Last Week in Wireless (#135): An "Informad" View
Amongst other happennings 'The Informer' pokes into:
* Professor Han Kaili's proposal for 3G licensing in China
* DoCoMo FOMA's flat rate plan
* CDMA450/900 in Europe
* Competing pre-OMA standard proprietary PoC approaches in GSMland
* '3' and its 'magic' numbers
* A winner and a loser or two
>> A Week in Wireless #135
The Informer
A Week in Wireless
19 March 2004
telecoms.com
The Informer was never much good at maths. Words have always been his medium, not numbers. There are few people alive today more grateful to William Seward Burroughs, inventor of the world's first 'calculating machine'. And so he naturally feels a pang of brotherly sympathy for those with a less than vice-like grasp of arithmetic. Not being able to count should, in a civilized, tolerant society, be no hindrance to a healthy, happy and fulfilling life.
Unless you are an accountant. Douglas Beatty and Michael Gollogly, CFO and financial controller of Nortel, have been sent back home on detention because they can't count. And, quicker than you can say "aggressive accounting", lawyers in New York have filed a class action lawsuit.
The action has been filed on behalf of investors who bought Nortel stock between January 7th and March 15th. They were understandably peeved that Nortel, having reported healthy 2003 Q4 results in January, then turned round last week and said that they were terribly sorry but their calculating machine was broken in January and therefore they may have to restate results from Q4 and the whole of 2003.
Nortel had said at the time that it would restate results for 2000, 2001, 2002 and the first two quarters of 2003, the suit alleges, but it then claimed bumper 2003 fourth quarter earnings and a first Q4 profit since 1997, surpassing stock market expectations and sending the stock into orbit. Barely a month and a half later, it turns out Nortel got its sums wrong. Which makes it look unfortunately like those talking up the company's recovery were employed by the same firm that makes TV ads for George W. Bush. Extraordinary.
But not that unusual. It may be of little consolation to messrs Beatty and Gollogly, but the Informer noticed this morning that oil titan Shell has also come unstuck in the adding up department. Again.
The Informer's sympathies also go out to Ed Zander's accountant, currently requisitioning Deep Blue to calculate his client's remuneration package from Motorola. After much huffing and puffing, and after postponing a Kasparov rematch so it could "concentrate on the matter in hand", the mighty computer exhaustedly spat out a figure.....20. $20 million that is, over five years.
Also having a spot of bother with those pesky numbers is Li-Ka-shing, Hutchison Whampoa supremo, who reported this week that 3 continues to be a $1.24bn financial drag on the group (see SPOTLIGHT for more details on 3's performance).
China's maturing market is dragging down profit growth and ARPU at China Mobile, the country's largest operator. The latest figures from China Mobile show subscriber numbers and revenues growing. But profits are beginning to stagnate and ARPU continues to head south at a rate of knots.
2003 stats showed China Mobile's customer base rising to 141.6 million subscribers, and operating revenues increased 23.4 per cent. Net profit for the year increased nine per cent but monthly ARPU was down to RMB102($12.3). As China Mobile said, this is a "moderating rate of decline." It still represented an 11 per cent deterioration on 2002, however, following a 20 per cent fall in 2002, and a 34 per cent decline the year before that.
The reason? The majority of new customers are at the lower-end of the income scale -- in outlying provinces away from the wealthy (and saturated) coastal areas. And intense competition with China Telecom's low-end 'Little Smart' wireless service has forced tariffs downwards. Competition "intensified by the day and the lower-end market was particularly impacted," said the operator.
That competition "presents demanding challenges" going forward and 2003 Q4 figures, according to a survey conducted by Bloomberg, showed ARPU slipping further to RMB99. Profit is also on a downward trajectory, registering about four per cent for the last quarter.
The market may be lifted if existing users can be persuaded to upgrade to more expensive feature-rich handsets and cameraphones. That's what Japanese handset makers NEC and Matsushita are banking on. According to Japanese newspaper reports both companies plan to double handset shipments, particularly of high-end models, to China in the coming business year.
If the local competition is a touch intense for China Mobile's liking, executives will be applauding a radical new plan for 3G licensing floated by professor Han Kaili, head of the Beijing University of Posts and Telecoms research institute. He is reported to have proposed splitting up China Unicom into CDMA and GSM operators, and awarding 3G licences to both operators and China Mobile. One more licence would be split along the existing north/south divide between China Telecom and China Netcom.
Beijing is reportedly concerned about creating a 3G investment and capacity bubble, and is therefore holding off granting 3G licences until next year. Professor Han's proposed regime would reduce capex costs for Telecom and Netcom while still fulfilling the authorities pledge to have four 3G operators nationwide. Separating Unicom's GSM and CDMA arms would also boost technology competition, and presumably drive down tariffs, as is happening in Japan.
KDDI and NTT DoCoMo are locked in a battle for mobile data subscribers. From June DoCoMo will offer its first flat rate for 3G mobile internet access, Reuters has reported. The price will be set at Y3,900 ($35.84) and will be limited to FOMA users on high-end price plans. The initiative is designed to undercut a similar plan launched by KDDI in November, which offers users of its CDMA1x EV-DO network unlimited access for Y4200 a month.
While we're on the topic of technology competition, this week the Electronic Communications Committee of CEPT, representing European regulators, gave the all clear for CDMA services in Europe in three frequency bands, two around 450MHz and one at 900MHz. Apparently 22 of the 27 countries represented said they would honour the decision, which is not legally binding. The mandate is currently limited to specialist Nextel-like PMR/PAMR services and does not cover mass market mobile phone use. It will still be up to national regulators to make the ultimate call. So expect intense pro- and anti-CDMA lobbying from the true believers and the European NIMBY fraternity.
Everybody's favourite technology expo, CeBIT, was flush with handset vendors parading their latest wares this week. Nokia unveiled its first megapixel cameraphone, the 7610. Not to be outdone, Siemens launched its own megapixel product, the S65, Samsung countered with the SGH-P730, and O2 came up with the X3, a megapixel model due in the shops in "early summer."
Interestingly, pictures of Samsung's latest 3G handset, the Z105 clamshell model, appeared on the web this week, with Vodafone livery. Vodafone is widely expected to debut 3G handsets from Asian vendors rather than Nokia, or other legacy suppliers.
Sharp, which has enjoyed great success customising Vodafone live! handsets, plans to do the same for T-Mobile. The two companies will co-develop handsets for the t-zones platform. First up is the TM100, a triband cameraphone available from April 2004 that looks remarkably similar to the popular Sony Ericsson T610.
O2 Germany has revealed its plans to launch 3G services for consumers in the third quarter, following the laptop/PDA route to market favoured by most UMTS operators like Vodafone and Orange. But not T-Mobile, which will offer the Nokia 7600 on its network, due to roll out in May in the UK, Germany and Austria.
On the services side T-Mobile also announced that, in conjunction with Sony Music and Universal Music International, it will be offering mobile phone users versions of popular songs, remixed by artists (a term the Informer uses advisedly) from the two record labels. Those participating include Anastacia, Beyonce, Limp Bizkit and Lionel Richie (of Lucent fame). The price will be £2.50 in the UK and Euro 2.50 in Germany and Austria with proceeds divided between T-Mobile and the record companies. The songs will be made available in the window between a song's radio debut and its availability in the shops. Truly, the modern artist brooks no compromise when it comes to their work.
CeBIT was considerably enlivened by a squabble that broke out between major vendors over that perennial wireless bugbear; standards.
In the rush to get Push-to-Talk solutions to European markets, Nokia has apparently elbowed aside its erstwhile standardisation partners in the Push-to-talk over Cellular (PoC) alliance, and they're not too happy about it. Nokia's PoC infrastructure, "will be introduced in GSM networks already in the second quarter of 2004 as a commercial service using pre-standard protocols," states a release from the company. A Nokia fait accompli before actual standardisation?
Christoph Caselitz, president of Siemens Networks, certainly thinks so. He told newsletter 3G Mobile that, "Nokia is offering a proprietary solution. Siemens, Ericsson and Motorola are following the standard. This is stopping the launch of PTT services in Europe." Johan Bergendahl, VP of marketing at Ericsson, told the Financial Times that, "Nokia is pushing its own completely proprietary solution that hasn't yet been proven to be interoperable, in order to gain lead time in the market. It is not playing by the rules."
The rules, such as they are, were laid down last August when Nokia joined Ericsson, Motorola and Siemens to submit a PTT standard proposal to the Open Mobile Alliance. The OMA having published a set of pre-standard specifications the vendors set about developing solutions. Only Nokia has developed one PoC solution while the others have developed another. Ericsson, Motorola and Siemens this week announced their first joint interoperability tests of their PoC system. Nokia says that "going forward" its infrastructure will support that system, although what "going forward" means in practice is anybody's guess.
Nokia says that the pre-standard specs are simply not up to scratch and so it is simply improving on those specs to get a solution to market that will satisfy operators. The Finns point out that the OMA has not yet finalised a PoC standard and so Nokia is doing nothing wrong. On the other hand, how is the OMA supposed to finalise a standard when the vendors' development and, in Nokia's case, deployment paths are already diverging?
Wait, haven't we been here before? I'm sure I recognise this place. Ah, yes, this is definitely familiar territory. It's that spectacular chasm between 'standards' and implementation. Look, there's Java. And MMS. And here's PoC. Join the club. Now, how on earth are we going to get to the other side?
*** SPOTLIGHT ***
19 March 2004
3-and its magic numbers
3UK has increased its subscriber base by more than 70 per cent in the last three months, it was announced this week as parent conglomerate Hutchison Whampoa released its annual results. UK customer numbers now stand at 361,000, with 3 claiming 1,038,000 customers worldwide. The Italian operation continues to outperform the UK, with 453,000 customers while the Hong Kong arm, just a couple of months into operation, has pulled in 36,500 customers so far.
While these numbers are by no means stellar for a company that has been operating for over a year in some of its markets, they do mark an improvement.
It's not clear, however, what is driving this growth. 3 has some new handsets from Motorola and NEC but these have only been available for a fortnight or so. The Nokia 7600, meanwhile, which lacks video calling capabilities and is exclusively distributed in the UK by Carphone Warehouse, has been available since the beginning of February. CPW reckons it's shifting around 8,000 of these a week at the moment. But, even if that figure had been true from week one (which is unlikely), it would still only account for 48,000 new subs.
The operator famously missed the Christmas boat, launching its prepay offering less than a month ago, so that's got nothing to do with it. Even the appearance of Anna Friel, a young actress famed primarily as one half of British network television's first lesbian kiss (how many firewalls will bounce this issue back for the (double) inclusion of the phrase 'lesbian kiss', the Informer wonders), in 3UK's television advertising is too recent a development to have already had a meaningful impact.
3 itself suggests that the growth stems from the company overcoming its handset supply issues towards the end of last year, according to a spokesperson. The Motorola A835 has been selling very well, apparently, a further boon, says 3. In this week's announcement, Hutchison also made reference to improved customer service and network coverage, optimisation and reliability.
It's difficult to know how to interpret these figures. If 3 has cleaned up its house, is this an idea of the kind of sign-up rates it can expect going forward? If so, it's still smalltime. 50,000 customers/month may be substantial in percentage increase terms for 3 but it means little in a market of 54 million subscribers. Still, perhaps that's not the point.
Given that 3 now has a more respectable handset portfolio in place, although carrying these phones could still give you a hernia, a decent breadth in payment options and still offers more minutes per month-at a decent price-than anyone truly needs, it is in the position it really ought to have been in when it took to the market a year ago. If it is unable to demonstrate a return from this situation then it could well be time to pull the plug.
The parent company obviously still believes in the potential of its offspring. Having bailed 3 out of its debts, there is little doubt that Li Ka-shing is in it for the long haul. Time to make daddy proud, 3.
Winners and Losers
19 March 2004
Tough times at KPN. "Go out and get me mmO2, and don't come back empty-handed," Ad Scheepbouwer, CEO of the Dutch operator presumably told Maarten Henderson; until recently KPN's chief financial officer.
Well, we all know what happens when you come back empty-handed; you're out on your ear. Of course nobody calls it the sack. It's a resignation. Mr Henderson resigned this week, prompting pretty much everyone in the industry to inch to the conclusion that he's been given the boot because he made a dog's dinner of the mmO2 bid.
The Dutch firm has stated firmly that it has no intention of resuming its attempts to get its hands on the UK-based operator in the short term, which had a negative impact on mmO2's share price. But it's only a matter of time, the Informer believes, before Mr Erskine and his merry band are tempted by the right offer.
Hitting the road this week:
Semiconductor firm Agere, which announced this week that it's not going to hit its Q2 revenue forecasts because of slow sales of 3G chips.
The huddle of Psion shareholders who were attempting to block the sale of Psion's Symbian stake to Nokia, which is to go ahead as planned. What a futile gesture it was. Reports that Mr Ollila made some emperor-esque comments along the lines of "puny rebel alliance" and "it has gone exactly as I had foreseen," are of course nonsense pumped out by people who watched Star Wars far too frequently as children.
Texas Instruments, whose request that Qualcomm's patent infringment claims be dismissed has itself been dismissed by a judge overseeing the mighty Q's latest IPR tussle.
While putting their feet up:
Research in Motion, which has struck another deal for the distribution of its Blackberry product. KPN will offer the service to its enterprise users in Germany, Belgium and the Netherlands.
Filipino operators Smart Communications and Globe Telecom, who lead the world in terms of data as a percentage of total revenues, according to Baskerville. Although the operators' data revenues have declined steeply in the past year, the massive use of text messaging in the Philippines keeps them well ahead of the rest of the world.
Nokia, which has won a deal with Israeli operator Partner to deploy its Push-to-Talk solution. Deliveries are to commence immediately, with Partner aiming to launch the service in Israel sometime in the fourth quarter this year.
The Informer <<
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- Eric - |
