President Trump’s unexpected ally: Finland kick-starts 6G

A few days after Donald Trump tweeted about 6G, when he was roundly ridiculed, Finland’s scientists proved that he had a point by announcing their plan at MWC 2019 to embark on the journey towards 6G.

The researchers in Finland expect 6G to take shape in about 2030. To gain the leadership by that time, the so-called “6Genesis” has been selected as the country’s flagship high-tech project for an eight-year period 2018-2026. The project is hosted by the University of Oulu, ranked a top 3 university globally in radio access engineering.

Professor Ari Pouttu, who leads the project, introduced the vision and key technology streams at the event. 6G will satisfy the expectations not yet met by 5G as well as new expectations fusing AI inspired applications with ubiquitous wireless connectivity, Professor Pouttu said. Specifically, he foresaw four technology trends that are fundamentally different from earlier generations.

“Wireless Connectivity” in 6G means disruptive radio access deployed on 5G core networks, enabling Tbps speed and deliver unmanned process. “Devices & Circuits” means that the current semiconductors will not be able to operate on super high-frequencies. When communication takes place on frequencies above 500GHz or even at terahertz level, new materials will be needed to replace silicon. “Distributed Computing” refers to moving the computing power to the extreme edge. For example, instead of conducting computing from the “brain” of the robot, in 6G environment computing will need to be moved to every limp tip of the robot to enable time critical and trusted apps. “Service & Applications” refers to the disruptive value networks enabled by multidisciplinary research across industry verticals, in contrast to the siloed approach to research and development now.

The Finnish government has already granted 6Genesis €25 million through the Academy of Finland. Five co-founders have signed up, including Nokia, VTT (Finland’s technology research centre), Aalto University, Oulu University of Applied Sciences, and BusinessOulu (local business promotional agency). The total funding of the project so far, including contribution from these partners, other national and EU grants, plus the Academy of Finland grant, amounted to €251 million. Professor Pouttu quipped, while speaking to Telecoms.com, that this amount is for science fiction, not science. He may be on the conservative side with his estimation for science fiction though. “Avengers: Infinity War”, a recent sci-fi blockbuster, cost nearly $400 million (€350 million) to make.

Improving funding is clearly one of the reasons why the project was calling for more companies and institutions to sign up. The fact that the announcement was made during MWC could only mean that global partners are also being sought after. Professor Pouttu could consider pushing a tweet to President Trump directly.

The world’s first 6G Wireless Summit will be held in March in Levi, a ski resort in Finnish Lapland.

VCs are spending more on less, how will that impact innovation?

CB Insight has released its latest quarterly report on venture capitalist funding claiming new records are being spent in terms of total cash, but trends are leaning towards the bigger players.

Over the course of the last 12 months, US venture capitalists spent a total of $99.5 billion funding businesses, though the number of deals stood at 5,536, the lowest since 2013. Later-stage mega-deals pushed annual funding to its highest level since 2000, though you have to wonder whether there will be any material impact on innovation, a worrying though when you consider the emerging potential of 5G for disruption.

Although the majority of the segments are relatively stable, as you can see from the graph below seed-funding has been gradually eroding for some time.

CBI Graph 2For those with the cash to spend, these trends make a lot of sense. Why would you take a risk on a start-up which might fail in the next couple of months when you could invest in a company which has scaled, secured customers and revenues and has a stable foundation? There are so many medium sized technology companies out there looking for financial fuel to go to the next level makes perfect sense.

However, the impact on the future might be damaging for the US on the whole if it wants to maintain its position at the top of the technology rankings table.

Here’s our point; not all innovation comes from start-ups or garages hidden away in suburbia, but a notable number of the significant disruptions do. If funding is being more prominently directed towards the established players, is a trick being missed?

Let’s dissect that point for a second. The larger companies certainly do search for innovation, but the search is for a purpose. Nokia, for instance, wouldn’t allow their researchers to run wild without any tethers whatsoever as there are limited R&D funds available and commercial considerations have to be factored in. The search for innovation is almost certainly tied to a current commercial objective or with specific ambitions to exploit an emerging segment.

This is not a bad way to do business of course. R&D has to be conducted with a purpose; these organizations have a responsibility to investors and shareholders to spend money reasonably, with the objective of making more money in the future. It certainly is sensible, but it is a restricted approach to innovation. Start-ups don’t necessarily have these burdens of responsibility, they can explore the unknown.

5G has been billed as a revolution. It will change the ways businesses operate and open a host of new connectivity possibilities to everyone in society. But like 4G, the best ideas are ones we haven’t thought of yet. They are probably businesses which do not exist. How many people would have thought of an idea such as Uber before 4G was a reality. This idea only came to be because the right conditions were in place and a creative inventor thought of it. Throughout the 4G era many of the better ideas emerged from start-ups which either scaled or were bought by one of the major players.

The world of 5G is not upon us quite yet, therefore it is a bit of a pre-emptive point right now. Innovation needs to be encouraged at every level if the US is to hold off the Chinese challenge to its technology leadership position. The trends are currently leaning away from seed-funding, which is certainly sign.

SoftBank plans massive IPO for its Japanese telecoms business

Tech conglomerate SoftBank wants to raise a few trillion yen by offering some of its Japanese operator up for public consumption.

Around a third of SoftBank Japan’s shares will be served up in an initial public offering that is expected to raise around 2.4 trillion yen (21 billion bucks). If things go really well it could even challenge Alibaba for the biggest ever IPO, which would come in handy for a group that is especially exuberant in its spending.

“Through the listing of SB shares, SBG expects that the respective roles and valuations of the two companies will be clear,” said the announcement. “SBG is accelerating investments on a global scale, while SB is a core company to the Group’s telecommunications business. It is hoped that each of the two companies will be able to provide information regarding their businesses to the market with greater clarity and thereby better respond to the various needs of investors.

An alternative way of looking at it is that SoftBank Group is a bit short of cash and has decided that a sport of equity release from one of its subsidiary companies is the best way to get hold of the kind of cash it needs. As well as big acquisitions such as ARM, the group seems more concerned with general tech investment these days. This IPO seems to have been on the cards for a while, but it remains to be seen how much, if any, of the cash raised will be reinvested in SoftBank’s, Japanese network.

Former Cisco boss thinks tech leaders are too cocky

John Chambers, who ran Cisco for 20 years, reckons the leaders of tech companies need to dial down the arrogance a bit.

He made the comment to Yahoo Finance in the context of the tech venture capital business he started up since stepping down from Cisco. “I worry about our industry – it’s a tug-of-war between overconfidence, bordering on arrogance, among some of the leaders,” He said. “It’s hard to get that arrogance out of them.”

Chambers’ major issue with this mindset is that arrogance can prevent the people running tech startups from continuing to learn and grow, which makes them less attractive investment prospects. “For the companies I select, if they are arrogant I don’t touch it,” he said. “I have developed a criteria. If the CEO doesn’t want to be coached, if they don’t know what they don’t know, and truly if the chemistry is off, I don’t touch them.”

The VC business is called JC2 Ventures, so named because Chambers runs it with his son. Showing the kind of humility he expects of his fellow tech moguls Chambers named his son after himself and JC2 Ventures apparently has 12 companies in its investment portfolio.

Siris Capital makes half a billion bucks in 10 months with Intralinks sale

Private equity firm Siris Capital is selling Enterprise collaboration software vendor Intralinks for $1.5 billion, having bought it for a billion less than a year ago.

It’s starting to look like Siris Capital is pretty good at this capitalism business. In November 2017 Siris agreed to buy Intralinks from crisis-hit mobile software and services company Synchronoss for $1 billion. Synchronoss itself, which also accepted a further strategic investment from Siris, had only bought Intralinks less than a year previously.

Ten months of patient incubation later, with Intralinks now positioned as ‘a leading financial technology provider for the global banking, deal making and capital markets communities’, financial software company SS&C Technologies has decided it’s now worth 1.5 billion. It will pay Siris a bil in cash and half a bil in SS&C stock.

“Intralinks brings a wealth of expertise and a leadership position in the data sharing and collaboration technology space,” said Bill Stone, CEO of SS&C. “Intralinks and SS&C share many of the industry’s largest customers and together we are well-positioned to meet the needs of major banks, alternative funds and other corporations seeking to automate document-centric, collaborative workflows.”

“I have been privileged to lead Intralinks through an exciting period in which we refocused the business on delivering innovative technology to the financial services sector,” said Leif O’Leary, CEO of Intralinks. “Intralinks’ acquisition by SS&C is a testament to the progress we have made toward our strategic objectives, and we are excited to deliver even more value to our customers as a combined business.”

“My colleagues at Siris and I recognize the tremendous work the Intralinks team has done to deliver on its strategic vision and generate profitable growth under our ownership,” said Frank Baker, a Co-Founder and Managing Partner, Siris Capital.  “We believe that the combination of Intralinks and SS&C will benefit customers, employees, partners and investors.”

Siris has emerged as a pretty significant player in the telecoms and tech private equity scene. Not only did it rescue Intralinks from a failed marriage and trouser half a billion bucks in less than a year for its troubles, it’s heavily involved in the resurrection of Synchronoss and also owns Mavenir and Polycom.

Nokia gets half a billion euros from Europe to get better at 5G

Finnish kit vendor Nokia has been granted a €500 million loan from the European Investment Bank to help with its 5G R&D efforts.

The EIB is part of a larger ecosystem of pan-European financial services bodies that allocate public money in order to pick private-sector winners within the bloc. The over-arching concept is the Investment Plan for Europe, which the EU fawningly refers to as the Junker Plan after its dear leader. Within that is yet another group called the European Fund for Strategic Investments, which is apparently ‘supporting’ the EIB in handing over this cash.

The terms of the loan are unstated (Nokia says it ‘extends its debt maturity profile’), but are presumably more benign than just going to the open money markets which, of course, Nokia is free to do whenever it needs a few euros to help it with its 5G R&D efforts. For the EU this is an easy way to demonstrate it’s supporting 5G in the European bloc without actually doing anything, so it looks like a win-win for everyone except tax-payers who would like to see their cash spent on other stuff.

“5G is happening fast, faster than most people even expected,” said a startled EIB VP Alexander Stubb, who is responsible for lending in Northern Europe, which is apparently very different from lending in Southern Europe. “It’s anticipated that it will enable entirely new business cases, while dramatically enhancing existing wireless applications. I think bringing 5G to the market will definitely improve people’s lives, as the motto for the EIB’s 60th anniversary states.”

“Ensuring that Europe embraces and benefits from new technologies requires sustained investment,” concurred EC VP Jyrki Katainen, who is responsible for jobs, growth, investment and competitiveness. “That is where the Investment Plan for Europe can play a crucial role. I am delighted that, with today’s agreement, the Plan is contributing to Nokia’s research and development activities across multiple European countries to advance the development of 5G technology.”

It may be a coincidence but Katainen is Finnish. It may also be a coincidence that the last press release issued by the EIB before this one was on 16 August and entitled ‘EU funding for growth of Finnish companies’. “I am delighted that, with today’s transaction, the Investment Plan will allow Finnish firms to benefit from EUR 100 million in financing opportunities,” said Katainen at the time.

“We are pleased to land this financing commitment from the EIB, who shares our view of the revolutionary nature of 5G – and the realisation that this revolution is already underway,” said Nokia CFO Kristian Pullola. “This financing bolsters our 5G research efforts and continues the broader momentum we have already seen this year in terms of customer wins and development firsts, supporting our relentless drive to be a true leader in 5G – end-to-end.”

If this sort of thing belatedly makes Europe more competitive in 5G then it’s hard condemn, but there’s something unnerving and protectionist about Europe picking private sector winners within its bloc. And what about Ericsson? Sweden is also a member of the EU but, crucially, not the eurozone, having decided to cling onto the krona. The process of picking winners is inherently discriminatory and you have to wonder whether Ericsson is being punished for Sweden’s currency defiance.

Hyperoptic unveils UK expansion plans after raising £250mn

Full-fibre broadband provider Hyperoptic has unveiled plans to expand its services to an additional 50 towns and cities through the UK after it completed a debt raise of £250 million.

Claiming this is the largest single investment in the UK for a full-fibre optic network provider, companies like Openreach don’t fall into the full-fibre definition, the plan is to reach five million homes by 2025. Hyperoptic claims to currently have nearly half a million homes and businesses using its 1 Gbps broadband service.

“Such large financial backing from prestigious investors is testament to the strength of Hyperoptic’s business model and proven track record for delivery,” said CEO Dana Tobak. “All our teams are forging ahead with one rally cry: Let’s Gigabit Britain.”

“Hyperoptic has the vision, determination and means to lead the rollout of gigabit connectivity across this country, and smash the digital divide once and for all,” said Hyperoptic Chairman, Boris Ivanovic. “I am proud that we have led by results. This latest round of funding is a tremendous recognition of our achievement and provides the impetus for making Hyperoptic the premier full fibre national network.”

Hyperoptic was advised by LionTree Advisors and the deal was co-led by BNP Paribas and ING, with a funding club of eight Tier 1 banks; Royal Bank of Scotland, Societe General, Royal Bank of Canada, HSH Nordbank, NIBC, and Barclays. Last year the company also received £100 million in funding to accelerate the build of its full-fibre network.

The cash itself will be used to hire an additional 1500 employees, more than doubling its current 600 staff across five offices, with plans to recruit at least a further 400 employees by the end of this year and another 1,000 by the end of 2019. Over the last 12 months, Hyperoptic has expanded its network to 10 additional UK towns and cities, and signed contracts in a further 14, taking the total north of 50. These funds will also be used to meet these commitments.

Fibre connectivity in the UK has certainly been sluggish to date, Ofcom suggests less than 4% of UK homes are currently hooked up, though the progress of alt-nets such as Hyperoptic and CityFibre are certainly putting forward a challenge to the status quo. Openreach certainly has the scale, but it remains to be seen whether positive moves from challenger business provides the kick the incumbent so desperately needs.

Xiaomi IPO was compromised by Chinese regulators

Chinese smartphone maker Xiaomi’s initial plan for a dual listing in Shanghai and Hong Kong was hamstrung by the draconian requirements from Chinese regulators.

According to Bloomberg, which cited sources familiar with the situation, Xiaomi failed to address the long list of questions China Securities Regulatory Commission (CSRC) asked, including demand for more information disclosure and profitability projections. This resulted in the company’s decision to scrap its plan to offer Chinese depositary receipts (CDR) at the same time as its IPO in Hong Kong.

This was a blow on two fronts. For Xiaomi, listing on the Hong Kong Exchange and pricing at the lower end of the expected range only raised $4.7 billion, less than half of the $10 billion it had expected to bring in. Market reaction was also lukewarm. The retail part of the offering was 8.5 times oversubscribed, compared with the hundreds of times oversubscription of other recent Chinese offerings in Hong Kong.

CDR was devised to provide a channel to the Chinese investors, in particular the retail investors, to buy into the fast growing Chinese successes. Therefore, for CSRC, the failure to get Xiaomi as the first high profile Chinese company to offer CDR on the Chinese market and IPO overseas simultaneously must be viewed as a setback to its ambition to stamp its authority on the global financial market.

More worrying for CSRC in the future, this could cause the other Chinese companies lining up to offer CDR as well as IPO to rethink their strategies. According to Bloomberg, the questions deemed by CSRC not addressed adequately by Xiaomi are very different from what is required on the Hong Kong market and are asking for much more detailed information to be disclosed. This means companies will find it easier to meet the demands for an overseas IPO than a listing on the domestic markets.

For Xiaomi though, not all doors are shut. In its new prospectus Xiaomi said it would “conduct a CDR offering in mainland China at an appropriate time in the future.” When or whether this will happen remains to be seen.

IPO fails to Xiaomi the money

The initial public offering of Chinese gadget giant Xiaomi seems to has raised considerably less cash than it hoped.

Bloomberg reports that Xiaomi priced the IPO on the Hong Kong exchange at the lower end of its expected range, resulting in a mere $4.7 billion being raised and pricing the company at around $54 billion, far less than had been hoped at the start of the year.

Bloomberg spoke to James Yan of Counterpoint Research, who offered the following analysis: “Xiaomi’s exceedingly thin margins from hardware significantly drags down its valuation for potential investors. I expect it to invest more in the smartphone unit, especially on international expansion. It also needs cash to beef up its ecosystem in markets like India. All those fronts are extremely capital-intensive.”

Another apparent hit on investor enthusiasm was Xiaomi’s decision not to do whatever the equivalent of an IPO is in China for whatever reason. This in turn meant it was going to raise less money and thus be able to reinvest less, hence reducing its investor appeal.

Xiaomi has done a great job of reclaiming market share it lost a year or so ago (see below), but the mere fact it had to do so is a reminder of how volatile the smartphone market is. Combine that with the company’s apparent Apple-style reliance on a captive installed base to flog other stuff to and the great job companies like OnePlus are doing of competing with it directly and you can see why the investment case is far from clear cut.

Xiaomi launches $6 billion IPO in Hong Kong

Chinese gadget giant Xiaomi has launched its initial public offering in the Hong Kong stock exchange that could raise over $6 billion.

2,179,585,000 shares will be on offer at a price range of HK$17 to HK$22 per share. If they all sell at the upper end of that range that will value the company at around $70 billion and raise around $6 billion. A proposed listing in China has been shelved for now.

“Today we present ourselves to you as we prepare to enter a new stage in our journey,” said Lei Jun, Founder, Chairman and CEO of Xiaomi. “We are an innovation-driven internet company committed to the principle of ‘amazing products at honest pricing’.

“Leveraging our unique ‘triathlon’ business model, we maintain excellent design and outstanding quality in our products, while pricing our products as close as possible to cost by selling them to users through highly efficient online and offline new retail channels. We then provide our users with a range of comprehensive and engaging internet services.

“Xiaomi’s achievements so far illustrate the strength and resilience of our model. Within seven years of our founding, our annual revenue exceeded RMB100 billion, achieving a growth rate that many traditional companies are unable to match.

“We believe that the potential of our global business is limited only by our imagination. With our unique ecosystem model, we have mobilized many like-minded entrepreneurs, and we are not only changing industries in China, but also elsewhere in the world.

“Fundamentally, the Internet is all about transparency, efficiency, and equality. We want to allow everyone to enjoy the benefits of technology. That is the goal that all Xiaomi employees and I are working tirelessly for.”

The triathlon business model simply refers to Xiaomi’s involvement in hardware, internet services and ecommerce all at once. In that sense it’s often compared to Apple, but it has only recently started to embrace third party sales channels. Xiaomi plans to spend the money raised equally on R&D, other investments and global expansion.

Xiaomi triathlon