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Business analysis for telecoms professionals

feature

DECEMBER 2013

timeline technology business geography events

Dates for your diary and details of the must-attend events in the telecoms industry over the coming months

Big Numbers: Mobile connections are rocketing, driving up capex, but rveneues are not following suit

Moving On: 2013 saw certain big names in the industry head for pastures new, some more willingly than others

Closing the Loop:Mobile-only operators will become a thing of the past, but telcos have to decide whether to buy or build

A round-up of some of the major stories reported in our daily news service www.totaltele.com

incluDes

preDictions

for 2014

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as is customary in this December issue, we take a look back at the key events in telecoms over the past 12 months and set out our predictions for

the year ahead. 2013 was quite a year. This time last year Vodafone’s

exit from the US was just one of those rumours that resurfaced from time to time, whenever it was a quiet news week. The idea of former Nokia CEO Stephen Elop selling the company to Microsoft was something we joked about but didn’t really believe. And we didn’t expect the likes of BT, Telecom Italia and Belgacom to be going into 2014 with new, or no, chief executives at the helm. It just goes to show that you can’t forecast the future any more than you can the British winter weather, but that hasn’t stopped us from giving it a go for next year; we stick our necks out and declare who we think will buy whom in 2014.

While M&A dominated the telecoms headlines in recent months, our review of the year takes a slightly different tack. We look at a key trend that emerged in 2013, that of mobile operators looking to buy and/or build fixed infrastructure to support their mobile network rollouts and lower the cost of backhaul.

For the full annual report, that is the key news stories from the industry in 2013, see our six-page timeline special. It’s all there!

Mary Lennighan, editor mary.lennighan@totaltele.com @TelecomEditor

All the news and industry trends from the past 12 months, plus a look ahead to what 2014 has in store

annual reportopinion

feature reVieW of 2013

Faced with the prospect of hooking up small cells, mobile operators are buying and building their own fixed backhaul

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A round-up of the major stories in telecoms in 2013, as reported in our daily news service www.totaltele.com

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analysistop stories

2020 VisionThe specifications for the fifth generation of mobile technol-ogy have not have been laid out yet and even those heavily involved in its development are unclear on what it will mean. “[If you asked me] what is 5G? I would tell you I don’t know,” said Bernard Barani, deputy head of the European Commission’s DG Connect, at the Total Telecom Festival in London in December.

Nonetheless, the industry is now starting to talk in earnest about 5G. Specifically, people are discussing dates. Samsung arguably started it in May when it stated its aim to commer-cialise 5G technology by 2020, claiming a technology breakthrough related to millimetre wave spectrum that it said will essentially permit mobile speeds that are hundreds of times faster than LTE. Mobile industry analyst Bengt Nordstrom called the announcement a “PR trick”, noting that 5G will not come about through the efforts of a single vendor.

However, it soon became clear that Samsung is not the only player with 2020 in mind. In October Japan’s NTT DoCoMo revealed it may try to launch 5G services in time for the 2020 Olympic Games in Tokyo. “It seems far-fetched but nonetheless we need to consider it,” said Takehiro Nakamura, director of NTT DoCoMo’s radio system design group. Huawei thinks it can be done. Towards the end of the year the Chinese vendor said it expects the first 5G networks, capable of speeds upwards of 10 Gbps, will be up and running by 2020. To help make that vision a reality, Huawei plans to plough $600 million into 5G research in 2014-2018. And that R&D effort will be very important. “We have already achieved many technological breakthroughs in 5G research and innovation, but the majority of the work remains ahead of us,” admitted Huawei’s rotating CEO Eric Xu.

VeriZon Buys out VoDaAfter years of speculation, in September Vodafone agreed to sell its 45% stake in Verizon Wireless to Verizon for $130 billion. The FCC approved the deal in December and, pending shareholder approvals, it is expected to close in Q1.

noKia sells DeViCes unit Also in September, Microsoft agreed a €5.44 billion deal to acquire Nokia’s mobile phones business. When the deal closes the Finnish vendor will be left with NSN, mapping unit Here and a patents portfolio.

softBanK sprints into us Japan’s Softbank took control of US operator Sprint in July after a protracted battle with satellite firm Dish Network. The $21.6 billion deal left Sprint with $5 billion in cash and gave Softbank a 78% stake.

aMeriCa MoVil’s Kpn BiD Mexico’s America Movil made a €7.2 billion offer to take control of Dutch operator KPN, but in October it chose to abandon its ambitions rather than increase its bid when a shareholder group blocked the move.

We HaVe aCHieVeD Many teCHnoloGiCal BreaKtHrouGHs in 5G researCH anD innoVation

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BiG neWs

opinionaDVanCinG lte18 months ago the UK was “behind the curve” in LTE, lagging behind coun-tries like Azerbaijan and Angola, said EE’s chief sales officer Marc Allera in December. EE launched its LTE network in late October 2012 and the market has “moved very quickly since then,” he added.

Indeed, the UK’s LTE spectrum auction took place in February, raising £2.37 billion. The big four all won bandwidth, as did BT, which insists it has no plans to return to the UK mobile market, but will instead use the spec-trum to extend its broadband offers. Vodafone and O2 were anxious to bring LTE services to market though, something they both achieved on 29 August, while 3 quietly introduced a limited LTE offer in December. At the same time, EE continued to push ahead. It reached the 1 million LTE customers milestone in September, ahead of its original target, and in November inau-gurated a small-scale LTE-Advanced network in London’s Tech City area.

The UK might not be behind the curve anymore, but there were bigger LTE-A rollouts than EE’s in 2013. SK Telecom got the ball rolling in June when it launched its LTE-A network and five months later was already talking about increasing speeds to 300 Mbps by aggregating three carriers. Kuwait’s Zain introduced LTE-A in November as part of its bid to become an enterprise provider, and various other operators undertook LTE-A trials.

BaCK of tHe netBT garnered a lot of attention with the August launch of its BT Sport TV channels. However, its acquisition of broadcast rights for Premiership football, rugby, and later Champions League and Europa League football, among others, was not made solely to shake up the UK’s pay-TV market. Rather the telco aimed to consolidate its position in the ISP space by bundling BT Sport free with its broadband tariffs.

It’s a strategy that does not come cheap. The rights to broadcast just 38 Premiership football matches per season for the next three years cost it £738 million. A three-year rights deal for the UEFA Champions League and Europa League set it back £897 million, far in excess of what fierce rival BSkyB said it was prepared to pay. Nonetheless, new BT CEO Gavin Patterson said despite the significant investment, BT Sport does not fall into the category of crazy money in light of some of the other projects the UK incumbent is investing in, namely its £2.5 billion nationwide FTTC network.

It is also a strategy that has won a considerable number of fans. BT Sport had 1 million customers by the end of August and 4 million a month later. With premium sports content such a big draw for UK consumers, it will be interesting to see how BT’s rivals hit back in 2014.

top stories

oi sWalloWs portuGal telPortugal Telecom and Oi in October announced that they will merge to create a new Brazil-based operator under the leadership of current Oi CEO and former Portugal Telecom head Zeinal Bava.

VoDafone Buys KaBel D Vodafone completed a €7.7 billion takeover offer for Germany’s Kabel Deutschland in October, securing a 76.57% stake.

Kpn sells GerMan unit Telefonica in July agreed to pay KPN €5 billion in cash for its German mobile unit E-Plus and to give the Dutch telco a 17.6% stake in the combined entity. Regulatory scrutiny is ongoing.

italian JoBTelefonica in September brokered a deal that will see it increase its indirect stake in troubled Telecom Italia, which this year saw CEO Franco Bernabe step down and reportedly canned a network spin-off plan. The deal has antitrust implica-tions in Latin America.

european aMBitions Hutchison Whampoa closed its acquisition of Orange Austria in January and in July agreed to buy O2 Ireland from Telefonica for €850 million–the EU is examining the latter–but it failed to pull off a mobile merger with Telecom Italia.

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2018 GloBal MoBile

serViCe reVenues Will DeCline for

tHe first tiMe (Ovum)

top stories

transatlantiC CaBle DealLiberty Global in February agreed to buy UK cableco Virgin Media via a $23.3 billion cash and stock merger.

BlaCKBerry Blues 2013 was a turbulent year for Canada’s BlackBerry, which changed its name, put itself up for sale, failed to complete a takeover deal with Fairfax, and replaced CEO Thorsten Heins with an interim leader, John Chen.

t-Mo Buys MetroThe $1.5 billion merger of T-Mobile USA and MetroPCS closed in May. The combined company is known as T-Mobile US, but the pair are continuing to offer services under separate brands.

at&t taKes a leap Consolidation in the US continued in July when AT&T announced a $1.19 billion deal to acquire prepaid specialist Leap Wireless. Leap shareholders approved the acquisition in November.

proJeCt loonGoogle unveiled Project Loon in mid-2013, an initiative designed to provide Internet connectivity to hard-to-reach parts of the world via a fleet of balloons.

yaHoo taKes tuMBlrYahoo agreed to pay $1.1 billion in cash for blogging start-up Tumblr in May. It was one of many acquisi-tions made by the firm, which also bought Xobni, Qwiki and Summly.

tWitter floatsMicroblogging site Twitter raised $2 billion from an IPO that saw it list on the New York Stock Exchange in November. Its shares are still trading at around double their $26 IPO price.

faCeBooK pHone Facebook in April partnered with HTC and AT&T to launch Facebook Home, a customised interface for mobile phones.

internet CoMpany HiGHliGHts

naMe DropperQatar’s incumbent telecoms operator stole the show at Mobile World Congress in February with the announcement that it would rename itself and all group companies as Ooredoo, which means “I want” in Arabic. As if a glitzy press confer-ence attended by such dignitaries as women’s rights cam-paigner Cherie Blair and ITU secretary general Hamadoun Toure weren’t enough, the telco formerly known as Qtel also unveiled Barcelona footballer Leo Messi as its new brand ambassador. The rebrand is still taking place, with Algeria’s Nedjma being the most recent group company to become Ooredoo in November.

Ooredoo wasn’t the only company to adopt a new name in 2013. Nokia took sole control of its Nokia Siemens Networks joint venture in August and retitled it Nokia Solutions and Networks, thereby retaining its ‘NSN’ monicker.

analysis

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auCtion aCtion in europeaustria up in arMsAustrian operators T-Mobile and 3 have filed complaints over the “ex-orbitant” sums raised by October’s LTE auction. In total the state netted €2.01 billion.

BelGiuM at roCK BottoMAs the only auction entrants, Belgium’s three mobile network op-erators secured LTE spectrum in the 800-MHz band for the €360 million reserve price in November.

sloW proCess Finland finally concluded its 800-MHz spectrum auction in October after nine months. DNA, Elisa and TeliaSonera all won spectrum, pay-ing €108 million in total.

no neWCoMers Telefonica, T-Mobile and Vodafone picked up spectrum in the Czech Republic’s LTE auction, which failed to bring newcomers to the market after two start-ups dropped out.

Mystery BiDDerNorway in December raised NOK1.78 billion (€210 million) from the sale of spectrum in three bands. Newcomer Telco Data paid the most, while Tele2 missed out.

plans afoot in HunGary In December Hungary’s telecoms regulator published plans to sell spectrum in various bands with the aim of raising up to HUF150 billion (€500 million).

MarKet snapsHottop stories

MexiCan oVerHaulFollowing the approval of a telecom reform bill, Mexico got a new regulator in September when Ifetel replaced Cofetel. Ifetel is keen to improve competition in the market.

MaroC teleCoM solDAfter lengthy negotiations, Vivendi in November agreed to sell its 53% stake in Maroc Telecom to Etisalat for €4.2 billion.

ConsoliDation in russia Tele2 sold its Russian mobile unit to financial group VTB for $3.55 billion. In December it emerged that Rostelecom’s board has approved a merger of Tele2’s mobile assets with its own.

sprint Cans nextel netIn July Sprint finally closed down the iDEN network it gained via its 2005 acquisi-tion of Nextel.

MyanMar...Vellous2014 will bring with it the launch of more affordable mobile services in Myanmar, the most recent global market to liberalise and one with so much potential that some of the world’s biggest telecoms operators duked it out to receive an operating licence there.

The country named Qatar’s Ooredoo and Norwegian incumbent Telenor as the winners of the two licences on offer in June. The pair triumphed over stiff competition. Myanmar’s Ministry of Communications and Information Technology (MCIT) received a staggering 91 applications for the licences and whittled the hopefuls down to a final dozen that included France’s Orange, Malaysia’s Axiata and Japan’s KDDI; a Vodafone/China Mobile consortium pulled out of its own accord before the final decision was made.

So what now for Myanmar?Starting next year, Ooredoo and Telenor plan to roll out

coverage to approximately 85% of the country by 2018 and establish large distribution networks for prepaid credit and low-cost SIMs, which to date have been priced far beyond the reach of the average consumer. In fact, the $1.53 fee proposed by Telenor and Ooredoo is 200 times cheaper than prices charged in 2012 by Myanmar’s state-owned telcos. Consequently the mobile penetration rate is incredibly low.

To reach their ambitious network coverage targets, Telenor and Ooredoo are reportedly considering sharing cell towers in order to keep down costs. The latter is even considering outsourcing its network build altogether in a bid to overcome the practical difficulties of deploying infrastruc-ture in the country.

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top stories

neW telCo in portuGalPortugal’s Zon Optimus–created from the merger of pay TV firm Zon Multimedia and mobile operator Optimus–officially launched in August.

MexiCo-us ties America Movil in May agreed to acquire US MVNO Start Wireless and its 1.4 million customers, via its US unit Tracfone. Meanwhile, AT&T sold some of its America Movil shares for $564 million, but ruled out exiting the operator.

BHarti Buys QualCoMM opQualcomm sold 100% of its Wireless Business Services unit in India to Bharti Airtel during the course of 2013.

asiaCell’s iraQ float Iraq’s Asiacell became the first telco to list on the country’s stock exchange in January when it completed a $1.3 billion IPO.

Dt Buys anD sells Deutsche Telekom acquired GTS Central Europe for €546 million in November, less than a month after it sold 70% of online ad unit Scout24 for €1.5 billion.

sMart Meter Deals The UK government awarded contracts to provide comms services for a smart meter project to Telefonica (£1.5 billion) and Arqiva (£625 million).

auCtions elseWHereaustralia raises a$2BnThe sale of digital dividend spectrum to Telstra, Optus and TPG Internet added A$2 billion to Australian government coffers in May but close to A$1 billion worth of frequencies were unsold.

fiVe for 4GClaro, Movistar, Avantel, DirecTV and ETB/Tigo won 4G licences in Colombia in June, spending COP770.53 billion ($400 million).

Hon Hai Wins in taiWanTaiwan raised NT$118.65 billion (€2.93 billion) in its 4G auction in October. Six companies won spectrum, including a unit of contract electronics manufacturer Hon Hai.

anotHer speCtruM saleNew Zealand’s three mobile operators, Telecom, Vodafone and 2degrees, paid NZ$176 million plus tax for 4G spectrum in October.

analysis

Carrot anD HoCKey stiCKCanada’s CRTC has had a tough year trying to keep the big three–BCE, Rogers and Telus–in check. The watchdog has reserved spectrum in January’s 700-MHz auction for a new challenger and has twice stepped in to stop Telus acquiring ailing rival Mobilicity. Still, it has struggled to convince smaller players or prospective new entrants that they stand a realistic chance of success. Low-cost Public Mobile agreed a sale to Telus in October, and there are questions over whether Wind Mobile will stick around unless it can acquire the aforementioned Mobilicity. Verizon was linked with both Wind and Mobilicity, and with participation in the spectrum auction, but announced it had no interest in Canada due to concerns about value creation. Meanwhile, Egypt’s Naguib Sawiris attempted to re-enter the market with a bid for Allstream but after his offer was blocked on national security grounds he angrily declared he was ‘finished with Canada’.

CanaDa MoBile MarKet sHares, Q3 2013rogers Wireless 34%regional 5%new entrants 6%Bell mobility 28%telus mobility 28%

34%

Source: Rogers Wireless

5%28% 6%

28%

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5% GroWtH in GloBal

it spenDinG to $2.14 trillion

in 2014 (IDC)

oVerseas aMBitionsJapan’s telecoms operators are looking outside their home market for growth. Softbank captured most of the headlines with its acquisition of Sprint in mid-2013, but the US-based mobile operator was not its only buy of the year. Softbank also paid $1.26 billion for a 57% stake in US-based mobile distributor Brightstar and $1.53 billion for 51% of Finnish mobile game company Supercell.

Meanwhile, NTT Communications in October agreed to pay $525 million for cloud services specialist Virtela, capping off a year in which it took every opportunity to strengthen its business through acquisition. Indeed, NTT Com simultaneously announced that it would take an 80% stake in US-based RagingWire Data Centers. In August it picked up a majority stake in French conferencing services and unified communications provider Arkadin for an undisclosed sum and completed the purchase of US managed security services provider Solutionary. In June it agreed to buy Thai data centre provider Digital Port Asia.

Just over a year ago we suggested that KDDI might need to consider jumping on the M&A bandwagon in order to keep pace with its domestic rivals. While there were no major foreign acquisitions for the telco in 2013, it completed the acquisition of Japan’s biggest cable TV operator JCOM.

BiG neWs

top stories

oranGe in DoM rep Deal Orange in November agreed to sell its Dominican Republic business to investment firm Altice for €1.1 billion.

fiBre in afriCa Google kicked off Project Link by rolling out fibre in Kampala, Uganda, to enable mobile operators and ISPs to connect to international cable links.

europe-CHina tensionsThe EU in October con-firmed it is still in talks with China over subsidies it alleges the latter’s equipment makers receive from Beijing.

st-eriCsson split In August Ericsson and STMicroelectronics complet-ed the division of the assets of their semiconductor joint venture ST-Ericsson.

alu Has a retHinK Alcatel-Lucent’s new CEO Michel Combes in June unveiled the Shift Plan, that will see the vendor cut €1 billion in costs, sell assets and refocus its activities.

toWerinG expense2013 saw a number of telecom operators move to monetise their mobile towers. In one of the most high-profile deals Crown Castle agreed to lease 9,100 towers from AT&T and purchase a further 600 in a transaction worth $4.85 billion. Latin America was a hotbed of activity; NII Holdings sold towers in Brazil and Mexico to American Tower for $811 million, while Oi hived off a chunk of its towers real estate to SBA Communications for $645 million. And in Tanzania, Vodacom agreed to sell more than 1,000 towers to Helios for an undisclosed fee. Meanwhile, Telecom Italia is reportedly looking to raise €1 billion from the sale of its mobile towers.

There were also cases of tower companies buying one another, such as American Tower’s acquisition of MIP Tower Holdings. And in India, Indus Towers completed the merger of its towers with those of Bharti, Vodafone and Idea Cellular, while Reliance Jio Infocom entered a $2 billion pact to share towers with Reliance Communications.

teleCoMs operators are MoVinG to Monetise tHeir MoBile toWers

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reVieW of 2013

ClosinG tHe loopMobile-only operators are set to become a thing of the past as telcos increasingly seek to own the infrastructure that connects up their base stations

over the past 12 months the mobile operator business model has

begun to unravel. 2013 marked the begin-

ning of the end for the mobile-only operator. For some time mobile players have sought to offer a more complete service offering, by adding fixed broadband into their portfolios. But with 4G rollouts well underway–and the next generation of mobile technology just over the horizon–operators are having to think seriously about how they will cope with smaller cell architec-tures and the fixed assets they will require to support them.

Vodafone is leading the way, but it is not the only mobile player to have addressed the fixed networks issue in 2013. Mobile operators worldwide are looking to hook up their base stations to their own fixed infrastructure one way or another, and that gives rise to one key question: whether to buy or build.

Fresh from acquiring Cable & Wireless Worldwide and New Zealand’s TelstraClear in 2012, Vodafone this year picked up where it left off, launching in July a €7.7 billion tender for

German cableco Kabel Deutschland, a transaction it completed in October. It was also linked with a move for Italian fixed-line provider Fastweb in June.

“There’s room for mobile-only in certain countries for a certain amount of time,” says Andy Hudson, head of spectrum policy at Vodafone. “But I don’t think we’ll be talking about it in 10 years,” he predicts.

Indeed, a number of major mobile operators are already moving in a direction that suggests they will not be able to call themselves mobile operators for much longer.

“We would be interested to own our own fixed network,” says Omar Saud Al-Omar, CEO of Zain Kuwait. “It makes a lot of sense...The demand for data showed us how much it is costing us to buy the required bandwidth and to eventually provide it to our customers.”

Zain generates 25% of its revenues from mobile data in Kuwait and buying the backhaul to support that traffic is proving costly. It is all very well growing or maintaining your top line, “but EBITDA and net profit are different when it comes

to data because the cost structure is different than voice,” Al-Omar explains.

Zain operates in eight markets across the Middle East and North Africa, which makes the business case for owning fixed infrastructure more valid, Al-Omar says. “The [Zain] group has started building their own network,” he says. “We should own our own network and provide this connectivity to our operators, instead of buying it from international carriers.”

At present Zain partners with Vodafone for interna-tional connectivity, Al-Omar notes. “They skipped so many steps by buying Cable & Wireless...They provide to others, but most importantly to their own operators,” he says.

But while a group like Zain might have the money to build out its own network, that sort of project doesn’t come cheap. For many, buying ready-made infra-structure will be a more cost-effective method than building.

“I think you’re going to see more deals like Vodafone/Kabel [Deutschland],” predicts Alcatel-Lucent CTO Marcus Weldon, who says that

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acquiring a fixed network will likely prove a more economical way for operators to backhaul large numbers of small cells, compared with leased lines.

Operators are certainly concerned about the financial implications of moving to smaller cell networks. “Small cells are a bit of a nightmare,” says UK mobile operator EE’s head of spectrum Inge Hansen. “We know we will need them at some point in the future, but it is just way too expensive to contemplate in the environ-ment we live in, with falling industry revenues,” she says. “How are we going to get backhaul...to all of these small cells?” she asks, also listing site rental and maintenance as key cost issues for network operators. “This is a real headache.”

That backhaul challenge is one of the things that could push more mobile operators into the M&A market. “Backhaul pricing is based on peak usage, not average, which makes it a difficult model,” Weldon explains. “Unless you can somehow get really cheap backhaul, you’re going to have to buy the backhaul company.”

However, telcos need to move quickly if they want to acquire fixed-line assets since there are a limited number of fixed networks out there.

In Europe there are around 1.5 fixed networks per market–typically one

national player and one cableco with 50% coverage–and three-to-four mobile operators, points out Stephen Howard, head of global telecoms, media and technology research at HSBC. “We will see more [fixed-mobile] convergence over time,” Howard says. “Some of it will be driven by operators with the cash and confidence to invest them-selves, some of it will come from regulators that move from cost-oriented [access pricing] to equivalence,” he predicts.

“They need to move early because there aren’t many companies to acquire [and] there aren’t many options that give you scale,” Alcatel-Lucent’s Weldon warns. There are alternatives, such as building your own

network, but “that takes time; you can spend a decade building it,” he says.

Sometimes though, that is the only option, “particularly in markets with a strong fixed-line incumbent,” says Vodafone’s Hudson. In these markets it can be difficult to get access to the incumbent’s network at all, let alone on reasonable terms, he says, and there may be a lack of viable alternative operators.

Vodafone is pursuing this strategy in Spain in partner-ship with Orange. The two are co-investing in a €1 billion fibre-to-the-home (FTTH) network with which they aim to pass 6 million premises across 50 major cities by September 2017. They plan to launch commercial services early next year.

aGainst tHe GrainWhile most mobile operators are looking to add fixed assets, there are always exceptions to the rule.

UK mobile operator O2 actively took steps away from the fixed-line mar-ket in 2013. In March it announced the sale of its fixed broadband business to satellite operator BSkyB for £180 million and later in the year inked two separate 10-year LTE backhaul deals, one with BT and another with Virgin Media. It subsequently launched LTE services in August.

Meanwhile, some in the industry got excited, albeit very briefly, this year at the idea that BT might re-enter the mobile business. In February’s LTE auction the fixed incumbent paid £201.5 million for 2x15 MHz of 2.6-GHz spectrum and 20 MHz of unpaired 2.6-GHz spectrum. However, BT immedi-ately announced that it has no plans to build a nationwide mobile network. Instead it will use the frequencies to enhance its consumer broadband and enterprise offerings.

It is interesting to note though, that just as some mobile operators begin to see fixed infrastructure as an imperative for cost-effective delivery of high-capacity mobile coverage, a fixed-line player like BT, which has been quite happy to leave the spectrum to others, now sees the value of owning the means to extend fixed broadband services to mobile devices.

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But not everyone will be able to build or to buy.

“The safest option is a cableco allied with a mobile operator; not necessarily through mergers but through partnerships as well,” says Weldon.

HooKinG upPartnerships featured prominently in 2013, as telcos in a number of markets sought to rein in costs with network-sharing agreements.

Europe saw a lot of activity, with network-shar-ing deals between Vodafone and Wind Hellas in Greece, and Orange and Vodafone in Romania. In the Netherlands, T-Mobile and Tele2 struck a 10-year deal to share cell sites, in a move aimed at lowering the deployment cost of the latter’s 4G network. France’s ongoing mobile price war encouraged SFR and Bouygues Telecom to enter into network-sharing talks, which at the time of going to press are ongoing. New entrant Free Mobile–which sparked the French price war–is hoping to join the discussions.

In India, Mukesh Ambani’s Reliance Jio Infocomm, the only holder of a nationwide mobile broadband licence, made progress towards deploying its network by striking a deal to share fibre, undersea cables and cell towers with Bharti Airtel. In April, the company also established a tower-sharing pact with

Reliance Communications, owned by Mukesh Ambani’s brother Anil. We’re cautious-ly optimistic about the impact that Reliance Jio will have on India’s mobile broadband market. While it has a licence that allows it to offer a full suite of services, it remains to be seen how affordable they will be.

In March, Telefonica’s Brazilian arm Vivo entered into a network-sharing pact with local rival Claro, owned by America Movil. The companies received regula-tory backing in May. More recently, three of Israel’s mobile operators–Cellcom, Pelephone, and Golan Telecom–agreed to form a joint venture tasked with building a shared 4G network, and agreed separately to share 2G and 3G infrastructure.

stitCHinG it toGetHerAs always, M&A was high on the agenda in the telecoms space in 2013 as operators sought to build scale.

One of the biggest transactions, not just in telecoms but in corporate history, saw Vodafone agree in September to sell its 45% stake in Verizon Wireless to Verizon in a deal worth $130 billion. The move marks Vodafone’s exit from the US and the cash it receives will enable it to invest in those all-important fixed networks elsewhere.

Vodafone shedding its Verizon Wireless stake led to speculation that AT&T is

preparing a bid for the UK operator, retaining some assets to boost its own business overseas and selling off others. Such a move might seem like a step too far for the US giant (see Predictions 2014, p.12), but AT&T was no stranger to brokering sizeable deals in 2013. In September it closed a deal to buy $1.9 billion worth of spectrum from Verizon and completed its $780 million acquisition of Alltel, and in November sharehold-ers of Leap Wireless gave the go-ahead to a $1.19 billion takeover by AT&T.

AT&T was not the only player in the US at the centre of M&A talk this year. The long-running battle between satellite operator Dish Network and Japanese telco Softbank for control of Sprint captured the head-lines for months, coming to a head in June when Softbank upped its offer to $21.6 billion. Dish pulled out and Softbank took control of the newly-created Sprint Corp in July; just days earlier Sprint completed the acquisition of the remainder of Clearwire that it did not already own, its $5 per share offer valuing the US telco at around $14 billion.

This time last year we suggested that there would likely be more consolidation to come in the US. Not only did that prove to be the case, but that same prediction is still valid 12 months on. As we went to press, there were rumours that Sprint is

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working on a bid for number four mobile operator T-Mobile US, which came into being in its current form in May, following the completion of its $1.5 billion merger with MetroPCS.

There were major telecoms deals elsewhere in the world too. Cross-shareholders Oi and Portugal Telecom agreed to merge to create a new, Brazil-headquartered telco headed up by current Oi chief executive Zeinal Bava.

After much negotiation Abu Dhabi-based Etisalat in November signed a €4.2 billion agreement to acquire Vivendi’s 53% stake in Maroc Telecom. The deal is due to close early next year, subject to regulatory approvals.

Meanwhile, Germany will get a new mobile market leader in 2014 if Telefonica gets the regulatory go-ahead

for the €5 billion cash and stock deal it brokered for KPN’s E-Plus unit in July. It plans to merge E-Plus with its O2 Germany operations.

The most active player in the European M&A space in 2013 was arguably Hong Kong’s Hutchison Whampoa, which started the year by wrapping up its acquisition of Orange Austria in January, before moving on to new targets. In June Hutchison’s Irish unit agreed to acquire O2 Ireland for €850 million; the deal is still being examined by European regulators. Hutch also approached Telecom Italia about merging their Italian mobile operations, but discussions over a potential tie-up ultimately came to nothing.

The cable market was also a hive of activity. In February US-based Liberty Global

agreed to acquire Virgin Media in a $23.3 billion deal, adding the UK company to its European cable footprint. Later in the year Liberty Global made a bid for Dutch cable operator Ziggo, in which it already holds a 28.5% stake. Ziggo rejected the offer, but as the year drew to a close it admitted that it is holding talks with the US outfit. Meanwhile, in the US there is ongoing debate over the future of Time Warner Cable, which is reportedly drawing takeover bids from rivals Charter Communications and Comcast.

If the world’s mobile operators are keen to snap up some cable assets to help future-proof their networks, they had better not wait too long to make a move.

Mary Lennighan, Nick Woodnewsdesk@totaltele.com

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BuDDinG BiG Dealsl Telefonica will persuade Telecom Italia to sell TIM Brasil and will snap up a portion of its assets to bulk up its Vivo unit. Talk of a merger between the Spanish and Italian incumbents will come to nothing, but expect closer cooperation between them in Europe.

l America Movil’s European expansion plans will remain on ice while it sets its sights on other regions. One possible target is the US, where the Mexican telco has been growing its presence via its Tracfone MVNO. T-Mobile US is the likeliest candidate, unless Sprint gets there first.

l Hong Kong’s Hutchison Whampoa could brandish its chequebook once more. The telco could make a new move to bulk up its operations in Italy after its failed mobile merger with Telecom Italia. We’re not ruling out a move for the UK’s O2 either.

stayinG putl Despite all the speculation to the contrary, US telcos will not expand overseas, due to healthy ARPUs, increased competition to deal with in their home market, and

remaining growth potential. Rumours of AT&T buying Vodafone will persist though.

netWorK neCessitiesl Europe’s cable operators will find themselves telco acquisition targets as mobile players discover that buying a fixed network is cheaper than building one. However, potential buyers will face competition in the form of an ambitious Liberty Global.

l UK mobile operator EE will prove to the sceptics that it is possible to differentiate on its LTE network with the launch of an all-singing, all-dancing LTE-Advanced network with coordinated multi-point (CoMP) technol-ogy, while its rivals play catch-up on coverage.

MeDia MoGulsl BT’s success with its sports programming will encourage operators elsewhere to spend sizeable sums on premium content. The UK incumbent will continue to add to its content portfolio. Virgin Media and Sky will hit back with enhanced set-top box and mobile app features.

C Minusl Faced with overwhelming indifference, Apple will pull

the plug on the iPhone 5c...unless China’s TD-LTE market comes to the rescue first.

BanDinG toGetHerl Brussels’ dream of a digital single market will remain just that as the Connected Continent reform package receives a fresh bashing from from industry players at MWC 2014. Digital Agenda chief Neelie Kroes will stick to her guns though.

Hey BiG VenDorl BlackBerry will stop making smartphones. Despite the fact that other OS makers are moving in the opposite direction, the Canadian vendor will relaunch itself as a software and patent licensing com-pany. Brace yourself for teary-eyed retrospectives about the ‘CrackBerry’.

l Talk of an Alcatel-Lucent/NSN mash-up will refuse to die, given their complemen-tary geographic footprints, newly-svelte corporate structures and the pressure they face from China. The fact that the merged entity would require phablet-sized business cards to accommo-date the new name will turn out to be a dealbreaker.

Next year Total Telecom expects some operators to move outside their core foot-prints while others stay put; certain devices may disappear from the shelves

HoMe anD aWaypreDiCtions 2014

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2013 saw certain big names in the telecoms industry head for pastures new; some went more willingly than others

people in 2013

cable operator Ziggo in January, passing control of the German incumbent to CFO Timotheus Höttges.

In neighbouring Belgium, one CEO left his post rather less willingly. Belgacom’s Didier Bellens was fired by the government after his latest outspoken remark proved to be the last straw. And while Belgacom goes into 2014 with the CEO position vacant, Swisscom will start the new year with a new man at the helm, having appointed Urs Schaeppi to the top job after the untime-ly death of Carsten Schloter.

Arguably the most ‘in-flux’ European incum-bent this year was Nordic operator TeliaSonera. Just a month into 2013 CEO Lars Nyberg handed in his resignation in the wake of the debacle over the telco’s activities in Uzbekistan; a full board reshuffle was announced two weeks later. Former Vodacom executive Johan Dennelind became TeliaSonera’s new president and CEO in September.

Telenor also saw execu-tives come and go this year, mainly in Asia. It named Petter Furberg as CEO of its new Myanmar unit, moving him from Thailand’s DTAC. And Telenor India CEO

The news that Franco Bernabe had tendered his resignation as CEO of Telecom Italia came as less of a surprise, the press having been awash with rumours to that end for weeks. Bernabe stepped aside after failing to convince shareholders to back a capital hike plan

two of the big five incum-bents entering 2014 with new CEOs.

We were taken by surprise in June when BT announced the departure of CEO Ian Livingston, who left his post to become Minister of State for Trade and Investment in the UK government. His replacement and former BT Retail head Gavin Patterson took over in September, shortly before the UK incumbent issued another unexpected resignation announcement. The telco is looking for a new leader for its access network division Openreach after Liv Garfield quit to become CEO of water company Severn Trent.

MoVinG on

it is a priVileGe to HaVe Been offereD tHe position of Ceo of Bt Group anD i aM DeliGHteD to aCCept

it has been quite a year for executive changes in the telecoms space, with a

number of operators parting company with well-estab-lished CEOs and the vendor community welcoming a handful of new arrivals.

For once, Europe was a the centre of the action, with

designed to shore up the company’s finances. Chief operating officer Marco Patuano has taken the reins on an interim basis. Bernabe also ceded his role as chairman of industry body the GSMA, a position that has been handed to deputy chair and CEO of Telenor, Jon Fredrik Baksaas.

Looking forward, it is worth noting that BT and Telecom Italia will not be the only ones in the big five going into a new year with a new CEO. Having sported the ‘outgoing CEO’ label for the duration of 2013, Deutsche Telekom’s Rene Obermann will finally take up his new role at Dutch

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to Jean-Yves Charlier.Nokia CEO Stephen Elop

stepped aside in September when Microsoft agreed to buy the firm’s mobile phones business; he will trasfer back to Microsoft when the deal closes and is one of a number of execs tipped as a successor to Steve Ballmer, who will retire as the company’s CEO next year.

Having failed to sell itself–in more ways than one–struggling BlackBerry replaced CEO Thorsten Heins in November; John Chen took over as interim chief exec. And having launched the new Firefox smartphone OS earlier in the year, Gary Kovacs resigned

Yogesh Malik resigned in November after just six months; he has yet to be replaced.

Also in India, Bharti Airtel restructured its leadership, naming Gopal Vittal as Indian CEO and Manoj Kohli as international CEO; the pair serve as joint managing directors. It also appointed former MTN Group executive Christian de Faria as chief executive of its African operations.

Ones to watch in 2014 include Zeinal Bava, who became CEO of Brazil’s Oi in June and in October was named as chief executive of the Brazilian-based entity that will result from the Oi/Portugal Telecom merger.

All eyes down under will be on Bill Morrow next year. Morrow will take over as the new CEO of Australia’s NBN Co, leaving his post as head of Vodafone’s local unit. He replaces industry veteran Mike Quigley, who resigned in July, and relieves ex-Tel-stra boss Ziggy Switkowski from the interim CEO duties he accepted when he became NBN Co chairman in October. Incidentally, the industry lost another well-known name in 2013, when former CEO of Singapore’s StarHub Neil Montefiore announced his retirement. He was replaced by COO Tan Tong Hai.

Vodafone witnessed executive changes outside Australia too. Newly-arrived Brian Fitzpatrick was named as CEO of the Carrier

Services division Vodafone created in May to bring together its wholesale businesses with its Cable & Wireless Worldwide assets. In September Vodafone UK chief executive Guy Laurence crossed the Atlantic to become CEO of Rogers Communications in Canada, where he replaced Nadir Mohamed; Jeroen Hoencamp has taken on the Vodafone UK job. And the following month group CFO Andy Halford announced he will leave the company in March 2014, after nine years in the role, without sharing his plans for the future.

Meanwhile, a former Vodafone executive took the

helm at Alcatel-Lucent in February, replacing Ben Verwaayen who resigned earlier that month as the equipment maker posted a hefty fourth-quarter net loss. Michel Combes, who left Vodafone in 2012 for a position at SFR that ulti-mately fell through, has the remit of delivering sustain-able profitability at Alcatel-Lucent. SFR also changed its leader in 2013; the French mobile operator separated its chairman and and CEO functions, handing the latter

We Will HaVe a unifieD ManaGeMent teaM...i Will Be tHe Ceo of oi anD portuGal teleCoM

as Mozilla CEO in April to join AVG.

Lastly, December brought news of what is likely the last major executive change of 2013. Qualcomm announced that CEO Paul Jacobs, son of co-founder Irwin Jacobs, will step down in March, to be replaced by 20-year company veteran Steve Mollenkopf. Jacobs will keep his hand in as executive chairman though.

Mary Lennighan, editor mary.lennighan@totaltele.com @TelecomEditor

1-2 July 2014ETC Venues St Paul’s, London

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lte GroWtH aHeaDThere will be 1 billion LTE connections worldwide by 2017, up from 176 million at end-2013, according to GSMA Intelligence. By that date half of the population will have LTE network coverage.

Source: GSMA Intelligence

0.4%

46%

1%

29%

39%

9%

47%

20%2%

3%

n africa n americas n asia n europe n oceania

2013

2017

GeoGrapHy: WorlD

BiG nuMBersThe number of mobile connec-tions worldwide is rocketing; capex is up but revenues are not necessarily following suit

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9.3bn GloBal MoBile suBsCriBers

By 2019(Ericsson)

$1.28 trillion

reVenues of tHe WorlD’s top 100 telCos in 2013

(Total Telecom)

europe’s CoMpeti-tiVe position on tHe GloBal sCene is unDer tHreatneelie Kroes, eu commissioner

Hey, BiG spenDers!Globally service provider capex grew by 6% in 2013 compared with the previous year as Europe’s big operators increased their spending slightly, the BRICs returned to the market and expenditure increased in Japan, according to Infonetics. The firm expects capex to reach $355 billion in 2017.

Source: Infonetics Research

GloBal Capex GroWtH

2012 2013 2014 2015 2016 2017

400

320

340

160

80

0

20%

15%

10%

5%

0%

avg

cape

x in

$us

bill

ions

avg

cape

x to

reve

nue

ratio

n capex — capex:revenue

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