Mobbing up

Google was flexing its financial muscle again this week, dipping into its beer money to buy mobile advertising network Admob for $750m. Admob serves display ads on mobile sites and in applications - a complement to Google's mobile search ad offering - and the acquisition represents further fortification of Google's mobile garrison.

November 13, 2009

6 Min Read
Mobbing up

By The Informer

Google was flexing its financial muscle again this week, dipping into its beer money to buy mobile advertising network Admob for $750m. Admob serves display ads on mobile sites and in applications – a complement to Google’s mobile search ad offering – and the acquisition represents further fortification of Google’s mobile garrison.

According to Google, the deal will bring new innovation and competition to the nascent mobile advertising market, and will lead to more effective tools for creating, serving, and analysing emerging mobile advertising formats.

For Admob, meanwhile, the deal is proof of concept and, apparently, the end to a niggling inferiority complex. Omar Hamoui, founder and chief executive of AdMob said: “Until now, it has always felt like those of us involved in this space played second fiddle to our online brethren. I believe that time is over.” Now that Admob is playing with the big boys, Hamoui predicted that: “Our ads will become more relevant, our products more robust, and our monetization capabilities more significant.”

So it’s happy days at Admob, whose entire team will move to Google. Hamoui was spreading the love in Apple‘s direction as well, praising the iPhone creator for effectively jump-starting the in-application advertising business (by effectively jump-starting the mobile application business)

Apple itself was living the high life this week, with Strategy Analytics reporting that the firm overtook Nokia to become the world’s most profitable handset vendor in the third quarter of this year. The Finnish market leader, whose margins were long the envy of the handset manufacturing sector, dropped to second place in the wake of the economic downturn and, said Strategy Analytics, “a stagnant presence in the United States.”

“We estimate Apple’s operating profit for its iPhone handset division stood at $1.6bn in the third quarter of 2009. Apple overtook Nokia for the first time, which recorded a lower $1.1bn of operating profit. With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years,” said analyst Alex Spektor.

From the largest handset vendor by profit to the largest operator by revenue and things remain positive at Vodafone. The UK-based international carrier saw revenues for Q3 jump by 9.3 per cent year on year to £21.8bn, with profit for the three-month period reaching £4.8bn. All, good then?

Not if you’re one of the employees likely to get the chop as part of Vodafone’s accelerated cost reduction programme, which CEO Vittorio Colao said will see the firm target a further £1bn in savings by 2012. The original £1bn savings plan will be achieved a full twelvemonth ahead of schedule, he said.

“The £1bn cost reduction programme is expected to be delivered a year ahead of plan and we have extended this to a further £1bn of cost savings by 2012. At the same time, we have maintained our capital investment at £2.6bn in the first half, delivering further improvements in network quality and performance for our customers,” Colao said.

Meanwhile, Vodafone, as a Mafioso might say, is now made in Taiwan. The firm announced a non-equity partnership deal with Taiwanese player Chunghwa Telecom this week. Chunghwa will get exclusive access to a range of products, services and devices from Vodafone, while existing Vodafone customers will be able to use ‘home’ services as normal when in Taiwan.

The move increases Vodafone’s presence in Asia, where it already has agreements in place with China Mobile, SmarTone in Hong Kong, M1 in Singapore, Celcom in Malaysia, Dialog in Sri Lanka, dtac in Thailand, SoftBank in Japan, and Vodafone Fiji.

So it’s a sunny outlook for Vodafone, like much of Africa. The Informer’s been at Informa Telecoms & Media‘s AfricaCom event in Cape Town this week, taking the temperature of the regional industry. And for those companies within the sector focussing on solar power, things are warming up.

Indian solar powered infrastructure firm VNL, told the Informer that it is building many pilot sites throughout Africa, after interest from local operators. Craig Hall, senior vice president for global initiatives at VNL, said that the company’s WorldGSM base station has been specifically designed to enable mobile operators to reach remote rural areas where ARPU is less than $2 a month. The target audience is the 1.6 billion people who have no electricity and another one billion, who live in areas with unreliable access to power.

Recent research published by the GSMA found that there is significant interest in off-grid power solutions, with 60 per cent of mobile operators interviewed by the association revealed to be exploring off grid charging initiatives for handsets. However, there is thought to be only limited understanding about the full scope of options and the associated social and business benefits.

Singaporean carrier SingTel, owner of Optus, became the latest major player to express an interest in the African region during this week’s show. Chief executive Chua Sock Koong said that she was eyeing up Africa as a potential target for expansion. “Africa is a market that is definitely worth our interest,” Chua said.

The announcement came as SingTel reported quarterly financials for the three months to the end of September. Net profit at the group was up ten per cent year on year to S$956m, compared to S$868m in 2008, while revenues climbed 5.4 per cent year on year to S$4.1bn.

Singapore has a mobile penetration of  around 150 per cent and SingTel, unsurprisingly, is looking further afield for growth opportunities. Given its 32 per cent holding in Indian operator Bharti Airtel, SingTel was one of the supporters of Bharti’s move to acquire a stake in African carrier MTN, a move that came to nought.

As will speculation about Zain‘s bid to offload its own African operation, at least according to Chris Gabriel, CEO of Zain Africa. “Zain Africa is not for sale. We are focused on our objective to become a top ten player by 2011 and we still have an appetite for expansion,” he said at the show this week.

Dealing with contraction rather than expansion at the moment is US carrier Sprint Nextel, which this week announced that as many as 2,500 jobs could be for the chop. The firm is looking to save around $350m a year in labour costs, and has closed 27 call centres in the past seven quarters.

If Sprint’s looking to save money you might think it would be tempted to resist further investment in Clearwire. But you’d be wrong. The WiMAX outfit announced this week that it has secured agreement from its investors – Comcast, Time Warner Cable, Intel, Eagle River Holdings and Bright House Networks alongside Sprint Nextel – to contribute a further $1.56bn of logs for the fire. Sprint shouldered the lion’s share, stumping up almost $1.18bn.

Google, meanwhile, which many would suggest should be seen as a savvy investor, opted not to participate and, by so doing, reduced its stake in Clearwire.

And we seem to have come full circle, so that’s about it for this week.

Take care

The Informer

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