Fitbit fights back at Apple in the smart watch market

The latest smart watch numbers from analyst firm Counterpoint reveal Apple is still the dominant player but Fitbit is giving it a run for its money.

Total global smart watch shipments grew 37% year-on-year but it’s rapidly turning into a two horse race. Apple hijacked the market as soon as it took the segment seriously but its initial success seemed to stall. Meanwhile Fitbit more recently made the strategic decision to diversify beyond fitness bands and that move seems to have paid dividends.

Apple still dominates with a 41% of global shipments, but that’s down from 48% a year ago. Meanwhile Fitbit has managed to propel its share from 8% a year ago to 21% in Q2 2018, thanks to the apparently popular Versa smart. Everyone else is miles behind, with one-time leader Samsung now bordering on irrelevance.

Counterpoint smartwatch Q2 2018 1

“Back in Q4 2017, Apple stepped up its strategy in the smartwatch segment by enhancing the features of smart watches into broad-based functionalities, including some health and fitness tracking capabilities,” said Satyajit Sinha of Counterpoint. “Moreover, Apple is catalysing the trend of ‘smart watch as a standalone wearable device’ with adoption of cellular connectivity, which is driving the new wave of cellular connected wearables globally, great news for mobile operators.”

It doesn’t look like the market got the memo about standalone smart watches, however. As Sinha’s colleague Neil Shah notes, people seem reluctant to pay the premium just for the opportunity to talk to their wrist like a nut-case.

“Despite initial hype and traction of cellular based Apple Watch Series 3 in the first two quarters, Apple iPhone users are actually choosing the Series 1 as a non-cellular option over Series 3 non-cellular model which is surprising to many industry watchers,” said Shah. Not all industry watchers mate. The strong inference here is that Apple hasn’t done much to improve on the Series 1 other than whack in an expensive and largely redundant modem.

As indicated the Apple Watch Series 1 is the best selling model, followed by the Fitbit Versa. Given that Chinese vendor Amazfit has the third best selling brand despite only having a 4% total market share, that implies these two models are by far the biggest sellers. Unsurprisingly the Fitbit Versa is significantly cheaper than any Amazon Watch, so it wouldn’t be surprising to see it continue to grab share in the coming quarters.

Counterpoint smartwatch Q2 2018 2

Huawei Site Integration Services: Facilitating Transformation in the Site Infrastructure Industry & Enabling Operators to Achieve Digitalization

In June 2018, Huawei Rotating Chairman, Eric Xu, released a clear timetable for 5G at Mobile World Congress Shanghai 2018. To help global operators roll out 5G networks, Huawei will launch E2E NSA 5G commercial systems on September 30, 2018, and E2E SA 5G commercial systems on March 30, 2019.

Operators and site service providers must answer the following questions about the site infrastructure industry in the 5G commercial network era: How can we quickly obtain new site locations for fast site construction as the number of required sites increases? What is the optimal solution for site deployment? How can we seamlessly develop existing sites towards 5G in order to protect investments?

The traditional manual site construction and maintenance mode is expensive, slow, and inefficient, which means it cannot meet the expectations of the industry or operators. To address these issues, Huawei proposes digital site solutions. Digital site service capabilities, innovative ideas for solutions, and ecosystem-building systems have allowed Huawei to facilitate transformation in the site infrastructure industry and enabled operators to achieve digitalization.

End-to-End Digital Site Service Capabilities

Digital site capabilities: In traditional site operation mode, as-built documents cannot be quickly updated, while format standards are different. This means that site surveys are required for each site expansion and reconstruction. In addition, sites are run in the dumb state, which causes frequent faults and high maintenance costs. To address these common problems facing the industry, Huawei takes advantage of 360-degree panoramic shooting and BIM modeling technologies to digitize physical assets such as site infrastructures, existing assets files, and telecom equipment. These assets are then stored on structured storage, and physical sites are mirrored in order to build virtual digital sites for online site surveys and quick solution design. By using Internet of Things (IoT) technology, Huawei provides solutions that monitor and manage dumb devices at sites to achieve real-time, manageable, and controllable site operations. These solutions use static and dynamic data at sites to create innovative applications, facilitate site construction and O&M transformation, reduce CAPEX and OPEX, and reconstruct TCO at sites.

Committed to maintaining data security, Huawei adopts the digital site architecture through hybrid cloud. This is where operators store all static and dynamic data on their private clouds or local servers, and innovative applications are deployed on the public cloud for local downloads and invocation.

Efficient site design capabilities: Huawei has been involved in site integration design solutions for more than 20 years, and standardizes and visualizes these integration design solutions. Huawei also ensures it is involved with the world’s best design solutions in order to establish an excellent site solution database. This helps operators select site solutions on the cloud. In addition, it supports automatic solution production and 3D display, greatly improving site design efficiency, optimizing solutions, and reducing site construction costs.

Innovative Site Solutions

Huawei quickly customizes different site solutions using the digital site platform to meet scenario-specific requirements, which can be classified into three types:

a. All-In-One Tube Site Solution for Easy Acquisition of Site Locations in Urban Areas

In urban and suburban areas, acquiring site locations can be difficult and time-consuming. The all-in-one tube site solution installs site equipment into a tower to reduce floor space and ensure that there is no visible communications equipment. This environment-friendly solution greatly reduces site acquisition times.

b. Zip Site Solution with Low Costs in Rural Areas

In remote rural areas, traditional sites require high levels of investment but have long return on investment (ROI) periods. To deal with this challenge, the zip site solution complies with the all-in-one design concept, converting the tower into a simple pole, and using solar power instead of diesel power based on small-scale requirements. The zip site solution also adopts a free-standing design to eliminate the need for excavations or concrete, maximizing ROI and reducing maintenance costs.

c. Scalable 1+X modular tower solution

In scenarios where multiple operators share a network, or the network of a single operator is gradually evolving, this solution uses a modular, building-block tower. This tower has standardized components and a standardized installation processes and can quickly change height and load on demand. This makes it incredibly easy to expand and evolve, significantly reducing the initial investments required for site construction.

Establishing a Sustainable Ecosystem Through Mutually Beneficial Cooperation

Building and operating communication site infrastructures is a complex operation, involving site acquisition, design, construction, and all subsequent required maintenance. In this field, Huawei works with the world’s leading operators, infrastructure providers, and material suppliers, as well as other excellent institutions, to promote digital site development. Huawei is also cooperating with government infrastructure management agencies, road administration companies, and building property owners to create the site ecosystem alliance, address site acquisition issues, optimize site TCO, and accelerate site TTM. All of this is being done while achieving site sharing and mutually beneficial outcomes. In the Indonesian market, the Huawei-led site alliance has helped operators to shorten the site acquisition time from 9 months to less than 6 months. This represents a 60% reduction in rental costs, while also helping site owners gain extra rental income every month.

Huawei site integration services aim to provide telecom operators with all-scenario digital site, wireless site, OSP, ODN, and energy integration services, including planning, evaluation, and design solutions for project management. To date, Huawei has helped customers in over 140 countries deploy 134,000 new sites, reconstruct more than 950,000 sites, and deploy over 250,000 km of backbone optical cables. In total, these projects provide ODN integration services to 1.6 million users. Huawei site integration services serve 45 of the world’s Top 50 operators.

Google faces yet another antitrust probe, this time in the US

US Senator Orrin Hatch has written to the FTC requesting the body investigate whether it is using it dominant position in search and digital advertising to stifle the market place.

The Republican Senator, quite a frequent critic of the technology industry, is asking whether practises such as restricting competing advertising services to collecting data from users’ Gmail inbox are having a notable impact on the industry. The issue raised doesn’t seem to be about a single instance, but the collective impact of several smaller practices. A more wholistic investigation into Google’s business might well uncover some uncomfortable truths.

“Needless to say, I found these reports quite disturbing,” the Senator stated in the letter. “Although these reports concern different aspects of Google’s business, many relate to the company’s dominant position in search and accumulating vast amounts of personal data. That is why I also write to the Federal Trade Commission (FTC) to reconsider the competitive effect of Google’s conduct in search and digital advertising.”

Google is of course becoming quite used to dealing with antitrust complaints and investigations, though it will still remain an irritation. The restriction of publishers search advertisements from competitors is currently the subject of on-going monitoring from the European Commission, though more prying eyes and prodding fingers from cumbersome regulators is hardly going to enthuse the Google management team.

This is not the first time the FTC would be taking an interest in Google, though since the last investigation in 2013, Senator Hatch has pointed to several developments in the market. Google is currently under a consent order from the agency to hold it more accountable to privacy and data protection rules, though critics have suggested it violated this order with its most recent intrusion into users lives.

Recently Google was exposed for collecting location data on users who had ticked the opt-out button on some popular apps. Google subsequently changed the wording in some T&Cs, stating apps might continue to collect data irrelevant of the opt-out, with the process of actually getting off the Google grid being an incredibly cumbersome and difficult one. The issue here is more about how important Google products are to the lives of consumers, some people simply can’t avoid the products, but this should not be a reason for the internet giant to abuse this position.

President Trump has set his sights on Google, and it seems he has the support of his party, as the Google legal team warms up for another bout with the FTC.

Vodafone India and Idea Cellular officially tie the knot

The merger of Vodafone India and Idea Cellular to create India’s largest MNO has finally been completed.

The two companies first started publicly courting back at the start of 2017 but their protracted engagement took almost two years to come to fruition. The capex-intensive telecoms industry naturally tends towards M&A and the economies of scale it promises, but the brutal arrival of Reliance Jio hastened this process in the unusually fragmented Indian market.

The Vodafone announcement was of the stripped down type often associated with M&A – we didn’t even get a canned quote from the CEO saying how excited they are. There was plenty of reassuring talk about synergies, however, which was nice, and the new company is going to be called Vodafone Idea.

The combined effort claims 408 million customers, which makes Vodafone Idea the largest Indian MNO, with around 38% subscriber share according to Ovum’s WCIS. Bharti AirTel’s 30% share is relegated to second place, while Jio continues to grab subscribers and is a solid third with a 19% share.

It remains to be seen how smooth this merger will be and how much of the anticipated $1.5 billion of synergies will ever be realised. Thanks largely to Jio the Indian market has gone from being highly fragmented to just four players (BSNL has around 10% of subscribers). The brutal price war seems likely to continue and, as much as anything else, this merger seems designed to ensure the two companies involved can survive it.

Ciena is doing well and is only going to get better – Jefferies

Off the back of its quarterly results, investment bank Jefferies is confident business at Ciena is only going to get better.

With the last three months looking very positive for the business, Jefferies has warned investors not to get too jumpy and hold onto shares in the business. With the team reporting a 12% year-on-year rise in revenues to $818.8 million, share price also jumped 12%. Some might be tempted to cash in on the bonanza, but they might be missing out.

“The July quarter results reinforced our view that Ciena’s perceived margin issues are normal and temporary in nature,” said George Notter, MD of the telecoms research group at Jefferies. “Moreover, they’re the long-term market share consolidator in the space. We still think the shares are still too cheap given potential upside to the model, faster EPS growth, and improving consistency here. We reiterate our Buy rating.”

There are of course risks to the Ciena business model. Three customers account for more than 33% of total revenues, a slightly uncomfortable concentration, though Jefferies believes the struggles of Ciena’s rivals only compounds its leadership position in the segment. On-going security concerns for Huawei and ZTE will not make these attractive vendors for the sizeable investment made by telcos, while Infinera has missed recent product cycles resulting in lost market share, and Nokia is seemingly innovating its own portfolio but at a slower pace than Ciena.

Ciena has the best technology, a reliable and secure supply of product, and the resources to support very large network buildouts, making it an attractive proposition for potential customers. In comparison to competitors, Ciena is also spending more on R&D allowing the firm to meet the aggressive product recycle demands of customers. This is demonstrative in Ciena is the only vendor currently shipping a 400G/wavelength coherent product, Wavelogic Ai, and while technology leadership can change quickly, it is believed Ciena will announce a successor product over the next couple of months to consolidate this position.

According to Jefferies, while there has been a surge in share price, it is still cheap and should move upwards. If you’re a Ciena investor, the advice here is don’t get twitchy with the sell button, greater gains are on the horizon.

Amazon Pay acquires app aggregator platform Tapzo

Amazon has acquired Indian app company Tapzo in a deal to bolster its digital payments offering.

According to the Economic Times, the deal will be valued between $40-45 million, while co-founders Ankur Singla and Vishal Pal Chaudhary will be brought onto the Amazon team to continue development of the offering. While the acquisition is yet to be confirmed by either party, sources state Amazon is after a shortcut to get in on the mobile money bonanza.

“It would have taken Amazon Pay up to two years to build an entire stack of service offerings to enable efficient use-cases for its payment platform,” one source familiar with the deal stated. “So this acquisition helps them save time and also enables them to spread their cashback offers across a host of services immediately.”

Tapzo is an aggregator platform that allows users to access over 35 apps including Amazon, Flipkart, Ola and Uber through a single screen, but also allows for mobile payments, to pay bills, order cabs and food and book flights and hotels. The most popular service for users to date has been bill payments and recharges, with about 15,000 transactions per month across the two services.

Integrating the Tapzo capabilities into the Amazon Pay business will offer the team plenty of ammunition as the battle for domination in the Indian payments market warms up. While there are several local firms are controlling market share for the moment, PhonePe and Paytm for example, the continued digital revolution in India is attracting the interest on the international scene.

Aside from Amazon, Google has also been carving itself a new revenue stream in India. Its Tez offering has recently been rebranded to Google Pay, and will start offering new services such as pre-approved loans.

Huawei appeals to FTC to talk sense into Trump administration

Huawei has written to the FTC asking it to have a quiet word with the FCC and Congress in its bid to gain a foothold in the US telecoms industry.

As it stands, Huawei and ZTE are effectively banned from contributing any products or services to any meaningful projects or networks in the US. When the Defense Authorization Act was signed into law, clauses came into effect which effectively prevented Huawei and ZTE from providing any components or services to processes or infrastructure which would be considered ‘essential’ or ‘critical’. The definition of the terms are grey enough to turn it into an outright ban.

While the anti-China sentiment in a sweeping up to tsunami levels, Huawei is fighting back. The 5G prize is too big for it not to. This letter to the FTC appeals to the competition-conscious; effective competition cannot exist without the world’s largest vendor contributing. Presumably ZTE benefits from the doggedness of Huawei, as a reversal of the law would seemingly open the door for it as well.

“Huawei requests that the FTC offer to brief the FCC and appropriate Congressional Committees on these topics,” the filing states. “The agency should also work with the DOJ to help ensure competitive effects are appropriately weighed as part of any inter-agency review of proposed actions by the government.

“As the FTC pivots towards the 21st century, it is imperative that it prioritize achieving its mission through collaboration with other agencies and law enforcement partners to minimize the negative effect on competition, and thereby harm to consumers, caused by government regulation that is not narrowly tailored to achieve its legitimate objectives in the least restrictive way. Failure to do so will result in higher prices, lower-quality goods and services, reduced investment in the U.S., and reduced incentives to innovate. Such negative consequences will isolate the United States and cause it to fall behind other developed countries in important industries like telecommunications.”

The upcoming FTC consultation on communication, media and IT competition in theory should provide suitable ammunition for Huawei to launch another appeal. Some might assume the result of this consultation would be to realise how small the telco industry actually is. There aren’t that many buyers in the ecosystem, in comparison to other verticals, which directly impacts the number of vendors. As you move down the value chain, more niche players appear, but considering the shortage at the top, can the US afford to lose one and still create a competitive environment which benefits the telcos? We suspect not.

Huawei needs a win in the US, as the anti-China rhetoric is starting to spread. Following months of political posturing and finger pointing at China, the US’ prejudices seemed to have rubbed off on Australia, with Japan reportedly the next domino to fall. Huawei is facing an increasingly hostile environment worldwide, and the US is the source of the resentment. Should it be able to win in the US, negative impacts could be controlled, but that win needs to come quickly before too many governments jump on the ‘ban Huawei’ bandwagon.

Appealing to the competition-conscious is a logical move, one which you suspect should work, but this is politics. The political ping-pong extravaganza has grown too large for Huawei to be forgiven. It might be to the detriment of the telco industry, but we cannot see how the US will allow Huawei onto its shores or into its networks.

ZTE loses another billion bucks but expects a profit in Q3

ZTE has, for some reason, decided to report earnings for the nine months ending 30 September 2018 and while they’re not good, they could be worse.

The numbers can essentially be broken down into historical ones for the first half of the year and forecasted ones for Q3. ZTE lost 6.8 billion RMB in H1 2018, which is around $1 billion. Meanwhile it expects a profit somewhere between not much and a billion RMB for Q3, which is presumably why it has served up the numbers in this way – to sugar the big loss with the promise of imminent profit.

In terms of actual trading ZTE seems amazingly to have broken even as it blames the loss largely on the billion dollar fine it had to pay as one of the many conditions attached to it being allowed to trade with the US again. For the first six months of 2017 ZTE managed a profit of 2.3 billion RMB, which is around a third of a billion bucks.

Here’s what the ZTE announcement had to say: “The substantial decrease in results for the period from January to September 2018 compared to the same period last year was mainly attributable to: (1) the USD1 billion penalty mentioned in the “INSIDE INFORMATION ANNOUNCEMENT AND RESUMPTION OF TRADING” published by the Company on 12 June 2018; (2) operating losses and provision for losses resulting from the suspension of the major operating activities of the Company as referred in “INSIDE INFORMATION ANNOUNCEMENT” published by the Company on 9 May 2018.”

The second table below shows ZTE’s revenue mix by business unit and geography for the first half of the year. It’s interesting to note that one of the main reasons ZTE has been able to maintain a decent amount of revenue during its struggles seems to be government work within China. While you can’t blame the Chinese state for trying to help ZTE out during its troubles, this sort of thing won’t do much to allay the fears of Western governments concerned about letting Chinese kit vendors into their telecoms networks.

ZTE 1H numbers 1

ZTE 1H numbers 2

FCC plans to inject $1.5 billion into rural broadband expansion

US telecoms regulator the FCC is set to provide a substantial cash injection over the next ten years to expand rural broadband availability.

Over the next decade, some 713,176 homes and businesses across 45 states will benefit from the investment.

The FCC is seeking minimum broadband speeds of 100Mbps in 53 percent of the rural locations targeted. Over 99.7 percent of these locations will receive at least 25 Mbps downstream speeds.

Better still, according to the FCC, 19 percent of locations will get access to gigabit services.

Funds are being allocated following the ‘Connect America Fund’ auction. There were 103 winning bidders in the auction, with the 10-year support amount totalling $1.488 billion.

As part of the funding deal, providers must reach 40 percent of locations in a state within three years. Furthermore, construction must increase 20 percent each year with the goal of finishing by year six.

However, not everyone is happy with the maps used for planning the rural broadband extension.

In a statement, FCC Commissioner Jessica Rosenworcel said:

“The Federal Communications Commission’s wireless maps are not what they should be. They have too many inaccuracies to be reliable.

They overstate signal strength in rural America and understate where universal service support is needed to ensure that communities are not left behind.

If we’re not careful, this agency will distribute as much as $4.53 billion over the next decade based on this less than credible set of data.”

Delivering broadband to rural areas has been a key pledge by FCC Chairman Ajit Pai since his appointment in January 2017.

Pai is from the small southeastern Kansas town of Parsons and so will have direct experience with poor rural connectivity.

"I'm always struck by those rural communities that have (broadband) access and are using it to strengthen the lives of the families who live there and just the overall sense of optimism about the future," said Pai in an interview with USA Today.

The biggest winner from the auction is the state of Missouri which is set to receive an investment of $255 million over 10 years. This is followed by California ($149 million) and Virginia ($109 million).

What are your thoughts on the FCC’s plan to address rural broadband? Let us know in the comments.

UK eyes Africa for technology conquests

Millions across the continent are shaking in fear, not in anticipation of a technology-orientated wave of colonialism, but in anticipation of UK Prime Minister Theresa May dancing in celebration.

Following an announcement from the Department for International Trade which outlined future trade relationships between the UK and various African nations, the Department for Digital, Culture, Media and Sport is weighing in on the African expansion. New partnerships in South Africa, Kenya and Nigeria will include dedicated teams to boost innovation in technology and research, an accelerator programme to help grow African start-ups, and entrepreneurship schemes.

“Nigeria, South Africa and Kenya’s technology sectors are growing rapidly and generating a significant part of their economic output. This means huge opportunities for UK businesses and for future partnerships,” said Digital Secretary Jeremy Wright. “New ideas, game-changing research and cutting-edge science are good news for our African partners and good news for the UK’s world-leading scientists, technologists and researchers who are representing the country on a global stage.”

As part of the new relationship, UK entrepreneurs will work alongside business men and women in Africa to develop new ideas in next generation technologies. Aside from charitably sharing their own expertise, the engagements will open up new opportunities in largely untapped markets. While African nations are playing catch-up, technology is making a more significant impact on society, with the sector accounting for 10% and 11% of the Nigerian and Kenyan economies respectively.

“Africa’s economy is projected to grow by 3.2% in 2018 and to a further 3.5% in 2019, according to the latest 2018 World Bank report,” said Julian David, CEO of techUK. “Kenya, Nigeria and South Africa represent a significant part of that growth with technology increasingly underpinning these numbers. The decision to set up Innovation Partnerships and extend the tech hub network to these African nations shows the Government clearly recognises this opportunity.”

Aside from creating new revenue opportunities, UK tech enthusiasts also might learn a thing or two when it comes to mobile money. While digital payments are a comparatively new craze in the UK, there are much more established markets across Africa. Today more than half Kenya’s daily GDP goes through mobile money, with mobile-phone based money transfer service MPesa one of the most popular.

The news might be worth rejoicing about, but we are all hoping our PM is excited enough to break out her own version of ‘dancing’.