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Yahoo!, Vivendi, Samsung, 3UK/O2: Telco 2.0 News Review

Unlikely Yahoo! bidding war; Vivendi swapping TI for Mediaset; RIAA vs. YouTube, again; the TV costs timebomb

Rather surprisingly, a bidding war is developing for Yahoo! Verizon kicked it all off, with an $8bn offer that foresaw Yahoo! being integrated into AOL under the purview of their new businesses EVP, Marni Walden. Then it was rumoured that Google might be interested - just imagine, searching the web with Google Yahoo! - or perhaps Time, Inc, in an ironic replay of the AOL-Time Warner merger.

But surely nobody expected serious interest from Daily Mail & General Trust, the company that - if you’re British - stands for tub-thumping conservative journalism, and if you’re not, for its click-tastic pursuit of celebrity outrage. That said, the paper is apparently determined to build a digital future on ad revenue and the remorseless pursuit of more pageviews, and if nothing else, the Yahoo! sites would be a great place to syndicate their content.

Inside Yahoo!, meanwhile, there’s an increasing divide between the technology and the media elements of its culture. Ironically, ex-Googler Marissa Mayer has chosen to play up a classic magazine approach, hiring star editors and writers for big money and letting them set the agenda, while the engineering team tries to divine what the public wants from what it read last. And, it turns out, that’s usually something to do with Kim Kardashian.

Well, anyone who’s seen the Daily Mail homepage knows the paper heartily agrees with that. If the Mail gets the deal, they plan to keep the media operations and the big-traffic homepage and pretty much dump the rest. To achieve this, DMGT needs to sign up at least one financial investor, as Yahoo! is still a surprisingly big company.

Verizon agrees on strategy, in part - it wants to sell Yahoo! Japan and the complete web business, while keeping the media shop. This week, Verizon also acquired a much smaller content company, Awesomeness TV. This is meant to feed the Go90 mobile video business, and apparently it’s going to be paid content - if that’s what “premium transactional original content” means in earthling.

Now this is interesting: after forcing the CEO of Telecom Italia out, Vivendi has bought into Mediaset, Silvio Berlusconi’s TV holding company. This looks like media consolidation around Europe. The Financial Times thinks Vivendi will eventually go for full control of the company, and further acquisitions elsewhere, and that it might sell Telecom Italia to fund them. This mostly makes sense if you think Vivendi is going to break up TI, as otherwise, why bother building a stake and forcing out the CEO?

Part of Berlusconi’s motivation is apparently that his football rights are coming up for renewal and he’d rather cash in Mediaset than fork out the enormous sums football demands. In Germany, the anti-trust regulators have decided to limit how many matches any one broadcaster can have. Obviously, this restricts how valuable the franchise can be, as does the fact most German football is free-to-air, but it also makes it possible for multiple players to have a bidding war for the good bits and all end up overpaying.

This speaks to a deeper truth. Everyone in telecoms, especially, sees media and specifically TV as the sector where it rains money. But the cost of programming rights is going up, and up, and up. Football is the most outrageous example, but scripted content is no different. Todd Juenger of Bernstein Research points out that, if current trends continue, margins will reach zero by 2023 and rightsholders will capture all the money in the business.

That’s the reductio ad absurdum, of course, but the shorter-term version of his forecast suggests TV gross margins might be down to around 17% by 2018, at which point they’d be about half typical wireless carriers’ margins and in line with fixed-line ones.

The music industry is having another row with YouTube, not coincidentally at the same time their contracts are up for renewal. The labels are complaining, ironically, that the Digital Millenium Copyright Act they lobbied so vigorously for isn’t punitive enough, and that this weakens their bargaining power. Re/code’s Peter Kafka points out that they sued repeatedly and lost repeatedly, and in any case two of the big three labels are partners with YouTube via Vevo. Why can’t they just accept it and move on? To which RIAA CEO Cary Sherman says:

We accept the inevitability of death. It doesn’t mean we have to like it.

Very deep. Meanwhile, a huge row has broken out between Charter, Comcast, and Byron Allen, owner of seven US cable TV channels. Charter and Comcast say it’s about their terms of carriage, he alleges it’s down to racism, and the row is even hotter than John Legere vs Marcelo Claure.

Facebook is worried that people aren’t oversharing enough, in a word. Rather than pouring their lives into the ‘book, they’re posting links to other websites. Other websites that have their own business models. Imagine the horror. This aggression cannot stand, as they say, and Facebook has an engineering team in London working on it.

Sticky Q1? Sprint’s network leasing scheme in full; VZ, Incompas propose pole peace

US analysts, meanwhile, are predicting a sticky quarter at AT&T and VZW due to the increasing importance of device sales and the absence of a big device launch in Q1. The iPhone SE wasn’t out until the last day of the quarter and the Galaxy S7 ramp-up only began towards the end. Also, VZW chose not to follow the revival of unlimited data plans.

Sprint’s latest financial wheeze is here, and it goes like this. Sprint, Softbank, and an “external partner” together create a special-purpose company. This company buys $3bn worth of Sprint network assets from the carrier, and uses them as collateral to raise a large loan. It then pays Sprint for the assets in “staggered, unequal” instalments, out of the cash it just borrowed, for a total of $2.2bn (note that the debt is over-collateralised). Sprint then uses this money to make the debt repayments that fall due this year, and leases the network gear back from the company.

The filing describes the special-purpose company as a “bankruptcy-remote entity”, meaning presumably that Softbank, the outside investor, and the lenders would be able to keep the network assets in it if Sprint itself went bust. If we were doing something like this, we’d probably try not to use the word “bankruptcy” too much, as the structure is very similar to Enron’s infamous special-purpose vehicles. Unlike them, though, the “entity” will still be consolidated in Sprint’s books, so the debt will be counted in with Sprint’s $34bn of liabilities, and the payments from the “entity” to the lenders will be recognised as interest costs, so they will be deducted from Sprint’s profits/added to its losses. Mind you, they will also of course be added-back to its EBITDA, so expect Sprint earnings announcements to feature the EBITDA and EBITDA margin numbers prominently.

Before Sprint started leasing the network, it leased the phones. That created a pool of leased phones, attracting regular billings, that Sprint was able to spin off into a special-purpose vehicle and use to borrow a lot of money. There is only one problem - both the economics and the accounting treatment are very dependent on the resale value of the ex-lease phones. As a result, Sprint is texting all its lease subscribers reminding them that the phones have to be returned at the end of the contract.

Much of the bull case for Sprint, such as it is, revolves around that block of 2.5GHz spectrum it still has. This has been more than a bit of a disappointment so far, so this might be good news - Google just took out a temporary authorization to test some kind of wireless network in that band. The Google has also been lobbying in favour of getting another 2.4GHz channel, 14, reassigned for WiFi.

In the regulatory game, Verizon and one of the ILECs, Incompas, have come up with a joint submission to the FCC’s review of special access. Essentially, it’s a proposal for peace between the various parties in the debate, proposing technology neutrality, Title II implementation on the condition that the FCC “forbear” from various requirements, and rate regulation on a technology neutral basis except where the FCC considers the market competitive. The USTelecom lobby group had previously submitted a study it claims shows the market already is competitive.

From that, you can see that the ILECs and telcos can probably agree on the Verizon/Incompas proposal. It recognises the telcos’ contention that some places already are competitive; it provides the indies with some regulatory guarantees. The people who don’t like it are the cablecos, who are doing very nicely, don’t care about ILECs, and don’t want any interference.

After all, as WOW!’s head of wholesale says:

Many folks we speak to now say that 10 Mbps is the new T1 and 10 Gbps is the new DS3

Frontier’s acquisition of Verizon’s fixed-line operations in Florida has closed, and so did the network after a major fibre cut in Tampa. An analyst suggests VZ will need to find $375m in cost savings, or additional revenues, to make up for the sale. He doesn’t sound too keen on buying Awesomeness TV, either, or indeed Yahoo!

Here’s an interesting story about access to poles. Google is lobbying for US cities to adopt rules that allow for coordinated access to the electricity and phone poles for all services, making it rather more efficient, but also much easier to roll out Google Fiber. AT&T, which owns some of them in Louisville, a Fiber target market, is suing - and in the meantime, frantically rolling out 1Gbps service.

AT&T’s LTE rollout in Mexico continues.

And Venezuelan operators have been turning off mobile roaming and even plain old international direct dialling because they can’t find the foreign exchange to pay the termination fees.

CMA to Europe: kill 3UK/O2. Orange-Bouygues, the fallout. Choice 5G hype at Vimpelcom.

The British anti-trust regulator, the Competition and Markets Authority, has come right out and practically begged the European authorities to kill the 3UK/O2 deal. Their argument could not be simpler - three MNOs isn’t enough. Before their dramatic intervention, 3UK had announced its final offer, signing long-term MVNO agreements with Sky and Virgin Media over a total of 30% of the combined network capacity and promising to sell the stake in Tesco Mobile. That was roughly what 3UK and CK Hutchison managers had been briefing all along, so perhaps the negotiations never actually moved much.

After the collapse of the Orange-Bouygues deal, Orange is looking at alternatives. The search kicked off by buying into Africa Internet, the VC fund that invests in African startups. Taking a €75m stake, Orange joins Rocket, MTN, Millicom, AXA, and Goldman Sachs. Rocket is the Berlin-based fund famous for backing startups that clone major US Internet companies’ business models in a localised form, and ironically, Africa Internet is pretty much a clone of Rocket.

Meanwhile, the French public sector bank BPI has exercised its rights in Orange under the so-called loi Florange, which gives long-term shareholders twice the votes. This takes the government stake to 29.5% of the voting rights and basically rules out anything like Bouygues’ bid happening again if the minister doesn’t want it to.

The bidders for Orange codenamed the transaction “Project Jardiland”, after a chain of French garden centres. Now it’s pushing up daisies, life must go on somehow, and Bouygues and Free dashed to the ARCEP offices to get their 700MHz spectrum OK’d. The TV networks had to move out by the 5th of April, Bouygues turned up the first base station, in Paris, on the 6th. Free activated three in Tarbes later that day. Bouygues also fetched a test authorisation for 3.5GHz wireless broadband.

ARCEP, meanwhile, issued its regular market report, showing that mobile service revenue is still falling, but that the curve is flattening out. Meanwhile, 4G subscribers are doubling in less than a year.

Mobile Europe points out that MTS made a policy decision to concentrate 4G on the 1800MHz band. It’s also one of the star operators we identified in the 4G Global Rollout Executive Briefing.

Sigve Brekke, Telenor CEO, says they can’t “steer” Vimpelcom’s strategy and that’s why he’s hawking the 33% stake in the carrier around. Meanwhile, the Vimpelcom group CTO says:

5G needs to become the customer-oriented transformative language

If that’s the type of dialogue they’ve had, it’s not hard to see the disconnect in style at least.

Spanish 4th operator Yoigo, the subject of a takeover offer from a team of ex-Virgin Media execs, is shortening sail by ending its popular 20GB data plan.

German regulators have issued a new national numbering plan. Major changes include letting MVNOs issue IMSI numbers for international use, good for things like global M2M SIMs or complicated enterprise private networks.

And the UK has reached, sort of, 90% coverage with “superfast” broadband, sort of.

Samsung, LG Q1s; new gadgets, reviewed; iUsers spend $35/year on apps; Intel 5G, IoT bosses out

Samsung’s preliminary Q1 results show operating profits up 10% after the Galaxy S7 apparently did what the S5, S6, and S6 Edge were meant to - sell by the bucketload. Shipments may have been as much as 2.5 million over expectations. Meanwhile, LG told investors to expect a strong Q1 too, although this was more about white goods than phones.

Here is an in-depth review of the G5, which likes it but complains about the manufacturing quality. Here is an in-depth review of Apple’s iPhone SE, which says it’s like an iPhone 5 with 6 performance and much better battery life than either. Pretty good, then.

Kantar Worldpanel says Android is gaining market share in Europe, although the Huawei premium lines don’t get across in the UK and the Galaxy 7 will have to crack that one.

This new HP laptop is literally covered all over with shiny metal, gold if you’re willing to spend the money to show you have more money than taste. The specs inside it are pretty impressive if you can handle the bling.

BlackBerry is planning two new mid-market Android devices.

In the US, the average iPhone user spent $35 on apps in 2015. Oddly enough, if they keep the device for 3 years, they’ll have spent precisely the price of a Windows 10 install.

Changes are afoot at Intel. The people in charge of IoT and wireless are both leaving, although the company is putting more investment into both than ever before.

Here’s a good discussion of why Microsoft decided Windows needed to support a proper Ubuntu Linux command line. Essentially, the logic of its long-term strategy - “developers, developers, developers”, as Steve Ballmer said - means that Microsoft has to have a credible developer platform, in an era where most laptops are Apple machines running a Unix-based OS, practically all mobiles are running either an Apple Unix or a Google-backed Linux, the vast majority of servers are Linux, and network equipment, IoT devices, and such are also usually Linux of some flavour.

Relatedly, if you search Bing for a snippet of code in most programming languages, it now gives you an interactive editor that can actually execute it in the results. Also, MS’s latest surprising mobile app is a power user’s keyboard for iOS.

Microsoft and Amazon are considering taking a stake in HERE, the ex-Nokia maps business owned by the German car industry.

The people responsible for Opera and Opera Mini have a new web browser out.

Some Nest IoT devices will no longer work, after Google said so.

5G backhaul on test; Telenor may exit India; VF India IPO plans; Telstra outages

KT and NEC have been testing a 5G wireless backhaul system operating at 70GHz, around a ski resort in South Korea. You can bet that’s part of their drive to deploy something for the 2018 Winter Olympics. It’s also telling that 5G radio is coming first to private applications like backhaul.

In Japan, the government has ordered NTT DoCoMo and Softbank to stop selling smartphones at hugely discounted prices. At the moment, NTT will sell you a shiny for $6 if your family takes several, while Softbank will pay you a huge buyout if you change carrier.

Telenor reckons its 4G rollout in India will be finished in mid-2017, when Huawei will have upgraded 25,000 cell sites. Apparently Telenor’s not happy that it doesn’t have a national spectrum footprint and might sell. However, the report also says the 1800MHz holdings aren’t “suited to 4G”, which doesn’t sound right.

Vodafone is hiring financial advisers for the IPO of Vodafone India.

Reliance Infocomm is getting ready to migrate its remaining CDMA users to the 4G network, so it can clear the 800MHz spectrum they’ve sold to Reliance Jio. Worth doing anyway, of course.

After three major outages, Telstra has called in Ericsson, Cisco, and Juniper to sell them a lot of expensive equipment, sorry, review the network. Meanwhile, Aussie regulators are worried about Telstra’s role in the NBN now its cable network is part of it.

In Thailand, the 900MHz block Jas Mobile failed to pay for is back up for auction.

Nokia job cuts, passive optical LANs; ZTE Q1; telcos and OpenStack; Brocade buys Ruckus Wireless

Nokia promised there would be cost savings as a result of the Alcatel-Lucent acquisition, and the savings have started with 3,100 job cuts, split between Finland, Germany, and France. It seems that the product rationalisation has mostly meant keeping the Nokia product. In order to comply with promises to the French government, Nokia is also hiring 500 people in France.

More cheerfully, here’s an interesting bit of Nokia technology - using GPON, familiar in the context of FTTH and an Alcatel speciality, for enterprise LANs.

ZTE reports revenue up 23%, mostly from carrier networking gear, and sacks the board in order to appease the Americans.

Here’s a really interesting blog post on what telcos wanted from OpenStack and how it got into the current release, codename Mitaka.

Brocade, the Ethernet and IP router vendor that’s increasingly interested in mobile, is buying high-end WiFi vendor Ruckus Wireless for $1.2bn. Ruckus is usually the feature leader in WiFi and surprised everyone recently by getting involved with MuLTEFire.

T-Mobile USA hits 300m VoLTE calls a day; call centres in AWS; random Swedes

T-Mobile USA says it’s now up to 300m calls a day on VoLTE. They’re using it to offer HD voice, WiFi calling, and some other enhancements starting with the LG G5 and Samsung Galaxy S7.

LiveOps, a contact-centre solutions specialist, is now offering call centres in the cloud, running in Amazon Web Services.

The Swedish tourist board has followed up on its @sweden Twitter feed, which is operated by a different randomly selected Swede every week, with a phone number that is answered by a different randomly selected Swede every time.

A roundup of WebRTC activity at Microsoft, Apple, and Google.

Avaya is refocusing its activities around cloud voice. Here’s a rundown of the product line.

Interesting project from VMWare: a mail app that’s actually good.

Smart meters that weren’t; WhatsApp encryption; software and the Panama Papers; Free Basics, for good or ill

The UK smart meter deployment has been put on hold after CESG, the defensive arm of GCHQ, pointed out that using the same encryption key for all the 53 million meters wasn’t too bright.

WhatsApp’s end-to-end encryption is now live and you can read how it works here.

The Panama Papers - insider leak or catastrophically misconfigured Drupal site? Also, the account of the open-source software infrastructure the journalists built to cope with 2.4TB of leaks is fascinating.

An intelligent critique of Facebook’s Free Basics. One less critical observation is that it seems they pulled out of Egypt rather than spy on their users.

For most of Sunday, Holland’s biggest news sites were all serving malware via a dodgy ad.

This page will tell you what your web browser tells all the other pages.

And Microsoft Edge will come with Flash blocking as standard.

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