Heads up

The Informer keeps hearing that the worst of the recession is over. Well, in vendor-land it isn’t. There’s the terrible sound of an axe being ground at Nokia Siemens Networks (NSN) HQ, and almost 6,000 more heads are on the block.

November 6, 2009

9 Min Read
Heads up

By The Informer

The Informer keeps hearing that the worst of the recession is over. Well, in vendor-land it isn’t. There’s the terrible sound of an axe being ground at Nokia Siemens Networks (NSN) HQ, and almost 6,000 more heads are on the block.

This week the monster vendor said it is seeking to reduce annualised operating expenses and production overheads by €500m by the end of 2011, which means between seven and nine per cent of its approximately 64,000 employees face redundancy. However, disruption to customer-facing sales positions is expected to be limited.

The shake up will also see a company wide overhaul of the firm, reducing business units from five to three. The new departments to come into effect from the start of 2010, are: Business Solutions, which will focus on end user services, billing and charging, convergence and subscriber data; Network Systems, which will focus on both fixed and mobile infrastructure, including optical transport systems and broadband access equipment; and Global Services, which will focus on outsourcing and network management.

Meanwhile, over in Sweden at rival infrastructure vendor Ericsson, heads were moving. Ericsson’s head of technology, Håkan Eriksson, has been appointed head of Ericsson in Silicon Valley, the centre of the company’s important IP business. Eriksson will lead Ericsson’s development of fixed, mobile and internet convergence technologies from January. He will succeed Bert Nordberg, newly appointed head of the manufacturer’s struggling handset joint venture Sony Ericsson.

Eriksson, who’s got a long history of heading up the Swedish firm’s tech division, serving as CTO since 2003, prior to which he led Ericsson Research for five years, will also keep his present position as CTO. The Informer hopes it doesn’t all go to his head.

Keeping with the head hunting theme, Google-backed satellite operator O3b Networks has hired a veteran to steer it on its course to bring internet connectivity to emerging markets. The brainchild of American entrepreneur Greg Wyler, who has rolled out fibre networks in Rwanda with his company Terracom, O3b Networks (which stands for “the Other 3 billion”) proposes to wirelessly connect markets in Asia, Africa, Latin America and the Middle East at prices comparable to fibre in developed regions. It’s an ambitious plan, but one that has attracted the interests of Google, HSBC Principal Investments and Liberty Global as backers.

So as it prepares to launch another round of fundraising, Wyler is set to step back to a board role, to be replaced by ex-Cable & Wireless emerging markets wireless head Greg Clarke, who currently heads up property developer Lend Lease.

The Informer is hoping to catch up with O3b at the Africa Com show in Cape Town next week, where he will be roaming the floors (bars) looking for the region’s juiciest titbits of news.

Sticking with the skies for a paragraph or two, Vint Cerf, the father of the internet, gave a presentation at the Open Mobile Summit in San Francisco this week about his work on an interplanetary internet (an outernet?) protocol known as Delay-Tolerant Networking (DTN). In space of course, you’d have a hard time running TCP/IP because of the mammoth distances between planets and the fact that they rotate. So DTN stores information until one node finds another to communicate with, rather than continually trying to send the information until it is successful.

The Informer really only included this because of a brilliant quote from Cerf presentation regarding DTN: “Engineers are really good at labelling and branding things. If we had named Kentucky Fried Chicken, it would have been Hot Dead Birds.”

Actually, DTN has already been implemented into the Android OS stack, which is rather fitting, given the marketing to come out of Motorola recently. The Motorola Droid, unveiled last week as the first Android-powered handset to use the version 2.0 firmware, is on its way to Europe under the guise of the Motorola Milestone. Italy and Germany will be the first markets in Europe to stock the Milestone, with further availability to be announced at a later date. It is believed T-Mobile, Vodafone and O2 will launch the device in Germany, while Italian carriers are not yet confirmed.

Android has been hogging the limelight of late, with Sony Ericsson on Tuesday showing off its first handset to be powered by the mobile operating system. The X10 is the latest addition to the handset vendor’s Xperia portfolio and will be the flagship model in a family of phones coming to market during the first half of 2010.

Like a number of other manufacturers experimenting with Android, the X10 will feature Sony Ericsson’s own user interface, known as UX, which shoves certain features to the forefront. In this case, it’s Timescape, which streams all communications with one contact together in one place regardless of the medium; and Mediascape, which streams music, photos and videos from contacts and artists via Sony Ericsson’s content shop/app store, PlayNow. However, the device will also offer a link to the generic Android Market as well as its own storefront.

T-Mobile, which is one of the biggest operator cheerleaders for Android, wants to give its customers the opportunity to go shopping with ease in the Android Market. During a presentation at the Open Mobile Summit, Cole Brodman, CTO of T-Mobile USA, said that from November 17, Android users would be able to pay for apps downloaded to their device on their monthly bill. The carrier is also deploying a T-Mobile channel in the Android Market to support this carrier billing functionality.

According to Brodman, around 50 per cent of users of the myTouch 3G, which is the US moniker for the HTC Magic, visit the Android Market at least once per day. Moreover, around 80 per cent of myTouch users also browse the web on their devices multiple times per day.

These sorts of figures are always a bit problematic, and some numbers from research house TNS ComTech have been causing confusion this week. According to the researcher, the new generation of non smartphone touchscreen mobile phones is causing a significant drop in the value generated from UK bills. While users of non-touchscreen handsets are spending 12 per cent less per month than they were last year, the comparable decrease amongst users of non-smart touchscreen handsets is almost double at 23 per cent.

Since the launch of the original iPhone in 2007, touchscreen technology has taken the mobile market by storm and today touchscreen phones account for almost half (43 per cent) of all UK sales. However, the technology has filtered down the value chain and non-smart cheaper touchscreen devices like the Samsung Tocco and the LG Viewty are accelerating the decline in contract average revenue per user (ARPU).

TNS’s study reveals that consumer misunderstanding is to blame, with consumers not aware of the difference between a phone with an advanced operating system and a touchscreen phone with a basic operating system. As long as a phone looks like a high end smartphone, the average Brit will think that it is one and go for the cheapest deal they can find.

Oh wait… Just as the Informer was penning this very paragraph TNS’s own Paul Moore wrote in to clarify that the data shows that the customers who are now acquiring non-smart touch handsets were previously higher value customers in terms of monthly bill spend. So, those users who switched from smart touchscreen to non-smart touchscreen handsets went from spending on average £38.11 per month to £32.14 per month. While those who transferred from non-touchscreen to non-smart touchscreens spent more than 12 per cent less per month after the transfer. “Whichever way we look at the data, the consumers that own non-smart touchscreen phones are spending less than other market segments, when they were previously higher value customers,” Moore says. So that clears that up.

The good news is ARPU among touchscreen phone users with advanced operating systems, such as Apple’s iPhone and BlackBerry’s Storm, is up by an average of £5 per month.

That may be so, but UK mobile operator Orange was attracting criticism this week as it prepares to go up against O2 with its own iPhone offer. The bulk of the criticism is directed at Orange’s terms & conditions, which have revealed a fair usage policy of just 750MB per month on each of wifi and 3G. This usage cap, which O2 does not have, raises the ugly prospect of network congestion, and has prompted some of our readers to comment on how well Orange’s 3G network stands up to the onslaught of data usage, when the iPhone launches November 10. Saying that, the carrier isn’t shying away from offering tethering options for the iPhone, so it is a least expecting some customers to use the handset as a modem.

With pricing pretty much identical and Vodafone set to launch the device too, it looks like the UK battle for iPhone customers will come down to the quality of service each network operator can offer. And that makes the proposed merger between Orange and T-Mobile of the utmost importance as it’s thought that the move would give the new entity a data optimised network to better handle all that extra iPhone traffic.

On Friday the parent companies Deutsche Telekom and France Telekom announced the signing of the final agreement to combine the two UK carriers. The deal is to be conducted as a merger of equals, with T-Mobile and Orange folded into a 50:50 joint venture. This move would create a new market leader, with over 33 million subscribers and a 43 per cent share of the UK market. This represents a 50 per cent leap from current leader O2’s 22.44 million strong user base and 29 per cent market share, according to the latest figures from Informa Telecoms & Media’s WCIS. The new player will also benefit from the inclusion of Orange’s fixed broadband subscriber base and the potential to deliver converged services.

This week Deutsche Telekom reported a 7.2 per cent rise in net profit for the third quarter, from €895m in 2008 to €959m in the third quarter of 2009. Revenues climbed 5.2 per cent year on year to €16.3bn. The US operation continued to be the driving force, with T-Mobile USA delivering a 4.4 per cent increase in profits to €595m. Europe didn’t fare so well due to the continued decline of fixed line revenues, particularly in Telekom’s domestic market, while revenues were down across the board with T-Mobile in Europe.

That’s all for this week folks, the Informer has a plane to catch,

The Informer

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