Vimpelcom is exiting Vietnam following a write down of assets

International operator VimpelCom is to exit the Vietnamese mobile market, selling its 49 per cent share of fifth placed mobile operator Gtel Mobile for $45m. VimpelCom, which is headquartered in The Netherlands, said the stake would be bought by GTEL Transmit and Infrastructure, “a related party” of Vimpelcom’s local partner, Gtel.

The Vietnamese operation will be able to use the Beeline brand, which Vimpelcom has rolled out to a number of its operations, for six months before being required to rebrand.

A year ago VimpelCom increased its holding in Gtel Mobile from 40 per cent to 49 per cent at a cost of $196m, and assumed management control of the company. At the time it said a wider financing plan could lead to total investments of £500m in the Vietnamese operation by the end of 2013.

But earlier this year Vimpelcom booked an impairment charge on its Vietnamese investment, signalling a rethink of its commitment to the market.

Jo Lunder, CEO of VimpelCom, commented: “We have previously outlined our Value Agenda, within which all of our operations are reviewed to assess their future value to the Group. The decision to dispose of our interest in GTEL Mobile is a result of this process, which focuses on allocating capital to those markets where we see the best opportunities to generate shareholder value.”

Vietnamese mobile subscriptions by operator, Q4 2011

Source: Informa’s WCIS Plus www.wcisplus.com

This round of consolidation will bring 3 far closer to its Austrian rivals

Orange Austria, owned by France Telecom, is to be acquired by Hong Kong’s Hutchison, which competes with Orange through its 3 Austria operation. The deal, worth €1.3bn, consolidates the third and fourth players in the Austrian market.

Estimates for December 2011 from Informa put the Orange Austria subscriber base at 2.16 million, and 3 at 1.31 million. The combined base of 3.483,700 will leave 3 in third place behind T-Mobile (3.99 million) and Telekom Austria’s Mobilkom (5.3 million), but with a fight for second place now a viable option. Austrian mobile penetration was 151 per cent at the close of last year, according to Informa’s WCIS Plus service.

Hutchison said that certain of the assets that it will acquire as part of the deal will be divested to Telekom Austria as soon as the deal is completed. The firm said that these would include “certain frequencies” and “base station sites,” as well as the Orange-operated discount MVNO Yesss!. Telekom will pay €390m for the assets, off-setting Hutchison’s purchase price.

The Hong Kong conglomerate is targeting synergies of at least €500m from the deal.

The deal will see TeliaSonera acquire 49 per cent of Kcell from part owner Kazakhtelecom, for $1.519bn. The remaining 51 per cent of the carrier is currently owned by Fintur Holdings, a joint venture between TeliaSonera (58.55 per cent) and Turkcell (41.45 per cent).

TeliaSonera said that it has agreed, subject to certain conditions, to sell 25 per cent of Kcell in an IPO at some stage in 2012. When both transactions have completed, TeliaSonera’s effective stake in Kcell will be 61.74 per cent.

“This agreement is another step in the execution of our strategy of increasing ownership in core holdings. Kcell is a clear market leader in Kazakhstan, the largest market in Central Asia, and has shown remarkable growth over the years. The fact that part of the company will be sold in an IPO will make it even more attractive”, said Tero Kivisaari, President, TeliaSonera Eurasia.

Hans Vestberg, CEO, Ericsson

The owners of handset joint venture Sony Ericsson are to part company, with Japanese electronics firm Sony acquiring the 50 per cent share of the JV held by Sweden’s Ericsson for €1.05bn. The announcement comes ten years after the formation of Sony Ericsson, which saw two struggling handset units combined in the hope of marrying Sony’s consumer electronics expertise and Ericsson’s telecoms experience.

Sony Ericsson has endured mixed fortunes over the past decade and a repositioning in early 2010, together with a commitment to the Android OS in the high end was the latest in a line of strategic overhauls designed to secure a consistent and improved performance. Earlier this month the firm reported net profit of zero for the third quarter of 2011, down from the €49.9m it made for the same period in 2010, but up from a loss of €50m for the second quarter of this year. Such ups and downs have typified its performance.

Ericsson’s commitment to the JV has long been questioned and Sony’s move earlier this year to release two Android tablets under its solo brand hinted that it might be preparing to go it alone.

Still, there are some that find today’s development surprising, given that there were rumours not so long ago that Sony was looking for a way out of the JV, as its consumer electronics business suffered and mobile phones were not considered a core opportunity. Informa analyst Dave McQueen suggests that Sony may see value in creating a unified experience across its device range, incorporating TV, Blu-ray, PlayStation 3, tablets and mobile devices, as part of a wider connected home strategy whilst also leveraging on its music, video and film assets to create rich content ecosystem.

Ericsson’s announcement supported this suggestion. A shift in the nature of the handset space to content and service-oriented smartphones meant that “the synergies for Ericsson in having both a world leading technology and telecoms services portfolio and a handset operation are decreasing, “the Swedish firm said.

As part of the deal, Sony will gain an intellectual property portfolio of five patent families, and a “broad IP cross-licensing agreement. The Japanese firm believes it will be able to better position handsets as part of its wider product portfolio, said chairman and CEO Howard Stringer.

“With a vibrant smartphone business and by gaining access to important strategic IP, notably a broad cross-license agreement, our four-screen strategy is in place. We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment,” Stringer said.”

“We will now enhance our focus on enabling connectivity for all devices, using our R&D and industry leading patent portfolio to realize a truly connected world” said Hans Vestberg, president and CEO of Ericsson.

The deal is expected to close in January 2012.

AT&T 's fortunes suffer, but how likely is the T-Mobile USA acquisition to go ahead?

The USA’s number two operator also saw its net income for the quarter – which ended September 30, 2011 – stand at just $3.6bn, a cool $8.7bn down from the $12.3bn it recorded in the same quarter last year. However, the figure from 3Q10 included one-time gains from a tax settlement and the sale of subsidiary Sterling Commerce. Net income excluding one-time items in 3Q10 was $3.2bn, meaning the firm effectively saw a $400m improvement to its bottom line.

The overall earnings may have been slightly skewed due to the fact that many consumers opted not to buy the operator’s flagship offering, the iPhone, towards the end of the quarter, as they anticipated the launch of Apple’s new handset, the iPhone 4S. AT&T said it activated just 2.7 million iPhones in the third quarter, the lowest number in a year and a half. The fourth quarter looks much more promising for the firm though, as it has already activated one million iPhone 4S customers, as orders began coming in early October, after the end of the third quarter.

Worryingly, the firm’s wireless service revenue grew just 4.3 per cent on the same quarter last year.  In 2008 it had 14 per cent third quarter YoY growth, in 2009 it was 10 per cent, in 2010 it was seven per cent and in 2011 it was four per cent.

Sara Kaufman, analyst for telco strategy at Ovum explained that the reason for the slowdown is more a symptom of US wireless market saturation and the shift in the types of connections operators are now selling.

“Exploiting the demand for mobile broadband services, AT&T and other operators are now seeking new revenue from a new mix of lower ARPU mobile broadband services like tablets, USB modems, connected devices or even M2M services all of which tend to garner considerably lower ARPU per connection,” she said.

“In other words, with operators selling second, third and perhaps fourth connections to consumers, each consumer’s wireless bill maybe be going up even as AT&T collects less additional revenue per user from these additional connections.”

Kaufman added that it is worth noting that AT&T has the highest postpaid ARPU among the US operators and that 3Q10 was an exceptional month of growth for AT&T, so any comparisons to that quarter will be somewhat muted.

There were a few of the other dynamics at play that are impacting revenue growth for AT&T, and Verizon too, she explained. The move to tiered data pricing coupled with data, which is currently a lower ARPU service, is making up a larger proportion of services revenue and AT&T has lost its iPhone exclusivity.

T-Mobile USA acquisition

As AT&T is still trying to push through its acquisition of T-Mobile USA, the Department of Justice (DoJ) has filed a civil lawsuit opposing the proposed merger, and Kaufman admits that this makes predicting whether this deal will ultimately go through extremely difficult to determine.

“I don’t believe AT&T entered this $39bn deal complete with a multi-billion dollar back-out penalty lightly and without reasonable certainty that it would ultimately be approved,” she said. “But it is clearly going to have to make huge concessions in order to make that happen, something the company surely realised going into this endeavour. So the question is, how much is AT&T willing to give up to make the deal happen? And how long will it take to come to agreement on these new terms?”

The deal would make AT&T the biggest operator in the US, displacing Verizon Wireless, but AT&T is really after the capacity it would gain from T-Mobile’s spectrum assets which AT&T claims would allow it to expand its LTE rollout from 80 per cent coverage to 97 per cent coverage across the US, explained Kaufman.

“That gives AT&T a lot of room for negotiating concessions for all of T-Mobile’s other assets. But it also puts AT&T in a difficult negotiating position. Too much eagerness or willingness to make concessions on divesting other assets resulting from the deal supports the DoJ’s claim that AT&T’s purchase is motivated by reducing competition in the market.”

The US carrier market has shown that the more competition in the market, the more price-sensitive consumers and operators become. In 2009 to 2010 with growth in demand for prepaid services helping smaller players like Leap Wireless and MetroPCS gain market share, the bigger operators were forced to expand their prepaid offerings and lower pricing. According to Kaufman, it is very unlikely that without that pressure from the smaller players, AT&T or Verizon would have responded or accommodated this shift in consumer demand so quickly.

“An AT&T and T-Mobile merger will mean a large proportion of consumers outside of the top metro areas would have their choice of carriers limited to just two or three carriers. Although, it’s also important to note that there are, in fact, potential new entrants to the market. Lightsquared is still planning its network launch in 2012 provided it can overcome its current GPS interference issues with the FCC which are currently preventing it from launching, or even performing live testing, its new network. DISH networks has also filed a request to have its spectrum cleared by the FCC for use with DISH’s proposed LTE wholesale mobile satellite network. Meanwhile, NetAmerica Alliance, a network sharing alliance of Tier 2 and Tier 3 operators also claims to be gearing up to launch a national LTE network.”

“While all of these potential new entrants have obstacles to overcome, it is evidence that an opportunity and climate exists for additional competition and there are serious players contemplating new network and service launches to capitalise on this opportunity.”

But she added that timing is essential for AT&T; “Acquiring T-Mobile is about market leadership – stealing the number one spot from Verizon, having the highest revenues, the most customers, the biggest network. But it’s also about fulfilling long-term strategies and goals.”

“For AT&T, this involves further integrating and upgrading the network, service, operational and customer components of a variety of legacy acquisitions including SBC, Bellsouth, and Cingular Wireless. It will be very difficult for AT&T to fulfill its long term vision and goals or to execute its LTE strategy on a large scale in the midst of a long protracted legal battle that leaves the company uncertain about what spectrum or other assets the company will ultimately have to work with once the battle is over.”

15 US politicians have sent a letter to Obama urging him to approve merger

US President Barack Obama has received a letter from 15 US politicians calling for his administration to approve the merger between AT&T and T-Mobile.

The letter, put forward by member of congress Heath Shuler and 14 other Democrats, said that the proposed merger of AT&T and T-Mobile USA would help solve America’s job crisis by reducing unemployment, encouraging private investment and promoting new and innovative technologies that will drive job creation.

“AT&T has announced plans to repatriate 5,000 jobs that are currently being performed overseas.  In addition, a recent SITE study has shown that the merger will create somewhere between 55,000 and 96,000 new jobs to integrate the two networks and upgrade facilities,” the letter read.

It added that the merger will encourage new private investment to deploy wireless high speed internet access services to 97 per cent of the US population. Coverage of this magnitude will necessitate an additional $8bn investment from AT&T over and above its current industry leading capital investments, the politicians argued.

“Finally, the deployment of next generation, wireless broadband is the type of investment in new and innovative technology that will drive job creation for years to come,” the letter continued, adding: ”A recent study by Deloitte predicts that next generation wireless broadband buildout by the wireless industry will create 371,000 to 771,000 jobs and GDP growth between $73bn and $151bn by 2016.  AT&T’s proposed merger commitment to make available this new technology to 98 per cent of the nation’s population will be a key component of the industry buildout.”

However, Public Knowledge, a Washington-based public interest advocacy organisation, said that the deal would be bad for the US economy, consumers and technological innovation.

“We thought the issues of job creation and investment had long been settled.  It is perfectly clear that AT&T’s history has been to destroy jobs, not to create them.  The company has shed 10,000 jobs a year for the past ten years.  There is no reason to believe that the takeover of T-Mobile will do anything to change that dynamic,” said Gigi B. Sohn, president and co-founder of the organisation.

“To the contrary, T-Mobile has created jobs at the same time AT&T has cut them.  And by removing T-Mobile’s investment, the amount of money spent on improving the wireless networks will be less, not more.”

Sprint is suing AT&T over its proposed acquisition of T-Mobile USA

US operator Sprint Nextel has brought a lawsuit against AT&T, seeking to block its rival’s proposed $39bn acquisition of T-Mobile’s US operation. The suit follows a civil antritrust lawsuit from the US Department of Justice, which claimed the deal was anticompetitive.

Sprint claims the deal would be a violation of Section 7 of the US Clayton Act, which covers competition issues in the US. The lawsuit was filed in federal court in the District of Columbia as a related case to the DoJ suit against the AT&T.

“With [this] legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal,” said Susan Z. Haller, vice president for litigation at Sprint.

Among the firm’s complaints was Sprint’s assertion that the proposed acquisition would harm customers by raising prices and curtailing innovation, and damage Sprint and other wireless carriers. The firm alleges that if the deal were to get the go-ahead, a combined AT&T and T-Mobile would have the ability to “use its control over backhaul, roaming and spectrum, and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses and ultimately to lessen competition.”

The DOJ suit against the proposed acquisition cites that the deal would “substantially lessen competition” in the US wireless sector.

AT&T responded to the DoJ’s suit, saying it was “surprised and disappointed” by the legal action, as it had with the Department of Justice several times, and received no indication from the DoJ that such action was being contemplated.

“The DoJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court,” said Wayne Watts, AT&T senior executive VP and general counsel.

Watts claimed that the merger would allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans; 97 per cent of the population, and result in billions of additional investment and tens of thousands of jobs.

“We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court,” added Watts.

It has been suggested that, if the deal is blocked, AT&T could have to pay $3bn to T-Mobile’s parent company Deutsche Telekom, and hand over additional spectrum and wireless data roaming arrangements, as part of a “reverse break fee”.

Skype is expanding it capabilities through acquisitions

Internet telephony player Skype, recently acquired by Microsoft, is doing some shopping of its own, entering into an agreement to acquire mobile group messaging provider GroupMe.

GroupMe is a very new startup, having only been founded in 2010 in New York, and allows users to group text, conference call, and share pictures and location data. Skype said the purchase, which is for an undisclosed sum, complements the acquisition of mobile video provider Qik earlier this year.

Qik is a US-based mobile video sharing platform, which gives the VoIP firm greater capabilities in the mobile telephony market on both mobile and desktop type devices.

Microsoft announced its intention to buy Skype for $8.5bn in May this year and has received the go-ahead from American anti-trust regulators, following an “early termination” of a review into the proposed sale. The VoIP player claims 170 million connected users of over 200 billion minutes of voice and video conversation in 2010.

HP's webOS devices are no more

Software and PC giant HP has unexpectedly killed off its poorly performing webOS mobile device unit and announced its exit from the hardware space altogether. Instead the firm will focus on software and services with an eye on cloud computing through the $10bn acquisition of Autonomy.

HP chief Leo Apotheker made the announcements during the firm’s quarterly earnings call on Thursday, candidly admitting that tablets were eating into the PC market and that consumers were not buying HP’s own tablet device – the Touchpad — or its webOS-based smartphone relations.

“HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward,” he said, noting that the device platform acquired with the $1.2bn purchase of Palm in April, would live on as an operating system only. The news is a complete u-turn on plans announced in March under which the webOS operating system would be installed on every PC shipped by HP. In fact, HP is getting out of the hardware business altogether, with Apotheker announcing plans to spin off the Personal Systems Group as a seperate entity if it can’t find a buyer.

“PSG is a world-class scale business with a leading market share position and a highly effective supply chain and broad reach and go-to-market capabilities. We believe there are alternatives that could afford PSG more autonomy and flexibility to make strategic investment decisions to better position the business for its customers, partners and employees,” said Apotheker.

“In March we outlined a strategy for HP, built on cloud, solutions and software to address the changing requirements of our customers, shaped heavily by secular market trends that are redefining how technology is consumed and deployed. Since then, we have observed the acceleration of these market trends, which has led us to evaluate additional steps to transform HP to meet emerging opportunities. We believe the acquisition of Autonomy, combined with the exploration of alternatives for PSG, would allow HP to more effectively compete and better execute its focused strategy.”

HP’s renewed focus will be on software and services, specifically the cloud, which will be fuelled by the acquisition of Autonomy, a firm that specialises in unstructured search and data mining, through text, email, web pages, voice and video. “Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information. Together with Autonomy, we plan to reinvent how both unstructured and structured data is processed, analyzed, optimized, automated and protected. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix,” said Apotheker.

HP’s headline figures for the quarter came in at a nine per cent increase in net profits year on year, from $1.8bn in Q310 to $1.9bn in the same period in 2011, while revenues were up just one per cent year on year to $31.2bn. Software revenues were up 20 per cent year on year while device revenues sunk by three per cent.

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Indian foreign ownership rules limit direct investment at 74 per cent

International carrier Vodafone has sold 5.5 per cent of Indian operation Vodafone Essar to Indian medical services provider Piramal Healthcare for $640m. Vodafone is required to divest the stake to bring it back below the 74 percent ownership threshold, which is the Indian limit for foreign investment within a company. In July Vodafone acquired Essar’s holding in the operation, taking it beyond that threshold.

The partnership between a mobile operator and healthcare provider might turn out to be more than just a convenient financial relationship. Wireless health solutions are an area of increasing interest to mobile operators, especially in emerging markets, where traditional health infrastructures are less developed.

In 2009 Vodafone created the Vodafone Health Solutions business unit, which is located within its Global Enterprise division. The unit is tasked with developing a global portfolio of health-related services.

According to the World Health Organization, between the years 2000 and 2050, the number of people worldwide aged over 60 will grow from 600 million to two billion. As the population ages, more and more people are living with chronic disease, shifting the focus of the healthcare sector from acute care—battling illness that is serious but brief or episodic—to the ongoing management of long term conditions like heart disease, diabetes or high blood pressure. The ageing of the population will be most keenly felt in populous, emerging markets like China and India.

For more on m-health look here.