Thursday, June 12, 2014

European M&A rumours....

Here is the text from an email I got today....

Posted: 12 Jun 2014 02:35 AM PDT
Does anybody else find it a bit odd that today's media coverage of the failed merger talks between Orange and Bouygues Telecom pretty much all fail to mention the bigger industry tale that has been rattling around European markets all week - the talk of a EURO 90 billion merger between Deutsche Telekom and Orange.

I know this one has been knocking around for the last few days and a bit of an 'old chestnut' of a deal story. But this time I think there may be something in it, so it's worthwhile a mention on Betaville this morning.

Indeed, Gary Parkinson, the market reporter over at the The Times, tweeted on Monday he had been hearing rumours Deutsche Telekom is preparing a takeover bid for France's Orange. And on Tuesday Bryce Elder and Paul Murphy over FT Alphaville said on their execellent Markets Live show they have heard similar things but people close the situation have been playing the gossip down.

Well, I hear that several investment banks have lined up on either side of this potential EURO 90 billion combination, adding credence to the scuttlebutt.

Deutsche Bank, Bank of American Merrill Lynch and Citigroup are said to be working with Deutsche Telekom on the possible merger. Orange is believed to be working with Credit Suisse, Lazard and Credit Agricole.

Rothschild is likely to advise the French government, which owns 27pc of Orange, on any merger deal although the venerable corporate adviser was mandated to work with Bouygues Telecom on its EURO 6 billion sale talks to Orange, whose shares fell yesterday about 4pc.

Anyway, that's the extra detail I have managed to glean from my sources. The idea of Deutsche Telekom and Orange combining has been around for several years (the two companies have already merged their British businesses into EE) but my sources tell me things are now "hotting up".

In part, this is because Deutsche Telekom is close to securing a deal to sell its 67pc stake in T-Mobile USA to Sprint, which is controlled by Japan's Softbank. Here is a link to last week's report on the matter: http://uk.reuters.com/article/2014/06/05/us-tmobil-sprint-corp-idUKKBN0EF2DG20140605

Some of my sources reckon Deutsche Telekom will secure an upfront cash break fee payment of over EURO 1 billion from Sprint as it will take a long time for the US regulators to clear the sale.

Any deal between Deutsche Telekom and Orange is likely to see the German company pay for the French business using its own stock and a little bit of cash, claimed one source.

Bankers also tell me there is a political will to see both Deutsche Telekom and Orange come together to create a European telecoms champion that will be able to compete on a global stage. The German government owns 14.5pc of Deutsche Telekom and France has a 27pc stake in Orange.

I have to admit, though, I don't know whether this deal is just a glint in Deutsche Telekom's eye or whether talks - albeit informal, early or late stage - are "live". Market participants can make their own mind up what price Deutsche Telekom will/would have to pay for Orange

Deutsche Telekom and Orange both declined to comment although people close to the latter said there is "no project" being worked on.



The sender is a journalist.

I think that it is highly unlikely that any such deal will happen as the French are unlikely to accept the sale of Orange to the Germans.  If the deal was to happen I think that the EU regulators would have a serious look at what measures would be needed to make sure that wholesale access were fair and open to all as well as price regulations.  I cannot see where the New Co can make savings aimed at making the deal work medium to long term.

Whilst many Bankers are running models for consolidation I think that politics and personalities will make any such transactions limited to smaller markets or lesser players rather than former State Operators taking one another out.  That said I would welcome either DT or Orange buying BT.

Saturday, May 10, 2014

So where are we going in Mobile?

I look at the mobile ecosystem in Europe and fear that rather than making progress it is regressing, people are not innovating rather they are controlling costs in order to offer some kind of financial return for the shareholders.

Back in 2008 the former Strategy Director of Orange and I were telling everyone that if the Mobile Networks were to have a future as well as building out networks they needed to invest in improving Voice services or they would end up hollowing out the core business. Well I guess they were not listening.  My own family fear making telephone calls on the basis that they are too expensive regardless of the fact that I have told them that the tariff they are on means that they have unlimited to calls to fixed and mobile numbers in the UK. Asked to say how much a call costs they appear like a Government Politician asked the price of a pint of milk and a loaf of bread.

Meeting with others involved in Futurology and they have moved on from evangelising Apps to now push the rise of Wearables/Internet of Things/Big Data.  I am reminded of the Early Days of Imagineering at Orange  where they worked with Charles Church and Microsoft to build a House of the Future in Commuter Belt Hertfordshire.  People were asked to come and live in the house and then observed in an effort to understand what was possible and what was not.  The biggest issue I have with the Automation of the House is just how do we propose to install the technology into the millions of houses that we have already built because at 150-200K new homes a year it's going to take a very long time before the market is of significant scale without such.  I look outside my window at home and less than one in fifty houses where I live have a solar panel despite financial incentives. I know that I am due another round of renovations as it has been nearly ten years since I replaced the bathrooms and lighting. But I don't think that many others would say right now is the time to invest in enabling my house to be run by the Internet.

If I were to make the investment in enabling my house to be part of the next wave of technology what guarantee do I have that I have invested in the VHS solution rather than Betamax?  Worse still will my investment be that of MiniDisk proportions and in a few short months the novelty of the new has faded and I no longer wish to use Nest to control my heating system or who ever supplies my lighting system.  Worse still now will my connect fridge work if I persist in shopping at the Farmers Market rather than Whole Food Market? My artisan Butcher, Baker, Brewer and Cheese maker will not sully their products with smart tags and life is too short for me to inventory everything that comes into the house.

The fate of Nike's Fuel Band is something we can expect to see with Google's Glass and an number of current trendy fitness bands. Am I going to have another shoe box of tech junk that will only be fit for my own personal technology museum because they were once mass market and are now obsolete?

Perhaps now is the moment for the Mobile Networks to take greater control of there assets and whilst installing 4G technologies also adapt the API's that are used by Internet Firms to enable Apps and Internet of Things?  In doing so they can once again price the value of connectivity this time using terms such as Quality of Service, Security and Enhanced Bandwidth to get extra payment above that of basic utility prices.

We are at the very early stages of 4G in Europe, it will be another 2-3 years before the service is deployed to cover the majority of the Landmass in most countries and then the speeds available will slowly be increased and new services/businesses will come to the fore.  I do not expect that the companies that will dominate 4G are know yet just as Apple, Android and Apps were not on the tip of everyones tongue in 2003.        

Sunday, February 23, 2014

GSMA World 2014 in Barcelona, time to end the show?

The global get together that is GSMA World rolls into Barcelona this week and I am left with the feeling that as with Telecoms World before it no longer fits a purpose. At the hight of the Dot.Com bubble Telecoms World was THE trade show for the fixed telecoms world, $1M+ was spent by firms on the production of stands; it was such a success that the ITU build a new space for the next show, unfortunately that new space had tumble weed rolling through it and the ITU has become a zombie.

In past years GSMA World was an important conference that happened to have an exhibition attached.  It was something that you had to attend if you wanted to achieve or be recognised in the Mobile Industry. Over the course of a week it was possible to meet all the important players in the industry and get a real feel for what was going to happen for the coming year. That is no longer the case.

At this years conference the GSMA has decided that the Keynote speakers should be Facebook and IBM rather than the CEOs of Vodafone, Ericsson or Huawei.  In the past we have listened to the future as outlined by charismatic leaders and disruptors such as Richard Branson and Hans Snook who were upstaged by the likes of Douglas Adams. This year the line up is such that many very senior executives whilst in town will not be at the show; rather they will stay close to the Arts Hotel to network and lobby.

As for the exhibition, well the security will rival that of the airport and it is of a size to rival CeBIT next month in Hanover.  It is unlikely that we are going to see anything of mind blowing innovation or design because now they are revealed elsewhere at times more suited to consumer demand and/or the news cycle.

The cost and the scale of GSMA World Congress does mean that a number of those on the edge of the mobile ecosystem will not be in attendance. I have a number of conference calls after the show finishes with people who will not be in attendance but what to confirm that in missing Barcelona they have not missed out. If they are right even fewer decision makers will attend in 2015 and the were are faced with a downward spiral rather than an upward curve.

The media reporting on World Congress are unlikely to report that the Emperor stands before them unclothed as they enjoy a comfortable time with plenty of chances to party on a PR firms credit card. So whilst the SWAG on offer has declined the good times roll providing that you work for the right media.  A number of Industry Analysts are not attending as they have not been able to find sponsors willing to pick up the tab and so will be stuck at home.

The GSMA missed the fact that Mobile's focus had shifted from Europe to West Cost America with the rise of 3G. As 4G starts to become mainstream in the developed world and 3G is deployed on a Global basis it needs to become relevant again.  The Executives leading the day to day operations have to understand that they are working for a trade association that is about the Mobile Networks, Equipment Manufactures and those that support them, it is not about the software companies that are marketing to consumers whilst making little or no investment in the infrastructure.

I would be happy to see Facebook and WhatsAp CEO's booed and hackled at their keynotes rather than applauded as this would demonstrate that the GSMA was still relevant and represented it's members.    

Monday, December 16, 2013

Will the real BT stand up?

Over the weekend I read three stories about BT which paint a confused view of just what it's future might be. On Saturday the Guardian reported that thanks to BT TV complaints have shoot up. The Yesterday's Sunday Times had two stories in the Business Section about the return of BT Mobile and a feature on NEW CEO Gavin Patterson's £2bn bet on sports TV.

If you read on paper you get the view that BT's retail strategy is in need of a major review. The customers are unhappy with the failings of not just it's TV product but also it's Broadband product. The only provider that gets more complaints for it's Broadband is EE.

Read the Sunday Times and all is good for BT it's about to get back in the Mobile Phone business after leaving in 2001 and BT TV has seen 3M on Virgin and Sky take the service. Then a full page feature on new CEO Gavin Paterson and his £2bn bet on sports TV is a bold gamble that aims to grow the business after a period of cost cutting. He will use a Quad Play offer to drive up incomes having bought some 4G spectrum and struct an MVNO deal with EE.

The problem is that Simon Duke in the Sunday Times does not seem to understand that BT has had MVNO agreements with O2 and Vodafone ever since it sold of it's mobile arm after over paying for 3G spectrum in 2000. He also does not seem to understand that since 2008 BT has failed to invest the money need to provide the long term upgrade in super-fast fibre to the curb rather than cabinet just as it failed to match European spending in ADSL deployment ten years previously.

When you start to understand that last week OFCOM reported that the UK has the lowest consumer prices for Mobile services in Europe you start to ask it's not just Duke that fails to understand the realities of a very competitive telecoms market but BT also.  For too long the Company thinks that one of its prime roles is to defend itself against the regulator rather than invest in it's Network so that it survives long term.  

Thursday, November 28, 2013

You lost the love....

Hey Mobile Network Operator just what is going on. We have been together for some years now and whilst my love of mobile has grown stronger you have lost the love for me you once had. When we first started you were happy and helpful, giving and gracious. Nothing was too much for you, my calls were picked up by a human quickly and presents were given. Today it takes an age to get through the machine before a grumpy despondent surly conversation leaves me thinking why did I call because you don't love me any more.

I pay my bill on time, I accept you declining coverage when it comes to a phone call and the fact that when ever possible you hand me off to a wifi network. I know that the present of a new shinny device once a year was too much to ask and can now wait two years or go out and buy a replacement device myself.

Yet you now seem to think that the transaction should be something that is best undertaken at lowest cost despite the fact that I still manage to spend £100+ when others around are giving you far less each month. I know that at this time my leaving to join another makes no sense as you are working to an Industry Standard but it cannot be sustained soon I could become a nomad and operate with just wifi and tablet. I am not someone who is looking for the lowest transaction cost but rather the service that my loyalty and spend justify when seen against the average. Keeping me is about more than a calculation of margin over Subscriber Acquisition Cost it is about your Brand Values meaning something.

Looking at Twitter and chatting with mates it seems that I am not the only one that feels that you have lost the love for the consumer. It is not that our standards are raised rather that yours have dropped. Soon I will be embarrassed to say that I work in the Mobile Industry and can no longer recommend my supplier to those looking to change as at this time the reasons to change are difficult to see.

Please roll back the changes, stop trying to be a faceless heartless corporate and show some empathy not just for me but for each of the contract customers once more. You might just be rewarded yourself with growing revenues and fewer contract cancelations.         

Friday, November 15, 2013

It's not about the technology....

A friend on Twitter pointed me at this article on how Blackberry could have avoided becoming a footnote in business study classes looking at the Kodak Moment.

I am surprised that someone who works for an Advertising Agency fails to point to the obvious factors in Apples success.  When none of the others were directly advertising to the consumer on TV, Apple were.  When few were advertising handsets in the Press Apple did. Others at that time had stopped advertising above the line because they were selling products via Partners those partners were the Mobile Operators who used the coop funds to pay for in store and brochures which lets face it looks old and out of date compared to Apple.

NOTHING on a iPhone was new to the mobile industry what was fresh was the promotion and development of the aspirational quality of the handset.  It has been helped by the "exclusivity" model used by Apple to "limit" mass market appeal. This fashion label allowed Apple for a time to lead the Smartphone market but was quickly overtaken in terms of volume by Samsung who used it's Far East cooperation ethos to appeal to those that where anti-Apple to grab the market.

The big question is will my Grandchildren read that Apple was just another Levis Strauss in that it helped establish a sector, almost died, had a return to fashion and then a slow but inevitable decline?

Thursday, November 14, 2013

An act of stupidity by a desperate Prime Minister

I picked up my morning paper and almost tore it in two reading the latest stupid PR stunt from David Cameron. When Ed Miliband made his Conference Speech this September we were told that price controls could not work and were wrong. Yet with his back to the wall Dave has decided that all utility companies need to be told that his government will not accept price rises in the run up to the 2015 election.

This is an act akin to King Canute except the Prime Minister does not understand that he cannot turn back the tide of price increases.

An analysis of the players in the market will show that many are subsidiaries of  overseas businesses rather than British and thus have little loyalty to local politicians. They are in the majority investing in significant infrastructure programs that mean that rather than pay taxes they have losses to cover.

What the Prime Minister should be doing via the offices of the Department of Culture Media and Sport and Ofcom is making sure that telecoms networks are able to deploy high speed broadband to the majority of the population in the majority of places. It is with such a network that the economy will grow and income rise at such a level that people do not feel price rises.