yo t clI ur o r cK Ip ea He Ho d re Ne oN /Ip ad

BusINes s aNalysIs for telecoms profes sIoNals

mAy 2012

leader

coNteNts
news in brief

WINGING IT
Addressing new industry verticals could prove to be more of a leap of faith than telecoms operators anticipated
ts one thing to say youre going to do something, but its quite another to actually go ahead and do it. if that were not the case then most of us would by now have put in enough guitar practice to be comfortably on the road to stardom (in my defence, i broke my arm just as i was getting the hang of stairway to Heaven). in the telecoms space, this principle is particularly pertinent in the discussion around new verticals. Having spent plenty of time talking up the opportunities for tapping fresh sources of revenue from sectors like M2M, finance, health and automotive, some operators are

3 Timeline
A round-up of some of the major stories reported in our daily news service www.totaltele.com
COrPOrATe serViCes

Nick Wood Deputy Editor Total Telecom

Success is by no means guaranteed for the big telcos

demonstrating that theyve done more than just talk by launching new products and services in a bid to address demand for new connectivity services. As our story on p.12 shows, success is by no means guaranteed for the big telcos, but it is easy to see why they are so keen to make the move. The GsMA, for example, predicts the M2M market could be worth as much as $1.2 trillion by 2020 with the automotive sector alone accounting for $202 billion;

by the same year Visa believes 50% of the payments it processes will be carried out on mobile devices. A clear growth area then. but telcos still need to take care not to fall into the procrastination trap. As Arthur D. Little director Didier Levy warns, if they do not act quickly to address these opportunities, over-the-top (OTT) players probably will. The OTT risk could repeat itself in these new verticals... [OTT companies] are experimenting, he told Total Telecom recently. Adjacent industries are by no means the only new source of revenue for telcos though. The connectivity requirements of enterprises based in emerging markets are becoming increasingly sophisticated as they target growth at home and abroad. On p.7 we look at how telcos need to adapt their offers in order to capitalise on these evolving demands. in keeping with the new opportunities theme, some observers are willing to speculate that the UKs forthcoming LTe auction may open the door to new market entrants (p.10). The scarcity of spectrum and the bidding power of existing players limit the likelihood of a new national operator, but there could be room for a regional player to offer LTe services targeted at specific niches, should such a company be willing to spread its wings. n

7 Going global
emerging market-based multinational companies will provide a growing revenue opportunity for telecoms operators over the next decade.
neTwOrK sTrATeGies

10 Niche opening
existing mobile operators are likely to snap up the bulk of the UKs LTe spectrum, but there could be an opportunity for a newcomer to sneak in.
bUsiness & finAnCe

12 New verticals
european telcos look to adjacent markets for growth, but they could still struggle to offset core revenue declines.
sTATisTiCs

15 Prime numbers
Messaging revenues, iPTV ArPUs, backhaul, mobile capex, m-payments and smartphone ownership in the Us.

AN ETHERNET SOLUTION THAT MAKES ADDING SERVICES EASY? NOW THATS REFRESHING.
With Verizon Global Wholesales flexible Ethernet and wireless backhaul solutions, you can serve up a range of bandwidth and performance options for your customers. You get all this from a single interface that makes it easy to incrementally add services as your customers needs grow. And as they do, we can customize service agreements to help you manage costs and ensure terms and pricing are never hard for your customers to swallow.

verizon.com/wholesale/globalsolutions

Verizon Global Wholesale serves: Carriers - Wireless Providers ISPs - Cable Operators - Resellers
2012 Verizon. All services are provided by Verizon in accordance with certain rates, terms, conditions, and restrictions set forth in Verizons tariffs or in applicable agreements between Verizon and the carrier.

tImelINe

A round-up of the major stories in telecoms in the past month, as reported in our daily news service www.totaltele.com

Business
Vodafone buys C&W
Vodafone agreed to pay $1.04 billion for Cable & wireless worldwide, after would-be rival bidder Tata Communications decided against tabling an offer. The deal gives Vodafone a fixed network in the UK and an international cable network.

pledged to return a large portion of the proceeds to shareholders.

arbitration proceedings against the indian government over its retroactive tax proposal.

...and sells bulk to Facebook

The software giant later said it would sell 650 of the patents and applications to facebook for $550 million in cash.

between Vodafone, O2 and everything everywhere in the UK, highlighting competition concerns.

LightSquared buys some time

Us Lightsquared has settled an outstanding $56.25 million invoice with inmarsat and brokered a deal to suspend further payments under the pairs cooperation deal until 2014 to give it time to secure regulatory approvals for its troubled LTe network project.

FCC OKs spectrum deal

Us regulator the fCC gave the green light for the transfer of around $1 billion worth of spectrum from AT&T to T-Mobile UsA. The spectrum forms part of the breakup fee for AT&Ts failed takeover bid.

Indian instructions
etisalat and s Tel were ordered by the TrAi to keep their indian mobile operations open until their licences are officially cancelled on 7 september. etisalat, which shut down services on 31 March, said it would be unable to comply.

City Telecom sells telco assets

Hong Kongs City Telecom agreed to sell its telecoms operations in its home market, Canada and China to private equity-backed Metropolitan Light Co for HK$5.01 billion (Us$645 million) in order to focus on its TV broadcasting business.

Brazil sets $2bn auction price Microsoft invests in Nook

bookseller barnes & noble and Microsoft formed a joint venture in the e-books space. Microsoft will invest $300 million in the new unit, while barnes & noble will contribute its nook e-reader assets and digital books business. brazilian regulator Anatel announced it has set a minimum target price of 3.85 billion reais (Us$2 billion) for the auction of 2.5-GHz and 450-MHz spectrum due to start in June.

O2 gets Wallet out

UK mobile operator O2 launched m-payments service O2 wallet. it plans to upgrade the service to support nfC in future.

Trouble at Nokia
After a profit warning that sent its shares sharply downwards, nokia swung to a 1.3 billion operating loss in Q1, and announced accelerated cost cuts and plans to divest non-core assets.

Oi hikes capex
brazils Oi said it will invest 6 billion brazilian reais ($3.25 billion) in its operations this year, up from brL5 billion in 2011.

EU probes UK m-pay plan Voda threatens arbitration

Meanwhile, Vodafone threatened to launch international The european Commission opened an investigation into the proposed mobile wallet venture

EU has eye on OTE

34.70%

Facebooks $1bn deal

social network facebook agreed to pay around $1 billion in cash and shares for mobile photosharing application instagram.

India mobile net additions Feb 2012, operator shares

31.48% 24.50%

Share in net addition (Net Add. = 7,440,985)

13.08%

11.26%

10.67%

The european Commission has expressed concerns over the Greek governments golden share in OTe, which it says gives it too much power. Greece has two months to respond.

4.69%

3.12%

Etisalat -12.22%

1.17%

mTNL 0.47%

Loop 0.15%

AT&T announced the sale of a majority stake in its Yellow Pages business to private equity firm Cerberus Capital Management for $950 million. The Us telco will retain a 47% stake.

Stel 0%

AT&T sells Yellow Pages

Idea Uninor Bharti Reliance Vodafone

Tata -24.61%

1.54%

DT, KPN eye withdrawals

Deutsche Telekom is reportedly considering selling its Dutch unit next year, a move that could raise up to 3 billion. Meanwhile, KPn may offload belgian mobile operator base, which could be worth up to 1.8 billion.

Aircel

Videocon

Sistema

BSNL

HFCL

Source: TRAI

Microsoft buys $1bn of patents

AOL agreed to sell 900-plus patents and patent applications to Microsoft for $1.06 billion, and
may 2012 www.totaltele.com

New figures from the Telecom Regulatory Authority of India show that Idea Celullar captured the largest share of mobile market net customer additions in February, closely followed by market newcomer, Telenor-owned Uninor, which was one of the companies to have its GSm licences cancelled at the start of that month. Etisalat, at loggerheads with authorities overs its decision to close down its Indian mobile operations, unsurprisingly lost customers.

Google stock split

Google went ahead with a stock split that shores up key players
3

tImelINe

control of the company. Cofounders Larry Page (also CeO) and sergey brin each hold around 29% of voting rights, while chairman eric schmidt has 10%.

of reggeborgh assets due to competition concerns.

Chorus wins rural fibre deal

fixed infrastructure firm Chorus said it will build the majority of the second phase of the new Zealand governments rural broadband network.

Level 3 CDN boost

Level 3 has expanded the capacity of its global content delivery network to 5.6 Tbps, up from 2.15 Tbps in 2010, and has added new markets in the Americas and saudi Arabia to its footprint.

RIM restructure
research in Motion is exploring its restructuring options, including the sale of assets or licensing its operating system. it also previewed the blackberry 10 Os and launched a prototype device to attract developers.

PeOPLe
Vodas Combes joins SFR
Michel Combes, CeO of Vodafone europe, stepped down to become CeO Of french mobile operator sfr. He will take up his new post on 1 August.

Bharti launches LTE

bharti Airtel claimed to be indias first 4G operator when it launched services in Kolkata.

BeN WINs plaudIts despIte Q1 results

This is an industry that is truly challenged... and sometimes we create great value, but thats not always recognised, said AlcatelLucent chief executive ben Verwaayen in his acceptance speech for the CeO of the Year trophy at the 2012 world Vendor Awards. Verwaayen scooped the award having come top of a poll of Total Telecom readers. we are looking to innovation to deal with the questions of society, like green [issues], like the explosion of video, like the increasing demands of people around the world, he said. To be rewarded by your confidence is more than i could hope for. Confidence is something investors are lacking though. ALUs shares fell following the publication of its first-quarter results and are down over 10% since the start of the year and more than 75% over 12 months. Alcatel-Lucent reported a wider Q1 operating loss of 289 million and a 12% slide in revenues to 3.21 billion. Verwaayen is standing by the companys full-year operating margin and cash targets, but admits he will have a clearer view on profitability at the end of the current quarter.

Mobile phone decline

Global shipments of mobile phones declined 1.5% in the first quarter of 2012 to 398.4 million units, according to iDC. smartphone shipments were up 42% to 144.9 million.

LION2 goes live

france Telecom-backed submarine cable system LiOn2 connecting parts of Africa with international networkswas switched on.

NZ Telecom new CEO

Telecom Corp appointed simon Moutter as its new chief executive, effective 1 september. Moutter, currently CeO of Auckland international Airport, has previously held roles at Telecom, including that of COO.

Lack of luxury
nokia is reportedly in talks to sell its luxury mobile phone brand Vertu to private equity firm Permira for around 200 million.

StarHub begins LTE rollout

nokia siemens networks was contracted by starHub to roll out its LTe network in refarmed 1800-MHz spectrum and to modernise its GsM network.

Telenor chairman goes

Harald norvik will resign as chairman of Telenor after a disagreement with the norwegian trade and industry minister over the sale of TV2.

Big Apple
Apples share price rose to $644 pushing its market capitalisation above the $600 billion mark. The company added $100 billion to its market cap in 28 days of trading.

EvEv starts spectrum sale

everything everywhere has appointed Morgan stanley to help it sell a quarter of its 1800MHz spectrum, as required under rules governing the 2010 merger of Orange and T-Mobile UK.

Sony confirms job losses

Japans sony will cut 10,000 staff worldwide under a revival plan unveiled by new CeO Kaz Hirai.

neTWORKs
Softbank awards LTE deals
nokia siemens networks and ericsson separately announced contracts with Japans softbank to provide LTe network equipment. ericsson will roll out the network in major cities, while nsns base stations and microwave backhaul deal also includes an HsPA+ network expansion element.

Yahoo names consumer heads Vodafone on fire

A fire at a facility in rotterdam interrupted Vodafones service in the netherlands, affecting around a third of subscribers. sam shrauger and Mollie spilman will co-lead Yahoos new consumer commerce business, one of the three pillars of its new corporate structure.

Tele2 Dutch deal

The Dutch government awarded Tele2 a 120 million fixed telephony deal. KPn was also in the running for the deal.

New CFO for Tellabs

Tellabs appointed Andrew szafran from bPO firm APAC Customer services as its new finance chief.

KPN fibre buys

The Dutch cartel office gave KPn the go-ahead to acquire companies owned by reggefiber, but said it would investigate the telcos planned acquisition
4

...and Baltic LTE plan

Tele2 also contracted nokia siemens networks to roll out its LTe networks in estonia, Latvia and Lithuania.

Optus to shed jobs

Australias Optus said it will cut 750 jobs as part of a plan to restructure the business and boost efficiency.

www.totaltele.com may 2012

Together, Telcordia and Ericsson can help you realize value through unparalleled efficiency and customer experience with the industrys foremost capability in operations and business support systems. Because perfect moments begin with an outstanding experience. ericsson.com/telcordia

asia communication awards

Asia Communication Awards 2012

Celebrating the success of Asian telecoms, globally

The finalists...
Best Business Solution
Blackberry Lavastorm Analytics

Green Technology Award

Ericsson Huawei Smart Communications

Best Cloud Service

CITIC Telecom International CPC SingTel Verizon Global Wholesale

Innovation Award
Flytxt PCCW SingTel Smart Communications YTL Communications SingTel Smart Communications StarHub Telstra International Unitel Aegis Ericsson Huawei SingTel Avea Smart Communications Tulip Telecom U2opia Mobile Ciena Ericsson Huawei ZTE BT NTT Communications Pacnet Telstra International

Best Content Service

CSL Limited 3 Hong Kong PCCW StarHub Ufone Blackberry Comviva - Comviva mobiquity mTicketing Comviva - Comviva WebAxn Internet Apps SingTel Avea Batelco Celcom Axiata Berhad Roshan Smart Communications Syniverse Ufone

Operator of the Year

Best Mobile Strategy

Outsourcing Provider of the Year

Customer Service Initiative

Social Media Initiative

CTO of the Year

To be announced on the night

Vendor of the Year

Emerging Market Initiative

Comviva Ericsson Hutchison Global Communications Smart Communications Ufone ZTE

Wholesale Operator of the Year

www.asiacommsawards.com
Organised by: Founding Partner: Asia ICT Partner: Sponsored by:

Media Partner:

corporate serVIces

GoING GLOBAL
new breed of multinational enterprise is springing forth from the worlds emerging markets, bringing with it a potential revenue opportunity for the telecoms operators that can provide the connectivity and services required. Telcos be warned though: there are still challenges to be overcome, and smart investment strategies and tailored service portfolios are a must. in india alone 2,200 companies will become multinationals by 2024, with the country overtaking China in terms of the number of multinational companies (MnCs) by 2018, srinivasa Addepalli, sVP corporate strategy and communications, at indias Tata Communications said at a press and analyst event in March. There are multinationals coming from emerging markets that are going into developed markets and other emerging markets, he said, presenting the results of a new survey of business leaders in developed and emerging markets (see box). Tata Communicationswhich not only provides telecoms services to global businesses, but also forms part of an ambitious emerging market-based multinational conglomerate itselfis one of a number of telecoms operators keen to exploit this emerging market potential. There are emerging market companies that are going global... we are not the only one, said Tata Communications CeO Vinod Kumar. There were 100 emerging market companies in the fortune 500 in 2011, up

E M E R G I N G M A R K E T M U LT I N A T I O N A L S

Emerging market-based multinational companies will provide a growing revenue opportunity for telecoms operators over the next decade. By mary lennighan

from 20 in 1995, 61 of which are based in China, he added. emerging markets will account for Us$1.22 trillion, or 31.7%, of the total $3.86 trillion global iT spend (including consumer) in 2012, according to Gartner. The telecoms sector will make up 75%Us$920.6 billionof the emerging markets figure. At the top end there is good evidence that there are emerging MnCs that want services and want them fast, says Ovum principal analyst David Molony. These companies are typically regional today but probably using a national telecoms provider like China Telecom or embratel, for example, he says. right now they are muddling through, but in two to five years time they will be looking for global network support and thats where theres a big opportunity for international carriers, Molony predicts. emerging MnCs...will need global service support, network performance, account management and product expertise that not many emerging operators really have; how many can do global account management, as well as regional hosted VoiP and UC services? he asks. steve rathborne, VP global banking and financial markets, bT Asia Pacific, agrees that companies within his remit are used to working with local (domestic or regional) providers...[and] thats a challenge, for companies like bT. Part of [addressing that challenge] is

Emerging regions: IT spending (US$ billions)

2010 computing Hardware software It services telecommunications total It, emerging regions total It, Worldwide emerging markets It % of Worldwide total 128.8 28.7 77.6 785.3 2011 148.5 32.8 88.8 861.8 2012 168.2 36.7 98.3 920.6 2013 194.6 40.8 108.4 974.6 2014 226.3 45.3 120.2 2015 263.0 50.1 133.6 share(%) caGr (%) 2012 2011-2015 13.7 3.0 8.0 75.2 100.0 15.4 11.2 10.7 5.6 7.6 4.8

1,023.3 1,070.9

1,202.3 1,131.8 1,223.7 1,318.5 1,415.1 1,517.6 3,427.4 3,688.8 3,859.2 4,048.2 4,45.9 4,451.6 29.9 30.7 31.7 32.6 33.3 34.1

Source: Gartner (December 2011)

investments, says rathborne, although he notes that bT will not invest in rolling out infrastructure in local markets in Asia, but rather is partnering with local players. it may [also] require tailoring the portfolio, to address emerging market needs, rathborne explains. we continue to see increased global expansion not only by our multinational customers looking to grow in Latin America, but we also see more and more Latin American enterprises expanding within the region and beyond, says Mauro Cruzeiro, VP Latin America at Orange business services. The most important difference between emerging and developed markets is that in the former buyers and sellers are not easily or efficiently able to come together, he says, noting that the briC markets account for more than a quarter of the worlds land area and 40% of its population. enterprises from emerging markets have been facing difficult situations for many years in their home markets, such as complex regulatory environments, lack of infrastructure and security, [and] doing business in remote locations, says Cruzeiro. This experience may be an advantage when expanding to new markets where they will face similar obstacles. Orange recently boosted the capacity of its Latin American network by 10 times due to demand from multinational enterprise customers. The upgraded network accommodates customers needs for expanding high-speed broadband services, including MPLs, international ethernet link, and video services, such as telepresence, says Cruzeiro. At one level there are clear similarities, between the requirements of traditional MnCs and those based in emerging markets, says rathborne. for example, they are all interested in working with fewer partners on an international basis, he says. However, there
7

may 2012 www.totaltele.com

corporate serVIces

Where next? Companies speak out on global expansion plans

84% of companies in emerging markets are looking to other emerging markets for growth opportunities and best practice lessons, according to a survey of 1,600 business leaders in a variety of global markets conducted by Vanson Bourne, on behalf of Tata Communications, in January and February 2012. The percentage was even higher among Chinese executives, with 95% saying they are looking at other emerging markets. Everyone tries to emulate China, but Chinese executives are saying we want to learn from other emerging markets, says Srinivasa Addepalli, SVP corporate strategy and communications, at Tata Communications. The highest percentages of positive responses came from the business services, telecoms, IT and technology, manufacturing and financial services sectors. When asked whether their organisation has considered operating in emerging markets, 49% of respondents (from both developed and developing markets see below) said they were currently looking into it, while 38% already operate in those markets. Just 5% said they had considered such a move but decided against it. Those who already operate in emerging markets or are considering it plan to increase investment in those markets by an average of 36% over the next year. All respondents were asked which emerging markets they are considering expanding into. China, India, Brazil and Russia topped the list, in that order. When emerging market respondents only were asked which countries they felt offered the most growth opportunities, the top three were the same, but Russia only ranked eighth, behind South Africa, Malaysia, Taiwan and the UAE. Emerging market operators dont really think much beyond China, India and Brazil, Addepalli notes. When asked what factors would prevent their organisation from entering an emerging market, four in 10 respondents said the lack of a reliable communications infrastructure. Only political instability, corruption and economic uncertainty ranked higher. And when asked what characteristics they look for in a telecoms supplier, 54% said reliability, 34% security, and 33% experience across multiple markets. They want a provider that has global presence, says Addepalli.
1,600 respondents from companies from the Middle East, South Africa, Hong Kong, Singapore, India, China, France, Germany, the US and the UK took part in the survey. Half came from emerging markets (defined as the Middle East, South Africa, India and China) and half from developed markets.

are also key differences. in some cases, the company has particular expectations based on its home market dynamics. for example, rapid mobile growth in many emerging markets, means that the bringyour-own-device trend (see Total Telecom+, november 2011 issue) has been particularly prevalent in markets like China and india, he says. Meanwhile, Laurie bowen, president of sales and strategy at Tata Communications, charts the differences in the way companies based in india and in the UK, for example, operate. UK customers are thinking in a longterm way, she says, undertaking a process of selection a year before they need to make a decision. in india, i see urgency and i see speed, she says. The market is growing and changing very quickly: Youve got to be ready for that. Citing the results of an Ovum survey, Molony notes that when it comes to outsourced PbX and hosted iPT services, receptiveness was significantly [higher] for companies in Latin America, than
8

for Us firms, for example, he says. The survey also revealed a strong interest in managed services, despite the still limited availability of managed services in many emerging markets. emerging market companies want support, Molony says. furthermore, emerging market MnCs will look for the ability to remain fairly agile, says rathborne, explaining that the platforms and managed services bT can offer will enable them to enter new markets without risk of upfront capital investment in infrastructure. some companies, such as those operating in the financial services space, want to enter a market on a pilot basis, he says. rathborne names Hong Kong-based brokerage and investment group CLsA as an example of a company looking to broaden their geographic ambitions beyond Asia-Pacific. in December the firm awarded bT a 45 million contract to provide a managed voice, data and trading systems solution across 14 countries in the Asia-Pacific, the UK and the Us.

we need to be able to adapt quickly, and scale up and down across geographies in a way that maximises our ability to seize opportunities and manage risk, CLsA CiO Thiyagarajah rajah said at the time. we decided to gain the required efficiencies by consolidating our communications and network requirements with a single global partner. One thing telecoms operators looking to take advantage of the emerging market opportunity need to be aware of is that not all regions and not all market segments are equal. its clear the market opportunities are variedif AsiaPac is a $500 billion iCT opportunity, Africa is only $50 billionso service providers need to select their targets, says Molony. You need to be even more careful and distinctive about which sectors you target and what kind of services you bring to the market, he says. Pick the markets and make sure your solutions are really going to work for those sectors. Molony names the financial services industry as a good example. There are some huge players among the major briC banks, he notes. There are five big banks in China, and the fifth has just announced its plan to set up operations in Australia. They are looking to get into western markets, he says. bTs rathborne also highlights Chinas finance space. Until recently, bTs investment strategy was driven primarily by its existing customers footprint. emerging market customers [are] having a stronger influence now on where our investments need to be, says rathborne. increasingly the influence is coming also from the emerging MnCs, such as those in Chinas finance industry. They are following their Chinese corporate customers investments in Latin America, for example, he says. Meanwhile, Orange business services Cruzeiro has some words of advice for anyone looking to do business in Latin America. Those with an eye on success in this market must be flexible and ready to adapt to constantly-shifting landscapes, he says. n
www.totaltele.com may 2012

NetWorK strateGIes

NIcHe OPENING
Existing mobile operators are likely to snap up the bulk of the UKs LTE spectrum, but there could be an opportunity for a newcomer to sneak in. By andrew Williams
orthcoming spectrum auctions and the move to LTe could change the shape of the UK mobile market. fierce competition may limit the opportunities for new entrants to grab anything more than a small slice of the market, but a combination of limited spectrum availability and ever-increasing customer expectations could push the LTe sector in some unexpected directions. And the flexibility promised by wholesale business models will assume greater importance in the coming years. while we wouldnt necessarily expect new national entrants to come along, we may see further MVnOs [mobile virtual network operators] or regional players emerge offering 4G services to specific niche areas [including] city centres [and] remote villages, predicts robert Joyce, radio evolution manager at Telefonica O2 UK, referring to the auction of spectrum suitable for LTe services slated to get underway before the end of the year. we may see some new entrants bid for spectrum in the 2.6-GHz band, but they will only be able to acquire spectrum to roll out sub-nationally; there isnt enough spectrum available in the auction to support a new nationwide operator and the existing set of operators are likely to bid to acquire what spectrum there is, says Matthew Howett, practice leader, regulation and policy, at Ovum.

LT E O U T L O O K

However, Howett believes there will be some variation in the levels of speed and coverage the UKs mobile network operators will be able to offer with LTe. some will be better in rural areas, others better in cities, he says. in the same way that todays operators have made available their networks to MVnOs on a wholesale basis we are likely to see the same with 4G networks. Having launched an urban 4G trial in London in november, O2 is rigorously reviewing and testing 4G technology, network infrastructure and devices. However, while we are doing the hard work now, we will only launch 4G services when we deem the technology...to be mature enough, explains Joyce. As it stands, of course, most of the UKs mobile operators have no other option but to wait to launch LTe. regulator Ofcom plans to auction spectrum in the 800-MHz and 2.6-GHz bands in late 2012, although further delays in the process are a distinct possibility, as would-be bidders object to the complex terms the regulator has laid out. based on current spectrum holdings (see chart), only everything everywhere has the means to roll out LTe before the auction. The operator is waiting for regulatory clearance for its well-documented plan to deploy LTe in refarmed 1800MHz spectrum and, despite opposition

UK mobile retail revenues ( millions)

Total Access & UK fixed bundles calls services 6,415 6,582 638 563 On-net mobile calls 607 526 Off-net mobile calls 1,228 1,062 Intl calls 353 352 Other calls 1,355 1,422 Data services 1,731 2,038
Source: Ofcom

2010 2011

14,913 15,060

UK call & message volumes (millions of minutes/messages)

All calls UK fixed calls 31,999 31,397 On-net mobile calls 44,528 41,585 Off-net mobile calls 38,074 40,873 Intl calls 2,051 2,086 Calls when roaming 1,877 1,841 Other calls 6,419 5,778 SMS & mms msgs 129,012 151,212
Source: Ofcom

2010 2011

124,947 123,561

from rival players, Ofcom looks set to give it the green light. [if] we are granted the [LTe 1800] licence...in the spring, we will roll out 4G for britain on a small-scale this year, the company says. it is trialling LTe 1800 in various locations across the UK. everything everywhere also plans to bid in the spectrum auctions to ensure it has sufficient lower-frequency spectrum. it is running a joint LTe trial with bT wholesale in Cornwall to test LTe at 800 MHz as a means to deliver broadband to rural areas. The results have been extremely positive, proving fixed and mobile technologies can work together to offer a broadband delivery option with sufficient capacity and service for remote and rural areas using low frequency spectrum such as 800 MHz, it says. The telco is also working on a spectrum sale of its own. it has contracted Morgan stanley to advise on the sale of a quarter of its 1800-MHz spectrum, as required under the merger agreement between the UK arms of T-Mobile and Orange that created the enlarged company in 2010. whoever buys that spectrumexisting operator or market newcomercould also seek to use it for LTe services, just as everything everywhere is doing. Virgin Media, a company often named as a potential auction participant, has also been testing LTe. Late last year the company launched a trial service based on a small cells architecture in Londons Oxford street, using 2.6-GHz spectrum obtained via a temporary licence from Ofcom, and recently said it will expand to other cities. The trials delivered the expected results [of] high-speed broadband in a concentrated area, but [Virgins] involvement in the auctions is less assured, says steven Hartley, practice leader, telco strategy at Ovum. Theyd only be interested in spectrum if it were cheap. However, its a compelling notion for
www.totaltele.com may 2012

10

NetWorK strateGIes

them to want to leverage their broadband pedigree, he adds. indeed, Virgin Media has not ruled out the possibility of bidding for spectrum, but it has made it clear that it will only do so if the economics stack up. Kevin baughan, director at Virgin Media, told attendees at a Total Telecom breakfast event in March that the company would be interested in acquiring good value low-power spectrum. Access networks are expensive, he said: You go bust if you get it wrong. while Ofcom has yet to make any pricing announcements regarding the auction, analysts predictions for the total amount the UK will raise range from 2 billion to 4 billion.

UK spectrum holdings
spectrum band 900 mHz 1800 mHz 2100 mHz Vodafone 2x17.4 2x5.8 2x14.8 paired spectrum holdings in mHz o2 everything everywhere 2x17.4 2x5.8 2x10 0 2x45 2x20 3uK 0 0 2x14.6
Source: DCmS

Wholesale change
As the UKs established operators roll out trials, a new player in the LTe space has been quietly scaling up operations. PCCw-owned UK broadband (UKb) has turned on the first phase of a TD-LTe network in the London borough of southwark and will start commercial services this month. it is also building a hybrid LTe/microwave infrastructure in swindon, in partnership with Capita, swindon borough Councils iT service provider; customers are expected to start using this LTe service in July. UKb intends to offer the majority of its capacity on a wholesale, open-access basis, but will also sell capacity directly to big users such as local government. The mobile network operators (MnOs) will be free to buy capacity for offload, just as they do today with wifi, should they run short of capacity, says nicholas James, CeO at UKb. And James believes that is a likely scenario. Assuming a relatively even

distribution of spectrum from the forthcoming auction, no single MnO in the UK will have enough 4G spectrum to meet the needs of its customers in a few years time, he predicts. even with future spectrum allocations, usage will always outpace the availability of new spectrum, he says. for example, in Hong Kong average data usage has grown to 8 Gb per user, per month from 2 Gb over an 18-month period, driven by the availability of faster mobile networks, he says, adding that average data usage in the UK is currently around 0.6 Gb per month. UKb has enough spectrum capacity to deploy 6 x 20-MHz channels in any area of the UK, James says; the company holds 124 MHz of spectrum in the 3.5-GHz band, as well as 2 GHz of backhaul spectrum. However, after the auctions, James predicts that the other MnOs are likely to have only 1 x 20-MHz channel each at their disposal. Looking further ahead, LTe-Advanced, or true 4G, requires a minimum of a 20-MHz channel to deliver the full potential and capacity of LTe, James says. indeed, O2s experience suggests capacity could quickly become an issue. The UK trial...allowed us to study user behaviour on 4G and how it differs from 3G. because of the enhanced uplink speeds 4G offers, we see a much higher percentage of uplink data on the 4G network than we see on our 2G and 3G networks, with approximately one third

of traffic being in the uplink direction, Joyce says. Our heaviest 4G users [are] consuming over 200 Gigabytes of data per month. UKbs James predicts that no existing MnO can hope to satisfy the demands of its customers from its own spectrum holdings alone by 2016. Moreover, he says it is unlikely to make sense for all operators to deploy LTe everywhere. in rural areas for example, does it make sense to expect there to be four separate deployments of LTe to cover the same area? On top of this, customers are going to expect to get a great video or TV experience wherever they are and will not care how they receive it as long as any transition is invisible to them, he says. seamless domestic roaming between networks, including wifi, will be a must to meet consumer expectations and deploy LTe economically. by 2016 UKb expects roaming agreements to be in place with wholesale sources such as UKb and wifi [providers], he adds. There are a number of possible models, James says, including roaming agreements between operators, formal network and/or spectrum-sharing deals, or the emergence of separate wholesalers who will effectively take all of the roaming traffic. Although the full rollout of LTe and true 4G remains some years distant, there are clear signs that the development of a coherent LTe strategy is now a key objective for UK telcos. n

Advanced Mobile Gateway

The Next Generation of Automatic Vehicle Location Solutions

may 2012 www.totaltele.com

11

BUSINESS & FINANCE

VertIcally CHALLENGED
European telcos look to new verticals for growth, but they could still struggle to offset core revenue declines. By mary lennighan
hen not only everyone, but also everything is connected, surely telcos should benefit, notes the 11th annual telecoms report from Arthur D. Little, exane bnP Paribas. The report, published last month, focuses on the move to all-iP and the impact on european operators: This creates opportunities for telcos in adjacent markets such as automotive, energy and utilities, financial services, it says. but there is doubt over whether those opportunities will be enough to stem the decline in core revenues, and some say telcos will have to take a long-term view, dig deeper into adjacent markets and consider making acquisitions. europes incumbents have made no secret of their ambitions to enter new markets, and to generate a higher portion of their revenues from those markets. Deutsche Telekom in April brokered its latest deal in the energy space, while Telefonicas O2 targeted a new revenue opportunity with the launch of its UK m-payments service. And operators in Asia are making even greater strides. some telcos have lofty targets for these new revenue streams, but analysts show caution. we estimate potential revenues [from diversification] at 4%-9% of large telcos revenues by 2015, the ADL-exane report predicts. [That figure is]

NEW MARKETS

significant, but not enough to reverse the overall trend, the authors say, forecasting that core european telco revenues will decline by 1.8% per year through 2015. Telefonica groups together revenues from content, digital services, iCT solutions and vertical units as services beyond Connectivity. it aims to generate 9% of group revenues from these businesses by 2013, up from 5%or around 3 billionin 2010 and 6% in 2011. The spanish incumbents UK mobile unit is also getting in on the act, having launched mobile payment service O2 wallet last month. As operator revenues decline in the wake of iP-based voice and messaging, it is interesting to see O2 exploring more innovative revenue streams, noted fred Huet, managing director at Greenwich Consulting. Telekom Austria is turning to machineto-machine (M2M) communicationsfleet management, agriculture, healthcare and energy being key segmentsto drive new revenue streams. by 2015 it expects to have 5 million M2M connections across its footprint, a 50% market share, up from around 1 million in March. Deutsche Telekom, meanwhile, aims to book 1 billion in revenues from intelligent networks by 2015, which includes its operations in the energy, healthcare,

media and automotive sectors. The aim of our strategy is to expand Deutsche Telekom along the entire value chain and position the company as an open partner for other sectors, such as energy, software or the media, said Deutsche Telekom CeO ren Obermann when he unveiled the target in May 2010. in April the German telco announced a partnership with Motoren-AT, a maker of combined heat and power plants (CHPP), and sustainable energy firm GreenCom to provide small power-generators to residences that can be connected together like a virtual power plant. Deutsche Telekom generated 100 million from intelligent network solutions in 2011. we are seeing some good signs, especially at the healthcare area, Obermann said. but again, analysts are treading carefully. Deutsche Telekom has a number of competitive advantages in its home market that should bring success, but it remains to be seen whether there will be sufficient opportunities to meet [its 2015] target, warned Ovum principal analyst stuart ravens, late last year. The manufacturing and supply chain sector (which comprises fleet management, asset tracking, factory monitoring and similar) is also a key area for telcos and, according to a new study from

Revenue opportunities from diversification

Total telco revenues, bn in 2015e, believers case CDN 1.2 Cloud 2.0 Building automation 0.8 Smart metering 0.5 m-payment 1.4 Vending machines & payment terminals 0.4 Other 0.5

Outlook for incumbents revenues

110 100 90 ]80 70 60 50 40 30 20 10
43 2011 39 2015e Sceptics 39 2015e Believers 53 43 43

n mobile n Fixed line n Pay TV n Verticals

1 1 3 3 7 43

Connected cars 1.7

Fleet and freight telematics 2.0 Source: Arthur D. Little, Exane BNP Paribas estimates

Ebn

Source: Arthur D. Little, Exane BNP Paribas estimates

12

www.totaltele.com may 2012

BUSINESS & FINANCE

Machina research, will generate 13.5 billion globally in revenue in 2020 and will boast 175 million M2M connections, up from 71 million at the end of last year. 86% [of that revenue opportunity] is addressable by mobile network operators, and 24% is expected to go to them, says Matt Hatton, director at Machina research. fleet management will account for the lions share of the total, he says. The sector is proving particularly attractive to operators in emerging markets, where there are few established fleet management specialists, but in more developed markets telcos are looking to partner, Hatton says, highlighting the fleet management services partnership agreed between Telefonica and UK-based vehicle tracking system firm Masternaut in september 2011. some emerging market operators are showing european players the way when it comes to addressing new markets. its not just about generic connectivity anymore...you have to do more than

provide a network, says Laurie bowen, president of sales and strategy at indias Tata Communications, which is eyeing finance, healthcare, and the oil and gas industries. Tata offers managed ATM services, which include securing and maintaining cash dispensing machines and the related central switch infrastructure. According to bowen, it is considering taking advantage of a recent law change in india that allows non-banking entities to set up, own and operate white label ATMs, by rolling out Tata-branded cash dispensing machines. The reserve bank of india stipulates that, in addition to transaction fees, the white label operators will be permitted to earn extra revenue through advertisement [on ATM screens] and by offering value-added services. Meanwhile, the ADL-exane report names Japans nTT DoCoMo the global operator with the biggest announced ambitions in verticals. The telco aims to generate 20% of its revenuesor around

10 billionfrom new services by 2015. its key focuses are media/content, finance and commerce, and it has a range of partnership deals in place with companies in those sectors. The largest operators are already positioning themselves [for diversification], the report says. nevertheless, if they are to capitalise on these opportunities, operators will need to be more proactive about extending their value chain positions, potentially by acquiring early movers in the market. And Machinas Hatton agrees that mobile operators might well move from partnerships to acquisitions. Over time mobile operators might do the same thing as some did in the MVnO market: buy up those resellers or MVnOs who do a great job at acquiring subscribers in a rapidly growing market, he predicts. Theres a strong argument for bringing the expertise, and subscriber base, in-house. Theres not a lot of revenue in carrying traffic. n
re fo d 5 be an 7 ok ay to Bo M up 25 E V SA

2 Day Conference 12 13 June 2012, London

The Future of Mobile Communications Opportunities Created by M2M Finance and Strategy Networking the Future Developing Markets Monetising the Mobile

Peter Fitzgerald Director Google UK Yan Ou Managing Director China Telecom Europe Andrew Edison Regional VP (EMEA) AT&T Ronan Dunne CEO Telefnica UK Ltd Kim Bybjerg Head Northern Europe M2M Vodafone Rohit Talwar CEO Fast Future

SPEAKERS INCLUDE

For sponsorship opportunities email sales@totaltele.com View the conference agenda and speaker list at www.totaltele.com/wireless

www.totaltele.com/wireless
may 2012 www.totaltele.com 13

World Vendor Awards 2012

Rewarding the architects of the communications industry
26 April 2012 Jumeirah Carlton Tower, London www.worldvendorawards.com

The Winners
Best Cloud Solution
VOSS Solutions - Cloud Fulfilment

Best Support System

Best Content Solution

Alcatel-Lucent Digital Media Store

NetCracker Technology Telecom Operations and Management Solutions

Best Transport Solution

Best Emerging Market Product

Acision - Collect SMS

Syniverse - PRIME IPX Network Solution

Green Technology Initiative

ZTE - Green Converged C-RAN Solution

Best Fixed Access Product

ADTRAN - Ultra Broadband Ethernet

Outstanding Vendor of the Year

Best Mobile Network Product

Syniverse - Real-Time Intelligence Solution Portfolio

NetCracker Technology

Technology Foresight

Ericsson - Heterogeneous Network

Best Newcomer

fonYou Telecom - XtraLine

The Small Cells Award Best Brand

ZTE

ip.access - nanoConverge solution

Best Revenue Assurance Solution

Lavastorm Analytics The Lavastorm Analytics Platform

Best Specialist Vendor

Momac

Ceo Of The Year

Ben Verwaayen, Alcatel-Lucent

Organised by:

Sponsored by:

prIme NumBers

coNtacts Header sectIoN

$39BN BacKHaul Boost

Mobile network operators worldwide will spend a cumulative us$39 billion on mobile backhaul equipment in the five years from 2012 to 2016, according to new research from infonetics. The global mobile backhaul equipment market grew by 8% on-year to $7.4 billion in 2011, driven in large part by a surge in ethernet mobile backhaul router purchases in China, the company said. Around 55% of all mobile backhaul physical connections are on microwave, with dual TDM/ethernet microwave and packet-only microwave equipment together accounting for more than half of revenues. ericsson maintained its leadership position in the mobile backhaul market last year with a 22% share of revenues, but in the fourth quarter it was eclipsed by Chinas Huawei, which took the top spot for the first time.
$8.5

growth in global mobile capex in 2012 to US$111.1 billion. (ABI Research)

9%

edItorIal

4th Floor, Welken House, 10-11 Charterhouse Square, London EC1m 6EH +44 (0)20 7608 7030; newsdesk@totaltele.com

Global revenue in $US billions

Global mobile payment transactions will grow by 97% per annum over the next three years to reach a value of 591 billion by 2015, driven by growth in contactless payment technology, according to KPMG. The firm predicts that growing user demand for devicestablets and smartphonesequipped with near-field communication (nfC) technology will push contactless payments to take a 37% share of the m-payments market by 2015. for technology and telecoms companies, speed to market will be critical and how quickly they can respond will depend on the impact of regulation, KPMG notes.

coNtactless tecH drIVes m-paymeNts

total telecom mary lennighan Editor Nick Wood Assistant Editor michelle young Art Editor

mary.lennighan@totaltele.com +44 (0)20 7608 7069 nick.wood@totaltele.com +44 (0)20 7608 7046 m7chelle@gmail.com

adVertIsING

HEAD OFFICE, LONDON Nick carter Sales Director Jessica Gillies Sales manager

nick.carter@totaltele.com +44 (0)20 7608 7065 jessica.gillies@totaltele.com +44 (0)20 7608 7027

UNITED STATES AND CANADA KCS International T +1 717 397 7100 F +1 717 397 7800 Karen c smith-Kernc East KarenKCS@aol.com alan Kernc West & Canada AlanKCS@aol.com JAPAN Hiroko Kujime pacific Business +81-3-3661-6139

kujime-pbi@gol.com T +81-3-3661-6138 F

adVertIsING productIoN

Please forward all advertising material directly to: production@totaltele.com aleisha Bryant +44 (0) 7608 7042

$0

2012

2015 Source: Infonetics

Monthly mobile ARPU in Africa in Q4 2011 (Wireless Intelligence)

$8

marKetING

tally Judge marketing manager ruth clark marketing Executive

tally.judge@totaltele.com +44 (0)20 7608 7076 ruth.clark@totaltele.com +44 (0)20 7608 7047

eVeNts

charles Georgiou Project manager

charles.georgiou@totaltele.com +44 (0)20 7608 7071

In lost messaging revenues suffered by telcos in 2012 as a result of social messaging. (Ovum)

$23 billion

us smartpHoNe oWNersHIp HIts 50%

GloBal IptV arpu up

The number of iPTV subscribers worldwide reached almost 60 million at the end of 2011, fuelled by the largest ever number of quarterly net additions in Q4, according to Point Topic. net adds for the full year came in at close to 13 million, up from fewer than 12 million in 2010. weve [also] seen growth in the average revenue per user operators have managed to generate, the company said, noting that on a global basis ArPU grew by just under 2% last year, while total revenues increased by more than 30%. iPTV is really starting to find the sweet spot, the firm said.
may 2012 www.totaltele.com

Almost half of Us mobile subscribers own a smartphone, according to new data from nielsen. As of february, 49.7% of people with a mobile subscription had a smartphone, up from 36% a year earlier. More than two thirds of those who acquired a new mobile device in the last three months opted for a smartphone over a feature phone, nielsen said. Android continues to dominate when it comes to operating systems; 48% of all smartphone users have an Android device, 32% a phone based on Apples iOs and 12% blackberry. However, Apple is making up ground. Of the subscribers that acquired a smartphone in the past three months, 48% opted for Android, 43% for iOs and just 5% for blackberry.

suBscrIptIoN/customer serVIces

aleisha Bryant aleisha.bryant@terrapinn.com Customer Services Executive +44 (0) 7608 7042 or subscribe free at: www.subscription.co.uk/totaltelecom mANAGEmENT rob chambers Publisher Greg Hitchen Chief Executive Officer

rob.chambers@totaltele.com +44 (0)20 7608 7077 greg.hitchen@terrapinn.com

otHer puBlIcatIoNs
Online: www.totaltele.com Television: www.totaltele.tv

total telecom eVeNts

World communication awards www.worldcommsawards.com World Vendor awards www.worldvendorawards.com asia communication awards www.terrapinn.com/2011/asia total telecom World www.totaltele.com/world total telecom Wireless World www.totaltele.com/wireless Total Telecom+ is published by

n Smart phones n Feature phones

71%

70%

70%

66%

64%

62%

63%

59%

58%

57%

56%

56%

54%

52%

52% 48%

50%
2012. All rights reserved. Terrapinn Holdings Ltd registered office: 4th Floor Welken House, 10-11 Charterhouse Square, London EC1m 6EH 15

29%

30%

30%

35%

36%

38%

37%

37%

40%

41%

42%

43%

44%

44%

46%

48%

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12

Source: Nielsen

Total Telecom Finance Summit

Reshaping the financial landscape for the global telecommunications industry
10 11 October 2012 Grand Connaught Rooms, London
2 day conference for those involved in finance and investment for global telecommunications.

BOOK YOUR PLACE NOW!

www.totaltele.com/financesummit
Organised by: