DT gets slap on wrist for net neutrality naughtiness

Deutsche Telekom has found itself on the wrong side of right after its ‘Stream On’ offering was found to break European net neutrality rules.

After the Federal Network Agency (BNetzA) imposed restrictions on the telco on the grounds of net neutrality, DT took to the courts to fight the decision. Unfortunately, the lower courts and today in the Higher Administrative Court in Muenster, it was confirmed the telco would no-longer be able to offer the ‘Stream On’ value add feature in its current form.

The issue which the telco is facing boils down to the small print. DT customers have found themselves to have traffic throttled and are unable to make use of the ‘Stream On’ feature outside the German borders, violating European rules on roaming.

‘Stream On’ was first introduced to customers in the US, with the German business following suit after witnessing the success. Offering zero-rating benefits on video streaming, the proposition proved to be as successful in Europe, with two million German customers signed up.

It is of course a strategy which will sound attractive to the data-intensive consumers of today. With entertainment and gaming content from selected partners not bleeding the monthly data allotments, it sounds very interesting, however it seems DT is a victim of its own sluggishness.

One of the issues which BNetzA found was on the data throttling side of the offer. For cheaper data tariffs, download speeds were throttled with the critics arguing this violated one of the key principles of net neutrality, irrelevant as to whether the user consented to the downgraded speeds.

For the tariffs at the bottom end of the scale, download speeds had been throttled to 1.7 Mbps. This might have been sufficient at some point, but at this is not fast enough to deliver a HD quality resolution, the courts decided it was undermining the rules.

Secondly, in limiting the zero-rating offering of ‘Stream On’ to its own borders, DT has also been found to have broken European roaming rules. As the free data stream ended at the border, the courts agreed with regulators that the user was effectively being ‘charged’ for using video and gaming services when in another country. Charging more for services while abroad is a no-no when it comes to the European Union’s rules on roaming.

Although the telco will not be happy with the outcome of this case, it is not the end for the ‘Stream On’ proposition. With two million users signed up, it is clearly at attractive value add for DT, but the telco will have to tweak the small print and update some permissions to ensure it is compliant with current regulations.

DT and Software AG team up to launch IoT FTW

Deutsche Telekom has partnered with fellow Germans Software AG in a bid to boost both company’s IoT offering.

They’re even calling it ‘IoT made in Germany’ as it combines the Teutonic virtues of DT’s enterprise customer unit T-Systems and its Cloud of Things offering, with Software AG’s Cumulocity IoT platform. The resulting combined forces are expected to expand the empires of this business axis to the rest of Europe, the US and who knows where else.

“We’re delighted to be extending the reach and capabilities of our Cloud of Things IoT platform alongside our partner,” said Adel Al-Saleh, CEO of T-Systems and Board Member of Deutsche Telekom. “Software AG’s technology is critical in enabling us to scale an already successful service and introduce new functionality, giving us the confidence to move into new sectors. Our strategic partnership will help us continue to drive innovation and provide the best possible platform and services for clients, both from the enterprise sector and Germany’s world-leading Mittelstand.”

“This is a new way of partnering and co-operating to offer complete IoT solutions for the real-time economy,” said Sanjay Brahmawar, CEO Software AG. “With Deutsche Telekom as our strategic partner, we will offer the most competitive platform. Customers can simplify their IoT and integration needs with self-service analytics and gain insights to accelerate their businesses for the fully connected future. We look forward to scaling this partnership and making it a global success.”

You can see the two of them chatting about their grand plan while sitting on a small sofa, under a tree, by a river, in the video below. As is so often the case with these kinds of corporate partnerships it’s all about scale, synergies, TAM and that sort of thing. It always looks great on PowerPoint but the practicalities of getting two separate organizations to collaborate constructively often lead to disappointing outcomes.

 

DT, Carphone Warehouse and Elisa show their 5G FOMO

The 5G hard launches are coming thick and fast, which is causing fear of missing out for some in the telecoms game.

Today’s big announcement comes from Vodafone UK, on which more from us later. BT has also got involved and now Deutsche Telekom, Carphone Warehouse and Elisa have all rushed out press releases to make sure nobody thinks they’re off the pace.

DT hasn’t hard launched anything yet, but has chosen to detail at considerable length how profound its plans to do so are. Today’s announcement is the start of DT’s 5G network rollout in Germany. Berlin and Bonn will be first, followed by Darmstadt, Hamburg, Leipzig, and Munich and by the end of 2020 DT expects Germany’s 20 largest cities to be 5Ged up.

“We punched our ticket for a 5G future with the spectrum auction,” said Dirk Wössner, MD of Telekom Deutschland. “Our goal now is to get 5G to the streets, to our customers, as quickly as possible. Nearly three-quarters of our antenna locations in Germany are connected with optical fiber – we’re now building on that… At the same time, we need a clear regulatory framework and pragmatism from the authorities – particularly when it comes to questions regarding regional spectrum, local roaming, allocation of the auction proceeds, and the approval procedures – which takes far too long in Germany.”

Despite not having activated 5G anywhere yet DT is generously offering its subscribers to pay for it anyway. You can shell out €900 for a Samsung Galaxy S10 5G as well as a 5G tariff and when DT gets its act together you can be among the first people to get access to its 5G. “Telekom is 5G ready and offers the first 5G devices with suitable rate plans for everyone who wants to be there from the start,” said Michael Hagspihl, MD for Consumers at Telekom Deutschland.

In the UK Carphone Warehouse has joined the 5G pre-order party by announcing the availability of a few 5G smartphones. The ubiquitous Samsung Galaxy S10 5G will cost you £1099 SIM-free and is available today. We’re told the Oppo Reno 5G is also available today but you can’t can’t get it online for some reason. The Xiaomi Mi MIX 3, OnePlus 7 Pro 5G and LG V50 ThinQ will all be available for pre-order tomorrow.

“Retailing the largest range of the newly announced 5G compatible phones means those looking to upgrade to the new offering will have the biggest choice in terms of device and networks to best suit their needs across an impressive range of smartphones, deals and trade-in offers,” said John Coleman, Director of Connectivity at Carphone Warehouse.

Lastly Finnish operator Elisa is proud to announce it was the seller of the first 5G phone bought in any Nordic country. The lucky punter was one Harri Hellström, who strolled into Elisa Kulma in Helsinki unaware of how his life was about to change. Moments later, amid streamers and rapturous applause, Hellström was handed his phone by Elisa CEO Veli-Matti Mattila and held aloft by exuberant Elisa staff.

“I have always been into cutting-edge technology, and I have often been among the first to buy new devices,” said Hellström, once he had composed himself. “I feel wonderful about having the first 5G phone in the Nordic countries. I travel a lot in Finland and abroad, and I often rely on my mobile device for communication on the road. This is why fast connections are essential.” Words so fitting they could almost have been written by Elisa itself.

“Demand for 5G devices and subscriptions will increase as network coverage expands,” said Antti Ihanainen, VP of Elisa’s consumer subscription business. “5G will revolutionise the way we use mobile devices beyond anything we have seen during previous technological evolutions. Fully utilising the benefits of a 5G network requires the use of 5G devices, which means demand will inevitably rise. We are continuously developing innovative 5G services and exploring ways of utilising 5G technology.”

As more operators around the world activate 5G networks and get to bang on about how much better life is for their subscribers as a consequence, the FOMO for those operators that have yet to get involved will increase. If those subscribers start openly wondering what the fuss is all about once they start using 5G, however, being late to the game might not be such a bad thing.

SK Telecom and Deutsche Telekom buddy up for 5G

Collaboration is one of the key works currently floating around the 5G world and it seems SK Telecom and Deutsche Telekom haven’t missed the memo.

At a meeting attended by roughly 100 executives, the two operators announced a partnership with the ambition of seeking the promised revenues in the 5G epoch. As it stands, 5G is nothing new. It’s bigger, badder and faster than 4G, but that is not going to satisfy the financial demands of the telcos who need to invest so heavily in the future-proofed networks. The joint venture company created as a result of this partnership will be first tasked with developing new 5G technologies.

Initial focus will be to develop 5G repeater and a 5G in-building solution, as well as a Multipath UDP solution to manage accesses for a seamless connectivity experience and MPEG Media Transport (MMT) technology for low latency media streaming.

“Through partnerships with companies throughout the world, SK Telecom aims to expand beyond the realm of mobile communications to become a global ICT company,” said Park Jung-ho, CEO of SK Telecom. “And I expect this, in turn, will lead to the revaluation of assets and competitiveness of SK Telecom.”

“DT/SK Telecom partnership continues to be of strategic importance for both DT and SK Telecom.” Said Timotheus Höttges, CEO of DT. “We want to work together to make tangible result and strengthen our partnership also with closer technical cooperation.”

This sort of joint investment should not perhaps come as the biggest of surprises considering the pair signed a Memorandum of Understanding (MOU) at the Mobile World Congress Barcelona 2019. There is also the fact Alex Jinsung Choi, DT’s SVP of Research and Technology Innovation, was formerly the CTO at the Korean telco.

As part of the agreement, SK Telecom will also contribute $30 million to DTCP, an investment management group with $1.7 billion assets under management and advisory from Deutsche Telekom. The group is tasked with seeking new investment opportunities in technology, media and telecommunication sectors across Europe, the US and Israel. Moving forward, DTCP will open an office in Seoul to identify new opportunities with SK in Asia.

Looking at the greater opportunities for telcos in the 5G era, this could work out to be a very useful partnership for DT. Offering more products and extracting more revenue from enterprise customers is seem as a key objective, and the Asian telcos have progressed further here. Conversations with the verticals have been in play for longer periods of time and these telcos are closer to creating specific products for specific verticals. DT could certainly learn a thing or two.

Telcos complain about auction as German regulator bags €6.5bn

With 41 blocks available in the 2 GHz and 3.6 GHz bands, this spectrum auction has proved to be a busy one for Germany, but it certainly is a profitable one also.

Lasted 52 days and consisting of hundreds of different bids in what appeared to be a frustrating process, the German regulator will pocket €6.5 billion. It seems Deutsche Telekom and Vodafone were having the biggest feud, sending the total expenditure considerably north of the €3-5 billion expectation.

Sitting at the top of the pile, Deutsche Telekom spent €2.2 billion, while Vodafone contributed €1.9 billion. Telefonica spent €1.4 billion and up-start Drillisch wrote a cheque for €1.1 billion as it searches for a means to break the dominance of the three MNOs.

“Vodafone is committed to bring the full benefits of a digital society to Germany through our gigabit network including 5G,” said Vodafone Group CEO Nick Read. “We believe it is important to have a balance between the price paid for spectrum and our strong desire to create an inclusive society through investment in mobile network coverage.”

And while Read’s comments are as bland as you would expect for a press statement, there have been grumblings elsewhere over price. Deutsche Telekom has said the process has left a ‘bitter taste’.

“The network rollout in Germany has suffered a significant setback. The price could have been much lower,” said Dirk Wössner, Member of the Board of Management of Telekom Deutschland.

“Once again, the spectrum in Germany is much more expensive than in other countries. Network operators now lack the money to expand their networks. With the auction proceeds one could have built approximately 50,000 new mobile sites and close many white spots.”

Deutsche Telekom has secured 4 frequency blocks in the 2 GHz band and 9 frequency packages in the 3.6 GHz band. Vodafone on the other hand has purchased four different blocks in 2 GHz, and one continuous block of 90 MHz in the 3.6 GHz spectrum band. Telefonica collected two paired blocks in the 2 GHz band and seven unpaired blocks in 3.6 GHz.

Although Telefonica feels it can maintain its market share leadership position in mobile following this auction, it also felt the need to vent over a frustrating couple of months.

“We remain convinced that frequency allocation via auction was counterproductive for the expansion of mobile communications in Germany,” said Valentina Daiber, Chief Officer for Legal & Corporate Affairs at Telefónica Deutschland.

“The course of the auction showed that the design as well as the insufficient amount of available frequencies drove up the costs. From the consumer’s point of view and for Germany as a business location, these investment funds would be much better spent on network expansion.”

The telcos will certainly be glad they have a bit of breathing room from the auction process now, though the relationship between the regulator and industry seems to be turning very sour.

US drives solid Deutsche Telekom numbers but German 5G auction is a drag

German operator group Deutsche Telekom has reported solid Q1 revenue growth, driven largely by T-Mobile US.

As you can see from the table below, revenues and EBITDA all grew nicely in Q1 2019. Profits, however, went in the opposite direction, apparently due to one-off things like the cost of trying to get the merger between TMUS and Sprint approved. Speaking of the US the second table shows just how much of the revenue growth is attributable to TMUS.

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Revenue 19,488 17,924 8.7 75,656
Proportion generated internationally in % 69.0 66.6 2.4p 67.8
EBITDA 6,461 5,269 22.6 21,836
Adjusted EBITDA 6,901 5,549 24.4 23,333
Adjusted EBITDA AL 5,940 5,487 8.3 23,074
Net profit 900 992 (9.3) 2,166
Adjusted net profit 1,183 1,190 (0.6) 4,545
Free cash flowa 2,370 1,382 71.5 6,250
Free cash flow ALa 1,557 1,318 18.1 6,051
Cash capexb 3,827 3,139 21.9 12,492
Cash capexb(before spectrum) 3,682 3,076 19.7 12,223
Net debtc 71,876 50,455 42.5 55,425
Number of employeesd 214,609 216,926 (1.1) 215,675

 

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Germany
Total revenue 5,357 5,325 0.6 21,700
EBITDA 1,946 1,915 1.6 8,012
Adjusted EBITDA 2,114 2,082 1.5 8,610
Adjusted EBITDA AL 2,108 2,058 2.4 8,516
Number of employeesa 62,358 64,695 (3.6) 62,621
United States
Total revenue 9,796 8,455 15.9 36,522
US-$ 11,124 10,394 7.0 43,063
EBITDA 3,210 2,360 36.0 9,928
Adjusted EBITDA 3,309 2,332 41.9 10,088
Adjusted EBITDA AL 2,679 2,331 14.9 10,084
US-$ 3,042 2,865 6.2 11,901
Europeb
Total revenue 2,891 2,811 2.8 11,885
EBITDA 1,035 905 14.4 3,757
Adjusted EBITDA 1,059 911 16.2 3,880
Adjusted EBITDA AL 945 898 5.2 3,813
Systems Solutions
Order entry 1,609 1,506 6.8 6,776
Total revenue 1,630 1,665 (2.1) 6,936
Adj. EBIT margin (%) (0.2) (2.3) 2.1p 0.5
EBITDA 79 19 n.a. 163
Adjusted EBITDA 125 57 n.a. 429
Adjusted EBITDA AL 92 60 53.3 442

“We got off to a successful start to the year,” said Tim Höttges, CEO of DT. “Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group.”

Not included in his canned comments, but picked up by Reuters, was Höttges inevitable irritation at the amount of cash DT is having to drop on the interminable German 5G spectrum auction. We’re on round 305 of the bidding, believe it or not, and the total pledged has now reached €5,687,520,000. Expect to hear persistent muttering about how that’s money they can’t spend on infrastructure, etc, before long.

Germany’s 5G auction has not got off to a flying start

Telefónica Deutschland has filed an urgent appeal against the country’s 5G auction terms. Deutsche Telekom may follow suit.

Telefónica Deutschland was seeking to halt the country’s 5G auction by filing an appeal for injunction at an administrative court in Cologne on Tuesday 5 February. Germany was scheduled to hold the 5G auction by the end of March and was expecting to raise up to €5 billion. The key items on the terms issued by the Federal Network Agency being contested are concerning the coverage requirements, especially the coverage in rural areas and along motorways, and the mandated network sharing with competitors (the so-called domestic roaming).

Telefónica Deutschland argued that the coverage obligations could not be fulfilled with the spectrum at auction, while the frequency in its possession is already being used by other expansion requirements.

“This legal uncertainty is extremely unhelpful for the necessary massive investments in future network expansion. Billions in 5G cannot be invested on the basis of unclear rules. It must be in the interest of all involved that clarity and planning security are created here before an auction,” said Markus Haas, CEO of Telefónica Deutschland.

Telefónica was also unhappy that politicians should demand network sharing between competitors. “We have already invested €20 billion in infrastructure in Germany. We have always said that we will continue to invest if the conditions are right,” Haas told the German publication Handelsblatt late last year. However, as a condition to approve its merger with E-Plus in 2014, EU regulators already required Telefónica to make 30 percent of its capacity available to MVNOs, in this case 1&1 Drillisch.

Meanwhile Telefónica insisted that even if there would be a delay in the auction, “this would not have any influence on a large-scale launch of 5G in Germany. This is because the spectrum available for auction for this purpose will not be allocated to the successful participants until the end of 2020 anyway,” the company said in a statement.

Deutsche Telekom may also consider its position differently now. It first told Handelsblatt “we have not yet made an urgent request, to avoid delaying the auction schedule.” But in light of the new appeal from Telefónica, “we are therefore examining all legal options,” the spokesperson added.

It is not the first time the telcos have resorted to legal measures. By the end of December, Deutsche Telekom, Vodafone, Telefónica, as well as the challengers United Internet and Freenet had all filed lawsuits against the government’s rules over the upcoming auction, but none was successful in halting the process.

Deutsche Telekom, Vodafone, Telefónica, and United Internet (trading as “1&1 Drillisch”) filed applications before the deadline of 25 January to participate in the upcoming 5G auction.

German regulator effectively confirms IBM/T-Systems talks

As it does from time-to-time, German regulator Bundeskartellamt has published a list of mergers and acquisitions which is evaluating. IBM and T-Systems are lucky enough to make the list.

Reports of the discussions emerged over the weekend, with IBM rumoured to be considering taking the mainframe service business unit off the hands of the struggling T-Systems. Although the specifics of the deal are not completely clear right now, it would hardly be a surprise to learn T-Systems is attempting to slim the business down.

On the Bundeskartellamt website, there is a page which lists some of the main transactions which the regulator is considering in its role as merger overseer. These are mainly deals which are in the ‘first phase’ and usually passed unless there are any competition concerns. Although the description is not detailed, it lists IBM will be acquiring certain assets from T-Systems.

The news was initially broken by German-language newspaper Handelsblatt, quoting an internal email which suggested 400 employees would be transferred to the IBM business in May. Subsequently IT-Zoom has suggested IBM will be paying €860 million for the business unit.

The origins of such a deal can only lead back to one place; the office of T-Systems CEO Adel Al-Saleh. Al-Saleh was initially brought to the firm, having previously worked at IBM for almost two decades, to trim costs and salvage a business unit which, recently, has been nothing but bad news for parent company Deutsche Telekom. Aside from this saga, job cuts of roughly 10,000 have been announced since Al-Saleh’s appointment.

Confirmed back in June, the 10,000 job cuts were a result of a long-time losing battle to the more agile and innovative players such as AWS and Microsoft. Al-Saleh’s objective was to trim the fat, focusing on the more lucrative contracts, as well as more profitable, emerging segments of the IT and telco world.

While T-Systems and IBM do already have an established relationship, it seems options are running thin to make this business work effectively. With headcount going down from 37,000 to 27,000, its footprint dropping from 100 cities to 10 and this deal working through the cogs as we speak, Deutsche Telekom employees will hope this is the last of the bad news. Whether Al-Saleh feels this is enough restructuring to make the business work remains to be seen.

DT and Ericsson hit 40 Gbps over millimeter wave

Operator group Deutsche Telekom and kit vendor Ericsson got together in Athens to claim a new record for wireless backhaul.

Right now you’re apparently looking at a maximum throughput of 10 Gbps (gigabits per second) from your wireless backhaul. At a DT service centre in Athens the two companies teamed up to quadruple that threshold using millimeter wave over a distance of 1.4 kilometers. The aim of the demo was to prove the commercial viability of future wireless backhaul technology.

“A high-performance transport connection will be key to support high data throughput and enhanced customer experience in next-generation networks,” said Alex Jinsung Choi, SVP Strategy & Technology Innovation at DT. “While fiber is an important part of our portfolio, it is not the only option for backhaul. Together with our partners, we have demonstrated fiber-like performance is also possible with wireless backhauling/X-Haul solutions. This offers an important extension of our portfolio of high-capacity, high-performance transport options for the 5G era.”

“Microwave continues to be a key technology for mobile transport by supporting the capacity and latency requirements of 4G and future 5G networks. Our joint innovation project shows that higher capacity microwave backhaul will be an important enabler of high-quality mobile broadband services when 5G becomes a commercial reality.”

In the light of AT&T’s absurd rebranding of LTE-A as 5Ge it’s good to see some concrete, substantial 5G progress being demonstrated. 5G will require a lot more base stations and small cells to work, which means a lot more backhaul. So we’re likely to see a lot more of this sort of thing in the coming months and years.

German Gov told to sell DT stake

The Chief of the Monopolies Commission in Germany has suggested the German government should sell its stake in Deutsche Telekom over conflict of interest fears.

Achim Wamback, the President of the Monopolies Commission, has made the call on the grounds the German government is currently sitting in a suspect position on both sides of the fence, according to local newspaper Wirtschafts Woche. Although there is no suggestion this position is currently being abused, owning a notable share of a major telco, while simultaneously exercising regulatory power over the industry could lead to market abuse. With the 5G auction set to take place in the immediate future, Wamback’s call will make for awkward reading in the Bundestag.

As it stands, the German government owns roughly 31% of DT, the profits of which will contribute to national coffers, meaning there is less of an emphasis on taxing the general public to raise funds. This will only be a minor impact on the taxation strategies, but every little helps for a governing party which has struggled to maintain power and influence in recent years.

If you try to take a purely impartial approach to the situation, you can see Wamback’s point; this is a conflict of interest. Nationalised businesses are always a talking point for the more left-leaning members of society, but they are deeply unpopular when things are going well in the economy.

This is not the first time the German government’s position in DT has been called into question however. During 2017, when Chancellor Angela Merkel’s grip on government was starting to loosen following federal elections, two potential coalition partners pushed for the sale as well. The Freedom Party and the Greens were unsuccessful with their ambition then, though the idea was never quashed.

Part or fully state-owned telcos are certainly not an unusual fixture on the global telco scene, though you have to question whether it aligns with the pro-competition sensitivities of the European Union.