Profit and loss

It’s results week, and the Q2s are out for a lot of the big names in the industry. For some it’s a chance to boast of great riches and for others a humbling of Murdochian proportions. So who’s up and who’s down? It was all smiles at leading industry supplier Ericsson, where profits for the quarter were up a whopping 59 per cent year on year at SEK3.2bn ($508.1m).

July 22, 2011

8 Min Read
Profit and loss

By The Informer

It’s results week, and the Q2s are out for a lot of the big names in the industry. For some it’s a chance to boast of great riches and for others a humbling of Murdochian proportions. So who’s up and who’s down? It was all smiles at leading industry supplier Ericsson, where profits for the quarter were up a whopping 59 per cent year on year at SEK3.2bn ($508.1m).

Sales were up a lot less, increasing just 14 per cent from Q210, due in part to the strength of the Swedish Kroner. Geographically Ericsson saw “especially strong growth” in Brazil, China, Germany, Korea and Russia, the firm said, which contributed to a 31 per cent growth in network sales. In the managed services unit, where Ericsson has performed so strongly in recent times, sales were actually down year on year.

Back in the day Ericsson and Nokia were head to head on both networks and handsets. They went their separate ways, spinning out their less-favoured businesses into joint ventures—SonyEricsson and NokiaSiemens Networks—and it seems to be working a lot better for Ericsson than its erstwhile competitor.

Nokia turned in an operating loss for the quarter, misplacing €487m, compared to an operating profit of €295m for the same period last year. “The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011,” said CEO Stephen Elop, before making a limp effort at positivity:

“Even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business. Most importantly, we are making better-than-expected progress toward our strategic goals,” he said. The “better than expected” part that makes the Informa wonder just how slow they were expecting progress to be.

It was Apple that pulled the rug out from under the Finnish handset player and Jobs and Co turned in numbers that were in marked contrast to Nokia’s, to say the least. It’s become routine for Apple’s quarterlies to lead with the news that the firm’s had a record three months and this set was no exception. Sales of the iPhone are up 142 per cent, iPad sales are up 183 per cent and net profit hit $7.31bn on revenues of $28.57bn. Those numbers translate into year on year increases of 125 per cent and 82 per cent. Tidy.

Number cruncher StrategyAnalytics said this week that Apple picked up 61 per cent of the tablet market for the second quarter, which is the one number that appears to be on the decline for Cupertino’s finest. That’s the problem with kickstarting a market; you lose share when everyone else gets in on the action. Strategy Analytics said that for the second quarter in 2010 Apple’s tab share was 94 per cent.

A lot of firms have joined the fray, with Android the favoured platform. Google’s OS captured 30 per cent of the tablet market, the analyst said, adding that no vendor has managed to come up with a “blockbuster” product to rival Apple’s definitive iPad.

RIM’s Playbook, the performance of which has been muted in the market, got a bit of a lift this week when the US Government approved it for use by federal agencies. Still, that’s hardly the consumer market that RIM’s going after and may, in fact, be a nail in the coffin in terms of desirability. You have to wonder at what kind of deal was made to win that contract.

Silicon vendor and IP warehouse Qualcomm was in the billions again, with net profit up 35 per cent year on year to $1.04bn on revenues of $3.62bn.

On the carrier side, Vodafone – which keeps quarterly profit numbers to itself – managed revenues of £11.66bn, an increase of 3.6 per cent. US player AT&T fared less well, meanwhile, dropping its profits by just over ten per cent to $3.5bn on revenues of $31.5bn. The numbers weren’t all down, however, as AT&T reported an increase in churn from 1.29 per cent to 1.43 per cent.

Emerging markets specialist Millicom saw its profits on the up, hitting $175m, compared to $134m for the same period in 2010. Revenues were up by more than a fifth to $1.12bn. The firm has for some time been cutting its costs by disposing of its infrastructure through a series of deals with tower ownership companies.

This week Millicom said that its Colombian subsidiary had agreed to sell 2,126 cell towers to American Tower for $182m in cash. Millicom-owned Colombia Móvil will transfer the towers to a newly formed Colombian operation called ATC Infranco. Following the deal, Millicom and Colombia Móvil’s other shareholders will have an option to acquire an indirect, substantial minority equity interest in ATC Infraco. Colombia Móvil and ATC Infraco will enter into a long term leasing agreement and build-to-suit agreement, whereby ATC Infraco will provide Colombia Móvil with towers for its network.

Last week we had a good look at O2’s new Priority Moments location-based rewards programme but the location news this week is less celebratory in nature. Location technology specialist TruePosition is suing the weighty triumvirate of Ericsson, Alcatel Lucent and Qualcomm, alleging that it’s being “illegally cut out of future mobile positioning standards, despite having the only high-accuracy network-based technology that is proven to work.”

TP reckons the three are in cahoots and have “hijacked” the standards bodies responsible for selecting location technologies to be used in LTE networks. The end game for the dastardly trio, TP said, is to exclude the TruePosition solution, widely used in the US for emergency location solutions, and install their own products for economic gain. Taking a civic stance, TP CEO Stephen Stuut said: “When it comes to locating 9-1-1 callers and protecting U.S. citizens, no one should be playing games with public safety.” ETSI and 3GPP are also named in the suit.

While we’re on LTE, the seers at Ovum have proclaimed that unlimited data bundles must be axed for LTE. Analyst Nicole McCormick said that operators should be wary of repeating the mistakes that have led to the capacity crunch in 3G networks. “While LTE delivers video more efficiently than 3G, operators offering flat rates for LTE could quickly overstretch their LTE networks and find themselves having to invest more than expected to alleviate this congestion,” said McCormick. She added that she was disappointed to see a lack of innovation in early mover LTE pricing strategies. “Big bucket and unlimited pricing dominate LTE offerings across the globe,” she said, shaking her head like the parent of a naughty child.

Meanwhile US carrier Verizon Wireless has announced that it has extended its LTE network to an additional 28 markets, taking the total number of cities the network covers to 102. Areas now enjoying LTE include Colorado Springs, Portland, Oregon, and Honolulu. “In fewer than eight months we have introduced our 4G LTE network to more than 100 markets and we are continuing to aggressively expand our 4G LTE network; by the end of 2013 we plan to bring 4G LTE mobile broadband to our entire 3G coverage area”, said David Small, the firm’s CTO.

Sticking in the US for a moment longer, troubled aspiring wireless broadband player NextWave is negotiating its second brush with bankruptcy. It’s secured a brief stay of execution with a waiver that will now expire on August 1st. The firm had been under obligation to repay $129m in secured debt by June 30th. It doesn’t look to good for the company spun out of Qualcomm in 1995, after which it bought up a huge chunk of US spectrum. After filing for bankruptcy it sold off the spectrum and maintained a presence with proprietary chipsets and related network and device products based on the WiMAX standard as well as wireless video technology. It has since sold off all these other assets in a bid to stay afloat but a second bankruptcy now looks likely.

Over in the UK, the CEO of Everything Everywhere, the merged operations of Orange and T-Mobile, has resigned citing personal reasons. Tom Alexander was put in charge when the firms merged and will be replaced by FranceTelecom’s Olaf Swantee, head of FT’s European operations, and an Everything Everywhere board member since its inception.

Orange and T-Mobile’s co-operative efforts are extending to Poland as well, where the two have announced that they are to share networks.  Orange-owned Centertel and T-Mobile’s PTC are setting up a third party JV to manage their merged network, dubbed NetWorkS!, and that’s their exclamation mark – what is it with awkward names for network management ventures? The contract is set over a term of 15 years and is limited to technical elements of the RAN. Orange and T-Mobile will remain respective owners of their core networks and frequencies. But through the venture, the operators will be able to eliminate duplicate base stations, serving both customer bases from a total of 10,000 installations. At present PTC has around 7,000 and PTK around 6,400. The project is scheduled for completion in 2014.

Finally this week, the UK’s public service broadcaster, the BBC, has decided it’s going to hold the UK networks to account on their mobile coverage claims and is launching its own coverage map of the UK. The broadcaster has developed an Android app in conjunction with test specialist Epitiro that, when downloaded by consumers, will feedback data on the availability and strength of signal at different locations throughout the UK.

The use of a smartphone app is an interesting experiment into crowd-sourcing, with the BBC citing UK regulator Ofcom’s assessment that there are some 12 million smartphones in use in the UK. Analysts have suggested that as many as half of these could be Apple iPhones, although if only ten per cent of Android users—effectively the remainder of smartphone users—in the UK sign up to the trial, the test base would be substantial.

The BBC and Epitiro have said that all data will be anonymised and no personal data will be stored. Ofcom’s own research into mobile coverage and performance in the UK will be published later this year.

Take care

The Informer

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