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.

Europe is losing in the race to secure digital riches – DT CEO

Despite politicians around the world declaring the importance of technology and insisting their nation is one of the world leaders in digital, Deutsche Telekom CEO Tim Hottges does not believe Europe is competing with the US and Asia.

This might seem like somewhat of a bold statement, but it is entirely true. The US, led by the internet players of Silicon Valley, have dominated the consumer technology world, while the China and Japan’s heavyweight industries have conquered the industrialised segments. Europe might have a few shining lights but is largely left to collect the scraps when the bigger boys are done feasting on the bonanza.

“Europe lost the first half of the digitalisation battle,” said Hottges, speaking at Orange’s Show Hello. “The second half of the battle is about data, the cloud and the AI-based services.”

In all fairness to the continent, there has been the odd glimmer of hope. Spotify emerged from Sweden, Google’s Deepmind was spun-out of Oxford University, while Nokia and Ericsson are reconfirming their place in the world. There is occasionally the odd suggestion Europe has the potential to offer something to the global technology conversation.

What has been achieved so far cannot be undone. The US and Asia are dominant in the technology world and Europe will have to accept its place in the pecking order. That said, lessons must be learnt to ensure the next wave of opportunity does not pass the continent by. A new world order is being written as we speak, and it is being written in binary.

If Europe is to generate momentum through the AI-orientated economy, it will have to bolster the workforce, create the right regulatory landscape (a common moan from the DT boss), but also make sure the raw materials are available. If data is cash, Europeans are paupers.

As it stands, less than 4% of the world’s data is stored in the European market, according to Hottges. This is the raw material required to create and train complex, AI-driven algorithms and business models. If European data is constantly being exported to other continents, other companies and economies will feel the benefits. More of an effort needs to be made to ensure the right conditions are in place to succeed.

Conveniently, the data collected through Orange’s and DT’s new smart speaker ecosystem will be retained within the borders of the European Union. There need to be more examples like this, forcing partners to comply with data residency requirements, as opposed to taking the easy route and whisking information off to far away corners of the world.

Another interesting statistic to consider is the number of qualified developers in Europe. Recent research from Atomico claims there are currently 5.7 million developers across the continent, up 200,000 over the last 12 months, compared to 4.4 million in the US. Everyone talks about the skills gap, though it seems Europe is in a better position than the US if you look at the number of professional developers alone.

Europe has lost the first skirmishes of the digital economy, and to be fair, the fight wasn’t even close. However, the cloud-oriented, intelligent world of tomorrow offers plenty more opportunities.

Operators stress the need to collaborate over 5G

At Huawei’s MBBF 2018 event some of its operator partners talked up the need for greater collaboration, including among themselves, to make a success of 5G.

Howard Watson, CTIO of BT, said “we truly need interoperability,” when detailing all the many moving parts that need to work with each other in order to make all this 5G hype a reality. He identified the TIP initiative as an example of operators collaborating towards a common goal and was careful to stress that he thinks vendors can still raise their game in that area too.

Being given a keynote at MBBF is also a great opportunity for a spot of self-promotion and Watson didn’t hold back. We were reminded of the recent announcement of EE’s 2019 5G rollout plans and even its most recent 5G trial in London. He also took the opportunity to talk up BT’s group strategy, using the diagram you can find here, which BT is bafflingly keen on, to illustrate his point.

Once Watson got all this corporate chest-beating out of his system he did flag up one interesting feature of BT’s broader strategy: the tight integration of wifi into the overall connectivity picture for BTEE customers. BT is extending the IMS network it currently uses for wifi calling in order to facilitate this and will be doing some clever stuff to solve the pain currently experienced when trying to dynamically switch between wifi and cellular. Creating all this simplicity is very complicated, he concluded.

We also heard from Alex Choi, Head of T-Labs at Deutsche Telekom. He couldn’t resist a bit of light self-congratulation in flagging up its 5G efforts in Berlin (in partnership with Huawei). He too stressed the need for ‘an ecosystem approach’ to 5G and highlighted HD video streaming as a key use-case for consumers.

TIP offers start-ups a new way into the telco business

With internet traffic continuing to accelerate and innovation starting to stagnate, new ideas are needed to stimulate the telco industry. For the Telecom Infra Project team, start-ups could be the answer.

There have of course been numerous examples of start-ups disrupting an industry or creating an entirely new segment. Think of WhatsApp impact on the world of messaging or Netflix on content delivery, though navigating the waters of the telco industry can be a rough ride for start-ups. Few achieve the recognition their ideas deserve, possibly to the detriment of the industry.

“If the big players would buy them [start-ups] at a time when there is a product and they acquire them not to kill the product it would be okay,” said Axel Clauberg, VP of IP End to End & Infrastructure Cloud at Deutsche Telekom and Chairman of the Board at TIP. “We saw a couple of positive examples where it happened in the past, however many good ideas just don’t make it to that stage because when people start running a company and want to get funding by approaching a venture capitalist, suggesting their market is telco, the answer is no, sorry.”

“We were routinely being approached by start-ups who had really innovative ideas, but they were running out of money really quickly,” said Aaron Bernstein, Director, Connectivity Ecosystem Programs at Facebook and a TIP Board Member. “It was impossible for them to get the attention of VCs, and it really comes down to how do they go from zero to dollars as quickly as possible. That is what led to the creation of the TIP Ecosystem Accelerator Centre programme. How do we connect VCs who are interested in infrastructure with start-ups and operators who can create the idea of coaching to get them from zero to dollars much quicker.”

The TIP Ecosystem Acceleration Centre (TEAC) programme is an initiative which looks to creative the wrongs of telco life and bring new innovation into the fray. Several of the world’s largest Telecom Service Providers are hosting TEACs in the UK (BT), Paris (Orange), Seoul (SK Telecom) and Germany (DT), with the aim of creating breakthrough technologies that reimagine telecom infrastructure. TIP is an initiative which is all about doing something different to stimulate innovation, and accessing untapped ideas in the start-ups is certainly one way to go about.

Whether it is the procurement cycle, the cut-throat nature of acquisition or simply running out of funds, gaining traction in the telco world is an incredibly difficult task for start-ups. Perhaps this is the reason the industry moves at such a sluggish pace compared to the internet players of Silicon Valley who embrace the concept of start-ups, but for a healthier ecosystem, all ideas need to be taken into account.

For the moment, the TEACs are small scale, but every idea has to start somewhere. Start-ups could be the saving grace the telco world needs to stimulate innovation and recapture lost revenues, but the ecosystem has to change to embrace them.

TIP 2018 is a wakeup call for the big kit vendors

The third Telecom Infra Project (TIP) Summit marked an further attempt by operators and Facebook to accelerate the development of the telecoms industry.

In his opening keynote Axel Clauberg, TIP Chairman and VP of technology innovation at Deutsche Telekom, was careful to stress that the big kit vendors are an important part of the telecoms ecosystem. But most of the discussions that followed on the first day of the 2018 TIP Summit was focused on fixing a telecoms kit market that TIP participants clearly feel is underperforming.

Clauberg spoke about the persistent exponential growth in data traffic that is set to continue for the foreseeable future. He stressed that, while he’s not saying kit vendors don’t do enough, the industry collectively needs to do better. The clear inference is that if we leave it to the incumbent vendors things won’t move quickly enough.

A lot of what this comes down to is putting into practice all the worthy talk of agility, devops, etc that everyone agrees is a great idea in principle. Through a network of ‘community labs’ minimum viable products are built and deployed. The message is that the traditional constraints imposed by the protracted standardisation process and exhaustive testing just won’t cut it anymore and telecoms needs to get a bit more Silicon Valley in its approach,

This seems to be where Facebook comes in. One of its core strategic needs is active user growth and it it’s running out of opportunities to do that in developed markets. So its quest for ‘the next billion’ is heavily dependent on improving access to connectivity in less developed regions. This requires some new thinking on both the technological and commercial fronts.

So TIP claims to be all about novel thinking, rapid turnaround and expanding the telecoms ecosystem to a broader range of players, including startups that traditionally find it hard to engage with operators, via its TEAC programme. The general aim seems to be to open up the whole ecosystem via things like open interfaces such that it undergoes a transformation equivalent to the computer industry a generation ago. Its all about more players, more choice and more flexibility.

You can see a summary of its many working groups below, which illustrates how broad its ambitions are. Another speaker said TIP reckons it can bring about a 30% reduction in total cost of ownership of running a network. This saving will ultimately come of if the pockets of the big kit vendors. Nokia is a TIP member but there’s no sign yet of Ericsson and Huawei, for whom the very existence of TIP poses some serious existential questions.

TIP 2018 working groups

DT writes €20bn cheque to target 99% 5G coverage by 2021

Deutsche Telekom has unveiled a ‘plan’ to make 5G a reality, including a commitment to spend €20 billion by the end of 2021 to roll it out.

Should the plan prove to be a success, DT plans to have 5G to 99% of the population by 2025, while geographical coverage would be 90%. The team believe these coverage ambitions are achievable for 4G by 2021.

“The digitalization of Germany is a challenge for our society as a whole,” said CEO Tim Höttges. “Our part is the networks. We take this responsibility seriously, which is why we are focusing on investment, innovation, and partnerships.”

To fuel the 5G ambition, DT has connected 22,000 of the 27,000 mobile base stations with fiber, and will be adding at least 2,000 each year through to 2021 to take the total up to 36,000. Not all of these stations will be equipped with 5G equipment to start with, though this is a part of the plan which is murkier. The less details available, the less accountable DT becomes we suppose.

5G is only part of the connectivity plan, with the fixed network getting its own upgrades. One of the first aspects of the plan is to initially install fiber to the curb, before extending the fiber to the home at a later date. This approach has been criticised, though DT has pointed out it is a fairer means to improve connectivity for a greater number of residents across the country.

“Of course we could have installed fiber to the home directly, but due to the shortage of underground construction capacity and the high investments needed, we’d only be serving 20% of households at most, instead of the 80% we do now,” said Walter Goldenits, CTO at Telekom Deutschland.

Progress is being made in Germany, the team have laid the 500,000th kilometre of fiber across the country this week, though it does still lag behind leaders in the European market. DT claims 250 Mbps are already available to around ten million households, while the ambition is to expand this footprint to 28 million by the end of 2019.

DT searches for fibre efficiency with Fraunhofer AI

Sometimes there are stories which come along and prove stereotypes can be true. In the search for efficiency, Deutsche Telekom is turning to artificial intelligence to help with its fibre rollout plans.

Partnering Fraunhofer IPM, DT has unveiled a pilot project where artificial intelligence will look at images and information gathered by a measurement vehicle, before deciding what the best way to dig trenches and lay fibre will be. The pilot will take place in Bornheim, near Bonn.

“The shortest route to the customer is not always the most economical,” said Walter Goldenits, Head of Technology at Telekom Deutschland. “By using artificial intelligence in the planning phase we can speed up our fiber-optic roll-out. This enables us to offer our customers broadband lines faster and, above all, more efficiently.”

The measurement vehicle is equipped with 360° cameras and laser scanners, and will collect roughly 5 GB of surface data per kilometre. Depending on the terrain, the vehicle can cover 50-80 kilometres per day, collecting information such as the location of trees, the type of ground which will need to be dug up and if there is street furniture which needs to be accounted for. When deploying new infrastructure, engineers have to ensure the environment is returned to the same condition as before; various scenarios can have different impacts. Sometimes it could be more time and cost efficient to go the long way around.

“Such huge amounts of data are both a blessing and a curse,” said Dr. Alexander Reiterer, project lead at the Fraunhofer IPM. “We need as many details as possible. At the same time, the whole endeavour is only efficient if you can avoid laboriously combing through the data to find the information you need. For the planning process to be efficient the evaluation of these enormous amounts of data must be automated.”

The neural network used for this recognizes a total of approximately 30 different categories through deep learning algorithms, including trees, street lights, asphalt and cobblestones. The applications can even identify whether the pavements feature large pavement slabs or small cobblestones, if the trees deciduous or coniferous, or whether the trees roots will impede the engineers during the project. Once all these factors have been taken into account, the existing infrastructure is assessing before decisions are made and an optimal route planned for the new fibre.

Such a project will capture the attention of many around the world. The rollout of fibre has been staggered and slow to date partly due to the expense. Of course, the raw materials are expensive, though digging trenches and laying the cable is an laborious, costly and slow process. Telcos will of course be looking for new ideas to keep the cost down, though governments will also be peering across as they increasingly demand faster deployments.

Back in April, the FTTH Council Europe unveiled research which demonstrated quickly some countries were progressing with fibre rollout, though it also shed light on how woefully terrible others are doing. Latvia led the way with 50.6% household penetration, though Ireland’s was down at 1.7%. The research did not include the UK, though Ofcom’s estimates put FTTH penetration down at 3%; definitely in the woefully poor category.

DT blames dodgy results on toll roads

Profits might have plummeted but that hasn’t stopped Deutsche Telekom from raising its full-year outlook as subscriber gains in the US business drags the rest of the group forward.

Total revenues for the last three months stood at €18.367, down 2.8% year-on-year, though profit nose-dived to €495, a decrease of 43%. The team has blamed this drop on a one-off payment of €600 million to the German government, settling a long-running legal dispute over the delayed implementation of a truck toll system DT designed with Daimler. Without the fine, profits would have increased by 3%.

“We remain firmly on track,” said CFO Thomas Dannenfeldt. “The trends in Germany and the United States are positive. At our European subsidiaries, we are again posting sustained growth.”

Looking at revenues in the individual markets, Germany declined by 0.9%, while the US accounted for a drop of 4.5%. Across the rest of Europe, revenues rose by 1.3%, while the Systems Solutions business unit increased by 42.2%.

The main success of the business here is in the US, T-Mobile US is continuing to make positive steps forward stealing market share from competitors, and also the convergence strategy across Europe. Across the last twelve months, the number of customers opting for convergent products rose 48% to 2.7 million.

The hot topic for investors and industry onlookers remains to be the merger with US competitor Sprint. No new information has been offered, though the sluggish regulatory process might be a tricky one. Similar deals have of course been rejected by watchdogs in years gone, though with the unpredictable nature of the Trump administration, who knows which direction it could go.

Deutsche Telekom embraces automation to efficiently reduce workforce

Deutsche Telekom expects to grow its revenues by 1% per year through to 2021, but it also expects to continue a long-standing trend of streamlining its workforce in favour of automation and digitalisation.

At the firm’s Capital Markets Day in Bonn, DT said it plans to make a host of announcements including changes to how dividends are structured owing to greater contributions to revenues from the US, as well as outlining the promising prospects of the convergence business, but it also snuck in a brief announcement about further staff reductions. It should now be considered good PR form to sandwich bad news in between the good, but this is not a new trend for the German telco. As you can see from the table on the right-hand side streamlining the workforce is simply part of the day-job.

Employee numbersThrough to 2021 the team plan to realise cost efficiencies of €1.5 billion, half of which relates to staffing. CEO Timotheus Höttges spoke of the importance of reskilling the current workforce, and also the fact the business is hiring at the same time as shaving the workforce. Some of the staffing efficiencies will be realised through an early-retirement scheme, but you simply cannot argue with the numbers; DT is reducing the size of its workforce.

This is a trend which we should not be incredibly surprised by. With the progression of the artificial intelligence world, as well as the emergence of more automated business process software, multinational corporations are going to search for ways to reduce the biggest burden on the spreadsheets; the people who do the work.

The promise of artificial intelligence is the mundane tasks can be offloaded to a machine to allow human employees to focus on high value tasks. It was heralded as a positive for the workforce, but is starting to appear as anything but.

“In particular, the Group is deploying automation and digitalization to reduce indirect costs outside of the United States by 1.5 billion euros by 2021. Around a half of these cuts will come from non-staff-related savings in areas such as real estate and legacy IT platforms, some of which will result from the migration to IP, due to be concluded for consumers in Germany by 2019,” said DT spokesperson, Andreas Fuchs.

Whether the reasoning is early-retirement or more efficient recruitment strategies, the numbers are absolute. DT is decreasing its workforce and becoming more reliant on automation as a means to operate the business. Worryingly for workforces around the world, these are still the early days of automation. It is still in its embryonic days of development with more powerful and efficient forms of the technology to follow. If jobs are under threat from the technology today, what will it be like in five years’ time?

Deutsche Telekom is currently a business which is growing and has promising prospects. CFO Thomas Dannenfeldt highlighted to investors there might be a ‘blip’ on the spreadsheets which will affect Earnings Per Share should the Sprint merger be approved, but this would only be a two-year ‘valley’. Year three would see the company recover, in theory being in a strong position as a result of an increased US footprint. The T-Mobile/Sprint merger will of course increase the headcount, which might disguise the workforce streamlining process, but employee numbers are seemingly only heading in one direction at DT.

Höttges and Dannenfeldt were coy on how much the workforce would be reduced by through this efficiency programme, but it seems automation isn’t living up to the glorious promise of adding value to an employee’s productivity. It’s simply just taking all of it away; who would have seen this coming?