Back to basics for Huawei as China remains the bedrock of success

Pretty much everyone in the technology world knows Huawei is under pressure, though with its dominance of the Chinese market, it has more than enough to weather the storm.

According to new estimates from IDC, Huawei has now officially become number one in the market share rankings for tablets in China. These estimates follow smartphone shipment figures which demonstrate extraordinary dominance from the under-fire firm.

Over third quarter of 2019, Huawei shipped 2.12 million tablets, up 24.4% from a year ago, to take 37.4% of the total market. It has leap-frogged Apple to lead the market, the iLeader currently controls 33.8% of shipments, while the rest of the field are no-where near the leading two. Xiaomi currently sits in third position, with market share of 5.9%, a decrease of 47.4% year-on-year.

Although increased tablet sales in China are not going to compensate for the troubles which Huawei are facing in the international markets, alongside the smartphone dominance during the same period, it demonstrates the comfortable position Huawei is currently in.

Talking of smartphone shipments, as you can see from IDC’s figures below, the strong market share position is duplicated.

2019 Q1 2019 Q2 2019 Q3
Shipments (Million units) 29.7 36.3 41.5
Market share 35.5% 37% 42%
Year-on-year growth 40% 27% 64.6%

And even with heavy criticism from the White House, Huawei is maintaining its position as the leading network infrastructure vendor worldwide. In the third quarter, Dell’Oro estimate Huawei owned 28%, though some might suggest this is due to its dominance of the Chinese market. The firm has been missing out on valuable contracts in some European markets though it doesn’t seem to be having a disastrous impact.

Noise from the White House might be starting to have an impact on the Chinese vendors influence on certain Western markets, but let’s not forget how Huawei created such a dominant position in the first place.

Some might suggest the dominance of Chinese companies on the Chinese market is only due to an uneven playing field, Western challengers might be handicapped when it comes to competition, but this is largely irrelevant. This is not a situation which is likely to change in the future, regardless to the number of complaints, therefore it should be accepted.

This dynamic afforded Huawei the confidence to aggressively expand in bygone years, and it will continue to be a comforting thought as uncomfortable aggression floats both directions out of the US.

With continued dominance in the Chinese smartphone, tablet and network infrastructure segments today, Huawei has firmed up its bank accounts. The spreadsheets will not be under anywhere near as much threat as they potentially could have been, as the management team can rely on revenues continue to flow through the domestic market. This is the same position Huawei was in prior to its international expansion.

Huawei is not necessarily a Chinese company anymore. Yes, it was founded in China and the country continues to house its headquarters, but this an international beast with considerable influence around the world. The management team will not be happy its international revenues are being eroded, though the Chinese domestic market can prop this giant up; it is that big.

Irrelevant to the amount of noise coming out of the White House, and regardless of the success it has in convincing its allies to ditch Huawei as a vendor, it will always have the Chinese domestic market to lean on. And as long as it is still one of the country’s leading companies, it will always have the opportunity to expand aggressively internationally. It just has to wait for the anti-China rhetoric to die down, like it did in the early 2010s.

FTC forcing through rethink on data throttling

The Federal Trade Commission (FTC) has come to a settlement with AT&T over a 2014 lawsuit on data throttling in unlimited tariffs.

While few consumers will have knowledge of data throttling clauses in ‘unlimited’ tariffs, the practise is widespread. It is of course a nuance rather than being directly misleading, though this settlement might well create precedent to shift the approach to data throttling in the US.

“AT&T promised unlimited data – without qualification – and failed to deliver on that promise,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”

The complaint was initially filed in 2014 suggesting AT&T was misleading millions of customers with the practise of data throttling. Although there might be an argument for throttling extremely heavy users on a basis of reasonable use, it does appear AT&T went too far. The FTC suggested AT&T was throttling speeds to such a degree some common applications become difficult or nearly impossible to use.

In the case quoted by the FTC, AT&T sold ‘unlimited’ plans to 3.5 million customers but then throttled speeds once 2 GB of data was consumed in the billing period. At the time, this would have been considered a hefty allowance, though many would have surpassed this quota.

The $60 million sum paid by AT&T to settle this complaint will partly be used to refund customers who signed up for the services in 2014. Those who are still AT&T customers will have the refund automatically applied to their account.

As telcos are now exposed to the threat of a FTC fine, there might well have to be a rethink as to how data throttling is applied to data tariffs.

Firstly, this settlement will not mean the end of data throttling, however the telcos will have to consider whether the current cut-off point would be deemed appropriate. It is perfectly reasonable to restrict the consumption of data in very extreme cases, though the FTC will have to agree to these quotas being reasonable.

Secondly, the telcos will have to make more of an effort to educate the customer on the purpose of data throttling as well as increase awareness as to when it will be introduced. As it stands, most of these unattractive elements of contracts are usually buried in the terms and conditions though this will have to change.

This is of course not the only example of a US telco finding themselves in hot water because of data throttling. During California wild-fires last year, Verizon throttled the data services of a fire department

Ultimately, many consumers will not be impacted, however with data consumption rapidly increasing through more data-intensive applications and a broader array of connected devices, more will be in the future. The US telcos will have to ensure the data throttling practices are evolving with the progress of connectivity, as well as being more transparent when customers sign-up to contracts.

Sharing, selling and standardizing – the great spectrum conundrum

With the World Radiocommunication Conference currently underway in Egypt, it’s timely to discuss some of the spectrum issues facing the industry today.

Spectrum is and will probably remain a hot-topic for the industry due to its critical importance. The success of a telco is partly defined by the spectrum licences it is able to horde, and depending on where you are in the world, the scarcity of these assets varies. That said, to describe anywhere as having an abundance would be foolish to say the least.

Starting with the idea of selling spectrum, this is a topic which is under constant debate, review and criticism.

“When you talk about spectrum, the price you have to pay always has an impact on the rollout strategy,” said Jasper Mikkelsen, Director of Public and Regulatory Affairs for the Telenor Group, during a panel session this week.

This is where the balancing act is at its finest. The regulators will argue they need to charge for access to spectrum for several reasons, but the price of spectrum is often the centre of criticism in various markets. Mikkelsen pointed out during the auctions in Thailand earlier this year, many of the spectrum assets went unsold due to the reserve prices assigned to the lots.

However, according to Donald Stockdale of the FCC, the complaints from telcos might have some merit. If spectrum is unsold at the end of the auction, this is most likely due to the auction being badly designed. Perhaps not enough was released, the channels hadn’t been cleared effectively, the reserve price was too high, or the obligations attached to the winning assets were deemed unreasonable by the telcos.

Telcos will always complain and point to markets where spectrum is effectively given away for free, however there are cases where they have a point. If such a valuable asset is remaining unsold, despite the pleas of telcos to free-up more spectrum, there is perhaps something wrong with the product itself.

What is worth noting is that the auction process is not perfect. There will always be complaints and criticism, though it is currently the least worst option. It is certainly better than the ‘beauty contest’ concept, which leaves the door wide open to corruption.

How to design and manage spectrum auctions is more of a ‘trial and error’ process, which will come as little comfort to those shelling out the investments, however the idea of standardising is something which should certainly be given more traction.

This will of course be a topic of conversation for at the World Radiocommunication Conference, especially concerning the higher frequency airwaves, though there is still a lot of work to do on the spectrum licenses which are already a hotch-potch of complexity.

While there is work being done to standardise spectrum across various different regions, this is a lot more complicated than just simply creating new rules. Bureaucrats have to deal with the dreading concept of legacy.

As Michael Sharpe, Director of Spectrum and Equipment Regulation at ETSI, pointed out there are 48 countries in Europe, all of which have been assigning spectrum to different usecases, products and services over the last few decades. Harmonisation is a topic of conversation now but unravelling the maze of red-tape which already exists in each of these nations is a very complex task.

First and foremost, there are some very attractive benefits from standardisation. In a region like Europe, the risk of interference is present, driving the case, while there are also be benefits driven through interoperability or economy of scale, however there will always be a downside.

Looking at Europe once again, the congestion of certain bands will vary depending on the demands of the nation, while the cost assigned to clearing these costs will certain vary quite considerably. Then you have to look at the idea of flexibility.

Politicians generally don’t like being told what to do, and they like it even less when it comes from bureaucrats over which they have very little influence. In designing a harmonised approach to spectrum allocation and usage, flexibility will need to be built into the process to ensure each nation can address the specific needs of dominant industries and the nuances of societal variance.

This is of course very difficult to judge the right balance, but it is a critical element not only to ensure economic prosperity in each of the nations, but to make sure the rules are adopted by the Governments in question. If it is too much of a hinderance or costs too much to clear the bands, who is to say these suggestions are not just simply ignored, these are sovereign states after all.

The final area which is attracting some attention out of the US is a spectrum sharing initiative out of the FCC.

Focusing specifically on the valuable 3.5 GHz spectrum band which is being championed in Europe to deliver the first 5G services, the FCC is trialling a dynamic spectrum sharing project. Known unofficially as the ‘Innovation Band’, it offers a palatable compromise between high-speed data transmission and extended coverage. However, the US has found itself in a bit of a pickle as the current incumbent on this spectrum band is the Navy.

The spectrum is currently utilised by the Navy in offshore radar operations, however it is not being used all the time, such is the nature of naval operations. For such valuable spectrum, this is largely viewed as a waste.

Stockdale highlighted the team has created a three-tier, demand-orientated system, where spectrum is utilised dependent on the presence of those in the tier above. The Navy has the right to use the band first and foremost, though when it become unutilised, mobile service providers can purchase licenses to gain access for the second tier. Should the Navy or the telcos not be making use of the spectrum, it can be assigned for general use for those approved in the third-tier.

Although this is only a trial for the moment, it demonstrates the point made above. Flexibility needs to be built into spectrum harmonisation initiatives, as it is unrealistic to repurpose this band in the US. The cost and effort are unlikely to be justifiable when you consider the size of the US Navy.

This is an excellent example of innovation when looking at spectrum, and regulators around the world should be paying attention to the lessons learned through this experiment. The idea of dynamic spectrum sharing could be huge if the fundamentals are validated here, such is the demand for this valuable and increasingly scarce resource.

This is of course not the only example of spectrum being repurposed in regions where it is not being utilised. In the UK, Ofcom has introduced rules which dictate unused spectrum must be released, assuming there is demand.

Vodafone recently announced it entered into a three-year agreement with StrattoOpencell to share the use of it 2.6 GHz spectrum assets to deliver connectivity in Devon. The spectrum licences are being used in highly-urbanised areas, but not in the countryside, therefore it is inefficient use of the asset without these rules from the regulator.

Although spectrum is a topic which has been the centre of many debates, it does appear it will be an ever-lasting ebb and flow. The World Radiocommunication Conference will likely free-up some more spectrum, but the TMT industry is very good at finding ways to use it. Scarcity is most likely going to persist, though there are some interesting conversations evolving to improve this niche of the mobile segment.

Revenues are down, but BT looks ready to do battle

Total revenues and profits might have slipped slightly at BT, though it met expectations and it seems the business is lining-up its pieces for an assault on the UK market.

With the assets the telco has at its disposal, BT should dominate the market leaving the scraps for rivals to fight over, but this has not been the case. There have been some lavish spending sprees over the last few years, though the refreshed management is taking a more network-orientated approach as opposed to the ‘bells and whistles’ of the previous regime.

“BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year,” said CEO Philip Jansen.

“We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.”

Capital expenditure for the first six months of 2019 was £1.88 billion, up £225 million year-on-year, although this excludes the grants from the Broadband Delivery UK (BDUK) programme. Such increase should come as little surprise as the team has been enthusiastically shouting about 5G launches across the UK (now up to 20) as well as new homes which are being passed with fibre (23,000 per week) in pursuit of the Government’s lofty full-fibre goals.

In years gone, BT looked like a telco which was defined by its challenge to Sky in the content market, while few could recognise the synergies with EE. The BT of today looks very different, thrusting the connectivity assets to the centre of the business. With the convergence business model proving its worth in various European markets, see success at Orange for evidence, BT is taking inspiration.

With the fixed network in the UK, which is being aggressively fibred-up, 30 million mobile subscribers, five million wifi hotspots and a new TV proposition to be launched at some undefined point, the cross-selling opportunities are abundant should BT be able to nail the experience on the assets. This seems to be the focus of investments under Jansen, instead of going for the glamorous, the team is concentrating on delivering the core connectivity experience and then bundling on additional added-value options.

Across the business, the Average Revenue per Consumer (ARPC) for broadband remained relatively flat at £38.5 per month, while postpaid mobile decreased to £20.8, down 5.5% though as this has been attributed to new regulation and the SIM-only trends it is nothing too be too concerned about. Interestingly enough, the number of Revenue Generating Units (RGUs) per household has increased to 2.38. This is where the convergence strategy could make a very positive impact.

As a business model, convergence is more efficient and creates higher customer loyalty and NPS. Bundled at a suitable price-point, and it looks like a very attractive offer to steal subscriptions from rivals also. However, experience does have to be very high across the entire portfolio, hence the increased spend on the network over recent months.

This is where BT could be a very interesting business over the next couple of months. The ‘Halo’ converged products could attract interest, especially when the hotspots are bundled in also. Rivals might be able to compete with BT with a few bundles, but no-one can offer the same breadth across mobile, broadband, wifi and content. This is a massive advantage, and BT should be shouting and screaming.

We might have to wait a couple of months before the refreshed TV proposition is fully polished, but this is another reason why no-one should worry too much about the slipping revenues for H1. BT is still lining up the various pieces before an aggressive push with the full convergence offer. It has been suggested the TV proposition will not be ready until the new year.

With its assets, BT should be untouchable. It still has work to do on the fibre rollout, 5G deployment, finalising the TV offer, improving the wifi experience and aligning the BT and EE brands, but the ‘Halo’ converged offer could create some serious noise.

2019 First Half Financials
Total Revenue £11.467 billion (1%)
Profit before tax £1.333 billion n/m
Profit after tax £1.068 billion n/m
Basic earnings per share 10.8p 2%
Capital expenditure £1.882 billion 3%
Business units
Consumer £5.194 billion (1%)
Enterprise £3.055 billion (5%)
Global Services £2.196 billion (6%)
Openreach £2.356 billion n/m

n/m = not-meaningful

Verizon unveils mixed bag as media continues downward spiral

Verizon has released its third-quarter financials with the mobile business growing, broadband middling and media dropping.

Total revenues for the three-month period ending September 30 stood at $32.09 billion, a 0.9% increase year-on-year, though it has racked up $97.093 billion across 2019. As with previous quarters, there are positives to take away though the media business is still weighing heavy on the prospects of the group.

“Verizon continued its momentum in the third quarter by driving strong wireless volumes in both our Consumer and Business segments, while delivering solid financial results, highlighted by continued wireless service revenue growth, increased cash flow, and EPS growth,” said CEO Hans Vestberg.

As many would have imagined, little attention was given to the fragile media business. With each financial statement, the $5 billion bet on Yahoo’s media assets looks a little bit more like a waste of funds. Revenues in this business totalled $1.8 billion, down 2% percent year-on-year.

What was supposed to be the pursuit of alternative revenues in the ever-growing digital advertising segment is seemingly turning into nothing more than an Elephant’s Graveyard for assets in the digital economy. Aside from divesting interests in Flickr, Moviefone, MapQuest and Tumblr, Verizon is also reportedly on the search for a buyer for the Huffington Post. Perhaps executives have just had enough and are searching for a way to elegantly backtrack.

The failings of this business unit have been well-documented, so we do not want to invest too much time here, but Verizon was always going to fighting a losing battle. Winning a slice of the digital advertising profits requires out-of-the-box thinking, the ability to make money out of nothing. This is what Google, Amazon, Facebook and other innovative digital players can do.

But Verizon is not that type of business. It is a functional, engineering-focused, traditional beast. From a culture and risk-appetite perspective it was always going to struggle to compete with the lateral thinking Silicon Valley residents, and this is further evidence.

That said, when Verizon focuses on what it does best it can make money. The mobile business unit boasts of 193,000 retail postpaid net additions over the quarter and revenue growth of 2.6% year-on-year. Revenues for the broadband business are down year-on-year, but the number of Fios subscriptions are up 2.3%. It might not be as exciting to talk to investors about the world of connectivity compared to digital advertising, but it is what the company is very good at.

The team should of course attempt to secure new revenues to bolster the bottom line as the business of connectivity becomes increasingly commoditised but taking on the likes of Facebook and Google for digital advertising revenues always looked like too much of an ask.

Although this is a dampener for the Verizon business, there is more than a glimmer of hope around the corner; 5G.

There might be some questions regarding the coverage of its mmWave spectrum, but Verizon is making progress with 5G deployment. Alongside the financial results, the team also hit the go button for 5G in Dallas, Texas and Omaha, Nebraska. All of the launches are very limited from a coverage perspective, but momentum is gathering very quickly.

5G can form the catalyst for growth is the telcos force themselves through their own digital transformation. Let’s be clear, the telcos will not escape the utilitisation trends with 5G alone. The business needs to be transformed to offer new connectivity solutions to enterprise and consumer customers alike. Digital transformation is a more pressing concern for telcos than any other vertical.

But there is hope on the horizon. The lure of 5G contracts are proving to be tempting for consumers, which will help the bottom-line as data tariffs quickly surge towards unlimited as standard, and enterprise customers are enthusiastic about the connectivity euphoria. There are of course companies who want to steal the profits from the telcos, but the opportunity is still there.

Is the UK’s Shared Rural Network a ploy to extinguish spectrum obligations?

The UK government and operators have pledged to spend £1 billion on rural coverage, but is it enough to convince Ofcom to drop the deeply unpopular coverage obligations placed on the 700 MHz and 3.6 GHz spectrum licences?

Next year Ofcom will auction licences for valuable spectrum assets in the 700 MHz and 3.6-3.8 GHz bands, and while these airwaves are incredibly attractive to the telcos, the attached coverage obligations are not. This has been a point of conflict in the industry over the last few months, with Vodafone being particularly critical.

Sources have suggested to Telecoms.com that the Shared Rural Network is an effort to appease the demands of the UK regulator. Over the coming months, we are likely to see a consultation from Ofcom, and perhaps it will be tempted to drop the universally unpopular coverage obligations which have been attached to the 700 MHz and 3.6-3.8 GHz spectrum auctions as a result of the Shared Rural Network.

Looking at the obligations, the MNOs who profit from securing the valuable spectrum assets would have had to dig even deeper in the pockets to fund the obligations. Not only would geographical coverage have to be increased to 90%, an additional 500 sites would have to be built and the winning telcos would have to provide good quality service outdoors for at least 140,000 premises to which it currently does not.

One of the issues with these obligations is that there is no consideration to how they might individually influence each other. An auction winner might not have to build an additional 500 towers or add an extra 140,000 premises to the coverage cone to get to 90%, but that didn’t matter. The money and effort would have to be spent in any case.

Telcos generally do not like being told how to spend their money, and these obligations were met with widespread criticism. Ofcom created a common enemy to unite the telcos, which is no easy task, to figure out a way around these demands. This appears to be the driver for the Shared Rural Network; invest in rural together, to rid the landscape of what is perceived by private industry as unreasonable coverage obligations.

As you can see from the statement below from Ofcom, the plan seems to have been successful, though we will wait for the ink to dry.

“We warmly welcome these commitments, which follow detailed discussions between Government, Ofcom and the mobile operators,” said an Ofcom spokesperson.

“These improvements will make a real difference to mobile customers across the UK, and we’ll ensure they’re legally binding by writing them into operators’ licences. We will also monitor and report on companies’ progress in achieving better coverage.

“Separately, we will shortly set out revised plans to release more airwaves for mobile services next year. In light of today’s agreement, we are no longer proposing to include coverage requirements in our auction process. We will now press ahead, with industry, on the urgent task of getting better mobile services to people wherever they are.”

These are promising noises being made by the regulator, but the Shared Rural Network is only a proposal for the moment, and Ofcom can still go back on the suggestion it will remove coverage obligations. However, the telcos should view this as a win.

The UK Government and the four MNOs have finally come to an agreement to fix the digital divide with a £1 billion shared rural network.

With £530 million being contributed by the MNOs and an additional £500 million being squeezed out of the UK Government, the aim is to increase geographical coverage of 4G networks to 95% of the UK. Part of this will involve reciprocal agreements between the telcos to share existing infrastructure, but the plan will also include joint investments to build telco-neutral sites for the total not-spots.

“Brokering an agreement for mast sharing between networks alongside new investment in mobile infrastructure will mean people get good 4G signal no matter where they are or which provider they’re with,” said Digital Secretary Nicky Morgan.

“But it is not yet a done deal and I want to see industry move quickly so we can reach a final agreement early next year.”

While the digital divide in the UK is no-where near as apparent as some places around the world, it does still exist. In recent months, this has also become a mainstream, politically charged issue and this is not a reversible change. The telcos will be under continued pressure to deliver connectivity in the nooks and crannies of the UK, though for it to be commercially viable this initiative will be crucial.

As it stands, only 67% of the UK landmass is covered by all four MNOs, while 7% are deemed total not spots, with zero coverage from anyone. Under the new plans, each of the MNOs will bring their own geographical coverage up to 92%, which when brought together, will bring 4G coverage to 95%.

Looking at the total not spots, although this is a secondary objective of the shared rural network, addressed further down the line, the aim is to bring this 7% of the UK which gets zero 4G coverage down to 3%.

“There is no other scheme like this in the world,” said Vodafone UK CEO Nick Jeffery.

“It will spell an end to annoying mobile ‘not spots’ for hundreds of thousands of people living, working and travelling in the more remote parts of the UK. By working together, we will deliver better coverage while offering more choice for consumers and businesses using far fewer masts.”

This is a good scheme, which should go someway to addressing some of the challenges which are being faced across the UK’s connectivity landscape. What is worth noting however, is this is not an overnight fix. To get to the 95% threshold suggested in this statement, it make take five to six years.

What is also worth pointing out, is the contributions by the telcos are unlikely to be equal. Those who have the most to gain from a shared rural network will likely be asked to contribute more to the CAPEX column, while the OPEX of these sites will be split evenly between the four MNOs.

And there are of course other questions which remain, such as, how will this process and mechanism be managed? The most logical answer would be for the four MNOs to create a joint-venture, invite Government stakeholders to sit on the board, to manage this process commercially. That said, we suspect Ofcom and the Department for Digital, Culture, Media and Sport will want to have more skin in the game and may well push for this management function to be an offshoot of an existing public sector body.

That said, the proposal is a promising one to address Government demands to meet coverage obligations and MNOs needs for investments to be commercially viable. But who gains the most from this initiative?

Looking at the 2018 Connected Nations report from Ofcom, O2 would have the most to gain and EE the least:

Operator Geographical coverage
EE/BT 84%
O2 74%
Three 78%
Vodafone 79%
All MNOs 66%

While these figures are a little bit dated, we can’t imagine the rankings have changed too significantly. One aspect which we were surprised about was the city-centric Three pipping O2 on geographical coverage across the entirety of the UK.

Just taking the figures at surface level, EE might be a bit irked with the Shared Rural Network as it erodes a competitive edge. EE can sell its services to customers with the promise of having the most widespread network across the UK, and the holding-hands approach to bring everyone up to 92% might undermine this. However, there are some advantages.

Firstly, 92% coverage will not appear overnight. It will take years to get to this number, allowing EE to maintain its competitive edge for some time. The other element you have to consider is the work it will take to get to 92%.

Although the pain of building passive infrastructure will be shared between the four MNOs, not evenly however, the purchase and installation of active equipment will be down to each of the telcos. EE does not have as much of a gap to bridge to reach 92%, freeing up time and resource. This could be spent on improving networks in the cities to reduce network congestion or improving connectivity on the transport links throughout the country. It might seem like a negative, but it can be turned into a positive.

While many in the industry will complain about the mountains of red-tape which is constructed through the aisles of the telco industry, this is an example of a forward-looking, collaborative initiative. It marries the coverage demands of the Government which are set forward in campaign promises, while being sensitive to the CAPEX and OPEX requirements of private industry.

Governments and regulators around the world should look at these proposals and take inspiration. The digital divide is not as great in the UK as elsewhere, though this is certainly a step forward.

Investors scupper Sunrise expansion plans

Sunrise has cancelled an Extraordinary General Meeting (EGM) to secure acquisition funds to acquire UPC Switzerland after investors rejected the move.

Announced back in February, Liberty Global proudly proclaimed it had offloaded its Swiss business unit, UPC Switzerland, for $6.3 billion. At the time, the acquisition looked expensive, and it now appears the investors aren’t prepared to foot the bill.

“We regret cancelling the EGM,” said Peter Kurer, Chairman of the Board of Directors of Sunrise.

“We have spent a significant amount of time engaging with our shareholders and continue to believe in the compelling strategic and financial rationale of the acquisition.”

To fund the acquisition, Sunrise was attempting to force through a 2.8 billion franc rights issue, though this was opposed by Freenet, Sunrise’s biggest shareholder, as well as several other investors. With the opposition from such weighty investors, the writing was clearly on the wall for the Sunrise management team.

While the deal had already received regulatory approval, the usual stumbling block for consolidation in smaller markets, all the opposition arguments come back to the price of the acquisition.

For Sunrise, this was supposed to be a deal which would allow it to compete on a more level footing with market leader Swisscom. With UPC Switzerland introduced to the mix, Sunrise would have inherited mobile subscribers to boost market share, but also a fixed business unit which passes more than 50% of homes across Switzerland.

Theoretically, the inclusion of such assets would have enabled the business to create an attractive convergence model to challenge the leadership position of Swisscom, but it was too expensive.

Just to put things into perspective, the current market capitalisation of Sunrise is roughly $3.57 billion, less than half of the value of the acquisition. This is not necessarily unusual, though when you look at what is being acquired the numbers start to look a bit suspect.

UPC Switzerland has passed just over 2.35 million homes with its fixed network, roughly 50% of the country’s total households. It has 1.07 million broadband subscribers, and 1.04 million video customers, 599,400 of which are premium. The mobile business currently has 173,400 subscribers.

In the three-months ending June 30, revenues at UPC Switzerland stood at $315 million, a year-on-year decrease of 5.2%. The revenue dip was attributed to poor performance in the fixed business unit, though this might be down to decreased marketing activity as management team cast its eye towards the Sunrise transaction; it isn’t necessarily a dip to read into too much.

Investors clearly do not believe these numbers justify a cheque worth $6.3 billion. Just to put it into context, BT acquired EE for £12.5 billion in 2016 and inherited 30 million mobile subscribers at a very similar ARPU.

For Liberty Global, this would seem to be back to the drawing board. The team is attempting to reduce exposure in Europe, refocusing attention on South America, and this will be a disappointing outcome.

Fingers pointed towards 3G work for Three network outage

While the full-extent of the network outage has not been unveiled just yet, some are suggesting maintenance on the firms 3G network is the root cause.

Three has confirmed it was a change to the network which was being made overnight on Wednesday [October 16] which caused the outage, but it is being elusive with the specifics. Either it doesn’t know, which we doubt, or it doesn’t want to say.

There does appear to be customers who are struggling to connect to voice, SMS and data services, though the majority of the issues seem to have been settled. Networks appear to be up-and-running, and now the work begins to understand the cause of the outage. Perhaps more importantly, the team will also want to figure out how to ensure this incident does not occur again.

“Following the technical difficulties with our services yesterday, the majority of our customers can now make calls, send texts and use data,” Three said in a statement.

“Our engineers have worked overnight and are continuing to iron out a few remaining issues from a technical perspective. While voice and text have returned to normal, unfortunately a small number of customers may continue to experience intermittent issues with data.

“To help with the process we advise our customers to turn their phones off and on or turn airplane mode on and off, which will in most cases resolve the issue by resetting your phone’s connection to the network.”

Although the ‘turn it off and turn it on again’ request will infuriate a few, it is usually the best way to get things fixed. Three is suggesting the problems are in the past and it will be hoping its reputation has not taken too much of a hit.

Unfortunately for the team, there was a bit of a misguided attempt at humour during the saga. In one tweet, Three suggests O2 had unplugged its 3G network when plugging in its own 5G infrastructure, though a few commentators noted that it might have been a bit funnier if there weren’t customers continuing through the data-less struggle.

Looking at the root cause of the issue, there is still some ambiguity. Some have suggested it might have been teething problems for the new cloud core, being supplied by Nokia, though Three has denied this. Other reports have emerged suggesting maintenance and repairs on 3G infrastructure could be the reason.

The 3G work is an interesting angle, as while Three is attempting to switch-off 3G in pursuit of re-farming valuable spectrum for 4G and 5G, this is still a work in progress.

Interestingly enough, while the process of switching-off 3G networks is one which is gaining popularity, spectrum is a valuable resource after all, it might have a negative impact on the 2G networks which are still running.

Although it might seem unusual to discuss 2G in today’s world, a report from Tech UK suggests the need for 2G services is likely to continue into the 2030s. The services are still being made use of by the elderly, rural users and M2M applications, this will not change in the immediate future. If telcos are switching off 3G, the demand of these areas cannot be offset meaning 2G networks will have to be maintained for the foreseeable future.

“We sometimes focus on technology without fully understanding the impact on services people rely on,” said Tony Lavender, chair of the Spectrum Policy Forum Steering Board.

“Among other things, 2G enables smart metering and the mobile phones used by many vulnerable people in society. We need to think through the alternatives for these services before switching them off.”

While hiccups are rare in the connectivity world, they are certainly not unheard of. Last year, inadequacies from Ericsson resulted in an expired software license crashing O2’s network in the UK and Softbank’s in Japan. At the time of writing, Verizon is also entering the domain of damage control after users faced the connectivity baron land in the North-east and the Mid-west.

What is unclear is what the financial impact of the outage will be. As has been shown with the O2 network outage last year, consumers do not immediately flood towards the exit when services crash for an extended period of time. Three’s network does not crash regularly, therefore customers will likely tolerate this incident, but it might end up costing the firm a few million in compensation.

BT launches biggest TV campaign for two decades

BT has launched its biggest TV advertising campaign for 20 years’ in the hope it can link-up all the network and brand assets in pursuit of the convergence business.

The new campaign, running across all available channels, will hopefully build the foundations to reinvigorate an ageing BT brand and push towards creating a new business model, heavily relying on the new ‘Halo’ convergence product.

More than three and a half years after acquiring the EE business, BT is getting down to the difficult work of making sense of the business. The expensive and questionably beneficial venture into TV proved to be a useful distraction for the team, though now it seems it is making progress on validating the £12.5 billion deal which brought the mobile giant into the group.

“Today’s launch of the ‘Beyond Limits’ campaign represents a real shift for BT, inside and out,” said Marc Allera, CEO of BT’s Consumer division.

“Our presence and scale across the UK means that we have an opportunity and responsibility to go further than ever to connect more people and businesses across the UK, help them make the most out of the technology they have, and equip them with the skills they need to shape the future. This campaign represents just that, a bold step into the future, helping people to break down barriers and realise their potential.”

The TV ad follows the story of a young girl as she travels through modern Britain to reach her classroom of the future. This aspect of the campaign draws attention to the innovations which are made capable as future-proofed networks, both 5G and full-fibre, are rolled out through the country.

While this aspect of the campaign does not pay too much homage to the wider scale of the BT business, it does draw attention to the digital skills and education campaign which the team has launched.

Alongside this TV campaign, BT will also brand all of its EE shops with the BT branding and will sponsor all four football unions representing the members of the UK. The BT business does need a brand refresh, it needs to be presented as a modern company in the same way Three and O2 has done in recent years, though we will be curious to see how these campaigns aim to marry the different assets in the mind of the consumer.

If you look at the assets which the UK telcos have at their disposal, BT should theoretically be untouchable. The largest mobile and fixed networks, a wifi footprints with five million access points and a new TV proposition, behind schedule currently but should be launched in the New Year.

The new BT brand is a good start, offering the company a fresh start, but soon enough someone will have to make the brave decision to retire the EE brand, as well as the expensive brand marketing campaign fronted by the likes of Kevin Bacon and Britney Spears. Not only is running two advertising campaigns very expensive, the perseverance of a multi-brand strategy does not help the push towards convergence.

Hopefully this is the first step in this journey forward. A significant brand marketing campaign will refresh the brand and drive towards repositioning the BT business. The TV ad does encourage the association with BT and future-tech and does provide the foundation to build bigger and better things. However, the team will still have to tackle the complicated job of marrying all the connectivity and entertainment assets into a single, bundled proposition.

Battle for control of connected car ecosystem has not been decided – Renault

It might be slightly unusual to have one of the worlds’ automotive giants presenting at a broadband conference, but despite the odd fit, there were some very interesting points made.

Speaking to Telecoms.com on the side-lines of Broadband World Forum at Amsterdam, Renault’s Chief Sales and Marketing Officers for the services unit Benoit Joly, gave a statement which will come as a tsunami of relief to the telco industry; the battle for control of the connected car ecosystem has not been decided yet.

This has been the worry of many industry analysts and commentators. When a new segment of the digital economy emerges, can the telcos move quick enough to capitalise on the newly created revenues?

A perfect example of this is in the living room. When the idea of the smart home emerged, the telcos got very excited. Here was an opportunity to move beyond the realms of connectivity service provider and into the promised land of digital services provider. However, progress was too slow, and now it looks like the OTTs own this space through their smart speakers.

In this instance, aside from a few rare examples around the world, the telcos have been relegated to commoditised connectivity providers. In the connected car segment, this is not the case, not yet anyway.

As Joly pointed out, there is a space for the telcos in the connected car segment, above and beyond the dreaded utility tag. Renault is of course working closely with the telcos in this fast evolving but still embryonic area, but it is also working alongside the OTTs. Business models are evolving, and services are still being created, this is an exciting area.

The interesting element for the consumer is going to be the seamless nature of the connected car as an element of the wider digital life. The telcos already have skin in the game, as the connectivity provider, however so do the OTTs; the fraternity which owns the customer experience will reap the profits.

From a purely commoditised revenue perspective, there is of course opportunity. Joly highlighted that the car could be seen as an additional element to monetise, though it is not exactly nailed down how. Should connectivity in the car be seen as an extension of existing consumer mobile tariffs or do the telcos wholesale mobile connectivity to the automotive OEMs?

This element of the equation will perhaps depend on who owns the connected car platform and the supporting ecosystem. Should the telcos win out over the OTTs, there will be a lot more influence to dictate the state of play, or perhaps the OEMs would want to wholesale connectivity? The automotive giants do not want their product to be commoditised, therefore this could be a way in which the OEMs add value to customers beyond the point-of-sale of a vehicle.

There are still a lot of moving parts in this fast-evolving segment of the digital economy, and many questions which need to be answered. The OTTs will of course want to own the ecosystem, and the newly created revenues which come with it, however the telcos will be relieved to hear there is still a chance they can move up the value chain in this segment at least.