Abu Dhabi investment fund buys 1.85% Jio Platforms stake

Reliance Industries have found a fifth investor to purchase a handsome stake in Jio Platforms, its digital business unit, with Mubadala signing a $1.2 billion cheque for 1.85%.

Confirmed via Twitter, Khaled Abdulla Al Qubaisi, CEO of the Aerospace, Renewables and ICT portfolios for Mubadala, revealed the $1.2 billion investment will make the firm a stake holder in Jio Platforms, the holding company of disruptive telco Reliance Jio and numerous other digital ventures. “This investment is in line with our current ICT strategy and complements our portfolio of investments in telecoms, satellite operations, data centres and other ICT infrastructure,” Al Qubaisi said.

For Reliance Industries, it certainly caps off a successful seven weeks, though who knows whether there are other irons in the fire.

Jio Platform investments since April 22, 2020
Partner Stake Investment Date
Mubadala 1.85% $1.2 billion 4 June
General Atlantic 1.34% $860 million 18 May
Vista Equity Partner 2.32% $1.5 billion 11 May
Silver Lake 1.15% $750 million 4 May
Facebook 9.9% $5.7 billion 22 April
Total 16.56% $10.01 billion

As you can see from the table above, it certainly has been a profitable couple of weeks for the Reliance Industries MD Mukesh Ambani. Aside from the additional cash which is being invested into the business to continue network deployment and upgrades, there are some interesting synergies.

Facebook, for example, offers interesting opportunities to work with SMEs in the emerging cashless economy. General Atlantic already invests in Doctolib, digital healthcare platform in Europe to connect health professionals and patients. Mubadala is the same.

One of the Mubadala investments happens to be Yahsat, a satellite company which offers voice and data coverage across 161 countries. Not only could this company assist Jio by improving the connectivity patchwork in India, it is also an interesting partner to have in the mix for international roaming.

Each of these investors have expertise and investments which would be of interest to the Jio connectivity mission, or the second wave of monetization which follows the democratisation of the mobile internet.

4G subscriptions in India (2015-21), thousands
Year Bharti Airtel Vodafone Idea Reliance Jio Other Total
2015 1,459 21* 77 1,557
2016 10,800 9,541* 72,000 3,700 95,150
2017 30,000 36,998* 160,091 22,466 242,130
2018 77,067 75,300 280,100 22 433,061
2019 127,345 104,200 370,000 604,745
2020 180,491 105,062 406,978 702,686
2021 219,718 110,344 403,310 754,803

*For simplicity, Vodafone India and Idea Cellular subscriptions have been bundled together

Source: Omdia World Information Series

The table above offers a lot of information, but there are a few very important points which we would like to draw attention to.

Firstly, the total number of 4G subscriptions in India. At 754 million, there is still plenty of headroom for growth in a country where the population exceeds 1.3 billion. Secondly, the Reliance Jio disruption dragged the India market through a digital revolution from 2016 onwards. And third, Reliance Jio has a much greater opportunity to diversify revenues through digital services as it has more 4G subscriptions than its rivals.

When you look at the subscriptions data for all mobile technologies, adding everything from 1G through to 5G, the market share battle looks a lot more flattering for Bharti Airtel and Vodafone Idea, but it is a misleading picture. We are focusing on the 4G subscriptions as there is much more potential for additional revenues from this generation of mobile connectivity.

The blunt force object approach to telecoms is selling more subscriptions at an attractive price. Reliance Jio is clearly better at this than rivals, and there is more opportunity to sell 4G contracts in India. This will make Reliance an interesting investment, but the more savvy investors will look at everything this connectivity enables.

Through Jio Platforms, Reliance Industries has launched ventures into digital entertainment, AI, enterprise connectivity, IOT and many others. Democratising connectivity is an entry point to build a second wave of businesses as more of India is brought into the digital economy. These additional investments could be healthcare orientated, offering an alternative to traditional banking infrastructure or digitising government services. As the growth of Silicon Valley has shown, there is potential to make fortunes by leveraging connectivity.

This is why Jio Platforms is getting foreign investors excited. There is so much more to India’s digital economy than selling 4G subscriptions.

Amazon said to be considering $2 billion stake in Bharti Airtel

The strange big tech arms race in the Indian telecoms sector looks set to escalate further if Amazon buys a major stake in Bharti Airtel.

The rumour comes courtesy of Reuters, which has had a word with no less than three people who reckon they’re clued up on the situation. They say Amazon is in early-stage talks to buy a stake worth at least $2 billion in Indian mobile operator Bharti Airtel. That would apparently equate to around 5% of the company, although it seems Amazon could double that investment if it got a sudden rush of blood.

While the Indian telecoms market is arguably the number one growth opportunity in the global market, the operators left standing are all in a lot of debt. That, combined with the depressed value of assets thanks to the coronavirus-induced global recession means there are some great investment opportunities. Not only do they offer potential capital growth, having a piece of the action also grants access to billions of Indian punters.

Which explains why US internet giants are showing such an interest. In April Facebook chucked $5.7 billion at Reliance Jio and last week it was reported that Google is having a sniff around Vodafone Idea. While all this cash will doubtless come with major strings attached, this is probably good for the Indian telecoms sector as a whole as it should enable the operators concerned to accelerate their network rollout plans.

Road to successful digital transformation: Platform, Ecosystem, and Continuous Reinvention

There aren’t many telecom operators in the world that have not yet realised the importance of digital transformation. However, too often we have seen piecemeal measures being taken, which almost invariably lead to unsatisfactory results.

To succeed in digital transformation, telecoms industry stakeholders need to collaborate and embrace a holistic approach, building from platform up, reaching out to partners beyond the conventional telecoms domains to develop an ecosystem that can address changing market demands, and continuously delivering the most up to date solutions to enable customer value creation.

It is a valid statement that every telecom operator is different from the next one, because the customers they are serving are different, by geography, by segment, or by demographics, often by all of these factors. On the other hand, there is also strong commonality between operators, because the fundamental requirements to support digital service provision that most of the customers demand are the same. These include data collection, storage, governance, and cross-domain data analysis, frictionless handling and delivery of content and service, accurate billing, payment settlement, and many more.

This makes it a classic scenario where the 80:20 principle should apply. In other words, about 80% of a typical customer’s demand to power their digital services can be satisfied by a strong unified platform. Such a platform should be able to satisfy most use cases, carry out common tasks like network planning, construction, maintenance, optimisation, and operations, and should be equipped with the full AI suite, including AI algorithm engine, one-stop AI development environment, and AI service operation.

The platform should also have the flexibility to enable partners to develop or customise their own use cases. This is where the other 20% of customer requirement should be addressed. Despite the strong commonality between operator demands, no single platform can satisfy all the different requirements, and these are better served by a vibrant ecosystem gravitated towards the platform. Such a “pull” effect can be achieved with the platform’s capability to enable, to certify, to support, to incentivise, and so on.

When it comes to incentives to attract more partners to the ecosystem, different revenue sharing schemes can be implemented. For example, if the customer’s demand can be satisfied by a partner’s standard solution, in other words, if the partner does not need to customise its solutions for the customer, revenues may be split equally between the platform and the partner. In cases where partners need to customise their solutions to meet customer needs, the partners should have a bigger share of the revenues. The platform can also set up an “application marketplace” to host apps developed by partners. In such cases, dominant revenue sharing models used by leading consumer and business application stores, for example Salesforce AppExchange should be applied.

One operational characteristic that has separated internet companies from conventional telecom operators is that internet companies would undergo continuous delivery of new features and functions while telecom operators’ networks and services are more static. This needs to change if telecom operators’ digital transformation is to succeed. Such continuous reinvention is not limited to functions and technologies of the digital platform either, it should also continuously improve the enablement of the ecosystem that the platform orchestrates. Equally important is that such continuous delivery of improvement should not only be frequent but also discreet, without interrupting customers’ business operation.

As we can see, successful interaction between the three key elements, the platform, the ecosystem, and the continuous operation, to create values for customers relies heavily on the strengths of the platform.

Source: Huawei

Huawei’s General Digital Engine (GDE) is such a unified big data platform. It is built with the company’s expertise accumulated and refreshed from over three decades’ experience of serving telecom operators and other customers around the world. Such expertise has been with our engineers but with the GDE platform, it is now digitised and can serve all the customers in a broad range of service scenarios. It is also equipped with Huawei’s artificial intelligence and machine learning capabilities to help customers cope with and predict market and business demands that go beyond the capability of manual calculation.

Such expertise and capability are continuously being updated, to make the platform more powerful and able to meet more customer needs, therefore simplifying the transformation, shortening the time to market, and optimising lifetime total cost of ownership. Huawei will keep updating the platform, at least twice a year, to enable partners to deliver customisation more easily.

The platform is also the anchor point of a broader ecosystem, working with operator customers to first engage qualified existing partners, then to recruit new partners.

Moreover, the platform, the ecosystem, and the continuous operation mode all live by these values:

  • Agility: always ready to adapt to new market and customer needs and opportunities
  • Openness: open-minded approach to new technologies and new approach to solve problems
  • Equality: treating all partners in the ecosystem equally and fairly

Gartner: Smartphone shipments nose-dived 20% during Q1

Smartphone shipments have been slashed across the industry during the first three months of 2020, though Xiaomi managed to post some year-on-year growth.

It might have only been marginal, a far shot from what the management team would have expected as this point last year, but a 1.4% year-on-year increase for Xiaomi shipments was as good as it got for the worlds’ leading smartphone manufacturers.

“The coronavirus pandemic caused the global smartphone market to experience its worst decline ever,” said Anshul Gupta of Gartner. “Most of the leading Chinese manufacturers and Apple were severely impacted by the temporary closures of their factories in China and reduced consumer spending due to the global shelter-in-place.”

Manufacturer Market share Year-on-year shipments
Samsung 18.5% -22.7%
Huawei 14.2% -27.3%
Apple 13.7% -8.2%
Xiaomi 9.3% 1.4%
OPPO 8% -24.2%
Others 36.3% -24.2%

Perhaps the most worrying aspect of this report from Gartner is the anticipation of the next one. Let’s not forget, the vast majority of societal lockdown procedures started during the latter stages of Q1 and continued through the majority of Q2. With economies beginning to reopen, consumer confidence is likely to be very low, resulting in delays to big ticket purchases. The smartphone slowdown is highly likely to extend throughout Q2, possibly pushing into the next quarter.

As one would expect, the fortunes of the different players are quite varied.

“Huawei will have a challenging year,” Gupta said. “It has developed the Huawei Mobile Service (HMS) ecosystem, but with the lack of popular Google apps and Google Play store, Huawei is unlikely to attract new smartphone buyers in international markets.”

For Huawei, trust and credibility are big factors. Yes, it has a solid reputation for manufacturing smartphones, but hardware is very different to software. It has an uphill battle to convince customers, both old and new, that its devices will deliver the desired experience without the Android ecosystem to underpin it.

Apple on the other hand, has a lot to be excited about.

In September (or October, if you believe the rumours), the iGiant will unveil its own attempt to crack the 5G market. This is a moment many analysts have been looking forward to, as few companies have the power to sway the opinions of the masses like Apple does. This launch could push 5G into the mainstream markets, such is the loyalty of Apple customers.

OPPO is an interesting company as it has been credited as one of the better performers when it comes to offline distribution and sales, though that was obviously severely distributed by COVID-19. This is a wake-up call, with the team needing to reinforce its online presence to ensure greater resiliency.

2020 is going to be a very tough year for the smartphone manufacturers and any company where products or services would be considered an expensive luxury. The damage inflicted to the industry during this pandemic will not be limited to Q1, though recovery could certainly be varied.

Apple has a lot to look forward to, though September might not come soon enough, as perhaps a major event is what the industry needs. Something to inspire the consumer and reinvigorate enthusiasm in technology purchases while pushing 5G into the mainstream market. Let’s hope sluggish sales trends do not drag through to September, but it is a very realistic possibility.

As MasMovil becomes latest acquisition target, are more takeovers on the horizon?

KKR, Cinven and Providence have combined forces to buy Spanish telco MasMovil, but with depressed share prices and regulatory opinions shifting, it could be the first of many corporate transactions.

The merger and acquisition landscape has been somewhat quiet over the last few months, since the COVID-19 pandemic set in across the world, but we struggle to believe there are not cash rich investment funds considering weighty purchases. The most successful investment funds are only such because they can sniff an opportunity, and this is exactly what the MasMovil acquisition should be viewed as; corporate opportunism.

There are still approvals needed from Banca de Espana, the Spanish Telecoms ministry and Industry & Commerce ministry (foreign investment approval), as well as competition authorities in the EU, China, Turkey, Serbia and Israel. However, we suspect the process will run smoothly, especially considering MasMovil CEO Meinrad Spenger has already said he would support the transaction.

First reported by Reuters, the trio of bankers have now made an official public tender offer for $3.3 billion, a 22% premium on the opening share price this morning (June 1). Share price has surged 20%, as one would expect, though it has only just crept above the pre-lockdown levels.

This is what is very interesting about the telco market currently; share price for all major and minor telcos is severely depressed. For those who have money available, and the desire to push into the telecoms space, it is a very attractive opportunity currently.

Share price of selected European telcos during COVID-19 lockdown period
Telco Share Price, June 1 Share Price, Feb 3 Change
BT 120.51 163.34 -26%
Telecom Italia 0.48 0.34 -29%
Telefonica 6.11 4.48 -26%
Telenor 17.75 15.02 -15%
Orange 12.80 10.98 -14%
Vodafone 150.82 134.86 -11%

Share prices accurate at the time of writing – 10.30am, June 1

Some of the companies mentioned above would be too big to consider to be an acquisition target, Orange or Telefonica for example, though others could certainly fall into the right bracket. BT has a market capitalisation of £11.9 billion and is underperforming against UK rivals considerably, while the likes of KPN in the Netherlands could be another interesting target. Sitting third in the mobile market share rankings in the Netherlands, a cash injection and refreshed strategy could be a worthwhile gamble with the telco’s market capitalisation currently €9.42 billion.

Of course what is also worth noting is that the opportunity for acquiring business is not just limited to the bankers. Thanks to a ruling from the European Court of Justice, telcos might have renewed enthusiasm for market consolidation.

Last week, the General Court of the European Court of Justice annulled a decision made in 2016 to block a merger between O2 and Three in the UK on the grounds of competition. In annulling this decision, it challenges the long-standing belief that mergers which would take a market from four operators to three would be vetoed automatically.

This decision is very important for those who have been championing market consolidation. Some argue fewer telcos would results in more concentrated network investment, as well as scaled economics thanks to larger customer bases. The decision from the European courts opens the door for potential market consolidation.

There are of course markets where consolidation is not realistic, the Netherlands or Belgium for example where there are only three mobile network operators (MNOs) today, but there are others where this could be an interesting development. Spain is certainly one of them.

The Spanish market is one where there is plenty of competition. There are currently four major mobile operators, albeit MasMovil is an MVNO, while Euskaltel announced plans to challenge the market with a Virgin Media branded proposition. KKR, Cinven and Providence want to take control of MasMovil, but might Orange be tempted to muscle in on the action?

Telco subscriptions in Spain (2018-2021)
Telco 2018 2019 2020 2021
Orange 19,450,963 19,016,941 19,783,330 19,890,931
Telefonica 18,384,400 18,916,801 19,579,529 20,040,114
Vodafone 15,500,832 15,427,639 15,262,546 15,406,460
MasMovil 6,760,000 7,435,000 7,513,777 7,952,289

Source: Omdia World Information Series

MasMovil could look attractive to Orange for several reasons. Firstly, this is a telco which is heading in the right direction, subscriptions are growing year-on-year. Secondly, MasMovil has bought into the convergence business model which is being championed by the Orange Group. And finally, MasMovil is a MVNO customer of Orange’s Spanish wholesale business, making integration a bit simpler.

With the European courts turning a new page on market consolidation, possibly indicating authorities might be more accommodating of such transactions, this could be an idea which is being discussed in the Orange offices. It would make sense for Orange’s ambitions in the country, while MasMovil is open to some sort of transaction.

Some might also suggest Telefonica would be interested, but with the management team desperate to reduce the €44 billion debt burden and its credit ratings not exactly sparkling, this is unlikely. Vodafone might have considered such a move at another time, but it has larger problems to tackle without adding the complications of an acquisition, most notably in India and Italy.

Speculation aside, KKR, Cinven and Providence will attempt to buy the Spanish challenger telco. With a depressed share price and appreciation for the importance of the telecoms industry at its highest levels, we would not be surprised if this is only the first of several transactions from investment funds, though telco consolidation is also another story worth keeping a close eye on.

A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


GSMA cosies up to O-RAN Alliance

The GSMA, the telco industry lobby group, has announced a new partnership with the O-RAN Alliance to accelerate the adoption of Open Radio Access Network (RAN) technologies.

Full story here


Europe backtracks on market consolidation opposition

The General Court of the European Court of Justice has annulled a decision made in 2016 to block the merger between O2 and Three in the UK, potentially opening the door for consolidation.

Full story here


Huawei CFO loses first legal battle in extradition case

Huawei CFO Wanzhou Meng, the daughter of Ren Zhengfei, has lost her first legal battle in Canada and will now have to face an extradition case.

Full story here


Data privacy is in the same position as cybersecurity five years ago

It has taken years for the technology and telecoms industry to take security seriously, and now we are at the beginning of the same story arc with privacy.

Full story here


Indian telco association pushes for ‘floor tariffs’ on data pricing

In an open letter to India’s telecoms regulator, the Cellular Operators Association of India (COAI) has pressed for quicker decision making on pricing restriction rules.

Full story here


UK’s National Cyber Security Centre launches another Huawei probe

The National Cyber Security Centre (NCSC) has confirmed it is attempting to understand what impact potential US sanction directed towards Huawei would have on UK networks.

Full story here


 

GSMA cosies up to O-RAN Alliance

The GSMA, the telco industry lobby group, has announced a new partnership with the O-RAN Alliance to accelerate the adoption of Open Radio Access Network (RAN) technologies.

Although the benefits of OpenRAN technologies are still widely disputed by opposing corners of the industry, there is clear momentum gathering. With telcos desperate to make the commercial realities of network deployment more attractive, it should come as little surprise new ideas are being embraced.

“As the demand for data and vastly expanded mobile communications grow in the 5G era, a global, cross-border approach is needed to rethink the RAN,” said Andre Fuetsch, Chairman of the O-RAN Alliance, and CTO of AT&T.

“The GSMA collaboration with the O-RAN ALLIANCE is exactly the sort of global effort that’s needed for everyone, operators and vendors alike, to succeed in this new generation.”

The promise of OpenRAN technologies is simple. Firstly, more competition will be introduced to the market to encourage diversity and resilience. Secondly, once hardware and software have been disaggregated, deployment costs will be decreased, and innovation can be increased as best-in-breed technologies can be selected for each segment. Finally, vendor lock-in will become a thing of the past.

The Telecom Infra Project (TIP) has recently released a report which demonstrates the drive of the mobile network operators (MNOs). 53% are now prioritising total cost of ownership (TCO) reductions as profits erode and capital expenditure expenses increase.

What is worth noting is that the MNOs are taking a realistic view on the development of this segment. 66% believe Open RAN technologies will be critical to the survival of numerous MNOs as ARPU falls, but it will be several years before a comprehensive, resilient and competitive ecosystem emerges. A third of tier-1 and half of tier-2 telcos believe they will have commercially launched OpenRAN by 2023, but this does not mean the death of traditional network infrastructure within a generation.

While all these promises sound very interesting, optimism is not shared by all in the industry.

“Not all openness is good and not all closed-ness is good,” Nokia CTO Marcus Weldon said this week.

The likes of Nokia, Ericsson and Huawei will give messages of support to OpenRAN in public, but there will always be an undertone of doubt, as is in Weldon’s message above. The OpenRAN movement fundamentally destroys their business model so it is not difficult to understand why they have resisted and not been as helpful as they could have been to date. Slowing down this movement provides a bit more time for profits without disruption to operations after all.

The OpenRAN ecosystem is not ready yet, despite what some might insist, though progress is being made. And while this partnership might seem like little more than a ribbon cutting ceremony it is also very important. Like Vodafone or Telefonica embracing OpenRAN trials, a partnership with the GSMA provides credibility for the technologies, encouragement for less adventurous and innovative telcos.


Telecoms.com Poll:

When will OpenRAN be ready to be embraced by the industry without reservation?

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Europe backtracks on market consolidation opposition

The General Court of the European Court of Justice has annulled a decision made in 2016 to block the merger between O2 and Three in the UK, potentially opening the door for consolidation.

In 2016, Europe decided it was better for sustainable competition that the four operators in the UK remain independent, blocking the mega-merger between O2 and Three. This decision has set market precedent over the subsequent period, with the generally accepted rule that bureaucrats would not allow less than four independent mobile network operators in a single market. This ruling turns that presumption on its head.

“In our appeal, we argued that the Commission’s approach to reviewing the proposed merger, and European telecoms mergers more broadly, was guided by a misconceived default view that European telecoms markets are better served by having a minimum of four Mobile Network Operators in each EU Member State,” CK Hutchison, Three UK’s parent company, said in a statement.

“This approach ignores market realities, the clear evidence of successful market consolidation in Europe and across the world as well as the very significant efficiencies in terms of increased investment, network improvements and consumer benefits that can be achieved from mobile mergers.”

As soon as the decision from Europe was made to block the merger between Three and O2 was made, the agreement between the two parties was terminated. It will now always be a case of what could have been, as this decision will not reignite talks between the two parties.

“Telefónica notes the EU Court’s decision, but the company has moved on,” a Telefónica spokesperson said. “Telefónica recently announced a transaction that combines Virgin Media, the UK’s fastest broadband network, and O2, the country’s most reliable and admired mobile operator, into a 50:50 joint venture that will create a powerful fixed-mobile challenger in one of its core markets.”

As there will be no material impact on the proposed merger between Virgin Media and O2, which was announced in recent weeks, questions will now turn to more general market consolidation in Europe


How do you feel about market consolidation in Europe?

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Europe has always been against market consolidation if the result leads to less than four independent service providers in the mobile segment. If concessions are offered, like in the Netherlands for example, mergers would be allowed but this would result in a diluted version of what the merging parties would have wanted to achieve.

The ruling from the General Court changes everything.

In 2016, the European Commission considered the reduction from four to three service providers would have resulted in increased prices, decreased quality of service, hindered investment in infrastructure and would have had a detrimental impact on the MVNO segment also.

The ruling which has been made public today disputes the claim there would be negative impacts on competition. Negative experiences for the consumer has not been seen in other markets around the world where there has been consolidation, while there were several flaws during the assessment process. The original assessment also failed to demonstrate effectively that network infrastructure would be impacted also.

With the General Court annulling the decision to block the merger, it is effectively saying Europe would consider market consolidation should there be a good business case. This is a very interesting ruling and statement to make, as it is effectively a green flag to the industry. Could this spur the market’s imagination for consolidation?

New appointment arrives to clean up Three’s network fiasco

UK telco Three has announced the appointment of Carlo Melis as Chief Network Officer just as the Huawei saga starts to rear its head once again.

Over the course of the last week, the rumour mill has been churning at full capacity, with Huawei’s name popping up on more than one occasion. Prime Minister Boris Johnson is facing a backbencher revolt unless ‘high-risk’ vendors are removed from networks within years, while the National Cyber Security Centre (NCSC) is once again investigating whether the firm is in a sound enough position to work with UK telcos.

One might have said there were better times for Melis to join the business.

Arriving from Wind Tre in Italy, Melis has been working on network resilience during the on-going COVID-19 landscape though eventually his attention will turn to managing the spectrum portfolio and presumably creating a network which can rival market leaders within the UK. Much work has been done in recent years, though thanks to outside influences, Three is still in somewhat of a difficult position.

“Three has been on an incredible journey, completely overhauling its network and IT infrastructure and laying the foundations for a 5G network that will dramatically transform the experience for its customers, at the same time as delivering major 4G improvements,” said Melis.

“I’m looking forward to joining Three, bringing my expertise to build on the great progress already achieved and to deliver a network that will stand the business in good stead long into the future.”

The last few months have certainly been an eclectic mix of ups and downs for the Three business. The fixed wireless access (FWA) proposition and campus network offering was looking healthy before Ros Singleton left the business. These business units are still functional, but look a little weaker without Singleton involved, however it is the more mainstream 5G programme which looks more precarious.

Announced at almost the exact same time as the departure of Phil Sheppard, who was effectively the company’s CTO, was the conclusion of the Supply Chain Review. Huawei was designated a high-risk vendor, and therefore limited to providing a maximum of 35% of a telcos network infrastructure equipment. This is a significant problem for Three which decided Huawei was going to be the sole supplier of RAN equipment for its 5G network.

These are the complications Melis needs to manage over the next few months. Alongside the teething problems of a new cloud core and ensuring the 4G network remains stable during this period of dramatically increased traffic, the 5G deployment strategy needs to be reimagined. Of course, this becomes difficult when even more uncertainty is introduced by rebellious politicians and the NCSC investigation.

It could have been a smoother start for Melis…


Telecoms.com Daily Poll:

Should privacy rules be re-evaluated in light of a new type of society?

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MTS delivers solid Q1 but provides cautious outlook

Russian operator MTS saw revenues grow 9% in Q1 but believes the whole-year performance is likely to be flat.

MTS has delivered a financially solid Q1 with a total revenue of RUB 119.6 billion ($1.7 billion), up by 8.9% year-on-year. The company’s OIBDA grew by 1.6% to RUB 51.5 billion ($730 million), while net profit improved 0.8% to RUB 17.7 billion ($250 million) compared to the same period of 2019. The strongest growth comes out of its mobile and fixed telecom services, but about half of the top line growth comes from the adjacent businesses, including fintech, digital services, and retail.

“…this is an unprecedented time that is impacting billions of people around the world, including millions of our customers and thousands of our employees,” Alexey Kornya, MTS President and CEO, said during the earnings call. “Connectivity has never been more critical and we are proud to be helping our customers stay in touch with their friends and family as well as colleagues and classmates.

“Overall, I am deeply proud of the MTS team and would like to express my appreciation for their professionalism in this challenging environment. Looking ahead, I am cautiously hopeful for the future, and our strategic focus is clear: supporting our customers today while not losing sight of our goals for tomorrow.”

As Russia entered COVID-19 lockdown only at the end of March, its impact was not reflected in the Q1 results. However, MTS does provide a glimpse into the impact on April and the first half of May.

Similar to other operators that have witnessed during COVID-19, MTS has seen increased traffic but a big drop in retail with many shops are closed. Meanwhile, the operator has seen and expects increased digital activities, in communication, media, and in financial product consumption. In mobile, MTS has received the regulatory approval to implement self-registration SIM cards through an app.

“Looking ahead, we plan to prioritize this channel at the key level to lower subscriber acquisition cost,” said Inessa Galaktionova, First VP for Telecommunications. MTS is “also broadening our SIM-based infection tracking across all of our sales channels.”

“Now more than ever, consumers are shifting to digital-first banking from online customer service to virtual cards and contactless payments,” said Andrey Kamensky, VP for Finance, on the earnings call, suggesting there could be greater benefit for MTS.

Looking at the full-year expectations, MTS’s management is more cautious. Citing concerns including reduced number of retail outlets as well as the impact of lockdown on roaming income, the operator projects a 0% to 3% growth in total revenues and -2% to 0% OIBDA move, compared with 2019.

MTS is the latest of telecoms companies to show that the industry has withstood the uncertainties from COVID-19 well enough especially when it comes to coping with surging traffic, but it is certainly not immune to the impact. Factors ranging from reduced retail and roaming income due to lockdown to overall economic weakness are beyond the telecom operators’ control, but have or will have manifested on telecom operators’ quarterly and annual numbers.