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Golden Age of Telecoms Nearly Over For All But A Few Remaining Markets

For the past 20 years the telecoms industry has seen its “golden age”, even growing fast enough to catapult its most powerful figure, Carlos Slim, to the head of the Forbes Rich List. This growth is now beginning to slow and industry analysts Ovum predict that by 2018 the market will see its first decline. Until then, new phone connections will continue to grow by approximately 4% per annum, rising from 6.5 billion to 8.1 billion – more than today’s worldwide total population. Revenues won’t rise nearly as much as this, likely due to the lower incomes of the few remaining markets that telecoms companies will target in the meantime.

Myanmar has previously been highlighted as one of those markets and this week it emerged that the Myanmarese government would be inviting both Orange and Vodafone to pitch to them with the idea of a leading telecoms company partnering with their state run mobile phone operator, MPT. The idea behind inviting these particular network operators to the party is based on Orange coming second in the previous round of bidding for spectrum space in Myanmar and Vodafone now being on everyone’s lips after signing the 3rd largest deal ($130b) in telecoms history.

Both companies offer exciting opportunities to quickly capitalise on the fact Myanmar only have a current mobile phone subscription rate of 9%. To put that into perspective, neighbouring Thailand has a subscription rate of 110%.

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Alcatel-Lucent Employees Protest Companies Plans To Cut 10,000 Jobs

Alcatel-Lucent have been a company in decline since 2006 according to Michel Combes, CEO of the ailing business. That was the last time the company made any money, prompting the company to announce that they will be cutting 10,000 jobs in an effort to reduce costs by €1 billion. This has sparked protests by company employees who are now facing a similar fate to those that BlackBerry employees faced during September 2013, just 1 month previous.

The protests caused a stir in the French capital on Tuesday October 22nd as 1,000 of the companies employees wore black bin bags with crosses on during their march to the Eiffel Tower and then on to the Alcatel-Lucent headquarters.

The company itself is the second in as many months to post troubling losses, as another pioneer on the mobile phone industry, BlackBerry, announced a fire sale in an effort to remain in existence. Both have been reported to have made catastrophic decisions over the past few years, deciding against including technologies that most consumers in 2013 see as a necessity. This has caused profits to dry up and all but disappear. The ultimate fate of the business could mean Michel Combes fears come true and Alcatel-Lucent disappear altogether. A sad ending to a story of once such a pioneering company in an industry many of us grew up with.

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Vodafone and Verizon involved in third biggest corporate deal ever – $130b

It’s been a long running feud in the telecoms world, with Vodafone being 45% major shareholders in Verizon. The heads in charge had calmed the storm that was brewing some time ago, based around an unknown answer to a very important question regarding total control. The answer has now been given and it comes in the form of Verizon paying a total package of cash and stocks to Vodafone. Making the grand value of the deal $130b – approximately £80b.

The deal is widely acknowledged to be best for both companies. Verizon can focus solely on 100% of the business without the need to discuss and agree with Vodafone. And Vodafone receive the third biggest package in corporate history, allowing them to reinvest in their European market and specifically their fast data driven services. However, there is also the fact that Vodafone shareholders are still attempting to sue the company but seeing as the company has given £61b to them since 2005, making them the most generous dividend paying company in the entire FTSE 100, you wonder what grounds they have.

This deal, amongst others this year which we’ve spoken about previously, sees the first 10 months of 2013 become the highest in terms of merger values in 6 years – raising the question, will it be the highest ever with just under 3 months left? Investment bankers are certainly hoping so.

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BlackBerry to be sold for $4.7b

The mobile phone manufacturer owned by parent company RIM is to be sold after announcing that they expect to make a loss of just under $1b for the 2nd quarter of 2013 and will be restructuring the business, starting with an exodus of up to 40% of it’s current workforce.

The company swooping in on the ailing Canadian manufacturer is Fairfax Financial. It’s believed that a deal worth $4.7b has already been agreed with Fairfax CEO Prem Watsa already having made this statement:

“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.”

Little is known regarding how Fairfax plan to rescue the company but early indications point towards a return to the business market where BlackBerry originally made their name. Another of their strengths is the BlackBerry Messenger platform, which has kept loyal customers returning to the device for years. However, there isn’t anything to suggest that the company can continue to even produce handsets, as the decline in sales number means the company will no longer be able to profitable sell handsets. Ben Wood, a researcher for CCS Insight acknowledges this “It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made”. Just what these tough decisions will be, we’ll have to wait and see.

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New Telecoms.com Industry Awards

Every industry has to have an “awards” of a sort and now the telecoms industry has the telecoms.com awards. There are 16 categories overall, with the winners being announced at this year’s Mobile World Congress in Barcelona.

The shortlist will be drawn up in January with contenders for each award being suggested from within the industry itself. From there, a panel of judges will decide upon each of the winners for categories including Mobile Pricing Innovation, Connecting the Unconnected and Best Operator.

The awards are of course worldwide, and there are a few networks and people we’ve spoken about throughout the year that we’d certainly like to see put up for contention. In particular, we recently spoke about a Mexican village that launched their own network in order to become connected with the world – there’s a contender right there for Connecting the Unconnected, even if it was themselves. We’d also like to see Neelie Kroes nominated for Person of the Year for fighting against the roaming charges within Europe, almost single handedly.

Hopefully the awards aren’t restricted to the work of only the largest telecoms companies in the world, with the smaller companies/groups being put on an equal playing field.

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Mexican Village Launch Telecoms Service

After being forgotten by the biggest telecom companies in the world, including those owned by one of the world’s wealthiest men and Mexican born Carlos Slim, Villa Talea De Castro have launched their own service to reach the outside world.

The village is in the southern state of Oaxaca and is considered an indigenous village with a population of just over 2,500 people. Classed as not profitable enough by the networks, this mountain village had seeked the help of Rhizomatica, civil organisations and universities, who have helped them erect a rooftop antenna, install radio and create the micro telecom service called Red Celular De Talea (RCT).

The micro service has a basic monthly charge of 15 pesos (£0.73p), which is 13 times cheaper than the residents of the countries largest city, Mexico City, pay. They’ve even made it possible to make international calls only a few pennies per minute, allowing residents to call the United States for very little, where a majority of migrants travel to for work and to live.

Rhizomatica who were integral to the creation of the network hope that such a project will break down the barriers preventing other community based projects from working in a similar way. President Enrique Pena Nieto approved the project, with the non-for-profit company hoping it will be the first of many more. A spokesman said “Many indigenous communities have shown interest in participating in this project and we hope that many more can join this scheme”.

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Ethio Telecom expanding with $800m ZTE deal

Mobile subscription rates have been growing for over a decade worldwide. There are now huge opportunities in developing countries like Ethiopia where mobile phones are now becoming more affordable than ever before. This has become the driving force between Ethiopia’s largest network and the Chinese phone manufacturing company ZTE signing an $800m deal.

The deal will see Ethio Telecom expand their current subscriptions rates to a projected 50 million, aiming to also include 4G services in certain areas, with 3G being available nationwide. This will see them double their current subscribers and vastly improve the access to mobile internet in the country, where only 1% can currently do so.

The head of Ethio Telecom Andualem Admassie said “The expansion is vital to attain Ethio Telecom’s objective of increasing telecom service access and coverage across the nation, as well as to upgrade existing network to new technology”.

The $800m deal is only half of the current project in the country. Half is made up in partnership with ZTE and the other half in competing Chinese company Huawei.

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BlackBerry eyeing potential sale

bbm logoThe mobile phone brand could be sold off as the Canadian company struggle to keep it afloat. With share prices dropping from $14.48 to $10.29 in just 24 hours recently, directors are beginning to view their options as to what can be done with the once popular business.

BlackBerry were amongst the most purchased smartphones just 3 years ago, with their operating system being on more phones than Apple and double the numbers of now market leader Android. Some blame the company’s lack of ability to innovate, instead resting on the success of BBM and their monopoly on the messaging market. However the emergence of apps such as WhatsApp has transferred that power to iPhones and those featuring Android.

BlackBerry have since attempted to regain market share with the release of the BB10 operating system alongside the Z10 and Q10. These have failed to capture the imaginations of the mass market, causing the manufacturer to tumble out of the most popular handset manufacturers as recognised by Gartner for the first time since 2008.

The people tasked with deciding the future of BlackBerry have been put in place since the company employed investment firm JP Morgan to advise them. Former employee of JP Morgan’s historical competitor Goldman Sachs, Timothy Dattels, has since been place in charge, who has now spoken about the need for the company to review their options. He said “given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives”.

The alternative could be an outright sale, joint-venture or partnership aiming to steady the ship. With other mobile phone manufactures such as market leader Samsung and Apple posting a drop in sales figures recently, it may be the perfect time to do so.

Source and article by Darren Kingman

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Telecoms is centre-stage in potential EU – China trade war

Karel De GuchtJust like everything in China lately, the telecoms networks are expanding. China Mobile will be selecting winners for the their contract to create a huge next-generation wireless network soon and the EU will shortly afterwards launch an incendiary trade case against them.

The project that China Mobile are embarking on is expected to be worth half of the global investment in telecoms next year. The Commissioner of Trade in the EU, Karel De Gucht, is believed to be willing to drop the case as long as EU companies are allowed to be part of the project.

The telecoms debate has opened up and become the number 1 discussion between the territories after closing the case over Chinese made solar-panels last week. The on-going disputes for trade are now coming thick and fast, causing an air of concern that a trade war could erupt.

Mr De Gucht is keen to see the case through before his term as EU Trade Commissioner is over, and is hopeful that the agreements made last week will “set the tone” for future disputes.

At the moment there are a few European companies, such as Nokia, Ericsson and Alcatel-Lucent all keen on being involved in the China Mobile project. However concerns have been raised since De Gucht found solid-evidence that illegal subsidies had changed hands involving some of China’s largest network equipment manufacturers in the past.

The size of the tender is not only vast due to the amount of immediate capital being invested but it is also believed that companies able to tie up relationships now will also have a better chance of winning contracts when the 4G auctions roll out.

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Myanmar Telecoms Auction Winners Announced

Myanmar is one of the last remaining untapped markets for telecoms companies operating in Asia. We reported in January 2013 about the impending boom set to hit Myanmar’s telecoms industry, and this is now well and truly up and running.

Two networks were selected after the auctions to spearhead the countries drive in becoming modernised and able to operate as part of the global economy. Those networks were Qatari state-owned Ooredoo and Norwegian based Telenor. These companies were handed the licensing laws to the countries telecoms spectrum, allowing them to expand both 3G and 4G services.

Currently, the number of mobile subscription is just 9% of the overall population. In comparison, neighbouring Thailand has a mobile subscription of 110%. With between 55 – 60 million people currently living in Myanmar, the potential for growth is huge. As part of the agreement for Ooredoo and Telenor to operate their services, they have agreed to raise subscription levels to 85% within 5 years.

It was always going to be hard to put a figure on the value of the Myanmar telecoms market, but it already appears that Ooredoo seem confident that they will more than recoup their expected $15 billion investment, as they’ve planned to open 240,000 SIM card purchase points, with a massive 720,000 top-up locations. The majority of these will be already opened and running shops who will provide services on their behalf. In contrast and possibly attempting to utilise a more “online” focused service, Telenor plan just 70,000 SIM card points and 95,000 top up locations.


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