T-Mobile USA launches; Vodafone: Germany is the new Spain, Samsung bears answered; Telco 2.0 News Review
Telco 2.0 Top Stories
- Strategy & Finance: More Shiny Now: T-Mobile USA launches scramble for geek customers
- Broadband Connectivity: Vodafone: Germany is the new Spain
- Hardware: What was that about Samsung bears again?
- Software: Forkdroids rule in China; the Ubuntu vision
- Cloud Computing: Microsoft passes "10 Google Units"; Amazon loses money
- Voice 2.0: Shakeup at Voxeo; BT squeezes freephone
- Security & Surveillance: Chinese Internet filter: OK. Chinese PC: Not OK.
Here's the video from last year's Digital Arabia event. Don't miss out: book now.
More Shiny Now: T-Mobile USA launches scramble for geek customers
Whatever Sprint's new owners eventually do, disruption in the US mobile market is well under way thanks to T-Mobile. Having started off by getting users to pay for their devices separately from the service, they then suggested that if you were willing to pay an extra $10 a month, you could expect faster updates - in fact, as many as two new gadgets a year.
The attraction for high-spending geeks is obvious, as is the fact that pushing more gadgets at the customer is a time-honoured way of boosting share, but one that eventually costs money. This particular move isn't quite as expensive as just turning the subsidy tap back on, but it will still cost money. Typically, the subscriber pays the unsubsidised price of the device in instalments of about 5% each month, but gets to trade the phone back in for a new one after 6 months.
AT&T, for its part, announced wireless data revenues up almost 20% year-on-year, while U-verse VDSL+IPTV revenues were up 30%. On the other side of the equation, the combination of eroding voice revenues and price-cutting to move the TV service meant that the fixed-line operation's revenues fell 0.9% and net income 15% overall, while margins in wireless fell from 45.8% to 42.4%, mostly because smartphone prices were cut to keep up with the competition.
AT&T had hoped for 500,000 net-adds in wireless, and beat that with 551,000. But this wasn't enough to beat Verizon, which recorded 941,000 net-adds in the quarter. 94% of their customers are now on post-paid. VZW also managed to increase its average revenue per account, by 6.4% year on year, as it concentrated on the high value customers. That had consequences for CAPEX. VZW had promised to cut back expenses, but this took a back seat to deploying more LTE into the 1.7GHz band.
With things going well at VZW, it was time for another go around of Vodafone-Verizon rumours, as Vodafone chairman Gerard Kleisterlee said the company would consider proposals if they generated more shareholder value. Not much of a revelation, but there's always a reason for a bout of VZ-VF rumour-mongering.
Vodafone: Germany is the new Spain
For the fourth successive quarter, Vodafone's group-wide service revenue fell, by 3.5% year-on-year, in Q1. We've become used to bad results from Vodafone's southern European markets, hammered by the terrible macroeconomy, but this time, it's Germany that's a problem - revenues were down 5.1% there, and 4.5% in the UK. It wasn't anywhere near as bad as Italy (off a further 17.6%) or Spain (10.6%), but the direction of travel was the same, with a combination of worse macro-economic conditions and intensified pressure on prices.
Vodafone's answer in Europe is the Vodafone Red tariff, which is intended to shift revenue towards post-paid data and establish a regular €30/mo price point. Uptake is pretty good - in Italy, the percentage of revenue coming from in-bundle usage was up 25% - but the point is, after all, to sacrifice some of the margins on out-of-bundle usage in order to create a defensible bundle. There was good news from Turkey, India, and VZW. India, in particular, saw service revenue up 13.8%, with mobile voice minutes of use rising and prices per minute actually climbing.
VF expects to close its acquisition of Kabel Deutschland in Q4, but suddenly the idea of adding more German assets doesn't seem quite as clear cut as it used to.
Unless you're Telefonica. Having managed to reduce their debts by €10bn this year, to a mere €48bn, they're now looking at buying E-Plus off KPN, which would bring them some 21.3 million additional German subscribers. This would cost them €5bn in cash, plus €3bn in shares, and earn them the undying enmity of Carlos Slim, who will hardly be delighted to see KPN's subscriber count shrink by two-thirds just before he buys it.
For his part, Slim pulled out of a KPN shareholder agreement that limited his stake to 30%, thus clearing the decks to bid before the Telefonica-KPN deal can happen. America Movil, by the way, had reasonable results in Q2, but the telling point is that although Mexico's new regulator isn't functioning yet, prices are already falling.
The big question is whether either the German or European authorities will accept a market the size of Germany going down to 3 operators. On that theme, it looks like a power struggle is coming in European regulation. Neelie Kroes' draft regulation on wholesale prices, which would be highly empowering for players like Free Mobile, has been criticised by "other" EU officials and of course by operators, who are playing their theme from this year's MWC - regulation is too pro-consumer and all about knocking down roaming rates, and it needs to be nicer to the industry. There's obviously scope for a deal here: clearance on mergers in exchange for rate regulation.
Indian regulators are going to let spectrum-sharing go to the shop for a "long weight". Meanwhile, towerco Bharti Infratel saw its profits hop 68%.
Orange had half-year results, which showed that revenues were down 4.5% year-on-year, or 2.2% ignoring regulatory changes (like you can). Also, the French government has a €2bn tax bill for them.
EverythingEverywhere claims to have 687,000 LTE subscribers out of its target of a million by the end of the year, but its ARPU has slipped slightly.
Virgin Media, meanwhile, is getting more and more like a "not quite a mobile operator" - it's deploying small cells for third parties into a network it's going to build around Birmingham. This network will support their business customers, a public WLAN deployment, some municipal customers, and also sell capacity for mobile operators to host their small cells in Virgin's multi-radio chassis.
O2 UK has discontinued its telehealth product, after being the latest carrier to find this is actually quite difficult. TalkTalk reports that its TV subscriber base has gone up sharply, thanks to the old trick of "giving stuff away", in this case YouView boxes. Meanwhile, Sky has introducted a casual/one-off pay TV offering that is delivered through something that looks like a white-labelled Roku.
What was that about Samsung bears again?
Samsung may be the world's most profitable phone manufacturer, pulling ahead of Apple in Q2. It's incredible what a holiday does for you, isn't it? A couple of weeks ago, everyone thought the S4 was a flop and Samsung was about to go the way of HTC. Now, not so much.
A couple of months ago, nothing was more fashionable than saying that Apple was ripe for a correction. Q2s are out, and they're pretty good too; sales of iPhones are strong, and although average selling prices are down a tad, this is probably due to running on the iPhone 4 as an entry-level product in new markets. That said, the exec responsible for mobile has been moved, in the faintly disturbing manner common at Cupertino:
Early Sunday afternoon, Bob Mansfield, Apple's senior vice president of technologies, disappeared from the company's Web site, his biography removed from its executive profiles page without explanation.
Overall, Q2 may have been the biggest quarter ever for smartphone shipments. Interestingly, LG seems to have recovered substantially and to have snuck back to third place by shipments behind the Big 2. The same mood has taken hold over at Horace's, who points out that everybody has not got a smartphone and in fact, adoption rates beyond 50% US penetration are much like they were before it. So is the pattern by platform - Apple and Android share the great bulk of the gains, Windows picks up a few, and BlackBerry is shrinking.
Apple and Samsung, meanwhile, have been in talks about a global settlement of the patent disputes. And here's an argument that disruption was the last thing Steve Jobs ever pursued.
Nokia, meanwhile, reported grim Q2s, marked by disturbing weakness in the mass-market sector and the final exit of the Symbian OS products in smartphones. That said, the Asha 501s roll out in the coming quarter, and there's a new product - the Lumia 625 is a 4.7" tablet with LTE and some of the photo technology from the PureView demonstrator, priced at €220.
Meanwhile, Microsoft has written off $900 million worth of Windows RT-based tablets. Horace argues that the Microsoft write-off suggests that there is something seriously wrong in their software business model and Nokia is actually doing better with the Lumias. After all, PC sales are sliding.
Forkdroids rule in China; the Ubuntu vision
Here's a piece about cheap Chinese OEM Android devices, with a handy chart showing the huge share Android has in China.
But for us, this is a story about software. We've long argued that Google has little control over Android once out in the wild, and that "forkdroids" would proliferate. Here they are, an army of mutant Androids that don't necessarily use the Google apps that actually carry Google's contractual conditions. Larry Page may boast of millions of activations per day, but he notably doesn't say how much money this amounts to. That said, Google did increase its net profit substantially in Q2. Discussion here suggests that if the Android growth is doing anything, it's flooding the ad market with inventory and driving down prices.
Facebook, meanwhile, claimed that 41% of its ad revenue is now mobile - but as the Google example shows, that might not be a good thing. Either way, they're profitable to the tune of $333 million in Q2, nothing like Google but a big improvement on the negative $157 million in Q2 2012.
Google has plenty of tricks up its sleeve, though. Perhaps too many. GMail recently got a new feature, in which e-mail is displayed in a tabbed interface, automatically classified into things like "priority", "promotional", "social", etc. Sounds handy! Here's the catch: users have noticed that they're getting new and unfamiliar adverts delivered into the "promotional" tab. But surely the advertisers will notice that their ads are basically going into a spam filter? Also, for $35 you can get a dongle that streams HDMI video from your Android to the telly.
Here's a telling detailed post on the troubles of Facebook's developer platform over the years.
Canonical reckons that the Ubuntu phones are six weeks from launch, with four devices being available. MTN is the latest carrier to sign up for the talking shop, although we'll see how many actually buy some gadgets.
They also launched a crowdfunding drive to build a super-high end developer phone. The big idea here is the one they pioneered with the Ubuntu Android app - you plug the phone into a monitor and it provides a full desktop, you unplug it and it behaves like a smartphone, and in general you carry your computing environment around with you. It might resonate in a post-Snowden world. Some more discussion is here.
There's an interview with Mark Shuttleworth here.
Microsoft passes "10 Google Units"; Amazon loses money
In Q2, Google and Microsoft spent $3.4bn on infrastructure between them. Among other things, it looks like Microsoft is now running a million servers in the cloud - if you take the size of Google at the time of The Data Centre as a Computer as the basic unit of cloud computing, one Google unit is 100,000 servers, so that's 10 Google units.
Meanwhile, Facebook disclosed that its energy usage is up by a third in the last year. As a result, they're trying to transfer more servers out of Silicon Valley into their new data centres which have cheaper power and better efficiency. And as a result of that, they're renting out rack space in the Valley. Even if the Virginian data centres are more efficient, though, they're on an electricity grid that mostly burns coal whereas Santa Clara County's power is only 9% coal.
Equinix, for its part, is seeing a slowdown in sales as enterprises try to get their heads around this "hybrid cloud" lark.
Amazon's Q2s are in, and the company's notoriously tight margins are tighter than ever. In fact, they're negative - the company lost $7m on a turnover of $15.7bn. ReadWriteWeb argues that this is OK, and if all else fails they could just sell the data. That said, McKinsey turns the volume down a bit, arguing that although "big data" is one of its five economic "game changers", it's nowhere near as important as roads, energy, or education.
AWS deployed CloudFront and Route 53 to India this week.
T-Mobile deployed Comarch's "Cloud Marketplace" product in Poland. And Axiata's Sri Lankan operation has snagged a $150m contract to provide the government's cloud services.
Shakeup at Voxeo; BT squeezes freephone
BT reports that its preferred revenue measure was off only 1% in the quarter. No wonder. Its interconnect rates on FreePhone numbers are about to double, but subscribers won't complain, because FreePhone will now be free from mobiles. So MNOs and alternative voice providers get to give BT a bag of money.
OnSIP does a detailed review of Skype Connect's interoperability and considers it "more like a legacy product".
And Viber's support site gets hacked by the "Syrian Electronic Army".
Chinese Internet filter: OK. Chinese PC: Not OK.
In security news, the British prime minister is very keen on TalkTalk's parental filtering, a service bought in from Huawei. His security advisors have banned all Lenovo products from their classified-level networks.
Karsten Nohl is always at it with the GSM exploits, and he's going to present an attack on Java Card SIMs at Blackhat this week.
BlackBerry devices route your e-mail through the BlackBerry network even if you don't use BlackBerry e-mail. This was originally a major selling point for BlackBerry - their network provides various compression and acceleration features and helped make web browsing work on random GPRS networks.
Brewster Kahle talks about what happens when you get a National Security Letter.
And finally, nobody's going to try all the 10,000 four-digit PINs one after the other to unlock your stolen phone. But they might build a robot.