Ring! Ring! Hot News, 23rd March 2009
In Today's Issue: Sony Ericsson without the Ericsson; the mid-market group of death; Eurovendors: still got it, as Ericsson ties up huge Chinese contract; ZTE's good year; China Mobile profits up, obviously time for an unwise monster acquisition; Palm's race with the graveyard; AT&T iPhone contract=$400; MS pushing Silverlight "Deep Zoom"; spreading fibre with big lasers (but no sharks); Vivendi wants Francopenreach; Iliad doesn't care, just keeps generating cash, wants mobile licence; fibre-to-the-desk - wanted, telcos for new business model; pricing apps on the app store; Sony+Google=trouble for Amazon Kindle; Fennec out in beta; OFCOM makes BT very happy, again; building an open source BTS; Samsung sells online videos, network operators groan with dread; pretty UIs pull traffic through the system, with added Odlyzko; UK network sharing out, outsourcing in; Zain's giant m-banking launch, without "remittance service providers"
Ericsson wants out of Sony Ericsson, German media are reporting. Apparently, they want to sell their half of the handsets operation to Sony, but this may be complicated by the fact that Sony is short of cash and might struggle to round up enough to pay the greenmail. We predicted back at MWC that SE was especially exposed to the world economic crisis; here's some evidence of the pressure on the mid- and low- end handsets business.
If shipments are to fall 15% overall, with the top end holding steady, the rest of the market must fall more, and the other main support for it is emerging markets, so it's the mid-market that's being squeezed...and SE specialises in just that. Unsurprisingly, first quarter numbers were dire. In rather better news, the networks half of Ericsson announced a megadeal with China Unicom, under which Ericsson is going to build them a green-field UMTS network in 15 Chinese provinces and upgrade their GSM network in ten. Eurovendors; still got it, as they say, even if ZTE had a very good year. Telco 2.0 points to anyone who spotted that the boss of ZTE is talking about VAS platforms.
China Mobile, however, is looking a healthy shade of pink, with net profits up 11% in the quarter. It's threatening acquisitions, as well, based on its huge cash flow. (Is anyone reminded of Vodafone in the 90s? You might want to step away from that share-printing machine...) And Telefonica is promising solid performance from its Latin American operations. You might almost think there was something in those James Enck credit crunch posts about the major telcos' fundamental robustness.
Robustness is exactly what Palm lacks; it's all down to whether they can get the Pre out of the door before the cash runs out now. You have to wonder whether relying on the Telco USSR as the launch customer was that good an idea; after all, Sprint is focusing heavily on a WiMAX network, and its existing network is CDMA, and the first lot of Pres are GSM/UMTS devices. So this choice forces them to develop two different versions of it, one of which has a strictly limited lifespan because of the coming of LTE...
Meanwhile, AT&T has provided us with some useful data: they're offering no-contract iPhones for an extra $400. We can therefore conclude that the expected value of the business an iPhone user brings over the life of a contract is at least $400, and the handset subsidy is $400 minus Apple's revenue share, and that Steve Jobs stole the telcos' wallets. Again.
Speaking of iPhones, Microsoft reckons its Silverlight user interface language will trounce the arrogant scorpions of Cupertino with its Deep Zoom feature, which lets you zoom, er, deeply into web pages while keeping everything in focus. Well, maybe.
How can we get fibre-to-the-whatever further into the wilds without spending a ton of money? How about with a REALLY BIG LASER? Seriously; Australian scientists presented this as a solution for deploying GPON in rural Victoria. The science is fairly simple - like anything else, fibre systems have a link budget which is primarily determined by the error rate, just as Claude Shannon worked out all those years ago. And the further you go, the more you are exposed to entropy, and the higher the error rate, until you reach a distance at which the probability of effective communication falls below the acceptable level. This is your range limit. The Australians suggest cranking up the power and using a laser amplifier to pump the bits further - it's cheaper than installing another repeater node.
It's actually not a bad idea, even though it sounds more than a tad crazy; there's what amounts to a HOWTO here. You do have to worry about wearing laser safety goggles and not pointing the end of a cut fibre at anyone...unless you really don't like them.
Regarding fibre, the CEO of Vivendi wants France Telecom to spin off its fixed access network into a separate company, or at least an French Openreach, on the grounds that FTel has slurped up "85% of the available profit in the fixed-line market". He may struggle with this; after all, look what's happening down the round with Iliad. Our favourite ISP is looking for a mobile licence to go with its growing FTTH network, which is benefiting from regulated layer-zero access to FTel's ducts and poles. And more to the point, Iliad is throwing off €300 million in free cash flow a year, crisis or no crisis. Their profits are up 30% as well; operational excellence wins.
Fibre is good for more than just your bowels. So why not lay it in buildings as well as outside? Fibre-to-the-desk, they're calling it, and they reckon that among other things it can lead to big savings in CAPEX, OPEX, and electricity usage. A question - isn't there a gap in the market for a business that would lay the fibre and monetise from the savings over time, perhaps sharing this with the client? Sounds a better idea than a YouTube application for S60 devices.
App stores are everywhere; Gabor Torok at Forum Nokia has an interesting post about how to price your applications. He suggests quite simply starting at $1 and either cranking up the price or going free depending on what happens next. Interestingly enough, something very like Smile emerges in the comments.
In other content news, the Amazon Kindle is about to bash into something hard; Sony has a deal with Google to stuff its e-books with the whole of Google's inventory of digitised books, some 650,000 titles as against 245,000 in Amazon's catalogue.
Mozilla's Fennec mobile browser looks pretty and sounds like it could do a lot of good things for mobile user interfaces (recall that the Pre's entire UI is essentially a browser). Still only available for the N810 though; apparently they're planning to port it to Symbian, Windows Mobile etc later. This sounds more than a little backwards.
OFCOM seems to have been trying to make BT very happy recently; first there were the terms for wholesale access to the planned FTTC network, and now, there's clearance for triple-play, which BT has never been allowed to do in the past. (They could sell telephony, Internet access, and IPTV, but they couldn't bundle them. It must have made sense to somebody.)
Samsung, meanwhile, is llaunching an online shop for movie downloads onto its more video-centric devices. The initial 500 titles are on sale for £4.99 or 24-hour rental for £2.49, and the service launches first in the UK. Operators, stand by to see those BT backhaul pipes running hot; content may not be king of anything much, but the combination of content and user interface can certainly drive traffic. We saw this with the BBC iPlayer; we're also seeing it with the Apple iPhone. Supposedly, Dutch T-Mobile users with iPhones are pulling 640MB per user per month, compared to a baseline of about 20MB for voice and messaging; watch out! (Thanks to Andrew Odlyzko for the numbers.)
As if in preparation for this, the rumours about another wave of infrastructure-sharing in the UK petered out; instead, Vodafone has decided to outsource its UK network operations over the next seven years to Ericsson, while Orange UK is doing the same with Nokia Siemens Networks. The Orange deal requires NSN to "manage, plan, expand, optimise, and maintain" Orange's network - we can't help thinking that it's now a racing certainty that all that iPhone or Samsung-generated traffic will pass through a lot of brand new NSN gear.
Out in the wider world, Zain (that's Celtel as was, before Mo Ibrahim took his coat and giant sack of oily lucre) is launching a mobile money transfer/m-banking service across the whole of its footprint in East Africa, some 100 megasubscribers. They integrated the HLRs and eliminated roaming fees between Kenya, Uganda, and Tanzania some time ago, thus making their airtime credits a de facto single currency; but now they're taking it up a notch. Like Orange in West Africa, they are partnering with the banks, specifically Citigroup and emerging markets specialists Standard Chartered. No sign of "remittance service providers", though.
And Iraq, of all places, gets mobile TV. No word on who the lucky operator is yet.