5G Fixed Wireless: Many roads….the same destination.

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Els Baert, Director of Marketing and Communications at NetComm takes a look at the potential of 5G Fixed Wireless

5G is finally here and dozens of news stories are being published globally every day about the opportunities, possibilities and challenges this new technology brings – rarely has a technology generated as much interest.

Whilst it is great to see so much excitement surrounding 5G – and there is a lot to be excited about – this level of media coverage can also create problems for the industry, especially when 5G is such an incredibly complicated topic.

One of the biggest issues we face in this regard is the media generated belief that 5G is positioned to deliver mind-blowing speeds by using the large bands of spectrum available in the millimetre wave (mmWave) spectrum band.

The truth – as we all know – is somewhat different.

Recently a lot has been written about the performance of mmWave, with one high-profile operator comparing its performance very unfavourably to the performance of 600MHz spectrum in a public demonstration of the technology.

We all knew that mmWave would have its challenges and there were no guarantees on the performance of the technology.

With these latest trials, it’s becoming more and more clear for the industry that considering 5G in mmWave alone, won’t be enough to be successful. 5G is much more than that. mmWave is certainly part of the 5G landscape but it is only one part of a much broader suit of spectrum assets that will be used.

The reality of 5G – especially when we are talking about 5G Fixed Wireless deployment – is that there is no one-size-fits-all solution, there are going to be several different deployment mechanisms for operators in the field.

If we look at the much-vaunted but recently much-maligned millimetre wave spectrum we can see that there are already operators out there delivering 5G Fixed Wireless with this spectrum – but they are doing it using an external antenna and in a topography that suits its usage.

There will doubtless be improvements in millimetre wave usage as we move forward but you can’t change the laws of physics and it will always have its limitations in terms of performance compared to low-range and mid-range spectrum.

That’s why we will see operators operating 5G Fixed Wireless services over a combination of spectrum bands using both the mid-band and mmWave.

The mid-band frequencies have shown that reliable high-speed services can be delivered as they are being deployed in rural areas to connect the even most remote locations. By using this spectrum as a base, operators can guarantee a consistent performance from the technology.

However, these operators can still make very effective usage of mmWave spectrum in certain locations where it’s suitable, this is by no means a zero-sum game.

The mmWave spectrum can be used to top up the speeds offered over the mid-band to allow for peak speeds of the much sought-after gigabits per second.

From a launch perspective, we need to see operators delivering reliable and stable 5G Fixed Wireless services into the marketplace in order to build customer confidence in the technology as early as possible.

The best way to ensure this will be to see operators focus their initial 5G Fixed Wireless launches in the mid-range bands.

It will be interesting to see how that plays out over the coming years but as those 5G media stories keep on piling up in your inbox it’s certainly worth remembering that there will be a multitude of ways for operators to get 5G Fixed Wireless off the ground –  but the really important thing is the quality of the service, not how it is delivered.

Europe’s lead data watchdog opens Google GDPR investigation

Ireland’s data protection watchdog has kicked off a GDPR investigation into Google following a complaint from ad-free web browser Brave.

Although GDPR is approaching its first birthday, there is yet to be an example of the towering fines which were promised for non-compliance. Perhaps everyone is playing merrily by the rules, or it might be that they are very good at covering their tracks. Brave will be hoping to chalk up a victory over Google with this investigation however.

“The Irish Data Protection Commission’s action signals that now – nearly one year after the GDPR was introduced – a change is coming that goes beyond just Google,” said Johnny Ryan, Chief Policy Officer at Brave. “We need to reform online advertising to protect privacy, and to protect advertisers and publishers from legal risk under the GDPR.”

The complaint itself is directed at Google’s DoubleClick/Authorized Buyers advertising system. While giving evidence to the Data Protection Commission, Ryan has suggested the way in which data is processed through the system violates Article 5(1)(a), (b) and (f) of GDPR, as well as Section 110 of the Irish Data Protection Act.

DoubleClick/Authorized Buyers advertising system is active on 8.4 million websites, allowing the search giant to track users as they scour the web. This information is then broadcast to more than 2,000 companies who bid on the traffic to deliver more targeted and personalised ads.

This information can potentially be incredibly personal. Google has various different categories which internet users are neatly filed into, including ‘eating disorders’, ‘left-wing politics’, ‘Judaism’ and ‘male impotence’. The companies bidding on this data will also have access to geo-location information and the type of device which the user is on.

Under Article 5 (1)(f) of the GDPR, companies are only permitted to process personal information if it is tightly controlled. Brave suggests Google has no control over the data once it is broadcast and is therefore violating GDPR.

With the Irish watchdog, Europe’s lead for GDPR, investigating the system in Ireland, similar complaints have been filed the UK, Poland, Spain, Belgium, Luxembourg and the Netherlands. Should Google be found non-compliant, it would be forced to ditch the DoubleClick/Authorized Buyers advertising system and could face a fine as much as 4% of annual turnover. Based on 2018 revenues, that figure would be $5.4 billion.

“For too long, the AdTech industry has operated without due regard for the protection of consumer data,” said Ravi Naik of ITN Solicitors, who will be representing Brave for the complaint. “We are pleased that the Data Protection Commissioner has taken action. The industry must change.”

GDPR is supposed to be a suitable deterrent for the internet economy, but without enforcement and demonstrable consequences little will change. If GDPR is to work as designed, a monstrous fine will have to be directed at someone sooner or later. Could this be the first domino to fall?

Estonia is best digital home away from home, report says

Expats voted Estonia to the top of their digital life quality list in a new survey.

InterNations, a social network for expats, recently conducted a global survey to gauge the perception of digital lives enjoyed by those living in a foreign country. 68 countries were featured. Although most of the findings confirmed the conventional wisdom, the report also threw up a couple of surprises.

Overall, the Nordic countries ranked high, with Finland, Norway, and Denmark all in the top 5 best countries for digital life table. But topping the list is Estonia, which ranked exceptionally high on the e-government index, with 94% of all expats surveyed feeling satisfied with the availability of the country’s administrative services. Estonia also topped the table of unrestricted access to online services. The country, similar to other Baltic and Nordic countries, adopts a light-touch approach towards Internet. Following Estonia on the e-government satisfaction list is Singapore, with Norway coming second on the unrestricted access to online service table.

Unsurprisingly, South Korea, which leads the world in broadband access, also tops the league of high-speed internet at home, followed by Taiwan and Finland. Expats were also asked to rate their experience of cashless payment. The four Nordic countries took the top 4 positions, with Estonia rounding off the top 5. Finland was ranked in the first place, with 96% expats saying they are happy with the experience.

A question that is particularly relevant to expats is how easy it is to get a local mobile number. Here we see a bit surprise. Myanmar, which ranked at the bottom of the overall Digital Life table, came on top in this list, followed by New Zealand and Israel.

On the other end of the tables, China was only beaten by Myanmar to the bottom of the overall Digital Life table and sat comfortably at the bottom of “Unrestricted Access to Internet”, thanks to the all powerful Great Firewall. This is particularly pertinent for expats who would have a stronger need for the global social networks more than the local residents, to communicate with their home countries. 83% of all expats were unsatisfied with their access to social networks from China, followed in the second from bottom by Saudi Arabia, where 46% said they were unsatisfied.

The ranking may not be a big surprise, but the margin between the bottom two countries may be. The only table that China was not in the bottom 10 was the one on cashless payment. But, maybe surprisingly, with all the fanfare about the contactless payment experience enabled by companies like Alibaba and Tencent, expats living in China did not manage to take the country to the top 10 table either.

Best and worst countries for Digital Life

UK MNOs set to claw back £200+ million in licence fees

A UK court has ruled in favour of the telcos in an on-going battle with regulator Ofcom over licence fees paid on spectrum assets between 2015 and 2017.

The legal battle concerns the process which was undertaken by Ofcom prior to increasing licence fees paid by each of the telcos for access to the airwaves. The decision to increase the licence fees was met by much criticism during the initial announcement, and you can see why.

The licence fees concern 900 MHz and 1800 MHz spectrum assets awarded to each of the telcos during a 2013 auction.

Telco Fee paid (post-2015) Fee paid (pre-2015) Difference
Vodafone £76,245,025.10 £21,865,536 £54,379,489.10
O2 £76,245,025.10 £21,865,536 £54,379,489.10
Three £44,390,398.53 £17,463,600 £26,926,798.53
EE/BT £139,823,997 £57,380,400 £82,443,597

While telcos are constantly complaining about regulation, as well as the amount paid to regulators around the world, the drastic difference in licence fees was too much to stomach here.

Following the decision to increase licence fees, EE was first to act, challenging the ruling in the courts in 2017. The other UK MNOs were quick to follow, with Ofcom being named as a defendant in the lawsuit.

“We welcome the court’s decision that finds in favour of the mobile operators,” said an O2 spokesperson. “We are however disappointed that Ofcom has been granted leave for appeal and we will strongly defend any future appeal brought by Ofcom.”

Ofcom will most likely appeal the decision.

The argument from the telcos is one which we have heard before. The more money which is demanded from Ofcom, the less which is available to invest in networks to ready the UK for the digital economy.

Following EE’s decision to challenge the changes to licence fees in 2015, a move which was supported by the other MNOs, Ofcom decided to revert back to the licence fees which were paid in the previous regime. There has been another consultation since, resulting in an increase to licence fees paid moving forward, though this case is focused on the period between 2015 and November 2017.

Aside from clawing back the payments made during this period, the parties have agreed simple interest be applied on whatever sum is due, calculated at 2% above the Bank of England base rate during the period.

For the MNOs, this news will be very much welcomed considering the financial burden they face ahead of the 5G era. With billions set to be spent rolling out the networks, a bit of financial relief will go a long way.

T-Mobile and Sprint ponder concessions to force through merger

T-Mobile US and Sprint are weighing up the sale of one of the pair’s prepaid brands in an attempt to woo decision makers into greenlighting the divisive merger.

Dating back to April 2018, you will be forgiven for forgetting this saga is still an-going debate in the US. With privacy scandals, the Huawei drama and BT’s dreadful logo stealing all the column inches, the debate over whether T-Mobile US and Sprint should be allowed to merge their operations has been relegated below the fold. But it is still a thing.

The countdown clock, the 180 days the FCC gives itself to approve mergers, spent a lot of time on pause, though the longer the process takes the more likely it appears the answer will be no. If the relevant authorities were looking at the information in front of them, an answer would surely have been given by now, but sceptics might assume the FCC is desperately searching for a reason to say no.

According to Bloomberg, the duo is prepared to make concessions to force through the deal. These concessions include the sale of one prepaid brand, a pledge to finish the rollout of a 5G network in three years and promises not to raise prices during this deployment.

In terms of the timeline, crunch day is fast approaching. The FCC 180-day review is set to come to a close at the end of June, though the deal also has to be signed-off by the Department of Justice. With decision time on the horizon, egos will have to be stroked and arguments set in stone.

The issue at the heart of this debate is focused on competition. Critics of the deal suggest consumers who are at the low-end of the tariffs scale will effectively be punished with higher prices in a market with only three providers. T-Mobile US and Sprint have suggested prices would be kept down in an attempt to compete with AT&T and Verizon, though more than paper-thin promises will be needed.

Selling off one of the prepaid brands would help to preserve competition in this segment, offering more choice for those consumers who do wish to, or cannot afford to, invest in postpaid contracts. It is believed Sprint’s Boost brand is the one facing the chop, with the Virgin Mobile and Metro brands to remain in the potentially merged operations.

Peter Adderton, who sold Boost to Sprint in 2006, has previously stated he would invest in the divested brand. Adderton has been a critic of the T-Mobile/Sprint merger, though if there is a chance to make money entrepreneurs have a way of changing their tune.

Reports have been emerging over the last couple of weeks suggest regulators are still concerned over competition despite assurances made by executives. The Wall Street Journal suggests the deal would not go ahead with the proposed structure of the company, a claim which T-Mobile US CEO John Legere rejects, suggesting there is still some stroking to be done.

Although trying to figure out which way this deal will go is little more than guess work at the moment, there is a feeling it is not going the way T-Mobile and Sprint would want. Rumours are only rumours, but the familiarity of the reports is starting to add weight. It does sound like T-Mobile and Sprint will have to make some considerable concessions to get the greenlight.

Don’t ignore Huawei’s ban on buying US components

While everyone is focusing on the ban on selling in the US, the ban on buying US components is a much more interesting chapter of the Huawei saga.

President Donald Trump has dropped the economic dirty bomb on China and it’s dominating the headlines. Although Huawei, or China, are not mentioned in the text, the Executive Order is clearly a move to stall progress made in the telco arena. China is mounting a challenge to the US dominance in the TMT arena, and this should be viewed as a move to combat that.

There are clearly other reasons for the order, but this should not be ignored. The security argument, albeit an accusation thrown without the burden of concrete evidence, is a factor, but never forget about the capitalist dream which underpins US society.

However, although most are focusing on Huawei’s inability to sell components, products and services in the US market, there might be an argument the ban on purchasing US components, products and services is more important, impactful and influential.

“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List,” said Secretary of Commerce Wilbur Ross. “This will prevent American technology from being used by foreign owned entities in ways that potentially undermine US national security or foreign policy interests.”

While we will focus on the ban on purchasing US components, products and services for this article, it is worth noting the ban on Huawei selling in the US will have an impact.

Rural telcos in the US have mostly been against any ban on Chinese companies. In October 2018, Huawei made a filing with the FCC arguing its support for rural telcos is underpinning the fight against the digital divide and a ban would be disastrous for those subscribers. Michael Beehn, CEO of MobileNation, was one of those who argued against the ban, suggesting the cost-effectiveness of Huawei allowed his firm to operate. Without the advantage of nationwide scale, these organizations will always struggle when the price of networks is forced north.

While the US is a massive market, with huge opportunities to maximise profits, not being able to sell in the US is not going to have a significant impact on Huawei. Its customers are the rural telcos not the national ones. Huawei has not managed to secure any major contracts with the big four, therefore it is missing out on something which it never had. Huawei has still managed to grow sales to $105 billion without the US, therefore we believe this ban is not going to be a gamechanger.

However, it is the ban on purchasing US components, products and services which we want to focus on here.

Huawei is not outrightly banned from using US technologies and services, however, those companies who wish to work with the dominant telco vendor will have to seek permission to do so beforehand. The US can now effectively how strategically it wants to twist the knife already dug deep into Huawei’s metaphorical chest.

Although we’re not too sure how this will play out, Huawei’s business could be severely dented by this move.

Huawei recognises 92 companies around the world as core suppliers to the business. It will have thousands of suppliers for various parts of the business, but these 92 are considered the most important to the success of operations. And 33 of them are US companies.

Some are small, some are niche, some are more generic, and some are technology giants. The likes of Qualcomm, Intel and Broadcom all have interests in keeping the US/Chinese relationship sweet, though more niche companies like Skyworks Solutions, Lumentum and Qorvo have much more skin in the game. Firms like NeoPhotonics, who are reliant on Huawei for 46% of its revenues, might well struggle to survive.

Huawei will be able to survive this move, it has been preparing for such an outcome, but you have to wonder what impact it will have on its products and credibility.

HiSilicon, the Huawei-owned semiconductor business, has been ramping up its capabilities to move more of its chip supply chain in-house, while the firm has reportedly been improving the geographical diversity of its international supply chain. According to the South China Morning Post, not only has Huawei been moving more operations in-house, it has also been stockpiling US components in the event of the procurement doomsday event.

A similar ban on procuring US components, products and services was placed on ZTE last year and it almost crippled the firm. Operations were forced to a standstill due to the reliance on US technology. Huawei has never been as dependent on the US, though it seems the lessons were learned from this incident.

The big question is what impact a ban would have on the quality of its products.

Huawei might preach the promise of its own technology and the new suppliers it will seek/has sought, but there is a reason these 33 US companies were chosen in the first place. Either there is/was a financial benefit to Huawei in these relationships, or they were chosen because they were best in class.

Huawei is a commercial organization after all, it wants to make the best products for the best price. There will certainly have been compromises make during these selections, either paying more for better or sacrificing some quality for commercial benefits, and having to make changes will have an impact. Huawei, and its customers, will have fingers and toes crossed there is no material impact on the business.

The other aspect to consider is disruption to operations. ZTE found out how detrimental dependence on a single country can be, and while Huawei has mitigated some of this impact, it remains to be seen how much pain could be felt should the ban be fully enforced. Might it mean Huawei is unable to scale operations in-line with customer deployment ambitions? Could competitors benefit through these limitations? We don’t know for the moment.

The ban on selling in the US might sound better when reeling off headlines, but don’t forget about Huawei’s supply chain. We think there is much more of a risk here.

A look at how US suppliers have been hit by Huawei news

President Trump’s Executive Order and the decision to place Huawei on the US ‘Entity List’ is going to dominate the headlines over the next couple of days, but what will be the impact on US suppliers?

During the ZTE saga last year, where the firm was banned from using US components in its supply chain, several US firms faced considerable difficulty. With Huawei potentially facing the same fate, the next few days will certainly make for uncomfortable reading for some.

Although the main focus of the news has been on the Executive Order banning any Huawei components or products in US communications infrastructure, the entry onto the ‘Entity List’ should be considered as big. This is effectively the commerce version of a dirty bomb, and some might suggest it is being used to disrupt Huawei’s supply chain and dent its ability to dominate the telco vendor ecosystem.

But what is the impact of losing a major customer? What are the realities these US firms will face if the Secretary of Commerce turns down their application to work with Huawei?

Speaking to members of the financial community, it could be pretty severe.

Losing a customer which accounts for 2-3% of total revenues would be a concern but nothing major. For 5% of revenues, this is a headache, but something the spreadsheets could most likely tolerate. When you start getting to 10% the panic button needs to be hit.

A customer which accounts for 10% of total revenues is a major prize. Losing this revenue would result in a complete rethink in how the business operates, as this could effectively wipe out any profit for the year. If you are in the services industry, it isn’t as much of an issue, but when it comes to manufacturing and components, there are so many different implications.

For example, in the first instance you have to consider how this hits budgets, forecasts, resource allocation and manufacturing strategy.

Sales staff are probably the safest here, as the lost revenues will have to be replaced as soon as possible with new customers, but what about the marketing strategy? Do you want to replace the lost capacity with short-term customers (i.e. quicker) or long-term customers which may offer larger orders?

On the R&D side, does a company have dedicated resource working on projects for that customer? What will these staffers do now? Can those projects be re-orientated for another customer?

Finally, on the manufacturing side, there are all sorts of issues. How will the loss of revenue impact the resource recovery plan? How are the manufacturing facilities configured – do you have to close plants?

Another consideration is on your own supply chain and procurement strategies. When supplying products to said customer, you will have to source your own raw materials. Will the loss of this customer result in contracts with suppliers having to be re-negotiated? Will this mean quantity discounts are now impacted?

These are all the considerations when you are losing a customer worth 10-15% of total revenues. Anything above this and you would have to question whether the company can survive, or at least face a major restructure.

Share price of US suppliers to Huawei
Company Share price
Qualcomm -3.18%
Xilinx -4.1%
Western Digital -1.12%
Marvell Technology +0.5%
Seagate Technology +0.43
Texas Instruments +0.045
Skyworks Solutions -4.56%
ON Semiconductor -0.99%
Qorvo -5%
NeoPhotonics -12.9%
Flex -1.13%
Finisar -2.05%
II-VI -2.86%
Maxim Integrated -0.99%
Analog Devices -2%

All share prices at the time of writing (UK: 16:20) – in comparison to market close on 15 May 2019

Looking at Qorvo, executives at semiconductor supplier might certainly have something to worry about. Huawei is features in the ‘top three’ customers for the firm, while on the most recent earnings call, the team discussed the success of Huawei’s smartphone division and in particular the ‘P’ series as a contributor towards a successful quarter. Some have suggested 11% of Qorvo revenues are dependent on Huawei.

Skyworks Solutions, another semiconductor company, has been suffering in recent years. With large parts of the business reliant on smartphone shipments, the global slowdown has been tough. The team work with Huawei on both the mobile and infrastructure side, and while it does work with many tier one firms in both segments, the market is clearly worried about a competitive field and an inability to work with one of the largest telco vendors worldwide.

Both Qorvo and Skyworks supply radiofrequency chips to Huawei, which might have an effect on the Chinese vendors ability to manufacture devices. That said, the supply chain disruption will not be anywhere near as damaging to Huawei as it was to ZTE as it has HiSilicon which manufacturers many of its components.

Xilinx is another which seems to have worn the news quite negatively. The team work with Huawei’s enterprise business unit, helping with video streaming challenges. This might be the smallest business group at Huawei, though the 5G euphoria is set to offer considerable opportunities. Xilinx share price has been recovering after a 17% drop in April, though this has proved to be another set-back.

NeoPhotonics is a company which should be seriously concerned. As a customer, Huawei accounted for more than 46% of the total revenue across 2018. The executive team is relatively open with investors regarding this fact, and this might have been factored into any decision to invest, though this is a massive loss for the business to absorb.

Lumentum is another business which is somewhat reliant on Huawei. While we were not able to nail down specific numbers, the firm supplies fiber optic components to Network Equipment Manufacturers (NEM) and considering there aren’t many of them to supply to, losing Huawei will be a headache.

At Finisar, Huawei described as one of the company’s major customers, though it has seemingly been diversifying its customer base in recent years. In 2017 and 2016, Huawei accounted for 11% and 12% of the annual total respectively, though the percentage is not listed for 2018. This is because the percentage has dipped below 10%, though we were unable to ascertain what the figure now is.

We might have to wait a few weeks to understand the full extent of the impact, and how stringently the US will enforce Huawei’s entry onto the ‘Entity List’, but we suspect there will be some very stressful meetings taking place in numerous offices throughout the US.

Loyalty penalties for broadband, mobile and TV finally tackled

Ofcom has introduced rules which will aim to tackle ‘penalties’ imposed on renewing customers by broadband, mobile and content providers.

As part of the new rules, providers will have to inform customers 10 to 40 days prior to the end of the customers contract, the period where financial penalties would be applied for changing providers. In the notification, customers will be told the end date of the contract, differences in contract pricing moving forward, termination conditions and availability of cheaper deals.

Although customers will still have to be proactive in contacting rival competitors for better deals on the market, the hope is a more transparent approach with spur consumers into finding the best possible option. Telcos will have a year to ensure the right business processes and technologies are in place to action the rules.

“We’re making sure customers are treated fairly, by making companies give them the information they need, when they need it,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

“This will put power in the hands of millions of people who’re paying more than necessary when they’re no longer tied to a contract.”

The initial idea was put forward back in December, with the belief as many as 20 million UK consumers have passed their initial contract period and could be paying more than necessary. The Department of Digital, Culture, Media and Sport escalated the issue in February with a public consultation aimed at moving the industry towards a position where loyalty was rewarded, ending aggressive cultures towards customer acquisition.

In September last year, the UK Citizens Advice Bureau (CAB) launched a super-complaint with the Competition and Markets Authority (CMA) suggesting service providers over-charging renewing customers to bring in an extra £4.1 billion a year. Research commissioned by Broadband Genie has found many over 55s could be paying too much for their broadband service but lack the knowledge or confidence to choose a new package.

“Pre-emptive alerts and information about broadband and TV contract periods are good news for consumers since many have in effect been paying a premium for their loyalty once out of contract,” said Adrian Baschnonga, EY’s Telecoms Lead Analyst. “Today’s rules pave the way for a more proactive dialogue between service providers and their customers, which can unlock higher levels of satisfaction in the long term.”

While it will certainly take some work to bed in, such rules have the potential to move attitudes in the industry to prioritise customer retention over acquisition to meet profitability objectives. Much research points to this being a more rewarding approach to business, though few in the telco space practice this theory.

“uSwitch’s research found that the aggregate cost of out-of-contract charges to telecoms consumers is £41 a second,” said Richard Neudegg, Head of Regulation at uSwitch.com. “This is why time is of the essence – everyday spent waiting for these notifications to be rolled out, another £3.5 million is overspent on these services – meaning that more than £350 million has already been wasted since the consultation closed in February.

“While it has been a long time coming, this is an important step by the regulator to address what has long been a clearly unacceptable gap in the rules, penalising consumers to the tune of millions.”

This is a step in the right direction, but it will take more to ensure telcos shift their culture. The idea of customer acquisition over retention is deeply engrained in every aspect of the business and will define how the business operates. That said, progress is progress.

Faster isn’t always better – O2

With a new Opensignal report suggesting O2 has the slowest download speeds of the UK MNOs, the telco has hit back suggesting experience is about more than just speed.

According to the report, O2 has the largest proportion of customers experiencing slower speeds across the UK. This is down to a number of different factors, one of which is how spectrum holdings have shaped 4G deployment strategies.

The image below outlines what percentage of customers are experiencing different speeds across all the UK MNOs.

Openreach 1

While this might not paint the prettiest of pictures for O2, the telco has pointed out faster is not necessarily better.

“O2’s network deployment is focussed on customer experience and demand rather than maximum capabilities of certain aspects of network performance such as download speeds,” an O2 spokesperson said. “Some of the most popular mobile applications such as playing the game Fornite or streaming high definition content from Netflix require around 3-5 Mbps.”

Such is the obsession with speed, the entire telco industry is built on the concept of ‘bigger, faster, meaner’. Performance of telcos are measured on average speeds, however, one should perhaps question what speeds are necessary to produce the desired customer experience. Sometimes 10 Mbps is all that is required.

“We continue to invest £2m every day to improve the network experience for our customers as well as using a combination of technical and customer insight to gauge how well the network is performing and how satisfied customers are with their service. For the second year running O2 recently won uSwitch’s 2019 award for best network coverage as voted by the public and continues to have among the lowest levels of churn in Europe.”

In fairness to O2, you can’t argue with the numbers. In terms of market share, O2 is the leading telco in the UK. It must be doing something right otherwise how would it maintain this position? It isn’t the cheapest, the fastest or one which can offer any sort of convergence offering.

This second image from Opensignal indicates the spectrum holdings which are being utilised by each of the telcos.

Openreach 2

As you can see O2 is heavily reliant on the sub-1 GHz bands. The advantage of this band is greater range and better indoor coverage, though there is a trade-off when it comes to speed. And while some might complain about the lack of horse-power, it doesn’t seem to matter than much at the end of the day.

In the last financial results, O2 boasted of year-on-year revenue growth of 5.3%, a total subscription increase of 2.3% and customer churn of 0.9%, the lowest in the market, it claims.

What is worth noting is this is relevant for today. This might seem like an incredibly obvious statement, but developers are constantly bringing out new applications which test the boundaries of acceptability. Video and more immersive gaming content are ensuring demands on the network, and capable speeds, are a constant threat.

For the moment, this position from O2 seems perfectly sustainable, but how long the status quo lasts remains to be seen. Speed is not necessarily the defining factor of experience today, as long as fast is fast enough.

Vodafone ditches Kiwis and cuts dividend in search of ‘financial headroom’

Vodafone has announced the sale of its New Zealand arm and a cut to the dividend as the firm searches for breathing room on the spreadsheets amid its Liberty Global acquisition and annual loss.

Such is the precarious position Vodafone is under, a cut to the dividend was expected by many analysts, though the sale of its Kiwi business unit compounds the misery. Facing various challenges around the world, including expensive spectrum auctions in Europe, the telco giant is searching for financial relief, though whether these moves prove to be adequate remains to be seen.

“We are executing our strategy at pace and have achieved our guidance for the year, with good growth in most markets but also increased competition in Spain and Italy and headwinds in South Africa,” said Group CEO Nick Read. “These challenges weighed on our service revenue growth during the year, and together with high spectrum auction costs have reduced our financial headroom.

“The Group is at a key point of transformation – deepening customer engagement, accelerating digital transformation, radically simplifying our operations, generating better returns from our infrastructure assets and continuing to optimise our portfolio. To support these goals and to rebuild headroom, the Board has made the decision to rebase the dividend, helping us to reduce debt and deliver to the low end of our target range in the next few years.”

While the news of a dividend cut saw share price drop by more than 5%, trading prior to markets opening has seen a slight recovery (at the time of writing). The dividend cut is not as drastic as some had forecast, down to 9 euro cents from 15, while an additional €2.1 billion from the New Zealand sale will provide some relief.

Looking at the financials for the year ending March 31, group revenues declined by 6.2% to €43.666 billion, while the operating loss stood at a weighty €7.644 billion. This compares to a profit of €2.788 billion across the previous year, though there are several different factors to take into consideration such as the merger with Idea Cellular in India and a change in accounting standards.

The loss might shock some for the moment, though this is likely to balance out in the long-run. In changing from the IAS18 accounting standard to IFRS15, Vodafone is altering how it is realising revenue on the spreadsheets. From here on forward, revenues are only reported as each stage of the contract is completed. It might be a shock for the moment, but more revenue is there to be realised in the future.

Although these numbers are the not the most positive, there is a hope on the horizon.

“The dividend cut is a massive blow for investors, while the results highlight the on-going challenges facing the company in its quest to turnaround its fortunes,” said Paolo Pescatore of analyst firm PP Foresight. “All hopes seem to be pinned on 5G, but the business model is unproven. Huge investment is required to roll out these new ultra-fast networks, but it comes at a cost.”

On the 5G front, Vodafone UK has announced it will go live on July 3, initially launching in seven cities, with an additional 12 live by the end of the year. Vodafone will also offer 5G roaming in the UK, Germany, Italy and Spain over the summer period. Interestingly enough, the firm has said it will price 5G at the levels as 4G.

Although this is a minor consolation set against the backdrop of a monstrous loss, it is at least something to hold onto. As it stands, Vodafone is winning the 5G race in the UK, while the roaming claim is another which gives the firm something to shout about. Vodafone is not in a terrible position, though many will be wary of the daunting spectrum auctions it faces over the coming months.