US operators are gearing up to launch shared data price plans

Operators in the US are preparing to launch shared data plans, allowing multiple devices owned by an individual or members of a family to draw data from a single monthly allotment. The move is one of the first examples of innovation in data pricing, as operators struggle to reap dividends from increasing consumer data usage.

Mike Roberts, principal analyst and head of Americas at Informa Telecoms and Media, said that a precedent has already been set in the US with shared voice tarriffs already on the market, and it won’t be long before shared data becomes a key offering for all US carriers.

“We have heard Verizon say that it’s coming out with its data share plan in summer this year; AT&T has been less specific and said some time this year, they’re the dominant two carriers in the US. I haven’t heard it confirmed from the others but they are likely to introduce similar plans, as it will become one of the next phases in data pricing,” he said.

He added that, from the carriers’ point of view, the issue they need to address is how to move from individual to shared data plans in a way that would help, rather than hurt, data revenue margins.

“If they get it wrong, it could lead to people’s bills getting lower, which would not be good from a carrier point of view. The art for the carriers is to sell the appeal of shared plans as being more convenient and easier to manage. The head of the household could manage the one bill and have everyone on it and keep control without having to worry about multiple bills.”

He added that the operators that he’s spoken to about shared data plans admit that they face a tricky balancing act, as when they introduced family voice plans, voice usage went up quite significantly and operators do not want to encourage similar behaviour with data because data takes up more room on their networks than voice does.

“Verizon and AT&T are likely to go first – their prices are almost always at the premium end of the market. It may become more interesting when the second tier carriers – Sprint Nextel and T-Mobile USA come to market, because they tend to offer more competitive pricing,” he added.

T-Mobile is to cut 900 more jobs

Deutsche Telecom’s US mobile operation, T-Mobile USA, is to cut a further 900 jobs, following the unit’s failed $39bn purchase by AT&T late last year. The latest cuts come on top of around 1,900 job losses announced earlier this year.

Last week T-Mobile USA said it has seen revenue and profit deteriorate over the past year, and is now stepping up its efforts in the market, bolstered by the rollout of an LTE network.

Revenue for the US operation during the first quarter of 2012 increased two per cent year-on-year to reach €3.8bn, while adjusted EBITDA grew 12.9 per cent to €1bn. However, this was in part due to exchange rate gains made by the US dollar. In local currency, revenue decreased by 2.3 per cent, although adjusted EBITDA increased by eight per cent.

“Relaunching the T-Mobile brand on the US market and significantly enlarging the sales network in the country are important steps in implementing the strategy,” the firm said in its statement. “In addition, initiatives for cutting costs and reducing churn are having a positive impact. There was a 0.1 percentage point improvement year-on-year in branded contract customer churn, representing a 0.5 per cent improvement on the fourth quarter.”

So it looks like the cost cutting initiatives are set to continue. Most of the recently announced job cuts are to come from the closure and consolidation of call centres.

“We are restructuring the organization and optimizing operations so that we can make critical decisions better and faster in response to market and customer demands. Further, by reducing our cost structure and streamlining operations, T-Mobile will be able to invest in areas where we anticipate the strongest return: modernizing our 4G network; aggressively pursuing the B2B segment; and re-launching our brand,” the company said.

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LightSquared has filed for bankruptcy protection in the US

US wholesale player LightSquared has filed for Chapter 11 bankruptcy protection amid efforts to resolve regulatory issues that have prevented it from launching its satellite service.

The carrier has been planning to build a ground-based LTE network, supported by satellites, but the US Federal Communications Commission (FCC) blocked the project, stating that the proposed mobile broadband network will impact GPS services and that there is no practical way to mitigate the potential interference.

It has now commenced “voluntarily reorganisation cases under Chapter 11 of the US Bankruptcy Code” and will also file a recognition proceeding in Canada.

“The filing was necessary to preserve the value of our business and to ensure continued operations. The voluntary Chapter 11 filing is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network,” said Marc Montagner, interim co-chief operating officer and chief financial officer of LightSquared.

“All of our efforts are focused on concluding this process in an efficient and successful manner.”

The filing was made in the U.S. Bankruptcy Court for the Southern District of New York and the carrier said it intends to work with all key stakeholders to conduct its restructuring process and exit Chapter 11 as quickly as possible. Its current management team will continue to lead the company throughout this process.

“The company fully expects to continue normal operations throughout this process,” the firm said in a statement. “All LightSquared distribution partners and customers, including public safety, emergency response, government and military users of LightSquared’s satellite-based communications services can continue to rely on LightSquared to provide them with mission critical communications services.”

Dimitris Mavrakis, principal analyst – networks, at Informa Telecoms and Media, believes that future looks bleak for LightSquared.

“LightSquared’s plan was very optimistic from the start. From deployment strategy to business model, LightSquared would be an interesting case study, but very different than anything else in the mobile market today,” he said.

“In my opinion, LightSquared is unlikely to overcome the challenges its facing now, including interference issues and also lack of investor trust especially towards its CEO, Phillip Falcone. It is not entirely clear what will happen with LightSquared spectrum, but if the company folds, it’s very likely that it may be leased to a third party satellite provider.” 

LightSquared had recently defaulted on a payment of $56.25m to British satellite firm, although it eventually made the payment and struck a deal with Inmarsat to suspend further payments until 2014. It also recently announced plans to cut 45 per cent of its staff in order to save money, and even hired well-known solicitor Theodore Olsen in a bid to save the project.

T-Mobile USA's financials are recovering following the breakdown of its proposed takeover

Deutsche Telekom’s results for the first quarter of the year show a decline in net profit of more than 50 per cent year on year and a 1.1 per cent reduction in revenue.

Net profit fell from €480m to €238m for the first quarter of 2012, while revenue fell to €14.4bn. Adjusted net profit fell 17 per cent year-on-year to €581m.

Despite the scale of the decline, CEO René Obermann hailed it as a “satisfying” quarter, with the group claiming that its “most important KPIs” saw a positive trend. Adjusted EBITDA remained stable at € 4.5bn in the quarter remained and its adjusted EDITDA margin stood at 31 per cent, 0.4 per cent higher than the same period a year earlier.

The firm’s US operation, T-Mobile USA, has seen revenue and profit deteriorate over the past year and was the subject of a recently failed takeover from rival AT&T. Following the breakdown of that takeover, it received €3bn in cash and a mass of AWS spectrum and is now stepping up its efforts in the market, the firm said. It added that  T-Mobile USA is on schedule to implement its new LTE network  thanks to the transfer of spectrum  and is making preparations to refarm its existing spectrum.

Revenue for the US operation increased two per cent year-on-year for the quarter, to reach €3.8bn, while adjusted EBITDA grew 12.9 per cent to €1bn. However, this was in part due to exchange rate gains made by the US dollar. In local currency, revenue decreased by 2.3 per cent, although adjusted EBITDA increased by eight per cent.

T-Mobile USA also recorded a strong adjusted EBITDA margin of 25.6 per cent, a year-on-year increase of 2.5 per cent, and gained new customers. Growth in prepay business saw the total number of customers up by 187,000 in the first quarter. The number of branded contract customers, excluding machine-to-machine, on the other hand, was down by 510,000.

“Relaunching the T-Mobile brand on the US market and significantly enlarging the sales network in the country are important steps in implementing the strategy,” the firm said in its statement.

“In addition, initiatives for cutting costs and reducing churn are having a positive impact. There was a 0.1 percentage point improvement year-on-year in branded contract customer churn, representing a 0.5 per cent improvement on the fourth quarter.”

The interest of the Mexican giant in investing in KPN comes at a time when European operators are struggling. In recent months, we have seen emerging players investing in European markets, such as Russian operator Vimpelcom acquiring Italian assets, and Egyptian magnate Sawiris acquiring stakes in Telekom Austria. Like many of its European peers, KPN is a troubled company which makes it a good acquisition target for a buyer looking to turn around its business. In 1Q12, KPN saw its shares at their lowest level since June 2005 and had to cut the shareholders’ dividends. For cash-rich America Movil, this situation is an attractive opportunity to extend its reach. The Mexican giant has a history of investing in troubled regional operators to exploit synergies and turn them into successful companies. To date, America Movil has concentrated all its efforts in the high-growth emerging Latin American markets, but it has now become a good time to invest in the mature European markets.

From a competitive standpoint, America Movil’s biggest rival Telefonica already benefits from a presence in a variety of diverse markets, including its home market Spain, the UK, Germany and other European markets as well as Latin America. By investing in KPN, America Movil would go head to head with Telefonica beyond Latin America and into Europe. As European economies are struggling, Latin America remains the major strategic focus for both groups, but it is important for America Movil to build a presence beyond its core markets.

Bringing the know-how of an innovative European player such as KPN will also be an important asset for America Movil in terms of innovation. Telefonica has already been able to export innovative services from Europe to Latin America, for example cloud services for the highly strategic enterprise market. America Movil’s fixed arm Telmex has struggled to bring innovation to market and could certainly benefit from KPN’s know-how. Ultimately, bringing innovation means increasing the value of the customer base through the uptake of mobile data services which will boost the operator’s financial performance. This is a key objective for a player like America Movil as it is operating in markets with predominantly prepaid user bases with significantly lower ARPU and EBITDA than mature markets.

Nonetheless, we are not in a “gold rush situation” in Europe and not all acquisitions will eventually go through. What Europe brings to the emerging market operators is primarily know-how, but also the opportunity for industrial synergies and implementing best practices including cost-cutting.

America Movil is looking to increase the scale of its European operations

Latin-American operator group America Movil has tendered a bid to take its stake in Dutch fixed-line and mobile operator KPN from 4.8 per cent to 28 per cent, as it aims to expand its geographic reach.

The firm, bankrolled by billionaire Carlos Slim, is currently the third largest operator group in the world, in terms of subscriptions, according to Informa’s World Cellular Information Service (WCIS). The firm has over 220 million subscribers in the Americas, with a further 20 million in the US, and the move signals the group’s intentions to increase the scale of its operations in Europe.

According to Dario Talmesio, principal analyst at Informa Telecoms and Media, the move is symptomatic of a difficult landscape facing telcos in Europe.

“It’s quite obvious we are in a very uncertain situation in Europe, in terms of stability and economic prospects in the region,” he said. “In addition, the regulator environment is hostile to European telcos – we have a fragmented and very crowded market place and we do not have an industrial policy that is favouring European companies. This results in the weakening of European telcos at home, which makes them quite an easy acquisition target.”

He added that the research firm is seeing the balance of power shifting away from established European telcos in favour of firms from emerging markets. Vimpelcom, founded in Russia, recently acquired Italian assets, Egypt’s telecoms magnate Naguib Sawiris recently acquired Austrian assets, Hong Kong’s Hutchison Whampoa is bidding for Eircom in Ireland and Orange in Austria, and now America Movil is eyeing a stake in Netherlands, Germany and Belgium by increasing its stake in KPN.

Daniele Tricarico, senior analyst for the LatAm region at Informa, explained that America Movil has typically targeted companies that have been struggling in the region, most notably operator BSE in Brazil from US telco BellSouth, which it used to launch its Claro brand, now the biggest mobile operator brand in the region. He warned that the operator’s expansion often leads to job cuts.

“When America Movil has acquired operations in the past, headcount was one of the things that was affected immediately. America Movil is known in Latin America for being very efficient in terms of headcount, it has quite a small number of people working for it, compared to the likes of Telefonica,” said Tricarico.

He added that although America Movil has been purely a Latin American player until now, with exception of its TracFone MVNO in the US, this move is not entirely a surprise as the operator participated in a tender process for Telecoms Serbia in December last year.

Tricarico also said that increasing the scope of its business in Europe would also improve innovation within the business, and explained that Latin America is a prepaid-dominated market and it could benefit from a moving into Europe would help create more postpaid users.

“America Movil has been struggling to increase the value of its customers and this acquisition is motivated by bringing innovation and knowledge from a European operator such as KPN. It could also improve their financial figures, as EBITDA margins are lower in Latin America due to this focus on prepaid,” said Tricarico.

The company’s stock price had been in decline since late last week

The chief executive officer of Brazilian carrier TIM Participações – part of the Telecom Italia group – has stepped down effective immediately. Luca Luciani will be replaced by TIM’s group chief financial officer Andrea Mangoni in the short term.

TIM did not give a reason for Luciani’s departure, but the company’s stock price has been in decline since late last week, when Italian press reports speculated on the executive’s future.

Luciani had been named, but not charged, in a 2011 probe into allegations that Telecom Italia’s subscriber numbers were artificially inflated. Last year, Luciani worked at the parent company in Italy during a time when allegations were levelled at TIM that the company had issued around 1.5 million artificial SIM cards to inflate its subscriber numbers.

The probe has since ended, but the Italian press is now speculating that a prosecution may be imminent.

Cisco intends to acquire Truviso

Cisco has confirmed that it is planning to acquire privately-held Californian firm Truviso, a provider of network data analysis and reporting software, for an undisclosed amount.

Truviso’s continuous query technology, with its analyse-first, store-later capability, is expected to enable Cisco to provide instant access and visibility into network use and services, help increase operational efficiencies and drive new revenue streams for customers.

The acquisition of Truviso is subject to various standard closing conditions and is expected to be complete in the fourth quarter of Cisco’s fiscal year 2012. The Truviso team will be integrated into the Cisco Network Management Technology Group.

Cisco recently posted record revenues and profits for the quarterly period which ended January 28th, 2012, which CEO John Chambers attributed to a three-year plan to drive earnings faster than revenue, as well as the earlier-than-planned achievement of a billion dollar cut in expenses, and continued innovation.

Jaymee Johnson, head of marketing for Isis

US operators AT&T, Verizon and T-Mobile have created mobile wallet joint venture Isis, which is set to launch in the summer of 2012 in Austin, Texas and the Utah state capital, Salt Lake City. Jaymee Johnson, head of marketing for Isis, provides an overview of the group’s activities.

Q: What brought three competing operators together to form a mobile payments joint venture?

There was a recognition that, while the fundamental building  blocks for mobile commerce were in place, we were lacking the business system to pull a massively complex ecosystem together, and to do that at scale.

There are three elements that you need at scale. First is the consumer base, and with three of the four largest carriers we have 230 million customers in the US, which is 75 per cent of the market. Then we needed the banks and card issuers to come onboard. We’ve announced the first three—Chase, Capital One and Barclaycard—and they have more than 100 million cardholders, so they’ve got scale too.

The third element, which we’re working on now, is the merchant community. We recently announced that the four leading PoS terminal manufacturers in the US, Verifone, Ingenico, Vivotech and Equinox, are now including the Isis mobile commerce application in all of their terminals. Scale is important because it provides certainty to other players in the ecosystem.

Q: Is Isis focusing primarily on larger retailers?

We’ll be starting with the existing footprint of merchant acceptance, the ones that already have contactless solutions deployed. Beyond that we’re directly engaging with the tier-two and –three merchants through merchant acquirers, and also working at a very local level; coffee shops and dry cleaners. The idea is that consumer will be able to pay with their phone at the places they shop at on a daily basis—the every day spend verticals such as gas stations, grocery and convenience stores and pharmacies.

Q: Isis has adjusted its original strategy to deploy a payment network and now opted not to pursue interchange fees. Is this because the margins are too low?

Well, the per-swipe fee is low but there are a lot of transactions. But the banks are our customers. We provide a service to banks that allows them to securely provision and store their existing payment cards in the phone and we provide a customised and branded environment to those banks. It’s an extension of the existing relationship between the bank and the consumer and the banks pay us for that privilege.

Our second revenue stream is built around commerce events. We provide the ability for a merchant to deploy their loyalty programmes in the phones, to offer coupons and track the redemption of them. It’s much more like a direct response advertising model.

There is also a stored value element to the service. Why make this available if users are able to link Isis wallets to their bank accounts?

That does a couple of things for us. First there will be incentive dollars loaded onto that stored value account, so users can try the mobile wallet for free. The other useful thing about it is that it can be funded by any source. So if you bank at a small credit union or regional bank, which is not an Isis partner, here’s a way to tie that account into your mobile wallet.

Q: What device support does Isis have?

We will be supported on IOS, Android and Blackberry. And we have announced commitments and participation form six of the leading global OEMs, the biggest players in the world outside of Nokia and Apple. Those devices will be widely available when we hit market this summer.

Apple hasn’t committed to a timeline for NFC in the iPhone. So there is a sleeve provided by a third party that provides the NFC link through an external antenna.

Q: What learning has Isis taken from other mobile wallet projects around the world?

We were certainly aware of both what has been going on abroad and what hasn’t been going on abroad. NFC and mobile payments have been most successful in Asia, in markets that have some unique elements. They tend to be fairly concentrated so in Japan or South Korea, by virtue of one or two of the existing telecom providers leading the way, they were able to achieve the scale necessary for the industry to take off. So the importance of scale and magnitude is really at the heart of this collection of competitors coming together. There is no other way around it.

The other insight, and again this is true in Asia, was the importance of transit as another NFC use case. That is the reason we’re in Salt Lake City as one of our first markets. The existing Salt Lake transit system is system-wide, open loop contactless enabled. If you have a contactless bank card you can tap to ride. They’re the first in the US to have this, so it means you can do it with your phone too.

Q: Do you think that the Isis model is something that could be exported?

There are many initiatives around the world that are a collection of operators in one way or another. Europe is rife with them, there’s something in pretty much every market. Our focus is really on the US but fundamentally this is an industry that benefits from scale and the standardisation that comes from scale.

There are elements of the model that may be exportable, certainly technical standards around the handset, and around the point of sale interaction. Those are all exportable standards and it makes a lot of sense for the industry on a global basis to have a set of standards because it benefits everyone.

Europe dominates the global broadband top 10 connectivity chart, but South Korea leads

Countries in Europe enjoy the fastest average broadband connectivity globally, according to a report from global content delivery network Akamai. Details of the report, which is scheduled to appear later this week and revealed by GigaOm, defines a high-speed broadband connection as one that connected to the Akamai network in excess of 5Mbps.

The report shows that seven of the top 10 fastest connected countries are European, with the Netherlands the most connected of that group high-speed broadband penetration of 67 per cent. Others in the top 10 were Belguim, Switzerland, Latvia, Romania, Czech Republic and Denmark. However, the Dutch have to play second fiddle to South Koreas, which tops the overall list with a incredible high-speed broadband penetration figure of 83 per cent. Japan and Hong Kong comes in at 60 per cent and 57 per cent respectively, and the United States comes in 12th with 44 per cent.

The UK does not trouble the top 10 list and we await the full report to discover its placing. However, based on the report, the UK government’s stated aim of bringing of at least 2Mbps to every home and business appears to be decidedly under ambitious.

The report also focuses on the 100 fastest connected cities and the average speeds of the fastest cities were between 21.8Mbps and 8.5Mbs. The overall average was brought up by the peak speeds of the South Korean cities of Taejon and Taegu, which recorded speeds of 59.2Mbps and 56.7Mbps respectively.

The Broadband ip&TV Asia 2012 conference is taking place on the 15th-16th May 2012, KL Convention Centre, Kuala Lumpur, Malaysia. Go to the website now to register your interest.