Daddy's home!

Ah, my dear readers. It's so good to see you. Is that a new shirt you're wearing? Have you done something different with your hair? You look radiant! It seems so long since last we spoke but I trust you had an enjoyable summer - or winter if you're in the Southern Hemisphere (or the UK).

August 29, 2008

14 Min Read
Daddy's home!

By The Informer

Ah, my dear readers. It’s so good to see you. Is that a new shirt you’re wearing? Have you done something different with your hair? You look radiant! It seems so long since last we spoke but I trust you had an enjoyable summer – or winter if you’re in the Southern Hemisphere (or the UK).

Did you enjoy the Olympics? What about US swimmer Michael Phelps, eh? Eight gold medals in a single games. Not bad for somebody who allegedly huffs down 12,000 calories a day. By rights he should be a bit of a fatty. That’s much, much more than the Informer eats, and he takes half an hour to doggy paddle from one end of his municipal baths to the other.

Early indications are that the Beijing smog didn’t kill anyone – although long term effects remain to be assessed, a little bit like mobile phone usage – and the games have been judged a resounding hit. Especially for host nation China, which staged a fine spectacle and stormed to victory in the medals tables. Even if they did use computer generated fireworks in the opening ceremony and banish a perfectly presentable child singer from the television because she was deemed insufficiently pretty, although her voice was still used as the audio for another kid’s miming.

Against the back drop of so much guff about harmony – even some of the swimming was synchronised, for crying out loud – the Informer finds it puzzling that the Chinese Government persists with its solo pursuit of TD-SCDMA, a third generation standard that is surely destined eventually for status as a historical curiosity. Like Olympic quoits.

And yet so obsessively is the State chasing its dream that the nation’s 3G licensing process could be delayed yet further – until next year – to give TD-SCDMA time to develop a performance closer to the gold and silver medallists of WCDMA and CDMA2000.

It’s a political issue, with investment bank CLSA commenting recently that: “The Chinese government now considers TD-SCDMA as the flagship home-grown technology and compares it with the Shenzhou VII spacecraft. The issue of TD-SCDMA has become politicised and is no longer just about development of a home-grown technology.”

China Mobile – the only carrier entering the TD-SCDMA event – is now under enormous pressure to make a success of the technology. Its commitment can be in part assessed by the expectation that, when the 3G licensing process does finally roll around, the firm will win a WCDMA licence as well. As of early July this year, three months into its commercial TD-SCDMA trials, China Mobile only had 52,000 users, of which a measly 8,000 were paying for the service.

The Informer reckons the whole TD-SCDMA gig could make sense – just about – if the Government mandated that the entire country was allowed no other third generation standard. He’s all for free markets and technology competition, but you can’t have it both ways. If you mandate a standard and put it up against proven technologies with mature product lines and economies of scale, that standard will struggle. The only way it will succeed is if you tilt the market in its favour, in which case you might as well just ban the other standards anyway, right?

Still, as the Olympics have proven, perception is everything. Even in the wake of China’s cheeky tweaks with the opening ceremony becoming public, the authorities dead-panned their way through the questions. So long as the Government can say that TD-SCDMA is successful, it will probably be contented. The alternative would be to employ a trick it picked up over the summer. As with the singing children, China could deploy WCDMA and CDMA2000 and then just tell the rest of the world that it is, in fact, TD-SCDMA. So long as it looks and sounds right, what’s the problem?

China Mobile’s feeling ok, though, what with profits for the second quarter of 2008 leaping by 51 per cent year on year. The world’s largest carrier by subscription trousered $4.5bn in the three-month period – exceeding analyst expectations – by slashing tariffs in a bid to attract more customers. Now, according to the arithmeticians at the World Cellular Information Service, China Mobile has 421.4 million subscribers. That’s 71 per cent of the Chinese market.

These are big numbers. Vodafone’s itsy-bitsy little 3.27 per cent share of China Mobile now equates to 13.8 million subscribers. It’s only got 16.4 million in the UK.

Unfortunately the love is not spreading to the rest of the world, where it’s belt-tightening time as the credit crunch, er, crunches. Gartner’s Q2 handset sales figures came out this week and the firm’s predicting slower growth in the market for 2008; 11 per cent to be precise.

“The economic environment continued to negatively impact mobile phones sales in both mature and emerging markets,” said the firm’s handset specialist Carolina Milanesi, adding that the firm remains confident that the market will hit 1.28 billion units this year.

The familiar slide continued for third placed Motorola, which ceded 4.5 per cent market share year on year to its competitors, rounding out June on 10 per cent. Sony Ericsson’s also in a slump, dropping 1.4 points to 7.5 per cent while retaining its fifth spot. One up, Korea’s LG is on the climb and it’s surely only a matter of time before it catches and overtakes Motorola. The Korean is up two points year on year, and now has 8.8 per cent of the market. Nokia, which may or may not be aware that there are other firms out there that make phones, is sitting distantly pretty on 39.5 per cent. This puts it leagues ahead of second placed Samsung, up just shy of two points on 15.2 per cent. The ‘Others’ lost collective market share over the year.

Apple’s share isn’t big enough to get it a slot of its own in the Gartner table yet, but that hasn’t kept the iPhone out of the news. Back in 2001, UK consumers were infamously urged to Surf the BT Cellnet. Well, it seems not much changes in the world of advertising. This week Apple got in trouble in the UK for misleading the public with its advertising campaign. The Advertising Standards Agency upheld a complaint about an Apple TV ad that claimed “all parts of the internet are on the iPhone”. Two plucky UK pedants whinged to the ASA that the device doesn’t support Flash or Java, and this made the firm’s claim untrue. The ASA slapped Apple on the wrists and told the Cupertino firm that telling fibs is naughty and won’t be tolerated. The Informer has little sympathy, it has to be said.

In India the advertising authorities don’t seem to care that iPhone 3G customers are restricted to GPRS. The iPhone 3G hit Indian markets with Vodafone and Bharti in the second half of August. In India, over ONE QUARTER of the population lives below the government specified poverty threshold of $0.40 per day, which makes the 31,000 Indian rupee ($707.74) price tag set for the 8GB model look a bit steep. Especially when there’s no 3G network for it to operate on.

On the page of Vodafone’s Indian website calling local mugs to register for their latest Apple product, Vodafone uses the phrase “iPhone 3G” eight times. Then, at the side of the page sits the following piece of information:

“iPhone 3G uses fast GPRS and Wi-Fi wireless connections to deliver rich HTML email, Maps with GPS, and Safari – the most advanced web browser on a portable device.”

GPRS? Fast? For $700? You’d have to be pretty dumb to sign up for that. And if you did, you’d probably go right out and download the “I am rich” application that Apple had to remove from its App Store over the summer. It cost $999 and displayed a little red ruby icon on the phone’s idle screen. Nine were sold before the app was removed. There are nine people that stupid in the world. The Informer would like to meet them.

They’ll probably buy the 8800 Carbon Arte from Nokia as well; a handset made entirely of carbon fibre. Presumably the terminal is targeted at wealthy weaklings since it costs a small fortune and weights next to nothing.

In another iPhone curiosity this week, a UK purchaser turned his phone on for the first time only to find images of a Chinese factory worker seemingly in the Apple manufacturing plant. Boredom-relieving tomfoolery from the staff or a cheeky viral marketing ploy from Apple? You decide. Although the Informer has played with an iPhone, he has not had the Christmas morning excitement of unpacking a fresh one from the box and setting it up. So his understanding is that the iPhone cannot be used at all until it is activated, which makes claims of factory workers ‘testing’ the phones unlikely. Perhaps Steve Jobs fancies himself as a bit of a Willy Wonka, and the iPhones featuring mysterious photos are the equivalent of a golden ticket in a chocolate bar. Who knows?

Apple was not the only firm on the receiving end of a dressing down this week by the UK’s powers that be. Ofcom reckons that poor beleaguered Brits are getting a rum deal when it comes to all their cellular services. The regulator concedes that 94 per cent of punters are happy with their phone company. However, it points out that six per cent represents 1.4 million dissatisfied citizens which makes whinging about mobiles number two in the hit-parade of gripes.

Ofcom has also been looking at areas of patchy coverage dubbed ‘not spots’. What’s a not spot not? It’s not a good spot, that’s what. Termination rates are also being looked at with menace, and much as EU telecom regulator Viviane Redding had suggested previously, Ofcom has suggested alternatives such as a US-style called party pays model might help push prices down for consumers. The Informer reckons, however, that called party pays would be counter-intuitive for the majority of UK subscribers.

In some good news for the high-end phone vendors, research outfit Canalys has estimated that smartphones had 13 per cent market share in the second quarter. In this niche league – which may serve as a useful indicator of future rankings in the sector at large – Research In Motion is in second place, followed closely by HTC, Motorola and Samsung. Mind you, second place is only worth seven per cent, because Nokia’s even further ahead here, with 71 per cent. Still, RIM and HTC are both shifting close to one million units a quarter. This could be impacted by economic conditions, though, as operators might look to cut subsidies, Canalys said.

Oh, and if you want to read a bit more about smartphones, click here for an interview with David Wood, Symbian’s head of research and one of the group’s founders.

Enough about phones, how about what goes in them? One of the biggest stories of the summer was surely the announcement that STMicroelectronics is to merge with Ericsson’s Mobile Platform’s unit as the two firms spin the whole thing out into a JV, much as Ericsson did with Sony and its handset unit.

The JV will count Nokia, Samsung, Sony Ericsson, LG and Sharp among its customers and could represent some meaty competition for the likes of Qualcomm, Texas Instruments and Freescale. Earlier this year STM gobbled up most of another semiconductor firm, NXP, and the JV will acquire the remaining 20 per cent as part of its formation.

Informa analyst Malik Saadi reckons TI has the most to fear from the move. “The biggest chipset manufacturer to suffer from this merger is certainly TI. After losing its privilege as the main chipset supplier to Nokia, TI might also face losing EMP (Ericsson), their second biggest customer, which could seriously affect the chip maker’s revenues. TI will have to look for a chipset partner if they want to survive,” he said.

Nokia, you’ll recall, walked out on its German manufacturing plant in Bochum earlier this year, leading to alimony that might have been described at Espoo as ‘non-trivial’. Part of the separation deal was that Nokia had to find a company or companies to take its place as a major investor.

It strikes the Informer that all divorces should be conducted in this way.

“Darling, I’m leaving you. But I’d like to introduce you to Andrew, here. He’s got a good job, as you can see from his CV, he’s clean and tidy and he only wants it twice a month. He’s going to be your husband from now on. I wish you all the best.”

Anyway, Nokia’s found a firm to fill its self-shaped hole, and it’s called Scanbull Vertical Images. Forty per cent of the mobile handset market Scanbull does not have; rather it develops three dimensional scanning systems. They probably don’t give two hoots what Scanbull does in Bochum, they’ll just be pleased that some jobs are rolling into town. Expectations are that 150 former Nokia employees will find gainful employment.

Over on the infrastructure side, Nokia Siemens Networks has bagged a supply deal with Mobile Broadband Network, the 50:50 JV between T-Mobile and 3’s UK operations that the firm’s announced in December last year. NSN has been selected to deliver the 3G radio network infrastructure for the consolidation of the two operators’ 3G radio access network, which will provide near complete population coverage by the end of 2009.

Plans to decommission over 5,000 duplicate sites from both carriers’ combined existing cell site portfolio will result in significant savings in rent, transmission and other cell site operating costs, they said. Together with the lower future capital expenditure requirement, combined savings are estimated at £2bn over ten years.

Elsewhere in vendor land, Canada’s Nortel this week enjoyed the first fruits of its labour after recently switching its focus to LTE. On Thursday, the company claimed to have completed the world’s first mobile LTE live air handover.

Engineers at Nortel’s Research and Development Centre of Excellence in Ottawa, Canada, streamed HD video to a prototype LTE handset designed by LG Electronics, while driving at speeds of 100Kms per hour and moving between coverage sites.

These types of announcements always seem to follow a similar formula and the Informer wonders whether all cellular engineering teams have a designated driver, whose sole job it is to steer a van full of techies in a figure of eight pattern between two base stations at motorway speeds. Maybe that’s what Jacques Villeneuve’s up to these days.

Meanwhile, this just in – South African operator Vodacom has agreed to acquire most of the assets of pan-African carrier services and satellite firm Gateway Telecommunications for $675m.

The deal will boost Vodacom’s presence in Africa, giving the 50/50 joint venture between Vodafone and local carrier Telko a toehold in fast growing Nigeria. But the move could also give Vodafone a better foothold in Africa, should it ever see its desire to control Vodacom fulfilled. The Big V has long been seeking to take over the South African JV and has come close on occasion, although talks with Telkom always seem to break down.

However, Nigerian business tycoon Mike Adenuga, may have played a wildcard. Local reports that claim that Adenuga, who owns Nigerian mobile operator Globacom, has proposed a merger with Telkom’s 50 per cent stake in Vodacom. If the deal were to take place, it would be something of a double edged sword, blocking Vodafone’s chances of taking over Vodacom, but giving the UK firm a bigger African partner in the shape of Globacom, with a strong foothold in Nigeria.

Finally, something from the sports desk. They’re a funny bunch, up there in the Nordics and Baltics. And nothing illustrates this so well as the annual mobile phone throwing championships which, this year, were won by an Estonian man called Timmo, who threw his phone a distance of 85 metres. If it was a Sony Ericsson W850i, the Informer can understand why.

But surely the star of the show was Cara the old English sheep dog who threw a phone from her mouth a distance of 30cm. That’s about a foot, and is no mean feat. If you doubt the Informer’s word, try it yourself. Film it and send the footage to [email protected], where you can also contact him about anything else.

Take care

The Informer

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