February 23, 2015

T-Mobile Q4s, Vodafone, Telstra, Cloud: Telco 2.0 News Review

[Ed: We’ve just published a new report on valuing early stage digital businesses as part of our new ‘Transformation’ Stream. Plus if you’d like to meet us at the GSMA’s Mobile World Congress in Barcelona, next week let us know by emailing contact@stlpartners.com - though we’ve only got a few slots left!]

T-Mobile Q4s; AT&T vs Title II; VZW small cells; politicians vs. Comcast-TWC

T-Mobile’s John Legere says the AWS-3 auction was a disaster for US consumers because AT&T and VZW got so much of the spectrum and DISH got away with using a “small business” credit. He wants a special 40MHz carveout in the next auction and a ban on non-operators buying spectrum.

The T-results, meanwhile, weren’t at all bad. The company was profitable to the tune of $101m in Q4 and $219m for the full year, and service revenue was up 17% annually. Q4 was a net-adds monster, with 2.1m net-adds taking them to over 55 million subs, about 800k shy of overtaking Sprint. ARPU was down $2.87 at $48.26. If you count in device instalments you can say it rose, but then, the example of VZW and AT&T’s Q4s was that those device instalments contribute heavily to revenue but precious little to margin. Everyone’s margins are being shredded - it’s a choice between protecting ARPU by slashing device pricing, or slashing ARPU and hoping to recoup on the gadgets.

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February 19, 2015

Valuing Digital: A Contentious Yet Vital Business (Part 1 of 2)


We’ve just published a new research paper ‘Valuing Digital: A Contentious Yet Vital Business (Part 1 of 2)’. The valuation of digital businesses is vital because it drives key strategy and investment decisions, yet highly contentious, as there are many different possible approaches. In the first of two reports on this topic, we appraise the main external valuation methods, and their suitability for use or otherwise with new telecoms business models.

The report is part of our newly launched ‘Telco 2.0 Transformation’ stream, and you can read an excerpt of the report here. For more on any of these services, please email contact@telco2.net or call +44 207 247 5003.

Extract chart from the report:

Valuing Digital Fig 1.PNG

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February 16, 2015

Comcast-TWC, Title II, Google, Apple, BRICs: Telco 2.0 News Review

[Ed: We’ve just published a new report on Key Questions for The Business Case for Future Network Investment as part of our new ‘Future of the Network’ Stream. Plus if you’d like to meet us at the GSMA’s Mobile World Congress in Barcelona, March 2-5 - we are making our plans for the week now. Here is how, and here are our thoughts on why its worth going in general.]

Comcast-TWC: doomed or saved? cable lobby vs. cable lobbyist over Title II; price war

Comcast-TWC has got at least one regulator on its side, the California state PUC, but it’s not happy about the conditions. California insists that Comcast expand its Internet Essentials offering, required by the NBCUniversal merger conditions, that provides basic service to the poor, increase the speeds, provide free WiFi routers, and bring broadband to schools and libraries in underserved areas. The target dates and penetration levels have also been increased, which Comcast isn’t happy about. And they’ve got to do something about their customer service:

One provision requires improvements to customer service and would prevent Comcast from pressuring customers not to cancel subscriptions. Much of Comcast’s worst publicity has come from customers recording cancellation calls in which customer service agents practically refuse to disconnect service. Comcast employees have also changed customers’ billing account names to “asshole,” “whore,” “dummy,” and “super bitch”

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February 9, 2015

Title II, Sprint, Spectrum, BT-EE, Lebara, Overly Smart TVs: Telco 2.0 News Review

[Ed: We’ve just published a new report on whether telcos’ digital ambitions are unrealistic as part of our new ‘Telco 2.0 Transformation ’ Stream. Plus if you’d like to meet us at the GSMA’s Mobile World Congress in Barcelona, March 2-5 - we are making our plans for the week now. Here is how, and here are our thoughts on why its worth going in general.]

Title II reclassification is here - the document, the detail, the reaction

Title II reclassification is here. The FCC has issued a fact sheet detailing its intentions, and they include “no blocking, no throttling, and no paid prioritisation”. They also state that Title II reclassification includes wholesale service, making it possible to bring interconnection disputes to the regulator. On the other hand, the regulator “forebears” to impose Universal Service Fund charges on broadband, to regulate prices, or to require last-mile unbundling. However, broadband providers will be required to offer special access, i.e. access to their poles, ducts, and conduits, and we can see Google Fiber among others getting right into that.

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February 5, 2015

Reality Check: Are operators’ lofty digital ambitions unrealistic given slow progress to date?


We’ve just published a new research paper ‘Reality Check: Are operators’ lofty digital ambitions unrealistic given slow progress to date?’. Supported by a recent global survey of telco executives, our analysis suggests operators’ digital ambitions are rising fast but, given 9 substantial implementation challenges, too little is currently being done to engender successful industry-wide business model transformation. Lessons are also drawn from NTT DoCoMo, one of the operators that has made the most overall progress towards a ‘digital’ model.

The report is part of the Executive Briefing Service and our newly launched ‘Telco 2.0 Transformation’ stream.
You can read an excerpt of the report here. For more on any of these services, please email contact@telco2.net or call +44 207 247 5003.

Extract chart showing variations in ambition between regions and functions (not actual performance today):

Reality Check Figure 3.PNG

Source: Telco 2.0 CSP Survey, November 2014, n=55

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February 2, 2015

Big Q4 Resultfest: Facebook, Google, Apple, Samsung, Amazon, Comcast, AT&T, BT…

[Ed: We are delighted to be partners of the GSMA’s Mobile World Congress in Barcelona, March 2-5 - and are making our plans for the week now. If you’d like to meet us there here is how, and here are our thoughts on why its worth going in general. We’ve also just published a new report on Telco-Driven Disruption: Hits & Misses (Part 1) as part of our new ‘Dealing with Disruption in Communications, Content and Commerce’ Service.]

Facebook ad prices surge ahead in Q4, Google’s sink; YouTube copyfights, default HTML5, search trouble; Instagram battles the robots

Facebook is two entirely different businesses, says Quartz, after its Q4 results this week show that it’s generating revenue in North America and Europe, but not adding users, and adding users in the rest of the world but not monetising them much if at all. Well, it’s generating revenue in North America; elsewhere not so much. But it’s getting close to an ARPU of $10 in the US and Canada.

facebook-average-revenue-per-user-by-region-us-canada-europe-worldwide-asia-rest-of-world_chartbuilder1.png

As a result, it’s beginning to make substantial amounts of money, getting on for $3.5bn a quarter in sales and $701m in profit. Exactly how this is happening is really interesting, because the volumes of ads it serves up are actually falling.

Screen-Shot-2015-02-02-at-08.55.43.png

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January 29, 2015

Telco-Driven Disruption: Hits & Misses (Part 1)


Although telcos aren’t generally associated with disruption, many operators around the world have attempted to disrupt adjacent markets, such as digital commerce, entertainment and financial services. In some cases, telcos have even disrupted their core broadband and communications markets.

While many of these moves have fizzled out or have flown below investors’ radar screens, several have had a major impact on both the telco’s revenues and relevance. These include SK Planet, M-Pesa, Au Smart Pass and BT Sport. In our latest research report Telco-Driven Disruption: Hits & Misses (Part 1 of 2) we look at why some disruptive moves by telcos succeed and others fail? You can see an extract here. It’s part of our new research stream ‘Dealing with Disruption in Communications, Content and Commerce’.

telco disruption jan 2015 title.png

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January 26, 2015

O3, Verizon, Euregulators, Cablevision, Apple in China: Telco 2.0 News Review

[Ed: We are delighted to be partners of the GSMA’s Mobile World Congress in Barcelona, March 2-5 - and are making our plans for the week now. If you’d like to meet us there here is how, and here are our thoughts on why its worth going in general.]

3UK-O2 is official; Sky and others want MVNOs; full reaction

Here’s the statement - Hutchison has started exclusive negotiations with Telefonica over a bid for O2 UK. A price of £10.25bn is named, almost all of which would be in cash and up front. Depending on how you count M2M subscribers, the combined O3 would have as much as 41% of the UK market.

The point is made here that this still doesn’t settle the fibre-to-the-cell or quad-play issues - so it’s interesting to see that Sky has approached O2 about an MVNO agreement, and so have both TalkTalk and Virgin Media. (Note that the CEO of Belgacom is talking about quad-play and fixed-mobile integration here.)

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Barcelona here we come: see you there?


Our analyst team will be attending this year’s Mobile World Congress in Barcelona (March 2-5), where they will be discussing the latest industry trends with our clients. If you are interested in meeting with our analysts to hear what we have to say on a particular topic or learn more about our research, we would invite you to request a meeting.

Additionally, if you are an established start-up or a Telco with a proven innovation in mobile and digital technology and are looking to develop new channels and opportunities to grow your innovation, we would like to hear from you - providing you meet the criteria below…

Why should I talk to you?

STL Partners’ Innovation Scouting Service is a unique integrated proposition for innovators and innovation decision-makers alike. It combines our core strengths in telecoms consulting and research with our strong industry network to help Service Provider identify, evaluate and deliver innovation quickly.

ISS Overview jan 2015.png

By participating in our Innovation Scouting Service, you will be added to our “opportunities roster”. STL Partners will introduce your innovation to appropriate Telcos globally, providing you with the opportunity to position your service or product with a tightly defined market of potential buyers and partners, building visibility and providing new routes to growth.

What sort of innovations are we looking for?

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Insight: what the MWC inspires

Among many other things, the GSMA’s Mobile World Congress (MWC) is a useful barometer for the industry overall. Looking back at our analysis of Catalonian forays by Google, Microsoft and Facebook, telco CEO-speak, and also predictions for Huawei and others, we examine its appeal and look at the key trends it’s highlighted over recent years.

To a certain section of the telecoms industry (somewhere between 50,000-85,000 people depending on how and when you count them), the MWC is a regular institution on the annual calendar. Like all ritual opportunities for clan gatherings there are those that love it and those that hate it. It marks out something each year: something familiar and yet always with new aspects, a huge humming snapshot of the industry at a given moment.

We’re delighted to be official partners with the GSMA’s Mobile World Congress 2015, and love participating in the Congress for three main reasons:

  • It provides a concentrated experience of CEO-think, like the market briefly playing out in public;

  • We get to see lots of ‘stuff’ - ideas and technologies;

  • We also get to see and meet a lot of our clients and friends in the industry, in the enjoyable context of Barcelona.

Looking back overthe past few years, here are a few of the themes we’ve seen emerging and playing out. [Ed: Please email contact@stlpartners.com if you’d like to catch up with us there or take advantage of the discount code for Conference packages kindly offered to Telco 2.0 readers by our partners the GSMA.]

OTT - From Enemy to Frenemy

Screenshot from 2015-01-26 12:23:49.png

The biggest name on show in 2014 was Mark Zuckerberg, Facebook’s CEO and founder. This was on the back of Facebook’s acquisition of Whatsapp (our analysis here). Speakers from the Internet players have featured heavily in the past few years, with Steve Ballmer, then Microsoft CEO, failing to land all punches in 2012, and Google’s Eric Schmidt stealing the show in 2010. This year sees Jimmy Wales, Wikipedia’s founder, joining the roster (so please remember to pay that donation you’ve always promised to make before then) alongside Jeanie Han, CEO of LINE Euro-Americas, the communications app that originated in Japan.

Zuckerberg and the others received rock star welcomes live at the Congress relative to most speakers, bringing some intrigue and excitement to the show from the Valley. In terms of the messages they shared via the public platform of the MWC, it has been intriguing to watch the strategic sub-text playing out between the Internet CEOs and the telcos. We commented in 2012 in ‘Facebook, Google and Apple: of Bêtes Noires and the Art of Evasion’ on how to read what the players did and didn’t say, and noted in 2013 that the European operators had subtly changed tack and declared ‘Peace with OTT, War on the Regulators’.

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January 25, 2015

Six Good Calls: Were You In On Them?

STL Partners and the Telco 2.0 team are not naturally boastful people. From time to time though, we make predictions based on our views and insights. This is a risky business as forecasting the future is full of pitfalls. As a professional organisation it takes a bit of guts to put our name to predictions in public so we’re pleased when we get it right.

In this vein, here are six predictions we’ve made in our Executive Briefing Service that have recently come true.

To find out how you and your company could get ahead of the game by working with us, please email us at contact@stlpartners.com. [NB We promise not to let this run of success go to our heads.]

AT&T Is Dumping A Ton Of Its Copper, Like We Said

AT&T has issued an official stock exchange filing in which it announced that a substantial chunk of its fixed network is now surplus to requirements:

Our fourth-quarter 2014 operating results will also include a $2.1 billion noncash charge for the abandonment in place of certain network assets. During the fourth quarter, we performed an analysis of our network assets and determined that specific copper assets will not be necessary to support future network activity, due to declining customer demand for our legacy voice and data products and the migration of our networks to next generation technology. This decision by management will not be considered in our assessment of segment performance and therefore, this charge will be reflected only in consolidated results and will not affect segment operating results or margins.

The wording (“abandonment in place”) suggests that they’re going to close some networks, rather than selling them, and provide service via fixed-wireless, or possibly overbuild them with fibre.

In our December 2014 Executive Briefing, Will AT&T shed copper, fibre-up, or buy more content - and what are the lessons?, we predicted that AT&T was likely to reduce its fixed footprint, whether by sales or closures, and concentrate on either “wireless, plus satellite TV” via the DirecTV deal, or else build FTTH into a smaller, more urban footprint.

We expect, however, that AT&T may consider a Verizon-like disposal of some DSL assets, perhaps coupled with the beginning of major FTTP rollout

However, we thought they wouldn’t get out of the business completely, not least because of its interdependence with their star Strategic Business Services product line.

att-sbs-right.JPG

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January 19, 2015

European Consolidation is Here: Telco 2.0 News Review

After BT-EE, it’s O2-3UK. DTAG CapEx. Notspot deal in trouble. Missing €900m hangs over Altice-PTel

The BT-EE deal really is the starting gun for European consolidation. Canning Fok, managing director of Hutchison Whampoa, is promising more acquisitions to come in Europe, and the company has just reorganised its structure to support a big bid.

HWL, of course, bought the O2 network in Ireland not so long ago, which perhaps tips their hand towards this story - there is a rumour out that they will bid £9bn for O2 UK, left standing in the wake of BT’s merger with EE. Telefonica is, of course, so keen to get rid of O2 UK and cut its debts that Cesar Alierta hared to London before Christmas in an effort to push it on BT, so they won’t need much persuading to take a big bag of cash.

The problem of course is that this is consolidation with a vengeance. BT-EE can be defended on the grounds that it still leaves the UK with 4 MNOs, although the consequences for spectrum and for network vertical integration are serious. You can’t deny, though, that O2-3UK (O3? That’s ozone, isn’t it?) would take the UK down to 3 operators.

The really interesting question is that an O2-3UK deal leaves open the future of Virgin Media, whose Gigabit Ethernet backhaul has powered 3UK’s competitive surge forward over the last few years, and also CityFibre, which provides dark fibre to the cell for some 3UK networks. As it stands, O3 would be a beast of an operator, especially once it finished pulling the VMED or CF fibre to whichever O2 base stations it chose to keep. But Vodafone UK would then be a weak third operator a long way behind on fibre, although its pockets are very deep. It would be keen to make a bid for a broadband network, ideally Virgin Media.

And then things would get complicated. Did we mention that O3 would be in both the Cornerstone and the MBNL infrastructure alliances? In-depth coverage of the whole issue is coming in this week’s Newsletter and the Executive Briefing Service

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January 12, 2015

India, Gigabit Cable, FCC, Roku: Telco 2.0 News Review

India approaching 1bn subscribers, plans huge spectrum auction; Uninor +5k Node-Bs; East Africa ends roaming charges; more PTel/Oi weirdness

India’s regulator, the TRAI, says they had 937 million subs on the 30th November, 2014, growing a few million a month. As a result, it looks like they’ll hit the billion in the next year or so.

90% of Internet connections in India are wireless, and this means they’re going to need more spectrum. The Indian government has just decided to launch its biggest ever spectrum auction, with 465MHz going on sale across the 800, 900, 1800, and 2100MHz bands and a $12bn target price.

However, it’s worth pointing out that this isn’t a net increase of 465MHz, because Vodafone, Bharti, Reliance Communications, and Idea all have licences that are going to run out.

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January 5, 2015

Comcast-TWC, TIM Brasil, Huawei, HKBN, TalkTalk - Telco 2.0 News Review

Ed: Happy New Year and welcome to the first Telco 2.0 News Review of 2015, packed as full of rich content as most of the Telco 2.0 team have been for the last two weeks. Nonetheless we’re back, and if you’re full of New Year zeal and interested in the future of the network, we’d love to get your thoughts on what the key questions ahead are here to help drive our latest research.

Comcast-TWC on hold again; net neutrality vote on 26th February; Mexican spectrum; Telefonica sale of TI shares OKd

The FCC has stopped the clock on the Comcast-TWC deal again, holding the process at Day 104 of 180, rather like that rocket launch before Christmas that kept getting put off. They have decided to resume the review after the 12th of January - wouldn’t we all? The problem is that 31,000 documents have turned up that the cablecos should have already disclosed, and the FCC staffers need more time to read them.

Meanwhile, the regulator is moving forward with its proposed net neutrality rules. A final draft is expected in early February, with a vote at the open meeting on the 26th. Republican politicians are hopping mad and are speculating about trying to close the FCC.

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December 22, 2014

Iiad, Oi, Comcast, OFCOM, ARM, Merry Christmas: Telco 2.0 News Review

Ed: if you’re interested in the future of the network, and you’ve got a couple of minutes to spare, we’d love to get your thoughts on what the key questions ahead are here to help drive our latest research. Whatever the case, we wish you ‘season’s greetings’ and all the best for 2015.

So what will Xavier Niel do next, now that the T-Deal is off and so is more consolidation in France? Well, there’s the cloud, and there’s also this - buying an Orange OpCo, specifically the Swiss one they sold to Apax Partners in 2011. The carrier is valued at €2.3bn, after Apax bought it for €1.6bn, and gives Free a crack at Switzerland’s relatively concentrated, 3 MNO market. I think we can guess what the plan is there - discount all the things?

Meanwhile, the president of ARCEP has confirmed that Free Mobile now has 75% population coverage, three years from launch, ahead of the regulatory deadline on the 15th of January. They’re also deploying both 3G and 4G into the Paris Metro.

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Telco 2.0 Strategy Report Out Now: Telco Strategy in the Cloud

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