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Ring! Ring! Hot News, 19th October, 2009

Telco 2.0 Top Stories

The agenda is out now for Telco 2.0’s European and American events; book here while there are still places available.

Nokia announced ugly Q3 results this week, booking the first quarterly loss in 10 years. In Q3, Nokia lost €559 million overall, against a consensus forecast of a €350 million profit. In fact, the analyst consensus wasn’t that far off in terms of the operating level - Nokia took a €908 million write-off against the value of Nokia Siemens Networks, which therefore implies the company must have made €351 million from operations before the monster accounting charge hammered it. (Remind anyone of Vodafone’s books back in the day?)

They also lost six percentage points of smartphone market share, but the real horrors were deep within NSN; revenues and profits are sliding. Not so long ago, the head of NSN said he aimed to move towards software and services; is another Nokia services strategy really wise? Anyway, in Q3 the services line of business made up 47% of NSN’s sales.

After all, here are some leaked numbers about Comes With Music; there are a total of 32,000 users in the UK and 107,000 worldwide, nine months after launching. On the up side, NSN scored contracts for six of the geographical “circles” out of 22 in Telenor-owned Unitech Wireless’s Indian roll-out. For comparison, ZTE landed three.

There’s a podcast here on using the Ovi Store as a developer. Meanwhile, Telephony Online suggests Google Android might “take down Nokia”. But one of the analysts quoted as support says that as well as Android
Nokia is seeing increased smartphone competition from LG, Samsung, Palm, RIM, Apple and HTC
That doesn’t leave anybody else…although it’s certainly true that Samsung and RIM ship a lot more phones than Apple or Android.

Google had Q3 results as well this week. Revenues are up 7% and margins up 5% year on year. The key metric of traffic-acquisition cost, TAC, was up somewhat, but was marginally lower as a percentage of ad revenue than a year before. Free cash flow was some $2.54bn - Google is becoming a cash machine. Interestingly, 53% of revenue came from outside the United States; Google is also becoming a major exporter. Rich Karpinski of Telephony Online expects a renewed push for monetisation after Google took an investment pause during the crisis. (Even if Android could be crashed by a specially crafted SMS for a while…)

Meanwhile, the YouTube cost base wars are on again. Wired reports that Arbor Networks will present new research at the next NANOG meeting suggesting that Google is getting practically all its bandwidth from peering relationships, and further that the structure of the Internet is changing. In 2007, the majority of traffic was heading from or to the top 30,000 ASNs; now it’s the top 150. On the other hand, the density of interconnection between edge networks has hugely increased, as more and more content networks peer and more and more content is served from major CDNs, and less traffic has to pass through the major transit operators. Not surprisingly, with all that data whizzing around, Cisco is updating its line of routers.

We’ve done a string of posts - here, here, and here on this issue. From the last, this is what we were saying in June:
A case can easily be made that Google could make its cost of delivery for video - zero. Every global IP transit provider would love to be the exclusive deliverer of such a significant portion of the world’s Internet traffic, and the transit providers could make money by squeezing the downstream ISPs in their cost of delivery. Such an extreme network design would bear a heavy political cost for Google and would obviously be unpalatable, but it illustrates the power that Google has accumulated through the YouTube traffic.

In other content delivery news, remember Joost? The Skype founders’ venture into P2P TV has ended with acrimonious litigation, rather like the buy-back of Skype itself. It’s quite possible that Zennstrom and Co have just spent so much time in smelly developer pools together that they can’t stand the sight of each other any more.

And 70% of the British public opposes plans to cut off P2P filesharers from the Internet.

Sun Microsystems is about to launch its app store for the Java world; Apple has decided to permit free iPhone apps to offer things for sale inside the application. They had almost certainly insisted that such applications be sold for a price for fear of their revenue share being bypassed; now, theoretically, you could build an application that contains a whole app store.

In more interesting app-store/developer community news, we’ve wondered why Telefonica didn’t take Litmus to Brazil. Well, TIM Brasil is launching a multi-platform app store, backed by Qualcomm, using their Plaza Retail app store-in-a-box solution. Qualcomm is desperately keen to get into applications, as a counter to the end of its 3G monopoly and LTE’s victory in the standards wars. This gives them a serious launch customer in a country with a renowned hacker community (hey, they invented Commwarrior).

Meanwhile, Shazam has put on 15 million users since February and tapped some investment from Kleiner Perkins. It’s a nostalgia trip to the early 00s! Shazam was one of the very, very first mobile applications to hit the market and practically the only one to get any traction with consumers before the iPhone. It’s profiting hugely from the app store boom - it’s on all the big four (Apple, RIM, Android, and Ovi), it got 10 million downloads on Apple, and it’s the second most downloaded app on BlackBerry App World. AT&T’s CTO, meanwhile, recently blamed music applications for burning through their data network’s capacity.

Time Warner Cable announced it would begin reselling Sprint/Clearwire WiMAX service, in a move that had been long predicted.

Elsewhere, Saudi Mobily saw surging growth; MobileOne steady progress; and Alcatel-Lucent bagged a contract to build NTT DoCoMo an all-IP network.

Speaking of broadband and IP, the FCC is showing a lot of interest in the submission from the Berkman Centre about its stimulus plan, which argues that open access is vital to the success of fibre projects. As we recently pointed out, the public sector is leading the deployment of NGA worldwide - here’s Italy, with a scheme to ensure minimal broadband access, and here’s the Commonwealth of Massachusetts, with three public sector fibre projects getting their stimulus plan money.

The Ghanaian government and Vodafone are under pressure regarding the terms of Vodafone’s acquisition of Ghana Telecom - an investigation alleges that Vodafone paid significantly less than the officially announced price, and among other things that the state should hang on to the national fibre backbone as a strategic asset.

The US government is still suing to hang on to documents about the illegal surveillance program. The aim of that project was to data-mine the operators’ CDR piles in order to find suspected terrorists; some people do this voluntarily, and we call this “social networking”. Twitter has announced a PageRank-like reputation digging feature, and Microsoft claims to have recovered some of the lost Sidekick user data. A scandal is going on after a huge German social network, SchülerVZ lost records of over one million users.

You may recall that emerging markets pioneer and Celtel founder Mo Ibrahim decided to use some of the proceeds of selling Celtel to the Kuwaitis to pay a cash reward for African heads of state who behaved well and retired peacefully. This year, the prize goes to…no-one at all, as Mo doesn’t think any of the candidates deserve it.

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