Business analysis for telecoms professionals November 2010 leader contents

news in brief MORE FOR LESS 3 Timeline A roundup of some of the As operators endeavour to squeeze more out of their existing major stories reported in our daily news service, networks, we look at transforming technologies and markets www.totaltele.com.

content strategies elecoms operators share a (DSM) techniques that enable telcos common problem: end- to provide high-bandwidth services 6 Smartphone OS Tusers are increasingly over their copper networks. AT&T competition demanding. As customers call for was arguably the most vocal backer google and Apple are more capacity and higher speeds, of DSM in Paris, having deployed making inroads in the operators are looking for new ways the technology as long ago as 2004 smartphone OS market. A to get the most out of their existing to support its IPTV rollout. fierce battle now looms in the face of rocketing networks and to keep capex down iDate’s figures show US FTTH/B Mary Lennighan growth and consolidation. Editor for new rollouts. And these chal- household penetration at over 7% Total Telecom lenges took centre stage at and growing, backing up the asser- network strategies Broadband World Forum (BBWF) tion by China’s ZTE that telcos will 10 Managed services in Paris late last month. continue to stretch the life of their china’s leading vendors Fibre access networks will give copper alongside rolling out fibre Huawei and ZTE are users significantly greater band- for some time to come. ZTE and making strong headway width to their homes, but new domestic rival Huawei feature in our into providing managed figures from iDate presented in analysis on p.10, which charts their services to operators.

Paris show that operators are still rise in global managed IT services. technology trends dragging their heels, especially in Advances in fixed networks will Western Europe. Two of the conti- also provide much-needed backhaul 14 Data centre for mobile data services. Europe’s transformation Telcos will continue MNOs used the BBWF stage to in part two of our key express their shared opinion that briefing on data centres, to stretch the life of LTE simply will not be enough to roy Rubenstein looks at standards transforming solve the mobile capacity crunch. data centre networking. copper networks Small cells, such as picocells and femtocells, will be key, they claim. business and finance nent’s biggest economies, Germany However, the WiFi offload option 16 M&A activity and the UK, failed to make it into brings with it another set of chal- Private equity companies iDate’s ranking, which lists coun- lenges, most notably a lack of are circling as some telcos tries in which penetration of control over the user experience. streamline operations; fibre-to-the-home or building is Developments in mobile operat- others are buying into above 1% of households. ing systems have enriched that user rising service segments.

Deutsche Telekom CTO Olivier experience. But our feature on p.6 statistics Baujard illustrated the quandary for shows that smartphone OS makers operators. On the positive side, face an uncertain future as calls for 17 Prime numbers end-users are still willing to spend, consolidation grow. Consolidation developing economies’ he said. However, the “fibre capex is one driver behind renewed M&A share of global wireless connections, VoIP growth wall…is a real wall”. activity in telecoms, and on p.16 we and wireless backhaul. BBWF included much talk of round up some of the big recent dynamic spectrum management deals and likely ones ahead. n Insurance Financial Services Communications Public Sector

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A roundup of the major stories in telecoms in the past month, as reported in our daily news service, www.totaltele.com

Business value added tax on triple-play will still be available from 3, Mobile launch in South Africa bundles of TV, broadband and Telekom Austria and Orange. South African fixed-line operator Etisalat moves for Zain telephony. Operators will now be Telkom launched mobile United Arab Emirates operator required to pay VAT of 19.6% on TI raises stake in Argentina services to become the country’s Etisalat entered into an full triple-play service revenues, Telecom Italia increased its stake fourth mobile operator, joining agreement to buy 51% of Kuwait compared to the current rate of in Sofora Telecommunications, Vodacom, MTN and Cell C. mobile operator Zain, paving 5.5% on the TV service alone. the company that controls the way for one of the biggest Telecom Argentina, to 58% from India demands Vodafone tax corporate transactions of recent TerreStar files for Chapter 11 50%. It follows a long battle with The Indian government has times in the Middle East. Mobile satellite services provider the regulator over the Italian told Vodafone Essar to pay INR TerreStar Networks has filed operator’s share in Sofora. 112.1 billion (E1.8 billion) in Qualcomm axes TV service for Chapter 11 bankruptcy taxes within a month for the Qualcomm confirmed it will protection in the US. Jajah opens Facebook calling acquisition of Hutchison’s mobile shut down its FLO TV mobile Telefonica company Jajah venture in 2007. broadcast service next spring, Nitel sale approved launched a mobile application but will continue to explore The Nigerian government to enable direct VoIP calls from New MVNO in Spain strategic options for the network approved the US$2.5 billion social networking site Facebook. Spanish TV broadcaster and spectrum. Qualcomm has sale of state-run operator Nitel The application, called Jajah Sogecable has launched MVNO suspended sales of devices that to a consortium led by China Social Call, initially will only be Cuatro Movil on KPN’s network. use the service. Unicom, following an auction available on Blackberry devices. in February. Nitel has fast been NETWORKS 3G launches in India losing share and is now fifth in Verizon faces big payout Insight = Opportunity Tata Teleservices said it will the fixed-line voice market. Verizon Wireless will pay $25 BT must open fibre networks launch 3G mobile services in nine million to the US Treasury and UK regulator Ofcom ruled circles in India on 5 November, DVB-H suffers further setback refund a minimum $52.8 million that BT must give competitive while Bharti Airtel said it will In another blow for DVB-H to about 15 million customers it providers access to its new launch in its 13 circles by year mobile TV services, broadcasts wrongfully charged. Regulator fibre networks, including its end. Vodafone Essar subsequently in Austria will finish at the end of the FCC says the payment to the underground cable ducts and said it will launch 3G in the this year. Streamed 3G services government is the largest ever. telephone poles, so they can first quarter next year. They build their own last mile fibre PBINSIGHT.EU/UK > will follow the 3G launches of Available colocation space in key cities infrastructure. BT, which already state-owned operators BSNL and Average space available provides wholesale access to its MTNL in 2009. 0% 10% 20% 30% 40% 50% 60% 70% fibre broadband offering, will be Amsterdam able to set its own access prices. Hungary next for telecoms tax Chicago Hungary’s parliament passed Frankfurt French network sharing a proposal to tax the telecoms Montreal Nokia Siemens Networks will sector 61 billion forints (E225 New York upgrade and expand French All organisations need insight at all levels, with their customers and citizens, in their markets and communities. million) per year between 2010 Los Angeles mobile operator SFR’s HSPA+ Organisations aspire to acquire new customers, serve existing customers and uncover new growth opportunities— and 2012 to ease budget deficits. San Francisco radio access network, which whilst maximising effi ciency, minimising costs and improving customer satisfaction. But the EU has queried the tax Washington will then be available for use by Learn more about Pitney Bowes Business Insight solutions, software and services and see how we can help you to and could rule it illegal, as it did London subscribers of rival operators acquire serve and grow your customer and citizen relationships. with similar proposals in France — Average Range | Average Orange and Bouygues Telecom. and Spain this year. Source: TeleGeography Solutions for Customer Intelligence, Communications and Care. New data from TeleGeography shows that colocation service providers are struggling to keep up with demand. Despite significant new construction, some Italy broadband pricing probe 41% of sites surveyed by TeleGeography were at least 80% full by mid-2010, up France raises bundling tax from 34% of sites a year earlier. Operators added 1.5 million square feet of new The EC asked regulator Agcom France’s National Assembly colocation space and 124 megawatts of power in the year to mid-2010, but to review the prices that Telecom some key cities are showing less than 25% available space. passed a measure to increase Italia can charge for wholesale Every connection is a new opportunity™ November 2010 www.totaltele.com 3 timeline

access to its network. Telecom Next-gen broadband projects KPN names new CEO Italia had planned to raise its Several countries last month Eelco Blok will become KPN’s wholesale broadband prices by announced plans to extend next CEO and chairman when 24% over two years to fund next- high-speed broadband coverage. Ad Scheepbouwer retires next generation network build. The German government plans April. Blok has been on KPN’s to provide 75% of households management board since 2004 German network sharing speeds of up to 50 Mbps by 2014. and has worked there since 1983. German mobile operators Telecom Italia continued its fibre Deutsche Telekom, Vodafone deployment and aims to make Microsoft departures continue Germany and O2 Germany 100 Mbps services available in Microsoft chief software architect entered talks to roll out a joint six cities by the end of this year. Ray Ozzie became the latest SYMBIAN FORTUNES LTE network in the country, And Softbank floated a JPY500 executive to leave the company, The Symbian Foundation re- having acquired spectrum in billion (E4.5 billion) plan to build following the departures of ceived a much needed boost May. Deutsche Telekom will also a nationwide fibre network in Business Division head Stephen when the Artemis Joint Tech- nology Initiative, a public-pri- launch its own LTE services using partnership with rival operators Elop to Nokia, platforms and vate partnership that includes 800-MHz spectrum by year end. NTT and KDDI. services chief Kevin Johnson and the European Commission, CFO Chris Liddell. agreed to invest E22 million T-Mobile launches LTE End to 3G sharing in Australia in the non-profit organisa- tion. Just weeks earlier Sym- T-Mobile Austria launched Telstra will end its 3G network T-Mobile USA changes bian Foundation executive commercial LTE services in sharing agreement with Vodafone Philipp Humm took over as CEO director, Lee Williams (pic- Innsbruck, just four weeks after Hutchison Australia in 2012, after of T-Mobile USA in October, tured), resigned and was re- the completion of the country’s eight years. five months ahead of schedule, placed by CFO Tim Holbrow. David Wood, a co-founder of spectrum auction in September. replacing Robert Dotson. Further Symbian, left the Foundation NSN/Ericsson India contracts changes see CTO Cole Brodman a year ago. Williams was ap- Singapore 3G spectrum Nokia Siemens Networks and becoming chief marketing pointed executive director in The Singapore government Ericsson won contracts to supply, officer, and chief network officer, October 2008, a few months after handset maker Nokia will allocate 3G spectrum to build and manage infrastructure Neville Ray, will become CTO. announced plans to take full Singapore Telecom, StarHub and for the 3G networks of Vodafone control of Symbian and turn it M1 after there were no other Essar in India. PTC gets new CEO into the open source Symbian Foundation. His resignation is bidders for the S$20 million slots. Polish mobile operator PTC the latest blow to the Founda- people named Miroslav Rakowski as its tion as it struggles to regain the UK 3G spectrum reversal new CEO from January, replacing initiative from smartphone rivals UK regulator Ofcom ruled Executive remembered Klaus Hartmann. Rakowski is Apple and RIM and in the face of strong growth of Google’s that the refarming of spectrum Dean Olmstead, president of currently chief sales officer and Android operating system in the 900MHz and 1800MHz EchoStar Satellite Services, has director for CRM at T-Mobile (see story p.6). His departure bands for 3G services will not died aged 55 after a battle with Czech Republic. comes less than a month af- impact competition, reversing cancer. Olmstead worked for ter Sony Ericsson confirmed it would not develop handsets its previous decision. That the US Federal government and OTE appoints new leader based on the new version of could open the way for O2 and NASA before a 26-year career Michael Tsamaz was appointed the operating system, Sym- Vodafone to use the spectrum, in in the satellite industry holding CEO and chairman of Greek bian 3, mirroring Samsung’s line with European legislation. senior positions at SES Global, operator OTE, moving from his decision to abandon the plat- form. Both handset makers Arrowhead Global Solutions, position as head of OTE’s mobile were key financial contributors Denmark awards 3G spectrum Loral Space & Communications, arm Cosmote. to the project. Symbian is still 3 Denmark was awarded licences DirecTV and Hughes Electronics. the leading smartphone op- in the 900-MHz and 1800-MHz ITU reappoints head erating system, but its market share declined to 41.2% in the bands for DKK 12 million (about Nokia job cuts Hamadoun Touré of Mali second quarter from 51.0% in E1.6 million). Nokia’s new CEO Stephen Elop has been elected as secretary the same period of 2009, ac- announced the company will general of the International cording to Gartner. Strategy Analytics, says Nokia’s smart- Telecom NZ bids for NGN cut 1,800 jobs. The changes Telecommunication Union (ITU) phone market share slipped to Telecom New Zealand submitted will come at the Symbian for a second four-year term. a low of 34.4% globally in Q3, a new plan to become part of the smartphones unit, where the even though it shipped a re- country’s Ultra-Fast Broadband focus will be on creating a Telstra job cuts cord 26.5 million units. Apple and RIM gained ground, ship- initiative. The operator is common developer ecosystem Telstra said it will cut 950 jobs, ping 14.1 million and 12.4 mil- proposing operational and and streamlining software mostly in executive and middle lion units respectively. structural separation. development, and also in services. management areas.

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SMARTPHONE OPERATING SYSTEMS sMaRt WARS Google and Apple are making strong inroads in the smartphone OS market. A fi erce battle now looms in the face of rocketing growth and consolidation. By nick Wood

he increasingly fragmented year earlier. (gartner is due to publish its rather cumbersome.” Huggers believes the smartphone operating system Q3 figures in mid-november.) vast majority of developers and content tmarket is heading for a showdown so why are some already saying there producers will end up supporting no more that could lead to some well-known plat- isn’t enough room in the market for every- than three smartphone platforms, and that forms disappearing altogether over the one? “it’s a two-horse race,” says erik means some will lack the ecosystem needed next five years. the survivors will embark Huggers, director of future media and to survive. “ultimately, consolidation will on what promises to be a fierce battle for technology at the bbc. currently, Android take place and we will be left with probably the attentions of handset makers, devel- and ios have the most traction. “i think two,” he says. opers and customers. there are two platforms that have the but not all analysts believe considerable Microsoft and nokia both have intro- momentum needed to reach escape veloc- consolidation will take place any time duced long-anticipated new versions of ity, ” he adds. soon. idc forecasts mobile phone vendors their smartphone operating systems— Apple grew its share of the smartphone will ship 269.6 million smartphones—or windows 7 and symbian 3—in the run-up market to 18.3% in Q3 from 13.5% in the what it calls converged mobile devices— to christmas, all the while that google previous quarter, according to strategy in total this year compared to 173.5 million and Apple continue to make strong Analytics (see table above right), shipping units in 2009. in the company’s latest inroads with their respective Android and 14.1 million units. the analyst company worldwide Quarterly Mobile Phone ios platforms. says leader nokia is also facing increasing tracker, idc senior research analyst, but analyst numbers indicate it’s still all competition from Android players such as kevin restivo, says: “idc believes the to play for. According to gartner, one in samsung, Htc and sony ericsson. market will comfortably support up to five of the 325.56 million handsets sold in Huggers oversees how the bbc delivers five os players over the next five years. the second quarter this year was a smart- its content via the internet, interactive shorter replacement cycles and an ample phone; in the second quarter of 2009, tV and mobile devices, and leads the feature phone-to-smartphone upgrade smartphones accounted for just one in broadcaster’s research and development opportunity means the smartphone os seven handsets sold. High growth coupled activities. during february’s Mobile market will remain fragmented but with low penetration suggest there is still world congress in barcelona he unveiled healthy for the foreseeable future.” a sizeable opportunity for a smartphone the bbc’s first official smartphone appli- certainly, most developers have the player to claim substantial operating cation and rallied against fragmentation luxury of being more selective than the system (os) share. in the smartphone os market. bbc. “developers focus initially on one latest figures, from strategy Analytics, “i used that opportunity to tell the platform, familiarise themselves with it, show that global smartphone shipments [mobile] industry how much trouble and then look to see which other plat- grew by 78% in the third quarter to reach they’re causing us,” says Huggers. He forms they can develop for,” says dominic 77 million units, representing 23% of total explains that the bbc has “an obligation of lobo, head of the orange Application worldwide handset volumes. that growth universality” that means it has to make its shop. He says in some cases variances in compares to 50% in Q2 and just 5% in the mobile services accessible on as many smartphone os characteristics mean third quarter a year ago. canalys records devices as possible, including smartphones. some developers are reluctant to focus on 80.9 million shipped units in Q3, repre- “it’s tough when you have to work with making apps that are portable between senting 95% growth over the quarter a multiple standards,” he says. “we find it different smartphone platforms. “they’re targeting what they think will Worldwide Smartphone Sales to End Users by Operating System, (000s) give them good reach,” says lobo. “it depends on how much marketing push company 2Q10 units 2Q10 Market 2Q09 units 2Q09 Market share (%) share (%) there is behind [the os], how easy it is to symbian 25,386.8 41.2 20,880.8 51.0 develop for, and whether there are a lot of Research in Motion 11,228.8 18.2 7,782.2 19.0 operators [putting it in their ranges].” android 10,606.1 17.2 755.9 1.8 iOs 8,743.0 14.2 5,325.0 13.0 indeed, handset makers as well as soft- Microsoft Windows Mobile 3,096.4 5.0 3,829.7 9.3 ware developers have the potential to linux 1,503.1 2.4 1,901.1 4.6 make or break an operating system. Other Operating systems 1,084.8 1.8 497.1 1.2 total 61,649.1 100.0 40,971.8 100.0 “ultimately our strategy is about fulfill- Source: Gartner ing the expectations of the consumer, and

6 www.totaltele.com November 2010 cOntEnt stRatEgiEs

the os forms an important part of that,” q3 2010 global Smartphone Shipments and market Shares says Aldo liguori, head of global commu- nications at sony ericsson. global smartphone vendor Q3 ‘09 Q4 ‘09 2009 Q110 Q210 Q310 shipments (millions of units) the company has a policy of not pre- nokia 16.4 20.8 67.8 21.5 23.8 26.5 announcing new devices, but it made apple 7.4 8.7 25.1 8.8 8.4 14.1 headlines in late september when it RiM 8.5 10.7 34.5 10.6 11.2 12.4 Others 11.1 13.7 47.3 14.5 19.0 24.1 confirmed it has no plans at present to total 43.4 53.9 174.7 55.4 62.4 77.1 develop further phones based on symbian, the current market-leading smartphone global smartphone vendor Q3 ‘09 Q4 ‘09 2009 Q110 Q210 Q310 market share % operating system by some distance (see nokia 37.8% 38.6% 38.8% 38.8% 38.1% 34.4% table p.8). sony ericsson says it will favour apple 17.0% 16.1% 14.4% 15.9% 13.5% 18.3% Android for the majority of its new RiM 19.6% 19.9% 19.7% 19.1% 17.9% 16.1% Others 25.6% 25.4% 27.1% 26.2% 30.4% 31.3% devices. “given the tremendous growth total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% of the Android community it’s clearly an Source: Strategy Analytics os that’s really moving,” says gustaf brusewitz, spokesman for sony ericsson. Global Smartphone Shipment Growth

reflecting that growth, both gartner 100% and informa forecast that Android will overtake symbian to become the leading 78% smartphone operating system in terms of 80% market share some time in 2014. sony ericsson is by no means the biggest 60% 54% 50% influencer on the market: in Q2 the 32% vendor had a 3.4% share of total handset 40% sales globally—equal with research in Motion (riM)—compared to 34.2% for 17% nokia and 20.1% for samsung, according 20% 8% 5% to gartner. but smartphones now make up more than 50% of sony ericsson’s total 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 sales—up from 13.6% in the second Source: Strategy Analytics quarter and just 5.8% in 2Q09 —as it shifts its focus to higher-end devices. in october ceo bert nordberg said ‘Two years ago everybody was talking about the company also has no plans in the short term to develop smartphones Symbian, and Android didn’t exist’ running on windows Phone 7 (wP7), adding that it aims to be the world’s hit back if they feel they are becoming received. “unlike all the other solutions, number one provider of Android hand- marginalised. in september reports wP7 is not a sea of application icons,” says sets. (sony ericsson had a 13% share of suggested orange, deutsche telekom richard windsor, global technology the global Android device market in the (t-Mobile), telefonica (o2) and Vodafone specialist at nomura. “instead, wP7 is second quarter, says gartner, behind were considering the development of a more like a series of folders—called hubs Motorola with 26% and Htc with 41%.) common platform for mobile devices, in by Microsoft—that carefully organise such narrowing of focus, effectively to the face of the rising influence of Apple content in a way that aims to reduce clutter one smartphone platform, does not augur and google in the mobile space . and provide quick access to content.” well for operating system companies with unfortunately for people like Huggers windsor says Microsoft has focused on falling market share. but vendors are at the bbc, the number of competing integrating applications with web-based understandably reluctant to make predic- smartphone operating systems is still services more heavily than its rivals, a tions. “i don’t know what is the optimal growing. Microsoft in october unveiled move which he says has “clearly differen- number of operating systems,” says nine windows Phone 7 handsets, all of tiated” wP7 from alternative offerings. liguori. “Maybe two or three.” And which will ship in various markets across He has a warning, however: “it is still brusewitz adds: “two years ago everyone the Americas, europe and Asia Pacific in unclear how much developer support was talking about symbian and Android time for christmas. wP7 will capture, or whether operator didn’t exist; it’s a fast-moving industry.” Microsoft’s take on the smartphone retail channels [will] actively push its what’s more, mobile operators could user experience has been generally well- devices over rival solutions.”

November 2010 www.totaltele.com 7 cOntEnt stRatEgiEs

Worldwide Converged mobile device OS market Share Forecast offering a consistent application envi- ronment and user experience to a broader Operating system 2010 Market 2014 Market 2014/2010 change range of users. “it’s a set-up that makes share share symbian 40.1% 32.9% -18.0% more sense in the long term,” says BlackBerry Os 17.9% 17.3% -3.5% Hutton. closed platforms “are relatively android 16.3% 24.6% 51.2% expensive and hard to maintain profita- iOs 14.7% 10.9% -25.8% Windows Mobile 6.8% 9.8% 43.3% bly” compared to open platforms. He Others 4.2% 4.5% 8.3% says that working in an open source envi- total 100.0% 100.0% ronment with a range of contributors Source: IDC Worldwide Quarterly Mobile Phone Tracker, September 2010 also allows the symbian foundation to Global Forecast, Android and iOS Usage in Smartphones draw on a broader set of skills. in october Apple ceo steve Jobs hit 140 back at suggestions that Apple’s approach n Android n iOS to ios is closed, in particular attacking 120 google which it now trails for os market

100 share. “we find this disingenuous and clouding the difference between our 80 approaches,” he said. “closed versus open is a smoke screen for what’s best for the 60 customers.” Jobs maintained that the Millions of units 40 Android market is increasingly frag- mented, giving the example of mobile 20 twitter platform provider tweetdeck developing its product for 244 handsets 0 2010 2011 2012 2013 2014 and over 100 versions of Android, compared to the iPhone which has just Source: iSuppli Corp. two versions of software. the symbian foundation, along with Meanwhile nokia at the end of all but abandoned the os to focus on nokia, has also been criticised for taking september finally began shipping the first devices based on rival platforms . too long to develop a new operating of its symbian 3 handsets, the n8, in an the symbian foundation is confident it system that can compete with the likes of attempt to regain some momentum in the can maintain its position. “the forecasts Apple and Android. Hutton denies it is smartphone space. According to gartner, we’ve seen to 2014 still show symbian as related to the symbian foundation’s symbian had a 41.2% share of the smart- first or joint first, [and] that’s a worst case corporate structure. phone operating system market by sales scenario,” says ian Hutton, manager of “doing everything as a community in the second quarter, down from 51.0% the symbian foundation’s technology doesn’t necessarily mean being slow and in the same period a year ago (table p.6). roadmap team. but he admits that the os cumbersome; it’s not software develop- during that time Android’s market share market can’t sustain everyone. “i would ment by committee,” he says. “there’s an by sales grew from just 1.8% to 17.2%, expect to see some consolidation over the implication that doing everything placing it third behind riM (18.2%) and— next couple of years or more,” he says. in-house is quick and efficient, but i don’t notably—ahead of the other big grower the foundation’s future is being ques- think that’s necessarily always the case.” Apple ios (14.2%). tioned by some after executive director Meanwhile symbian’s vertically inte- comparing just Apple and Android, lee williams resigned last month after grated competitors have more than once isuppi expects the latter to overtake ios two years in the role. nokia has since expressed their reasons for controlling by usage in smartphones in 2012 (see bar denied speculation that it could bring the the user experience from top to bottom. chart above). but unlike gartner, idc development of symbian back in-house. “we’re able to deliver a more compelling forecasts symbian will retain its number Hutton argues that open source oper- user experience,” says rory o’neill, senior one position through 2014 with 32.9% ating systems like symbian stand a better director of business marketing for riM’s market share. it expects Android to grow chance of surviving compared to verti- eMeA activities. He argues that closer its share from 16.3% to 24.6% by that time cally integrated environments like Apple integration between hardware and soft- (see table top). and riM. He points out that the symbian ware enables a higher level of sophistication nevertheless, handset makers including foundation doesn’t have to cover the and therefore results in a richer user expe- samsung, Motorola and sony ericsson, cost of developing handsets, and can rience. “nothing gets thrown in the bin which once were symbian stalwarts, have attract developers on the promise of faster than a smartphone that doesn’t

8 www.totaltele.com November 2010 cOntEnt stRatEgiEs

work, and nothing gets deleted faster than over what they’re used for,” says o’neill. download sdks, learn new [program- an app that doesn’t work,” he says. All the while smartphones are generat- ming] languages or any new tricks.” riM in August unveiled the blackberry ing burgeoning traffic. new research but for now, at least, Huggers and his torch, powered by its new operating from informa says smartphones account contemporaries will have to contend with system blackberry os 6. the company for 65% of all mobile traffic worldwide. it a fragmented smartphone os market. believes its enterprise pedigree, its secure says average traffic per smartphone user And for consumers, at least, that is not email and messaging services, as well as per month will increase 700% to 2015, necessarily a bad thing. “ competition is its loyal ‘prosumer’ following will remain rising to 776 Mb from 85 Mb now. great for consumers,” he says. “it gives valuable differentiators going forward. Meanwhile Huggers at the bbc has a them more choice and lowers prices, and “we’re focused on how we can help clear vision for how the smartphone os of all sorts of other things like that.” companies make the most of what we call the future should take shape. “the most one well-known gadget lover, who has the ‘consumerisation’ of enterprise successful os will be the one that truly made no secret of his admiration for prod- devices,” o’neill says. embraces HtMl5,” he says. ucts like Apple’s iPhone, summed up the unchecked, that can cause problems for currently under development by the consumer’s point of view during it departments trying to manage multi- world wide web consortium, HtMl5 Microsoft’s wP7 launch in london in ple devices. “People are bringing into will become the latest revision of the october. “i think you have to be very work devices that are more advanced than HtMl standard for displaying internet stony-hearted not to welcome a new what their company has—the lines content. it will enable developers to incor- player,” argued actor and comedian between work and play are more blurred porate rich multimedia content and more stephen fry. “i want biodiversity in this than ever—so we’re working with compa- advanced functionality into web sites market, and all of us who love it probably nies to find ways of giving their employees without the need for additional plug-ins do too…the more players there are in it, the freedom to use their own smartphones such as Adobe flash. “the ecosystem for the more it drives creativity and innova- while at the same time enabling the the web already exists,” continues tion and the more thrilling a space it corporation to maintain some control Huggers. “[developers] don’t need to becomes.” n

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Sponsored by world telecoms council network strategies managed services EASTERN PROMISE China’s leading vendors Huawei and ZTE are making strong headway into providing managed services to operators, with key markets firmly in their sights. By Ken Wieland

estern network equipment Spending by operators on ICT services into second position behind Ericsson providers face a mounting has held firm during the economic down- with ICT services revenues from opera- Wchallenge from Huawei and turn, and there are signs that the market tors totalling US$1.43 billion (Ericsson ZTE to capture spend on managed ICT is beginning to pick up again. According drums up nearly US$2 billion). When services. China’s bright stars are to Ovum, operators globally spent US$64.4 Ovum first compiled its 12-month ICT gaining ground fast, and in particular billion on ICT services—infrastructure services revenue figures in the operator when it comes to operator spend on services (including managed network segment in 2006, Huawei had US$1 billion managed infrastructure services, but services), software and IT services (SITS), income from ICT services in a market they have yet to gain traction in the and business process consulting—during that was worth over US$47 billion—a more lucrative areas of software, IT the 12 months to the end of June this year. meagre 0.02% market share. and consultancy services. That is not far below the US$66.8 billion If you strip out SITS and business Taking into account just network ICT services spending peak recorded process consulting from the ICT services equipment providers’ proportion of ICT during the 12 months through to 3Q 2008, revenue mix and focus just on infrastruc- services revenues globally, in the second just before operators started to rein in ture services—which includes managed quarter Huawei took a 13% share among spending following the collapse of services, or the day-to-day running of its peers, according to latest figures from Lehman Brothers in September 2008 that networks—then Huawei claims an even Ovum (see chart opposite page, right). sent financial markets into a tailspin. bigger market share of operator spend- That was just a whisker behind Alcatel Since the fourth quarter of 2009, the ing, rising from 5% in Q2 2007 to 12% in Lucent (14%) and Nokia Siemens Networks 12-month rolling periods (to the end of Q2 2010, says Ovum. (Ericsson is still the (16%), although still some way behind each quarter) have seen increased levels of leader here, but only just with a 13% leader Ericsson (26%). ICT service spending by operators after a market share.) ZTE also starts to become Stéphane Téral, a principal analyst at year of decline. That appears to be a vote more visible when the parameters are Infonetics Research, says China’s suppli- of confidence by operators that suppliers, limited to infrastructure-related serv- ers will continue to make large strides in in general, can meet their key perform- ices, growing its market share from 1% in the global managed services market, and ance indicator (KPI) targets and deliver Q2 2007 to 3% in Q2 2010. before long will rival their network equip- on their opex-reduction promises. “The growth of Chinese suppliers [in ment provider (NEP) counterparts from And when it comes to making headway operator ICT services] is due in part to the West. “They will get there,” he says, in the operator segment, Huawei stands the relative strength of China’s economy,” “because they already have a strong repu- out from its rivals. Ovum says Huawei says John Lively, chief forecaster at Ovum. tation with their technology. They are no generated US$5.1 billion from operators’ “As telecom spending did not fall as much longer just competing on price.” spending on ICT services in the 12 in China as it did in Europe and North Although the market shares of Huawei months ended 30 June 2010, giving it a America, Huawei and ZTE have bene- and ZTE are still small within the bigger share of around 8% in a highly frag- fited from having a large share of China’s ICT services picture—taking into mented market (nearly 30 suppliers are telecoms market.” account spend from all industry vertical tracked by the analyst company). Ericsson But that is not the whole picture. Lively sectors and across all service providers— is again the market leader in the operator points out that expansion into Europe they are growing fast (see box opposite segment with US$8.1 billion of revenues and emerging markets over the last few page). From 2Q 2007 to 2Q 2010, Huawei grew its share of the total ICT services ‘China’s vendors have a strong reputation with market from 0.9% to 2.3% says Ovum. ZTE’s share grew from 0.14% to 0.60% technology. They are not just competing on price’ over the same period. But it is spend from operators where from ICT services, followed by Nokia years—and the opportunity for relation- China’s vendors currently major: Ovum Siemens Networks (US$5.8 billion), IBM ship-building with operators through the estimates Huawei derived 99% of its ICT (US$5.6 billion) and Alcatel Lucent supply of equipment—have provided a services revenues from telecoms service (US$5.2 billion). more solid international platform from providers over the 12 months ended 30 What’s more, Huawei continues to which Huawei and ZTE can persuade June 2010, compared with 85% for Alcatel- make ground. Taking the second quarter operators to take on additional services. Lucent and 75% for Ericsson. of this year in isolation, Huawei moves Huawei, for example, has won managed

10 www.totaltele.com November 2010 network strategies

services contracts from service providers ICT services market shares in Germany (Telefonica O2), Spain (Jazztel and ONO) and the UK (Virgin Media). To date, Huawei and ZTE have yet to branch out beyond the operator segment in the ICT And while ZTE has not been as successful services space, so despite Huawei’s considerable progress it does not appear in Ovum’s pie as Huawei in making inroads into Europe, chart for the top players in overall ICT services (below left). Ovum identifies a US$281 billion it is doing well at winning equipment ICT services market to the end of June, with telecoms infrastructure services accounting for $56 billion, software and IT services for $143 billion and business process consulting for deals in some emerging markets, particu- $83 billion. Of the total $281 billion, telecoms providers account for spend of US$64 billion, larly in Africa. with government and educational providers generating US$42 billion, and the remainder “ZTE is building a lot of CDMA networks made up from a range of different industry verticals. in Africa, so there is a strong likelihood NSN and Alcatel-Lucent—among Huawei’s main Western network equipment rivals in the managed services space—are also not among the top ten players when the ICT services they will be able to make a strong play in market is viewed as a whole, underlining the exceptional progress made by Ericsson, which managed services there in the future, as commands a 4% share. A measure of Ericsson’s increasing sway in other sectors, for well as in some parts of Eastern Europe example, came in November 2009 when it won a ten-year managed services contract with and Russia,” says Téral at Infonetics broadcaster TV4 Group in Sweden to run the day-to-day transmission of TV channels. But when compared with its network equipment provider (NEP) peers only (see chart Research. “It takes a while to build a trust below right), Huawei’s inroads into the telecoms segment are deep enough to give it a with operators, and suppliers usually need 13% market share of ICT services revenues generated by this sub-group. NEPs generated equipment deals to win that trust before revenues of US$42.3 billion in the year from the third quarter of 2009 to the second quarter of 2010, says Ovum. they can move into managed services.” Infonetics says telecoms service provid- Total $281 billion annual revenues (rolling) NEPs’ share of services market: $42.3 billion 3Q09 through 2Q10 ers paid network equipment vendors US$50.4 billion in 2009 for outsourced IBM NSN services worldwide, and forecasts that will 20% Amdocs 16% rise to $73.2 billion by 2014. It says the 7% H-P Others outsourcing vendors with the largest 13% 6% Others Ericsson revenue gains in 2009 were HP, Ericsson, 26% 26% Accenture Huawei Huawei and ZTE. 8% 13% Certainly, managed services deals are Fujitsu rolling in, but the biggest contracts are 9% Cisco Alcatel- 18% Lucent still being won by Western NEPs. In Dell/Perot CSC 14% Systems 6% September, Ericsson announced a five- 3% T-Systems/ year agreement with Vodafone Germany Capgemini DT 4% to manage its fixed and mobile networks. 3% Ericsson 4% The deal, which marks the first time NEC 4% Vodafone Germany has outsourced any Source: Ovum part of its telecoms network operations, will see Ericsson manage the field services of the operator’s transmission network, as Younes Benchekroun, network services Chinese companies a managed services well as fixed core network nodes. sourcing manager at Orange, stresses the deal, but it also brought in Ericsson as part And earlier this year, Russian operator need to have multiple suppliers. “If all of a three-way agreement. Ericsson is also MTS announced what it claimed to be the elements [equipment and managed serv- making an impact in their own back yard: first full network outsourcing contract ices] are provided by the same vendor, the in July it won a substantial managed serv- signed in the country. The deal was not risk is being stuck with that one vendor,” ices deal from China Mobile, which won by Huawei or ZTE, which already he says. “It’s better to separate the two— involves the provisioning of field mainte- had experience as network suppliers to equipment and managed services—to nance services in Hebei province. Sistema (the majority shareholder of MTS) challenge vendor proposals, unless of “To have a credible managed services via its MTS India subsidiary, but by Nokia course there is a considerable economic proposition you need a lot of experience Siemens Networks. NSN in July also won advantage in opting for one supplier.” running networks, to go through a learn- an eight-year, US$7 billion outsourcing Yet operators’ desire to use different ing curve and to learn from your mistakes, deal to deploy and manage the forthcom- suppliers can also work against Huawei and that is something we have done,” says ing nationwide LTE network of US and ZTE in regions where they are the Valter D’Avino, head of managed services company LightSquared. more dominant suppliers of infrastruc- at Ericsson. “The depth of that experience Nevertheless, operators give Huawei ture. MTS India, a mobile operator that is something that really can’t be copied.” and ZTE hope for winning greater uses equipment from both Huawei and D’Avino emphasises network manage- managed services business outside China. ZTE, in September awarded the two ment experience, and the number of “soft

November 2010 www.totaltele.com 11 network strategies

Vendor revenues by task, worldwide Hiring local experts with network management experience is one way Huawei $35 n Network maintenance n Operations believes it can catch up with the leaders on

$30 the international outsourcing stage. A year ago Huawei employed BT chief technology $25 officer Matt Bross to bolster its interna- tional operations, working out of the US. $20 Huawei is aiming to make inroads in

$15 the US market—initially though equip- ment deals and from there into managed $10

Revenue in US$ billions services—where the government has expressed security concerns over the $5 vendor. Bross is heading up a national $0 security committee to try to allay those CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 concerns, and the company has enlisted Source: Infonetics Research the help of former government officials to lobby its case. Huawei already is working Worldwide equipment vendor revenue from professional services to carrriers with Cox Communications on the compa-

110 ny’s 3G CDMA network, and is believed to be one of the bidders for a network modernisation project by Sprint Nextel (it is already a WiMAX supplier for Sprint partner Clearwire). But for all its managed services progress in other markets, the Chinese supplier still has some way to go. Rodriguez

Revenue in US$ billions confirms, for example, that Huawei has yet to secure a managed services contract

0 with an operator that doesn’t already use CY08 CY09 CY10 CY11 CY12 CY13 s o m e o f i t s e q u i p m e n t . A l t h o u g h R o d r i g u e z Source: Infonetics Research says Huawei is building up extensive multi- vendor network equipment management issues” surrounding people management conceding that Huawei’s track record of experience, the Huawei and ZTE brand that need to be addressed. When opera- running networks is not as long as most names still are not strong enough to win tors hand over part or all of their other major Western NEPs—the Chinese services contracts from customers that do day-to-day network operations to a third supplier entered the managed services not use their infrastructure. party, which can include the transfer of market in 2005, a full ten years after By contrast, Ericsson continues to win staff from operator to supplier, D’Avino Ericsson made its first concerted push these types of customers. One of the most identifies the successful merging of the into this space—Rodriguez points out notable deals was the agreement it struck often very different cultures of the opera- that strenuous efforts have been made to with Sprint in July 2009 for the day-to-day tor (service-based) and supplier (technical) make up for lost time. management of its wireless CDMA and as key to making outsourcing deals work. Huawei’s service infrastructure now fixed-line networks over a seven-year “We have 40,000 staff associated with includes more than 130 branch offices period. The contract is reportedly worth managed services in some form or other, globally (14 in the EU), including an EU around US$5 billion for Ericsson. with around 20,000 coming from operator regional network operations centre Nevertheless, Rodriguez claims she is customers,” says D’Avino. “We also have a (NOC) with which to remotely manage seeing a changing attitude among opera- presence in 175 countries, which gives us a network elements for operators. It also tors to Huawei—at least in Europe—which very strong local reach.” has 20,000 service staff globally, 1,200 of could see the significant breakthrough of From Huawei’s perspective, the scale which are based in Europe. “We’ve hired managing a network comprised fully of and reach cards can be overplayed by the lots of local people for our EU operations, other vendors’ kit. “Instead of me asking more established Western suppliers. “A so there is really no cultural or language operators about whether they would be lot of these arguments are totally irrele- gap,” continues Rodriguez, who is a interested in our professional and vant,” says Adriana Rodriguez, Huawei’s former senior manager at Ericsson and managed services, they are asking me,” VP of services sales in the EU. While based in the Netherlands. she says. “It is quite a turnaround.” n

12 www.totaltele.com November 2010 The World Vendor Awards Be not afraid of greatness

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Do you have what it takes? Enter the World Vendor Awards and prove you're one of the world's greatest vendors! For sponsorship opportunities or further information contact Gordon White call: +44 (0) 20 7608 7041 or email: [email protected] Celebrating Telecoms' Leading Players

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Organised by: Founding Partner: technology trends data centres SCALE CHANGES Data centre networking is being transformed. The goals are automation, greater server efficiency, streamlined management and significantly lower costs.By Roy Rubenstein

he adoption of virtualisation IT automation. “That is a big hurdle for “The network has to support these techniques is causing an upheaval IT to get over: allowing systems to changes and it can’t be the bottleneck,” Tin the data centre. Virtualisation manage themselves,” says Zeus Kerravala, says Cindy Borovick, VP, enterprise is being used to boost server perform- senior VP at Yankee Group. “Do I think communications infrastructure and data ance, but its introduction is having a this vision will happen? Sure I do, but it centre networks, IDC. The result is profound knock-on effect, first on storage will take a lot longer than people think.” networking change on several fronts. (Total Telecom Plus, October 2010) and now Networking provides the foundation Currently, IT staff have to manage sepa- on data centre networking. for servers and storage and, ultimately, rate networks: Ethernet for the LAN, Fibre “This is the most critical period of data the data centre’s applications. “Fifty Channel for storage and Infiniband for centre transformation seen in decades,” percent of the data centre spend is servers, high-performance computing. To migrate says Raju Rajan, global system network- 35% is storage and 15% networking,” says the traffic types onto a common network, ing evangelist at IBM. Andy Ingram, VP of product marketing the IEEE is developing the Data Centre Data centre managers want to accommo- and business development, fabric and Bridging (DCB) Ethernet standard (see box). date variable workloads, and that requires switching technologies group, Juniper A separate Fibre Channel over Ethernet moving virtualised workloads between Networks. “The key resources I want to (FCoE) standard, developed by the servers and even data centres. That is be efficient are the servers and the storage; International Committee for Information leading to new protocol developments and what interconnects them is the network.” Technology Standards, enables Fibre network consolidation, all the while making Traditionally, applications have resided Channel to be encapsulated onto DCB. IT management more demanding, in turn on dedicated servers, but equipment Yet while DCB is starting to be requiring greater automation. usage has been low, at 10% commonly. deployed, networking convergence Standards to meet the networking chal- Given the huge numbers of servers remains in its infancy. “FCoE seems to be lenges created by virtualisation are close deployed in data centres, that is no longer lagging behind general industry expecta- to completion and are already appearing acceptable. Virtualisation splits a server’s tions,” says IBM’s Rajan. “For many of our in equipment. In turn, switch makers are processing into time-slots to support 10, data centre owners, virtualisation is the developing architectures that will scale 100 and even 1,000 virtual machines, each overriding concern.” Network conver- to support tens of thousands of 10-Gigabit- with its own application, improving gence may be a welcome cost-reducing per-second (Gbps) Ethernet ports. But server usage by 20%–70%. step, but it introduces risk. “So the net industry experts expect these develop- That could result in significant effi- gain [of convergence] is not very clear yet ments will take up to a decade before they ciencies when you consider the growth of to our customers,” says Rajan. “But the become mainstream. server virtualisation: In 2010, deployed net gain of virtualisation and cloud is “We are all marketing to a very distant virtual machines will outnumber physi- absolutely clear to everybody.” future, while most users are still trying to cal servers for the first time, claims IDC. Another protocol, the Internet get their arms around eight virtual machines In enterprise and hosting data centres, Engineering Task Force’s Transparent on a server,” says Stephen Garrison, VP of servers are typically connected using Interconnection of Lots of Links (TRILL), marketing at Force10 Networks. “We are on three tiers of switching. The servers are promotes large-scale Ethernet networks. a long hard path; it is going to be a really linked to access (top-of-rack) switches Its primary role is to replace the spanning challenging transition.” that sit above them, which in turn connect tree protocol that was never designed to IBM points out that its customers are to aggregation switches whose role is to address latest data centre requirements. used to working in IT siloes, selecting funnel traffic to the large, core switches. Spanning tree disables links in a layer- subsystems independently. New work The rise of virtualisation impacts data two network to avoid loops arising and practices across divisions will be needed centre networking profoundly, with appli- ensure that traffic has only one way to if the networking challenges are to be cations no longer confined to single get to a port. But closing off links can addressed. “For the first time, you cannot machines but shared across multiple disable up to half the available network make a networking choice without under- servers for scaling. Nor is the predomi- bandwidth. TRILL enables a large layer- standing the server, virtualisation, nant traffic ‘north-south’ (client-to-server) two network linking the switches that storage, security and the operations across this three-layer switch hierarchy. avoids loops without losing bandwidth. support strategies,” says Rajan. Instead, virtualisation promotes greater “TRILL treats the Ethernet network as A lot of the future value of these various ‘east-west’ (server-to-server) traffic, across the complex network it really is,” says developments will be based on enabling the same tiered equipment. Mike Benjamin, a vice president at Global

14 www.totaltele.com November 2010 technology trends

Consolidating data centre networks VEPA allows traffic to exit and re-enter the same server physical port to enable Data Centre Bridging (DCB) is designed to enable the consolidation of many networks to switching between virtual ports. EVB’s just one within the data centre. A single server typically has multiple networks connected role is to provide the required virtual to it, including Fibre Channel and several separate 1-Gbps Ethernet networks. DCB standard components include Priority Flow Control, which provides eight classes machine configuration and management. of traffic; Enhanced Transmission Selection, which manages the bandwidth allocated to “The network has to recognise the different flows; and Congestion Notification which, if a port begins to fill up, can notify virtual machine appearing on the virtual upstream along all the hops to the source to back off from sending traffic. “These [three interfaces and provision the network components] are some 98% complete, waiting for procedural things,” says Broadcom’s Ilyadis. As a result, DCB can now be safely encapsulated in silicon and can transport accordingly,” says Nick Ilyadis, chief Fibre Channel in a lossless fashion (Fibre Channel is intolerant to loss and can take technical officer for Broadcom’s infra- minutes to recover from a lost packet). That means critical storage traffic such as FCoE, structure networking group. “That is iSCSI and network-attached storage can now be supported over Ethernet. Network convergence may be the primary driver for DCB, but its adoption also benefits where EVB comes in, to recognise the virtualisation. Since higher server usage results in extra port traffic, virtualisation promotes virtual machine and use its credentials the transition from 1-Gigabit to 10-Gigabit Ethernet ports. “No-one is coming to the for the configuration.” market with 10 Gigabit [Ethernet ports] without DCB bundled in,” says IBM’s Rajan. The “The common goal of both [802.1Qbg uptake is also being helped by the significant reduction in the cost of 10-Gigabit ports with DCB. “This year we will see 10-Gigabit DCB at about $350 per port, down from and 802.1Qbh] standards is to help us with over $800 last year,” says Rajan. The upgrade is attractive when the alternative is using configuration management, to allow several 1-Gigabit Ethernet ports for server virtualisation, each port costing $50-$75. virtual machines to move with their entire configuration and not require us Crossing. “If you think of the complexity pre-sales manager. “We have the ability to to apply and keep that configuration in and topologies of IP networks today, make much larger, flat layer-two networks sync across every single switch,” says TRILL will have similar abilities in terms which ease management and the mobility Global Crossing’s Benjamin “That is a of truly understanding a topology to of [servers’] virtual machines.” huge step for us as an operator.” forward across, and permit us to use load Kash Shaikh, Cisco’s group manager, “Our view is that VEPA will be needed,” balancing, which is a huge step forward.” data centre product marketing, argues says Gary Lee, director of product IT vendors are also developing flatter multi-tiered switching is needed for marketing at Fulcrum Microsystems, switch architectures to reduce the switch- system scaling and separation of work- which has just announced its first Alta ing tiers from three to two to ultimately loads: “Sometimes [switch] tiers are used family switch chip that supports 72 x one large, logical switch. This not only for logical separation, to separate enter- 10-Gigabit ports and can process over promises to reduce the overall number of prise departments and their applications.” one billion packets per second. platforms and their associated manage- However, Cisco itself is moving to fewer Malcolm Mason, EMEA hosting ment, but also switch latency. Global tiers with the introduction of its product manager at Global Crossing, says Crossing’s default data centre switch FabricPath technology within its Nexus the upshot of these new protocols and design is a two-tier switch. “Unless that switches that support TRILL. flatter, more scalable networks will be top tier starts to hit scaling problems, at Another networking challenge caused less data centre equipment doing more, which time we move into a three-tier,” by virtualisation is switching virtual which will save power and require less says Benjamin. “A two-tier switch archi- machines and moving them between cabling. It will also enable more stringent tecture really does have benefits in terms servers. A server’s software-based hyper- service level agreements to be met. of cost and low-latency switching.” visor that oversees the virtual machines “The end-user won’t notice a lot of Juniper Networks is developing a comes with a virtual switch. But the difference, but what they should notice is single-layer logical switch architecture industry consensus it that hardware is more consistent application perform- that will support tens of thousands of better at doing the switching. ance,” says Yankee’s Kerravala. “From an 10-Gbps ports and span the data centre. There are two standards under devel- IT perspective, the cost of computing Juniper says the design will be based on a opment to address the virtualisation should fall quite dramatically; if it doesn’t 64 x 10-Gbps building block chip. “We requirements: the IEEE 802.1Qbg Edge fall by half we will have failed.” have some customers with very difficult Virtual Bridging (EVB) and the IEEE Meanwhile data centre operators are networking challenges that are signed up 802.1Qbh Bridge Port Extension. The hard at work understanding these new to be our early field trials,” says Ingram. 802.1Qbg camp is backed by many leading technologies. “I get a lot of questions Meanwhile, Brocade is set to launch its switch and network interface card about end-to-end architectures,” says virtual cluster switching architecture, vendors, while 802.1Qbh is based on Cisco Borovick. “They [data centre operators] which supports TRILL and DCB. “There Systems’ VN-Tag technology. are very cognizant of the fact that they will be 10 switches within a cluster and Virtual Ethernet Port Aggregation are sitting in the middle of the battle of they will be managed as if it is one chassis,” (VEPA), part of 802.1Qbg, is the transport [IT vendor] giants and they want to make says Simon Pamplin, systems engineering mechanism used. In terms of networking, the right decisions.” n

November 2010 www.totaltele.com 15 Business and Finance mergers and acquisitions BUYING SEASON Private equity companies are circling as some carriers streamline their operations, while other telcos are buying into rising technology and service segments. By Ian Kemp

t’s buying season again as mergers Swiss mobile provider Sunrise from TDC nine months of 2010 according to its quar- and acquisitions in the telecoms incorporated the largest leveraged loan terly regulatory filing. Google’s largest Isector show marked signs of acceler- component to a PE deal witnessed in three acquisitions so far this year are ating in the run-up to Christmas. Europe for two years,” say the analysts. mobile advertising start-up AdMob for M&A research firm Mergermarket says “A return to the good old days it is not, US$681 million, social networking appli- the telecoms sector accounted for 9.7% of but it certainly signals an increased appe- cation developer Slide for $179 million and all M&A deals worldwide in the first nine tite from banks to provide large debt video software maker On2 Technologies months of this year: 135 deals were financing packages for the right assets.” for $123 million. The numbers don’t completed with a total value of $138.3 Mergermarket says average debt financ- include travel software company ITA billion. The technology, media and tele- ing on PE buyouts across all sectors has Software, which Google agreed to acquire coms (TMT) sectors together accounted increased to 44.3% of total funding per for $700 million in July. for 16.3% of activity, with 1,257 deals deal this year, up from 30.4% in 2009. One of the biggest potential sellers is yielding a total value of $232.3 billion. Many of the telecoms deals taking place Vodafone. In September the mobile oper- As ever private equity firms will play a point to another round of consolidation ator sold its 3.2% stake in China Mobile key role in the consolidation. Pyramid in some of the most intensely competitive for £4.3 billion, 10 years after establishing Research cites PrivateEquityInsight.com’s markets and regions, but some are its presence in a country where subscriber calculation that a total of 12 transactions concerted bids to buy into rising technol- numbers are still rising sharply. Vodafone over E5 million were completed by private ogies and fast-growing segments such as as part of a corporate restructuring equity and venture capital firms globally mobile payments, cloud computing and placed non-core assets Verizon Wireless, in the TMT sector in the first seven location-based software (LBS). Motorola SFR, Polkomtel and Bharti Holding in a months of this year. Pyramid says the in September bought Aloqa, a developer separate division overseen directly by total could reach 25 transactions before of LBS, for an undisclosed sum. And CEO Vittorio Colao. Many see it as a the end of the year, which would repre- Creativity Software claims eight of Nokia’s precursor to Vodafone selling its minor- sent a near 100% increase over 2009 when last 10 acquisitions were LBS assets; it says ity stakes in Polish operator Polkomtel, in a total of 13 transactions were completed Apple and Google invested over half a which it holds 24.39%, and French mobile by private equity (PE) companies. billion dollars in LBS acquisitions in the operator SFR, in which it has a 44% share That is still well short of the 40 or so six months to the end of September. (see box). Moreover, there has long been deals each year in the 2006-2008 period Indeed Google is among the biggest speculation that Vodafone could sell its when debt was cheaper, says Pyramid. buyers this year, completing 40 acquisi- 45% share in Verizon Wireless to partner “[Nevertheless], CVC’s acquisition of tions worth US$1.6 billion during the first Verizon Communications. n

Recent deals: selected acquisitions (subject to approval)

September October billion cash deal. NTT Data then n Etisalat is preparing to buy Indian n Vodafone sold its 3.2% stake in n Russian mobile operator agreed to acquire IT services firm mobile operator Idea Cellular. China Mobile for £4.3 billion. Vimpelcom struck a US$6.5 Keane for an estimated $1.2 billion. n Deutsche Telekom is seeking to n France Telecom signed a deal billion deal to merge with most of n Carlyle Group bought mobile increase its stake in Greek operator to buy a 40% stake in Morocco’s the telecoms assets of Weather technology company Syniverse OTE, in which it holds a 30% stake. second largest telecoms operator Investments. The deal includes Italy’s Technologies for US$2.6 billion. n AOL and private equity firms could Meditelecom for around E650 million. Wind and 51.7% of Orascom. n Global Crossing acquired global team up to make a bid for Yahoo. n Private equity firm CVC Capital n United Arab Emirates operator video services provider Genesis n Telekom Austria, Deutsche Partners bought TDC’s Swiss Etisalat agreed to acquire 46% of Networks for $27 million. Telekom and France Telecom are all operator Sunrise Communications for Kuwait mobile operator Zain for n US operator Windstream bought eying a 51% stake in Telekom Srbija, 3.3 billion Swiss francs (E2.4 billion). US$11.7 billion. Zain sold most of its managed hosting/cloud provider for sale at around E1.4 billion. n Greek mobile operator Wind Hellas assets in Africa to Bharti Airtel in a Hosted Solutions for $310 million. n Qualcomm is talking to Indian was acquired by a consortium of its $10.7-billion deal completed in June. mobile operators about selling major bondholders. n Russian mobile operator Megafon In the rumour mill its Indian TD-LTE business for a n Swisscom paid E256 million to agreed to acquire St Petersburg- n Vodafone is preparing the sale of minimum of US$1.1 billion. acquire the remaining 17.9% share in based fibre network operator its 45% stake in SFR to media group n BT is planning to sell a part or all its Italian business Fastweb. Metrocom, in a deal worth 2 billion Vivendi for around £6 billion. of its 30.9% stake in Indian software n Telekom Austria acquired Bulgarian roubles (US$67 million). Earlier this n A string of private equity firms, company Tech Mahindra for about cable operators Megalan Network year Megafon bought long-distance TeliaSonera and Turkcell are lining up $663 million. and Spectrum Net for E80 million. operator Synterra for US$745 million. to buy Polkomtel for up to E4 billion. n Apple and Google are vying to n H-P bought security software n NTT agreed to buy solutions n Singtel and AT&T are considering acquire US mobile payments firm company ArcSight for $1.5 billion. provider Dimension Data in a US$3.3 bids for Cable & Wireless Worldwide. Boku for up to $450 million.

16 www.totaltele.com November 2010 pRiME nuMBERs cOntacts

EditORial Developing economies driving mobile growth 4th Floor, Welken House, 10-11 Charterhouse Square, London EC1M 6EH wireless intelligence says the developing connections. the top ten developing +44 (0)20 7608 7030; [email protected] world now accounts for four out of every economies for mobile connections have a tOtal tElEcOM plus five mobile connections worldwide. combined 2.6 billion connections, over half ian Kemp [email protected] Editor +44 (0)1626 835 703 figures to the end of september showed of the global total. by contrast, the top ten Michelle young [email protected] developing markets accounted for 3.98 developed economies total less than a Art Editor

billion of the world’s 5.15 billion total billion connections, with the us account- tOtal tElEcOM connections. what’s more, developing ing for about a third of that total. Mary lennighan [email protected] Editor +44 (0)20 7608 7069 economies grew their mobile subscriber developing economies accounted for seven nick Wood [email protected] base by 19.1% year-on-year in Q3, of the top ten largest mobile markets by Assistant Editor +44 (0)20 7608 7046 compared to growth of just 4.39% in connections in Q3; the developed econo- tim charters [email protected] developed economies. based on world mies were the us (third), Japan (eighth) Web Developer +44 (0)20 7608 7073 bank definitions both china and india are and germany (ninth). Mobile penetration CONTRIBUTING EDITORS Roy Rubenstein [email protected] classed as developing economies and is 112.7% in developed countries (popula- Omer, Israel together account for almost 30% (1.5 tion 1.04 billion) and 68.78% in developing ingrid lunden [email protected] billion) of the world’s total mobile countries (5.78 billion). London Ken Wieland [email protected] London craig stephen [email protected] top ten developing Economies by Mobile top ten developed Economies by Mobile Hong Kong +852 9048 1124 connections (millions) Q3 2010 connections (millions) Q3 2010 Jagdish Rattanani [email protected] Rank Market connections Overall Rank Rank Market connections Overall Rank Mumbai +91 22 287 55087 1 china 812.5 1 1 us 296.1 3 adVERtising 2 india 692.8 2 2 Japan 115.4 8 HEAD OFFICE, LONDON, UK 3 Russia 219.6 4 3 germany 108.5 9 nick carter [email protected] 4 indonesia 197 5 4 italy 90 11 Sales Manager +44 (0)20 7608 7065 5 Brazil 191.1 6 5 uK 74.6 15 gordon White [email protected] Sales Manager +44 (0)20 7608 7041 6 Vietnam 123.9 7 6 france 59.9 20 7 pakistan 100.9 10 7 spain 54.8 23 UNITED STATES AND CANADA 8 philippines 89.3 12 8 saudi arabia 51.1 25 KCS International 9 Mexico 86.2 13 9 south Korea 50.1 26 T +1 717 397 7100 F +1 717 397 7800 Karen c smith-Kernc – East [email protected] 10 nigeria 85.1 14 10 poland 44.8 28 alan Kernc – West & Canada [email protected] 2,598.4 945.3 Source: World Bank, Wireless Intelligence JAPAN Hiroko Kujime [email protected] pacific Business T +81-3-3661-6138 F +81-3-3661-6139 21 million Voip continues to surge ADVERTISING PRODUCTION Please forward all advertising material directly to: tablet devices forecast More than one in five consumer broadband lines [email protected] +44 (0)20 7827 4151 to ship in 2010, rising to worldwide now comes with a voice over IP service, according to new statistics from Point Topic. MaRKEting 129 million units in 2015. tally Judge [email protected] (IMS Research) Globally, 12 million VoIP subscribers were added in Marketing Manager +44 (0)20 7608 7076 the first half of this year to reach more than 112 charles georgiou [email protected] Marketing Executive +44 (0)20 7608 7071 million. In France more than 90% of broadband MicROWaVE cOOls subscribers have VoIP bundled with their service suBscRiptiOn/custOMER sERVicEs Infonetics says the worldwide micro- offering, and over 70% of French households now aleisha Bryant [email protected] wave equipment market yielded Customer Services Executive +44 (0) 7608 7042 have a VoIP service available to them . But elsewhere or subscribe online at: www.subscription.co.uk/totaltelecom revenues of US$1.3 billion in 2Q10, there is plenty of room for growth: In China, the down 4% from the first quarter, with the MANAGEMENT world’s largest broadband market, only one in 20 most marked slowdown in Asia Pacific. Rob chambers [email protected] broadband subscriptions comes with a VoIP bundle. Publisher +44 (0)20 7608 7077 Ericsson regained the lead for market greg Hitchen [email protected] The US is the largest market “in absolute terms” says share from NEC. A full 80% of micro- Chief Executive Officer Point Topic, with almost one in three broadband wave equipment purchased was for subscribers taking VoIP, mainly due to cable OtHER puBlicatiOns mobile backhaul network deployments, Online: www.totaltele.com companies offering their customers a voice service television: www.totaltele.tv with the remainder for transport based on the technology. applications (such as trunking and tOtal tElEcOM EVEnts metro access) and first-mile access. In a Broadband subscribers with VoIP service bundled, Q2 2010 World communication awards 100% www.worldcommsawards.com separate report the research company World Vendor awards forecasts service providers will spend 80% www.worldvendorawards.com World telecoms council US$36 billion on mobile backhaul 60% www.worldtelecomscouncil.com equipment between 2010 and 2014. 40% Total Telecom Plus is published by

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363 million Italy © 2010. All rights reserved. Japan homes in Asia receive pay-TV France Canada Sweden Slovenia Denmark services (50% penetration). Germany Terrapinn Holdings Ltd registered offi ce: Netherlands South Korea 4th Floor Welken House, 10-11 Charterhouse (CASBAA) Source: Point Topic Square, London EC1M 6EH