UK is the tech start-up centre of Europe – research

A new report from Tech Nation has crowned the UK as the European hotspot for technology start-ups, and fourth worldwide for scale-up investment after US, China and India.

While the US led the rankings by a considerable margin, the UK managed to attract 5% of global high-tech scaleup investment, with capital investments in UK firms topping £6.3 billion for 2018. Digging down into the details, Tech Nation estimate the fintech firms are doing even better, attracting £4.5 billion of investment between 2015 and 2018, with the UK leading the world.

“The UK continues to exceed all predictions when it comes to tech growth,” said Gerard Grech, CEO of Tech Nation. “This report shows how the UK is a critical hub when it comes to global technology developments, with scale-up tech investment being the highest in Europe, and only surpassed by the US, China and India. This is a testament to the innovation, ambition and tenacity of tech entrepreneurs across the UK.”

The claim itself is based on various datasets, including information from PitchBook. By identifying the number of scale-up companies in each of the determined countries, and the value of investments made into these companies, Tech Nation has drawn-up the ranking. Scale-up companies are identified as those which have either achieved employment or revenue growth of 20% for two consecutive years and have a minimum of 10 employees.

The US is leading the rankings, which will come as a surprise to few considering the dominance of Silicon Valley on the technology industry, with China coming in second and India coming in third. US firms attracted 49.3% of the world’s scale-up investment, while China accounted for 20.4%.

The total scale-up investments made in UK firms was also 2.5X the value of what would be expected for a nation the size of the UK. In fact, tech scaleup deals delivered £5 billion of the £6 billion investments made in tech companies in the UK across 2018. AI seems to have taken the crown, accounting for £1.3 billion of the total.

Critically, this demonstrates the work which has been done to attract and encourage innovation, investment and start-ups in UK society is working. Perhaps there is some method to the government madness. Looking forward, all the signs seem to be heading in the right direction. With 5G networks on the horizon, the catalyst for growth is about to emerge.

5G will not necessarily change the world overnight, but the power of the networks has the potential to foster the unicorns of tomorrow. This is a network which will deliver new services in the same way as 4G did, demonstrating the importance of being one of the first to scale the connectivity boom.

The US led the deployment of 4G networks did not spur the economy into any great revolution, but the tools offered allowed innovation. Companies like Uber scaled because evolution of the networks, while an entire new segment of the economy was allowed to flourish. Without the connectivity tools to play with, these companies would have not had the potential to scale; the same can be said about 5G.

5G offers an opportunity to create new products and services. Artificial intelligence, cyber security, latency, MEC and high-consumption/speed data-applications can all exist without 5G, but they are more attractive, practical and viable with the next evolution of the network. Uber could have existed without 4G, but it is a disruptive success because of it. Joe Bloggs cannot conceive what products and services will be available over the next couple of years, but the right tools have to be in place to ensure the innovators can scale them.

5G won’t change the world, but it will offer the opportunity for innovators to create value for themselves, customers and the national society which fosters them.

What might be a hurdle before too long are the deployment plans of the UK telcos. Having a test-bed to create these products and services in the first instance is all well and good, but soon enough these start-ups will need customers to scale the business. The faster networks are deployed, the quicker these start-ups can get to market, engage customers, tweak the proposition and potentially create the Uber of the 5G generation.

The UK Government has been looking for ways to shore-up defences against the future, hoping to give the economy and society the greatest opportunity to thrive. This is why fibre rollouts, or mobile coverage gains are so important now even if there is no immediate benefit; it’s all about making the country future-proof, ready for the unknown and resilient to the future challenges. And cultivating start-ups is a critical component.

Not only does this have the potential to address the questions surrounding wealth in-equality, it removes the UK dependence on the financial sector. Tech is the dominating growth sector in the global economy, and the best way to reap the rewards is to create an environment suitable for start-ups, the companies who could steal the headlines in the future.

The UK Government has been preaching about the world it is doing to encourage innovation and start-ups over the last couple of years; perhaps this report is vindication of the work which has been done.

French council gets sick of waiting for MNOs so goes it alone

The local government in Eure-et-Loir has seemingly got tired of waiting for the MNOs to end not-spots in the countryside, deciding to construct its own masts in the region.

Announced via Twitter, the local authority approved funding for the ‘Eure-et-Loir Mobile Networks’ project in an effort to bridge the digital divide. The scheme will create a new company, which will have a budget of €10 million and aim for 100% geographical 4G coverage, through building its own mobile infrastructure.

“The @eurelien department is the first in France to create a project company to accelerate the deployment of the #4G throughout its territory, for 2021,” Eure-et-Loir Department Advisor Remi Martial said on Twitter.

In claiming to be the first Department in France to take such action, with the move somewhat undermining government plans to tackle the rural connectivity problem. Announced back in January 2018, the ‘New Deal Programme’ was designed to tackle not-spots across the country, though it appears the Eure-et-Loir local authority has little confidence in the scheme.

Two firms bid to be part of the project, with ATC winning. ATC will now enter into a public-private-investment scheme with the Eure-et-Loir authority to improve mobile coverage. Reports have previously suggested the region is short of 100 mobile masts to provide adequate 4G coverage.

When you consider the environment, it starts to make sense why the Eure-et-Loir region is not necessarily a priority for the MNOs. With a population of 432,967 (2013) it is the 55th largest region across France, with a population density of 74 citizens per km2. Compared to Paris, 21,234 per km2 or Hauts-de-Seine, 9,042 per km2 the business case is less convincing.

That said, should the hard work be done for the MNOs, renting space to place mobile equipment is a small price to pay for meeting government demands and improving coverage. With the vast majority of capital being allocated into civil engineering aspects of the project, few will complain, even if it does give the impression of mediocrity.

 

Intel VC arm plugs its disruptive vision

Intel has seemingly learned a lesson from the woes of stumbling giants, announcing it has invested $117 million in ‘disruptive’ start-ups at its annual VC conference.

There is a very good reason investors are so keen to pump cash into the likes of Google and Amazon, despite recent criticism and the threat of regulatory reform; these are companies which never sit still. The likes of Jeff Bezos and Sundar Pichai are constantly pushing the boundaries, expanding the business into new segments. It should be viewed as a lesson for every CEO around the world.

However, this is seemingly a lesson which has only recently been added to the management curriculum. In generations gone, some of the worlds’ leading technology companies have climbed further than any other before, and then stopped exploring. IBM, Oracle and Microsoft are three examples of companies which sat still for years, and the industry moved on without them. They have since recovered, but it took a lot to bridge the chasm.

“Intel Capital is continuing that legacy of disruption with these investments,” said Wendell Brooks, President of the VC arm, Intel Capital.

“These companies are shifting the way we think about artificial intelligence, communications, manufacturing and health care – areas that will become increasingly essential in coming years as the linchpins of a smarter, more connected society.”

One of the oldest phrases in the technology industry is often forgotten, but it seems Intel is attempting to resurrect it; disrupt or be disrupted.

Google and Amazon are the perfect embodiment of this statement. If you look at the acquisitions made over the years, they are incredibly intelligent bets. Google bought YouTube, Android and DeepMind for huge sums at the time, but now they look like bargains. Amazon didn’t make a profit for years, instead re-investing and now has AWS as a profit machine. These companies could have collected profits, paid more dividends and rewarded management with more bonus’, but look at what the end result is.

As it stands, Intel is in a relatively healthy position. Looking at the financials for 2018, revenue was $17.1 billion for the fourth quarter and $62.8 billion for the 12 months. These figures are 8% and 9% up year-on-year respectively, with data-centric revenue up 21% compared to Q4 in 2016. Share price declined on the news, investors were concerned over a conservative forecast, but the warning shot has seemingly been heeded.

If growth is not satisfying investors, something needs to change. The status quo is unlikely to reap more rewards tomorrow than today, therefore investment is required. Some of this will be directed inwards, though through the investments in Intel Capital the firm is welcoming disruption; it wants to be in on the ground floor of these potential booming enterprises.

“Our continued goal is to leverage the global resources and expertise of the world’s greatest engineering company, and its ecosystem of customers and partners, to help these founders accelerate growth and innovation,” said Brooks.

Looking at the investments, AI features heavily. Cloudpick is a smart retail technology provider with proprietary computer vision, deep learning, sensor fusion and edge computing technologies to enable cashier-free stores. SambaNova Systems is building an advanced systems platform to run AI applications. Zhuhai EEasy Technology is an AI system-on-chip (SoC) design house and total solution provider.

The team is also investing in the edge computing hype with Pixeom, mobile content streaming with Polystream, digital healthcare with Medical Informatics and Reveal Biosciences and also smart manufacturing.

The lessons of sitting still are incredibly obvious. Oracle founder CEO Larry Ellison dismissed the cloud and look where that has landed the firm. IBM refused to respond to the evolving PC market and it resulted in a colossal overhaul. Microsoft was another which ignored market trends, with former CEO Steve Balmer making some very off-target predictions in 2006. All of these companies have learned a lesson on disruption, but it came at a cost which took years to fix.

With its VC arm, Intel is promising to invest $300 to $500 million a year in disruptive technologies. It is taking a page out of the Amazon and Google playbook; if you want to remain on top, you can never sit still.

Chinese operators said to be cautious about 5G investment

Analysts are predicting an underwhelming start to 5G from its biggest market, with China’s giant operators taking a cautious approach to investment.

The Global Times reports that, between them, China Mobile, China Telecom and China Unicom will invest around $5 billion on 5G networks this year. This is apparently in line with “their pragmatic and cautious strategies”. Apparently China Telecom is dropping 9 billion yuan on 5G this year and China Unicom around 7 billion, which by the reports own assertions means China Mobile will be the big spender with 18 billion yuan.

“5G investment will last 10 years, considering the investment speed in 4G,” said some bloke called Huang, apparently. “It’s a pre-commercial time for 5G, so it’s a pre-commercial investment model.”

As you can see in the clip embedded below, another analyst echoed this perspective in a recent interview with Bloomberg. All this speculation about Chinese 5G prospects has probably been prompted by the recent announcement of China Telecom and China Mobile’s 2018 numbers. The two slides from their respective earnings presentations offer some further insight into their immediate 5G plans.

China telecom 2019 5G slide

China mobile 2019 5G slide

 

Softbank turns its attention to Latin American start-ups

Softbank has announced the launch of yet another investment fund, this time turning its eyes towards the unfulfilled promise of Latin America.

Alongside the fund, the SoftBank Latin America Local Hub will also be created, an operating group which will help companies in the other Softbank portfolios enter Latin America, navigate the local markets and broaden their geographic reach. Yet again, Softbank CEO Masayoshi Son is attempting to prove he wasted decades in the telco space and should have been focusing on investment management.

“Latin America is on the cusp of becoming one of the most important economic regions in the world, and we anticipate significant growth in the decades ahead,” said Son.

“SBG plans to invest in entrepreneurs throughout Latin America and use technology to help address the challenges faced by many emerging economies with the goal of improving the lives of millions of Latin Americans. I am grateful to our Chief Operating Officer Marcelo Claure for leading this initiative, in addition to his other responsibilities at SBG.”

The SoftBank Innovation Fund will aim to raise funds totalling $5 billion, with Softbank contributing the first $2 billion, with a particular focus on e-commerce, digital financial services, healthcare, mobility and insurance.

For years, Latin America has been promised as a land of fortunes. With several economies on the verge of blossoming, the realities of the world have staggered success. Political controversies, violence, poor infrastructure and hostile environments have been some of the reasons this region has yet to properly flourish, however the statistics are on its side.

Since 2000, over 50 million people in the region have entered the middle class, increasing the amount of disposable income flowing around the local economies. Internet and smartphone penetration have grown considerably, to 375 million and 250 million respectively. E-commerce sales have jumped from $29.8 billion in 2015 to $54 billion in 2018, suggesting digital society is bedding in.

Combining all of these factors suggest there are fortunes to be made with the right execution. Many have failed to capitalise on the promise, but there has been renewed enthusiasm in recent years.

Liberty Global is excellent example of a company which seems to think this is a market set to burst. Over the last couple of years, Liberty Global has been trimming back its exposure in Europe, note its recent asset disposals to Vodafone in Germany and Sunrise in Switzerland, as well as spinning off Liberty Latin America as an independent, publicly-traded company. Chairman John Malone has built a successful business over the last few decades, and now he clearly spots something he likes in the Latin American markets.

Another interesting development is over at Telefonica. The Spanish telco is seemingly positioning Aura as a potential competitor to the Google and Amazon digital assistants, fighting to manage the consumer’s digital ecosystem, though initial launches have been focused on its Latin American business units, not its domestic market.

Latin America is a market which has consistently failed to deliver on the promise, but eventually the bubble will burst, and fortunes will be made. Whether this is another false dawn remains to be seen but laying the foundations for the future is not necessarily a bad move.

UK Government says company boards still don’t get cyber-security

The UK Government has released its 2019 ‘Cyber Governance Health Check’ which claims only 16% of executives have an understanding of cyber-security threats.

It might sound like the beat of an old drum, but eventually management teams will get the idea. Each week new reports emerge suggesting security is an under-appreciated and under-funded aspect of the digital economy, and this week the Government is throwing its own arguments forward. This report measured the attitudes of the FTSE-350 companies across the UK.

“The UK is home to world leading businesses, but the threat of cyber-attacks is never far away,” said UK Digital Minister Margot James. “We know that companies are well aware of the risks, but more needs to be done by boards to make sure that they don’t fall victim to a cyber-attack.”

While the report suggests 96% of businesses have a cyber-security strategy in place, this might prove to be somewhat of a misleading statistic, offering misplaced comfort. The presence of a strategy is irrelevant when the funds are not being appropriately allocated to put the plan into action. If only 16% of the purse-string holders understand the threat, appropriate investments are not going to be made, therefore the problem will persist.

“This report shows that we still have a long way to go but I am also encouraged to see that some improvements are being made,” said James. “Cyber-security should never be an add-on for businesses and I would urge all executives to work with the National Cyber Security Centre and take up the government’s advice and training that’s available.”

Awareness of cyber-security threats are increasing, 72% of respondents to the survey acknowledge the risk of cyber threats is high, and while this is an improvement on the 52% in the 2018 report, this number is still too low.

This is the position many businesses are in. Security is a recognised threat, but with many board members under pressure to produce profitability, funds are being directed to areas which will add to the bottom line. Security is not one of these areas, though the emergence of GDPR and changing consumer attitudes should help this.

Firstly, GDPR was introduced last year, though the first punishments are beginning to be handed out. As soon as board members start to see the hefty GDPR stick swinging, punishing those who are not deemed sufficiently prepared for a cyber-security breach, attitudes will change. The fines can be eye-wateringly high, and if you want to make an executive listen to you, hit them in the wallet.

Secondly, consumers are becoming more security-conscious. With breaches becoming more widely reported in the press and scandals drawing attention to data privacy demands, consumers (and enterprise customers for that matter) are becoming more aware of what should be considered adequate. Security will soon become a factor in the purchasing decision-making process, and companies will have to prove their credentials.

The tides are slowly turning, and soon enough the digital economy might be equipped to deal with the threat of the dark web. That said, with the astronomical pace of progress, you have to wonder whether the challenge is starting to become too big for the chasing peloton.

“Cyber-security is a mainstream business risk, and board members need to understand it in the same way they understand financial or health and safety risks,” said Ciaran Martin, CEO of the National Cyber Security Centre.

FCC and Oval Office locking horns over 5G

The FCC originally looked like a diligent foot-soldier for the President, but with the nationalised 5G infrastructure argument seemingly emerging again, heads are set to butt.

Reports have been emerging in various corners that the White House is revisiting plans to develop a nationalised 5G network, a plan originally raised in January 2018 to keep the US at the front of the technology arms race. The plan was shot-down back then, and the FCC has already raised set the tone of resistance through social media over the last week or so.

Following the President’s twitter rant last month, which saw the Commander-in-Chief bemoan progress being made by the telcos, FCC chiefs set their position out quite firmly.

In the case of FCC Chairman Ajit Pai, a retweeted message from 2018 reiterates a point which was made when the plans were first suggested; hands-off from the government is the best stance. This seems to be one of the only positions the Democrat and Republican representatives on the board of the FCC seem to agree on; the telcos should build the US 5G network, not the government.

Although the White House has not released any official statement confirming its favour of a nationalised 5G infrastructure, the defensive position entrenched by Pai and Commissioner Jessica Rosenworcel suggest there have been conversations which neither like. These tweets could be viewed as in-direct opposition, with the pair attempting to get ahead of the game.

According to Politico, this isn’t the only conflict which is emerging either. The Trump 2020 re-election campaign team have been pushing the benefits of a government-owned, wholesale infrastructure, while the current Trump political administration are keen to avoid the topic. While the disagreement is hearsay and reports for the moment, it would not surprise us if the Trump campaign led with such a promise.

This sort of political manoeuvre fits perfectly into the Trump playbook from his first election campaign. It hits pain-points for US citizens in the politically less-attractive states, the very people Trump was able to mobilise in 2016. However, attacking the digital divide in rural communities is not a new trick, Hilary Clinton used this tactic in 2016 also, but a nationalised 5G infrastructure will appeal to those who feel ignored by corporates. Trump has shown he can communicate effectively to those who believe they are under-represented by mainstream politics, and this angle could prove to be an effective tool.

The idea which seems to have been raised here is to create a wholesale network in partnership with a private third-party. The government would fund the deployment of the network, while the third-party would manage the operations and wholesale business, creating a system which would operate like the electricity market, with parties ‘purchasing connectivity’ on a rolling basis.

Theoretically, this position sounds wonderful. The arguments for nationalisation are often very compelling, and it could be justified as an effective way to spend tax-payers money. However, nationalised businesses and infrastructure have been shown to be ineffective time and time again. The government is not equipped to manage such projects in the long-run and not savvy enough to compete against private entities when they emerge. It might sound very appealing to voters who are stuck in the chasm of the digital divide, but it will not help the US in the global technology arms race.

As Brenden Carr, a Republican FCC Commissioner, notes above, private industry is the best way to secure a leadership position in 5G. This is a lesson which has been learned numerous times over the years in the US; when you leave private industry alone, simply creating a legislative and regulatory framework to encourage growth, much can be gained. In the technology world, this is perfectly evident with the success of Silicon Valley.

The dominance of the US on the technology stage is being widely challenged, though it seems the ego of the Trump party is getting in the way of logic. First to market does not necessarily mean the best, but this seems to be the angle which the President’s team is taking.

The big question is what impact this will have on the future for the Republican party. Should these rumours of a nationalised network evolve into reality, a split may well appear in the rank and file. The Republican FCC representatives are clearly not happy about this position, and neither are the science and technology advisors in the White House. However, you can’t argue that such a campaign promise would be very attractive to those who currently reside on the wrong side of the digital divide.

Here is what the Trump 2020 electoral campaign team will have to assess; is the long-term detriment of communications infrastructure a fair trade-off for the lure of ‘Middle America’ votes in the 2020 election? We suspect they won’t be looking much further beyond 2024.

Government to give Ofcom new stick swinging targets

The UK Government has unveiled a new consultation which will explore how it can encourage Ofcom to snap the whip, making sure telcos get their gears churning to meet connectivity targets.

Over the next decade, if the government manages to create a suitable amount of urgency across the telco industry, there will certainly be some progress made. The objectives currently set out are nationwide full fibre broadband coverage by 2033, while also increasing geographic mobile coverage to 95% of the UK by 2022.

Although this sounds very official, this consultation is more of a temperature check from the government. It’s asking the industry to give it feedback on its Statement of Strategic Priorities to reinforce its position and create a framework for Ofcom to work towards, ensuring the aims and objectives of the government and the regulator are on the same page.

In this consultation, the government is presenting its Statement of Strategic Priorities for a legally required 40-day consultation, which will validate and justify the aims, therefore providing a more stable foundation to bring Ofcom’s work in-line with government ambitions. This is a process which is required in other utility verticals and brings the telco industry more in-line with the stricter regulatory scrutiny which is placed on segments such as water and energy.

Aside from meeting the connectivity and coverage ambitions, the consultation will also look at how ‘loyalty penalties’, the price-creep which is placed on contract renewals, can be tackled. The telco industry is one which is geared towards customer acquisition, though many would like to see loyalty rewarded, instead of picking up the slack created by offers to lure customers away from competitors.

“As the UK’s telecoms regulator, Ofcom has a critical role in realising our shared connectivity aspirations for the UK,” said Secretary of State, Jeremy Wright. “As well as ensuring the necessary improvements to broadband and mobile services, consumers must also be protected. I urge Ofcom to tackle harmful business practices and remove barriers to switching.”

The ‘loyalty penalty’ is a highly emotive mission from bureaucrats and consumer champions to stop an age-old practise of the telcos, which is perhaps underhanded. It is effectively taking advantage of those who are not savvy-enough to search for a new deal, or those who might innocently and naively presume loyalty would be rewarded. Unfortunately, this is not the case in the telco space, an industry which has a woeful track record and outlook on customer experience and services.

In terms of improving mobile coverage, the up-coming Ofcom 700 MHz auction has caught the attention of the government. The auction will aim to sell off 80 MHz in the 700 MHz band, spectrum which is well suited for providing mobile coverage over wide areas and indoors. Ofcom is currently clearing this band of transmissions for Digital Terrestrial Television (DTT) and by wireless microphones used in the entertainment industry, though the plans are to have the spectrum free for mobile use by summer 2020.

Elsewhere in the consultation, rural roaming will be covered. Again, this ties back to empowering the consumer with greater connectivity and coverage, tackling the not-spots across the UK. Despite each of the telcos claiming progress in improving coverage, there are still plenty of not-spots across the UK where consumers only have the choice of one operator. Future proposals would aim to improve roaming agreements, to offer greater choice of providers to the consumer.

Finally, the consultation will ask for opinions on the current regulatory landscape. Central to this aspect of the investigation will be the suitability of rules and regulations to ensure the UK attracts investment.

While this might seem like bureaucracy for the sake of bureaucracy, it is a democratic nation ensuring all the boxes are ticked. The government has ambitions and objectives, though it is seeking validation from the community, before presenting a mandate to Ofcom to ensure it is regulating the industry in the way the government feels is most beneficial for society on the whole.

User backlash after Tencent’s Reddit interest

Chinese internet giant Tencent is reportedly leading the pack for Reddit’s Series D round, with the social media giant aiming to raise between $150 and $300 million, but not everyone is happy.

Reddit, a social media platform for news aggregation, web content rating and conspiracy theories, has been beating its chest to the press over the last couple of weeks to drum up interest for the funding round. According to Alexa website rankings, Reddit is the 17th most visited website worldwide, while it claims to have 330 million monthly active users, 138,000 active communities and 14 billion page views a month.

And it appears to have caught the attention of one of the worlds’ fastest growing internet businesses. According to TechCrunch, Reddit is hoping to raise between $150 and $300 million, which would value the platform between $2.7 billion and $3 billion. Details are thin for the moment, but what is worth remembering is the Tencent stake would be relatively minor.

That has not stopped criticism on the platform from users however. Many are linking the Chinese distaste for free speech with the demise of Reddit. Some are using the freedoms afforded by the Reddit platform to voice their concerns that Tencent might be able to block certain conversations and impose some levels of censorship. Reddit is currently blocked by the Great Firewall of China, though some fear with Tencent’s involvement the censorship could be extended elsewhere.

What is worth noting is Tencent is not acquiring the business but investing in it. Depending on the total amount pumped into Reddit, Tencent will certainly gain some influence from a strategic and development perspective, all investor do to a degree, but it will be very limited. Another factor to consider is that depending on the type of shares which Tencent acquires, it might not even be granted a seat on the Board of Directors.

That said, such is anti-China rhetoric around the world, this deal will catch the attention of politicians. There is perhaps little which can be done to prevent the investment, though the involvement of a Chinese business might bring greater scrutiny down on Reddit. While it has not be the centre of any scandals to date, it certainly does have the capability of influencing a wide, deep and highly engaged audience. The success of the business will partly rely on the management team’s ability to manage this new dynamic with politicians.

While Reddit is one of the most popular social media platforms on the internet, it is rarely considered in the same bracket as sites such as Facebook or Twitter. The number speak for themselves, though as the site does not look anywhere near as polished and as it does not feel as overtly commercial, it has snuck under the radar to escape the same scrutiny which is placed on the other platforms. We suspect this will change over the coming months however.

Recently the business has been going through somewhat of a refurbishment to take it into the big leagues. With a site redesign, the introduction of a native video player and the team has started to sell cost-per-click ads in addition to promoted posts, cost per impression and video adverts, it is starting to get the feel of a genuine internet business. This, alongside investment from a Chinese company, might bring it more to the attention of governments and regulators, many of whom are attempting to crack down on internet companies.

For Tencent, this is an investment which makes sense. Having created a monstrous business in China, primarily through the influence of WeChat and QQ, the team is looking to spread its wings in the international markets. There certainly has been some organic growth into the international space, though Tencent has certainly not been shy about investments and acquisitions.
Over the last few years Tencent has invested in several game developers including a minority stake in Robot Entertainment, videogame developer and publisher Glu Mobile paying $126 million and 84.3% of Finland-based developer Supercell for $8.6 billion. The firm also has holdings in Riot Games, Epic Games and Activision Blizzard. All of these titles have increased the presence of the firm in the international arena, as well as its influence in the data economy.

While expansion into the international arena is nothing new, attempting to muscle into the social media and news aggregation segment has got a few people anxious. Considering the Chinese approach to freedom of speech, Tencent’s involvement in Reddit has gotten a few users asking questions, while governments are bound to wade into the equation sooner rather than later.

Vodafone puts the brakes on core Huawei spend

There aren’t many things that could rival Huawei’s headaches derived from government bans, but a snub from another one of the worlds’ largest telco groups might be up there.

With 275 million customers around the world, plus another 250-odd million through joint-ventures, this is one of the biggest telcos in the world. With networks spreading across Europe, Africa and Asia, the buying power and influence of Vodafone is considerable. This could a massive blow to the prospects of Huawei, both financially and in terms of credibility.

Speaking on the earnings call last week, CEO Nick Read stated the following:

“Specifically on Huawei, what I was really trying to make clear is, I think we need to move to more a fact-based conversation, I think at the moment is a simplistic political level and there is a big distinction between radio and core. We are predominately using Huawei in radio. We are continuing to use them in radio for 5G. However, in the core, we have put them on pause. They are not significant in the scale of our operations in the core and therefore it’s not a big financial implication.”

This is where Huawei finds itself in a difficult position. In numerous markets it is still fully free to compete for on-going 4G and up-coming 5G contracts, though these telcos will question the risk. Does the benefit of working with Huawei outweigh the risk? Why spend money on kit when you might have to strip it out in the near future?

As it stands, Vodafone does not have a huge level of exposure in terms of Huawei in the core, this is the case for most European telcos, though should the ban extend to radio or transmission this might become a significant issue. A full-scale ban is certainly not out of the question, very little is when you consider how aggressive and antagonistic the current political climate is, and this could send ripples throughout the ecosystem.

Vodafone confirmed to us Huawei equipment is in the core in some minor markets and Spain, and this is where the pause is relevant. Huawei will continue to supply Vodafone with equipment in other areas. In this sense, the fallout should be contained. Just to put things in perspective, Vodafone’s position is similar to that many telcos around Europe are taking.

However, as Read notes, should a ban extend to other areas of the network it could proves to be a sticky situation for everyone involved.

“Clearly, if there was a complete ban at the radio level then it would be a huge issue for us, but it would be a huge issue for the whole European telco sector,” said Read. “And what, Huawei have probably, what 35% market share through the whole of Europe, so I think that is a totally different consideration, but we now need to make a lot more fact-based conversation.”

The point which Read is making is a logical and incredibly important one. Too many people are getting swept up in the political rhetoric and not looking at the facts which are on the table. The negativity surrounding Huawei is starting to snowball, but little (if any) hard evidence has been put on the table. People are forgetting about the facts, instead contributing to the momentum.

What businesses like Vodafone need is certainty. The political see-sawing with Huawei is not providing much confidence for the telco to appropriately invest in networks. If this has a negative impact on the performance of the networks in the future, the politicians will be the first to point the finger of accusation at the infrastructure owners. The perfect storm of disaster and disorganisation is started to develop.