Q&A with Sebastiano Galantucci, COO at Dime Global

The MVNOs Series team spoke with Sebastiano Galantucci at the MVNOs World Congress 2018, where he joined us for the hot seat panel discussion ‘Exploring the multi-play world’ and ‘Dime Global as a unique B2B and B2C Telecom grade Integrated Communication Platform’. In this interview, Sebastiano shares how MVNOs can address the rise of communities, why MVNOs should be investing in communication platforms and where they fit within a MVNOs digital transformation.

How can MVNOs serve niche communities and which tools can they use?

AppVNOs address the business needs of those who, on a regular basis, need to share information, processes, work updates and to plan activities whilst in the office or on the go. When you look at applications such as Skype for business, you spot an opportunity for MVNOs to develop their own product to serve the interest of this specific community. And with the rise of the ‘Bring Your Own Device’ policies, more and more businesses will either develop their own products or choose for one of the options already available in the market.

The success of other applications such as WhatsApp, for example, show case that it’s not only a business need anymore. People need to be connected at all times. We live in a society that is always connected, always on.

Why should MVNOs be investing in these communication platforms?

Dime Global, for example, presents the MVNOs with an opportunity to partner with us, share the platform and keep the ownership of the customer. Of course, this is provided as a value-added service, with costs being met by the customer, or as we like to call them ‘the community’. It’s another great opportunity for MVNOs to keep in touch with their customers and maintain that relationship through a range of customised services.

Will customer expect to have these services in future the same way they expect to have data these days?
It’s part of a much wider digital transformation and it’s fair to say it’s the future of communication. Of course, it requires a business models which focuses on data bundles, the opportunities for value-added services and their quality. Moving forwards, MVNOs must forget about competing for costs and gigabytes – the competition is for value added services and loyalty.

As we’ve seen already happening with voice and text services, it’s also possible that we will get to a stage where the customer will have access to these services, which will vary as much as a voice and text bundles do nowadays, paying a fixed amount. The same way, it is possible that very shortly we will see the rise of unlimited data.

How can MVNOs address these changes and stay ahead of the curve?

MNOs have the infrastructure, so MVNOs need to differentiate themselves to the customers. This is a moment where they can take advantage of their size, as the majority of the MVNOs tend to be quite small specially when compared to operators which are large and sophisticated.

MVNOs are in a better position here because operators tend to be very generalist due to their nature. We have some clear success stories in here for MVNOs, such as Poste Mobile in Italy, these examples show how MVNOs are capable of differentiating themselves.

What are the initiatives MVNOs can add to the market to differentiate themselves?

They have to build the story around their applications with one example being the communication environment. Apps are now everywhere and they can be linked to basic services which add value to the MVNO. There’s music options, finance and many others that will help position them in the market. Recently there’s been a lot of conversations around data and security, that’s another element that MVNOs can look into. There’s plenty that can be done for those users who value an additional security level – encrypting calls, texts etc.
Of course, their addressable market is the country where they get the licence. To create a scalable situation, they have to integrate their market by expanding the territory and to do so they have to modify their business model in the light of introducing services at OTT level.  Their addressable market has a strong limitation geographically – weakness. Global scale services create different situations.

What will the MVNO of the future, what will MVNOs look like?

They will face pressure from the local MNO, but on this pressure only local regulation can help MVNO in that market. Many services are provided on top of the sim, customer can use the MNO/MVNO to access – very challenging. Key factor is to address specific market. Revenue – that’s a revenue a new source of revenue source for MVNOs. Entry level – subscription or top up your monthly plan. Generate interest to provide additional services. Over the Top/ OTT – access the services through data or online.

Should every single MVNOs have their applications?

It’s not about the apps themselves, but the added services. It’s about moving the focus from the standard voice and encouraging users to be loyal in all levels – SIM and OTT. Surely MNOs should be doing the same thing, and some are already doing it. In terms of revenue, you could be charging anywhere from one or two dollars, what’s that when you multiply it by millions of users? That’s the opportunity right there. Dime consists of providing a platform (more products) with the ambition to move from the traditional telco position to a digital enabler. The customer has access to new services and the MVNO has the option to offer extra digital services.

Dime is a new concept blending new services and partnering with operators and services providers. investing in value added services – that are easily provided. It’s a collaboration platform which value the community concept. For user is about connectivity, for MVNOs and operators is about added value service and sharing, managing, and having more interaction with the community too.

In the current scenario, operator is losing control of the users. They control the data, but they can’t control what the user is doing with the data. Most would rather play a more active role and to do that you must provide those services yourself. It’s a matter of position, you can only focus on infrastructure or go along the value chain and provide more services – which means more loyal customers. The focus in on loyalty which translate into recurring revenue – the best sort of revenue for operators.

What other opportunities the AppVNOs market offers to MVNOs?

With Dime World, for example, MVNOs can use data roaming as an entry level strategy. In this case, instead of only focusing on the needs of their own customers, they also consider their competitors’. With that in mind, MVNOs can look at expanding from a SIM-level-service provider to a second-level/ OTT service provider. Roaming becomes a pure market strategy, where they find another revenue stream through an OTT service.

In this scenario, the SIM provider loses a potential revenue and could look at similar services and prices to compete with the OTT, that doesn’t own the sim. It all comes down to who’s providing the best additional services. It’s an option to use OTT, it’s a way to look at the market.

If the technology is not stopping you, then there’s nowhere you can’t go. To make your product visible, all that is required is the market and commercial effort depending where you see value. Prioritise the markets you like and potential local partners. DIME has global market knowledge with particular focus also on Middle East where the current regulation is challenging the OTT in some cases, still we see a lot of opportunities in there for new service providers, including the MVNOs where they are active. The Latin American market is considerably more opened and OTT is an easy entry. MVNOs can test the technology and test the market with a considerably lower risk. They start to play in an OTT level and check whether the market provides the right condition, then they move to an infrastructure level.

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TIM issues lame ‘clarifications’ of Sunday Telegraph story

Italian telco TIM is clearly unhappy with an interview done by its boss Amos Genish and has had a pretty feeble go at damage limitation.

The offending piece was published in the UK’s Sunday Telegraph, entitled Telecom Italia chief ready to quit if activist Elliott wins power struggle. It was based around an interview with Genish and quoted him as saying “If the Vivendi slate does not get the majority of votes, because this is clearly the only slate to support our long-term industrial plan, I firmly believe my position as CEO would be untenable.”

TIM followed up with a press release entitled ‘Clarifications regarding the Sunday Telegraph article’. “TIM would like to clarify that the headline is misleading and does not reflect the exchange between Amos Genish and the paper,” it opened, before pointing out Genish is not technically CEO at the moment.

Now, unless TIM is saying the Telegraph fabricated the above quote, the headline of the story would appear to be a laudably accurate condensation of what was said. Surely, if Genish considered his position to be untenable, he would indeed quit. Multiple online dictionaries define untenable as a position that’s indefensible; how could he do anything other than quit when in such a position?

The correction of his current job title seems an especially feeble attempt at misdirection. Genish was appointed as CEO last year and has remained in that position since. The recent spat between Vivendi and Elliot, on which the Telegraph story was about and in which Genish clearly favours Vivendi, has necessitated a re-election of the TIM board and thus the CEO position, so TIM tweaked Genish’s job title four days ago. Maybe TIM’s trying to make the technical point that he may not even be re-elected by a hostile board, but that still seems a trivial technicality. If Genish isn’t CEO then who is?

“The issues set out by Amos Genish in today’s article regarding the future make-up of the board and the need for the new board to express its position regarding the Business Plan had, in fact, already been dealt with and explained in another recent interview of Amos Genish published in Il Sole 24 Ore on 19 April,” concludes the TIM announcement. So what? That doesn’t make the article any less accurate.

It’s not uncommon for PRs to attempt this kind of damage limitation. When an exec says something regrettable in a media interview there are a range of techniques in the PR playbook including: the comments were off the record; they’ve been taken out of context; the quote is incomplete; and that’s not what they meant to say. But even that weak selection doesn’t seem to have been applicable in this case, so TIM’s flacks would’ve been better advised to suffer in silence.

Jio looks strongest in India survival game

Reliance Jio has continued its march to the top of the Indian telco rankings, reporting another quarter of monstrous growth adding another 26.5 million new customers.

Total new customers across the quarter stood at 27.9 million, with a churn rate at 0.25%, with the average data consumption per user per month of 9.7 GB and average voice consumption of 716

minutes. ARPU remained under pressure, dropping 11%, but this is hardly unusual for the country. Spreadsheets are being attacked from every angle, and it seems to be a case of who can last the longest.

“A full-blown social, mobile and digital revolution is underway across the world, and I am glad that India is not being left behind in any way with the advent of Jio,” said Mukesh Ambani, MD of Reliance Industries. “Everyone at Jio is today proud to have played a pivotal role in transforming the digital landscape of this country and empowering millions of Indians with all the leading digital tools and skills. Jio is offering the ‘power of data’ to each Indian to fulfil every dream and to collectively take India to Global Digital Leadership.”

Looking at the financials, revenues stood at $3.6 billion for the quarter with net profits slightly up year-on-year to $76.6 million. Growth might not be exceptional, but in comparison to competitors Jio is having a great time. Bharti Airtel posted its lowest quarterly profit in 15 years, while Idea was another which suffered through the last twelve months.

The India telco space is chaos right now. Consolidation is everywhere, while profits are shrinking at an alarming rate. Winning the telco battle in India seems to be a case of surviving longer than competitors. Last man standing collects all the glories.

T-Mobile and Sprint are set to merge in £18.9bn deal

US telecommunications giants T-Mobile and Sprint have agreed to merge in a deal worth almost £19 billion.

The operators attempted to merge under former president Obama’s administration, but regulators blocked the deal. President Trump’s administration has taken a more relaxed approach to deals which have been criticised as being potentially anti-competitive.

Once merged, the companies will have around 130 million subscribers. Around 72.6 million will come from T-Mobile and 54.6 million from Sprint.

John Legere, CEO of T-Mobile, said:

“I’m excited to announce that T-Mobile and Sprint have reached an agreement to come together to form a new company — a larger, stronger competitor that will be a force for positive change for all US consumers and businesses.”

The merged company will continue to operate under the T-Mobile brand and will be much closer to the size of the big two, AT&T and Verizon.

This is how the U.S market will look post-merger:

  • Verizon 143.6 million

  • AT&T 136.5 million

  • T-Mobile 130 million

Marcelo Claure, CEO of Sprint, comments:

“This merger will create jobs and boost the U.S economy, as the combined company will invest approximately $40 billion (£29 billion) over the next three years.”

The negotiations leading up to today’s announcement had been going on for months between T-Mobile’s main shareholder Deutsche Telekom, and SoftBank who controls Spint. After the merger, Deutsche Telekom will hold 42 percent of the company, Sprint 27 percent, and the rest (31%) held by the public.

What are your thoughts on the T-Mobile/Sprint merger? Let us know in the comments.

FTTH on the up, but UK still lags miles behind Europe

Ofcom has released the Spring edition of its Connected Nations report, revealing there are now more UK consumers who have access to FTTH connectivity than those who struggle to get a 10 Mbps connection.

In terms of progress since the last report, which was released in December 2017, the number of homes which have access to superfast broadband, 30Mbps or higher, now stands at 93% of homes, up from 91%. While this statistic is moderate for today’s digital economy, what is less encouraging are the number of homes who have access to full-fibre connectivity. This number is now 4%, or 1.2 million homes, which pales in comparison to the continent.

“There have been further improvements in the availability of broadband services across the UK,” the Ofcom report reads. “However, more needs to be done to provide all consumers with access to decent broadband and to encourage further investment in more reliable, faster full-fibre broadband services.”

Looking across the English Channel to the continent, Spain has passed 17.5 million homes with full-fibre connections, with roughly 33.9% of the population subscribing to the services. Spain has the highest penetration across Europe, but it isn’t the only Spanish we’re lagging behind. According to the Fibre to the Home Council Europe, the majority of the continent are ahead. Latvia apparently has more than 50% of the homes passed with fibre at the top of the list, while Lithuania and Sweden exceed 40%. Only Poland, Czech Republic, Italy, Germany Croatia, Ireland, Serbia and Austria are worse than us.

Looking at 4G services across the UK, 57% of geographic area is covered by all operators, up from 43%, while 13% is not covered at all. This is down from 22%, but is still quite a large number for a nation which is not necessarily the largest around. Indoor coverage is a bit better for 4G at 68%, but these numbers are still not incredibly encouraging.

For a country which constantly preaches about its supremacy on the global economics stage, harbouring ambitions of leading the next era of the digital economy through dominating the AI field, the foundations are severely lacking. We certainly hope this report has found its way onto desks at the Department of Digital, Culture, Media and Sport, as a reality check is probably needed.

How augmented reality is coming to fruition in the automotive industry

Many CIOs and CTOs are pursuing a competitive advantage that's enabled by emerging technologies. As an example, early-adopters in the automobile industry are exploring use cases with augmented reality (AR), because it offers benefits to the whole value chain -- from product design through production and sales.

As a result, smart glasses shipment for global automotive industry use will reach 1.7 million units in 2022. The total automotive AR market is expected to grow at CAGR of 177 percent during the forecast period and reach $5.5 billion in 2022, according to the latest worldwide market study by ABI Research.

Augmented reality apps market development

"Augmented reality benefits automotive manufacturers at many stages of a product cycle, including design, prototyping, manufacturing, and marketing," said Marina Lu, senior analyst at ABI Research.

In design, digital 3D visualization and analysis of body structure and components can save time and resources. Collaboration is streamlined and improved, evaluating the same content in real time, which ultimately speeds up decision-making.

AR technology supplements traditional tools, such as clay modeling, with virtual components on top of an existing physical object, to show design variants or to support design reviews, again shortening cycles and saving on design and prototyping costs.

High-end, head-worn AR devices are on a path to being applied for more complicated use cases in the automotive industry. Moreover, AR has already begun to transform the marketing and sales process for the automotive industry. Customers can interact with the customized digital vehicles in high detail before making a purchase decision.

Using Apple’s ARKit, Audi has released an AR app which enables users to place photorealistic 3D models of Audi vehicles on a surface wherever you are located and resize it as you find fit. Hyundai, Jeep, and Volvo have also begun to leverage AR for virtual test drives and digital showroom experiences, saving time, real estate, and cost.

According to the ABI assessment, while it is still early for automotive AR use, the applications at play have already shown a proven return on investment. The anticipated ROI is always the first question to answer for any new technology, and this is especially true for AR.

Outlook for AR application deployment

Collaboration, step by step instruction, remote expertise, 3D spatial visualization, and more have all been tried across industries, with positive and predictable results. The importance of design and prototyping combined with the slim margins of the automotive industry make it a prime candidate for wide AR adoption.

From 3D visualization with designers to enhancing employee efficiency and safety on the plant floor to enticing buyers with digital experiences, the symbiotic relationship between augmented reality applications and the end-to-end automotive market will continue to strengthen and grow.

Huawei prepares itself for potential Android ban

With tensions continuing to escalate between the US and China, Huawei is reportedly preparing for the worst-case-scenario by developing its own mobile operating system.

According to The South China Morning Post, Huawei has been building an alternative to the Android operating system, a project which will be accelerated in light of the rapidly deteriorating relationship between the US and China. Should Huawei face the same penalties as ZTE, its ambitions to be the world’s premier smartphone manufacturer would be severely dented as it could be left without an effective operating system to power devices.

Last week it was reported the US Department of Justice launched an investigation to see whether Huawei violated US sanctions against Iran. ZTE’s issues started with a similar probe, while the anti-China sentiment in the country combined with suspect activity at ZTE, took the firm down a worrying path. Huawei should certainly be worried about suffering the same fate.

As it stands, Google’s Android and Apple’s iOS are the world’s two dominant operating systems. There have been various attempts to break this strangle-hold, Microsoft’s Windows Mobile OS or Samsung with its Tizen system for example, but none have come close. Considering the tensions between the two nations, Huawei finds itself in a precarious position, with its smartphones and wearable devices dependent on the US Android system.

ZTE is certainly taking the brunt of US aggression at the moment, though Huawei has also been under the spotlight. Numerous reports have been produced pointing the espionage finger at Huawei, and it would surprise few if a chain of events unfolded, leading Huawei to the same position as ZTE; a ban from including any US product or IP in its supply-chain. For the devices business, this would be a disaster unless an alternative operating system could be produced.

As it stands, Huawei is the most popular smartphone brand in China and third worldwide. Progress has been very encouraging in the developed markets, where Chinese brands have traditionally struggled; being banned from using the Android operating system would put an end to this momentum. Sources close to the situation claim this is very much being viewed as worst-case-scenario, as one of the reasons the OS has not been released yet is that is simply isn’t as good as Android.

Worryingly for Huawei is the scrutiny which will be placed on a Chinese OS. While some European countries have confirmed a suspicious eye is watching Huawei, these governments might sleep easier knowing a US firm controls the operating software. Should Huawei (a supposed puppet of the Chinese government to the paranoid) control both the hardware and the software, intelligence agencies could be spurred into a state of panic.

NFV: How to get out of a virtual labyrinth

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Robin Kent, Director of European Operations at Adax looks at some of the concerns and uncertainties around NFV and how to resolve them.

For many years, Network Function Virtualization (NFV) has been the source of a lot of uncertainty for the telecoms industry. And by no means is the fight to dominate this technology over. The slow pace at which virtualization has progressed has meant that feelings of frustration have overcome the initial enthusiasm.

A broad mix of business and technical challenges, such as skills shortages and operational change, are taking their toll and effectively slowing down pace and scope of commercial implementations. As a result, the majority of service providers questioned in a survey by Telecoms.com now say that over the next five years NFV will have only a modest impact on business success. This begs the question: should we believe the hype?

The NFV hype

It is not unheard of in the telecoms sector for new technologies to generate a lot of hype from analysts and media commentators alike. In NFV’s case, there has been continuous dissolution. As we head into the fifth year since the emergence of NFV as a game-changing telecoms technology, with no real fruition, it is justifiable to wonder whether it is worth the hype.

Fewer than 10 per cent of service providers said that their company is meeting their deployment schedule for NFV. Despite all this uncertainty, many service providers do see benefits surrounding virtualization – increased network agility, shorter time to market and the creation of new services and revenue streams.

The concerns and uncertainties of NFV

NFV is expected to be most important for reducing operating expenses but high costs of deployment, complexity of NFV operations, skills shortages and lack of investment in/internal commitment to NFV are the main barriers to success for companies with regards to deployment. Similarly, another major challenge for service providers is integration with legacy equipment. They are also finding that NFV is seemingly complex and difficult for many service providers to deploy at scale.

With regards to the architecture, the breadth and the number of distinct components make it challenging to design, build and support. It is essential to integrate NFV into already-existing network architectures. Further hindrance to deployment is caused by a lack of “blueprints” and mature standards for the implementation of NFV.

That said, NFV will be able to deliver high-performance networks with greater scalability, elasticity, and adaptability at reduced costs compared to networks built from traditional networking equipment over time. New network requirements such as Internet of Things, 5G and SD-WAN ensure the drive of NFV, but it also covers a wide range of network applications.

Why service providers should take a carefully measured view to virtualization adoption

With NFV service providers must work towards improving the network performance and reliability and ensure that they have the ability to integrate existing operational and billing systems with legacy network architectures. To successfully deploy this, service providers must adopt a virtualized signalling gateway solution to integrate the old with the new. They need to ensure that they maximize the return of investment in their networks and are keeping TDM equipment in service – particularly the end-node voice switches.  A gateway can deliver the scalability, flexibility, throughput, and performance to manage the convergence and growth of networks while maintaining legacy TDM SS7 connections and infrastructure. This reduces the total cost of ownership of legacy equipment and enables the seamless transition to new IP-based networks.

For service providers, NFV demonstrates clear benefits not just to costing, but also bolsters efficiency and adaptability. It is undeniable that the ongoing uncertainty surrounding NFV has impacted the speed of its implementation. If the benefits of NFV are to be realised it is important that service providers see beyond the hype and push forward with their deployment schedule.

 

Robin Kent - Chairman Berks PGL Comms CommitteeRobin Kent is Director of European Operations at Adax Europe. For many years, Robin held senior positions within established equipment manufacturers, software houses and integrators in the telecom, wide area network, and office automation markets.  He joined Adax in 1994 to establish the Adax business unit in Europe. He has overseen the company’s successful transition from an OEM technology supplier to a customer focused provider of high quality, high performance telecommunications products to network equipment providers and VAS companies throughout EMEA and India.

The Apple iPhone X might be struggling

A recent report claims demand for Apple’s flagship smartphone ironically flagged in the first quarter of 2018.

Fast Company says it knows some people with inside knowledge of the Apple supply chain and they told it Apple is cutting its orders of the iPhone X from its manufacturers because it’s struggling to move the stock it already has. Apparently Apple has only ordered 8 million units for Q2 2018, which is way less than you would expect from a company that would expect to ship over 40 million units of all its phones in that quarter.

As you can see from our tracker table below, Apple always has its biggest quarter in Q4 as its choreographs the launch of its new iPhone with the holiday season. Apple shifted 77 million total smartphones in Q4 and, while it doesn’t break down its shipments by model, it’s generally assumed that a good chunk of those were Xs, and Canalys had an educated guess at 29 million – around a third.

 

Smartphone shipments Q4 2017

The moment of truth will be upon us soon, as Apple will report its earnings – and iPhone shipments – tomorrow evening. If shipments are well below 51 million (17 million Xs) then that would imply this rumour has some legs and the X has been a disappointment, at least in terms of volume. On the other hand Apple still makes obscene profits, so perhaps volume was never the aim in the first place.

According to Bloomberg analysts are a bit concerned by these rumours and Apple’s shares have fallen a few percent in the last week, presumably as a result of all this. An additional rumour doing the rounds is that Apple will launch a version of the X with a cheaper screen to bring the cost down, having apparently hit a ceiling for what many are prepared to spend with the X.

T-Mobile and Sprint formally announce their engagement

The love affair between T-Mobile US and Sprint will be taken to a new level as the pair finally agree terms on a $26 billion merger.

A combined business would have 120 million subscriptions, in comparison to the 144 million and 160 million at AT&T and Verizon respectively, the ability to invest at scale and more efficiently, as well as a catalogue of spectrum readying the organization for a 5G assault. T-Mobile US has been making waves as it chases down the AT&T and Verizon lead in the wireless market, though this merger would add momentum to the crusade.

The $26 billion all-stock deal, which will be viewed with a great deal of scepticism by regulators, will see John Legere become CEO of the combined company, known as T-Mobile, and Mike Sievert, current COO of T-Mobile, serving as President and COO. Tim Höttges, current T-Mobile US Chairman of the Board, will serve as Chairman of the Board for the new company, while Masayoshi Son, SoftBank CEO, and Marcelo Claure, Sprint CEO, will also serve on the board. T-Mobile has certainly gained the upper-hand when it comes to management.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” said Legere. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

The creation of a new, combined company promises faster rollout of 5G, increased competition, expansion into rural communities and to fuel US ambitions to dominate the next era of the digital economy. There are plenty of claims, some of which will certainly be nothing more than PR quips, but should it clear regulators the communications environment in the US will be a new beast.

The end of telco’s longest running soap opera

This announcement ends a will they/won’t they storyline which has been going on for years. Rumours of the pair finally getting together were becoming as common as rain in London, so those who dismissed last week’s reports should be forgiven.

2014 was the beginning of the saga, but at this point it was Sprint looking to acquire T-Mobile US. Deutsche Telekom had been mulling over an exit from the US market, where the brand was lagging light-years behind the AT&T and Verizon leaders. How things have changed.

Talks resumed mid-way through last year, only to collapse in September. At the time a deal was supposedly very close, only for Sprint to back out as the pair couldn’t agree on what ownership of the combined business would look like. T-Mobile reinvigorated talks in November, though this episode was certainly a short-lived one.

Surprising Son gives up easier than we thought

When the two companies were sat around the negotiating table last year, discussions fell apart as there was no agreement over who would have the controlling voice in the boardroom. As reports emerged last week, claiming a deal would be finalised in the coming days, we were sceptical. There are a lot of egos sitting around this table.

Softbank CEO Masayoshi Son, who controls 84.7% of Sprint, is not a man who likes to sit in the backseat. Neither are the top-guns over at T-Mobile US. To move this deal forward, it does seem Son has conceded his position, allowing executives at T-Mobile US to have the biggest offices in the combined organization.

We are not surprised this conclusion was reached, but we surprised at the speed. Son might be an influential and powerful businessman in the telco space, but in this relationship T-Mobile/Deutsche Telekom had the better hand. T-Mobile US has more subscribers than Sprint, momentum and future prospects are better with the magenta army, while Deutsche Telekom will hold a greater share of the newly formed company. There should be little surprise T-Mobile executives are the bosses.

Regulators might have a thing or two to say

Before anyone gets too exciting about the tie-up, it is worth bearing mind US regulators might have a couple of comments. Both the FCC and the US Department of Justice will have to greenlight the deal. AT&T’s attempted acquisition of T-Mobile in 2011 was called off after opposition from regulators, as were initial discussions between T-Mobile and Sprint in 2014.

“The main issue with this deal will be regulatory and if US competition authorities are prepared to allow the market to consolidate from four to three national operators,” said Gabriel Brown, Principle Analyst at Heavy Reading.

“Consolidation is probably good for operators, with a small risk they become complacent through lack of competition, but the calculation for consumers is harder to make. Affordable mobile connectivity is important to the wider online economy, and prices are generally driven lower, or at least kept in check, by competition. On the other hand, profitable operators are more able to invest in new technology and new networks, and therefore offer better services – the combined entity would be better placed to invest and compete in 5G, for example.

“Certainly there are technical and execution risks to the proposed integration, and valuation questions, but this is fundamentally about competition policy. It is a gamble on the regulatory environment in the US. To pursue this deal and then have it fall apart later will be negative for both T-Mobile and Sprint.”

Targeting troublesome Trump’s trump cards?

One common theme throughout the below video from Legere and Claure was indirectly addressing President Donald Trump. While the Commander-in-Chief has not passed comment on the deal just yet, he has shown himself to be proactive when it comes to major M&A.

Legere and Claure have seemingly tried to combat this offensive before it has any chance to gain momentum. The plan seems to be to align the merger with Trump’s interests and objectives.

Firstly, the pair spoke extensively about supporting rural communities throughout the US, many of whom are underserved by the status quo. Offering increased competition and better service to these communities, many of which are located in Trump-supporting states, would certainly gain favour in the White House.

Secondly, investment. This is a promise which has been loud and proud during the Trump administration, with promises to deliver new opportunities and jobs to the US people. Claure spoke of $40 billion investment over the coming years in delivering 5G connectivity, as well as the creation of thousands of jobs. Mergers guarantee redundancies, though the promise here is aggressive expansion plans through combined assets will create a bigger workforce possible than if the two organizations remained separate.

The promise of new jobs, in call centres for example or in new stores to fuel the rural expansion, might also address some of the concerns from regulators. In most mergers, jobs are reduced as there is natural overlap. Job creation is certainly a bold promise, though if the claims can be backed up, it might go some way to smoothing the approval path.

The final area is China. The Trump administration has been highly combative when it comes to addressing the Chinese threat to the US economy on the whole, and Silicon Valley’s strangle hold on the global technology industry. The message here is simple; only a combined T-Mobile/Sprint can deliver the 5G foundations necessarily for the US to retain its lofty position at the top of the global economy.

Beating China to the 5G punch

“Only the new T-Mobile will have the network and spectrum capacity to quickly create a broad and deep 5G network in the first few years of the 5G innovation cycle, the years that will determine if Americans lead or follow in the 5G digital economy,” said Legere. “Listen, only T-Mobile and Sprint can do this together.”

US dominance in the technology and business world can be pinned to a number of different factors, though Legere and Claure believe the country’s early actions in the 4G world was a major contributing factor maintaining this position. For the US to continue at the top, taking a leadership position during the early days of 5G is crucial.

The newly formed company will have access to the 2.5 GHz spectrum currently owned by Sprint, as well as T-Mobile’s 600 MHz hording and other assets. This combination is what the team believe is the best opportunity to scale and deliver 5G nationwide in the shortest period of time. Legere claims the mmWave spectrum at AT&T and Verizon is wholly unacceptable for 5G (due to its short range), estimating the total cost of delivering nationwide connectivity at $1.5 trillion. If these figures are anywhere near accurate, AT&T and Verizon might well struggle to keep up.

Compared to T-Mobile’s network today, the combined company’s network is claimed to be able to deliver 15x faster speeds on average nationwide by 2024, with speeds up to 100x faster than early 4G. The message here is relatively simple; no company standing alone can create a nationwide 5G network. T-Mobile and Sprint are justifying the acquisition by claiming nationwide 5G is impossible without the tie-up.

Expect a race to the bottom to start

T-Mobile has been offering lower tariffs and all-you-can-eat data plans for some time, while Sprint has been aggressively targeting new customers with lower prices in recent months. We would expect these trends to continue, with the acquisition fuelling a race to the bottom.

Customers will be happy with challenge to the status quo, though this could strain the spreadsheets at AT&T and Verizon. A more coherent convergence strategy is likely to be on the agenda before too long, perhaps the next Uncarrier offer, while the press release promises more ‘affordable’ connectivity solutions. Consumers will reap the benefits first and foremost, though government wireless contracts are in the sights as well.

In the video, Legere highlights Verizon and AT&T will have 4x the number of contracts with government and local authorities than the newly formed organisation. This is clearly one of the areas the team anticipate growth.

Will this improve prospects for Sprint customers?

While T-Mobile US customers are pretty happy on the whole, the same cannot be said for Sprint’s. Numerous customers have been quite vocal about the poor performance of the network, as well as sub-standard customer service, and while there have been improvements from the telco over recent months, some might be happy about the positive influence of T-Mobile.

As you can see from the tweets below, some customers hate Sprint, some are confused and some are excited by the prospect of the acquisition.

This is perhaps one of the reasons the T-Mobile brand will be maintained under the new business, and why T-Mobile executives are getting the best offices; it is the better performing of the two right now. Maybe this is just what the Sprint business needs; a break from the past, draw a line and move on.