O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefónica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Since the end of the Supply Chain Review, the UK telecoms market has been relatively mundane, operating as one would largely expect, however this merger throws a cat amongst the pigeons. All of a sudden, the UK has become on the most interesting markets to watch, with the promise of a second convergence connectivity business to rival market leader BT.

“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical,” said Telefónica CEO Jose Maria Alvarez-Pallete. “We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

“We couldn’t be more excited about this combination,” said Mike Fries, CEO of Liberty Global. “Virgin Media has redefined broadband and entertainment in the UK with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the UK, always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today.”

Talks emerged earlier this week, though they certainly got to the official confirmation stage quicker than many were expecting.

As part of the agreement, a 50-50 joint venture will be created, with the promise to spend more than $10 billion on network development over the next five years. Synergies are expected to be as much as £6.2 billion, with 46 million subscribers, 15 million homes passed for broadband, 99% population coverage for mobile, 18,700 employees and £11 billion in revenue.

Full details on the deal can be found on a new website, proudly proclaiming the creation of a national digital champion.

This all sounds very promising, but when the merger is complete in mid-2021, which brand will survive?


What should a merged O2/Virgin Media company be called?

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“In the long run, we believe it would be better for the JV to retain the O2 brand at the expense of Virgin Media,” said Kester Mann of CCS Insight. “Both have a strong presence, but O2’s respected customer service, highly loyal customers and sponsorship of the O2 arena mean it is impossible to drop. A multi-brand approach serves only to duplicate costs and risks confusing customers.”

For convergence to work, there can only be one brand which survives. BT’s £12.5 billion of EE has arguably not paid off to date as the two brands still exist, effectively creating two separate business units inside the same group. There might be convergence benefits from an operational perspective, but to realise the gains from a customer and commercial angle, the businesses have to be fully consolidated and coherent.

BT has never really been able to take advantage of its assets. It has the largest mobile network, the largest broadband network, the largest public wifi footprint and the largest bank accounts to throw cash at content. Its inability to evolve into a convergence-defined business has opened the door for O2 and Virgin Media. But the question is whether the duo can learn from these mistakes.

Ultimately this is a major threat to the BT business, not because this is a combination which can potentially match the scale and depth of BT services, but these are also two currently healthy businesses which are coming together.

Financial Results for O2 and Virgin Media to March 31 (UK sterling (£), millions)
O2 Virgin Media
Total Year-on-year Total Year-on-year
Revenue 1,739 2.9% 1,266 -0.6%
Profit 516 2.4% 84 >1000%

Sources: Liberty Global Investor Relations and Telefonica Investor Relations

Usually, when mergers and acquisitions are discussed, one of the parties is a significantly stronger position than the other. It can still be good news, but there is plenty of work to do during the integration stages to ensure the new company is fighting fit. This is not the case with O2 and Virgin Media.

Virgin Media might have experienced a bit of a downturn over this three-month financial period, but this could likely be attributed to dampened customer acquisition amid the COVID-19 outbreak, while O2 has demonstrated year-on-year increases once again.

While these are healthy businesses right now, some might have suggested limited success in the convergence game would have caught up eventually. This is a very encouraging move forward, getting ahead of negative impacts, though a renewed assault on TV/content is needed. Neither, despite what Virgin Media claims, have done very well in this segment.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

One area which should be allocated to the risk column, though it is a very minor risk, is the prospect of regulatory intervention.

“Unlike when O2 attempted to join forces with Three in 2015 but was blocked by the European Commission, I don’t expect there to be any major hurdles to this deal going through,” said Dan Howdle, consumer telecoms analyst at Cable.co.uk. “After all, with BT’s purchase of EE given the all-clear in 2016, it’s difficult to see how a case could be made to block it.”

These are both telecoms companies, but service overlap is minimal. Core competencies lie in different segments, and while there have been attempts to launch into parallels, success has been woeful. These are complementary companies with little material service overlap.

When considering whether competition authorities will be interested, you have to ask whether the merger would make single business units stronger or is the company stronger by association with parallel services. O2’s mobile business will not be enhanced materially by Virgin Media’s MVNO proposition, and Virgin Media will not benefit from O2 at all in the fixed connectivity game. There does not seem to be any case for objection on the grounds of competition.

Aside from the direct impact for both Virgin Media and O2, the rest of the market could be spurred into action.

“Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services,” said CCS Insight’s Mann. “It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019. We think this deal will trigger a ripple effect on the UK market: Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”

This is a challenge to the industry and will create a rival to BT in mobile, broadband, convergence and enterprise. However, it is also worth remembering the ‘also rans’.

Unless the ambitions of rivals are inspired by this threat, the prospect of a tiered connectivity industry could emerge, with those offering bundled services on top and the pureplay service providers on the bottom.

The UK has quickly become one of the worlds’ most interesting telecoms markets, thanks to the permutations which could be inspired by this merger.

Tier One Tier Two Tier Three
  • BT (mobile, broadband, content)
  • O2/Virgin Media (mobile, broadband)
  • Sky (content and broadband)
  • Vodafone (mobile and broadband)
  • TalkTalk (broadband)
  • Three (mobile)
  • MVNOs
  • Alt-nets

Taste of remote working whets employee appetites for more – O2

Research from O2’s enterprise business unit suggests the UK’s eyes have been opened to the benefits of working from home and employees want the temporary measures to remain, post-coronavirus.

With the coronavirus pandemic coercing companies through a digital transformation programme to enable remote working and the continuation of business operations, one question which has been asked is how many of these evolutions will be long-term. According to the research, 45% of Brits predict a permanent change to their employers’ approach to flexible working when lockdown lifts.

“With more of us working flexibly than ever before, for most businesses, digital infrastructure has become more important than physical infrastructure,” said Katy Liddell, Director Business Sales & Service at O2. “In the face of this, businesses must continue to evolve to meet the changing needs of their workforce to ensure they continue to attract and retain talent.”

Mobility has been a promised benefit of the digital economy, and while there are some companies embracing the concept, more traditional organisations have resisted. With COVID-19 forcing society into lockdown, these firms are being driven through a transformation programme at rapid speed, but there are notable benefits.

63% of the respondents to the survey would be prepared to live further away from the office should commuting commitments be reduced. The majority would be prepared to live up to an hour away, doubling the amount which currently do so. This is of course a significant benefit to organisations as well as employees, as talent retention might be increased, and it broadens the scope of recruitment to a wider region.

It also means less money would have to be allocated to physical infrastructure, as an office would not need to be as big if only a portion of the workforce will be in at any one time. These savings can be allocated to reinforcing digital infrastructure, but also investing in new projects.

Should flexible working be adopted by urban firms, 41% of city-dwellers would be tempted to move to more rural locations with seaside towns more than doubling their appeal, 16% of respondents.

But what is the potential for COVID-19 working conditions being adopted in the long run?

“It will be difficult to go back to normal ways of working after lockdown, as we’ve now proven that most of us can work from home – despite many companies previously telling employees that it wouldn’t be possible,” said Dr Heejung Chung, Reader in Sociology and Social Policy Director at the University of Kent.

“The UK has a huge challenge with the geographic distribution of wealth, and this exaggerates the problem of overpopulation in cities. If people could work from wherever they want to, without any fear of career penalty, this would create a huge opportunity for everyone.

“Even though the findings highlight that people will be willing to live up to one hour away from work in the future – that’s still constrained by what people feel they currently need to do. If we completely opened this up with consistent flexible working, and we had the right digital infrastructure in place, that time could be significantly increased.”

We suspect that while there will be some return to pre-COVID-19 activities, but for the majority the work from home trend will persist. This does not mean the end of the traditional office, but death to the idea that you have to be sat next to your boss every day. The myth that some industries cannot operate from home at all has now been officially debunked. Interestingly enough, some employees would want a hybrid situation to maintain sanity.

26% miss informal socialising with colleagues, while 30% have admitted working from home can be lonely. The wider social lockdown during the coronavirus pandemic does not help the situation, as a traditional social life does not currently exist. It is also worth noting that digital cannot replace some of the benefits of working face-to-face. We are social beings, albeit some are very miserable, so it would be very immature to suggest the extinction of traditional office spaces.

That said, for numerous digital industries, from cloud computing infrastructure to office virtualisation products and telecoms services, this is a very positive trend.

O2 completes full convergence U-turn amid Virgin Media merger talks

Two years ago, O2 CEO Mark Evans said he was not convinced by the idea of convergence, but as merger talks between O2 and Virgin Media swell, the telco has entered into moonwalking mode.

The negotiations between O2 parent company Telefónica and Virgin Media owner Liberty Global, which have been confirmed by Telefónica’s group corporate communications team, would being together two of the UK’s connectivity heavyweights, significantly shifting competition dynamics in the telecoms market.

“A deal between O2 and Virgin Media has much logic,” said Kester Mann of CCS Insight. “Notably, it would offer each side crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2. Should it come to fruition, it would transform the UK telecoms industry and a create a giant converged provider to rival BT.”

As Mann highlights above, the merger of the two parties would certainly create a converged telco capable of challenging the market dominance of BT. For one reason or another, the convergence trend was passing these telcos by, but uniting powers is a very interesting move.

At Virgin Media, this is a team which attempted to make waves with bundled service offering, but never really cracked the equation. The TV element was always a bit weak, while not owning its own mobile network was always going to put it a step behind the main players.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

At O2, the executive team always made a point that the telco was a mobile connectivity business and it would not get distracted by side-missions into content or broadband. This stubborn position has of course been watered down over the last year or two, and now it appears Telefónica is embracing the convergence trend without prejudice.

To date these are companies who have been successful focusing on core competencies, but the world is of course changing, with the risks to pureplay telcos very noticeable.

“Neither company is immune to the driving need for a converged network and services,” said Paolo Pescatore of PPF Foresight.

“This is the next battle ground in the UK. Virgin Media has been one of the pioneers in this area but has been let down without a mobile network, late to market in 4G and a struggling TV business. Whereas O2’s sole focus on mobile and championing consumers will run out of steam at some point.”

What is of course worth noting is that this is a deal which is far from complete. Firstly, the duo would have to agree on a price, secondly, existing partnerships would have to be unwound, one of the brands would have to be folded into the other and finally, regulatory approval would have to be sought.

Both of these UK telcos are successful components of international corporations. Group level executives would want to ensure there the business benefits suitably financially, while also maintain a high enough stake in the merged business moving forward. This could prove to be a prickly point during the negotiations.

In terms of the existing partnerships, Virgin Media signed a very prominent MVNO agreement with Vodafone in recent months, while O2 offers MVNO services to Sky. These deals would likely have to be examined during the negotiation periods to ensure a merged party does not offer to much assistance to rivals.

Although O2 and Virgin Media are successful brands in their own right, one would have to give way to the other. BT and EE co-exist in the same group function, but the full benefits of convergence cannot be realised with two distinct brands. The teams would have to figure out which brand survives, and which one dies.

Finally, regulation. This has been an irritation for UK telcos in recent years as European authorities seem very dismissive of consolidation demands from the industry. As service overlap between O2 and Virgin Media is minimal, we suspect this will not be too much of an issue, though the likes of BT, Vodafone, Sky and Three will likely kick up a stink as the merged entity is a threatening prospect.

Should all the pieces fall into place, this is a move which could benefit both parties considerably. O2 would gain more access to fibre assets, Virgin Media to mobile infrastructure and both would be able to offer a broader portfolio of services.

Convergence is a business model which offers considerable gains in terms of customer loyalty, operational efficiencies, net promoter score, average revenue per user and momentum in diversification ventures. However, the barriers to entry are high, time consuming and very expensive. This is far from a finished deal, but it would create a much more competitive force and a potential catalyst for disruption in the UK market.

Toothless German regulator capitulates during 4G coverage review

German telco regulator, Bundesnetzagentur has let all three mobile network operators escape any punishment for missing coverage obligation deadlines.

While many regulatory authorities might choose to punish telcos for missing coverage obligations, Germany’s Bundesnetzagentur is perhaps offering some colour as to why the country lags behind others in terms of connectivity benchmarking. All three failed to meet commitments made to the regulator in 2015 but have been afforded the opportunity to correct mistakes by the end of 2020.

A regulatory enforcer who does not dish out punishments when telcos fail to meet obligations is as useful as a chocolate teapot in a Saharan Quidditch match.

“Our primary goal remains to ensure that the coverage of mobile broadband is moving forward,” said Jochen Homann, President of Bundesnetzagentur. “We want to see verifiable improvements over the next few months that will ensure that the requirements are fully met by the end of the year. This expressly includes that we may impose fines and fines if necessary.”

A fine might be directed towards the telcos in the future, but that is not the point. If you give these companies an inch, they will take a mile. If this deadline was not actually a deadline, what was it?

This relaxed attitude towards enforcement of obligations perhaps explains why Germany is seen as a laggard in the connectivity stakes.

Looking at OpenSignal’s 4G coverage data, Germany is one of the poorest performing European nations with geographical coverage of 76.9%. These estimates are slightly dated, but the rankings would not have changed that dramatically. But it would be unfair to reserve all the criticism for the MNOs when the broadband service providers are similarly sloppy.

According to the latest estimates from the FTTH Council Europe, Germany has only connected 3.4% of homes to full-fibre broadband, which is only set to increase to 24.8% by 2025. To demonstrate the performance of Germany to date, the UK currently has a higher percentage of full-fibre homes. Being behind the UK today is a pretty embarrassing place to be.

Coverage maps and data does not give the complete picture for a measure on how developed a country’s digital society and economy is, but it is a useful yardstick. As a more traditional country, it would surprise few Germany has been slow to evolve, however when you add into the mix a regulator which does not run a tight ship, it starts to become more obvious as to why.

These telcos are pursuing profits, therefore the urban environments will be favoured in the ROI chase. The regulators have to force telcos to provide connectivity in the most sparsely populated areas, as few telcos care about farmer John or dog walker Jane. This is where Bundesnetzagentur is failing as a regulator; it is not holding the telcos accountable, instead it added some extra slack to the leash.

In the review, Telefónica failed to meet requirements in all 13 federal states and only got to 80% coverage on major transport links. Deutsche Telekom missed the requirements in three states and failed to meet the obligations for main traffic routes with 97% coverage for motorways and 96% for the railways. Vodafone fell short of expectations in four states, while coverage of 96% for motorways and 95% for railways are below the coverage requirement.

The obligations which were agreed were 98% 4G coverage of households nationwide and 97% of households in each federal state with minimum download speeds of 50 Mbps. In addition, all major transport routes would have to be fully covered.

Although some might suggest these obligations were too high, the telcos did have five years to meet the expectations, and they agreed to them in the first place.

Telcos and regulators have to have a working relationship. Collaboration is a buzzword, but it is perfectly suitable and should be appreciated by all markets. However, there also needs to be a bit of fear to ensure the dynamic works effectively. The regulator is a watchdog, not an industry partner, and the prospect of swift and measured punishment needs to be a realistic possibility.

A self-regulating industry almost always fails in some way or another, and that is effectively what situation is created when you have a toothless regulator.

How UK operators are helping customers during the COVID-19 outbreak

With telecommunications now acting as the foundation for almost every element of society, how telcos react to the on-going coronavirus outbreak will be critically important.

Although the UK Government has stopped short of measures implemented on the continent, at least at the time of writing, this week has seen a much sharper response to the global pandemic. With movements becoming increasingly limited, the telecommunications networks will become more critical, but what are each of the telcos doing in reaction.

Each of the telcos have made slightly different concessions to customers, though we suspect the plans will looks remarkable similar in a couple of weeks. Each will likely learn from competitors as none will want to look like they are doing less for customers than rivals.

Vodafone

At Group level, CEO Nick Read announced a number of measures to be applied across the European footprint.

Capacity is being increased to deal with the new spikes in internet traffic, Vodafone has said it has seen a 50% increase already, while consumers accessing government-supported healthcare websites and educational resources will be able to do so without worry about data consumption.

In terms of working with the Government, Vodafone has said it will offer anonymised data, where legally permitted, to aid in tracking people’s movements and the spread of COVID-19. Government departments have also been offered the opportunity to deliver targeted text messaging where technically possible.

To assist its own supply chain, Vodafone has said European suppliers will be paid in 15 days, instead of the customary 30 to 60 days.

From a scientific perspective, Vodafone’s DreamLab, a specialist app that uses smartphones’ data processing capacity to help cancer research projects while users are asleep, will receive a £200,000 cash injection from Group to repurpose the app to support research into antiviral properties.

Elsewhere within the Group, Vodafone Italy Foundation has donated €500,000 to support the Buzzi Foundation and the Italian Red Cross, Vodafone Czech Foundation’s emergency app Zachranka is pushing out public health alerts to its 1.3 million users and the remaining business units are all creating initiatives to help young people gain access to their digital learning platforms.

Virgin Media

From March 23rd, Virgin Media’s postpaid customers will be offered unlimited minutes to landlines and other mobile numbers, as well as a 10 GB data boost for the month at no extra cost. For broadband, any data caps on legacy products will be lifted.

In terms of technicians and home visits, Virgin Media has now set-up procedures to protect its own employees. Three days before a scheduled visit to a customer’s home, a text will be sent to ask if anyone living at their property has been asked to self-isolate or has flu-like symptoms. If the answer is yes, the appointment will be re-arranged for two weeks later. 30 minutes prior to the appointment, the technician will phone the customer to ask the same questions.

Although this will come as little comfort to those customers who are in need of a technician, the precautions are completely understandable. In these cases, new customers will be sent a self-install QuickStart pack which will hopefully mean a technician is not needed. Vodafone has not responded to questions to what the plan is should a technician be the only option.

O2/Telefonica UK

Like many other telcos, O2 has said all NHS UK websites will be ‘zero rated’, meaning any data used on these sites won’t count towards a customer’s monthly allowance, while it will make efforts to help those who are not able to pay their monthly bill. Customers who are concerned about the impact coronavirus will have on their monthly income are urged to call 202 to discuss the situation.

Little has been said on what work will be done to ensure the network remains resilient during the period of heightened pressure. This seems odd, as the O2 network shut down in certain areas this week, not related to increased internet traffic or congestion. Some customers might want more reassurances considering the dependence on communications infrastructure over the immediate future.

Elsewhere in the Telefonica Group, the Spanish business unit has said it will add 30 GB of mobile data to all Fusion and Movistar convergence customers for the next two months.

BT/EE/Openreach

In response the potential of increased strain on the network, BT is seemingly not that worried; the following is an extract from the website addressing the immediate challenges:

We have more than enough capacity in our UK broadband network to handle mass-scale homeworking in response to COVID-19. Our network is built to accommodate evening peak network capacity, which is driven by data-heavy things like video streaming and game downloads, for example.

By comparison, data requirements for work-related applications like video calls and daytime email traffic represent a fraction of this. Even if the same heavy data traffic that we see each evening were to run throughout the daytime, there is still enough capacity for work applications to run simultaneously.

This is a confident position to take, though the team has also said it will prioritise emergency calls and systems supporting emergency services such as the NHS, Airwave and the Emergency Services Network (ESN), critical national infrastructure and vulnerable customers, should the network come under intolerable pressure.

The BT Group has not unveiled any new measures for consumer customers yet, though it has put in additional procedures for enterprise customers due to the increased demand for home working.

The enterprise business unit has said it will work with customers to provide short-term upgrades for network capacity, increased virtual private network (VPN) connectivity, additional conferencing and collaboration tools, as well as call routing/forwarding solutions to divert calls to home phones or mobiles.

Three UK

Although Three UK does not seem to have introduced any additional policies in respect to the coronavirus outbreak, it does already have several initiatives which could prove to be quite useful. For example, free home delivery for customers and Three Store Now, which is a live stream to connect customers to in-store assistants for demos or to discuss potential purchases.

Sky

In response to almost all major sporting events being cancelled, Sky has said it will allow customers to ‘pause’ Sky Sports subscriptions without any additional charges. With the Premier League being suspended until early April, England’s cricket tour of Sri Lanka cancelled and PRO14 Rugby postponed for the foreseeable future, there will certainly be a shortage of programming for this element of the premium TV offering.

On the broadband front, although Sky has reiterated it believes its service will be consistent, it does not need to make any announcements regarding data caps, like operators in the US, as these limitations are very rare in the UK market.

Telefónica consortium will launch 5G Open RAN trial this year

Spanish operator group Telefónica has announced the creation of a new consortium of companies aiming to accelerate Open RAN development.

Altiostar, Gigatera Communications, Intel, Supermicro and Xilinx are all mucking in to assist in the development and deployment of Open RAN in 4G and 5G. In announcing the new collective effort Telefónica said it will launch 4G and 5G Open RAN trials in UK, Germany, Spain and Brazil this year, which is refreshing optimistic considering the world has ground to a halt.

Here’s what the Telefónica announcement had to say about the specifics: “The collaboration focuses on the appropriate Distributed Units that implement part of the baseband radio functions using the FlexRAN software reference platform and Intel Xeon processor based servers, appropriate Remote Radio Units connected through open interfaces based on O-RAN fronthaul specification, and suitable software that manages the connectivity in an open Cloud RAN architecture.”

“Once again, Telefónica is leading the transformation towards having the best-in-class networks in our operations with our customers as key pillars,” said Enrique Blanco, Telefónica CTIO. “Open RAN is a fundamental piece for that purpose while widening the ecosystem.”

“Telefónica is known for its leading-edge network and has been championing open vRAN implementations to bring greater network service agility and flexibility,” said Pierre Kahhale, Altiostar VP of Field Operations. “By bringing together the best-of-breed innovation, Telefonica is looking to achieve this vision into their network. We look forward to supporting this transformation of Telefonica’s network.”

“Open RAN offers a way for service providers to enhance customer experiences and enable new revenue-generating applications,” said Dan Rodriguez GM of Intel’s Network Platforms Group.  “We are collaborating closely with Telefonica and the broader ecosystem, and also participating in initiatives like the O-RAN Alliance, to help accelerate innovation in the industry.”

And so on. The rest of the announcement was mostly about bigging up the benefits of O-RAN tech, such as cheapness, adaptability and playing nice with mobile edge computing. The most interesting bit was the ambition to get the ball rolling ASAP, however. O-RAN is very threatening to the business models of the big kit vendors as it opens them up to unprecedented competition. When asked about it they tend to counter that it’s nowhere near ready, but developments like this mean they might need to come up with some new spin soon.

Telefonica and TIM circling bankrupt Oi for Brazil expansion

With the troubles of Brazilian telco Oi plain for everyone to see, Telecom Italia and Telefonica are sniffing out an opportunity for growth in market with significant potential.

Telecom Italia (TIM) has confirmed in a letter to shareholders that it and Telefonica have approached Bank of America Merrill Lynch, Oi’s financial advisor, to jointly purchase the telco’s mobile operations. This should not be taken as a sign of any merged business operations, but more corporate opportunism in a market which has potential for riches as the digital society beds-in.

What is worth noting is this acquisition would only be for the mobile business unit. The broadband and fixed line units would continue as an independent operation. As the country’s largest broadband business, the collapse of the wider group would certainly be a much larger problem.

Telco Subscriptions Market share
Telefonica – Vivo 77,793,156 34.5%
TIM Brazil 55,044,418 24.4%
Oi 35,844,975 15.8%

Statistics curtesy of Omdia World Information Series (WIS)

What is slightly unusual is the level of competition which will be left in the market. Outside of these three service providers, only Claro offers a competitive threat, meaning the market will shrink from four to three. Many regulators would get twitchy at such a thought, though it seems this is not a worry for Telefonica or TIM.

Although the extinction of the Oi brand is not something Brazilian authorities would have wanted to see, it is an entirely predictable outcome. Oi has been searching to offload the mobile business unit, and the financials have not been painting a pretty picture.

Period Total revenue Net income
Q3 2019 5,001 -5,747
Q2 2019 5,091 -1,559
Q1 2019 5,130 568
Q4 2018 5,365 -3,359
Q3 2018 5,481 -1,336
Q2 2018 5 545 -1,258
Q1 2018 5,668 30,543

Figures in Brazilian real (millions)

The incredibly large net income figure during Q1 2018 is down to a cash injection from various different distressed asset funds. Roughly $1 billion was injected into the business as part of the restructuring process following the telcos decision to file for bankruptcy in 2016. In the years following this saga, financial reform was introduced in Brazil thanks to this saga, though the capital raised could not entirely save the business.

Oi’s misery is a gain for the European duo, both of whom have big plans for the Brazilian market moving forward. There are of course many questions which still remain, for example, how will the assets be split between the pair, but it is still early days in the acquisition process.

Four operators take the lead on GSMA edge initiative

Last week, the GSMA announced an initiative to standardise the edge, with Telefónica, KT, China Unicom and Telstra the first to step up to lead the way.

In signing a Memorandum of Understanding (MoU), the four telcos the aim will be to test Edge Computing functionality and interconnection capability, as well as verifying the ease and simplicity of a MEC platform for application developers to leverage.

“Together with these Tier 1 operators, we are making available to the industry the means to build and deliver a global telco-based Edge Cloud service, providing the necessary mechanisms that complement current MEC standards to enable the federation of operator’s edge computing platforms,” said Juan Carlos García, SVP Technology and Ecosystem at Telefónica.

“With this, telcos will be able to deliver a universal Edge Computing service that will facilitate application developers and Enterprises the deployment of their services globally through a simple and single interface.”

The aim of the GSMA initiative is to standardise platforms for edge computing, ultimately driving towards interoperability in the telco community. Although standards might not be the most exciting part of the industry, they are critical to ensure smooth progress and also realising the telco rank in the pecking order.

The collaboration will take place over four phases:

  • Phase One: development of basic Edge Computing capabilities such as interconnection of MEC platforms, smart edge discovery and smart resource allocation
  • Phase Two: enabling mobility features
  • Phase Three: service availability to roamers, to enable the use of edge when customers moves from their home network and visit a different network
  • Phase Four: federation capabilities

Ultimately the aim is to create global consistency, a telco platform without the need to develop custom integrations for each and every market. Such interoperability and consistency is critical to ensure the effective development of a sustainable edge ecosystem. It also provides confidence to customers to deploy applications in any data centre, with policies designed for privacy, security and enhanced performance.

“Through our partnership with Telefonica, Telstra and China Unicom, all from different regions across the world, we set out to explore the most effective way to build a globally federated edge platform and tap into the full potential of telco-based Edge Computing,” said Jongsik Lee, SVP & Head of Infra R&D at KT.

“Leveraging MEC standards and key technologies, we aim to provide a reference model the industry can build on and developers and enterprises can take advantage of.”

Parallel Wireless fights for Open RAN leadership with Peruvian win

Parallel Wireless is arguably carving out a leadership position in the increasingly popular Open RAN movement as it bags another contract in Peru.

The likes of Mavenir, NEC, Altiostar and Cisco are all vying for attention as the new infrastructure trend gathers steam, but it is Parallel Wireless who’s name keeps popping up all over the world. This week, the vendor has announced an agreement with Internet para Todos Perú (IpT Peru), a new telco owned by Telefonica, Facebook, IDB Invest and CAF.

“We have selected Parallel Wireless Open RAN to help us reduce our network deployment costs through disaggregation of hardware and software, RAN and core virtualization and network automation with real-time SON for deployments across Latin America and 5G readiness,” said Renan Ruiz, CTO of IpT.

“We are proud to have been selected for these deployments in Latin America to deliver quality wireless services to the end users and businesses through better communication and collaboration between ‘development’ and ‘operations’ groups by enabling the CI/CD based operating model,” said Steve Papa, CEO of Parallel Wireless. “The end goal is to help global MNOs build and release software at high velocity. without making extensive capital investments or incur ongoing maintenance cost associated with legacy network deployments.”

The new telco, IpT, is an effort by the four players to seek revenues in a market which has been notoriously difficult to find success. South America is another region where the digital divide is very evident, though with new technologies gaining maturity, connectivity is becoming more of a commercial reality.

While it may seem unusual to see Facebook associated with these projects, the social media giant has been the driving force behind the Telecom Infra Project (TIP), an organisation where the mission is to deliver the internet to all. Part of this mission is Open RAN, to decouple hardware from software in the network, helping to reduce deployment costs and improve maintenance.

When you tie all of these elements together, it means internet for more people. And internet for more people means more advertising opportunities for Facebook and its customers. As you can only serve so many ads to a single user without destroying the experience, Facebook has to introduce more services and attract more users to continue growth. It is attempting to do both, and Open RAN is proving to be an important component to ‘connect the next billion users’.

Irrelevant as to whether the ambitions of these projects are philanthropic or commercial, the end result is more people accessing the digital economy, which shouldn’t be viewed as a bad thing. Open RAN is increasingly becoming a mature technology, and while it might not be ready for the more developed markets where telcos still rely on the resilience of the tried and tested traditional RAN, there is traction in the developing markets.

Looking around the world, Parallel Wireless does seem to be one of the more popular vendors in these embryonic test beds.

With Vodafone, Parallel Wireless has been drafted in to help run trials in the UK business and in the Democratic Republic of Congo (DRC). It is also one of the partners drafted in to help MTN deploy OpenRAN over 5,000 sites in 21 markets and was also recently named as the main partner for Etisalat to trial the technology across its markets in Middle East, Asia and Africa.

Mavenir, Cisco and NEC might be making a significant amount of noise in the press for OpenRAN, though Parallel Wireless seems to be making more waves with deals and active trials. It is always worth noting that not all deals and trials will be proclaimed from the treetops, on the evidence which is available to use Parallel Wireless has arguably taken an early leadership position.

Telefónica doubles down on the smart home

Telefónica has created a global unit, known as the Chief Digital Consumer Office (CDCO), which will champion new digital products and services, paying particular attention to the smart home.

Led by Chema Alonso, the team will aim to drive forward the Aura AI digital assistant, as well as continue the creation of the ‘fourth platform’. The initiative will help take Telefónica into the digital era across several areas, but there does seem to be particular attention being paid to the smart home ecosystem.

José Montalvo will become Chief Data Officer, with a primarily focus on the development of the fourth platform project, including integrating new products and services such as Aura onto the platform. David del Val will become Director of Core Innovation, with a particular focus on edge computing. Antonio Guzmán is the Director of Digital Home, tasked with overseeing the development of the smart home and digital services ecosystem.

These are only a few of the names, but it does appear Telefónica is hoping to create a standardised smart home ecosystem for the markets which it currently operates in. This is an incredibly intelligent approach to creating value in the future, and with its global presence, Telefónica can provide competition to other players who are attempting to create a platform to control the smart home ecosystem.

This initiative builds on progress being made in the smart home following the announcement of a partnership with Microsoft at Mobile World Congress last year.

Alongside Microsoft boss Satya Nadella, Telefónica CEO Jose Maria Alvarez-Pallete launched the fourth platform initiative in attempt to own the smart home ecosystem, seemingly learning from the ‘walled garden’ business model which has been so successful for the likes of Facebook.

In this model, Telefónica leverage its relationship with the users, creating a platform for third parties to offer products and services. Telefónica will of course offer its own services, such as content, but why not create revenue by monetizing the link between the user and other companies in the digital economy.

While the smart home is still emerging as a viable segment in the digital economy, this is a very intelligent move from Telefónica . Connected objects are becoming more common, as there will need to be a focal point to manage this ecosystem, but also guarantee security. Telefónica has a trusted relationship with the consumer, a recognised digital assistant and the power of Microsoft as a partner. This is not a guarantee, but at least Telefónica is trying something new under the threat of the connectivity industry becoming commoditised.