Germany follows the UK on coverage collaboration

Deutsche Telekom will be joining forces with the German bits of Telefónica and Vodafone so they don’t duplicate each other’s efforts in remote locations.

The move seems identical to the initiative announced by UK MNOs a few weeks ago, which resulted in Ofcom removing coverage obligations from the next tranche of low-frequency spectrum to be made available. Presumably the German regulator has indicated it would be in their best interests for the German MNOs to follow suit, although in this case it’s more about satisfying existing coverage oblgations.

Right now, however, this is just a statement of intent rather than a hard pact. “The three telecommunications providers plan to coordinate the set-up and operation of up to 6,000 new cell sites and have signed a letter of intent to this effect,” says the announcement. “1&1 Drillisch AG has been invited to participate in this network expansion collaboration. A prerequisite for joining the collaboration is that the operator must be willing to take on an equal share of the expansion projects as the other parties.”

This seems a bit harsh on Drillisch as it’s currently an MNVO using the Telefónica and Vodafone networks and has far fewer subscribers than any of the MNOs. “The plan proposes that each company participating in the collaboration should set up an equal number of new sites which can then be used by the collaboration partners and fitted with their own antennas and the appropriate network technology as required,” added the announcement.

“The planned collaboration is a milestone for network expansion in Germany,” said Telekom Deutschland’s Managing Director Dirk Wössner. “Our common goal is to eliminate coverage gaps in the mobile network as soon as possible. Sharing infrastructure is nothing new for us. Sharing it at this scale, however, is a major step in the right direction. After all, high-speed internet and excellent voice quality on road, rail and water are vital for an industrial country like Germany that relies on mobile communications.”

“Mobile communications will be the most important technology in the coming decade. And we are pooling our resources to put Germany in an ideal position,” said Markus Haas, CEO of Telefónica Deutschland. “This collaboration is an outstanding example of intelligent cooperation towards taking the next logical step. We must join forces if we are to consolidate Germany’s position as a leading business location that is ready to take on future challenges. Together, we will take digital transformation in Germany to the next level.”

“Today, we are forging an alliance to combat dead spots and increase mobile communications coverage even in areas where it is not profitable,” said Vodafone Deutschland CEO Hannes Ametsreiter. “In future, hundreds of thousands will benefit from this – people in small rural communities, people on roads, people traveling by train. Together, we operators will construct and share a common infrastructure in dead spots – and of course continue to be rivals in a competitive infrastructure market in the rest of the country. This is good for the network, good for customers and good for Germany’s digital future.”

This looks like a good solution for the MNOs so long as they can agree on an equal share of the work. Drillisch announced it wanted to get into the MNO business buy winning some 5G spectrum in the most recent auction, leading to considerable sulking from the incumbents about the cost of it all. It looks like they’re going to make the newcomer pay to get into their little coverage club.

Vivo introduces FTTH franchising model in Brazil

Telefonica’s Brazilian brands Vivo and Terra have launched a franchise model for its fibre rollout plans seemingly to ease the financial demands of the digital economy.

Working with local partners, the initiative will focus on cities with populations between 20,000 and 50,000. The aim will be to add an additional 1 million households to the fibre footprint by 2021, taking the total north of 15 million.

“Population demand is for the internet, and Vivo is the only company in Latin America to invest heavily in a fiber project, promoting a unique experience for its customers,” said Fernando Duschitz, Senior Franchise Manager at Vivo.

“This new business model from Vivo is an opportunity for companies and investors who want to enter this market, as well as for those already acting as providers, to benefit from the strength of the Terra brand, with Telefonica scale, and Vivo quality, as well as of all our experience in expanding fiber, present today in 154 cities across the country.”

Just to paint a bit of context to the situation, Telefonica is a company which is not in the most comfortable position when it comes to debt. While debt had been reduced to €41.785 billion, this is still seemed too steep for investors. Various other strategies have been introduced, such as a new business model for the tower division, though this franchise idea also aids the pursuit of a future-proofed network.

This is the conundrum being faced by Telefonica. The management team does need to reduce debt, though it also needs to find investment for fibre and 5G deployments. Without these investments, rivals would gain the upper hand and potentially erode profits as customers elect for better services. Franchising certain localities in Brazil is a compromise, lessening the financial impact to fuel the mission for future-proofed networks, but weakening control.

Franchisees will be responsible for developing all necessary network infrastructure, as well as managing the operation, including sales, service and installation. On the other side of the deal, Vivo will offer agile processes, managerial and technical training, access to tiered qualified suppliers, unique central call centre, network topology ensuring stability and scalability.

Although not many telcos are facing the same debt challenges as Telefonica, finding cash to fuel network upgrades and deployment is an industry-wide conundrum. Compromises will need to be made, and this is certainly an interesting idea.

O2 UK reports steady customer and revenue growth

The UK bit of Telefónica has reported healthy Q3 2019 numbers, with all the key metrics headed in the right direction.

Total revenues at O2 UK grew by 4.1% year-on-year, operating income was up 5.7% and the total customer base expanded by 5.6% to 34.1 million. O2 also reckons it has the lowest contract churn in the sector at 1%. Having said that the net adds were fairly flat, maintaining its mobile customer base at 26 million.

“Our Q3 performance continues the strong momentum we saw in the first half of the year, powered by a relentless focus on our customers through award-winning coverage and great offerings such as flexible Custom Plans and limitless data,” said Mark Evans, CEO of Telefónica UK

“We’re moving at pace with our 5G rollout, already live in six UK cities rising to twenty by the end of the year. 5G offers critical support to the UK’s digital economy, supporting jobs and growth. That’s why we welcome Ofcom’s recent statement updating the rules for the planned auction of more 5G airwaves. This will help operators to deliver greater value and better connectivity to the public.”

The other thing O2 seemed keep to flag up was its involvement in a scheme to test driverless vehicles in London via its recently launched 5G network. The project is being run by an organisation called the Smart Mobility Living Lab and it seems to have a fair bit of industry and public sector buy-in.

“At O2 we’re determined to help businesses of all sizes realise the potential of fifth-generation mobile technology,” said Brendan O’Reilly, O2’s CTO. “We know that the transport sector is going to be one of the key beneficiaries of 5G – and that the technology has the potential to reduce traffic congestion, as well as making journeys safer and more enjoyable.

“That’s why we’re excited to be working with the teams at the Smart Mobility Living Lab, who are driving forward our understanding how this next generation technology will fundamentally change the fabric of the cities in which we live and work as well as creating entirely new methods of travel.”

O2 UK launches 5G network with no tariff premium

As the last UK operator to switch on its 5G network, O2 seems to be trying to make up for lost time by charging its customers no premium to switch from 4G.

The ‘new’ tariffs are the same as the old ones – i.e. you get the same amount of 5G data as you would 4G data, including an unlimited tier coming it at 40 quid a month. Initially only the following cities will have access to O2 5G and only in certain parts: Belfast, Cardiff, Edinburgh, London, Slough and Leeds. That will grow to 20 towns by the end of the year and 50 by the summer of next year.

“Today is a significant moment for our customers and our business as we switch on the O2 5G network,” said Mark Evans, CEO of Telefónica UK. “We’re launching with a range of tariffs that make it easy and fair for customers to access 5G, with flexible plans that cost no more than 4G. We’re also switching on 5G in important parts of towns and cities first, places where it will benefit customers and businesses most.

“I believe 5G is going to revolutionise the way people and businesses use mobile connectivity, unlocking huge possibilities for our economy and society. No one in the country has all the answers today, but I’m excited about getting it into the hands of our customers and working with leading partners to help shape the future of 5G for the next generation.”

Here are the tariffs, with the second one including some kind of virtual reality music service:

O2 UK 5G launch tariffs

Custom plans along with O2 Priority are important features that resonate with its customers,” said analyst Paolo Pescatore. “These will be paramount in the future in maintaining its customer centric leadership in the U.K. Expect content to feature more prominently in the future as it seeks to broaden O2 Priority for customers.”

The decision to charge no premium for 5G seems sensible as there is little incentive for them to pay it while the network rollout is still in its infancy. Instead 5G will become table stakes over the next year or so and the usual differentiation challenges will apply. Whether or not VR music will be a significant one remains to be seen.

Telefónica demos surgery with a bit of help from 5G

Some surgeries were performed in Spain with real-time assistance from Japan thanks to the low latency of 5G.

This is still far from the remote surgery that has for so long been used as an illustration of the utopian potential of 5G, but is nonetheless a dramatic illustration of the kind of things it could unlock. A surgeon performed some operations in Malaga and had real-time assistance from another doctor who was dialling in from Tokyo. That assistance would have been far less useful if there had been a lag on the line.

The demo was part of the Advanced Digestive Endoscopy Conference and featured some degree of augmented reality. It claims also to be the first in medical congress in which the training sessions have been broadcast live with almost no latency, thus enabling attendees to interact thanks to 5G and AR.

“The operations organised at this conference are just an example of the numerous practical applications that 5G can have in healthcare,” said Mercedes Fernández, Innovation Manager at Telefónica. “Thanks to two key features of this technology – the low latency that allows transmission without delays and the ability to handle large video streams at high speed – it was possible to perform this intervention with the added value of doing so live and in real time with the interaction of doctors and attendees to provide solutions and ask questions about the clinical case that was undertaken.”

“The experience of previous years in organising innovative training courses in digestive endoscopy allows us this year to provide a global training course thanks to 5G technology, something that might seem science fiction but that we are making reality today” said Dr Pedro Rosón the surgeon who performed the operations.

“The use of 5G and augmented reality is, without doubt, what stands out in comparison with our previous editions and with any other standard medical workshops. We are therefore proud to keep and to continue offering an innovative training space with the live conducting of cases by specialists from Spain and abroad, with an emphasis on theory and reviewing the latest advances in interventional endoscopy.”

Remote assistance via 5G that makes use of AR may well be one of the primary use-cases used to sell 5G to industry. The potential it offers for providing training in the field is clear and it could transform the way training and mentoring is conducted. These are still early days, but each demo such as this one likely makes mainstream acceptance of this kind of technology more likely.

We want to build a network where failure is impossible – Telefonica CTIO

If you consider 5G is not 5G without a 5G core, why have we not been talking about the 5G core more when 5G is being deployed and the 5G economy is just around the corner.

If you hadn’t figured it out, this article might be about completing the 5G puzzle.

In Madrid, telco executives are gathering to talk about a topic which has not grabbed many headlines to date. The evolution, or perhaps revolution, of the core. And whilst it might be a very complicated project, one thing is very clear; the 5G core will not look very similar to the 4G core.

“We are not building infrastructure for the customer,” Telefonica CTIO Enrique Blanco said at the 5G Core conference.

“We are building it for society. How can we build a network which will not fail? 5G Core is a key topic for us.”

There are two interesting elements to this statement from Blanco. Firstly, the network is fundamentally different in its application. And secondly, if connectivity is going to central to society moving forward, failures cannot be tolerated, irrelevant of severity, location or impact.

Starting with the application of the network, while 4G was built for the mass market and appeasement of the increasingly digitally-native consumers, 5G is much more than that. Increased download speeds are an added bonus, but the value of 5G is realised through the creation of new services and engagement with enterprise.

Walter Wang of Huawei illustrated this nuance very well. The 4G network has been built for a single purpose, however the 5G core needs to be built in a way which allows for the creation of customisable connectivity services for enterprise. For example, a customer in the energy sector will be demanding low-latency. In manufacturing, reliability and resilience are key. And for broadcasting, its speed and availability.

The ‘one-size-fits-all’ 4G network cannot deliver on these demands. If 5G is to offer an opportunity to engage enterprise customers, the 5G core needs to be created in a way which allows for the creation of these services. It’s multi-layered, regionalised and distributed and multi-vendor. Which leads us very nicely onto the next area.

The 5G network cannot fail. The same could be said of the 4G network, however the impact is very different. If 4G networks go down, the general public can’t watch cat videos on the bus. If a 5G network fails, enterprise customers are irked and SLAs (service level agreement) come back to haunt the telco. Critical services fail and there is a very real impact to society.

As Blanco highlighted, operating through multiple layers, distributing the core over several regions and engaging with multiple vendors adds resilience. If there is a failure at one point in the network or ecosystem, it is a case of damage limitation not everyone to panic stations.

This is a perfectly reasonable approach to business, though there are certainly some risks to bear in mind.

A multi-vendor environment is all well and good for resilience, reliability, competition and innovation, however as Veon CTO Yogesh points out, the more variables in the ecosystem, the points of failure. Franz Seiser of Deutsche Telekom also echoed this point; the future network is impossible without automation and automation is very difficult.

This is the challenge with the 5G network of tomorrow; if it is multi-vendor, with telcos selecting components which have been deemed best-in-breed, this is not necessarily a guarantee they will complement each other. The ingredients might be perfect, but if the recipe doesn’t work, neither will the network. In some case, it might be worth sacrificing some quality because the components complement each other.

What is worth noting is that all of these discussions are very much in the early days. The 3GPP Release 16, due in the early part of 2020, will pay more specific attention to the 5G core, and at this point we might see work accelerate.

That said, always bear in mind that 5G is not really 5G until the core is 5G. And the nuances of delivering a 5G core are a lot more complicated than 4G.

Change is on the Telefónica horizon with towers and workforce restructure

Telefónica has announced plans to accelerate the strategy of monetizing its tower assets after getting the green light from the Board of Directors.

The woes of Telefónica have been quite apparent in recent years. Despite owning regionalised businesses which are either market leaders or at the top-end of the scale, the firm has been drowning in debt. In bygone years, it was rumoured the firm was struggling with €53 billion debts, though it does seem to have gotten a handle on things.

At the end of 2018, thanks to several cost saving initiatives, debt had been reduced to €41.785 billion. During this period the firm did toy with a number of divestments (O2 UK) and an IPO of the tower infrastructure business, Telxius. This IPO fell through, but the business unit does present a new opportunity.

Following the Board Meeting, the team is pushing forward with plans to generate more profits through monetizing both passive and active telecoms equipment. And it does appear there are profits to be made.

Telefónica currently claims to own roughly 68,000 sites globally, either directly or through subsidiaries. Of those 68,000, tower infrastructure business Telxius owns approximately 18,000, with the remaining 50,000 owned by other units within the group. 60% of these assets are located within the four major markets (Spain, UK, Germany and Brazil).

By comparing the value of these assets with market benchmarks, Telefónica believes it can generate €830 million in revenues and €360 million in OIBDA. Another attractive component is the belief these sites would only require €25 million in maintenance capital expenditure across the year.

While this strategy might be considered as a means to aid rivals, the numbers are attractive to a business which is facing financial and competitive strain. Aside from the debt which is still looming above the heads of executives, subscriptions data is not the most attractive either as you can see from the table below:

Total access (connections/subscribers on network) in millions
Year Spain Germany UK Brazil South HISPAN North HISPAN
2015 41.97 48.36 25.29 96.92
2016 41.23 49.35 25.76 97.22
2017 40.99 47.6 25.31 97.91 58.45 72.57
2018 41.55 47.09 32.98 95.3 56.91 73.56

What is worth noting is that ‘total access’ accounts for everything which is running across one of the Telefónica networks in that region. That could mean mobile, wholesale, MVNOs, TV or broadband. That said, the numbers tell a story for themselves; Telefónica isn’t really going up or down, just hovering around.

If the traditional means of making money, attracting more subscribers, isn’t necessarily paying off the debtors, Telefónica needs to think about new strategies. Monetizing the tower infrastructure assets is certainly one way to go, and restructuring the workforce is another idea which might save money across the year.

Alongside the tower monetization announcement, Telefónica Spain has also said it is currently in negotiations with trade unions concerning its workforce. In short, that means some will be retrained, some will be encouraged into retirement and others will be shown the way to the door.

“The collective agreement we signed four years ago has enabled us to make great advances and has provided us with social and labour stability during this period,” said Emilio Gayo, Chairman of Telefónica Spain.

“Now we have to be more ambitious and evolve into a more digital company that is ready for the challenges ahead.”

Although Telefónica Spain is not putting any numbers out into the public domain, reports have emerged that the workforce will be trimmed by roughly 5,000. Those over the age of 53 will be offered a ‘voluntary individual suspension plan’, while the plan is to double the training budget to reskill staff members.

With an eye on the horizon, Telefónica is seemingly preparing to future-proof its largest expense; employees. The management team anticipates more than half of sales will be through digital channels in a few years’ time, while legacy fixed and mobile networks will be shut down during the ‘modernisation’ period. This will make a number of people redundant.

In fairness to Telefónica , it is creating plans to help evolve the skill sets of employees, but with any business evolution there will always be the messy job of headcount reduction.

O2 starts making progress in the enterprise services world

O2 might be an ‘also ran’ in the enterprise services world to date, but in being named a supplier on the Crown Commercial Service’s (CCS) new Network Services 2 framework, it is taking a step in the right direction.

As the Government agency tasked with improving government commercial and procurement activity, gaining recognition from the CCS is a notable win for O2. The Network Services 2 framework is effectively the list of suppliers public sector bodies and organizations can work with for telco services such as networks, voice and data provision, internet access and wifi.

“We know that making services easy to procure is a major priority for our public sector customers – so the news that we have been named as a supplier on the new Network Services 2 framework is a huge milestone for all of us at O2,” said Matthew Spencer, Head of Public Sector Sales at O2. “It means we can offer our entire product range of ICT services to public sector and non-profit organisations.

“Today’s announcement opens the door to all sorts of new projects and better integration for customers. As technology evolves, there is enormous potential for improved connectivity, productivity and savings across the public sector – and O2 is here to work with organisations as a digital partner, helping them reach their connectivity goals, faster.”

Originally formed in 1991 under a different name, the CCS is part of the Cabinet Office and negotiates preferred supplier lists for Government departments, agencies and non-profits. It you aren’t on the list, you will find it almost impossible to do business in the public sector.

The ‘Frameworks’ are effectively pre-negotiated template contracts for public sector organizations to use when engaging with potential suppliers for a variety of different services. In this case its telecommunications, but it could be anything from office supplies to payroll management software.

Within each of the frameworks, there are designated ‘Lots’. O2 has been named as a supplier for Lots 1-4 and 6-8, allowing it to offer services such as data access; local connectivity, traditional telephony, inbound telephony, mobile voice and data, paging and alerting and video conferencing. The suppliers for Lots 5, 10 and 13 will be decided in the near future, though we were not able to figure out what these Lots cover.

The supplier lists for Lots 9, 11 and 12 have also been drawn up, though O2 does not feature on these. Services covered here are audio conferencing, radio and surveillance.

At O2, this is a big step forward. The CCS has effectively given the telco its seal of approval, allowing the team to expand in the enterprise services arena.

To date, the enterprise market has been largely dominated by Vodafone and EE. O2 has been operating in the private space for some time, though it has been regularly highlighted by the management team as a significant growth area moving forward. This ambition seems to have been compounded with the looming introduction of 5G.

5G offers the telcos new avenues to work with enterprise customers above and beyond the traditional means of connectivity. With digital transformation a buzzword of yesteryear, enterprise organizations and public sector agencies are increasingly looking to technology to enhance operations. There is an opportunity for the telcos to secure a more valued position in the digital ecosystem, as well as the increased profits, if the proposition is right.

Over the last 12-18 months, O2 has been working alongside a number of the FTSE100 firms to trial usecases ahead of the 5G boom. Although details of the activities are relatively thin, the management team has boasted of its success to date.

Entry onto the preferred suppliers list might seem like little more than a box ticking exercise for some, this is a very important step forward from O2. The inclusion in the framework adds validity and credibility to the O2 enterprise services case, offering a much greater opportunity for the team to carve out market share in a, potentially, very profitable segment of the telco industry.

O2 and Vodafone double down on network sharing deal for 5G

Network sharing deals are not new in the UK, but with O2 and Vodafone evolving their existing relationship to active infrastructure, the partnership certainly has a new mission.

Announced today, O2 and Vodafone have agreed to share 5G active equipment, such as radio antennas, on joint network sites across the UK. The approach should accelerate 5G deployments in the areas where infrastructure investments are not as commercially attractive, though the 23 largest cities have been excluded from the deal.

“Today is an important step in demonstrating our commitment to invest for the future, with mobile connectivity one of the UK’s most powerful opportunities to strengthen the economy and improve the lives of British people,” said O2 CEO Mark Evans. “This agreement will enable us to roll-out 5G faster and more efficiently, benefiting customers while delivering value for our business.  It also importantly allows us to utilise the spectrum we acquired in the last auction very effectively.”

“We’re driving our 5G roll-out forward with this agreement, and taking our customers, our business and the whole of the UK with us,” said Vodafone CEO Nick Jeffrey. “Greater autonomy in major cities will allow us to accelerate deployment, and together with active network sharing, ensures that our customers will get super-fast 5G in even more places more quickly, using fewer masts. We can boost capacity where our customers need it most so they can take full advantage of our new unlimited plans.”

Prior to this announcement, the duo were already in partnership through the Cornerstone Telecommunications Infrastructure (CTIL) joint-venture. This company effectively acquires and manages passive infrastructure across the country, enabling the pair to share costs on some of the most expensive aspects of network deployment; site acquisition, local government bureaucracy and civil engineering.

This new agreement takes the relationship one step further. Although many telcos around the world believe active equipment is a means to differentiate experience, the pair are putting aside their squabbles to grow the network across all regions in the UK. For those areas where ROI is more difficult to realise, spectrum assets will be the only differentiating factor.

In the larger, more densely populated environments, the duo will remain competitive. In 23 large cities, covering 16% of combined cell sites, all assets will be separate. In cities such as London, Manchester or Liverpool, profitability has not been difficult to demonstrate through network expansion, such is the number of subscribers in such a small geographical zone.

Although we are slightly surprised by the concept of sharing active equipment, it is a logical path for the two telcos to take. Spectrum assets should be enough to deliver some sort of differentiated experience, and if the telcos want to move up the value chain, they will need to reconsider their thoughts on the delivery of data.

Connectivity revenues will remain the core business, but 5G presents an opportunity to create a new role in the ecosystem and deliver more value-added services. To enable this, a new mindset to network infrastructure has to be acquired to free up revenues for other areas. This is not the only advantage of network sharing deals, but the intelligent reallocation of funds could allow MNOs to transform from ‘Communications Service Providers’ to ‘Digital Service Providers’.

Telefonica pairs up with Santander for banking 5G usecase

Telefonica Spain has announced a tie-up with Santander to launch a joint-innovation project to test out 5G applications in the banking sector.

The project will focus on three different usecases, 4K video conferencing, low latency cloud storage and virtual reality. The hope is to more readily engage customers and adapt their financial products to meet the new demands of the digital economy.

“The initiative with Santander Spain is the result of the collaboration with our corporate customers to ensure that 5G technology is deployed in a way that fully meets their needs, prioritizing the development of the most demanded capacities,” said Emilio Gayo, CEO of Telefónica Spain. “With initiatives like this we also ensure the early adoption of 5G and the positive impact on the Spanish industrial network.”

“This agreement with Telefónica responds to Santander’s commitment to innovation and to accompanying our customers in the transformation process towards the new generation of 5G communications,” said Rami Aboukhair, CEO of Santander Spain. “The new technology will allow us to have a better connectivity and faster speed of response in transactions and to offer all our customers the best experience and the best possible solutions.”

Starting with the video application, a 4K video conferencing link will be set up between two bank branches to offer ultra-high-resolution image, 4096×2160, and natural motion with zero delay. Secondly, a low latency cloud storage solution will be provided by Telefónica, based on the Hitachi Content Platform Anywhere Edge solution embedded on Telefónica’s edge computing infrastructure.

Finally, the pair will introduce co-working spaces developed in collaboration with Idronia that use Virtual Reality, 360 video and Edge Computing technologies. The aim is to offer an immersive reality service allows customers to remotely visit co-working spaces such as the Santander Work Cafe located at the Santander banking office in the centre of Madrid.

5G is being switched on in numerous locations and now it is the time to focus more heavily on the commercial side of telco. There might be some gain in offering eMBB products to both consumer and enterprise customers, but to see the promised value the telcos will have to explore new areas. European telcos might be behind other regions when it comes to engaging the verticals, but progress is being made.