Dutch regulator hints at 5G network sharing plan

The Authority for Consumers and Markets (ACM) has proposed plans to create a network infrastructure sharing framework to counteract any potential for a digital divide.

With the plans intended to be released before the next spectrum auction in 2020, the regulator is putting in the groundwork ahead of time to theoretically ease the investment burdens of 5G network infrastructure in the rural environments. Telcos generally don’t like to be told how to spend their money, but the ACM is taking appropriate, proactive steps to prevent the digital divide which tends to emerge when telcos are left to their own devices.

“We regularly receive questions about what is and what is not allowed with regard to infrastructure sharing,” said Henk Don, an ACM board member.

“Working together in this can bring many benefits to telecom companies, but this should not be at the expense of mutual competition. With the guidelines we want to offer clarity to the parties on the mobile market and thereby contribute to a smooth rollout of 5G.”

Although the 5G rollout in the Netherlands is progressing at a much slower rate than other countries in the bloc, the pondering approach is allowing bureaucrats to create the necessary regulatory and legislative landscape ahead of time. Other nations, the UK for example, seem to be taking a ‘build now, regulate later’ approach, which runs the risk of creating the digital divide as telcos chase profits and an overbuild situation in the highly urbanised areas. As with anything in life, it is much easier to plan to tackle a problem as opposed to fixing after it has emerged.

As part of the ‘slow and steady’ approach to network deployment, coverage obligations will be placed on any future spectrum auctions. 98% of the Netherlands geographic area will have to be covered by a certain time, though more details will emerge over the coming months as the auctions close in. 98% might sound like a ludicrous objective, though the network sharing framework should aid this.

These are just very top-line ideas which are being presented by the ACM here, though more details will be offered over the short-term. Ahead of 2020, plans are being ironed out for spectrum auctions for the 700 MHz, 1400 MHz and 2100 MHz 5G bands, while the valuable 3.5 GHz 5G auction should take place at the end of 2021 or beginning of 2022. The ACM has suggested the proposals will be in place to ahead of next year’s auction.

Network sharing frameworks are not exactly uncommon throughout the telco world, though many regulators err on the side of caution in the pursuit of competition. The UK is considering such plans also, though these would only be in the regions which are seen as the most difficult to justify commercially. Generally, these not-spots have almost no coverage nowadays, usually home to an incredibly low population density or no-one at all.

This might not be the most rapid of rollout plans, but the ‘first’ tag does not necessarily mean much, or it might not end up meaning much. Laying the necessary regulatory framework ahead of plans, instead of playing catch-up like some nations, might just be a more considered approach. That said, the Dutch Government will not want to fall too far behind.

KPN goes in-house to resolve CEO soap opera

Having bailed on its new CEO within days of announcing her, Dutch operator KPN has taken the safe option with its next pick.

Current COO Joost Farwerck (pictured) has been promoted to CEO with immediate effect, following the decision not to follow through with the appointment of Dominique Leroy, who is being investigated for insider trading. Farwerck is effectively caretaker CEO for now, but KPN has announced its intention to formalize the gig on 1 December, presuming there are no further dramas.

Picking an internal lifer who has been on the management board since 2013 largely eliminates the possibility of nasty surprises or skeletons in the closet, which must surely be a high priority after the Leroy debacle. Having passed over Farwerck in favour of an external appointment so recently, the conversation must have been a bit awkward, but fair play to him for not sulking.

“With Joost assuming the role of CEO, the supervisory board is pleased to appoint an experienced telecommunications professional,” said the presumably relieved KPN Chairman, Duco Sickinghe. “He has been a member of the board since April 2013 and is part of the leadership team that shaped the 2019-2021 strategy. Joost knows the company inside out and the environment the company is operating in. With Joost as CEO, the supervisory board is convinced that we will make good progress on the further development and execution of KPN’s strategy.”

“It is with pleasure that I assume the role of CEO of this great company which focuses on offering high speed connections to consumers, businesses and Dutch society,” said Farwerck. “KPN is a company with a realistic strategy in place to perform in the competitive Dutch market. My primary focus will be to deliver on that strategy and explore how we can accelerate the execution even more to deliver organic sustainable growth. We have a great team and a lot of dedicated people in the company. I am eager to work with all of them to execute on that strategy.”

Farwerck will be paid €875kpa, which isn’t bad, but is still less than the €935k Leroy was due to get. Given the very strong negotiating position he must have been in following the Leroy business, this doesn’t say much for his negotiating skills. Maybe he’ll get a bit more in December.

KPN cancels CEO appointment following insider trading investigation

Dominique Leroy was due to switch from Proximus to KPN but now she’s CEO of neither following an investigation into insider trading.

Leroy (pictured) was unveiled as the new CEO of Dutch telco KPN earlier this month, having previously headed up Belgian operator Proximus. She was due to hang around at Proximus until December, but within days employees of the company protested the prospect of having a ‘lame duck’ CEO at a time when there was extensive restructuring underway. This led the Proximus board to bring forward Leroy’s departure date to 20 September.

Another reason for the staff kicking off may have been the revelation that Leroy had flogged a bunch of her Proximus shares on 1 August, just a month before calling it a day. No unreasonably this led to speculation that she may have conducted the sale in advance of an anticipated drop in the share price following the announcement of her resignation. Leroy addressed the matter in a personal message published on the Proximus site. Here is it in full.

I would like to comment my sale of Proximus shares on August 1, 2019.

A CEO of a stock quoted company has few moments in which he can trade his company shares on the stock market. As for me I was in a closed period- this is a period during which no transactions are allowed- since November 22, 2018. I had the intention to trade my shares since several months, but this was not possible. After the publication of the results of the second quarter, August 1st was the first day on which new transactions were possible. I have therefore instructed the bank end of July to sell shares that day, what happened with notification to the financial regulator on August 5, as it needs to be done and with publication on their site on August 6.

At that moment I had not decided to leave Proximus. I was in discussion about the renewal of my contract with Proximus and had some conversations with several external parties, amongst which KPN.

I understand that with hindsight the timing can create the perception that I did this exactly prior and because of my departure. This is surely not the reason for my sale of shares, but this can –now that the discussions with KPN are closed soon after my holidays and the communication on my departure already had to happen beginning of September- be understood in such way by the external world. I regret that this perception has been created, this is not in line with my values where integrity and transparency are very high.

Belgian authorities don’t seem to have been reassured by this explanation, however, and launched a formal insider trading investigation, even going so far as to search her home for incriminating evidence. Typically this isn’t the kind of stuff companies like hanging around their new CEOs and KPN seems to have decided Leroy is not worth the extra aggro.

“KPN regrets to announce that Mrs. Dominique Leroy is no longer a candidate in the process to become the Chief Executive Officer and Chairman of the Board of Management of KPN,” said today’s announcement. “The duration of the procedures which concern Mrs. Leroy by the authorities in Belgium is unclear and unpredictable. The Supervisory Board of KPN considers these uncertainties around timing not in the interest of KPN and its stakeholders. For this reason, the Supervisory Board has taken the decision to withdraw the intended appointment of Mrs. Leroy in the position of CEO of KPN.”

“This was a difficult decision for the Supervisory Board given the track record of Mrs. Dominique Leroy as a very accomplished executive,” said current KPN Chairman Duco Sickinghe. “However, the uncertainty around timing results in a situation, which the Supervisory Board considers not in the interest of KPN. We wish her all the best.”

In other words: you’re on your own, kid. While it’s understandable to rethink a decision in the light of new information, it’s notable that KPN isn’t willing to wait to see if Leroy is exonerated by rhe investigation. Either they think there’s little chance of that happening, they think she’s irredeemably tarnished regardless or they just think the process will take too long.

Leroy presumably did her due diligence before selling the shares, but it’s hard to see how she can justify selling the shares before the announcement of her departure was made, since she already concedes she was considering doing so when she sold them. Meanwhile both Proximus and KPN are CEO-less.

KPN poaches Proximus CEO

Dominique Leroy has played Benelux musical chairs by moving from Belgian Proximus to become Dutch KPN’s new CEO.

The CEO vacancy at KPN was created by the sudden departure of Maximo Ibarra earlier this year for family reasons, which coincided with a major outage for which KPN was culpable. Leroy has been CEO of Proximus for five years but her new salary of around a million euros a year was presumably a factor in convincing her to seek new challenges.

“We are very pleased to appoint Dominique Leroy as the new CEO of KPN,” said Duco Sickinghe, KPN Chairman. “Dominique is a dynamic, customer-focused and engaging leader with a wealth of experience in the telecommunications industry. With her strong strategic, operational and communication skills, we are convinced that Dominique will be able to successfully execute on KPN’s strategy.”

“At the end of last year KPN unveiled its 2019 – 2021 strategy, prioritising sustainable growth in the medium term. Good progress has been made to date, driven by our dedicated Board of Management and Executive management team, and executed by our colleagues throughout the firm. With Dominique at the helm, the Supervisory Board is confident that we will see further progress in the delivery of KPN’s strategy, positioning KPN for further success in the years to come. Continuing to execute against that strategy will remain KPN’s focus.”

“I am very excited to be nominated as the next CEO of KPN,” said Leroy (pictured). “KPN has a high-quality reputation and an excellent leadership team. I am looking forward to working with them and the wider KPN team to execute on the existing strategy and help KPN to become a premier digital services and communication provider with the customer at its heart.”

Ibarra’s resignation was due to complete on 30 September but Leroy isn’t available until 1 December. It looks like COO Joost Farwerck is going to be super-sub CEO for October and November, but since the board doesn’t seem to have been able to come up with any strategy beyond the basic default for any company, that shouldn’t be too tricky.

BT streamlining continues with reported £100m Dutch infrastructure sale

UK telco group BT is reportedly flogging £100 million of infrastructure assets in The Netherlands as its new CEO strives to make it a leaner operation.

BT doesn’t seem to have said anything official yet, but the Sunday Times got the scoop regardless. Apparently this is part of an attempt to streamline the struggling Global Services business, as BT currently uses its own infrastructure, such as towers and cables, to connect its Dutch business customers.

There’s not much more to the report other than a claim that, while BT is also looking to streamline its Global Services operations in other regions, including Ireland, Spain and Latin America, it doesn’t plan to completely abandon specific countries.

The report also refers to a previous Sunday Times scoop that BT is also flogging a legal software service called Tikit. It’s reasonable to ask what the hell BT was doing in the legal software business in the first place and if this is indicative of the kind of wild tangents the Global Services business has gone off on in the past, we can expect many more such disposals.

This news comes just days after it was revealed that BT was forced to hand over a bunch of cash to Ofcom due to its historical accounting incompetence. In addition BT announced last week that it was delisting from the New York stock exchange and earlier in the month decided to flog BT Fleet Solutions. Sadly for CEO Philip Jansen, none of this tweaking seems to have won over investors, with BT’s share price down by over 30% since he took over at the start of the year.

KPN CEO resignation definitely had nothing to do with recent network crash

Maximo Ibarra resigned at CEO of Dutch telco KP the day after a major network failure, but the company insists the two events are unrelated.

Ibarra had led KPN for just a year and a half, having moved over from Italy where he was a Wind lifer and CEO for five years. If we take the KPN announcement at face value Ibarra and his family never took to Rotterdam and have decided to move back to Italy. Luckily for them Sky Italia had a vacancy and has appointed Ibarra as its new CEO once he’s served out his notice.

“I have been with KPN since 2017, and appointed CEO in 2018,” said Ibarra. “I regret the timing, but family reasons gave me no choice. I will dedicate myself the coming months to secure a seamless transfer to my successor.”

The timing referred to must surely be the major outage suffered by KPN on Monday of this week, which even shut down the 112 emergency number. It seemed to just affect voice calls, which were down across the country for three hours.

“We regret that this could have happened, and we offer our sincere apologies to our customers and also to the Dutch society,” said Joost Farwerck, COO of KPN. “We immediately established a crisis team and yesterday afternoon and evening every possible effort was made to find a solution. Thankfully, as a result, by early evening service was resumed and 112 was also accessible again.

“It goes without saying, KPN will evaluate this disruption thoroughly, because this should never have happened. In this evaluation, we will work together with the Ministry of Security and Justice, the Ministry of Economic Affairs, and the Telecom Agency and other relevant bodies. Of course, we want to learn from this disruption, so that we can draw the correct conclusions and ensure that this kind of incident can be prevented in the future.”

In the Ibarra press release KPN felt compelled to include the following statement: “His resignation is unrelated to the network outage experienced yesterday.” It probably was just unfortunate timing and we certainly have no evidence to suggest otherwise. But you can see how some people might put two and two together to make five.

Apple under more antitrust scrutiny in Europe

The Netherlands Authority for Consumers and Markets (ACM) has launched an investigation into whether Apple is abusing its power through the App Store, favouring its own apps over rivals.

The Dutch regulator has reported back after receiving several complaints regarding Apple’s behaviour surrounding the App Store, suggesting there might be some foul play afoot. The initial foray has led the ACM into a larger investigation to understand whether Apple, and Google for that matter, are abusing dominant positions in the app economy to drive more favourable positions for their own apps and services.

“To a large degree, app providers depend on Apple and Google for offering apps to users. In the market study, ACM has received indications from app providers, which seem to indicate that Apple abuses its position in the App Store,” said Henk Don, an ACM board member. “That is why ACM sees sufficient reason for launching a follow-up investigation, on the basis of competition law.”

The news will not be welcomed by Apple, which is also under investigation at European level following disagreement with music streaming app Spotify. Spotify is suggesting Apple deliberately disadvantages other app developers, and while the complaint lodged with the European Commission is confidential, it has created a website listed the five ways Apple does not play fair in the app economy:

  1. The 30% fee which is applied to in-app purchases
  2. Apple won’t allow developers to communicate deals and promotions directly to customers
  3. Users cannot upgrade to premium services in app
  4. Apple rejects app enhancements for unknown reasons
  5. Spotify cannot be installed on all devices in the Apple portfolio

Some of the reasons might sounds a little moany but Apple does not seem to be laying the same rules on its own apps and services. For example, Spotify cannot be played on the Homepod, but iTunes can. This point might be of interest to the Dutch authorities.

While the original complaints received by the Dutch regulator have mainly been directed towards Apple and the App Store, the ACM also notes the dominant position Google is currently in for the Android app ecosystem. This investigation will be wide enough to assess the position of both companies and their knock-on activities in the developing ecosystem.

The initial investigation, which the ACM admits has not been in-depth enough, has uncovered some worrying elements of the business, we can’t imagine it will be difficult to dig up much more dirt on the pair.

Although both the App Store and Play Store are critical gateways in connecting developers to millions of consumers, that doesn’t mean developers need to be happy about the terms. Many are becoming increasingly frustrated with conditions, notably the 30% commission, with the larger developers looking to avoid working with the pair entirely.

There are few titles which have the brand recognition to achieve success without the reach of the App Store or Play Store, but Fortnite is one. Last August, Fortnite announced it would only offer downloads through its own website as opposed to the app stores. Estimates suggest it would save the firm $50 million in commission paid to Apple and Google.

The ACM has been keen to point out it has not come to a conclusion, despite some worrying findings in the initial investigation, and it may well find no antitrust violations. Despite pleas of impartiality, Apple and Google should certainly be worried; Europe has been pretty hot on antitrust cases recently.

T-Mobile’s Tele2 acquisition is not a sign of changing attitudes from Europe – Lawyer

While some might view European Commission’s decision for T-Mobile Netherlands acquisition of Tele2’s Dutch business as a softening approach to consolidation, White & Case, one of the law firms working on the deal, warned you shouldn’t get too excited.

With the European Commission historically taking an aggressive view against any acquisition which would take a market from four to three operators, T-Mobile Netherlands acquisition of Tele2 Netherlands looked doomed to failure. However, the European Commission has always stated there is no magic number, and each case would be considered on its own merit. Despite this stance, many believed the Commission secretly held the number four as sacred.

“Looking in the rear-view mirror, you could see that the tone seemed to have gotten harsher in terms of the Commission’s approach to four to three operators,” said Mark Powell, one of White & Case’s Partners who co-led the legal team on the deal.

Unfortunately for the European Commission’s claim of impartiality on market consolidation, the evidence has been stacked against it. In Austria, Ireland and Germany, consolidation was approved though there were increasingly stricter MVNO remedies placed on the deal. In Denmark, Telenor and TeliaSonera ditched their own deal just as the European Commission was set to block it. It did have to intervene in the UK with Three and O2, while in Italy consolidation was approved under the condition spectrum was released to create a fourth player, resulting in Iliad’s entry. As time progressed, the attitude towards consolidation seemed to become more vehemently opposed.

With this in mind, the approval of the deal in the Netherlands might have come as a surprise.

“Things are very different in this case,” said Powell. “If the Commission was prepared to look at the very specific conditions, we felt we would have a favourable decision.”

However, what telcos around Europe should bear in mind is the Netherlands is a unique market. This should not be taken as changing attitudes of the European Commission, or a new era where a free-for-all consolidation battle begins. So what were the favourable conditions in the Netherlands?

Firstly, the combined market share of the newly merged business would only be 25%, keeping it in third place. Tele2’s Dutch business was a relatively minor player, only controlling around 5% market share, but is also a pureplay 4G telco. The Commission did not have to worry about 2G or 3G. Another consideration is the aggressive MVNO segment in the country, perhaps compensating for any reduction in competition.

“You could say common sense prevailed, but the fact pattern was recognised by the Commission, so they should be credited for standing by what they say when they said they would look at specific cases and make a decision accordingly,” said Powell.

Another underlying point for the successful merger was the attitude of the regulator. The Dutch regulator was generally receptive to the idea of consolidation, which was perhaps taken into consideration by the Commission. In many of the cases which have gone against consolidation, the regulator has been against the deal. This was certainly the case in the UK Three/O2 merger, where the UK watchdog was publicly hostile to consolidation, as Powell put it.

The final point which Powell believes contributed to the success was the fact the case was heard verbally in court over the course of a single day. These are scenarios which are very fact intensive, resulting in a lot of paper. Simple sending opinions and evidence back and forth creates a mountain of information, perhaps confusing and convoluting opinions. By hearing the case verbally, the court was able to consider and crystallise a decision more effectively.

“At the end of the day, this confirms that if you think you have a strong case, then there is,” said Powell.

This is what should be taken away from this deal. This is not a changing of policy from the European Commission, but conveniently proving it will consider market consolidation in the right circumstances. There isn’t another market in Europe which mirrors the conditions here, but there are markets which could be successful in the same way T-Mobile Netherlands has been here in acquiring Tele2 Netherlands.

Interestingly enough, 5G did not factor into the equation much here. The Dutch 5G auction has not taken place yet, therefore the European Commission was taking into consideration the evidence which was put in front of it. Whether market consolidation is necessary in the 5G world still remains a valid question, and this decision should not be viewed as evidence for either side.

5G will require huge investment by the telcos, significantly more than previous generations, though how to ensure these investments are made in a timely fashion is an interesting question. Should consolidation be preventing to encourage competition and the fear of another eating a telcos lunch, or should it be allowed to ensure scale of customers and confidence in ROI? The debate rages on with pros and cons on either side.

While Powell warned against believing this is a sign the European Commission is softening its approach to market consolidation, it is evidence it can stick to its word that there is no magic number to make competition work.

Netherlands falls to three MNOs as Europe approves T-Mobile/Tele2 deal

The European Commission has officially approved Deutsche Telekom’s acquisition of Tele2’s Dutch business, reducing the number of MNOs in the country from four to three.

For many through the continent this will be seen as progress, as the European Commission has previously viewed reducing the number of MNOs in a single market below four as sacrilege. With telcos across Europe looking for ways to justify the vast expenditures expected for 5G and the full-fibre diets demanding by governments in the fixed space, the prospect of market consolidation is an interesting one.

What is worth noting is this is a relatively minor acquisition. Merging DT’s Dutch business and Tele2’s only adds a relatively small increment, roughly 5%, to the newly merged business. T-Mobile NL would still remain in third position with a market share of 25%, while the European Commission has also questioned Tele2 NL’s role as an important competitive force in the Dutch market. Despite these conditions, this will certainly be viewed as progress for those who sit in the pro-consolidation camp.

“Access to affordable and good quality mobile telecom services is essential in a modern society,” said Commissioner Margrethe Vestager. “After thoroughly analysing the specific role of T-Mobile NL and the smaller Tele2 NL in the Dutch retail mobile market, our investigation found that the proposed acquisition would not significantly change the prices or quality of mobile services for Dutch consumers.”

Through the five month investigation, Vestager and her team decided the proposed merger was unlikely to lead to significant price increases due to the limited incremental impact Tele2 would have on the T-Mobile NL business, the transaction would not increase the likelihood of coordinated behaviour between mobile network operators as there is sufficient enough difference between and the business models, and finally, conditions for virtual mobile network operators due to the proposed merger would not have a serious impact on the level of competition. In short, dropping from four to three operators would not negatively impact the consumer.

Here is the question though; will this decision have any material impact on consolidation decisions elsewhere? Perhaps it might, but we suspect the European Commission will stick to the three operator rule where competition is more intense.

In listing its reasons for approving the deal, Vestager effectively said that Tele2’s Dutch business was small and irrelevant enough to the other players that it being swallowed up by one of them would not make any material impact on competition. In most other markets around Europe the fourth players have much more of a foothold in the market.

Take the UK for instance. Here, Three is the smallest of the MNOs, controlling roughly a 15% market share. On its own it can provide suitable competition to the three larger players, though if it was acquired the gain in total subscribers would have a material impact on market share. This alteration in the status quo could lead to the anti-competition doomsday scenario, or at least this is what the European Commission might believe.

Despite consolidation being a positive for the industry, scale means confidence to invest, operational efficiencies, notable procurement benefits and greater ability to generate ROI, we suspect the European Commission will stick to its four operator rule for most markets. The only exceptions will be in cases like this one, where the fourth player controls a minor market share which would have no material impact on a competitors standing in the market.

That said, this is a step forward for the stubborn European Commission.