of 2012 as it aims to get a jump-start on rivals, amidst ongoing local uncertainty over new spectrum availability. [pp.56, 57.]
- SYSTEMS SOLUTIONS remained afflicted by the cost pressures of serving large enterprises during Q4 FY11, seeing sales dented by a switch in its charging structure for internal DT customers, and profit hurt by “assurance” and other costs of fulfilling big deals. [pp.59, 60.]
- USA: Isis, T-Mobile USA’s mobile wallet joint venture, continued partnership-building ahead of its planned soft-launch, later in 2012. It tied with three American financial service providers — Barclaycard US, Capital One, and JPMorgan Chase — to market Isis-based offerings to consumers, and announced a string of deals with point-of-sale equipment players. Marketing specialist Mobilize Systems indicated it is in discussions with both Isis and DT’s equivalent Project Oscar UK venture, over mobile couponing services. [pp.14, 64.]
Deutsche Telekomwatch Report #8 February-March 2012 Snapshot
March 22, 2012
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Table of Contents
1 Executive brief
4 Q4 FY11 management update
4 Cuts at forefront again as growth eludes
4 Group pushes for US recovery but still on back foot
5 Table 1. Deutsche Telekom, financial summary, Q4 and FY11
6 Targets: cash generation missed; cost cutting surpassed
7 Table 2. Deutsche Telekom, operational indicators, Q4 FY11
7 Operating areas: reliance on Germany remains
7 Table 3. Deutsche Telekom, Group Headquarters and Shared Services financials (as reported) and operational indicators, Q4 and FY11
8 Germany — preserving the cash cow
8 Europe — gloom reflected in write-downs and lowered target
9 USA — TMUS bears brunt of iPhone 4S isolation
9 Systems Solutions: execution difficulties linger; margin still sub-par
9 Growth Areas: mixed progress, Obermann ups involvement
10 Table 4. Deutsche Telekom, Growth Areas, progress on FY15 ambitions
11 Guidance: cautious
11 Table 5. Deutsche Telekom, FY12 financial guidance
12 Group
12 M&A
12 Group linked again with UK exit
13 People
13 Revolving doors still swinging, as Baujard departs…
13 …and new CIO comes in from Allianz
14 More changes in pipeline
14 Deutsche Telekom Management Board, March 2012
15 Regulatory
15 Pan-operator efforts attract EC suspicion
15 People movement highlights
15 Products & Innovation
15 Operators pin OTT hopes on joyn RCS launch
16 Android, BlackBerry, Windows backing secured, but Apple watches on
16 Can operators go against form?
17 Smit offers carrot and stick to OTT rivals — but will they listen?
19 Products & Innovation
19 DT ties with Mozilla on wider reach mobile push
20 Products & Innovation
21 Hase talks up third-party M2M innovation, NSN link
22 T-Venture
22 DT flags OpenStack-backed SME cloud push
22 First partners announced
22 DT joins an already-crowded market
23 Group sets up OpenStack team
23 DT expands smart metering push to heating and water
24 Terminals
24 Terminal highlights
25 Germany
25 Q4 FY11: margin protection still the priority
25 Table 6. Deutsche Telekom, Germany area financials (as reported), Q4 and FY11
26 Reliance on TDE increases, amid Euro-American troubles
26 TDE ups game on mobile customer acquisition
27 Table 7. Deutsche Telekom, Germany area key performance indicators and operational indicators, Q4 and FY11
28 Network
28 Products and services
28 TMDE targets Frankfurt with LTE expansion
28 Vodafone remains well ahead on LTE site count
28 Device, service competition finally heating up
30 Regulatory
30 BNA to rule on 2G/3G licence re-issue in 2013
31 Strategy
31 More doubts raised over TDE Bundesliga push
32 Kabel CEO seeks to dampen fears on TDE housing drive
33 Europe
33 Albania
33 Austria
33 Q4 FY11: commercial costs paste TMAU margin
34 Bulgaria
34 Table 8. Deutsche Telekom, Austria financials (adjusted) and operational indicators, Q4 and FY11
35 Croatia
35 Q4 FY11: Cost control to the fore, amid macro woes
36 Table 9. Deutsche Telekom, Croatia financials (adjusted) and operational indicators, Q4 and FY11
37 HT hits out at new state TV entrant
38 Czech Republic
38 Q4 FY11: Smartphone costs hurt TMCZ margin
38 Table 10. Deutsche Telekom, Czech Republic financials (adjusted) and operational indicators, Q4 and FY11
39 TMCZ to shut down secondary 3G network
40 Greece
40 Q4 FY11: OTE assets see another write-down
41 Table 11. Deutsche Telekom, Greece financials (adjusted) and operational indicators, Q4 and FY11
42 Copp plays down borrowing fears; no plans for DT “assistance”
43 No competitive respite for Cosmote after rivals’ talks fail
45 Hungary
45 Q4 FY11: DT bemoans “crisis” tax, unclear on removal
45 Table 12. Deutsche Telekom, Hungary financials (adjusted) and operational indicators, Q4 and FY11
46 Incumbents knocked back in new entrant appeal
47 Operators and regulators diverge over competitive levels
47 TMHU revamps core network for data challenges
48 MT teams with E.ON on smart-metering pilot
49 Netherlands
49 Q4 FY11: one-timer sees TMNE regain growth
49 Table 13. Deutsche Telekom, Netherlands financials (adjusted) and operational indicators, Q4 and FY11
50 Poland
50 Q4 FY11: currency, MTRs thwart TMPO recovery
50 Table 14. Deutsche Telekom, Poland financials (adjusted) and operational indicators, Q4 and FY11
51 Comarch wins deal to support NetWorks! JV
52 Romania
52 Slovakia
52 Q4 FY11: ST cost trimming kicks in
53 Table 15. Deutsche Telekom, Slovakia financials (adjusted) and operational indicators, Q4 and FY11
55 United Kingdom
55 Q4 FY11: EE cost cull offsets sales malaise
55 Table 16. Deutsche Telekom, UK financials (adjusted) and operational indicators, Q4 and FY11
56 Synergy programme “on track”
56 EE pushes for 2012 LTE rollout
57 EE to upgrade Northern Irish mobile network
58 EE, RACO Wireless prep March multi-IMSI pilot
58 RACO in talks over Group projects
59 Systems Solutions
59 Partnerships
59 Commercial
59 Q4 FY11
59 Focus remains on efficiency as margin slide continues
59 DT ready to renew customer acquisition
60 Products and services
60 Table 17. Deutsche Telekom, Systems Solutions’ financials (as reported) and operational indicators, Q4 and FY11
61 USA
61 Legal
61 Q4 FY11
61 TMUS seeks path to revival after write-down
61 iPhone 4S launch adds to pain
62 Marketing
62 Five-point redemption plan sees network, distribution, wholesale investments
62 T-Mobile USA ‘refresh’: main facets
63 Products and services
63 Table 18. Deutsche Telekom, USA area financials (as reported) and operational indicators, Q4 and 9m FY11
64 Isis signs three card issuers to partner roster
64 Alliance-building continues, as Isis seeks depth to combat Google
65 Regulatory
65 TMUS seeks to stop VZW spectrum grab
66 Index
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Blyk CEO on Shots uptake at Everything Everywhere, threats to messaging ad‑focus
February 10, 2012
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Everything Everywhere (EE) MMS and SMS advertising partner Blyk issued a brief statement claiming “steep growth” in user uptake during 2011, as well as lauding its services’ impact on churn.
The company — which works with both of EE’s Orange UK and T-Mobile UK arms, as well as Maxis Communications’ Aircel business in India, and Vodafone Netherlands — said its total base grew from one million to four million during the twelve months. It also claimed to be aiding customer retention, saying that Orange UK had seen a “35% improvement in its brand perception with customers” that receive the companies’ Bright Stuff- and Shots-branded interactive mobile advertising service, albeit without going into more detail on how this had been measured (or achieved).
Eric Kip, Chief Executive (CEO) of Blyk, declined to split out its overall subscriber numbers for Deutsche Telekomwatch, but said the “vast majority” of the four million users had been built up through the company’s engagements with EE and Aircel (Orange UK’s Shots service had around 1.2 million users in September 2011, according to a report in Mobile Marketing magazine at the time).
Blyk formed the partnership with Orange UK in 2009, succeeding a defunct mobile virtual network operator (MVNO) relationship with the OpCo, which foundered on the pressures of running a wholesale, advertising-funded mobile service.
Shots was then launched in early-2010, delivering targeted, SMS and MMS messaging-based “media” (including “branded content” and, more recently, mobile coupons) to customers, based on user input with regard to their interests, and the firm’s profiling software (Deutsche Telekomwatch, #4). In December 2011, EE extended the partnership to T-Mobile UK, launching a Blyk-supported You Choose offering (Deutsche Telekomwatch, #6), but again Kip declined to detail the consumer response. He did, however, rule out a return to the MVNO model.
“ [MVNO is] investment-heavy, that’s one [reason]. Secondly, we can clearly see that the operators are much more interested in teaming up with us in a partnership, to work on their customer base, and that, to us, is also more appealing [in light of] where we are today and how we can… deliver our business. If you look at the MVNO [model] then you’re [adding] one extra leg to your business, which is the hard-core telco business, and we’ve said that we’re going to completely focus on [the] two legs that we have right now — one is media and the other one advertising sales. And I think we have our hands full. ”
– Kip.
No ‘Group’ relationship
The company’s operator deals have been single-market relationships so far — a strategy Kip says is down to Blyk’s desire for partners that “really suit our proposition best”.
“ If you talk about a Group, an operator may have a completely different position or a different challenge in one country versus the other. Therefore, we are looking at what is best for the operator, what’s best for us, and now we can get the best partners on board, so that’s how we’ve done it so far. ”
– Kip.
Partnership tweaked; more segmentation
Originally, the Orange UK-Blyk partnership was billed in the media as one that would see close integration between it and the OpCo’s ad sales teams, but Kip said the company acts independently in approaching media buyers.
“ Blyk are now the exclusive sales partner of Orange and T-Mobile… We have an independent sales team that represent EE in the market, but we are independent. We work with the big media agencies to drive revenue through the service. We also have a partner network that represents Blyk in the market for niche segments: education being one. ”
– Kip.
He also said the company no longer works with Unanimis, the online ad network bought by Orange in 2009, and which set out to incorporate Blyk’s services into its line-up when Shots was debuted.
“ [With] Unanimis, we had the partnership — yes, they were also selling [our inventory], but at the moment they don’t any more. One of the reasons is that they wanted to focus more on the mobile internet and we offered to just focus on the messaging. So there was a partnership, but that now has separated. ” – Kip.
Messaging and web competition extending to ads
Alongside this separation with Unanimis, Kip sought to draw a broader line between messaging and mobile web ad sales, saying that the way to sell each service is “so completely different”.
“ We’ve experienced already a couple of times that people say ‘Well, we can start selling messaging next to our online or mobile internet offer’, and then it shows that it’s such a different game. It needs a different approach, a different way of selling. The proof has been, so far, that whenever we take it on board ourselves the results are better than if done in an environment where mobile internet is also available.”
– Kip.
This appears to echo sentiments expressed by multinational value-added service providers, like OnMobile and RealNetworks, which are adamant that far superior results are achieved for mobile network operator clients when vendors play an active role in marketing and operating services, including locating staff in-country. Kip denied that pressure on operators’ messaging revenue from over-the-top, web-based rivals forms a threat to Blyk’s business model.
“ It’s a very interesting question, [and] I get it asked quite a bit. If you look at it from a customer perspective: there, you may say that… apps like WhatsApp are a threat to the business, and we’ve seen it, of course, with KPN [in the Netherlands] who was even claiming that WhatsApp had done a lot of harm to their business [Deutsche Telekomwatch, #2 and #3]. ”
“ If we look at it from our side, then the usage of messaging will remain just as effective as it is right now. The feature will always be there. Let’s assume that the usage of messaging will go down, then the number of messages coming in will also decline and therefore every single message coming in will be an even bigger surprise than it may be today. ”
– Kip.
[Further reference: Vodafonewatch, passim; Market Mettle interview with Eric Kip, Chief Executive of Blyk, January 2012; Blyk Media grows to 4 million opt-in subscribers globally -- Blyk, 19 January 2012.]
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Deutsche Telekomwatch Report #7 January 2012 Executive Brief
February 10, 2012
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- GROUP: Local reports in Germany suggest a further change is pending for Deutsche Telekom’s Management Board, with ThyssenKrupp’s Thomas Kremer having apparently been lined up to succeed Manfred Balz as the Group’s Director of Legal Affairs and Compliance. Balz, whose contract is reportedly coming to an end later in 2012, will join Edward Kozel and Guido Kerkhoff in exiting the board over the last 12 months. [p.4.]
- Two new companies — Samsung Electronics, and photovoltaic system installation specialist Winkel Solarsysteme — joined the Group’s networked home partnership drive, agreeing to integrate products with the Smart Connect home-networking platform that DT plans to release later in 2012. [p.6.]
- Group investment arm T-Venture furthered its recent string of portfolio additions, joining a financing round in Berlin-based online video-marketing specialist clipkit. [p.6.]
- GERMANY: Telekom Deutschland continued targeting of cable rivals by partnering with regional multi-play service provider NetCologne, to extend its fibre service footprint. Elsewhere, it opposed the recent merger between cable operators Kabel Baden Württemberg and UnityMedia, saying that regulatory concessions do not go far enough to protect competition. However, it was suggested that the OpCo may itself face a legal challenge if, as mooted, it seeks to bid for broadcast and cable distribution rights to Bundesliga football matches. [pp.8, 12.]
- T-Mobile Deutschland, and rivals Telefónica O2 and Vodafone, declared plans to perform the Group’s first RCS-e platform launch in the coming months, amid ongoing operator attempts to counter over-the-top incursions. [pp.10, 11.]
- EUROPE: Activity around European mobile broadband evolution continued, with AMC flagging the addition of Dual Carrier HSPA+ services, and T-Mobile Croatia reportedly launching a tender for Long Term Evolution equipment, ahead of a planned rollout later in 2012. Huawei Technologies and Nokia Siemens Networks landed deals to enable the infrastructure revamp planned by T-Mobile Poland, as part of its network-sharing partnership with Orange Poland. Meanwhile, Everything Everywhere extended its LTE trial programme with BT Wholesale, and initiated a EUR500m bond issue to support future investment. [pp.13, 17, 23, 26, 27.]
- DT received a further macro blow in eastern Europe, after Croatia’s new government reinstated the country’s 6% “crisis” tax on mobile services, adding to the growing economic and regulatory pressures impacting Hrvatski Telekom. The move came as HT flagged plans to lay off around 7% of its headcount, as part of “necessary business optimisation” efforts. [pp.15, 16.]
- Further setbacks came in: Romania, where new mobile termination rate reductions were laid out by the regulator; and in Hungary, where it was confirmed that a controversial new state-controlled consortium will indeed become the market’s fourth mobile player, following its long-delayed 900MHz frequency sell-off. [pp.20-22.]
- OTE indicated that satellite communications subsidiary HellasSat could be its next asset to be offloaded, as it continues efforts to reduce its unsettling EUR5bn-plus debt overhang. [p.20.]
- EE launched a long-overdue push to better define and differentiate its Orange- and T-Mobile-branded service offerings, launching separate advertising campaigns for each arm, and releasing a new family of “unlimited” service plans to boost T-Mobile’s value-led positioning. Meanwhile, EE’s Orange UK arm — which is to be pitched as the provider that “goes the extra mile” on services — continued to flag activity around mobile health applications, tying with UK specialist Care in Motion on a BlackBerry OS-based remote information access solution for the sector, and claiming positive impact of an appointment reminder tool delivered to Barts and The London NHS Trust. [p.24.]
- SYSTEMS SOLUTIONS: T-Systems highlighted a renewed drive to increase its (and Deutsche Telekom’s) relatively low-profile in emerging markets, flagging plans to shift 1, 500 jobs away from Germany, in a bid to relieve cost pressures and find new customers. [pp.28, 29.]
- USA: T-Mobile USA mooted plans to initiate HSPA +84 technology later in 2012, as part of a wider review of its operations following the collapse of merger plans with AT&T. [pp.32, 33.]
Deutsche Telekomwatch Report #7 January 2012 Snapshot
February 10, 2012
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Table of Contents
1 Executive brief
4 Group
4 People
4 Kremer in line to succeed Balz on Group board
5 InteractiveMedia
5 People movement highlights
6 Technology and innovation
6 T-Venture
6 Technology and innovation
6 Two new partners back Smart Connect
7 Society
7 Terminals
7 Terminal highlights
8 Germany
8 Network
8 TDE enlists NetCologne to aid fibre push
8 Other deals sought amid more “prudent” NGN strategy
10 Products and services
10 TMDE freed for urban LTE rollout in Schleswig-Holstein
10 TMDE, rivals flag upcoming RCS-e launch
11 STRATO
11 RCS now needs to move beyond annual MWC PR puffery
12 Regulatory
12 TDE to be locked out from Bundesliga bid?
13 Europe
13 Albania
13 AMC adds DC HSPA+ as 3G competition hots up
14 Austria
14 TMAT challenged as smaller rivals combine
15 Croatia
15 Croatia does U-turn on ‘crisis’ tax, hitting HT
16 HT to cut headcount as Group targets Europe costs
17 LTE supply tender begins — report
19 ICSS
19 Czech Republic
19 Digital dividend auction penned for late-2012
19 Possibility for new player in market mooted
20 Greece
20 Romania
20 Progress flagged in O2 network-sharing deal
20 HellasSat next on block amid OTE cuts
21 Netherlands
21 Hungary
21 Controversy reins as state-led new entrant confirmed
21 TMHU adds 2MHz to existing 900MHz rights; 2G liberalisation confirmed
22 Reserve price oddity
22 Division over competitive benefits, state impact
23 Slovakia
23 Poland
23 Huawei, NSN land NetWorks! contract win
24 United Kingdom
24 EE seeks overdue revival with two-pronged campaign
26 EE tops up recent borrowing with EUR500m bond issue
26 Flying the nest?
27 Ofcom extends LTE licence for BT and EE trials
27 Incumbents face LTE catch-22
28 Blyk CEO on Shots uptake, threats to messaging ad-focus
28 No ‘Group’ relationship
29 Partnership tweaked; more segmentation
29 Messaging and web competition extending to ads
30 Systems Solutions
30 Contracts
30 Operations
30 T-Systems to expand emerging markets push in FY12
30 LatAm a target for intelligent services push
31 Contracts
31 ‘Sub-industry’ margins increasingly in frame
33 USA
33 Regulatory
33 Network
33 TMUS moots HSPA+ 84 launch in new roadmap
34 Tower sale gains interest as TMUS continues to weigh options
35 Products and services
35 TMUS adds messaging app to Bobsled
35 ‘Hacktivists’ steal T-Mobile staff details
36 Index
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Hungarian state grouping plots mobile challenge to T-Mobile, Telenor and Vodafone
February 1, 2012
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Hungary’s Nemzeti Média és Hírközlési Hatóság (National Media and Infocommunications Authority/NMHH) revealed that four companies are to bid in the country’s upcoming 900MHz spectrum auction (Deutsche Telekomwatch, #1-#3), with T-Mobile Hungary (TMHU) among them.
The sell-off — which is to take place in January 2011, with a total of 10.8MHz, “technology-neutral” frequency rights up for grabs — will see the participation of the market’s incumbents: TMHU; Telenor Hungary; and Vodafone Hungary (VfH).
Also competing for the spectrum will be a consortium of state-owned companies, comprising: development bank Magyar Fejlesztési Bank; energy firm Magyar Villamos Művek; and postal operator Magyar Posta, which has a distribution relationship with Vodafone. Business newspaper Napi Gazdasag reported that Magyar Posta will control 10% of the consortium, and the other two players 45% each.
The NMHH declined applications to participate from: Romanian cable operator RCS&RDS (which operates a mobile virtual network operator on Telenor’s infrastructure, and is a growing Group rival in southern and eastern Europe); and expansive Vietnamese operator, Viettel Group (which was also recently mooted as a potential new rival to T-Mobile Slovakia — Deutsche Telekomwatch, #4).
As outlined by the NMHH in August 2011, three levels of spectrum holdings will go up for sale: a 5MHz ‘A’ block, with a reserve price of HUF 4bn (EUR13m); 1MHz ‘B’ rights reserved at HUF 700m apiece; and 0.8MHz ‘C’ rights at HUF 560m.
It is currently unclear what (if any) restrictions the NMHH will place on the incumbents during the sale — previous reports suggested prospective new entrants will be given some level of priority over at least some of the frequencies.
Consortium criticised
The participation of the state grouping will be a boost to the regulator, which has long been eager to bring a fourth player into the mobile market, but failed to attract sufficient interest to go ahead with a planned auction in 2009.
However, the move raised controversy domestically, in light of the country’s stretched finances, and that government intervention is already a live topic in Hungary, around its recently implemented “crisis” tax on telecoms players (Deutsche Telekomwatch, #1 and #3). Gergely Palffy, a Hungary-based Analyst at KBC Securities, described the consortium’s participation as “unnecessary”, noting that to set up a fourth player would add to strains on the public budget.
[Further reference: Vodafonewatch, passim; Hungarian state firms to enter mobile telecoms market -- Dow Jones, 7 December 2011; Magyar Telekom files auction bid for 900MHz frequency blocks -- MTI, 8 December 2011; Hungary may 'squander' $400 million on mobile provider, KBC says -- Bloomberg, 9 December 2011; Nyilvános a 900 MHz-es sáv árverésére jelentkezők névsora -- NMHH, 9 December 2011; Magyar Telekom, Telenor, Vodafone to bid for Hungary mobile spectrum -- Dow Jones, 9 December 2011; Magyar Telekom, Telenor, Vodafone OK to bid for Hungary mobile spectrum -- Dow Jones, 2 January 2012.]
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Deutsche Telekomwatch Report #6 December 2011-January 2012 Executive Brief
February 1, 2012
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- GROUP: Deutsche Telekom bowed to the inevitable and abandoned efforts to secure clearance for the $39bn mega-merger of T-Mobile USA and AT&T, knocking recent Group strategy back by a year, or more; and turning attention onto whether management will now ‘stick or twist’ with its challenged American OpCo. The rumour mill remained split over whether DT will now pursue a sale to another, less powerful competitor, or offload assets, either in Europe, or the USA, to fund an aggressive new push to cancel out TMUS’s “investment overhang”. [pp.4-6.]
- Oddly, despite these strategic challenges, the Group decided not to seek a direct replacement for recently departed Chief Technology and Innovation Officer, Edward Kozel, and will instead divide his responsibilities between Chief Executive, René Obermann, and Head of Europe, Claudia Nemat. [p.7.]
- Thomas Berlemann took over from Bart Weijermars as Chief Executive of T-Mobile Netherlands, as the OpCo seeks a grip on multiple competitive challenges in the country. The move came as the Dutch government confirmed plans to reserve sizeable tranches of spectrum for new entrants in the country’s upcoming multi-band auction, due to take place in October 2012. [pp.8, 27, 28.]
- DT furthered a recently flagged push to revamp its portfolio of consumer Internet Services by teaming with online discount aggregator Groupon on European roll out of the latter’s high-profile daily deals offering. The Group also tied with US mobile video specialist MobiTV on “converged media services”. [pp.10, 12.]
- Group investment arm, T-Venture, remained an active spender, contributing to a financing round in USA-based device maker Jawbone. [p.13.]
- GERMANY: T-Mobile Deutschland was one of two additional OpCos to strike network-sharing deals, as the Group seeks out efficiencies across Europe. The OpCo is to provide backhaul capacity to rival Telefónica Germany, while T-Mobile Austria agreed a 2G/3G national roaming deal with competitor 3 Austria, seemingly replacing the sharing pact it highlighted with Orange Austria in 2011. [pp.14, 15, 17.]
- Telekom Deutschland gained a boost in efforts to dislodge cable rivals’ entrenched housing association relationships, by agreeing a “strategic innovation” tie-up with property group Deutsche Annington. The deal gives the OpCo the opportunity to provide broadband and television services to around 171, 000 households. [pp.16.]
- EUROPE: Activity around LTE continued to bubble away, with T-Mobile Hungary becoming the third Group OpCo to officially introduce the technology, following a previously flagged customer trial in the capital, Budapest. [p.22.]
- T-Mobile Czech Republic also began piloting LTE, in Prague; while UK joint venture, Everything Everywhere, claimed success in its own ongoing trial of the technology, taking place alongside BT Wholesale. On the services side, T-Mobile Croatia began running robotics trials with the University of Rijeka, using its pilot LTE network; and Audi highlighted tests of in-car communications across T-Mobile Deutschland’s LTE infrastructure in Cologne, furthering existing, 3G-based collaboration with the Group. [pp.14, 18, 20, 31.]
- DT’s eastern European investments continue to face disruption and uncertainty, as hard-up regional governments attempt to exploit sales of new and expiring spectrum rights. Romania published proposals to put up for sale, rather than automatically renew, Cosmote Romania and main rivals’ 2G licences, via an auction scheduled for the first half of 2012. Controversy also arose over Hungary’s upcoming 900MHz auction, with state-owned companies setting up a consortium to bid for the new frequencies. [pp.23, 28, 29.]
- DT and Magyar Telekom agreed to make sizeable payments to regulators in the USA, as part of settlements to end long-running, high-profile investigations into bribery allegations in Macedonia and Montenegro. [p.24.]
- OTE continued efforts to boost cash flow, by selling its 20% stake in incumbent Telekom Srbija, and agreeing a deal with unions on a new voluntary retirement programme at its remaining operations. [p.30.]
- Everything Everywhere confirmed a previously mooted mobile wholesale partnership with Chinese CDMA and fixed-line carrier China Telecom, potentially furthering wider efforts by DT to boost ties in the Far East. However, the joint venture received a blow after UK regulator Ofcom dropped plans to reserve 800MHz frequencies for it in the country’s upcoming spectrum auction. [pp.32, 33, 36.]
- SYSTEMS SOLUTIONS: T-Systems continued to highlight cloud services traction with key enterprise partner SAP, flagging customer agreements with: Correos, Spain’s national postal operator, with on-demand IT services from the software provider; and air charter company Jet Aviation. [p.37.]
- USA: DT came under further pressure from labour organisations over representation of its US employees, receiving criticism from the Trade Union Advisory Committee to the Organisation for Economic Cooperation and Development over corporate responsibility claims. [p.38.]
Deutsche Telekomwatch Report #6 December 2011-January 2012 Snapshot
February 1, 2012
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Table of Contents
1 Executive brief
4 Group
4 M&A
4 DT back to drawing board after TMUS deal collapse
5 Break-up compensation eases pain
6 Assets in play as DT looks for TMUS cash injection?
7 People
7 DT reshuffles board duties as Kozel departs
7 Nemat, Clemens widen responsibilities
8 Berlemann to take over from Weijermars at TMNE
8 Competition challenges will top agenda
9 People movement highlights
10 Products and services
10 Technology and innovation
10 Products and services
10 DT becomes Groupon’s first mobile carrier partner
12 Technology and innovation
12 Deutsche Telekom makes foray into palliative care
12 DT preps multi-screen service with MobiTV tie-up
13 Terminals
13 T-Venture
13 Terminals
13 Terminal highlights
14 Germany
14 Marketing
14 Partners
14 Network
14 Audi trials in-car comms on Cologne LTE network
14 TMDE, O2 agree network-sharing deal
15 Operators revive earlier ties
15 TMDE chosen over Vodafone
16 Products and services
16 TDE inks bulk fibre deal with housing group
16 Competition over bulk cable clients heats up
17 Europe
17 Austria
17 Bulgaria
17 Austria
17 TMAT, 3 team up on national roaming deal
18 Croatia
18 Croatia
18 LTE network supports robotics trial
20 Czech Republic
20 Czech Republic
20 Preparations underway for DC-HSPA+, LTE launches
21 Greece
21 Greece
21 Union deal reached over worker exit scheme
21 DT seeks more savings
22 Hungary
22 Hungary
22 TMHU steals march on rivals with New Year LTE debut
23 State grouping plots mobile challenge
23 Consortium criticised
24 DT, MT settle bribery lawsuits
25 Poland
25 Ixia gains network testing contract
25 Macedonia
25 No new entrant emerges from digital dividend sell-off
27 Netherlands
27 Montenegro
27 Huawei secures transmission upgrade contract
27 Netherlands
27 Auction pencilled for October; new entrants get leg-up
28 Netherlands
28 TMNE exits mobile wallet tie-up
28 Operator protests over allocation ignored
28 Romania
28 ANCOM seeks windfall from 900MHz/1800MHz sell-off
29 Netherlands
29 Slovakia
29 Orange, Vodafone hit out over timeframe
30 Serbia
30 OTE firms up Serbian exit
31 United Kingdom
31 United Kingdom
31 BT and EE update on LTE trials
31 Next steps for triallists unclear
32 United Kingdom
32 EE preps customer service revamp
32 EE hit as Ofcom changes 800MHz plans again
32 EE offered 1800MHz LTE consolidation, but still seen as main loser
33 EE hits out at Ofcom
33 Rural coverage obligations also to be tweaked
35 EE moves closer to 1800MHz sale
36 EE firms up China Telecom partnership
36 German expansion mooted
36 DT seeks place within developing global alliances
37 Systems Solutions
37 Partners
37 Customers
37 Contract highlights
37 Correos shifts to SAP/T-Systems cloud
37 Jet Aviation extension gained
37 Vueling turns to T-Systems for tech support
38 USA
38 Isis
38 Partners
38 Corporate
38 Unions hit out over DT corporate responsibility claims
39 Products and services
39 Regulatory
39 TMUS embroiled in Carrier IQ “spyware” controversy
40 Index
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Q3 FY11: T-Mobile Czech Republic provides jolt with 19% drop in EBITDA
January 4, 2012
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René Obermann, Chief Executive of Deutsche Telekom (DT), singled out the Group’s Czech performance as a “downside” of its Q3 FY11 (July-September 2011) results, after seeing its traditionally strong profitability hit hard by distribution and regulatory issues, as well as renewed marketing spend.
T-Mobile Czech Republic (TMCZ) reported an 18.9% drop in “adjusted” earnings before interest, taxation, depreciation, and amortisation (EBITDA) during the three months, to EUR116m. Revenue fell 8.1% — to EUR272m — a much worse contraction than the 3.1% decline reported in Q2.
As well as undoing part of TMCZ’s recent work on efficiencies (Deutsche Telekomwatch, #1 and #3), the reduced profit will have been a significant jolt to DT, with TMCZ forming one of its highest margin businesses in Europe, and previously appearing resistant to profit erosion, having been one of only three OpCos not to report a drop in EBITDA during the previous quarter (Q2 FY11). TMCZ’s EBITDA margin fell 5.7 percentage points, to 42.6%, in Q3 — still well above average for DT’s Europe division (35.8%), but now third-placed within the region, behind Hrvatski Telekom (51%) and Slovak Telekom (45.7%).
Deutsche Telekom, Czech Republic financials (adjusted) and operational indicators, Q3 and 9m FY11
[Table omitted from extract]
Source: Deutsche Telekom, Deutsche Telekomwatch.
Lottery firm troubles hits sales
Obermann described the profit erosion as “dissatisfying”, pointing to a “strong” effect from mobile termination rate (MTR) reductions implemented in July 2011, and complaining that “regulators still play a big role” in the Group’s fortunes.
He also blamed the “one-off effects partially related to the bankruptcy of one service provider” — presumably in reference to the March 2011 suspension of TMCZ’s airtime distribution arrangement with financially troubled Czech lottery operator Sazka (Deutsche Telekomwatch, #1 and #3). Oddly, DT did not mention the relationship’s demise as an issue in Q2.
TMCZ has also yet to update on the status of the Sazka partnership — rival Vodafone Czech Republic, which suspended activity with Sazka at around the same time as TMCZ, re-enabled its tie-up in September 2011, after the lottery firm was bought out by creditors.
Retention spend forced up
Another less exceptional factor behind the EBITDA erosion was marketing spend — again reflecting the conflicts inherent in the Group’s aim to ensure profitable growth from data services.
TMCZ is said to have conducted a “smartphone push aimed at defending the customer base” during the three months, hurting profitability. According to DT, TMCZ’s EBITDA would have still declined by 7.6%, without counting the effects of the MTR cut and Sazka issue. This suggests something of an enforced departure in the OpCo’s strategy — TMCZ had trumpeted control of marketing expenses in the previous three months, although it did flag a decline in data revenue that presumably instigated the smartphone drive.
Looking forward, DT continued to describe the economic outlook in the Czech Republic as one of “moderate” growth.
[Further reference: Vodafonewatch, #95; Interim Group Report, January 1 to September 30, 2011, supporting documentation and presentations (PDF) -- DT, November 2011.]
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