Dishing the dirt

Pearl Harbour is indisputably one of the greatest attrocities the world has ever seen and it stands for all right-minded souls as proof that, however much time might pass, you should never trust Michael Bay. Meanwhile the events the film depicts were popular justification among the WWII generation for taking a similarly ‘cautious’ attitude towards the Japanese.

May 24, 2013

9 Min Read
Dishing the dirt

By The Informer

Pearl Harbour is indisputably one of the greatest attrocities the world has ever seen and it stands for all right-minded souls as proof that, however much time might pass, you should never trust Michael Bay. Meanwhile the events the film depicts were popular justification among the WWII generation for taking a similarly ‘cautious’ attitude towards the Japanese.

Dish Networks must be ruing the fact that this generation is now all but passed, as it turns to good, old-fashioned nationalist scaremongering in its bid to defeat Japan’s Softbank in the battle for control of US carrier Sprint. Dish has launched a media campaign likening Softbank’s move for Sprint to the 2006 Dubai Ports World (DPW) incident in which Middle Eastern conglomerate DPW had its acquisition of a number of US ports blocked on security grounds.

This smacks somewhat of desperation, doesn’t it? Surely if Dish was confident that the differences between its bid and Softbank’s were sufficiently in its favour it wouldn’t need to trade on the differences between the people. Mind you, as Nigel Farrage has proved recently over here, you don’t actually need a coherent set of policies to win followers, you just need to bang on about scary foreigners.

Dish wants spectrum and it wants it bad. Reports emerged this week that the satellite TV provier had tabled a stalking-horse bid of $2bn for the spectrum assets of LightSquared. That spectrum was itself the subject of a successful bout of anti-outsider lobbying, with GPS users managing to block its use by LightSquared for LTE. It’s difficult to see how Dish could use this spectrum for a terrestrial service given that the interference issues cited by the GPS lobby have not changed.

For its part Softbank offered US authorities the opportunity to oversee the appointment of a security director at Sprint, should the Japanese firm’s bid prove successful. Previously it has also pledged not to use Huawei equipment in the US (it has kit from the Chinese vendor in its domestic network) and to swap out Huawei kit from Clearwire’s network.

Last year it emerged that Softbank was interested in acquiring a stake in Thai incumbent TOT and the Bangkok Post reported this week that a deal was fractionally closer after Softbank offered, anlong with fellow Japanese player Sumitomo, to fund the second phase of TOT’s 3G rollout in exchange for a jointly held minority stake. A decision is expected later this year.

Staying with Thai 3G for a moment longer, all of the market’s mobile operators have agreed to lower their 3G prices by 15 to 20 per cent, as instructed by national telecoms regulator the National Broadcasting and Telecommunications Commission (NBTC). According to local reports, the NBTC directed the nation’s operators to slash their prices a few weeks ago, but the operators raised the mobile data allowance by an equivalent amount instead, prompting a review of the way the tariff cut was being applied.

In the US AT&T has been going in the other direction, raising customers’ hackles with the introduction of a $0.61 monthly “aministrative” fee for its postpaid users.

In a statement, the operator said: “Consistent with similar fees charged by other carriers, the monthly fee of $0.61 per line will help cover certain expenses, such as the charges AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and cell site rents and maintenance.” And boardroom bonuses.

The charge applies to postpaid users of which, according to Informa’s WCIS, AT&T has just over 100 million as of March 2013. So the resultant net revenue uptick the firm is likely to see as a result stands at over $732m per year.

The operator  was inundated with online messages from customers complaining about the fee and threatening to report it to the US Better Business Bureau (BBB), Federal Communications Commission (FCC), and Federal Trade Commission (FTC).

On AT&T’s online community forum, one customer wrote: “The fact that other companies charge it is irrelevant.”

“Three or four wrongs don’t make a right. On the contrary the fact that the big wireless companies take turns matching each other’s increases is an old story and is the closest to collusion they can get without going to jail. In competitive markets such as Europe prices are going down.”

Well the grass is always greener, isn’t it. Listen, mate, in Europe it’s not just prices that are going down. Just ask Vodafone, which reported a 90 per cent drop in profit for the full year ended March 2013. The operator posted a profit of just £673m, down from £7bn a year earlier, hit hard by a £7.7bn impairment charge in Italy and Spain over the course of the year.

Group revenue also fell by 4.2 per cent to £44.4bn while full year organic service revenues declined by 1.9 per cent. The profit Vodafone saw from US operator Verizon Wireless, in which it has a 45 per cent stake, rose 30.5 per cent to reach £6.4bn. Which makes a sale of that stake look a little unappetising at the moment.

“We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment,” said Vittorio Colao, group chief executive.

Despite the good performance from Verizon Wireless, Vodafone’s results are a continuation of the story of the challenges facing Europe’s telcos, according to Steven Hartley, telco strategy analyst, at research firm Ovum.

“Ovum has always maintained that the primary goal of Europe’s telcos is to stabilise their performance at home. Emerging markets are good but our forecasts for 2017 warn of ‘emerging maturity’ as emerging market growth slows. Besides, low ARPU across emerging markets means that these markets generate less revenue and profit relative to their subscriber base,” he said.

Prices in Europe aren’t coming down everywhere, if that’s any solace to AT&T’s frustrated customers. According to data from Finnish analyst Rewheel, mobile operators are charging over three times as much per gigabyte in Germany than in the UK and up to 15 times as much than in some smaller EU member states such as Finland.

Research conducted by Rewheel for its EU27 mobile data competitiveness report shows that in markets such as Finland, Sweden and Denmark, smartphone tariffs are up to ten times cheaper and radio spectrum utilisation is ten times higher than in Germany, the EU’s largest market. The firm attributed this gulf to the fact that the German market is served by international operator groups DeutscheTelekom, Vodafone, Telefonica and KPN E-Plus, none of which are present in the other three markets.

In EU markets where international operator groups are not present, consumers get on average ten times the data allowance when spending €24 than in markets where they are. They also get twice as many minutes and SMS messages allowed in their packages.

As a result Rewheel, which has submitted its report to the European Commission, has called for provisions in the EU’s Regulatory framework for electronic communications that will mandate national regulatory and competition authorities to carry out periodic market analysis and determine the minimum number of national mobile network operators necessary to foster competition.

So, how do European operators bring down costs? They could outsource their customer care function, as O2UK is doing, for a start. O2 has signed UK firm Capita on a ten-year deal worth £1.2bn that will see Capita take on more than 3,000 call centre staff. The UK Communications Workers Union said that some 600 staff will be made redundant, describing the decision as a “mistake” and a “betrayal”.

Operators have, over recent years, outsourced core network deployment and management functions to vendor partners and claimed that they aim to differentiate by specialising in customer relationship management. But how do they plan do that when somebody else is managing those relationships?

Deals like this are built around target KPIs like call volumes, complaint resolutions and satisfaction surveys. The outsourcing partner, in this case Capita, will almost certainly face financial forfeits if these KPIs are not met. The logical extension of this is that O2 will save even more money if the customer service that Capita delivers fails to hit the targets it’s been set! And O2 can sidestep blame for any drop in quality by pointing the finger at its provider Capita, whose slogan should be: “We care, so you don’t have to.”

The whole thing puts the Informer in mind of one of those old people’s homes run by a corporate scale-builder. The operator’s customers will end up ignored, poorly tended, patronised and quite possibly sitting in a puddle of their own making when all they really want is somebody to talk to.

This wasn’t the only big money deal in the news this week as internet old-timer Yahoo! huffed back a couple of viagra and hooked up with social blog Tumblr for $1.1bn in cash. This is a last ditch attempt to keep Yahoo relevant and CEO Marissa Meyer made a promise during the announcement “not to screw it up.”

As a result, Tumblr will be operated as a separate business and David Karp will remain CEO, with product, service and brand defined and developed separately from Yahoo. According to Yahoo’s latest financials, cash, cash equivalents, and investments in marketable debt securities totalled $5.4bn as of March 31, 2013 compared to $6bn as of December 31, 2012. Yet actual cash only totalled $1.2bn, so this latest acquisition wipes out Yahoo’s liquid reserves.

Tumblr claims more than 300 million monthly unique visitors, 20,000 signups every day, 900 posts per second, 24 billion minutes spent on site each month and no profits.

The acquisition is expected to grow Yahoo’s audience by 50 per cent to more than a billion monthly visitors, and to grow traffic by approximately 20 per cent.

But the big question now is how this move fits in with Yahoo’s other similar-sounding, similarly anti-‘e’, picture-focused blogging social site, Flickr. Mayer had said that the photo sharing site was a top priority for investment in an attempt to regain lost ground on rivals Facebook, Twitter, Google and Instagram. It remains to be seen how that will play out once the money has been spent.

It is not inconceivable that in years to come foolish, expensive and/or desperate acquisitions will become known as “taking a tumblr”.

Take care

The Informer

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