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.

Veon raises outlook as it unveils diversification strategy

Telecoms group Veon has increased its EBITDA guidance for FY 2019 and is looking beyond connectivity for future growth.

Veon serves over 200 million subscribers, mainly in central Asia, and things seems ticking along nicely. “Veon is performing well in the current financial year against our 2019 targets and today we are increasing our EBITDA guidance for FY 2019 from low to mid-single digit growth to at least mid-single-digit growth,” said Ursula Burns, Group Chairman and CEO. “Previous guidance of Revenue growth and Equity Free Cash Flow remain unchanged.”

Despite that, Burns reckons Veon needs to diversify beyond mere connectivity in the pursuit of future growth. A new strategy framework is built around three pillars: connectivity, new digital services and future assets that open up adjacent growth opportunities. This essentially seems to be a version of the kind of 5G strategy most telecoms groups are advocating.

“Our new strategy framework underscores the growth opportunities we see beyond our connectivity business and aligns Veon’s ambitions with our industry’s future development,” said Burns. “I am confident that the greater flexibility in how we allocate capital will allow us to execute on these opportunities, reinforcing our market-leading positions and maximizing shareholder returns over the longer term.”

“Over the next 18 months, there are opportunities that we believe will best serve investor interests over the medium-term,” said Alex Kazbegi, Group Chief Strategy Officer. “We are excited about the opportunity in our core Russian market, which we believe can be best accessed through a short-term increase in network capex to allow us to drive medium-term service revenue growth.

“In Pakistan, there may be the opportunity to increase our stake in the business through the existing put option with Warid. We also believe stepping up our investment in Digital Financial Services in Pakistan is an exciting first step in Future Assets.”

Ursula Burns officially made Veon CEO, at last

Eight months after losing its last CEO, telecoms group Veon has decided to stick with Chairman Ursula Burns in the dual role.

When Jean-Yves Charlier suddenly had his security pass revoked back in March, there was a curious silence on the matter of his replacement. That silence continued for so long that, distracted by the passing of the seasons, everyone forgot Veon didn’t officially have a CEO.

Today, what vestigial speculation there may have been was finally put to rest when Veon anointed Ursula Burns as CEO. To call this a bolt from the blue would be an exaggeration as Burns was already Chairman and had been covering the CEO role since Charlier cleared off. But sometimes these things need to be rubber-stamped.

“I am honoured to be appointed Chairman and CEO of Veon,” said Burns. “The company operates in a diverse group of markets, with growing populations and rapidly increasing smartphone ownership. This clearly presents a host of growth opportunities for Veon as we seek to build on the positive momentum that we are seeing across the business. I look forward to continuing to lead Veon towards more success and increased shareholder value.”

“The Board has been impressed with Ursula’s performance and leadership of the company,” said Veon board Director Julian Horn-Smith. “The management team are clearly working well together and focused on delivering against strategic priorities. Ursula has led Veon through a major transaction in the sale of its Italy joint venture for $2.9 billion and overseen a period of solid quarterly operational performance. We are confident that with her as Chairman and CEO there will be further improvements across the business.”

There you have it. To be fair, actually getting someone to do the job for eight months is a fairly rigorous interview process, so Horn-Smith and his fellow board member can feel pretty confident of having made as informed a decision as possible.

Veon backs out of GTH acquisition

Veon has announced it has backed out of plans to acquire GTH assets in Pakistan and Bangladesh due to the falling Pakistani Rupee and the reaction from GTH shareholders.

The acquisition was initially announced back in July to improve Veon’s footprint in emerging markets. The purchase was supposed to be funded through the €2.3 billion sale of Veon’s stake in Wind Tre to CK Hutchison, though the stars don’t seemed to have aligned for this bit of business.

The Pakistani rupee fell another 4% on Wednesday, setting a new record low, as the country continues to battle debt. The International Monetary Fund has promised funds to bailout the Pakistani government, though it appears this will not be enough to cover the shortfall. Analysts are predicting more troubled times ahead for the currency and Pakistani economy.

Aside from the gap in the spreadsheets, there are concerns the US would block any financial aid offered by the IMF due to concerns over Chinese investment in Pakistan in recent years. Considering the anti-China rhetoric which is gathering momentum in the US, this would hardly be a surprising move.

Coupled with a lack of approval from minority shareholders for the transaction it would appear Veon has had enough, perhaps considering the hassle too much in comparison to the gain.

Hutch buys Veon out of Wind Tre for €2.45 billion

CK Hutchison has doubled down on the Italian market by giving Veon €2.45 billion for the half of Wind Tre it didn’t already own.

Labelling it Italy’s leading operator, Hutch wittered on about how this is a key step in consolidating its telecoms assets, how this would allow it to continue driving synergies and bits of corporate gibberish. In fact, according to Ovum’s WCIS, Wind Tre is the second Italian MNO by subscriber with 28.5 million, while TIM has 31 mil.

“We are delighted to become sole owners of Wind Tre, which gives us the strongest possible platform to drive increased and recurring value for our shareholders, said Canning Fok, Group Co-Managing Director of CK Hutchison. “Having pioneered mobile technology and digital leadership in Italy for over 15 years, CK Hutchison looks forward to continuing to invest in Italy’s digital future, benefitting consumers and businesses across the country.”

Veon, meanwhile, is mainly going to use the cash to pay off some debts and get its leverage ratio down to 1.8x. Around a billion dollars of it will be spent on buying the assets of Global Telecom Holding in Pakistan and Bangladesh, along with 1.6 billion of new debt, which presumably makes sense to Veon’s accountants.

“Our goal is to drive greater value for our shareholders through a more focused and optimized portfolio” said Ursula Burns, Executive Chairman of Veon. “To this end, the company has identified four immediate priorities: simplifying the group’s structure, increasing our operational focus on emerging markets, strengthening the group’s balance sheet and supporting the company’s current dividend policy. Today’s transactions are important steps towards this goal.

“We intend to provide a more comprehensive update on Veon’s strategy in the coming weeks, which will cover, among other things, our ambition to deliver operational excellence across our portfolio, supported by a refocused and expert HQ that provides strategic expertise and direction to our businesses.”

Veon CEO calls it a day with no replacement lined up

CEO Jean-Yves Charlier has decided to step away from the artist formerly known as Vimpelcom but they don’t seem to have even started looking for a new one.

Ursula Burns, who has been Chairman of Veon since July 2017, will now become Executive Chairman, which basically means she’s doing the CEO job too. To be fair she’s pretty well qualified for the gig, having been CEO of Xerox from 2009-2016, but she’s presumably now in the board member phase of her career, including American Express, Exxon Mobil, Nestlé and Uber, and Diageo next month.

“It has been a privilege to lead Veon through a critical period in its history,” said Charlier. “Over the past three years, we have achieved a profound transformation of the group and I am immensely proud of all that we have accomplished. The transformation creates a solid foundation for a positive path for the company in the years ahead and I wish Ursula and the Veon teams across the world the very best.”

“The supervisory board and I want to extend our thanks to Jean-Yves for his contribution during his time at Veon,” said Burns. “He leaves the company having led three years of performance, structural and business transformation, and he will assist me with the transition.

“With Veon’s unique geographic footprint, and a strong push on our digital agenda to better serve our 240 million customers, we are well positioned to compete, grow and prosper in the markets we serve. I look forward to working even closer with Veon’s management team to build on our strong foundations and find further opportunities to unlock value for our shareholders.”

The protagonists clearly want to create the impression of everything being mellow, groovy and under control. But the ideal succession choreography for losing a CEO is for the process of replacing them to be well underway by the time you go public. This doesn’t seem to be the case here and Veon is even having to hastily promote Kjell Morten Johnsen from Head of Major Markets to interim COO to help Burns out.

This latest executive turmoil follows Jon Eddy, Head of Emerging Markets and Mikhail Gerchuk, Head of Eurasia, stepping down in February. “I would like to thank Jon and Mikhail for their strong leadership and commitment over the years,” said Charlier at the time, perhaps using that opportunity to jot down some ideas for his own leaving canned quotes.

Telenor says enough is enough with troubled Veon

Most Norwegians we’ve met to date have been nice, relatively laid back people, but the execs at Telenor have seemingly been pushed to breaking point, resulting in the divestment of Veon.

It’s been in the works for a while, and it would appear Telenor has finally gotten sick of dealing with Veon. There has been ‘debate’ over the future strategic direction of the company, but it won’t be long before the Norwegians finally ditch their final 19.7% stake in Veon.

Telenor has announced it has begun an offering of 90 million Veon shares, roughly a 5.1% stake in the telco, priced at $4.15, with the offering expected to close on September 25. This will leave Telenor holding onto 14.6% of Veon, though plans are to transfer this stake to an exchangeable bond. Telenor will be able to clean its hands of any association.

This should come as little surprise considering the saga which played out in Uzbekistan back in years gone, when the business was known as Vimpelcom. Back in 2015, Telenor announced plans to divest its stake in the business, citing ‘challenging’ conditions. Apparently paying hundreds of millions of dollars to firms controlled by Uzbekistan’s President Islam Karimov for a leg-up in the country, is a no-no in Oslo.

And while many might view this as an admirable move by a telco wanted to keep its hands clean, let’s not forget Telenor was not completely absent of wrong-doing. A seconded Telenor employee raised concerns of corruption back in 2011, but this news didn’t make it to the CEO until March 2014, and then onto the board in December later that year. From there the memo was lost until October 2015 when it made its way to the Norwegian government, the majority shareholder of Telenor. Negligence or incompetence – we’ll let you decide, but neither should be present.

Telenor is on the verge of getting rid of the headache, which also blamed Uzbekistan for a recent profit warning, and it will receive a nice little $365 million boost in cash in the first instance. Seems a bit backward to be rewarding the telco when you look at the saga from angles, but hey-ho.