Intel triggered into joining Qualcomm Apple spat

Qualcomm has accused Intel of cheating at modems with Apple’s help, but Intel’s weak public riposte is unlikely to sway much opinion in its favour.

Judging by the general quality of their press releases all three of the companies involved in this spat refuse to issue a single public utterance until every syllable has been pored over by battalions of lawyers. As a consequence, when they decide to slag each other off via the media the result falls pretty far short of Wildean in its wit.

To be fair to Qualcomm, its latest allegations weren’t strictly public, although you have to wonder what the source of the court filing leak that resulted in the rest of the world knowing about it was. Essentially Qualcomm is questioning how Apple was able to replace its modems with Intel ones in the latest iPhones and figured it must have given Intel trade secrets to ensure its modems were up to the job.

Intel’s General Counsel Steven Rodgers posted a riposte entitled ‘Qualcomm’s Rhetoric Pierced’, which promised all kinds of rebuttals, refutations and rebukes but instead delivered a disappointingly generic whinge that amounted to ‘how dare you?’ It started fairly promisingly with a round up of all the fines Qualcomm has been hit with over the past couple of years for violating competition laws.

But then it degenerated into a general purpose moan about how unfair the allegations are when everyone at Intel works really hard, actually. “We are proud of our engineers and employees who bring the world’s best technology solutions to market through hard work, sweat, risk-taking and great ideas,” pouted Rodgers. “Every day, we push the boundaries of computing and communication technologies. And, the proof is in the pudding: Last year, the U.S. Patent Office awarded more patents to Intel than to Qualcomm.”

The correct form of the proverb is ‘the proof of the pudding is in the eating’, but if Intel chooses to keep its patents inside some form of dessert, who are we to judge? “For the most part, we have chosen, and will continue to choose, to respond to Qualcomm’s statements in court, not in public,” said Rogers, showing the acute judgment that you would expect of a senior Lawyer. Qualcomm has yet to publicly respond.

Amdocs and Openet settle baffling, endless patent dispute

After eight years of ensuring expensive holidays for their lawyers, rival telecoms software companies Amdocs and Openet have decided to call it a draw.

An extremely short announcement from Amdocs said “Amdocs and Openet today announced that they have settled a patent infringement dispute in the United States Federal District Court for the Eastern District of Virginia.  As part of the confidential settlement, Amdocs agreed to license certain patents to Openet.”

Back in 2010 youthful Light Reading hack Ray Le Maistre spoke to (then and still) Openet CEO Niall Norton in a bid to find out what Amdocs’ problem was. Norton, however, seemed to be as baffled as everyone else by this act of unilateral legal aggression and chose to conclude that it was merely a measure of how intimidated Amdocs was by the plucky Irish BSS upstart.

“[Amdocs] is a good company and a ferocious competitor,” said Norton at the time. “It’s good to know they’re thinking about us as much as we’re thinking about them. We’re open-minded about what might happen next. Our lawyers say this could take anything between three and 12 months to sort out.”

That’s what they always say Niall and then, before you know it, eight years have gone past and they’re the only ones with any cash. To be fair the case does seem to be especially arcane. A spot of light Googling revealed one case that was apparently resolved in 2016 and another that came to a conclusion a month or so ago. Both accounts seem like very effective cures for insomnia but we don’t feel any more enlightened about the merits and outcome of this litigatiathon as a result of enduring them.

In essence Amdocs accused Openet of infringing on some of its patents and the fact that Openet is now going to shell out some license fees would seem to vindicate it to some degree. But if we assume Amdocs’ intention was at the very least to force Openet to entirely abandon the technology in question, and maybe even to force it out of business, then the case seems to have been a failure.

Endless design patent case orders Samsung to pay Apple $539 million

Apple accused Samsung of coping some design elements from the iPhone back in 2011 and the lawyers have been making hay ever since.

First Samsung was found guilty of at least some of the claims in 2012 and ordered to hand over $1 billion for Apple’s troubles. Samsung appealed the amount and that’s what has, for some reason, taken six years to thrash out. Samsung paid up $399 million for design patent infringements following one wave of appeals but apparently want some of that back. Instead it has been told to find an extra $140 million, which must be pretty gutting.

The following public statement has been attributed to Samsung: “Today’s decision flies in the face of a unanimous Supreme Court ruling in favour of Samsung on the scope of design patent damages. We will consider all options to obtain an outcome that does not hinder creativity.”

Apple, meanwhile has been quoted as saying “It is a fact that Samsung blatantly copied our design. We’re grateful to the jury for their service and pleased they agree that Samsung should pay for copying our products.”

Design patents are a difficult area. To what extent can you prove that one rectangular touchscreen devices copied another? One of the patents, for example, concerns how rounded the corners are. Is only Apple allowed rounded corners? It also shows the frequent futility of patent litigation between companies that conclude it’s cheaper to keep the matter in the courts indefinitely than pay any fines.

Europe slaps Qualcomm with €1 billion fine for abusing dominance in LTE basebands

Mobile chip giant Qualcomm has been fined yet again for abusing its dominant market position, this time by the European Commission.

The precise amount of the fine is €997 million, but what’s €3 million between friends? As we have come to expect from the EC, this decision took 2.5 years to make. The investigation opened in July 2015, then escalated at the end of that year. An intriguing twist to this decision is the EC’s finding that Qualcomm directly bribed Apple, with which it is currently involved in bitter litigation, to stay loyal.

“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” said Commissioner Margrethe Vestager. “Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price – they were made on the condition that Apple would exclusively use Qualcomm’s baseband chipsets in all its iPhones and iPads.

“This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were. Qualcomm’s behaviour denied consumers and other companies more choice and innovation – and this in a sector with a huge demand and potential for innovative technologies. This is illegal under EU antitrust rules and why we have taken today’s decision.”

Maybe all the aggro between Qualcomm and Apple came about because Qualcomm stopped paying up. Who knows? Qualcomm has been quick to issue a public response, referring to the Apple things as “…an expired agreement between Qualcomm and Apple, which was in effect from 2011 through 2016, for the pricing of modem chips.” The litigation between the two companies kicked off in January 2017.

Qualcomm will, of course, appeal. “We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” said Don Rosenberg, Qualcomm General Counsel. “We have a strong case for judicial review and we will immediately commence that process.”

The other thing Qualcomm was keen to stress is that this has nothing to do with its licensing business, which is what Apple is objecting to, and has no impact on ongoing operations. That may be true but it’s hard to ignore the constant stream of negative judgements being made about Qualcomm’s business practices around the world. Investors don’t seem too bothered, with Qualcomm shares only down a percentage point on the news.

Qualcomm sues Apple some more – yay

Qualcomm has managed to dig up some more patents it reckons arch-enemy Apple has infringed upon and decided to turn that into three new legal actions.

With Christmas coming and the year drawing to a close we wouldn’t be surprised if Qualcomm’s horde of lawyers was keen to demonstrate a late flurry of activity. Apple has presumably been suspected of these infringements for some time, this litigation-athon having kicked-off at the start of the year, but there’s no harm in keeping a few up your sleeve is there?

“Qualcomm has filed three new patent infringement complaints against Apple in the U.S. District Court, asserting a total of 16 additional patents that Apple is currently using in its iPhones,” said the Qualcomm announcement.

“Five of these patents are also included in a new complaint filed in the International Trade Commission. Like the patents we asserted at the ITC in July, all of the 16 patents are non-standards essential patents implemented outside of the modem. Apple continues to use each of these patents in its devices without paying for them.”

It doesn’t really matter what these specific patents refer to, but here they are for anyone who’s into that sort of thing: U.S. Patent No. 9,154,356, 9,473,336, 8,063,674, 7,693,002, 9,552,633, 8,971,861, 7,834,591, 8,768,865, 8,229,043, 8,447,132, 9,024,418, 8,683,362, 8,497,928, 8,665,239, 9,203,940 and 7,844,037. Some of them even refer to patents Qualcomm got from Palm back in the day. It’s not obvious why Qualcomm has seen fit to get three law suits for the price of one out of this but, frankly, who cares?

This could all just be a bit of legal tit-for-tat after Apple thought it would be funny to sue Qualcomm for infringing on its patents earlier this week. Next they’ll be saying Snapdragon is a flower, and Apple trees also have flowers, so that’s an infringement too.

What the hell is going on at Synchronoss?

The appointment of former AT&T exec Glenn Lurie was the third change of CEO at Synchronoss in a year that has seen enough corporate drama to last a lifetime.

When we got the opportunity to interview Lurie recently, it was the first time we had checked in with Synchronoss for a while. Reviewing the Synchronoss press page immediately before and then after the interview revealed some rather intriguing announcements, so we decided to dig a bit deeper. Here’s what we found.

At the start of this year we reported that Synchronoss had moved out of its legacy handset activation business by selling it to a company called Sequential, which soon after appointed former AT&T exec Kent Mathy as its new CEO.

This disposal had been performed hand-in-hand with the acquisition of secure cloud messaging provider IntraLinks in early December 2016. The whole manoeuvre was positioned by Synchronoss founder and CEO Stephen Waldis, a former AT&T exec, as a strategic pivot to become a more general B2B cloud services provider. The incoming IntraLinks CEO, Ron Hovsepian, was appointed as CEO of the combined company, still called Synchronoss, with Waldis moving up to the Chairman role.

But before long there was significant turmoil at the top. Long-standing CFO Karen Rosenberger retired in February 2017 and was replaced by former Avid exec John Frederick. Just two months after Frederick’s appointment, however, it was announced that both he and recently appointed CEO Hovsepian would be leaving, with the latter serving as a consultant ‘to ensure a smooth transition.’ Waldis once more took the reins as CEO.

Within days Synchronoss had rescheduled its Q1 2017 earnings call, filing and release, prompting a letter from the NASDAQ notifying it of non-compliance with its rules. On 8 June Synchronoss announced its financial statements for the whole of the 2015 and 2016 fiscal years could no longer be relied upon and would need to be restated. All of the stuff we have covered so far had sent the Synchronoss share price right down the toilet – with the company losing around 80% of the value it had before the IntraLinks/Sequential move was announced.

Synchronoss Google Finance screen

It seems this caught the attention of Siris Capital Group, which knew a potential bargain when it saw one, and in June Synchronoss announced it had received an indication of interest from Siris to buy the whole company for $18 per share, which promptly stabilised the share price at that level.

The next few months were spent ‘reviewing strategic alternatives’, which usually means working out whether there is more value to shareholders from selling or from likely future growth. By October Synchronoss announced it had concluded the best strategic option would be to sell IntraLinks to Siris for around $1 billion and receive a further investment from Siris of $185 million in the remaining company. This investment would be convertible into 19.8% of Synchronoss common stock.

By 14 November that process was completed and Lurie was announced as the new CEO of Synchronoss two days later, with the strategic imperative of doubling-down on the white-label cloud business. As part of his inducement package Lurie was granted extensive stock options at an exercise price of $10.04 per share.

All of the above is taken from Synchronoss public statements, but, as you might expect from such a rollercoaster ride, Synchronoss has caught the eye of other market observers. The most significant of these has been an organisation called the Southern Investigative Reporting Foundation, which has the stated aim of ‘providing in-depth financial investigative reporting for the common good.’

SIRFing the web

On 24 February 2017 SIRF published a story entitled Synchronoss Technologies: The Friends and Family Plan. It started by outlining the IntraLinks/Sequential transaction and highlighted the extent to which the Synchronoss share price had already declined by that date. It also noted that Synchronoss had been trying to lure Hovsepian away from IntraLinks since May 2016.

But the most remarkable aspect of the SIRF piece was its finding that Sequential had only been formed in the month before the transaction and that its website was registered by one John Methfessel, who also became its Chairman. SIRF said Methfessel was also a former neighbour of Waldis as well as an early-stage investor in Synchronoss.

Also uncovered was a research note from Stifel Analyst Tom Roderick that stated Sequential Technology International is a unit of Omniglobe International, which is a business process outsourcing company that works with Synchronoss on its AT&T activation work. Omniglobe was also listed as a ‘related party’ in the 2006 Synchronoss IPO prospectus, which included details of an equity interest on the part of Waldis and three other Synchronos execs. Those investments were made through a holding group called Rumson Hitters, other members of which eventually bought out the Synchronoss execs’ stakes in Omniglobe.

SIRF then interviewed Omniglobe President and Chairman Jaswinder Matharu, who revealed that Rumson Hitters owns half of Omniglobe and that its investment is controlled by John Methfessel. Sequential’s press page has no releases other than the 12 January announcement about the Synchronoss transaction and the appointment of Mathy. The only other item is a 27 February interview conducted by Sequential CSO Tom Miller, who was an EVP at Synchronoss before its IPO.

So intrigued was SIRF by all this that it published a follow-up piece a month later entitled ‘Synchronoss Technologies: You Probably Wouldn’t Buy a Car From These Guys’. The piece took a closer look at Synchronoss accounting practices and was published long before the company announced its previous two years’ accounts could no longer be relied upon.

The picture this second SIRF piece paints is of a company constantly looking to maximise the revenues from its cloud business and resorting to some questionable book-keeping to achieve that. Among those include the allegation that the revenue contribution from the acquisition in March 2016 of Openwave, a messaging software firm, was deliberately downplayed, and the accounting of $9.2 million of the Sequential deal as revenue. The piece also claims the company’s three most senior execs sold an exceptional number of their shares over the past two years.

By far the most dramatic apparent consequence of the SIRF reports is the commencement of a class action civil law suit against Synchronoss ‘for violations of the federal securities laws’, and on behalf of anyone who bought Synchronoss shares during a period that was eventually extended to between 3 February 2016 and 13 June 2017. The suit was initiated on 1 May 2017 but has since been joined and amended several times.

Class acts

What follows is a summary of version 38 of the suit, filed on 21 November 2017.

Allegations

  1. CEO Waldis and CFO Rosenberger implemented a fraudulent scheme to conceal the company’s deteriorating financial condition by:
    1. Prematurely recognising contractual revenues
    2. Inflating revenues through a deal with Sequential that, unbeknownst to investors, added a $9.2 million licensing fee to Synchronoss’s bottom line that the company booked as revenue in Q4 2016, thus allowing it to meet earnings targets
    3. Therefore issuing falsely inflated earnings guidance
  2. To obscure that fraud they borrowed $900 million to buy IntraLinks and installed its CEO as the head of the whole company. The company simultaneously divested its activation business in the Sequential transaction.
  3. A 24 February 2017 piece by SIRF accused Waldis of having personal connections with Sequential. Days after, Synchronoss disclosed the $9.2 million licensing fee for the first time. Specifically, from the filing: “On December 22, 2016, the Company entered into a non-exclusive perpetual license agreement with STIH, in the amount of $9.2 million, which is included in net revenues in the statement of income, for the use of the Company’s Analytics software.”
  4. On an 8 Feb earnings call Rosenberger and Waldis misleadingly concealed both the existence of the $9.2 million licensing fee and the fact that it had been included in fourth quarter 2016 revenues.
  5. Less than two months after the new CEO and CFO took charge they resigned and the company announced a large miss of earlier earnings guidance, causing the stock to fall 46% in one day.
  6. In June 2017 Synchronoss announced its financial statements for the previous two years would need to be restated, and that its revenue during that time had been overstated by as much as 10%, which could amount to $100 million.
  7. Company management collectively unloaded at least $14 million worth of Synchronoss stock in insider trading sales during the Class Period (February 3 2016 to June 13 2017). Waldis sold 221,486 Synchronoss shares worth around $6.6 million and Rosenberger sold 29,583 shares worth around $800,000.
  8. Rosenberger sold shares between December 2016 and February 2017 at a far higher rate than she had in the same period in previous years.

Company background

Synchronoss was set up by former AT&T exec Stephen Waldis to offer mobile device activation services to AT&T. In the light of the expiration of AT&T’s five-year license to exclusively distribute the Apple iPhone, Synchronoss started to reposition itself as a consumer and enterprise cloud services provider in 2013.

The cloud business grew rapidly and by 2015 accounted for a greater proportion of revenues than the activation services. The company publicly acknowledged the attention investors were paying to the cloud business and also prioritised the cloud business in executive compensation.

On 5 December 2016 Synchronoss acquired IntraLinks and at the same time divested the bulk of its activation business to Sequential. There was no mention of the $9.2 million licensing deal in the associated filing.

Fraudulent accounting practices

These were committed in part because the company was struggling to maintain the rapid growth of the cloud services segment and took the form of manipulating accounting rules to make it look like the company had hit financial targets when it had actually missed them.

The Sequential licensing transaction is a likely illustration of this, as the $9.2 million licensing fee should not have been recognised as revenue because it was a component of the transaction to sell the activation business to Sequential. This is likely to be recognised in the financial restatement along with the accounting for a contract with Verizon and certain transactions with AT&T – its two biggest customers – with two anonymous insiders providing testimony to support those assertions.

Other significant details highlighted in the court document

Sequential was a new company that, according to the 24 February SIRF piece, is owned primarily by people affiliated to Synchronoss executives. Sequential was previously known as Omniglobe, which was part owned by Waldis. Synchronoss sold 70% of its activation services business to Sequential for $146 million, although only $18.1 million of that was paid in cash up front.

On the same day Synchronoss announced the acquisition of IntraLinks for $821 million in cash, some of which was paid for by $900 million of new debt. The incoming IntraLinks CEO – Ronald Hovsepian – would take over from Waldis as overall CEO of Synchronoss.

Rosenberger got a ‘release agreement’ payoff in the region of $2 million.

Hovsepian resigned on 27 April and received a lump-sum of $3.2 million as well as a two-year consulting contract worth $1.5 million. Waldis was re-appointed as CEO. A conference call was announced at which all this stuff would be discussed, but it was subsequently cancelled and soon after the company announced the need to restate its financials. This still hasn’t happened. Synchronoss is currently under pressure from NASDAQ to demonstrate compliance with its rules or face delisting.

The SEC repeatedly asked Synchronoss to make public the details of some of its deals with Verizon and the company refused. The allegation is that the timings of these deals would have revealed accounting fraud. A former company insider alleges that Synchronoss booked $7 million in revenue from two AT&T transactions in late 2015 that never materialised, which in turn allowed the company to show cloud growth in a quarter that would have otherwise been flat.

The desired outcome of this civil action is for a jury trial to be granted.

Analyse this

Mentioned in both the first SIRF piece and a prominent questioner on the 8 February 2017 earnings call was Stifel Analyst Tom Roderick. SIRF had been unable to reach him for comment but we were more fortunate and started our phone interview with him by asking what he thought of all the stuff that has been going on with Synchronoss.

“This is, without a doubt, the most head-scratching story I’ve followed in 15 years,” said Roderick. He went on to say that three or four years ago he was recommending Synchronoss stock but then started to be less keen on what he saw. It seems some of the aforementioned accounting irregularities caught his eye and he was especially struck by his inability to find any record of Sequential when the IntraLinks deal was announced.

Here’s the opening paragraph from Roderick’s 4 February 2016 research note in which he downgraded his recommendation for SNCR from ‘buy’ to ‘hold’. His target price for the stock prior to his downgrade had been $60 and he declined to state an updated target price in lieu of greater clarity.

Following Synchronoss’ Wednesday morning earnings call, shares of SNCR dropped nearly 11%, which we perceived all day to be an attractive entry point. However, as we evaluated our model more completely, and after examining the implications of the company’s “Net Income Attributable to Noncontrolling Interest” line, we have become convinced that the quality of the 4Q15 Cloud outperformance wasn’t nearly what we thought it was. We believe the Verizon Joint Venture contributed at least $18mn in one-time Cloud revenue in 4Q, leaving us incrementally concerned about what positive factors need to emerge to drive the company’s Cloud business up by 24% in FY16, as guidance suggests.

On 20 February 2017 Roderick wrote a research note entitled ‘Crossing “The Bridge”: Making Sense of SNCR’s Continuing Operations Figures’. The ‘bridge’ is a reference to reconciling Synchronoss historical financials and its projected estimates. “Let’s start with what many people don’t understand: ‘Cloud’ now includes a sizable chunk of historical ‘Activation’,” opened the analysis. It went on to say that isolated ‘cloud’ growth is more like 9%, far lower than the 30% investors had been used to, and to express scepticism that growth can ‘re-accelerate’. That report put a price target of $32 on Synchronoss shares, but by the time Hovsepian and Frederick had left the building Roderick had cut that to $10.

We asked Roderick what he thought of the civil suit and he described it as “a shocking development,” adding that actions like these often take years to play out and are often settled out of court. If that does turn out to be the case it will surely be another dark day for Synchronoss shareholders.

On the likely future of Synchronoss, Roderick reckoned the most positive set of circumstances would be for Siris to continue to back the company as it did with Xura (now known as Mavenir). On the flip side he thinks it’s imperative that Synchronoss diversify away from CSP white-label cloud, which is becoming commoditised, and its over-reliance on the two big US operators. To be fair that’s pretty much what Lurie told us it wants to do.

Asked for a summary of everything that had occurred, Roderick said: “At the very best it will be a case study in poor communication with Wall Street and at worst it’s a case of classic financial manipulation.”

Roderick has just published an update on the Synchronoss situation, focusing on the civil lawsuit, entitled ‘Another Brick in the Wall’. While he has sadly refrained from further Pink Floyd analogies he focuses on the testimony of the two anonymous insiders we mentioned in our summary of the case, referred to in the document as CW1 (confidential witness) and CW2. Here’s his summary of that.

It goes without saying that interviews in a civil lawsuit cannot be verified as fact, nor do we claim to have direct conversations with either CW1 or CW2. It also goes without saying that such civil suits will often cherry pick the most damning commentary and facts. However, given that we have also been on the record as being critical of what we have perceived to be SNCR’s aggressive accounting and weak financial disclosure policies – dating back to our downgrade of the stock on February 4, 2016 – such allegations from former employees do not strike us as altogether shocking.

Distilling all this information into one paragraph, the impression is given of a senior management intoxicated by the rewards associated with the initial rapid growth of its white-label cloud business and then becoming increasingly desperate when that growth started to decline. Big question marks still hang over the business, such as the civil action and potential NASDAQ delisting, but at the same time it needs to ensure there’s still a viable business left if those go its way. Good luck with that Glenn.

Qualcomm wants to ban iPhones in China

A report, subsequently confirmed by both companies, states that Qualcomm is seeking to ban the sale and manufacture of Apple’s smartphones in China.

The story was broken by Bloomberg, which said that Qualcomm had filed law suits at a Beijing intellectual property court, claiming patent infringement and seeking injunctive relief – i.e. a ban on commercial activity. A Qualcomm spokesperson offered a generic confirmation of the action while an Apple spokesperson gave a generic statement on how baseless it all is.

This is just the latest phase of a litigation arms race between the two companies. Apple doesn’t like how much money it has to pay Qualcomm for its chips and, as ever, the move to litigation is a consequence of negotiations between the two companies breaking down.

The dispute threatens to engulf the entire industry as the two protagonists seek allies and indirect ways of inflicting damage on each other. Qualcomm recently suffered another setback to its business model with Taiwan concluding it has been harming competition. It seems very unlikely that Apple will receive an injunction in China but a negative ruling in this case could significantly undermine its negotiating position.

Telia hopes to draw a line under Uzbekistan nightmare with $965 million payment

The region that keeps on taking has claimed another pound of flesh from Swedish telco Telia in the form of a billion dollar fine.

Positioned as a ‘global settlement’, Telia is handing over $965 million to US and Dutch prosecutors in what it hopes will be the final resolution of the Uzbekistan corruption case that has dogged it, as well as Telenor and Veon, for years. Sweden seems to want a piece of the action and is looking for a disgorgement (repayment of illegal profits), but Telia is hoping that will be covered by this settlement too.

The figure is actually a bit of a let-off considering Telia expected to be stung for $1.4 billion this time last year. This seemed a tad harsh when Veon got away with considerably less and Telia’s lawyers seem to have earned their fees in the intervening time.

“Today’s settlement brings an end to an unfortunate chapter in Telia Company’s history,” said Telia’s President and CEO Johan Dennelind. “Since 2013 the new board and management have worked diligently and responsibly to understand what went wrong, to remedy what has been broken and to regain trust from all our stakeholders.

“We have come a long way to establish a more sustainable company with a strong focus on governance and compliance but it is a never-ending journey as we aspire to embed this into our culture making sure that all employees understand the importance of doing the right thing all the time. The resolution and related financial sanction that we announce today is a painful reminder of what happens if we don’t.”

“Today, we announce one of the largest criminal corporate bribery and corruption resolutions ever, with penalties totaling just under a billion dollars,” said acting U.S. Attorney Joon H. Kim. “Swedish telecom company Telia and its Uzbek subsidiary Coscom have admitted to paying, over many years, more than $331 million in bribes to an Uzbek government official.

“Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City. If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws. Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

While bribery was clearly an implicit cost of doing business in Uzbekistan over the period that Telia and Veon committed their naughtiness, it’s less obvious why these companies chose to maintain their interests their rather than just bailing. Presumably targets and bonuses had a part to play and, if so, this simply echoes the mistakes of companies like Barings, Enron, Lehman Bros, etc.

Three formally launches its spectrum auction legal challenge

Having threatened it for ages, UK operator Three has finally filed its demand for a judicial review of Ofcom’s decision on UK spectrum caps in the coming 5G auctions.

Back in July Ofcom decided to cap the amount of usable mobile spectrum owned by any one operator at 37%. Three, which currently only owns 15%, wanted that cap to be 30% so it was pissed-off by the decision and hasn’t stopped moaning about since.

Meanwhile EE, which had initially indicated it was fine with the restrictions on its participation in the auctions necessitated by its current ownership of 42% of spectrum, recently decided to join the moaning party anyway, perhaps mainly to act as a legal counter-weight to Three.

The various arguments have already been in the public domain for some time. Three is sticking with its disingenuous claim that all it cares about is the poor old UK consumer and Ofcom is positioning Three as the selfish bastard, ruining the 5G experience for everyone else thanks to the delays caused by its legal challenge.

“We confirm that we have filed a judicial review before the UK courts in relation to the competition measures that will apply in the upcoming spectrum auction,” said a Three spokesperson. “We anticipate a short process and a court decision by early 2018. Ofcom does not expect commercial 5G services in the UK before 2020, so this short process will not impact the availability of 5G to UK consumers.

“It is absolutely vital that the regulator gets this auction right for the long-term benefit of all consumers. For a relatively short process, we feel it is a proportionate response to request an independent review of Ofcom’s proposal, which we feel unduly puts at risk its stated objective of a competitive four-player market and is to the detriment of UK consumers.”

“It is very regrettable that the auction will now be delayed by this litigation, which will harm consumers, businesses and ultimately the UK economy,” said an Ofcom spokesperson. “It is now crucial that companies don’t drag their feet, so the case can be heard as soon as possible.”

The one thing they both seem to agree on is that the review process should proceed as quickly as possible. There are not many precedents for arbitrarily capping this sort of thing so that looks unlikely. But the fact still remains that under the current proposals Three can significantly achieve its share of spectrum if it’s prepared to put its money where its mouth is and bid aggressively in the auctions.