Brazil nuts

By The Informer

Brazilian operators are missing out on revenues totalling R$40bn because they are not satisfying the coverage requirements of customers. And it is claimed that the prime reason they are not satisfying those coverage requirements is because the government is making it prohibitively difficult for them to do so. Yet the regulator has warned operators that if they do not begin satisfying customers, it will fine them and take their spectrum licences away. That must feel like a right kick in the Brazil nuts.

The majority of Brazilian consumers are willing to pay more for an improved mobile service and as a result operators have been estimated to be missing out on up to R$40bn (US$17.13bn) per year, according to research published by Commprove.

More than 56 per cent of Brazilian mobile users reported losing signal at least three times a month, according to the research and 40 per cent of consumers said they would be willing to pay an additional R$5 per month for better coverage. Ten per cent would pay R$10 and a further ten per cent would pay R$15 per month for the same. Surprisingly, 6.3 per cent said they would be willing to pony up as much as R$50 per month for better basic radio coverage and it was the 18-24 year old demographic that placed the greatest value on their mobile access with 56 per cent claiming unreliable signal was the main reason for looking to move to another carrier.

Anatel started its clampdown on poor network performance last year, warning operators that they risk having their spectrum licences revoked due to poor coverage levels and threatening to bar carriers from signing up new customers if they have coverage or capacity problems.

But the situation is at epidemic levels and operator efforts to improve radio network coverage are being stifled by local government bureaucracy according to Strand Consult. The firm pointed the finger at regulatory authorities around the world which allocate mobile licences, often with coverage obligations attached, but do not ensure favourable terms and conditions for erecting mobile network masts.

The consultancy said that operators are having difficulty in getting permission to erect new mobile network masts and antennas. Its research into the past 20 years of building and operating mobile networks found that the process to erect a single mobile mast or antenna can take a global average of between 12 to 18 months and cost €100,000 to €250,000 in some markets.

Focusing on Brazil: “The problem is that Anatel interprets poor mobile coverage as the fault of operators.  The reality is that creating good mobile coverage requires the cooperation of many stakeholders:  politicians, regulators, operators, municipalities, site owners, and so on,” said John Strand, CEO at the consultancy.

“The rental costs charged by municipalities for setting up masts is rising by up to 15 per cent each year in some markets. As an analogy it’s like a patient on a life support machine. The municipality can say this is the new price and if you are not willing to pay, then you must unplug your life support machine and you can move to a different hospital. So in practice, there is no choice for operators but to pay these prices.”

Strand said his consultancy recently conducted an international project that closely examined the conditions that mobile operators are working under in terms of antenna erection and claims the findings of the report improved the terms and conditions for mobile operators in the company’s native country, Denmark.

In fact, the report claims to have revealed cartel behaviour among 15 of 98 municipalities, and as a result the Danish competition authority took action, implementing a plan to improve the transparency and market conditions for applying and erecting new mobile masts.

Brazil’s antitrust regulator Cade also displayed a ruthless streak this week by fining Spanish operator group Telefonica R$15m ($6.3m) and ordering it to relinquish part of its stake in TIM Brasil or seek a partner for its own Brazilian subsidiary Vivo.

TIM Brasil’s parent company is Telecom Italia, and in September, the Italian firm’s shareholders struck a deal with Telefonica to gradually increase its stake iof  22.4 per cent stake in Telecom Italia.

However, with Telefonica’s own operator subsidiary Vivo operating in Brazil, Cade expressed concerns the group has created a scenario that poses potential risk to competition.

One Telecom Italia investor, Marco Fossati, went on record to respond to the ruling saying that the outcome “cannot and must not be the forced sale”.

Telefonica also announced this week that it will retire VoIP service Jajah in January next year. If you remember Telefonica acquired Jajah for €145m in late 2009 and has done very little with it since. So users will no longer be able to make calls using either the Jajah.com website or the Jajah Direct service as of January 31, 2014.

The Informer loves his Nordic thrillers and there’s a real life  mystery over in Norway, this week; namely the identity of an unknown company that has just picked up the largest spectrum allocation in the market’s latest auction.

Incumbent operators Telenor and TeliaSonera, which operates in Norway as Netcom, each bagged 2 x 10MHz in the 800MHz band, 2 x 5MHz at 900MHz and 2 x 10MHz at 1800MHz. The third winner, which collected the same allocations at 900MHz and 800MHz but 2 x 20MHz at 1800MHz is an unknown quantity.

The new operator is called TelcoData, according to the Norwegian regulator’s announcement, and local reports suggest that the firm has only come into being inside the last week and is backed by a big name foreign player. It is currently being represented by a legal firm and it is understood that it will unveil its true identity in the new year.

Challenger Tele2 came away empty-handed and must now look to address the holes in its spectrum portfolio. CEO Mats Granryd said in a statement that he was “obviously not satisfied with the outcome of the auction,” but added that the firm will make further efforts to gain access to 1800MHz spectrum in future.

Three blocks of 5 x 1800MHz blocks have yet to be allocated, the Norwegian regulator said, and Tele2 will likely be pursuing these to bolster its existing spectrum holdings, which are substantially smaller than those of its competitors.

The firm stressed its focus on partnerships, adding that its experience in this area will be “valuable going forward” and it may well now look to partner with another operator to gain access to spectrum in the lower bands.

And while the EU is busy making region-wide international calls cheaper for consumers, this week saw two initiatives to make international phone calls from the US cheaper as well.

US MVNO UltraMobile has launched an international calling plan packing 1,000 minutes for $19 per month. The firm, which operates on the T-Mobile USA network and is already disruptive with its free international texting plan, said its service eliminates the need for calling cards and global texting add-ons.  The included international minutes can be used to call more than 70 countries and unlimited SMS texts go to more than 190 countries.

“We wanted to make an international call just like any other call,” said Chris Furlong, EVP of Ultra Mobile product development and marketing. “It shouldn’t require add-ons or calling cards or cost half a month’s rent; it should just be a call.”

Furlong added that Ultra Mobile is planning to continue extending the country destinations for the service, but the firm is facing challenges due to different global political climates.

3UK also announced this week that it has extended its Feel At Home roaming proposition to the USA, as well as Indonesia, Sri Lanka and Macau. The offering allows customers to use their UK allowances, at no premium, to access data, text, call home and receive calls from home when abroad in certain countries. The offering now extends to 11 markets globally.

The moves follow an outburst by the CEO of T-Mobile USA, John Legere, who recently described roaming costs as “completely crazy” and “insanely inflated” before announcing that data roaming and text messages would generate no extra costs for “most” users on its Simple Choice plans.

T-Mobile announced that it is cutting data roaming costs for its customers when they are travelling in more than 100 countries worldwide, building on the firm’s pricing overhauls in March, when it cut contract lengths and separated the cost of device from the cost of service, lowering monthly rates.

“It doesn’t have to be this way,” Legere said. “The truth is that the industry’s been charging huge fees for data roaming. But what’s most surprising is that no one’s called them out – until now.”

Following T-Mobile’s lead in abolishing handset subsidies, rival AT&T has announced the launch of its own tariff that separates device costs from monthly service fees.  The firm claims the plans will save customers $15 per month on average.

The operator’s Mobile Share Value plans are available for subscribers who pay the cost of their smartphone in monthly instalments with AT&T’s Next service, already have their own smartphone or buy the device at full retail price.

The plan includes shared data as well as unlimited voice and SMS, and consumers can connect up to 10 devices, including tablets and other wireless devices. Business customers will be able to connect up to 25 devices. The plans offer data options ranging from 1GB up to 50GB.

Here in the UK, the government will open up a £10m fund in early 2014 to test innovative solutions to deliver superfast broadband services to remote areas of the UK. The fund is part of the UK’s national infrastructure plan, which details how the government intends to invest over £375bn into public and private sector infrastructure investment.

The investment builds on the 2013 announcement in which the government outlined plans for £100bn of capital investment in infrastructure projects.

The £10m figure may be used to enhance mobile services, although “new fixed technologies” and “alternative approaches to structuring” have also been mentioned as investment opportunities.

Commenting on the announcement, a spokesperson for UK operator Vodafone said: “The government’s decision is a real step in the right direction and signals a willingness to be pragmatic when it comes to rural broadband. Wireless 4G is better value for money and is the best technology to help close the digital divide between urban and rural Britain.”

Dave Pinnington, Director of Rural Networks, MLL Telecom, went even further, describing the government’s decision to now invest in mobile broadband as an admission “that it made a huge mistake by using fibre only to deliver its £530m BDUK programme”.

“At the moment, Britain lags behind other countries such as Germany and Japan in its broadband infrastructure, and the BDUK initiative is running two years behind schedule. So, there is a real urgency to bring superfast broadband with alternative technologies to rural parts of the country. We hope that the new fund encourages county councils to explore their options. Whether mobile, satellite or radio – councils need to choose the technology that is able to deliver connectivity to even the remotest communities as quickly and cost-effectively as possible.”

He added that the use of broadband technologies that don’t rely on fixed fibre networks will be crucial in safeguarding the UK’s competitive edge in the global digital economy.

As part of its announcement, the UK government also pledged to make the UK a centre for the testing and development of driverless cars.

It is looking to help the UK develop driverless car technology and will conduct a review to ensure that the legislative and regulatory framework to support this aim by late 2014. It will also create a £10m prize fund for a town or city to become a testing ground for driverless cars. Presumably that’s just to cover the insurance premium.

Staying with the UK now and 3UK has become the fourth and final operator in the country to launch LTE services. The firm said it has already begun offering the service to existing subscribers with LTE ready phones in areas with 4G coverage.

CEO Dave Dyson said that around one million of the firm’s 7.8 million customers have LTE-enabled smartphones but he was unable to say how many of these live within the firm’s current LTE coverage area. The firm’s LTE footprint currently covers the cities of London, Birmingham, Manchester and Reading.

By the end of 2014 the firm expects to have LTE coverage in 50 cities and aims to have parity with other UK operators within two years. Dyson said that LTE “is not a significant step change” for 3UK in terms of network performance, although he did highlight the technology’s cost efficiency as a key benefit.

He added that 3UK had seen no impact on its sales from the LTE launches of its rival networks.

“We are building a brand and network that encourages and enables customers to enjoy the mobile internet,” said Dyson. “Customers are using more data than ever on Three, far more than on any other network. As we add 4G capacity to the network, this experience will only get better.”

Rivals Vodafone and O2 launched their 4G services at the end of August this year, while EE has been offering its service since October 2012.

Meanwhile German operator group Deutsche Telekom has announced a strategic partnership with Twitter, allowing subscribers with selected Android smartphones to keep up with the social site directly from their home screen. The service will launch next year, initially in Germany, the Netherlands, Romania, Greece and Croatia.

Significantly, the operator also announced that it will be a preferred partner for Twitter for marketing, advertising and customer services opportunities on Twitter.

Twitter is becoming increasingly important to tech companies, particularly since its November IPO. Apple is certainly keeping a close eye on the microblogging site and this week it was revealed that the iPhone maker has acquired social media analytics company Topsy in a deal reportedly worth around $200m. Topsy is one of the few companies with privileged access to all of Twitter’s data.

It helps businesses analyse trends on the popular social media service, and by identifying trends and influencers helps these businesses keep tabs on the effectiveness of their – and their competitors’ social media strategies. The service is very popular among journalists, according to the company.

Apple keeps notoriously quiet on its strategy and rarely discusses its acquisitions. And while Topsy has not responded to requests for comment Apple spokespeople confirmed the deal to the Wall Street Journal.

Chinese infrastructure vendor Huawei made a pledge in September 2012 to invest £1.3bn group-wide research and development facilities in the UK. This week it announced that £10m of that investment will go towards supporting technology research in British universities. The investment will see the vendor collaborate with major British universities focused on advanced multimedia, IT and optical, green radio, wireless and 5G technologies.

The vendor said it expects that the research programmes will help it significantly increase its own understanding of cutting-edge technologies and thereby improve the consumer, network and enterprise services it offers.

While relationships with the UK are blossoming, the company’s fraying relationship with the US reportedly reached breaking point. Reports surfaced this week that CEO Ren Zhengfei has publicly stated that Huawei is abandoning the US market, yet the company’s official line is to the contrary.

“We remain committed to our customers, employees, investments and operations and more than $1 billion in sales in the U.S., and we stand ready to deliver additional competition and innovative solutions as desired by customers and allowed by authorities,” a statement read.

A weeka go was Black Friday in the US – a shopping holiday that sees Americans fight one another for bargains in retail stores. This year, maybe it was a few too many bruises sustained in last year’s chaos or just a general move towards using technology that caused mobile shopping to grow.

Tech giant IBM monitored over 800 US online retailers over the holiday and found that 21.8 per cent of all US online sales on the Black Friday shopping holiday were made from a mobile device. The revenue generated from mobile by retailers rose 43 per cent year on year, and mobile traffic accounted for 39.7 per cent of all online traffic on the day.

The IT firm’s 2013 Holiday Benchmark Report also found that US consumers use their smartphones to browse goods but tablet devices to purchase them. Smartphone traffic represented 24.9 per cent of all online traffic whereas tablets accounted for just 14.2 per cent. However, 14.4 per cent of all online sales were made via tablets – twice as many as those made by smartphones (7.2 per cent).

Sales made from tablet devices were also higher value than those made by smartphones, with tablet users spending $132.75 from their device on average, 15 per cent more than the smartphone average of $115.63.

The report also showed that iOS users are more likely to splash their cash than Android users. The average Apple user spent $127.92 per order compared with the $105.20 spent on average by Android users. iOS sales also represented 18.1 percent of all online sales, compared to 3.5 percent for Android. Traffic from iOS devices on the day more than doubled that of Android devices, with iOS traffic representing 28.2 per cent of all online traffic compared with 11.4 per cent from Android devices.

Overall, Black Friday sales increased 19 per cent compared with 2012 with an average order value of $135.27, up 2.2 per cent year on year.

And the fallout from European operator group TeliaSonera’s Eurasia scandal continued this week with four senior employees being dismissed from the firm as a consequence of some of its transactions “not being in line with sound business practices”.

CFO Per-Arne Blomquist was relieved of his position as well as Tero Kivisaari, the former head of the operator’s Eurasia region. Kivisaari had been appointed head of business area mobility after his tenure as head of Eurasia, but was relieved of these duties in October this year. The other two executives involved were not named by the firm.

Late last year, TeliaSonera attracted criticism over allegations of corruption involving its operations in Uzbekistan. A review by law firm Mannheimer Swartling led to the departure of former CEO Lars Nyberg.

The four latest departures follow a review by international law firm Norton Rose Fulbright which investigated the group’s transactions in Eurasia to assess the business ethics of the transactions. Although the review is still ongoing, the TeliaSonera Board has decided that the four executives “no longer have the trust of the board”, according to Marie Ehrling, chairman of the board.

“Therefore they have been notified that their employment with TeliaSonera will be terminated and they will leave their position effective immediately,” she said.

Christian Luiga, who is currently head of the CEO Office, will assume the position as acting CFO. Sverker Hannervall was been appointed acting president of business area mobility services at TeliaSonera, while Kivisaari was to take on other duties in the Group.

“Tero Kivisaari’s role in TeliaSonera’s criticized investments in Uzbekistan, and the attention surrounding them, has made it impossible for him to act with the internal and external authority necessary for the president of the largest business area of TeliaSonera,” CEO Johan Dennelind said at the time.

In a more recent statement, Dennelind added that he and the board concluded that the way “some transactions in the past were managed does not live up to the high standards of business ethics and transparency that TeliaSonera wants to stand for”.

And that’s about all for this week.

Take care.

The Informer