América Móvil strengthens its position in Brazil with Nextel acquisition

The Latin American mobile heavyweight América Móvil has agreed to acquire its competitor Nextel in the Brazilian market for $905 million.

Shortly after the deal was announced by América Móvil on Monday, and the board of NII Holdings, which owns 70% of Nextel, announced that it would propose to the shareholders to accept the offer. The other 30% of Nextel is owned by AI Brazil Holdings, the local operation of Access Industries, an American private company whose portfolio includes natural resources, telecoms, internet services, as well as Warner Music, among other media interests.

The nature of the deal, “cash free / debt free”, will let NII and AI Brazil keep all the cash while América Móvil will not assume Nextel’s debts. Although the total transaction value is less than 1.5 times of Nextel’s annual revenues in 2018 ($621 million), it represents almost four times NII’s market capitalisation on its latest trading day on NASDAQ ($229 million), indicating the buyer’s relatively strong confidence in the business prospect.

Brazil is a highly competitive market. According to research by Ovum, by Q4 2018, Vivo (owned by Telefónica) led with one third of the total mobile market, while TIM and Claro (América Móvil’s existing operation in Brazil) were vying for the second place, each serving about a quarter of the total mobile subscribers. Nextel had slightly over 1% market share. The rest of the market is served by Oi (a JV between Altice Portugal, formerly Portugal Telecom, and Telemar, Brazil’s largest integrated telecom operator).

After the acquisition, América Móvil plans to combine Nextel with Claro to “consolidate its position as one of the leading telecommunication service providers in Brazil, strengthening itsmobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil.”

For NII, selling Nextel in Brazil represents the end of an era. The company once operated mobile services in multiple North and Latin American markets, including the eponymous professional radio service in the US, which was later acquired by Sprint. Brazil is its last operation, where it has been struggling in a classic four-operator market. Not only has it not been able to break into the leader group, but also seen business declining fast. The revenues in 2018 were a 29% decline from 2017 ($871 million), which itself was a 12% decline from 2016 ($985 million).

“The announcement of this transaction marks the culmination of an extensive multi-year process to pursue a strategic path for Nextel Brazil and provides our best opportunity to monetize our remaining operating assets in light of the competitive landscape in Brazil and long-term need to raise significant capital to fund business operations, debt service and capital expenditures necessary to remain competitive in the future,” said Dan Freiman, NII’s CFO. Earlier potential buyers included Telefónica Brasil, Access Industries (NII’s JV partner), though the most concrete case was TIM, which, according to Reuters, approved a non-binding offer in November last year. None of these negotiations has come to fruition.

“Management and our Board of Directors believe the transaction is in the best interest of NII’s stockholders,” Freiman added.

Reports of Google China’s death are greatly exaggerated

Google engineers have found that the search giant has continued with its work on the controversial search engine customised for China.

It looks that our conclusion that Google has “terminated” its China project may have been premature. After the management bowed to pressure from both inside and outside of the company to stop the customised search engine for China, codenamed “Dragonfly”, some engineers have told The Intercept that they have seen new codes being added to the products meant for this project.

Despite that the engineers on Dragonfly have been promised to be reassigned to other tasks, and many of them are, Google engineers said they noticed around 100 engineers are still under the cost centre created for the Dragonfly project. Moreover, about 500 changes were made to the code repositories in December, and over 400 changes between January and February of this year. The codes have been developed for the mobile search apps that would be launched for Android and iOS users in China.

There is the possibility that these may be residuals from the suspended project. One source told The Intercept that the code changes could possibly be attributed to employees who have continued this year to wrap up aspects of the work they were doing to develop the Chinese search platform. But it is also worth noting that the Google leadership never formally rang the dead knell of Dragonfly.

The project, first surfaced last November, has angered quite a few Google employees that they voiced their concern to the management. This was also a focal point of Sundar Pichai’s Congressional testimony in December. At that time, multiple Congress members questioned Pichai on this point, including Sheila Jackson Lee (D-TX), Tom Marino (R-PA), David Cicilline (D-RI), Andy Biggs (R-AZ), and Keith Rothfus (R-PA), according to the transcript. Pichai’s answers were carefully worded, when he repeated stated “right now there are no plans for us to launch a search product in China”. When challenged by Tom Marino, the Congressman from Pennsylvania, on the company’s future plan for China, Pichai dodged the question by saying “I’m happy to consult back and be transparent should we plan something there.”

On learning that Google has not entirely killed off Dragonfly, Anna Bacciarelli of Amnesty International told The Intercept, “it’s not only failing on its human rights responsibilities but ignoring the hundreds of Google employees, more than 70 human rights organizations, and hundreds of thousands of campaign supporters around the world who have all called on the company to respect human rights and drop Dragonfly.”

While Sergei Brin, who was behind Google’s decision to pull out of China in 2010, was ready to stand up to censorship and dictatorship, which he had known too well from his childhood in the former Soviet Union, Pichai has adopted a more mercantile approach towards questionable markets since he took over the helm at Google in 2015. In a more recent case, Google (and Apple) has refused to take down the app Absher from their app stores in Saudi Arabia, with Goolge claiming that the app does not violate its policies. The app allows men to control where women travel and offers alerts if and when they leave the country.

This has clearly irritated the lawmakers. 14 House members wrote to Tim Cook and Sundar Pichai, “Twenty first century innovations should not perpetuate sixteenth century tyranny. Keeping this application in your stores allows your companies and your American employees to be accomplices in the oppression of Saudi Arabian women and migrant workers.”

Unlocking value in B2B at MWC

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Anders Lindblad, Communications & Media Industry Lead for Europe at Accenture, looks at unlocking value in B2B connectivity.

Growth in the communications industry has stalled and competition continues to intensify. CSPs know they must act and rethink their business models, but for too long there has been a lot of debate and very little action. We expect the buzz will continue on this topic at MWC. While some have put some form of change programs in place before, most of those have failed because they have been trying to patch up specific problems rather than taking a much bolder move to reinvent the way the whole business works.

Right now, CSPs are trapped, stuck in current operating models and the same old ways of doing things which make it hard to monetize investments and drive new growth. They are not ready yet to get rid of their legacy network and services since they still generate most of the (declining) revenue. This is preventing them to leverage their biggest asset: the capillarity and proximity to the customer. But the roll out of fibre and 5G could be the catalyst that encourages them to make drastic changes in the way they function and the products and services they provide.

The route to new growth is most likely to be in the B2B space, so expect to hear more about connected B2B possibilities and the importance of collaboration across vertical industries and value chains than ever before at the show. Discussions will be about the most efficient way to move from their legacy network and infrastructure and transition to a hybrid (cloud and on premise) software defined services portfolio, how to push the network intelligence at the edge, while embedding the OTT platform at the edge instead of being “embedded” by OTT, reinventing the device ecosystem leveraging the ‘decade of device divergence’ we are facing. Connected cars, connected health, augmented and virtual reality, is the prize of the game – the entire organisation will need to become much more agile and flexible to allow for front and back office supporting processes and technology to keep up with the possibilities.

The biggest B2B opportunity for CSPs could be in the SME segment. To succeed, they must adopt a bundling approach to services towards the customer, paired with intelligent pricing of their core services and drive simplicity through a digital-first approach and self-service capabilities. CSPs may have tried this approach in the past without success, but this time they can take a digital, platform-based approach to allow them to successfully simplify and standardize their offering portfolio, enable their own and third-party sales and services to effectively go to market and significantly bring down the cost to serve these customers. CSPs must have the courage to act now and renew their service portfolio quickly if they are going to retain and win market share.

Transforming the operating model toward customer centricity and agility, pushing the intelligence at the edge of the Network and injecting automation (Robotic Process Automation, AI) into the core culture, will provide a future-proofed foundation for communications companies to scale the value of their service portfolio for the B2B market and re-gain a central orchestration role in the device ecosystem that they currently don’t have.

The CSPs that understand the huge potential that B2B brings and move fast on new agile ways of working to adapt to these new capabilities will take the biggest share. If the opportunity is not captured NOW, using the newest and most innovative technologies available, and before the 5G ecosystem power game is settled, the market will find different winners, mostly coming for each vertical industry from over the top players.

 

Lindblad_300dpiAnders Lindblad is Accenture’s Communications & Media industry lead for Europe, responsible for business development and operations in the region and for helping clients form and deliver large-scale transformation programs.

RCS is here to stay and doing well

RCS has been touted as a saviour when the SMS value has been destroyed by OTT messaging services, but without much success, but it may finally have find its moment.

Mavenir, the software company, presented on day 1 of MWC 2019, promoting its rich communication solutions offered by Rakutan. The key benefits, or the main use cases that RCS can differentiate from OTT messaging actually are less to do with taking consumers back to texting each other, or P2P messaging, but rather the communication between businesses and consumers, or A2P messaging.

This view is corroborated by Infobip, a Croatia-based messaging platform that provides aggregated OTT messaging services (e.g. WhatsApp, LINE, Viber, KakaoTalk, etc.) for their corporate clients, which the clients then can use for customer service and CRM. However, the company told Telecoms.com that its dominant business, which it has seen annual growth of between 30% and 40%, is SMS and RCS based services.

One of the use cases is helping businesses improve customer engagement. Despite that on feature comparison RCS is mostly playing catching up on OTT messaging services, SMS and RCS tramp OTTs in consumer trust. To quote Guilliaume Le Mener, Manevir’s SVP for Enterprise Business, RCS is a “clean channel”, not tarnished by the privacy scandals committed by Facebook and co, or the over monetisation by others. Research shared by Mavenir showed 97% of SMS / RCS are opened within 3 minutes.

In one case, Infobip was hired by Twitter to reengage the inactive users, after the social media giant failed the mission with its early efforts through email. Thanks to its rich features, RCS messages can enable users to explore the content directly. For those users on phones not compatible with RCS, brands can choose to fall back on SMS with a web line. The results were much more improved also owing largely to the capability of producing rich analytics to evaluate the campaign effectiveness and make quick decisions on any changes needed.

In addition to A2P messaging, RCS is also being used by brands to engage consumers in P2A, that is engaging directly with the brands through messaging. On the brand side the service can be handled by bots. This will then need to be supported by AI and analytics which will be another business opportunity for the RCS solution providers. With OTTs also actively moving into the P2A domains, again this is an area that operators need to have a stronghold for RCS before it is too late.

For Rakuten, RCS may be particularly meaningful, as, coming from an internet service and MVNO background, Rakuten has a big range of digital service tied to a user’s Rakuten ID. RCS will be a key instrument to maintain and strengthen customer engagement when it builds out its 5G network from ground up.

Most European CSPs expect more enterprise revenue opportunities from 5G

A new survey conducted by IDC, commissioned by Amdocs, has found that almost 80% of European CSPs anticipate increased enterprise revenue opportunities from 5G.

This was the headline datapoint from a survey in which IDC spoke to a bunch of senior management at CSPs from around the world. Another notable finding was that a third of all operators plan to offer enterprise 5G services in 2019 and that will increase to 84% of them in 2020.

“Operators of 5G networks can support mission-critical enterprise communications, with performance backed by service-level agreements,” said John Delaney, Associate VP of Mobility Research at IDC. “Our research shows that mobile operators are optimistic about the potential for 5G to support an expansion of their role in the enterprise market.”

“The survey clearly demonstrates that operators see 5G as a means to restore value around core connectivity services for business customers.” said Matthieu Loreille, VP Head of Consumer, Enterprise and Technology Marketing at Amdocs. “5G technologies such as network slicing will allow them to tailor the performance, security level and characteristics appropriate to each business, opening up differentiating monetization opportunities.

“Furthermore, by leveraging additional technologies such as artificial intelligence, edge computing and hybrid cloud, operators will be strongly positioned to support enterprises in their digital transformation journey. Effectively, this enables them to shift connectivity to the heart of their solutions with meaningful value-added services on top such as cybersecurity, cloud migration, hybrid cloud operations and many more.”

Other datapoints include 72% of European operators reckon they’ll be first to market with 5G enterprise services and 65% of them said their enterprise customers have already expressed an interest. Obviously Amdocs thinks these findings should compel operators to invest loads more in software and services, which it happens to provide.

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.

Going under the hood of Qualcomm Snapdragon 855: plenty to like

More details of Qualcomm’s first 5G chipset have been released, bringing all-round improvements, and a 5G chipset for PCs was also announced.

On the first day of its annual Snapdragon Technology Summit, Qualcomm announced its 5G chipset for mobile devices, the Snapdragon 855, but released limited specs. On the following two days more details were disclosed. An SoC for 5G-connected PCs, the Snapdragon 8cx was also unveiled.

In addition to the X50 modem for 5G connectivity (on both mmWave and sub-6GHz frequencies) and X24 modem (to provide LTE connectivity), at the centre of the Snapdragon 855 is ARM’s new flagship Cortex A76 CPU, marketed by Qualcomm as Kryo 485. It contains 8 cores with the single core top performance at 2.84 GHz. Qualcomm claims the 855 is 45% faster than its predecessor 845, though it did not specify what exactly this refers to. More importantly for Qualcomm, the top speed is 9% faster than the Kirin 980 from HiSilicon (a Huawei subsidiary), another 7-nanometre implementation of the ARM Cortex A76.

Also included in the 855 is the new Adreno 640 GPU rendering graphics. Qualcomm has focused 855’s marketing messages on gaming performance, and the GPU is at the core to deliver it. Qualcomm claims the new GPU will enable true HDR gaming, as well as support the HDR10+ and Dolby Vision formats. Together with the display IP, the Adreno 640 GPU will support 120fps gaming as well as smooth 8K 360-degree video playback. Another feature highlighted is the support for Physically Based Rendering in graphics, which will help improve VR and AR experience, including more accurate lighting physics and material interactions, for example more life-like surface texture, or material-on-material audio interaction.

The key new feature on Snapdragon’s Hexagon 690 DSP is that it now includes a dedicated Machine Learning (ML) inferencing engine in the new “tensor accelerator”. The Hexagon 690 also doubles the number of HVX vector pipelines over its predecessors the Hexagon 680 and 685, to include four 1024b vector pipelines. The doubled computing power and the dedicated ML engine combined are expected to improve the Snapdragon 855’s AI capability by a big margin.

The integrated new Spectra 380 image signalling processor (ISP) will both improve the Snapdragon’s capability to deepen acceleration and to save power consumption when processing images. Qualcomm believes the new ISP will only consume a quarter of the power as its predecessor for image object classification, object segmentation, depth sensing (at 60 FPS), augmented reality body tracking, and image stabilisation.

On the OEM collaboration side, in addition to Samsung, on day 2 of the event we also saw Pete Lau, the CEO of Chinese smartphone maker OnePlus come to the stage to endorse the new 5G chipset and vow to be the “first to feature” the Snapdragon 855. Separately, the British mobile operator EE announced that it will range a OnePlus 5G smartphone in the first half of 2019.

On the same day, thousands of miles away, more Chinese smartphone OEMs including Xiaomi, OPPO, Vivo, and ZTE (in addition to OnePlus) also embraced the new Snapdragon chipset at the China Mobile Global Partner Conference in Guangzhou, southern China. China Mobile will also launch a customer premise equipment (CPE), likely a fixed wireless access modem, using the same platform.

Back in Hawaii, on day 3 of the Snapdragon Tech Summit, Qualcomm launched a new chipset for PC: the Snapdragon 8cx (“c” for computer, “x” for eXtreme). This is Qualcomm’s third iteration of chipset for PC, built on ARM v8.1 (a variant of Cortex A76). Similar to the Snapdragon 855, the 8cx also has the X24 integrated cellular modem with for LTE connectivity, and the X50 modem with 5G connectivity can be paired with it. The CPU also has eight cores, with a top speed of 2.75 GHz. The new Adreno 680 GPU is said to process graphics twice as fast as the GPU in the previous generation ARM for Windows chipset (Snapdragon 850) but 60% more efficient in power consumption.

Perhaps the most meaningful change is its memory architecture. The Snapdragon 8cx will have a 128-bit wide interface, enabling it to provide native support for much more software and applications, including Windows 10 Enterprise and Office 365, which clearly is a sales pitch to the corporate IT departments.

Unlike the OEM support garnered by Snapdragon 855, there was no public endorsement by PC makers yet. Lenovo did come to the stage but was only talking about its Yoga 2-in-1 notebooks that have used earlier generations of Snapdragon chipsets for Windows on ARM. On the other hand, Qualcomm does not position Snapdragon 8cx as a replacement for the 850 but rather as a higher end contemporary, with 850 mainly targeted at a niche consumer market.

In general, this year’s Snapdragon Tech Summit has delivered more step change with the new product launches. More concrete industry support was also on show, indicating that, depending on how fast and extensive 5G is to be rolled out, we may start seeing true 5G smartphones in the first half of next year. We may need to wait a bit longer before a reasonable line-up of always-on 5G connected PCs can hit the market.

How to get your business VoIP-connected without stumbling and falling

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Nick Johnson, CEO of Evolving Networks, looks at some of the confusion over connectivity for VoIP and how to overcome it.

Monopolies are seldom evil conspiracies but we all know where they lead – consumers end up with little or no choice and higher costs. Irrespective of industry or product, the monopoly dictates the suppliers, products, services or solutions that suit them, rather than offering what fits the consumer’s precise requirements.

That makes it interesting when disruptors enter the same marketplace and cause everyone to reassess how things are done.

In the IT and telecoms sector, new arrivals are typically more agile, have much greater focus on innovation and are able to offer the market better alternatives, either in terms of cost or functionality, or both. The established providers suddenly realise the upstart presents a real challenge to their cosy monopoly.

The mis-selling of connectivity for VoIP is a good example of this phenomenon. Established enterprise carriers have been operating in a set way for several years, using the age-old principle of fear, uncertainty and doubt to convince organisations they can’t possibly have a VoIP infrastructure with anything less than a leased line. No, to do so is just is out of the question.

This hidebound view that VoIP will only work with a leased line was certainly valid a decade ago. Now, however, with the emergence of better technology, better connectivity, and the arrival of innovators in the market with proven solutions, the customer has a wealth of other options. Gaining ground fast is multi-path ethernet delivered via an uncontended, multi-VNO access network with seamless integration of software and monitoring. It makes VoIP work brilliantly and the pedlars of leased lines are, at the very least, mistaken, when they say it won’t.

This optimised capability is especially worth considering when there is an increased push for VoIP in light of BT’s commitment to stop selling ISDN lines and public switched telephone network (PSTN) circuits by 2020. The technology is set to be switched off altogether by 2025.

Nobody can doubt that in today’s business environment connectivity is critical; there’s simply no way around that. It is used to access applications and systems, unite staff and connect an increasingly mobile workforce. As a result, quality, speed and resilience are three non-negotiables.

VoIP’s main requirement is quality. When communicating via VoIP with colleagues, prospects and stakeholders, quality is critical which means no lags, jags or inconsistent connectivity. Not only is a leased line expensive, depending on location, it certainly won’t offer the resilience and quality needed.

So, can quality and reliability be achieved without resorting to paying for a leased line? Why can’t VoIP work on multi-path ethernet (aggregated) connections like FTTC?

The answer to that question is simple: it can. VoIP works perfectly well on multi-path connections. This is welcome news for businesses, because using multiple lines means that both the challenges of quality and resilience can be resolved. The technology of multi-path aggregated connectivity delivers real benefits to organisations of all sizes using VoIP. Aggregated lines can offer increased bandwidth and capacity, enhancing data throughput speeds and application performance, while providing built-in resilience.

The emergence of disruptive companies in the market, such as those offering SD-WAN services, has changed the state of play entirely. Not only are connections more resilient, but thanks to the application of a software layer to connectivity, they can offer additional services such as fault-finding, continuous monitoring, and prioritisation of traffic. These are vital capabilities for high-performing VoIP. Of course, not every vendor gets this right. They may, for example, lay software over the top of connectivity while possessing no means of managing that inevitable disconnect between software and infrastructure layers. As a result, it’s critical to choose the right vendor.

Is a leased line a bad idea? Apart from the cost and the lack of resilience, consider the following scenario: Your business is using VoIP, delivered and supported by a leased line. There is a fault on the line and all connectivity to your organisation fails. You have no email, no access to cloud-based applications and, even worse, no phones.

If, on the other hand, your business was making use of a multipath aggregated FTTC connection, you would never need to worry about resilience. Due to the nature of the multi-path connectivity, there are numerous connections being aggregated together from different platforms, presented as a single virtual connection. If one line from one provider fails, there is another one (or more) to pick up the slack and ensure connectivity is uninterrupted.

Stimulating a mind-shift from established assumptions is never easy, but it is necessary to push the industry forward. When we examine connectivity, it’s clearly no longer sufficient to do the same things we’ve been doing for the past ten years. The market has moved on, end-user and business requirements have become more demanding and new ways of tackling fast-emerging challenges are urgently required.

40% of the world’s population on 5G by 2025, says GSMA

GSMA’s Director General spoke at Huawei’s MBBF 2018 event, talking up the prospect and promises of 5G and artificial intelligence

Mats Granryd, the Director General of the telecom trade organisation GSMA made a keynote speech themed on “intelligent connectivity” at Huawei’s MBB 2018 event at London’s ExCel today. Granryd put spotlight on 5G and AI as the key enablers to what the telecom industry has to offer in the years to come.

In addition to predicting that 70% of the world’s population, or roughly 6 billion people will be on mobile internet, GSMA forecast 40% of the world population will be on 5G networks. When it comes to AI, on top of improving individual experience (e.g. Personal Assistants) and serving new industry needs (e.g. network slicing), Granryd highlighted what the combined AI capabilities can do for society. The GSMA’s “Big Data for Social Good” initiative has launched in seven countries around the world. Mobile operators in those markets have worked with local partners to enable air pollution warning, malaria spreading prediction, and natural disaster preparedness, using big data and machine learning and prediction capabilities.

Guiqing Liu, EVP of China Telecom, the world’s largest integrated operators in the world by subscriber number, then took the stage to share what China Telecom saw as the biggest opportunity for telecom operators to undertake the digital transformation, especially with the ascendency of industry markets. Liu included four key capabilities the industry in particular the operators need to master to succeed in the transformation. They are: end-to-end slicing to cater to different user and industry needs; FMC edge computing to deliver seamless experience; 5G+Cloud based network and services to provide flexible and special customisation; and 5G+AI to both optimise service delivery and network management.

Liu also outlined the key challenges the industry is facing before 5G can become a real commercial success. He conceded that use cases now are still very much focused on eMBB, and the industry has not thought through how to change business models in the new era, including how to bill customers for the new use cases. On network challenges, in addition to the CAPEX and OPEX and skill gap, Liu also pointed the indoor coverage weakness intrinsic of the high frequency bands most 5G networks will be built on.

Alibaba Cloud opened two data centres in London

The e-commerce giant Alibaba is challenging Amazon and Microsoft in cloud service by adding London to its global data centre map.

If anything can indicate that the world is still confident in the UK as a business hub, amidst all the confusions over deal or no deal of Brexit, new investment from Alibaba can certainly do. The cloud service division of the e-commerce giant, Alibaba Cloud, announced on Monday that it is opening two data centres in London.

“Our decision on the location is driven by the rapidly growing customer demand in the U.K. The United Kingdom is one of the fastest growing European markets for Alibaba Cloud,” said an Alibaba spokesperson. “We are also working with many global and local partners to make sure we are offering best-in-class technologies, services and consulting to customers.”

Among the services the data centres will provide include a so-called “elastic computing”, which is a dynamic system to manage traffic spikes in the network, as well as deliver application services and big data analytics. Alibaba Cloud’s UK clients come from sectors like retail, finance, media, education, research, and logistics, and include public companies like the software maker SDL and the B2B media and event company Ascential.

Cloud service has become a key battlefield for the webscale companies and are clearly delivering results for the market leaders. Over 60% of Amazon’s operating income was from AWS, its cloud service division, in the first half of 2018, while Azure has been the most stellar performer among all Microsoft products.

Meanwhile cloud services have also attracted unwelcome following. According to a report by PwC, “Red Apollo”, a hacking group based in China, launched a series of sustained cyber-attacks last year, specifically targeting cloud service providers. The logic goes that, if they could break the defence of a major cloud service, they would be able to spread spying tools and malware to all the companies on these outsourcing services.

London joins Frankfurt to form Alibaba Cloud’s network in Europe. By the time the new data centres are up and running the company will have 52 data centres sites in 19 regions for its cloud service.