Winners and Losers
Telecoms.com
07-FEB-2003
There's been some disharmony between UK operator O2 and supposed future partner 3UK. According to UK broadsheet The Times this week, 3 has admitted that early users will experience dropped calls whenever they step outside the limited coverage area with which 3 plans to launch. 3's UK MD Colin Tucker pointed the finger at O2, says the Times, claiming that the incumbent had failed to make the necessary 'investment'. O2 responded with a flat denial of responsibility. Hardly a good start for what was trumpeted originally as a mutually beneficial relationship. Public finger-pointing is unlikely to prove a constructive means of resolving the problems. 3UK also this week announced that its 3G handset costs of £399 upwards were unsubsidised. The Informer heard of a Hutch employee at a party recently waving a 3 handset around and proclaiming that it cost "thousands of dollars". We'd be interested to hear from anyone who can clear this up, but the Informer rather expects that even at £399, there is subsidy involved somewhere.
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While being taken to the cleaners...
Vodafone's hobbled portal Vizzavi, which has just had its email service withdrawn by the operator. What will become of the project now is anyone's guess, but the future doesn't look too bright. Interestingly, the Informer logged on to the Vodafone news release site today and top of the list of releases was an old posting from August last year promising that all 3G networks would be switched on by end 2002. Since this has either not happened, or has happened without anyone noticing, it looked a surprising choice from the Vodafone webmaster.
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A Week In Wireless No. 87
Telecoms.com
07-FEB-2003
As succession plans go, Sprint's has turned out to be low on success and, for that matter, pretty short on plan. William Esrey has been in charge of Sprint since 1985, let's not forget, and that should have given the board plenty of time to consider what ought to happen next. Things briefly looked well in hand this week when the heir apparent was named as Gary Forsee, a VP at SBC (which controls Cingular Wireless). Problem solved? Well, not quite. A contract-waving SBC was quick to point out that Forsee is barred from working for a rival operator for at least 18 months - something of an oversight on both Sprint and Forsee's part (and not much foresight in evidence either). SBC then had a restraining order slapped on Forsee to prevent him from tripping across to the competition without their say-so.
The fiasco would have played nicely into the hands of Sprint COO Ronald LeMay - whom most people had expected to get the job in the first place - had it not been for bombshell number two: both he and Esrey have reportedly been told to step down by the Sprint board amidst allegations of having set illegal tax shelters up for themselves in the late '90s. Esrey has publicly protested that nothing untoward took place, and the IRS will no doubt confirm or deny that in due course. The pity was that the welcome news of Sprint's return to profitability in Q4 was overshadowed by these other, entirely avoidable traumas.
Regime change can be an awkward business, of course, whether it's tax shelters or bomb shelters that are causing the problems. But, as Ericsson demonstrated this week, changing leadership doesn't always have to be so difficult. The Swedes showed Sprint how it should be done yesterday by naming, with the absolute minimum of fuss, Carl-Henric Svanberg as the man who will take the reins at the end of the year. As the current head of Assa Abloy, the world's foremost lock maker we're told, Svanberg's management pedigree is far more impressive than his telecoms background (he doesn't have one); but the markets approved of his appointment nonetheless. Hellstrom, for his part, has decided that 60 is a reasonable age at which to retire and draw a line under what must have been a frustrating couple of years. After announcing earlier in the week that Q4 had been Ericsson's ninth successive quarter in the red, and being unable to promise any swift turn-around, Hellstrom probably felt that he had taken Ericsson as far as he could (and he's taken it backwards if you want to take a harsh view of things). Despite Ericsson's troubles, though, Svanberg enthused that he'd "always perceived Ericsson as the world's strongest company". Discounting Wal-Mart, presumably. And Exxon, and General Motors...
Meanwhile, the tangled chaos of Europe's 3G licensing process was threatening to tie itself in even more knots, this time in the Netherlands. Even though many licence holders (especially new entrants) have come to wish that they'd never bothered with 3G at all, Versatel, which drew a blank in the Dutch auction back in 2000, is still pursuing a legal battle to have the original process declared null and void. Losing out may have been a blessing in disguise, some would argue, but Versatel has evidently not been put off by the 3G difficulties prevailing elsewhere. Ironically enough, a victory for Versatel would actually be great news for the five current licensees - a second auction would give them the chance to recoup some of their original outlay if not ditch their 3G licences altogether.
Then there's O2's situation in the Netherlands, which further complicates matters. The operator's UK-based parent wants out of the Dutch market and is struggling to find a buyer, but O2's disappearance could leave a spare licence which might satisfy Versatel's continued interest. The uncertainty in the Netherlands aside, mmO2 has become the latest operator to have stopped the ARPU rot, announcing this week that average spending in the first nine months of 2002 rose 5.2% in the UK and 8.7% in Germany. mmO2's customer base grew by 9.2% across the operator's four market's.
The growth enjoyed by DoCoMo's Foma service, meanwhile, remained some way short of lacklustre. Just 16,300 people signed up in the three months to December, making 152,000 users in total. DoCoMo's already drastically scaled-back target of 320,000 by the end of March is therefore once again looking out of reach. By contrast, the popularity of KDDI's 1x service contributed strongly to quarterly profits of $257m, although ARPU at KDDI declined marginally even so. The average 1x customer now spends $77 a month, while ordinary subscribers spend $62.
Vodafone, which owns the third Japanese player J-Phone, was meanwhile announcing plans to offload Japan Telecom's fixed-line assets to US-based investment firm Ripplewood. Vodafone's controlling stake in Japan Telecom is worth just over £1bn, and the sale would allow Vodafone to concentrate on its core mobile operations. Japanese commentators, though, lamented the fact that this once proud national institution had become little more than a tradable asset for overseas investors. Ripplewood, they speculated, would only sell JT on for a profit in a couple of years' time. And no less worrying for the Japanese industry was the forecast made by DoCoMo CEO Keiji Tachikawa this week that new subscribers in the Japanese market as a whole would fall by 30% during the financial year 2003/4.
Another factor that could increase the pressure on tightening margins in Japan and elsewhere was the news from China's Ministry of Information Industry that the country's 36 handset manufacturers are expected to churn out no fewer than 250 million phones over the coming year - even though domestic demand is unlikely to exceed 170 million. In contrast, Salomon Smith Barney has predicted that the Chinese vendors will only produce 120 million phones and that they will therefore fail to meet domestic demand. However, the MII's forecast raised the possibility of a huge glut of cheap exports flooding the international market, which is the last thing that manufacturers elsewhere want to see. Meanwhile, Telecom Trends International reported that the global big four - Nokia, Motorola, Samsung and Siemens - have tightened their grip on the handset business, growing their collective share to 73.6% by the end of last year. So in a sense some stiffer competition from China would be no bad thing.
Causing the biggest stir on the handset front this week, though, was the N-Gage, Nokia's phone-cum-Gameboy concept. Partnerships with old video game favourites including Eidos, Sega and Taito were announced, while T-Mobile was named as an operator partner for the new device. What was most interesting, however, was the media excitement that Nokia so effortlessly drummed up this week over a product that is not slated for release until Q4 (at the earliest). The hype therefore appeared hugely premature, and the risk is that, as happened with the 7650, people will be tired of hearing about the N-Gage before it even hits the shelves.
Over-hype is also something that Hutchison will be keen to avoid as it goes for the commercial launch of its Italian network - just a couple of weeks away now we're told. Hutch claimed that 120,000 Italians have already put their names down to become 3's customers, although there will only be 30,000 phones available from the off. If 3G remains a fairly chancy roll of the dice for Hutchison, its decision this week to invest more heavily in the Indian market appeared a much safer bet. Although the details of the deal are unclear, Hutchison is believed to be buying First Pacific's 49% stake in Escotel, which operates in Punjab, India's fastest growing market. Hutchison is already India's number two player behind Bharti, and the move for Escotel should leave Hutch well-placed to mop up a good deal of that untapped growth potential.
And the wireless bust-up of the year entered its latest phase this week, as Microsoft arrived in court to answer the charges of plunder and deception brought against it by Sendo. The claims are complete rubbish, Microsoft unsurprisingly declared - in fact, it was "consistent failure" on Sendo's part that led to the Z100 smartphone project falling apart. Sendo, though, must have wondered what it had let itself in for as Microsoft's team of sharp-suited legal eagles filed into court. It was almost the stuff of John Grisham - small Birmingham, England-based handset vendor defies the odds by taking on huge, ruthless multinational with only the aegis of American justice for protection. Except that in Grisham you'd have a fair idea that the small Birmingham, England-based handset vendor would come out on top.
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