The deals marks Huawei's first such UK deal

Chinese equipment vendor Huawei said Monday that it has won a five-year agreement from Telefónica’s UK operation, O2, to manage the operator’s multi vendor core transmission and mobile access network.

Under the deal Huawei will be responsible for planning and managing the core transmission, mobile access and core network build, marking the first major managed services deal for the Chinese firm in the UK.

Huawei already works with Telefónica in a number of markets and this latest deal extends the companies’ relationship in the UK. The deal may come as a disappointment to Ericsson, which has a long-standing agreement with Telefónica to supply field maintenance services, but had also undertaken a core network modernisation initiative on some parts of O2’s UK network last year. As a result, Huawei will likely be managing a lot of Ericsson kit.

The agreement will see 56 permanent roles transfer from Telefónica UK to work for Huawei’s managed services business.  A further 62 contractor roles will also be transferring alongside the permanent employees.

Huawei is Platinum Sponsor at the 2012 Managed Services World Congress, taking place in Berlin on the 18-19th September 2012. http://www.managedservices-world.com/home/home

Huawei will look after China Unicom's Shanghai network

Chinese vendor Huawei has scored a managed services deal with local carrier China Unicom, the company said Tuesday.

Huawei will work with Unicom subsidiary Shanghai Unicom, providing managed services for more than 50 per cent of Shanghai Unicom’s base station sites over 11 districts of Shanghai.

With a population of over 23 million, Shanghai is one of the most populous cities in the world and Huawei will provide preventive, planned and corrective maintenance services for Unicom’s network.

China Unicom is the country’s second largest operator with 172 million subscribers at the end of March. The vast majority of those are on GSM but almost 17.5 million are on WCDMA 3G subscriptions.

Managed services is an area of increasing importance for telecoms vendors as their reliance on kit sales becomes unsustainable. While leading vendors such as Ericsson have established significant services businesses, one of the criticisms levelled at newer players like Huawei and ZTE is that their services offering is under developed.

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According to projections from Informa Telecoms & Media, mobile telecom revenues will reach $1.1tn by 2015 with 40 per cent of this figure ($440bn) coming from data services. The pressure on carriers to maximise returns from data revenues is therefore becoming intense.

Research commissioned by Motricity, a leading mobile marketing, advertising and data services company, reflects the findings of a survey run by Informa, which suggests that a growing number of carriers are interested in moving to a managed service model for data offerings.

From the results of a global online survey sent out to mobile, fixed and converged carriers globally, and interviews conducted with carriers in the Asia Pacific region, many operators see the managed service model as a way of managing risk effectively and being able to focus more on their core business. Risk management comes from limiting the upfront investment in infrastructure and being able to launch services more quickly. With the core competence of carriers not necessarily the development, delivery and management of services and applications, outsourcing such services can also give the operator more time to implement more directly customer-facing activities.

Key survey findings include:

• Third-party management of mobile data services such as merchandising, marketing, advertising, business intelligence, segmentation and commerce solutions will enable operators to expand their subscriber service offering.
• Top priorities for managed services include specialist services such as web discovery, advertising, content management and hosting/data-centre management.

• When asked which data services were most important to carrier revenues currently, the results suggested messaging (35 per cent) is perceived as the key driver, ahead of mobile internet (17 per cent) and music (14 per cent). The situation changes when asked what would be the most important data service in two years, with mobile internet (29 per cent) and social networking (28 per cent) overtaking messaging (26 per cent) as the key driver for revenue growth.
• The pressing need for innovation is critical for emerging markets due to the increased competitive, investor and subscriber demands placed on operators to manage churn, expand margins and improve the user experience.  In the Asia Pacific region, 82 per cent of respondents either currently have a relationship with a managed service supplier around their data offerings or plan to do so within the next three years. Carriers from this region expressed the most critical functions for operator support as including content provider management, portal management and business intelligence leading to more strategic market segmentation.

In the course of carrying out this research, it was interesting to note a common thread from operators – the need to launch new services within increasingly rapid deployment cycles but at the same time managing opex tightly. Quite a trick to pull off.  And one that makes the potential selection and management of a managed service supplier an even more strategic decision.

The deal represents a first for Ericsson as it moves into IT consultancy as a managed service

Swedish vendor Ericsson has announced a deal with 3 Italia that will see it take on responsibility for the modernisation and management of the operator’s data centre and IT infrastructure. The deal builds on a managed services deal covering the operator’s network, which was struck in 2005 and extended until 2014 in a further announcement last year.

While Ericsson is the market leader in managed services for mobile networks, this deal represents the firm’s first move into managing a carrier’s IT infrastructure.

Ericsson said the deal covers data centre consolidation with hardware modernization, upgrade and  consolidation of 3 Italia’s software application domains, as well as  transformation of operations and  business support systems, including billing and  customer relationship management.

3 Italia’s  three existing data centres will be consolidated into two, located in Rome and Milan. This, combined with the introduction of a new virtualized software  architecture, housing all of 3 Italia’s applications and allowing the operator  to use its total IT infrastructure more efficiently, means the operator can  lower its energy and IT hardware and software costs by 40 and 50 percent  respectively, Ericsson said.

“With the relationship we already  have today, we are confident Ericsson will contribute in the same positive way  as an IT consultant as they have as a network infrastructure  supplier,” said Antonella Ambriola, CTO 3 Italia.

“By strengthening our offering within the IT business we move  into an arena where operators previously have not seen us as a natural  partner,” added Valter D’Avino, head of Managed Services,  Ericsson.

IBM will manage the computing technology and services that power Bharti’s mobile communications networks in Africa

Information technology giant IBM made its presence known in the African telecoms market on Friday, having scored a deal with Bharti Airtel to manage the carrier’s technology and services across 16 countries and around 72 million users.

Under the terms of the sweeping ten year collaboration, IBM will manage the computing technology and services that power Bharti’s mobile communications networks, with the aim of lowering the barrier to entry for owning mobile devices in order to drive economic gain.

At the announcement of the deal, IBM chairman and CEO Samuel Palmisano and Bharti chairman and managing director, Sunil Mittal, said that on a continent where mobile communication forms the backbone for commerce (the World Bank estimates that 77 per cent of Africans do not have access to traditional financial services), every ten per cent jump in mobile penetration is estimated to drive a 1.2 per cent gain in gross domestic product (GDP).

The former owner of the African operations in question, Zain, was unable to turn a profit in this environment but Bharti has dealt with similar constraints in India and seeks to apply its “minute factory” model to the new operations.

According to analyst firm IDC, which commented on the deal, this model involves driving OPEX as low as possible while encouraging high network utilisation. Bharti, which intends to bring its African operations under the Airtel banner in October, is fighting on two fronts: First, it needs to shore up network quality, rural coverage, and customer care in advance of the rebranding. Second, it needs to cut debt and operating shortfalls to avoid credit downgrades on top of the ones it incurred when the acquisition closed.

Andy Hicks, research manager at IDC, notes that Airtel hopes to mitigate the debt problem by offloading its cell towers to corporate cousin Bharti Infratel. While its agreement with IBM is designed to address the running cost problem by consolidating and outsourcing IT functions. IBM has had a similar agreement in place with Airtel India since 2004 but the 16 jurisdictions of the African deal will present different challenges than its Indian project, most importantly regulatory fragmentation, a higher level of legacy infrastructure, and the desire of country governments to retain control and keep local jobs. “The ten-year contract term is necessary for IBM to earn a return on this massive investment,” Hicks said.

Hans Vestberg, Ericsson's CEO

Swedish vendor Ericsson, the leading supplier of infrastructure and services to the mobile operator community, has reported second quarter profit of SEK2bn (US$274m), up from SEK800m for the same period in 2009. But despite the surge in income, the company’s share price took a five per cent tumble in response to the announcement as the numbers fell some way short of analyst expectations.

Group sales were down eight per cent at SEK48bn from SEK52.1bn, with network sales down 12 per cent at SEK25.5bn. Revenues in the global services unit were flat at SEK20bn, although the profession services unit, which includes the firm’s managed services activities, saw sales increase five per cent to SEK14.8bn

“Operators showed a continued good demand for mobile broadband driven by smartphone and laptop usage,” said Ericsson CEO Hans Vestberg. “Sales were, however, impacted by continued industry component shortages and supply chain bottlenecks. We estimate that this had a negative impact on our sales in the quarter by SEK 3-4 b.”

The results reflected a stronger performance from the firm at the higher end of the market. Unit sales were down year on year from 13.8 million to 11 million (up sequentially from 10.5 million) but average selling price was up 31 per cent on Q109 to €160.  Gross margin more than doubled over the same period to 28 per cent, but was down three per cent on the first quarter of 2010. Sony Ericsson said the drop in unit shipments reflected a cull in the firm’s product portfolio.

The China Mobile Hebei deal is Ericsson's largest managed services contract in China to date

Sweden’s Ericsson has won a substantial managed services contract from China Mobile, on the home turf of its leading competitor in the infrastructure supply business, Huawei. The deal will see Ericsson providing field maintenance services for China Mobile’s operation in the Hebei province in Northern China.

Ericsson said that the deal, which will see the firm responsible for 22,000 GSM/TD-SCDMA base station sites in the regional network, which serves 35 million customers, represents the largest managed services win for the firm in China to date. The contract covers a three-year period and Ericsson has already begun to deliver services, the Swedish firm said.

Mats H Olsson, president of Ericsson China & North East Asia, said: “This shows China Mobile Hebei’s trust in Ericsson’s industry leading managed services capabilities and its willingness to be a strategic partner with Ericsson in China. We are confident of providing the best-in-class services to China Mobile Hebei and to help it capture new opportunities in this challenging and competitive marketplace.”

As Huawei and, to a lesser degree, ZTE strengthen their position in the global infrastructure supply market, incumbent Western vendors are  increasingly looking to their services arms to drive new and more stable revenue streams. Ericsson derives one third of its revenue from managed services. Strong managed plays offerings are still missing from the portfolios of the Chinese vendors and both have made the development of such plays a strategic priority.

China is a vitally important market for Ericsson, which won its first business in the market in 1892. In May the firm held its annual Business Innovation Forum in Shanghai, where Olsson described China as “already an ICT superpower”. Government involvement in improving the country’s communications infrastructure will be essential, Olsson said, citing RMB400bn that the Chinese Government has set aside for a stimulus package through to 2011. “China is becoming more and more influential in shaping the global communications market, with standards like TD-SCDMA and TD-LTE,” he said.

Informa forecasts that China will be home to 840 million mobile subscribers by the end of 2010, hitting one billion by 2012.

Zain Kuwait outsources network to Motorola

US vendor Motorola said this week that it has scored a contract with Zain Kuwait, to operate and manage the carrier’s 3G network.

Under the three year agreement, Motorola, in association with Zain Kuwait’s internal team, will handle the design, planning, support and optimization to provide high quality customer experiences as well as spearhead the optimisation of the operator’s existing 2G network.

“Motorola’s management and technical expertise will enable us to build a better network for Zain customers, while improving our operating margins and increasing productivity,” said Khaled Al Hajeri, CEO of Zain Kuwait.

As Informa Telecoms & Media’s Middle East specialist, Matthew Reed, has noted: “As the Middle East’s mobile markets mature, and with the impact of the recession still raw, many of the region’s operators are becoming more cost-conscious. Fortunately, the portfolios of international operations that the bigger players have built up over the recent few years present substantial opportunities for achieving economies of scale.”

One way international operators like Zain are tackling this is to create roaming services that take advantage of their presence in a number of countries. Zain has done the most in this area with its One Network roaming scheme, but the operator has also inked a series of managed services agreements, covering variously its networks in Iraq, Nigeria and East Africa some of which are with Motorola.

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Ben Verwaayen, CEO, Alcatel Lucent, has been visiting Telecom New Zealand over the past week

Reports from New Zealand suggest that Franco-US vendor Alcatel Lucent (ALU) is to award a compensation payment of NZ$100m (US$72.8m) to incumbent player Telecom over the poor performance of the ‘XT’ 3G network it delivered to the carrier, and operates on its behalf. ALU CEO Ben Verwaayen has been visiting New Zealand over the last week and the deal was understood to have been struck during his meetings with Telecom

In February this year Telecom’s CTO Frank Mount and Alcatel Lucent’s head of New Zealand Stevel Lowe both resigned over the network’s well publicised shortcomings, which have included several outages.

A report commissioned by Telecom from Analysys Mason argued that the network and support systems were not robust enough to deal with demand from Telecom customers migrating from the firm’s CDMA network. The Radio Network Controller was the weakest link in the chain, Analysys Mason reported.

Crucially, however, traffic levels were within Telecom forecast ranges, suggesting that the network ought to have been capable of handling them. Analysys Mason recommended that customer acquisition activities be slowed as the firms work to improve the network’s performance. It also said that ALU and Telecom had already made improvements to the network.

“The review has been both chastening and heartening at the same time,” said Paul Reynolds, CEO, Telecom New Zealand.  “Clearly some serious errors were made but the report shows that XT is fundamentally sound, that Telecom, and our partner Alcatel Lucent are now on the right track. Significant progress in improving the robustness and reliability of XT has been made.”

NSN said this is the first deal of its type to be struck in Russia

Nokia Siemens Networks has struck a deal with Russian carrier MTS for what the firms say is the first full network outsourcing contract to be signed in that country. The five-year project will see MTS outsource the daily operation and maintenance of its entire mobile network across Central Russia to NSN. The Finnish-German vendor will absorb 250 MTS employees as part of the deal

“Entering into a managed service agreement with Nokia Siemens Networks will allow MTS to substantially optimise network operations and increase efficiency while keeping service experience high for our customer base,” said Aleksander Popovsky, director of MTS Russia. “While managed services projects have already proved their efficiency worldwide, in Russia the experience of such project implementation will be unique and innovative. That is why we’ll attentively follow up the progress in its development under local conditions. In the future this will allow us to make the decision on introducing this approach to other regions.”

Nokia Siemens Networks sold 37 managed service contracts in 2009, according to Michael Matthews, the firm’s head of strategy and business development. “We have a consulting organisation that is increasingly being asked to help the operators. When you sell a managed services contract, which is a long term deal and involves us taking on the running of the network, it is about showing operators the business model rather than the technology model,” he told Telecoms.com. “We all understand the technology; now it’s about how can we make it work better for the carriers and that’s a business discussion.”

NSN has more than 240 managed service deals in place with fixed and mobile operators, the firm said, and has more than 300 million subscribers on networks that it manages.

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