T-Mobile Sprint merger cast into doubt once more

The US Department of Justice might not let the merger go through in its current form, according to reports.

The WSJ has the scoop, citing those handy people familiar with the matter once more, who also seem to have been chatting to Reuters. According to the latter, which isn’t paywalled, the DoJ has concerns about the deal as it’s currently structured. The news caused shares in both companies to fall and their respective CEOs to tweet coded dissent.

Both John Legere and Marcelo Claure said the article is, respectively, untrue and not accurate. While on the surface these might appear to be absolute rebuttals, it’s actually a bit more nuanced than that. Legere says the premise of the article is untrue without detailing what he thinks that premise is, while any small part of the piece could be inaccurate without the overall claim being so.

Here’s the opening paragraph of the WSJ story: “Justice Department antitrust enforcement staff have told T-Mobile US Inc. and Sprint Corp. that their planned merger is unlikely to be approved as currently structured, according to people familiar with the matter, casting doubt on the fate of the $26 billion deal.”

There’s not much else to say at this stage but the process certainly seems to be dragging on. Presumably there has been some discussions between the two companies and someone on the DoJ side decided to up the pressure on TMUS and Sprint to compromise via this mini-leak. Let’s see.

 

 

Skint AT&T flogs its 10% of Hulu for $1.43 billion

Having dropped $85 billion on Time Warner AT&T needs to raise some cash sharpish and getting out of OTT TV company Hulu us a start.

Hulu is a private company that is roughly 60% owned by Disney, 30% by Comcast and 10% AT&T. The latter stake (9.5% to be precise) is being bought back by Hulu itself for $1.43 billion, valuing the whole company at $15 billion. Hulu will presumably apportion the stake such at Disney owns two thirds of the company and Comcast one third.

“We thank AT&T for their support and investment over the past two years and look forward to collaboration in the future,” said Hulu CEO Randy Freer. “WarnerMedia will remain a valued partner to Hulu for years to come as we offer customers the best of TV, live and on demand, all in one place.”

AT&T says it will use the case to pay down its debt pile a bit, but the ongoing relationship of its expensively acquired media business with OTT players like Hulu will remain a source of intrigue. Disney recently announced its own streaming service, as did Comcast’s NBCUniversal at the start of this year.

On top of that Apple is getting funny ideas, Netflix and Amazon continue to throw money at original content and you’ve got all the various on-demand versions of traditional broadcasters. They can’t all go it alone. So the aggregation of this proliferation of video on-demand is a critical issue. How long WarnerMedia will remain a valued partner of Hulu now that AT%T doesn’t own a piece of it remains to be seen.

Vodafone not bothered by EC objections to Liberty Global deal

The European Commission has apparently notified Vodafone of some concerns it needs to be addressed before it will approve its acquisition of Liberty Global assets.

The acquisition was announced almost a year ago but such is the way of these things that the EC has only just got around to flagging up its issues with it now. The objections haven’t been published but they have been widely reported and are presumably not a million miles away from those flagged up at the end of last year.

Anyway it doesn’t seem to have thrown Vodafone out of its stride at all and it issued the following statement. “The Commission’s Statement of Objections is an expected part of the review process. We will review the Statement and continue our constructive dialogue with the Commission.

“This is a significant, pan-European transaction that will create a fully-converged national challenger in four European markets, and we remain confident that the Commission will recognise that it will deliver considerable benefits for consumers and competition. We still expect to receive final approval in the middle of this year.”

Reading between the lines this seems to be Vodafone saying “we got this”. Being given a bunch of hoops to jump through was always going to be an inevitable part of this process and it’s probably a relief to have finally received them. Vodafone will now spend a couple of months chatting to the EC to make sure all its objections are properly addressed, with its fingers crossed throughout.

F5 makes agile move with $670 million NGNIX acquisition

App security outfit F5 is buying open-source application platform specialist NGINX to augment its multi-cloud offering.

F5 is hardly the first to notice the importance of the cloud in the evolution of the entire tech industry, nor is it unique in realising that open-source is a great way of making a multi-cloud environment work. But for a company of its size (revenues of $563 million in 2018) this certainly qualifies as putting your money where your mouth is.

“F5’s acquisition of NGINX strengthens our growth trajectory by accelerating our software and multi-cloud transformation,” said François Locoh-Donou, CEO of F5. “By bringing F5’s world-class application security and rich application services portfolio for improving performance, availability, and management together with NGINX’s leading software application delivery and API management solutions, unparalleled credibility and brand recognition in the DevOps community, and massive open source user base, we bridge the divide between NetOps and DevOps with consistent application services across an enterprise’s multi-cloud environment.”

“NGINX and F5 share the same mission and vision,” said Gus Robertson, CEO of NGINX. “We both believe applications are at the heart of driving digital transformation. And we both believe that an end-to-end application infrastructure – one that spans from code to customer – is needed to deliver apps across a multi-cloud environment. “I’m excited to continue this journey by adding the power of NGINX’s open source innovation to F5’s ADC leadership and enterprise reach. F5 gains depth with solutions designed for DevOps, while NGINX gains breadth with access to tens of thousands of customers and partners.”

Open source and DevOps are often referred to in the same breath as part of a broader narrative around ‘agility’. One of the main benefits of the move to the cloud is the far greater choice, efficiency and flexibility it promises, but without a culture geared towards exploiting those opportunities they’re likely to be wasted. With this acquisition F5 is positioning itself as a partner for telcos heading in an agile direction.

Here’s a diagram outlining the rationale of the move.

F5+NGINX

AT&T mucks about with WarnerMedia some more

AT&T has finally got the US government off its back, but now the challenge of making a success of its mega-acquisition really begins.

Last week an appeal from the US Department of Justice to reverse the acquisition of Time Warner by AT&T, which completed in the middle of last year, was rejected and the DoJ decided not to appeal, so that seems to be the last of the US governmental opposition to it. Now we get to the small matter of absorbing a massive media company into an even bigger telecoms one and making a success of it.

Respecter of tradition as AT&T clearly is, the first step is a good old reorg. There’s nothing like hiring some fellow members of the CEOs golf club and drafting up a shiny new organogram to make you feel like you’re really getting somewhere and in that respect AT&T seems to have scored a hole in one.

The flagship appointment could also be viewed as a replacement since Richard Plepler, long time boss of arguably the most valuable component of the acquisition – HBO – decided to call it a day last week. It has been widely reported that this was the result of the kind of culture clash and competing visions that are typical of M&A, but it still feels like a major negative to lose someone with such rare experience of making and monetising premium content.

In retrospect the writing had been on the wall for a while. Last summer the AT&T lifer put in charge of WarnerMedia, indicated that he wanted to refocus on quantity of content, which usually means a reduced emphasis on quality. That’s not what HBO is about and all the talk in the world about big data and advertising won’t change that. HBO is a premium subscription model and AT&T would be unwise to think it knows better.

The person charged with reinventing the wheel is Robert Greenblatt, who was previously Chairman of NBC Entertainment. He will head up the entertainment and direct-to-consumer silos. Meanwhile Jeff Zucker is in charge of news and sports, which includes CNN, Kevin Tsujihara is in charge of kids content and Gerhard Zeiler is Chief Revenue Officer for WarnerMedia.

“We have done an amazing job establishing our brands as leaders in the hearts and minds of consumers,” said Stankey. “Adding Bob Greenblatt to the WarnerMedia family and expanding the leadership scope and responsibilities of Jeff, Kevin and Gerhard – who collectively have more than 80 years of global media experience and success – gives us the right management team to strategically position our leading portfolio of brands, world-class talent and rich library of intellectual property for future growth.”

“I’m honoured to be joining WarnerMedia during such an exciting time for the company and the industry as a whole, and I look forward to working alongside the many talented executives and team members across the company,” said Greenblatt, as convention demands. “WarnerMedia is home to some of the world’s most innovative, creative and successful brands and we’re in a unique position to foster even deeper connections with consumers. And it goes without saying I will always have a soft spot in my heart for HBO going back to the rewarding experience I had producing Alan Ball’s Six Feet Under.”

See? He’s all over this HBO shizzle. Thanks for everything Plepler, but I got this. To be fair Greenblatt he does seem to have pretty solid experience and is presumably a safe pair of hands, but if Stankey tells him to sacrifice quality for margin and the mass market he will presumably oblige. Telecoms is a very quantitative game and there is a real danger that AT&T will be culturally incapable of appreciating things that are harder to measure and for which the ROI is less immediate and demonstrable. If that turns out to be the case at least the former Time Warner people will be able to draw on their rich experience of failed M&A to help them.

Ericsson is buying Kathrein’s antenna business

Ericsson opened MWC 2019 by announcing the proposed acquisition of a big chunk of the antenna market leader Kathrein.

Speaking to press and analysts on the first morning of the show, Ericsson CEO Börje Ekholm said the acquisition would be incorporated into its networks business and, while it will add around a quarter of a billion euros in revenues, the main point of it seems to be to add another feature set to its networking offering and also grab around 4,000 boffins.

Kathrein has been around for 100 years, but Ericsson seems to think the dawn of 5G means this is a good time to be a major antenna player. All the extra bandwidth promised by 5G needs a lot more channels and a bunch of new spectrum and Ekholm was keen to show how much thought Ericsson is already putting into this matter by showing off a product called the Radio Stripe, which it doesn’t seem to have spoken about before.

Ericsson radio stripe screen2

“Strengthening our in-house antenna competence is another important step in our networks portfolio strategy,” said Ericsson’s head of networks Fredrik Jejdling. “The acquisition of Kathrein’s antenna and filters business will expand our capabilities and competences in the advanced active and passive antenna domain further. With the additional focus on the antenna and filter business led by Kathrein professionals, we will broaden our offering to further optimize site space, which is vital for the introduction of 5G.”

Aside from that news Ekholm’s speech was, frankly, a bit dull. He mainly went through stuff already in the public domain and indulged in the usual, safe platitudes about how exciting 5G is and how great at it Ericsson is. Other hacks and analysts we spoke to at the event felt the same way and, knowing from first-hand experience that he’s much more charismatic in person, this ‘boring Börje’ on-stage persona is a little bit baffling.

Maybe it’s an understandable correction of the more hype-driven Vestberg era, but Ericsson does sometimes seem to have a bit of an understatement problem. Focusing on substance over style is laudable, but sometimes leaders need to lead ostentatiously. It would be nice to see Ekholm unshackle his personality and go off-message every now and then.

Mesh wifi goes mainstream as Amazon acquires Eero

Amazon’s push into the connected home took another step with the acquisition of mesh wifi specialist Eero.

Mesh wifi has been put forward as the next generation of wifi router technology, which uses multiple nodes to not only resolve coverage issues but also create an electronic map of the home such that your interaction with the network can have a positional element. Qualcomm has been bigging up mesh for a while and Samsung has gone big on it in the US, where it seems to have the greatest consumer adoption.

Eero seems to be one of the more established players over there, so its acquisition by Amazon has raised some eyebrows. It’s perceived as a clever move by Amazon to augment its connected home drive that is focused around its Alexa smart speaker devices. On the flip side there is some disquiet at the prospect of a popular independent tech brand being hoovered up by one of the giants.

“We are incredibly impressed with the Eero team and how quickly they invented a wifi solution that makes connected devices just work,” said Dave Limp, SVP of Amazon Devices and Services. “We have a shared vision that the smart home experience can get even easier, and we’re committed to continue innovating on behalf of customers.”

“From the beginning, Eero’s mission has been to make the technology in homes just work,” echoed Nick Weaver, CEO of Eero. “We started with wifi because it’s the foundation of the modern home. Every customer deserves reliable and secure wifi in every room. By joining the Amazon family, we’re excited to learn from and work closely with a team that is defining the future of the home, accelerate our mission, and bring eero systems to more customers around the globe.”

Coincidentally another major mesh specialist – Plume – has just announced a partnership with UK ISP TalkTalk, to launch some kind of invitation-only early access to its technology. “Since launching Plume in the US, we’ve received a tremendous amount of interest from the UK,” said Sri Nathan, Head of Business Development at Plume. “We are thrilled to deliver a new level of personalisation, connectivity, and security in the home to TalkTalk subscribers.”

The migration of mesh technology into the mainstream is likely to prompt a fresh round of hand-wringing about data privacy. Amazon is already installing listening devices into people’s homes, now it will be offering a wifi system that knows where you are all the time. People are going to get freaked out by the prospect of a tech giant having access to so much personal information, so Amazon has created a fresh PR challenge with this move.

Cybersecurity investments on the up but not sustainable – study

Research from Strategic Cyber Ventures points to an increased appetite for cyber security investments, but the euphoria sweeping the segment forward is not sustainable.

On numerous occasions we have commented security is the ugly duckling of the technology world. It is critical to ensure the industry, and digital society on the whole, functions appropriately, though more often than not it is ignored. There will be numerous reasons for this, perhaps because security is a thankless and often impossible task, but the data suggests 2018 might have been a watershed year.

Not only did 2018 see $5.3 billion in global venture capital funding, 81% more than 2016, M&A activity increased as did private equity investments. On the M&A side of things, Cisco made a bang with a $2.4 billion acquisition of Duo Security, while Blackberry acquired Cylance for $1.4 billion. These are two of the larger deals, though there was increased activity in the segment across the period.

In terms of private equity, Barracuda Networks was acquired for $1.6 billion by Thoma Bravo, Bomgar by Francisco Partners for $739 million, while Blackrock spent $400 million on Cofense. Elsewhere in the more complicated financial world, Skyhigh Networks acquired McAfee with assistance from its financial sponsors Thoma Bravo and TPG Capital.

Cybersecurity one

Overall, the trends for the security segments are heading in the right direction. Perhaps now this is an area which will be taken more seriously by the industry, with adequate investments heading into security department.

That said, Strategic Cyber Ventures has warned the trends from a funding perspective are not exactly the most favourable. The amount of cash being invested is increasing, though it does not appear the rewards are reflecting this. Some of these companies have raised funds through big rounds, but growth has slowed, perhaps due to vendor fatigue or increased competition. The risk here is firms cannot raise additional funds at increased valuations from prior rounds, meaning they will have to lean on existing investors. Eventually these parties will grow tired of keeping them alive for minimal rewards.

The issue here is the need and hype around security. Its critical to secure the expanding perimeter of the digital economy, creating the need for the segment, while executives constantly talk about security being a number one priority of firms, creating the hype. This would seem to be the perfect recipe for investment in security companies and start-ups. However, the segment hasn’t taken off, perhaps due to the preference of customers investing in technologies which will make the company money as opposed to more secure?

This is maybe the most accurate assumption on why the security segment has faltered continuously over the years. Companies have limited spending power with executives choosing to invest in areas which will make the company more profitable, such is the pressure from investors and shareholders. However, consumer attitudes might be changing.

While many would have ignored the security risks of the digital economy in years gone, today’s consumer is more educated. Privacy scandals have demonstrated the power of data forcing the consumer to consider security more critically. This might have an impact on future buying decisions.

According to research by Onbuy.com 60% of US and 44% of UK consumers believe there is a risk to personal safety in the sharing economy, while 58% of all the respondents believed the risks outweigh the benefits in the sharing economy. Such attitudes will force companies to consider their security credentials as there is now a direct link back to the bottom line.

What this means for VC funding and investments from around the ecosystem remains to be seen, though the tides are turning in favour of the security segment. As Strategic Cyber Ventures notes, the current levels of investment are unsustainable, but there certainly are rewards.

How easy will it be for IBM to digest Red Hat?

Imagine our surprise the day before a lunch scheduled with the CTO of Red Hat when IBM announced it was buying his company.

Sometimes the journalism gods, those that are left, smile on even the humblest of hacks and today it was our turn. Lunch with Chris Wright (pictured below, with said hack) had already been arranged with the promise of delivering the kind of light Linux chit-chat over a glass of red that we all secretly crave. But then, out of the blue (pun intended) IBM announced it’s going to buy Red Hat for $34 billion and things suddenly got a bit more spicy.

Now, you don’t get to be the CTO of a major company by speaking injudiciously to the press, so we didn’t expect Wright to have much to say on the relative merits of the acquisition itself. Instead we wanted to know more about what Red Hat brings to the table, such that a venerable tech giant would want to drop such a serious chunk of change on it.

The core of Red Hat’s product strategy for the past few years has been the hybrid cloud. In its simplest terms this refers to the use of both private, on-premise server capacity and the public cloud as found in colossal data centers provided by the likes of AWS, Microsoft and Google. Increasingly this applies to pretty much all larger enterprises so it’s a pretty important place to be if you’re serious about the B2B tech space.

Sharing this writer’s love of a pun, Wright conceded that the cloud is a nebulous term, but that’s why you need companies that have made it their business to get their heads around it, such as Red Hat. IBM is, and always has been, a B2B tech company, so it’s easy to see why it would want to buy a company that specialises in one of the most important and arcane manifestations of that.

Everyone in tech has probably had to puzzle over one of those baffling software architecture slides that attempt to explain how everything fits together via the use of endless rectangles piled on top of each other like some geeky game of Jenga. Throw hundreds of those into a virtualised environment spanning any number of actual physical locations and you get somewhere close to the kind of challenge faced by today’s CTO.

Between the cloud and the cloud user lies an extended value chain of technologies and services dedicated to making that relationship as useful and intuitive as possible. One good example of this is the banking app, through which anyone can now whizz thousands of pounds around the world in an instant. For this to be made possible a hell of a lot of robust technologies have to exist between the bank’s servers and the client device.

According to Wright, Red Hat plays across that whole value chain, so for that reason alone it’s easy to see its appeal to IBM. But Red Hat is also deeply rooted in the Linux, open-source culture, which isn’t necessarily an obvious fit with IBM’s notoriously rigid corporate philosophy. As with so much M&A, how effectively the cultures of the two organisations are reconciled will be the single most important factor in determining whether this deal goes down smoothly or results in corporate indigestion.

Chris Wright Red Hat Telecoms

New York wades in to the T-Mobile/Sprint debate

New York Attorney General Barbara Underwood could prove to be another hurdle for T-Mobile and Sprint to overcome in their headache-inducing merger.

The problem for the pair is there seem to be a lot more objections surrounding the tie-up than there has been support. After T-Mobile CEO John Legere seemingly got little response from his appeal to MVNOs to support the transaction, the wild-eyed leader has opened up to opinions from staff; a dangerous move considering some would certainly be under threat of redundancy.

Perhaps what the duo didn’t need are objections from the New York Attorney General Office over fears the consumer might get screwed. According to the New York Post, the objection is relatively simple. T-Mobile runs a prepaid service called MetroPCS, while Sprint has Boost and Virgin Mobile. Bringing all three into the same business could lead to one or more being scrapped, reducing competition. Secondly, all three are incredibly aggressive on pricing, but again, bringing all three into the same business could end this trend of undercutting, and an increase in price. The New Yorkers are concerned tariffs could become too expensive for some.

While objections from a few lawyers might not be the worst thing in the world for T-Mobile and Sprint, it seems there is a queue forming. In fact, the FCC released a notice last week which stated the Attorney General Offices of Alabama, Connecticut, Florida, Hawaii, Mississippi, Tennessee, Virginia, Washington, Wisconsin and the District of Columbia have all requested information to assist their own investigations into the merger. The lawyers are lurking, and the more who gather around the fire, the less pleasing the situation appears for T-Mobile and Sprint.

This of course might mean nothing. All major parties in the US are perfectly entitled to do their own due diligence surrounding the deal as transitioning from a market with four major telcos down to three is a massive move. Considering there will be regions across the country where this transaction effectively creates a communications monopoly, every chance to scrutinise the deal should be taken.

As it stands, the self-appointed shot-clock on approving the deal at the FCC is on hold. This again is simply down to the magnitude and the potentially significant consequences of the deal, and should not be surprising at all, but the longer it stands still, we suspect the more nervous executives will become. Mergers of this nature have already been shot down in the US, and this deal does seem to be hanging in the balance.