Q3 validates O2 indifference towards convergence

Telefonica’s UK business O2 has continued a strong 2018 performance with a 7.9% increase in revenues in the third quarter, while it greedily captured an additional 120,000 subscribers.

The results perhaps justify the businesses decision not to enter into the convergence fight. Back in July, CEO Mark Evans confirmed the business would continue to focus on its mobile-only proposition, and wasn’t convinced entirely by the idea of bundled services. This statement is certainly contradictory to many telcos across the world, including its own cousin, Telefonica Germany, which plugged 5G FWA at Broadband World Forum. That said, the numbers speak for themselves.

Over the last three months, total revenues stood at £1.5 billion, up 7.9% year-on-year, while mobile service revenues grew by 3.4%, thanks to customers choosing larger bundles and MVNO growth. The O2 network now has 32.3 million customers, including MVNOs such as Lycamobile, making it the busiest network in the UK. Churn was also down to 1%, which O2 claims is the best in the UK.

“We continue to put the customer at the heart of our business, delivering leading propositions and unique customer experiences, as demonstrated by the launch of our revolutionary O2 Custom Plans, exclusively available in our direct channels,” said Evans. “O2 Custom Plan offers customers real choice, by giving them control, flexibility and transparency, and has once again driven the O2 point of difference in the market.

“Our on-going commitment to invest in our network includes enhancing 4G connectivity and preparing the ground for 5G. As champions of mobile we continue to build for the future, where mobile is one of the most powerful opportunities to strengthen the UK economy and enrich our society.”

This laser like focus on mobile is probably best for everyone involved. Despite O2 leading in the market share race, it has consistently been condemned for having the worst network in the UK. This has been confirmed quarter after quarter, by a variety of different sources. Some might come to the conclusion the consistency of poor performance simply suggests the management team does not care that much. However, efforts are being made to improve this record.

In the most recent spectrum auction, O2 claimed all the available 2.3 GHz spectrum to enhance its 4G offering. This spectrum has already been put to use, while most recently O2 suggested it was going to improve connectivity in 339 rural communities throughout the UK. The business is investing in its network, with the financial results indicating O2 spent £192 million on CAPEX over the quarter, which works out at roughly 12.5% of total revenues. This is not the highest around, but it is a healthy number.

O2 is the first of the UK MNOs to release its financial results for the third quarter, so there isn’t a fair comparison to make at the moment. However, 7.9% growth is going to be a very tough number to beat. Perhaps there is something in this ‘do what you know how to do’ mentality from O2.

BBWF 2018: Telefonica Germany pitches case for FWA

Telefonica’s UK business O2 might be avoiding convergence like the plague, but for its cousins in Germany, FWA is one of the biggest drivers for the adoption of 5G.

Speaking at Broadband World Forum in Berlin, Cayetano Carbajo Martín of Telefonica Germany is not fearful of the convergence distraction. In fact, it might just save the country from a connectivity embarrassment.

“5G implementation will be driven by different needs from fixed wireless access to ever increasing eMBB demand and even co-created new industry and service solutions,” said Martín.

As you can probably imagine, dealing with the tsunami of internet traffic is a big driver for 5G within Telefonica, but FWA is a long-term money making opportunity. In terms of the rate of growth, Martín highlighted traffic increased 160% over the last 12 months on O2’s network. Looking forward, even if you take a conservative estimate of 50% year-on-year growth, by 2027 internet traffic will be 38 times greater than it is today.

Looking at today’s resources, the network will hit full capacity by 2022 and the demand for new frequencies will become a necessity. And of course, these are conservative estimates not taking into consideration the unknown usecases of tomorrow. From a bandwidth perspective, 5G is increasingly becoming a necessity, with the deadline is becoming shorter and shorter.

This will also facilitate the telcos plans to venture into the FWA market. Martín highlighted there are no ambitions to explore the possibility of 4G FWA, it simply wouldn’t be able to compete with the experience of traditional broadband, though trials in Hamburg are readying the assault on the FWA space. If you listen to Martín, the opportunity is quite significant, with the CTO predicting 20-25% of Germany will convert to FWA, and perhaps this will dig Germany out of a hole.

Like the UK, Germany is one of those markets which has not glorified itself with an ambitious fibre rollout and is now playing catch-up. The FWA buzz which is beginning to build might just disguise a couple of blushed Bavarian cheeks should 5G-driven FWA be able to cover up the fibre-less cracks across the country.

What is worth noting though is FWA will not be the saviour many are plugging it to be. Some, no names mentioned, believe it might be able to bridge the connectivity gap between urban and rural environments, but this is exaggerated. The same financial pressures will be on FWA as there will have to be suitable population density to build the business case. FWA will not mean gigabit speeds will be democratized.

Even at what is supposed to be a fixed broadband conference, 5G has managed to muscle in on the action. It’s almost embarrassing how much its hogging the limelight.

Telefónica calls for machines to become more human

At Ovum’s Digital Futures event Telefónica’s Chief Digital Officer talked about the importance of making our interactions with technology more intuitive and natural.

Chema Alonso is an expert in cognitive intelligence, which in the tech context seems to be all about making computers think and act in a way that is more ‘human’. He heads up the team within Telefónica that is dedicated to artificial intelligence and its commercial use. His keynote at the event was entitled ‘How AI is Changing the Customer Experience and Telefónica’s Business’.

“Data is good,” opened Alonso, before adding “It’s time for computers to learn the human way of doing things.” The point of these two statements is that, while we’re in a digital era, we’re not so good at making use of all the data we’re constantly generating and accumulating. He danced around various considerations such as security but soon got to the core of his talk: AI and what Telefónica is doing with it.

Telefónica launched a platform/service called Aura at MWC 2017 that is designed to repurpose all the clever AI and cognitive intelligence stuff it’s doing internally into a something it can offer third parties. Right now this mainly means Telefónica’s Spanish operator Movistar, but the plan seems to be for anyone to use it. You can see a video explaining the point of Aura below.

Alonso refers to all this stuff as the ‘4th platform’, in reference to its internal role in unifying how data is handled within Telefónica, across systems and geographies. But on top of being some kind of middleware it seems to be all about using AI to make the user interface with technology more intuitive in all scenarios.

In a subsequent panel session Orange VP of Digital Innovation said “AI is the new UI,” which is designed to be short and memorable but is only partially true. In practice this AI is increasingly manifested through the voice UI, as first introduced to the mass market when Apple launched Siri and now commonplace thanks to voice-driven smart speakers.

Where AI comes in is in improving the voice UI. This doesn’t so much mean using data to anticipate your needs like some kind of creepy digital stalker, but using computing power to enable natural language processing, machine learning and context awareness to make voice interactions with machines at least as easy and productive as those with people. Some would argue this is a low bar, but it’s where we need to start nonetheless.

The main illustration Alonso, who used his keynote largely to big-up his employer, has for how great Aura is was Movistar Home, which is positioned as a superior smart home experience to the kind of Alexa-driven thing we currently have. It ultimately seems to come down to an improved voice UI and, perhaps, a more extensively connected home.

In the introductory presentation Ovum’s Richard Mahony warned of the dangers of AI concentrating power in too many hands. To illustrate this point he flagged up China’s plans to introduce ‘social credits’ – a system that tracks individuals constantly and gives or takes away social credit depending on how closely their behaviour conforms to the will of the Communist Party. The AI genie is out of the bottle and it will doubtlessly confer many benefits, but in the wrong hands it will enable and concentrate control on an unprecedented scale and so should be treated with profound caution.


Telefonica bags 470k assistant downloads – perhaps the telcos can feature in the smart home

In the three months since the launch of Telefonica’s digital assistant, Aura, has been downloaded by 470,000 users; perhaps the telcos can muscle in on the smart assistant market currently dominated by Google and Amazon.

It’s a position at the top of the totem pole which few telcos have been used to in recent years. Although the features are simplistic in comparison to leaders in the market, there are plans to further develop services to manage smart home devices. Such a proposition, should it prove to be any good, would elevate Telefonica up the value chain in the digital ecosystem, while also opening new opportunities to generate revenue.

Aura in Movistar+ allows users to search through content using a number of different differentiators such as genre, actors or directors, as well as recommending alternative titles and controlling the functions on a smart TV. New features would have to be released before too long, however users do seem to be happy with the service thus far. 90% of respondents to Telefonica’s own research suggest they would continue to use the assistant, 50% said it improves their own Movistar+ experience, while 70% claim it improved their impression of the Movistar+ brand.

To date, virtual assistants have largely baffled the telcos, with the likes of Google and Amazon taking a leadership position in the field. While prioritizing activities in areas which are more likely to produce success is a perfectly valid approach, allowing the internet giants to control the interaction with the consumer also grants them first pick of the cash which can be gleamed through the digital community. The further down the totem pole telcos sit, the smaller the share of the profits.

That said, Telefonica’s research suggests there might be room at the top. And it is not alone. Last year, Orange launched its own virtual assistant Djingo onto the market, which has been successful enough for the French telco to tie up with DT in Germany. As part of the Magenta offering, DT white labelled the Djingo assistant for its own smart speaker. The pair have also jointly developed a voice-controlled ecosystem, centred around the TV. Djingo is also being used as part of the Orange Bank offering. Elsewhere in the Telefonica family, O2 in the UK have also been using the power of Aura to fuel its own AI chatbot as part of a customer services push.

These are very simplistic versions of the virtual assistant at the moment. Looking forward, the expectation is virtual assistants will be able to help us order our groceries, choose a takeaway and even co-ordinate with our diaries. There are also some apps on the market which can help you with personal banking and budgeting. Controlling the TV and searching through film databases is a nice little gimmick, but there will need to be more if Telefonica and the other telcos want to play in the added value aspects of the digital economy.

Telefonica’s success with the Aura virtual assistant does demonstrate there is potential for telcos in this area though. Google and Amazon might have stolen a lead, but there might be a way for the telcos to push themselves up the value chain and away from the dreading tag of connectivity utility.

Telefónica UK singled out over outsourcing strategy

The Communications Workers Union (CWU) has accused Telefónica UK of being irresponsible with its ‘rampant’ outsourcing strategy, putting livelihoods at risk and eroding employee rights.

The union points towards outsourcing trends through the last few years as a risky game for employees, most notably as there have been few assurances that employees transferred to external companies have few assurances they would be welcomed back to the organization should the third-party find itself in bother, or even if they would be readmitted on the same terms and conditions. Although not saying it outright, the CWU seems to be hinting at nefarious strategies to reduce risk and corporate responsibility for employees.

“Back in 2013 the CWU vociferously objected to the outsourcing of the thousands of jobs in the Voice Channel and escalated the issue to the then CEO, Ronan Dunne, expressing our dismay,” said CWU Assistant Secretary Sally Bridge.

“We stated then that we did not believe that outsourcing to a third party supplier was in the best interest of the customer or Telefónica as a business – and in February we once again raised the question as to why Telefónica would want to continue to risk using Capita to handle a major piece of its customer-facing work.”

Telefónica has been on a mission to reduce operational cost over recent years, though the company’s position has always been that of voluntary redundancies and not replacing those who retire; this is certainly a different rhetoric than the more reprehensible suggestions from the CWU. Looking at the numbers, the headcount stood at 122,718 at the end of 2017, down from 127,323 a year earlier.

Streamlining the workforce is not a new trend we are seeing in the telco space, but what needs to be ensured is that it is being done responsibly. A couple of weeks ago BT announced it was trimming 13,000 jobs, and Vodafone also announced it was cutting thousands across its international operations, while increasing pay-outs to the management team.

It not an uncommon occurrence for the telcos to be their own worst enemy, this is a scenario which has been created by the blood-lust of the rest of the digital ecosystem. OTT players has continued to destroy the cash-cow business models in the telco space, SMS and voice calls, while simultaneously encouraging the consumer to be more demanding and data-intensive. The telcos are less profitable and expected to underpin (and fund) the growth of the digital economy. With such an unbalanced equation, there are always going to be difficult decisions to be made.

Some might point towards a lack of foresight and innovation from the telcos, suggesting inaction and reliance on dated business models was the cause of such fiascos, however the economy which sits on top of the infrastructure, getting the first pick of the profits, has been biting the hand which feeds it for years. Little concern has been offered to the telcos who are expected to uphold the digital experience, yet not been offered a share of the digital bounties.

The difficult position telcos are finding themselves in has been thrust upon them, though we would hope there is an element of responsibility and finesse when making the tough decisions.

Telefónica lures Netflix into its content aggregator platform

Telefónica and Netflix have jointly announced a global partnership which allow the telco’s customers to watch the popular streaming service through its content platform.

As part of the deal, integrate Netflix’s service into Telefónica’s TV and video platforms across Europe and Latin America, while also allowing customers to pay for the service as part of their monthly Telefónica bill. The first launches will be in LATAM over the next couple of week, while the plan is to launch in Spain towards the end of 2018.

“This agreement is a big step forward in Telefónica’s bet on open innovation and collaboration with leading companies around the world,” said José María Álvarez-Pallete, Chairman of Telefónica. “We want to offer our customers the most compelling video offering possible, whether it’s our own content or third party providers. The partnership with Netflix will significantly enhance our existing multichannel video platforms.”

“Over the next several years, our partnership with Telefónica will benefit millions of consumers who will be able to easily access their favorite Netflix shows, documentaries, stand-ups, kids content and movies across a range of Telefonica platforms,” said Reed Hastings, Netflix CEO. “Making Netflix available on Telefónica’s familiar, easy-to-use TV and video platforms enables consumers to watch all the content they love in one place.”

The aggregator strategy is perhaps the most logical way for telcos to make any meaningful impact on the content world, a key prong as the businesses search for the much lauded convergence business model. While it might seem like an attractive idea to own content or chase lucrative rights deals, realistically, the traditional telco business model does not lend itself suitably to the content industry.

Owning the content space, like Netflix in the streaming world or Sky in the UK’s pay TV market, is a different approach to business. It requires undertaking a greater level of risk and offering creative individuals the opportunity to make decisions which might not sit comfortably with everyone. It also requires agility, relationships with the production industry and a more extroverted brand. When you consider these factors, telcos are not set up to launch an assault on the content space. It is also a time consuming job.

Looking at the BT content platform, the sports feature was attractive to customers, but some might argue the lack of supporting content in other genres frustrated customers. Building the entire content package, like Sky has for instance, takes a lot of time, considerable effort and notable investment. BT’s lack of depth in it content offering is starting to show, as subscribers start moving towards the exit.

That is not to say the telcos will not be able to compete in this segment, however transforming the business will take time and the content revolution is here right now. The consumption of content is changing drastically, shifting towards mobile, presenting a notable opportunity for the telcos. Telcos don’t have to own content, but they can own the relationship with the consumer, who is increasingly becoming frustrated with the increasingly fragmented distribution of video. Aggregating all this content into one space is a logical way which the telcos can add value to the content ecosystem.

The telcos have arguably perfected the billing relationship with the customer and offer a non-intrusive way to put content in-front of the user. Minimising the number of bills would also be an attractive idea to the consumer, while simultaneously increasing the ‘stickiness’ of the telcos. Negotiating the relationships with companies like Netflix, will be a time consuming process, there are so many of them after all, but it is an excellent way for the telcos to stay relevant and avoid the dreaded tag of utility.

Telefónica gets intimate with Amazon Web Services

Telefónica Business Solutions has got into a strategic collaboration with Amazon Web Services in order to offer more cloudy stuff to its customers.

This seems to be a fair bit more than just a reseller agreement, with TBS creating an in-house team of AWS specialists as well as a ‘Cloud Center of Excellence’ in Spain that will relentlessly obsess about all things AWS. It’s all about holding companies’ hands during their cloud and digital transformation journey.

“Our customers are asking for advice and support in their cloud adoption processes,” said Hugo de los Santos, Director Global B2B Products and Services at Telefónica. “AWS, with its depth and breadth of services as well as global presence, is a piece that fits perfectly in our cloud portfolio. Telefónica’s cloud offering thus empowers our customers to run their infrastructure, applications and workloads on the most suitable cloud service possible.”

“Service providers are playing an important role in driving innovation and creating value for organizations,” said Niko Mykkanen, Head of EMEA Partners & Alliances at AWS. “We are excited to work with Telefónica to enable the digital transformation of enterprise customers and help them leverage the scalability and breadth of services that AWS offers.”

TBS said a bunch of other stuff that amounted to a compilation of associated buzzwords and clichés. Terms like ‘agility’, ‘digital services’ and ‘leveraging’ saw vigorous action, surely leaving TBS customers in no doubt that their digital aspirations are in safe hands.

Nokia invests in its IoT portfolio with SpaceTime Insight acquisition

Networking vendor Nokia has snapped-up machine learning-powered analytics firm SpaceTime Insight, which it says will augment its IoT offering.

SpaceTime Insight specialises in the use of predictive analytics to manage and optimize the use of enterprise assets. It has packaged all this cleverness into an IoT platform and it’s this application that seems to have caught Nokia’s eye. Specifically Nokia is going to integrate SpaceTime into its IoT software portfolio and expects to produce better IoT apps as a consequence.

“Adding SpaceTime to Nokia Software is a strong step forward in our strategy, and will help us deliver a new class of intelligent solutions to meet the demands of an increasingly interconnected world,” said Bhaskar Gorti, president of Nokia Software. “Together, we can empower customers to realize the full value of their people, processes and assets, and enable them to deliver rich, world-class digital experiences.”

“Today marks a transformational moment for SpaceTime, and I’m delighted to join forces with one of the world’s top organizations-a global brand that is reshaping the future of networking and intelligent software,” said Rob Schilling, CEO of SpaceTime Insight, who’s hanging around. “I am excited for this incredible opportunity to help accelerate and scale Nokia’s IoT business and provide a new class of next-generation IoT solutions customers cannot find anywhere else.”

It has been a busy start to the week for Nokia. On the software side its Nuage SDN division announced a deal win with Telefónica Spain to software-define its datacentres. This is an extension of an SD-WAN rollout last year and the usual claims of agility, scalability and efficiency apply.

“To meet the rapidly emerging business requirements for agility and on-demand deployments, we moved aggressively to build our business connectivity services around a new cloud-based architecture,” said Joaquín Mata, director of operations, network and IT at Telefónica Spain. “Nuage Networks provided us with a highly scalable SDN architecture that could support all our services across all our regions without disruption. We are confident our customers will significantly improve their businesses with these new cloud-based services.”

Lastly Nokia has got together with French operator SFR to claim the first French 5G NR call over the 3.5 GHz spectrum. It was a test conducted at Nokia’s Paris campus and seems to be a pretty standard affair, designed as much to give the protagonists some 5G kudos as anything else.

“SFR is developing a roadmap for the evolution of its networks that takes into account the benefits and complexity of implementing 5G,” said François Vincent, head of Mobile Network at SFR. “The joint projects and trials will enable us to meet future data demand in the most effective way, while exploring new ways to deliver our media content that will increase the subscriber experience.”

Q&A with Christiams Valle Gomez, Telefónica Perú

In this interview, Christiams Valle Gomez of Telefónica Perú shares his knowledge on the Latin American market, including his predictions for the region, which Latam markets he expects to drive most growth and how legislation has played a major role in promoting MVNOs.

As highlighted in the report ‘Shaping the Latin American MVNO Market’, growth in the Latam region has not yet happened as expected or planned, but with recent government regulations there is a significant opportunity to be grasped. Ahead of MVNOs Latin America in Mexico City, one of the speakers and expert in the region brings you further insights into this emerging market.

What are your predictions for MVNOs in the Latam region?

For MVNOs, the initial challenge lies in addressing the volatility that has characterised recent years, something that is strongly related to the business strategy they have been pursuing, which is normally based on trying to compete on price. It’s time to address this challenge with a different vision. Despite the unfavourable outlook, advances in technology will be the main driver of MVNO development.

What are the main challenges facing MVNOs and how can these be overcome?

Without a doubt, one of the fundamental challenges is finding the ideal business model. The current drop in mobile prices has created instability for MVNOs, transforming the B2B market into both an opportunity and a challenge. On the one hand, there is the opportunity to monetise specialised services and products for the business sector. On the other, there is the challenge of coming up with a strategy that targets a defined niche, taking into account key aspects such as the useful life of clients, barriers to entry and acquisition costs.

How does legislation help promote the growth of the MVNO market in Latam?

In recent years, legislation has played a major role in promoting MVNOs, largely by countering the dominance of traditional operators. However, it is still necessary to evaluate the specific business models, ensuring free agreements between network operators and MVNOs. Argentina, Chile, Mexico and Brazil are leading the way on these issues.

Which countries will be most important in driving growth in the LatAm region? Please explain why.

There are certainly countries in the region that offer major opportunities for MVNOs.
Definitely Brazil, with a population of 200 million, whose market is a major focus MVNO growth on account of its size. The country has also had specific legislation for virtual operators since 2010. Also, Chile which has become the country in which virtual operators have the greatest presence, with the level estimated to reach 15% of the market in the coming years.

Meet with Christiams Valle Gomez at the MVNOs Latin America 2018 where he’ll speak on ‘managing risk in the digital era while launching new services’.