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Not doom and gloom, only gloom

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We’re back in the quarterly results cycle. Here’s a brief catch up on this week’s network-side announcements.

Ericsson had a quarterly profit of SEK 3.3 billion, net income SEK 1.2 billion, clearly down from last year — a decline it said was “driven by Networks”. Overall revenue growth was 1% year-over-year, down 6% year-over-year for comparable units, that's basically the same as Ericsson had in the first quarter. Both Global Services and Support Solutions had strong quarters and are now contributing to around 50% of the turnover in the quarter of Ericsson. In Networks there was the expected impact of declining CDMA sales and weaker sales in the quarter in China and Russia – leading to networks being down 20% year over year. Ericsson’s operating margin for Networks ended at 5%. It was 14% in Q2 2011.

So what does Ericsson see as improving, given its CEO said that “100% of its revenue base” – ie the customers –  see no change in conditions. Networks head Johan Wibergh said that the focus operators have on improving network performance “really encouraged” it to believe that its margin position can be turned around. “We have established ourself with a really strong platform product, and that is performing extremely well on quality and performance.” said Wibergh.

Ericsson also sees VoLTE as providing a possible cause for optimism.

“We also then see next step when it comes to the voice business. Those operators investing in LTE, they are now starting to prepare for launches on moving voice over to LTE. And there, we are working really hard to capitalise on both on our strong position in LTE, as well as in stock, to each quarter,” Wibergh added.

Over in Paris, Alcatel-Lucent hasn’t reported its Q2 results yet but has warned that it has been doing its homework and things aren't looking so good. It thinks its 2012 results will fall short of its expectations, with the company reckoning it will report an operating loss of €40 million with revenue above €3.5 billion. Analysts were expecting Alcatel-Lucent to deliver an operating loss of €38 million on revenue of €3.83 million.

Of more concern than a further loss of €2 million over the year was the vendor’s thoughts on its revenue mix, with the company warning that margins are as hard to find as an empty seat on London tube train during the Olympics. Well actually it said it had experienced “a lower than expected business mix improvement”. That's not a positive sign for a business that has already cut about as far as it can, and has already outlined a major programme of ongoing cost and operating efficiencies. Al-Lu’s CFO, Paul Tufano, a man who always looks on earnings calls as if he’d gladly knife the next person to query his free cash flow projections, will be glowering like an evening sky over the Olympic stadium on the next call.

So can the buy side of the value chain offer any more cheer, seeing as how operators are clearly sweating the vendors for every inch of margin they can? Vodafone reported its 1Q 2013, and said Group service revenue grew 0.6%. This growth is slightly less than the previous quarter due, Vodafone said, to the boost in the prior quarter from the extra day in this leap year, as well as “continuing difficult conditions in a number of our European markets” (in particular Italy) offset by strong momentum from its AMAP region. Data grew by 17% driven by the increase in smartphone penetration, which is now nearly 29% in Europe.

Of interest for those watching vendor margins was the nugget from Vodafone that it now has a single RAN across 38% coverage in Europe. The carrier said this makes future network upgrades very cost effective as well as reducing the network operating costs that it incurs. And for fans of backhaul investment, we have another titbit, Vodafone said that it has increased the penetration of high-capacity backhaul, with 46% of sites in Europe now connected to high-quality backhaul.

In Germany, where the operator now has 193,000 LTE customers (20,000 of them mobile) service revenues grew 4%. U.K. growth declined for the quarter by 0.8%. The Netherlands was down too, but not as much as Italy, where mobile-only service revenue declined 8.3%. In Spain, service revenue was down 10%.

All this was against a backdrop of rising data usage and user demand for data. Across the European region, growth in data revenues was at 18%, fuelled by rising smartphone penetration, now at 29%. It's becoming clear that increasing data usage alone will not drive operators out of the overall revenue decline – witness our story from Infonetics, or this bleak assessment from Telco2.0.

Gloom, then, for most, if not outright doom.

Those watching user demand closely for signs of a major shift in usage grabbed hold of a report from UK regulator Ofcom this week, stating that consumers are still texting away like mad. There's some analysis on these Ofcom stats still to come from us here at Mobile Europe, but in the meantime it's worth keeping your eye on Ofcom next week, when the regulator will deliver its "final" LTE auction guidelines. As it set itself a July deadline, Ofcom is going to have to publish next week or miss the deadline. And as we all know, Ofcom doesn't miss deadlines.

Keith Dyer
Editor
Mobile Europe

 

What Apple ditching Google maps tells us about mobile location

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Apple's decision to ditch Google as mapping provider sends a signal that many have missed, says Rob Palfreyman, CEO of wireless location and mapping company sensewhere.

Rob Palfreyman, who wrote the guest post that follows this intro, argues that Apple's intentions are clearly to head indoors, and to integrate location information much more closely with its services.

Of course, Palfreyman is CEO of a wireless location and mapping company, spun out of academia, that has developed a new method of automatically mapping indoor locations — so it may be that he's hoping that the move to providing very accurate and granular indoor location is afoot. Indeed, there's one paragraph in this article (italicised) that specifically makes a case for sensewhere's technology.

Wish fulfilment aside, though, is Palfreyman right in his conclusions: that location is heading indoors, that it is going to be much more tightly integrated to services, and that the big players (Google included) are still only starting out on the location services journey?

Apple maps: Where is Apple going?

Rob Palfreyman, CEO, of indoor location company sensewhere

In early June Apple announced that it was dropping Google as the default provider of mapping services in iOS.

As is so often the case, Apple’s announcement immediately whipped large swathes of the technology community into a lather of excitement. What did the new system do? Is it better than Google Maps? Would it demonstrate the famous Apple ‘cool’ factor? When can we get it?

Perhaps, however, the questions we should really be asking are; why did Apple make this move in the first place, and what do the new features suggest about where Apple thinks the future of location lies?

Preparing for the inevitable future of seamless, universal positioning
I suspect that Apple’s desire to control its own maps is, at least in part, an extension of its central philosophy; that in order to provide a great user experience you need to control as many levels of the phone ecosphere as possible, from the hardware to the software and internet services.

We’re already seeing tighter integration with the OS, twitter, imaging, Siri, the provision of local information through Yelp, etc. And Google is playing much the same game, to a different degree, with Places, Local, etc.

Ultimately, Apple’s interest in mapping, and desire to disengage from Google, reveals something deep-seated about the future of location; that the significance of accurate positioning on phones is extending far beyond the ‘traditional’ uses; maps, navigation and ‘where am I now’: Instead, location information is becoming tied into and used by systems and apps at a much more fundamental level.

In terms of positioning techniques, hardware and location databases, the general trend in phones has been towards a more ‘holistic’ approach using an increasingly wide variety of sensor-information and databases. These range from from GPS to MEMs, magnetometers and, in our case, dynamic, crowdsourced databases of RF beacons using the phone’s standard radio technology.

As companies such as Apple make increasing use of these varied positioning techniques, and place more emphasis on the provision of location information both indoors and out, the whole location experience will become more seamless. When this happens, consumers are likely to see location as an ‘everywhere, all of the time’ service that they simple expect to work all of the time. Apps will take advantage of this new information to integrate location functionality in ways we are unlikely to have fully anticipated yet. Use of positioning information will simultaneously become more prevalent and less obvious.

It seems entirely likely that Apple is preparing itself for exactly this; a future where location is universal and somewhat commodotised. And anticipating this, why would Apple have continued to share its valuable location information with Google? Not only would increasingly deep integration of location in phones have made Apple severely vulnerable to a late-stage separation from Google’s service, but they would potentially be handing more and more valuable location data to a direct competitor in the handset business.

A closer look at some of the new features
Apple’s choice to use vector maps in its new product is really interesting. This may well lead to faster loading times, better scalability, and less reliance on data connectivity. Many of the major phone manufacturers and mapping app providers seem to be on a road to providing offline maps, and vector mapping, with its lower storage requirements, should fit in well with that roadmap. Such stored, offline vector maps could be particularly useful in areas where data signals drop out, such as the ‘urban canyon’, or, in particular, inside the walls or metal-doped glass of buildings.

Another much-touted feature; Apple’s move towards turn-by turn navigation, could, of course, be anticipated a long way off. Android and Windows phone have had this feature for a long time. But while smartphones are making a small yet significant dent into the market share of in-car satnavs, it seems likely that this technology will also be highly applicable to the world of pedestrian navigation.

The absence of a ‘Streetview-like’ function in Apple’s new system has also been widely commented on. Instead we have Apple’s 3D mapping feature, for which Apple as leveraged their purchase of C3 technologies, which uses processes overlapping fly-by images taken at different angles to render buildings and landscapes in 3D. It’s also particularly interesting to note that Apple has also absorbed Poly9’s real-time altitude information and metropolitan maps. You could speculate that these would be useful technologies to absorb if, for example, you wanted to be able to place people on the correct floor of a building, as visualized from the outside.

The future is indoors
This neatly leads us on to what I theorise may be the next big differentiator to emerge in the Apple Maps experience; indoor location: Both Apple and Google are making effort to add extra useful information such as transit systems and detailed traffic information to its outdoor maps, as well as some visual ‘cool’ factor. However, in terms of what people actually want from positioning, I strongly believe indoor location is the next untapped frontier.

The opportunities to monetize indoor location, in advertising, coupons, app functionality, etc., are vast: Device manufacturers want to produce the best and most capable device, Google wants to know more about its customers to improve search, and app developers want the best functionality in order to sell the most apps.

However, indoor location is not easy. It’s simple to see how Apple could obtain decent indoor maps, (through conventional crowdsourcing or the purchase of third-party maps, perhaps somehow also working-in its C3 3D technology to inform the shape of the boundaries of buildings). However, what really counts is how phones actually locate themselves in space in the absence of GPS satellites, and how accurately this is achieved.

Fundamentally there is only one economical approach to maintaining consistently accurate, self-correcting indoor positioning; and this is the automatic crowdsourcing and cross-referencing of RF beacons that we employ. By using its users’ devices to automatically fingerprint and position individual RF beacons as they pass through them, Apple could build up a dynamic location database that would be self-correcting should the RF reference points be moved around. Apple could foster a system that essentially builds and maintains itself.

Whether Apple buys its indoor maps, or has people manually submit them remains an interesting question, but I have no doubt that automatic crowdsourcing is the way to go in terms of providing the reference database by which individuals are positioned on these maps.

Does Apple really want it?
It’s easy to wonder whether Apple has enough of an incentive to produce blisteringly good mapping software. After all, now that it has ‘ousted’ Google maps, any deficiency in mapping detail can probably be countermanded through seamless OS integration and the overall product experience of using the phone. That said, there’s considerable money to be made directly through location services and apps taking advantage of best-in-class indoor location functionality.

Apple also shouldn’t forget that Google Maps will eventually return in app form, providing ample competition to Apple’s attempt to guard the gates to location data. It will be interesting to see whether people fall back on what will, initially, be a product with a considerable head start in terms of its gathering of fine-grained mapping detail.

I firmly believe the competition between Apple and Google is a good thing, and will only result in better features for the consumer. And while Google may have a head start, Apple has a habit of surprising people by overtaking incumbent market leaders.

Some people have pointed towards an ‘explosion’ of location-related activity in the last few weeks. Truth be told, I think the major players are just getting started.

 

How O2’s outage affected its brand: YouGov survey

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57% of O2 customers affected believe there was a lack of communication during the outage; BrandIndex registers sharp fall in brand health

YouGov has conducted a survey amongst O2 customers in order to understand how last week's network outage affected customers; how the event may have changed customer opinion of the brand; and how future consideration rates were affected– those customers expecting to stay with O2. In addition, YouGov looked at the mobile phone provider on its social media analysis tool – SoMA, as well as BrandIndex – a daily brand tracker, to determine how the media surrounding the incident may have affected brand health.

The survey, conducted amongst over 500 O2 customers, reveals that despite the incident, customers remain positive about the operator: 71% believe O2 is a good network despite the outage, and 65% believe all mobile phone networks suffer from outages and O2’s problems are no different. However, the mobile phone provider hasn’t got off lightly: just 20% of O2 customers affected believe the mobile phone provider handled the situation well, while 57% believe that there was a lack of communication during the outage. Despite this, loyalty amongst O2 customers remains high – customers are forgiving and understanding towards the fact that problems do occur, though research shows that O2’s communications during the incident let the brand down.

Analysing O2’s social media presence during the incident, SoMA – which measures what people are hearing using access to YouGov panellist social media feeds – reveals that 17% of UK Twitter users heard something about O2 on the day of the outage (Wednesday 11th). To put this into context — on the day LinkedIn announced that security systems had been breached — over a third of UK Twitter users (38%) had heard something about LinkedIn.

On the following day for O2 (Thursday 12th), 15.5% had heard something about the outage – even though the volume of mentions had risen by 25%; an indication that media channels, with a significant amount of followers, stopped tweeting about the incident, whilst those affected continued to discuss it on Twitter. Interestingly, the majority (76%) of those who heard about the incident on the day of the outage were between the ages of 18-44, while just 23% were aged 45+. This suggests that younger audiences were quicker to hear the news as it unfolded than those aged 45+.

So, did social media activity surrounding O2 and the outage damage brand perception of the mobile phone provider? BrandIndex – YouGov’s daily brand tracker – saw O2’s Index score (a composite measure of general impression, customer satisfaction, corporate reputation, quality and value) take a sharp fall, (dropping by 21 points) post-incident. O2’s Index score currently stands at its lowest level in three years. In comparison, when the BlackBerry outage occurred in October 2011, its Index score declined dramatically – dropping 27 points in a week. BlackBerry’s scores are yet to return to pre-outage levels.

Russell Feldman, Associate Director in YouGov’s Technology and Telecom’s team, says: “To O2’s credit – the problem was fixed in less than 24 hours. And whilst some O2 customers weren’t too happy with the decline in service, most understood that problems like this do happen from time to time.”

Feldman continues: “The challenge for all customer-centric organisations is to be transparent and keep communications open – customers appreciate honesty. One only has to look at BlackBerry and how they communicated during its own outage last October to learn valuable lessons.”

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European mobile service revenues to decline to 2016

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European mobile service revenues are expected to undergo a "slight" decline to 2016, as a result of economic turmoil and intensive competition, according to research firm Infonetics.

Infonetics said overall global operator revenues will increase by 6% increase overall to 2016, with the highest growth coming from Asia Pacific and Latin America. That will mean gobal operator revenues from mobile broadband data, voice, and messaging services will reach $976 billion by 2016.

In terms of service sector growth, mobile broadband connections will rise from 15% to nearly 40% of all mobile subscribers between 2011 and 2016. Voice revenue declined in 2011, Infonetics said, dipping 0.8% in 2011, as mobile data revenues grew in every region.

"The mobile world is undeniably shifting from voice to data, as mobile operators migrate as many subscribers as they can to data service plans and smartphones. Already in North America and Asia Pacific, mobile operators derive over 40% of their mobile revenue from mobile broadband and messaging. But, while mobile broadband is no doubt the fastest growing revenue stream for operators, mobile messaging and voice aren't dead just yet, not by a long shot," notes Stéphane Téral, Infonetics Research's principal analyst for mobile infrastructure and carrier economics.

Téral adds: "The prophecies of doom for mobile operators' SMS/MMS cash cow are being overplayed. Despite the popularity of over-the-top messaging applications like Apple's iMessage and WhatsApp, our data shows SMS growing every year from 2012 to 2016, delivering a cumulative $1 trillion in operator revenue during those 5 years. And over that same period, voice revenue will decline only slightly, still making up a sizable chunk of operator revenues."

Infonetics released its findings in its biannual 2G, 3G, 4G (LTE) Services and Subscribers: Voice, SMS/MMS, and Broadband report.

RIM ordered to pay mFormation $147 million for device management patent infringement

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Mformation has been awarded $147.2 million damages by a jury that found Research in Motion guilty of infringing on a patent relating to mobile device management.

The software found to infringe Mformation's patent is used on RIM's BlackBerry Enterprise Server (BES). The court awarded Mformation $147.2 million dollars in damages based on past sales of BES-connected BlackBerry smartphones in the US from late 2008, when the lawsuit was filed, up to the trial date.

A RIM statement said that it considers Mformation's patent not be valid, and said it was "disappointed by the outcome and is evaluating all legal options". RIM added that the trial judge has yet to decide certain legal issues that might impact the verdict, so the Canadian device manufacturer will await those rulings before deciding whether to pursue an appeal.

“Mformation created the mobile device management category in the late 1990s and was innovating in this area well before most of the market understood the fundamental importance of wireless mobility management. Our patents are a core part of our innovative products, and are fundamental to the methods used for device management in the market today,” said patent inventor and Mformation founder/CTO Rakesh Kushwaha

Wireless patent specialist and blogger Florian Meuller has criticised the award, saying that similar judgements would make smartphones unnaffordable. Meuller's view is that the figure of $8 royalty per device is over-inflated and he has called for the judgement to be over-turned: " this verdict must be overturned at the earliest opportunity".

Turkey exempts M2M SIMs from connection tax

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Turkcell ups M2M forecast

The Turkish government has enacted law to exempt M2M SIMs from a tax levied on any new SIM subscription.

Currently, Turkish mobile customers pay TRY37 (€16.7) as a fixed tax on a new SIM connection, but businesses and service providers installing M2M SIMs will now be exempted from the levy.

Turkcell, which recently announced the launch of an M2M platform, said that the change would speed up M2M market growth.

Chief Corporate Business Officer Selen Kocabas said, There are potentially around 150 million remote devices in the Turkish market, and this latest legal amendment marks a crucial step. The lightening of customers’ taxation burden will ensure increased revenues for the Treasury."

Turkcell operator likes to present M2M in terms of "savings" to the Turkish economy – through measures such as reducing electricity and energy revenue leakage, smart building and industry solutions and telematics. It claims that its M2M solutions "contributed" TRY318 million (€143.4 million) to the Turkish economy through savings in 2011. Originally the operator planned to double that amount in 2012, but it now says that due to the tax change it expects to treble that number, "saving" the Turkish economy TRY1 billion ( €450 million) over the course of 2012. 

Kocabas said the operator now expected to have 1.2 million M2M SIMs deployed this year: the operator said in March 2012 that it had 750,000 M2M SIMs under management.

The ins and outs of an outage

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So the word outage was on everyone’s lips this week, not least at Mobile Europe where a malware exploit of our webhost’s platform disabled our site for most of the week.

That experience, where we were essentially in the hands of a third party provider gave me new insight into the key concerns people have around outsourcing and managed services. A clear line of communication to our provider was vital in finding out what was going on. Even so, it was a frustrating three or four days.

But this was one small B2B media website going down. How much worse for O2 and Orange France, both of which saw potential brand and revenue losses due to major service outages. National media piled on. In France, Sarkozy’s buddy and Orange CEO Stephane Richard was called to a newly Socialist-packed National Assembly to give evidence as to what caused the outage. In the UK, O2’s initial slow reaction attracted criticism, although by the end of the second day its Twitter team were being praised in some quarters for their breezy handling of some unpleasant suggestions as to what O2 could do to itself. (Look them up, they’re too rude for a family newsletter like this) Once the good ship O2 was out of stormy waters CEO Ronan Dunne even took time out from his usual Twitter MO of updating us on his sporting engagements to retweet a satisfied customer, and apologise for the loss of service. It seems unlikely Dunne will be following Richard in popping up before a Parliamentary committee, but I wouldn’t yet rule it out.

So how much will the outages cost the operators? At the time of writing, O2 is still to react with a customer offer of any kind and it will take more than a few deftly handled tweets to satisfy those customers looking for recompense for a loss of service. France Telecom, by the way, said it will give all mobile customers a free day of calling in September to compensate them for the service disruption. Richard said that the incident is likely to cost the company "several dozen million euros”.

Naturally, in the industry, speculation centred on what had gone wrong. In France, the operator said that its Next Generation HLR (subscriber database) from Alcatel-Lucent had malfunctioned. There were data inconsistencies between the different elements of the HLR, Orange explained, leading to a storm of messages flying back and forth as the system tried to resolve the issue, eventually overcoming the HLR. Users were OK as long as they stayed in a cell, but as soon as their details were updated on the HLR, they too would be deregistered in the network. The software had been updated just before the outage.

In the UK, industry sources told Mobile Europe that O2 too looked to have been the victim of an HLR outage, as the issue didn’t seem to be anything to do with the access network, but rather the inability of some handsets (O2 said about a third of its user base) to register at all with the network. That looked to indicate a similar suspect for the outage. The Register’s Bill Ray went further, and said sources indicated that an Ericsson-supplied database had gone down during a data transition, taking with it affected subscribers’ ability to connect.

Whatever the cause of the outage, what we can learn immediately? First, the core is as important as access. An HLR may sound like some esoteric telco TLA, but a bungled update has cost France’s flagship operator millions. At a time when there is concern about operators de-skilling (Telefonica is outsourcing its core network operations to Huawei, don’t forget) this is a useful reminder that core competencies extend also to the, er, core.

Two, communicate. Yes, O2’s social media team did a decent job, but its CEO’s absence was noted (yes, what can he do, not much, but if you have a Twitter presence, then use it – even if it is just to point people towards a customer service feed), and intitial information was scarce. No doubt that was because the operator didn't have any and didn't wish to mislead. But when the operator did start communicating, it managed to get a grip on the situation quickly, showing the benefits of communicating.

Three, it’s not the end of the world. It’s not the event, it’s how you deal with it that counts with your users. That’s why I hope O2 is planning some comprehensive customer communications over the next day or so to apologise, yes, but also to state what it will do to make it up.

Right, onto other matters. We’ve seen the LTE licenses awarded to Russia’s big four this week. For free. The proviso is that the operators have to pay for refarming the spectrum that is currently used by the armed services. The extent of that spectrum is a state secret, though, so it’s hard for even the informed observer to judge what the capex required will be. One Russian financial analyst put had a huge spread on potential costs to the operator. Despite this somewhat opaque situation, the question UK readers will now be asking themselves is: will Russia have 4G before us? You wouldn’t bet against it.

Something else you wouldn’t bet against is more network sharing deals, as we saw Vodafone and Three Ireland confirm that they would be sharing a network infrastructure. I though this was quite interesting for the fact that it was Three and not Telefonica that Vodaone has gone teamed up with. Following the ambitious UK network sharing deal announced last month, you might have expected the two group operators to further consolidate in Ireland. But the deal is an indication that where possible, operators will look for deals that limit their infrastructure commitments. Just keep investing in the core, please.

Have a good weekend everyone, and to our French readers, have a happy Bastille Day.

Keith Dyer
Editor
Mobile Europe

Russia’s LTE market – who gets what, and pays for what

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Costs of armed service refarming holds key to Russian LTE market

Roskomnadzor (Russia’s telecommunications  regulator) has announced the results of the 4G tender held on 12 July. MTS, VimpelCom, Rostelecom and MegaFon each received 4X7.5MHz frequencies in the 700-800MHz range and 2X10MHz in the 2500-2700 MHz range. The winners got the slots for free, but agreed to pay for the refarming of  armed forces services which currently occupy the frequencies. The costs for each operator should differ slot by slot and are not known yet – making an analysis of operator investment difficult.

Under the terms and conditions of the tender, each recipient of a license is obligated to fully deploy the LTE networks within seven years, starting from 1 January 2013. Each recipient is committed to delivering LTE services in each population center with over 50,000 inhabitants in Russia by 2019. Likewise, each operator is obligated to invest at least €375 billon annually toward the LTE roll-out until the network is fully deployed.

Orkitie Capital said in a research note, sent to Mobile Europe: "The announced results are expected. The “Big Four” operators won the tender for nationwide LTE licenses. Each of the winners got a respective slot in the low range of the spectrum, which automatically means the allocation of other corresponding slots in low and high ranges."

But refarming costs could differ among the slots. Okritie said that the total refarming cost for all four winners could be in the range of RUB50-100bn (€1.25-2.5 billion) according to different estimates. The actual conversion price could differ materially by slots, depending on their load. The information as to which frequencies are used by the armed forces now is a state secret. Former Roskomnadzor Chief Oleg Ivanov previously claimed that the most busy slot is “number 1” (Rostelecom) while the most easy is “number 3” (MegaFon). If we take this assumption it seems that rollout intensity is related to the cost of the slot refarming. Refarming costs will be spread over time, and depend on the speed of the network rollout, so in case the difference between the slots is minimal we see the tender results as equal for all the winners.

Following the tender, MegaFonhas secured the best position in the Moscow market. Megafon has an LTE license for the 2570-2595 MHz range and already provides LTE services using Skartel 2500-2530 and 2600-2650 ranges as an MVNO. In addition to the auctioned frequencies, MTS has a license to run LTE on the 2575-2620 MHz range in Moscow, Rostelecom is ready for 4G rollout in Moscow in September 2012, while VimpelCom will be scrambling to start from scratch in Moscow and all the rest of the regions.

MVNO and technological neutrality – few chances left to for smaller operators.
TELE2, TTK and Summa Telecom lost the tender and the only opportunity for them to provide 4G services is to either wait for the adoption of technological neutrality, which should enable them to use the frequencies they have, or to start working as MVNO providers on the winners’ networks. According to the tender conditions each winner should provide this opportunity for five operators. The current view of Telecommunications Ministry on adoption of technological neutrality is rather cautious; therefore, Okritie thinks the probability of adoption is rather low.

The analyst said that annual capex should not increase as a result of 4G rollout. Required annual investment in 4G of RUB15bn by each operator is already included in the companies’ budgets. Most of the investments will be allocated for the development of backbone infrastructure, which should also help to develop 3G and fixed-line broadband services

Okritie said it thinks that operators will try to price 4G services at a premium to 3G. Price differentiation should be used as a tool to shift “heavy-data” users to 4G and at the same time offload 3G, which should improve customer satisfaction for both services. MegaFon plans to announce new tariffs by mid-August 2012. But Okritie does not expect 4G to be a significant ARPU and profitability increase driver, instead seeing 4G is just a tool to ensure stable revenues in the future.

At present, MegaFon offers only two devices that support 4G: a USB- modem (price RUB2,990) and the Samsung Galaxy tab 8.9 (price RUB29,900). Both devices work on 2G/3G/4G networks. MegaFon plans to introduce new modems in 3Q12 (including a wireless router that will provide 4G-speed access for all WiFi devices in range). Smartphones that will support 4G should appear on the Russian market in 4Q12.

Vodafone and Three Ireland to share network

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  • New 50/50 joint venture company established to manage shared physical infrastructure
  • Companies to pool site portfolios and ancillary infrastructure across approximately 2000 sites
  • Both companies will continue to run their own radio equipment and spectrum independently of each other


Vodafone Ireland and Three Ireland today announced a strategic partnership agreement creating a 50/50 joint venture company to share their physical network and site infrastructure at approximately 2000 locations across the country. Both companies will continue to run the ‘intelligent’ elements of the network separately, including their core network capabilities and service platforms, as well as manage their own radio equipment and spectrum independently.

The strategic partnership is the first of its kind in Ireland whereby the joint venture company will manage the roll-out of a consolidated portfolio of shared network sites and infrastructure. The joint venture will also be responsible for maintenance, on-going operational service and associated equipment. Under the agreement, duplicate sites will be decommissioned, and each company will have access to the other’s sites. 

Both companies will continue to remain independently responsible for what technology and spectrum is deployed on a site-by-site basis and what standard of service customers’ experience. Each operator retains the flexibility to invest in dedicated sites and equally to choose the pace and degree of new technology deployment according to the level of service each company plans to deliver.
 
Jeroen Hoencamp, CEO of Vodafone Ireland, said: “Securing future investment for technologies in a competitive market is critical to maintaining a sustainable business.  We believe this partnership will place both companies in a stronger position to commit to future investment in our network, and the products and services we provide to customers.
 
“This agreement, in which infrastructure is shared between both parties, means we can concentrate investment on the intelligent part of the network that will ultimately deliver a better experience for Vodafone customers. At a retail level, we will continue to compete with each other and with other operators as aggressively as before as part of our commitment to deliver great value and innovative services to consumers and businesses across the country.”
 
Robert Finnegan, CEO of Three Ireland, commented: “Around the world, operators are adopting a network sharing and consolidation strategy that delivers cost efficiencies and rapid network expansion with the roll-out of new technologies such as LTE, whilst still competing fiercely on customer service and acquisition. Today’s announcement is significant for Irish consumers – jointly we’re creating the largest physical network in Ireland with the best network quality and service. As a result of this agreement we expect to be able to deliver the latest technologies to our customers faster than ever before. This new joint venture combines the best of both networks and will be the smart choice for the savvy mobile customer.”
 
The new company is expected to be fully operational from the Autumn and will be headquartered in Dublin, with its own Management Board. Approximately 80 employees will transfer from Vodafone Ireland and Three Ireland to the new joint venture company after a consultation period. These will include employees that currently work in the Radio and Transmission teams, the Network Operations Centre, and some support roles.

Vodafone UK announced last month a network sharing deal with Telefonica, that deepened its existing passive nework sharing to active elements.

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