THE WRAP: France Tel net drops €1b; EverythingEverywhere survives MTR cuts

It’s been a week of ups and downs in terms of telco earnings, with France Telecom remaining in the black despite a €1 billion drop in net income, EverythingEverywhere growing earnings despite termination rate cuts, and Hong Kong’s SmarTone increasing income by almost 50%.
France Telecom chief Stephane Richard claimed the firm’s 2011 performance was on-target, despite post-tax net income falling from €4.8 billion in 2010 to €3.8 billion in 2011. Revenues for the year were broadly flat on 2010, and the chief conceded the financial environment in 2011 was more challenging than predicted.
He pointed to improvements in the firm’s domestic market and in Spain, while an upsurge in the performance of the firm’s businesses in Middle East and Africa appears to validate his five year plan to double earnings from emerging markets.
In the UK, EverythingEverywhere – France Tel’s mobile joint venture with Deutsche Telekom – overcame a 2.1% fall in revenue to grow EBITDA to £1.4 billion (€1.6 billion) in 2011, and lift its EBITDA margin 1.3 percentage points. The firm blamed mobile termination rate cuts for the lower sales, but benefitted from lower subscriber churn.
Data and other service revenues proved the key to SmarTone’s success in 2H11, the firm’s fiscal 1H12, with profit up 48% year-on-year at HK$475 million (€45 million). The operator augmented earnings with strong sales of mobile devices and accessories, and an operating profit of HK$42 million from its Macau business.
While data services are often cited as a main driver of telco’s business, research firm Ovum warned mobile operators must rework legacy messaging services to stave off growing competition from social messaging services – those that don’t use SMS, MMS or e-mail. The firm states the rival services cost operators $13.9 billion (€10.3 billion) in lost SMS revenues through 2011.
Voice-over-IP (VoIP) and Instant Messaging (IM) could be one answer for carriers. Regular statistics from Allot Communications show the two services were the fastest-growing consumers of mobile broadband bandwidth in the back half of 2011, despite their overall share of consumption remaining well below video, which tops the usage charts.
A senior Allot executive says operators must respond with their own VoIP and IM services to stave off the threat from over-the-top rivals.
Separate figures from Dell’Oro Group show that mobile operators spent most of 2011 investing heavily in radio access network (RAN) kit rather than worrying about OTT services.
Spending in 2011 hit its highest level since 2004, with almost half (40%) going on LTE kit. However, the firm predicts slower growth in 2012, following a drop off in outlay in 4Q11.
That slowdown clearly isn’t being felt in Thailand, where number one telco AIS this week detailed plans to invest 8 billion baht (€196 million) in network upgrades through 2012. Chief Vichien Mektrakarn expressed optimism that a 3G auction of 2.1-GHz spectrum will take place later this year, but noted it is up to operators to ensure the smooth running of any sale.
In Taiwan the concern is over 4G, with a government minister warning that careful controls will be needed if LTE replaces Wimax as the technology of choice to ensure fair treatment for operators that have already invested heavily in the latter standard.
Switzerland’s regulator, meanwhile, left it to operators to decide how to allocate additional frequencies auctioned off during February, reasoning the move allows carriers to better match spectrum to their business models. Orange, Sunrise and Swisscom bid a combined 996 million Swiss Francs (€825 million) for frequencies currently unused, and digital dividend spectrum due for release in 2014 and 2017.
In India, 2G spectrum continued to dominate headlines, with United Arab Emirates-headquartered Etisalat revealing it will shut down its local joint venture with Swan Telecom following the cancellation of 122 2G licenses early Feb. Rival STel may also be heading for the exit, due to lack of funding after partner Batelco bowed out following the revocation.
Russian carrier VimpelCom conducted its own exits, spinning off its holdings in Egyptian carrier ECMA and North Korean operator Koryolink, which it acquired ten months ago when it became majority shareholder in Orascom Telecom Holding.
And coffee machine manufacturer Nespresso detailed plans to smarten up its products with machine-to-machine capabilities.
The Switzerland-headquartered firm has partnered with Orange Business Services to embed two new coffee makers with SIM cards that enable remote diagnostics, as the firm seeks to boost its after-sales care.
But don’t worry – the information will be used to schedule preventative maintenance rather than passing details of your favorite tipple back to the firm.