T-Mobile

First in GSM, second in WCDMA: Where will Europe be with LTE?

Keith Mallinson — Tue, 24 Nov 2009 14:47:58 -0500

Most European operators will trail significantly behind major commercial LTE deployments elsewhere. Transition to the mainstream 3GPP technology track for non-HSPA operators and new spectrum availability are the driving forces for LTE front-runners in America, Asia and Scandinavia.

Next generation network implementation plans vary enormously worldwide. For example, India has yet to auction spectrum for legacy 3G technologies, while Verizon Wireless in the U.S. will start its transition from CDMA2000 to the dominant 3GPP technology track with LTE on its newly acquired spectrum in commercial deployments next year. While travelling west and east to chair conference tracks on mobile broadband at Informa's LTE Americas in Dallas and GSMA's Mobile Asia Congress in Hong Kong this month, I've been able to assess LTE strategies and deployment plans first hand with a total of 11 operators in my panel sessions, while quizzing and listening to several more.

Europe created GSM and deployed it first. Japan blazed the trial with WCDMA for a couple of years before European pioneering deployments began in earnest by 3 in the U.K. and Italy with market entry using new spectrum. This time around with the LTE transition, the most fertile conditions for adoption are mostly in China, Japan and the U.S. With the exception of Scandinavia where TeleSonera and Telenor are likely to launch commercial services in Norway and Sweden next year, these conditions do not yet exist in most of Europe. Major European multinational operators Vodafone, Telefonica and T-Mobile will do little more than just trials during 2010 and seek fresh spectrum for most of their national operators.

Migration from 3GPP2 to 3GPP in the U.S.

In the U.S., LTE provides the timeliest opportunity for CDMA operators Verizon Wireless, Metro PCS and Leap to get onto the mainstream in network technology. Flush with new spectrum from 1700 MHz and 700 MHz auctions, these operators will deploy LTE in allocations that are currently unoccupied by cellular technologies. There are no preexisting mobile devices with any technology for the 700 MHz band. Whereas Verizon Wireless plans to launch and rollout LTE aggressively in 2010 and cover virtually all its current nationwide 3G footprint by yearend 2013, America's other top-two operator, AT&T, will use its new stash of 700 MHz and 1700 MHz spectrum to follow with its deployment approximately starting one year later.

Leapfrogging 3G in China

China Mobile is the wild card among LTE early-movers. The operator drew the short straw in this year's 3G technology allocations with a requirement to implement the immature TD-SCDMA technology. China Unicom and China Telecom were awarded WCDMA and CDMA2000 respectively. It is already too late for much ever to come of TD-SCDMA. Whereas the TD-SCDMA mandate serves as a face-saver for China, the opportunity to establish China Mobile as a world leader in next generation technology is with LTE in its TDD form. This technology has some valuable commonalities with TD-SCDMA including the frame structure. Huawei was boasting a van drive demo for TD-LTE at the Hong Kong show. The vendor will also benefit from resurgent interest in TDD technology outside of China following its lackluster adoption as a UMTS technology in the rest of the world.

PCCW in the dynamic Hong Kong market is eager to use its paired "LTE spectrum" recently obtained in auction and will likely launch FDD-based LTE commercially in a couple of years time.

Refarming 2G in Japan

Japan has world-leading mobile data use at around 40 percent of ARPU and with 90 percent of subscribers already using 3G technologies. Success in 3G with such heavy use in this densely populated nation makes the case to trade up to LTE is most compelling. In addition to new spectrum allocations for LTE, plans to close down 2G PDC within the next year or so will ensure significant additional spectrum to refarm for use with LTE.

DoCoMo suffered by going it alone for several years with WCDMA but is undeterred in its desire to lead with LTE. Among other difficulties with WCDMA early on from 2001 until the middle of the decade, DoCoMo's FOMA customers had poor coverage due to absence of backward compatibility with 2G PDC. Meanwhile KDDI performed better in 3G with CDMA2000, benefitting from volume shipments in the US, Korea and from backward compatible with cdmaOne. In Japan and elsewhere worldwide, multimode devices with backward compatibility to legacy 3G technologies will prevail with LTE.

Waiting game in Europe

Whereas European 3G operators can cautiously upgrade all the way to HSPA+ in existing 3G spectrum, LTE will in practice require separate allocations that are not yet generally available. Although it is theoretically possible to substitute LTE for GSM or HSPA spectrum usage, that is unappealing at this stage and some operators have already undertaken to reallocate some 900 MHz spectrum to UMTS with HSPA. With the exception of limited new allocations, such as in Scandinavia, European operators are waiting for 2.5/2.6 GHz and the so called digital dividend spectrum in the 800 MHz band. It will be years before the latter is allocated and generally available for use.

It is no tragedy for the rest of Europe that the U.S. and Asian operators will be driving early LTE volumes, supplemented by deployments in the relatively small Scandinavian region. Front-runners have the new spectrum resources to make the change efficiently and some have a particular desire to switch technology that makes LTE deployment urgent. The early years of 3G were unpleasant for European operators with onerous spectrum fees, clunky and costly terminals with disappointing performance. European operators will benefit from LTE technology and terminal improvements in commercial use elsewhere because most do not yet have the additional spectrum to deploy commercially themselves. Meanwhile, HSPA and HSPA+ provide the natural upgrade path on existing spectrum.

Keith Mallinson is a leading industry expert, analyst and consultant. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007.

Deutsche Telekom searches for T-Mobile US partner

Paul Rasmussen — Fri, 20 Nov 2009 10:18:24 -0500

Having been forced to find a partner for its struggling UK mobile operations, Deutsche Telekom (DT) would now appear to on the hunt for a similar deal for its much larger, but equally troubled, US division.

While DT's head office has formally denied any such move, the well-founded rumours claim that the company is looking for a US partner to help finance billions of euros of investment in high-speed networks. Potential partners being suggested include MetroPCS, Clearwire and AT&T, although a financial investor from outside the telecoms industry is also a possibility. The company is said to be no longer considering a share sale and a takeover of rival Sprint-Nextel.

Hamid Akhavan, DT's COO, said that he expected the difficult business conditions in the US to improve: "We have had some heavy headwinds ... but we are quite optimistic that this trend can be reversed," he said, attributing the problems to a delay in the group securing 3G networks and the population of Apple's iPhone on AT&T's network.

Speculation that T-Mobile US would need to revamp its strategy is not new, but with the company stuck firmly in 4^th position - and continuing to lose ground, a solution has become now more pressing.

Separately, the merger between Orange UK and T-Mobile UK has seen Orange claim that the new company will not have to hand back spectrum in order to get regulatory approval.

For more on this story:
Reuters

T-Mobile worker sold 100,000s customer names for 'substantial' amount

Paul Rasmussen — Wed, 18 Nov 2009 13:03:26 -0500

Having protested over being named, T-Mobile UK has now admitted to allowing its customer data to be stolen by an employee and sold for a substantial amount to a third party. Latest estimates claim that details of 100,000s of T-Mobile contract customers have been passed to agents or dealers, although pay-as-you-go users are apparently unaffected by the scam.

The company, which is now positioning itself as a victim of the crime, called in the UK Information Commissioner's Office (ICO) after it identified the loss of contract customer data. Christopher Graham, the ICO Commissioner, said that it "appears that the information has been sold on to several brokers and that substantial amounts of money have changed hands". T-Mobile has not provided information on the quantity of data sold, who is involved or what level of money was involved.

However, the company is being lambasted for seemingly having lacked robust data protection processes. Graham Cluley, senior technology consultant at security firm Sophos, said that technology does exist to help intercept and control the movement of personal data inside organisations, "but many firms have still not taken even the most basic steps to halt it dead in its tracks. The cheapness and availability of devices like USB thumb drives has just made it easier than ever to scoop up large databases and waltz out of the office without anyone suspecting a thing."

Mark Fullbrook, European director with Cyber-Ark, the secure collaborative working specialist, said that the T-Mobile data theft case highlighted the problem of rogue employees circumventing data protection systems designed to stop external hackers and electronic attacks. "Almost all data protection systems are designed to stop organisations' data leaking from an external attack. Internal defences are still quite new in terms of their development", he said.

The ICO is also having to defend itself against a growing tide of opinion that it is using the T-Mobile case to push for breaches of data protection law to be punishable with jail sentences, not just fines.

For more on this story:
The Register and The Guardian

Vodafone look to tempt staff away from Orange/T-Mobile UK

Paul Rasmussen — Fri, 13 Nov 2009 12:49:05 -0500

Given that the agreed merger period is around 18 months before Orange UK and T-Mobile UK come together, staff working at the two firms will have plenty of time to review their likelihood of being offered a role within the new company.

This uncertainty has prompted Vodafone to launch an aggressive campaign to recruit staff from Orange and T-Mobile, which has seen Vodafone positioning advertising vans outside the headquarters of the two companies.

With little attempt at subtly, the advertising vans' hoardings showed a woman, roller brush in hand, pondering the colours orange and pink--the respective colours of Orange and T-Mobile. A slogan asked: ‘Need another option? See Red.'

Vodafone HR director, Matthew Brearley, said the operator decided to ‘seize the moment' and launch a targeted recruitment campaign after ‘an influx of applications' from both Orange and T-Mobile staff ‘at all levels of both organisations'. Brearley said the recruitment drive did not contradict Vodafone's wave of redundancies last year, or further huge cost-cutting announced last week.

An Orange spokesman said of Vodafone antics: ‘It is a cheap tactic but we are not surprised.'

For more on this story:
Mobile Today

T-Mobile and Orange agree JV terms, huge costs savings promised

Paul Rasmussen — Fri, 06 Nov 2009 12:23:42 -0500

Two months after entering exclusive negotiations, terms have been agreed to between Deutsche Telekom and France Telecom over the merging of their mobile operations in the UK. The companies said that the 50:50 joint-venture should produce savings in excess of €4 billion, generate revenues of €9.4 billion and EBITDA of €2.1 billion.

However, these costs savings are seemingly based on some far-reaching assumptions. The merger statement claimed that the Opex savings of €490 million per year from 2014 onwards were dependent on up to €880 million in integration costs over the period from 2010 to 2014, which relate mainly to the decommissioning of mobile sites, the rationalisation of the network of retail stores and the streamlining of operations.

The JV anticipates large scale Capex saving over the first five years due to the integration and unification of the networks and from jointly expanding 3G coverage. The potential for Capex savings, net of integration Capex, is estimated by the JV at €680 million on a cumulative basis over 2010-2014, prior to stabilising at approximately €110million a year from 2015 onwards.

The leadership of the new company, which will have over 28 million customers, has been fudged by having Tom Alexander, currently CEO of Orange UK, as CEO and Richard Moat, currently CEO of T-Mobile UK, as COO. The two brands will continue to operate separately for 18 months after which branding alternatives for the JV will be developed.

For more on this story:
Cellular News and Mobile News

Smartphone revolution tests established players – page 2

Keith Mallinson — Tue, 27 Oct 2009 17:15:32 -0400

Major operators such as Vodafone are no less challenged by the rise of Apple and others. Vodafone's moves--I'm loathe to describe most of these as strategic--aim to hedge its position against competition for customer control and margin right across the value chain. Whereas the old enterprise-focused BlackBerry provided significant added-value for operators and did not pose a competitive challenge, in its expanded guise to consumers the BlackBerry ecosystem competes for the customer relationship and bottom line profits. Vodafone and Orange picking up iPhone distribution in the UK counters O2 on expiration of its iPhone exclusivity. Whereas this eliminates a competitive advantage for O2, it also puts Apple in an even stronger competitive position versus the operator market. Apple anticipates a fall in street prices with carrier competition in iPhones, but it does not expect its wholesale prices to fall. So far, Google's Android is predominantly with the T-Mobile with the HTC G1, but this OS is also set to diversify. For example, Vodafone's Verizon Wireless joint venture with Verizon is imminently expected to announce a Motorola "Droid" phone.

Vodafone and other carriers have numerous possibilities in smartphones. Focus is required. Vodafone has had a mixed relationship with Nokia for a decade or more. Club Nokia's mobile portal threatened to circumvent Vodafone and was crushed in order to preserve the regular handset trade. Club Nokia's reincarnation with Ovi was backed by Vodafone since 2007.

Vodafone's 360 initiative is an attempt to get back into the driving seat where its Live! portal has failed. It is promising sophisticated personal contacts management, social networking and an applications store. Its payment mechanism enables content and applications charges to appear on the phone bill. Vodafone plans to rollout 360 to Germany, Greece, Italy, Ireland, Portugal and Spain by yearend and into a further nine nations during 2010.

Vodafone has signed-up phone suppliers Samsung and Nokia with LiMo and Symbian OS respectively for 360. The attraction of LiMo's Linux is the pledge that this will never be used to circumvent the mobile operator with the independent service portals and applications stores that are strategically being pursued by Apple, RIM, Google and Nokia with Ovi.

A key potential competitive strength for 360 versus Apple, BlackBerry and Google is that Vodafone can allow developers deeper access into network capabilities with applications running on a variety of OSs. Similarly, Orange has opened up applications programming interfaces under its Orange partner Program.

Easier said than done. Most carriers groups are loosely structured federations: ownership and control is not absolute. It is difficult for Vodafone's corporate centre to impose a one-size-fits-all approach across many operating companies because local history and conditions differ significantly from nation to nation.

Carriers are disadvantaged by their limited scale. Even though Vodafone is a large group with 315 million proportionate subscribers worldwide, this is still less than a tenth the worldwide market of 4 billion subscribers addressed by Nokia and increasingly other smartphone and OS vendors. Scale attracts developers, helps amortize development and operational costs and build cool brands.

The Joint Innovation Lab initiative promotes creation of mobile applications and services with a global platform for developers. Widget compliant handsets from supporters LG, RIM, Samsung and Sharp will enable developers to create applications that can be rolled out to customers across JIL member companies China Mobile, Softbank, Verizon Wireless and Vodafone with a combined user base of more than 1 billion worldwide.

Many such alliances in IT and telecoms have failed over the years in their attempts to drive cohesion and scale. Alternatively, Ericsson is helping carriers by offering mobile internet, applications and messaging services including hosting to all comers on a white label basis. Carriers worldwide brand these as their own.

Vodafone's old anxieties about Nokia should be the least of its worries with so many new strategic challenges.

Keith Mallinson is a leading industry expert, analyst and consultant. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007.

T-Mobile boosts LBS with social apps

Paul Rasmussen — Wed, 07 Oct 2009 13:25:20 -0400

Having just announced its best ever month of subscriber growth--100,000 new customers in September--T-Mobile UK will be part of a European launch of new LBS services aimed at existing web'n'walk customers. The company has agreed a deal with deCarta to provide new navigation and social applications in the UK, Germany, Austria and the Netherlands starting next quarter, with other T-Mobile markets are to follow.

Deutsche Telekom multimedia VP, Ingo Schneider, said that LBS was a core component of its mobile Internet strategy. "Notably, this new offering will give web'n'walk customers the next generation of LBS almost immediately."

Schneider added that T-Mobile would deploy deCarta's new ‘NavSearch' location-based search, mapping, and routing capabilities for mobile phones and the web, through a turn-by-turn navigation application. T-Mobile users would be able to share information across applications such as directions and favourites, and between multiple devices.

According to a new research report by the analyst firm Berg Insight, the number of mobile subscribers downloading navigation routes and turn-by-turn navigation instructions using their mobile handsets increased twofold from H1-2008 to H1-2009 and reached 28 million.

For more on this story:
Mobile News

Orange dropped T-Mobile UK takeover to push through merger deal

Paul Rasmussen — Fri, 02 Oct 2009 08:58:50 -0400

The 50:50 merger between Orange UK and T-Mobile UK was forced upon the France Telecom subsidiary in a rush to complete a deal ahead of rival bids. According to reports now emerging, Orange UK had wanted to acquire T-Mobile UK outright, but had to settle for a merger of equals to persuade T-Mobile to sign the agreement ahead of offers from Vodafone and O2.

The deal, which came after months of speculation and strong denials from the involved companies, was only concluded after details were leaked that Vodafone and O2 had offered around £3.5 billion to acquire T-Mobile UK.

To snatch the deal, Orange instead agreed to a 50:50 joint venture that would see Deutsche Telekom contributing T-Mobile UK and its 50 per cent share in mobile network joint venture MBNL with 3 UK, while France Telecom Orange would put in Orange UK, including £1.25 billion of intra-group net debt. Talks are still ongoing over the finer points of the agreement, but a conclusion is expected this month.

While Orange has indicated that an eventual takeover is the most desirable option for France Telecom, a 50:50 merger is more likely to receive the go-ahead from the UK telecoms regulator, Ofcom. If the deal is signed, the UK operators have stated that they will retain both brands for 18 months, by which time some of the huge integration effort might have been achieved.

For more on this story:
Total Telecom

UK ripe for mobile network consolidation – page 2

Keith Mallinson — Tue, 29 Sep 2009 17:13:32 -0400

Significant problems remain with two issues: control and branding. With partners' desire for equality, there is by definition no controlling shareholder. In absence of this, the JV agreement will stipulate, among other things, dividend policy with 90 percent to be distributed to shareholders. That will avoid the pickle that Vodafone is in with no cash flow from its 45 percent stake in Verizon Wireless in the U.S., but it is a recipe for management gridlock. Instead, agility is required. It is difficult to predict what the future holds and how the interests of the shareholders might diverge. Deferring the decision for 18 months on whether or not and how to consolidate brands reveals the JV is already having difficulties with the weightiest of decisions.

The competition authorities in the UK and Europe might attach some strings or at least undertake a thorough review prior to approving the JV. There is so much infrastructure sharing in the UK that competition might be affected. T-Mobile shares its 3G network with 3UK. Orange announced RAN sharing with Vodafone, although it seems only mast sharing has occurred. Instead, Vodafone and O2 are sharing infrastructure. These arrangements, including the provisions for folding them up, are the kinds of things the antitrust authorities will likely review. If the JV is allowed, it would be difficult to justify denying H3G, with around 7.5 percent market share, the right to be acquired by Vodafone or O2. This, however, would limit the market to just three network-based competitors.

The proposed new JV stirs memories of the sorry tale when FT and DT combined their international fixed service offerings to corporate customers in the mid 1990s. That old JV was named GlobalOne. DT and FT even arranged cross-shareholdings to consummate its partnership. It was actually a bit more complicated because Sprint also joined with a $3 billion investment by FT and DT. Within five years from start to finish the failed partnership was dismantled. Thankfully the strategic logic is much better this time in UK mobile.

The new mobile JV's integration will be a walk in the park in comparison to T-Mobile's rumoured desire to acquire Sprint in the US. Sprint is still floundering with the legacy of disparate mobile network technologies, brands, marketing strategies and organizational clashes with its acquisition of Nextel in 2005. Its diversification into WiMAX with Clearwire makes matters worse. Sprint Nextel is suffering massive customer losses while market leaders Verizon and AT&T are still enjoying significant additions. With its severely depressed stock price and market capitalization at only around $11 billion Sprint Nextel might go for a song; but there's no quick or easy fix, with or without T-Mobile USA.

Keith Mallinson is a leading industry expert, analyst and consultant. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007.

UK ripe for mobile network consolidation

Keith Mallinson — Tue, 29 Sep 2009 17:11:31 -0400

The UK is crying out for mobile network operator consolidation. The market is mature and nowhere is as brutally competitive for all participants. In the 3rd and 4th positions out of five, Orange and T-Mobile are desperate to improve their competitive positions and financial performance. The proposed joint venture between these two is attractive on several counts, while plans for control and branding are marred by an indecisive compromise and procrastination. Precedent is unfavorable for FT and DT as JV partners.

Anemic profits with operator EBITDA margin percentages in the low twenties illustrates that the UK mobile operator market is ailing. Even global market leader Vodafone is struggling, despite its economies of scale in purchasing and branding. Pricing power is nonexistent with market shares spread fairly evenly among network operators, including their MVNO-hosted subscribers, and with regulatory controls hammering hitherto lucrative call termination and roaming charges for voice and SMS. In contrast, market average EBITDA margins range from 35-45 percent in France, Spain, USA, Germany and Italy where there are one or two clear market leaders and in most cases fewer competitors.

Intense competition with low prices can be beneficial to consumers in the short term, while damaging in the longer term. Mobile is a capital-intensive business and the sector needs a new round of investment and expansion with the development of the mobile broadband, including new spectrum and equipment. Even deep-pocketed multinationals cannot justify investing and will contemplate leaving national markets if returns are inadequate, as is currently the case in the UK.

But nobody's willing to sell for a price anyone else is currently willing to pay. This is a bit like residential property markets of late. Foreclosures aside, many would-be sellers try to ride out the downturn rather than take a hit with a low price. This explains why 3UK has not been bought, despite being up for sale.

Under these severe financial pressures and constraints, Deutsche Telekom and France Telecom have decided to merge their respective UK businesses into a 50/50 JV. With regulatory approval expected in the first half of 2010, the combined business will become the UK's largest operator with 28.4 million subscribers and a 37 percent market share on the basis of 2008 figures. Unlike Orange and T-Mobile with similar standing, there is no comparable player to 3UK in 5th position. It continues to wait for better days.

Engineering of the financial and orthodox forms is significant in this JV formation, its deconsolidation from corporate accounts and in operations. Upon deal completion, parents' EBITDA margins rise a bit in a trice and the merger synergies worth GBP 3.5billion are promised in reduced annual OPEX and CAPEX of GBP 445 million and GBP 100 million respectively. Costs will be saved in the network with rationalized base station and site figures along with reductions in retail outlets and staff numbers. The structuring for GBP1.25 billion of debt reflects differences in value for the two entities being combined.

The deal is a lot less unacceptable than the humiliating figures of around GBP 3.5 billion that were rumoured to have been offered T-Mobile by Vodafone and O2. The need to do something was serious, but this figure is much less than the GBP 8.4 billion T-Mobile paid to buy the company, formerly called One2One, in 1999, let alone the GBP 4 billion it paid for 3G spectrum plus subsequent network investments. FT paid GBP 26.9 including debt for Orange. The JV is a clever wheeze because it saves face by bringing a solution without the embarrassment of having to recognize such losses in value...Continued