Archive for January, 2002

VODAFONE – AIMING HIGH IN 2001 – JANUARY 2002

Tuesday, January 1st, 2002

The company recorded its maiden operating profit in the financial year ending March 2001, with operating profit of $70 million, up from a $2 million loss in 2000. It also achieved strong EBITDA growth, with a 123% increase to $177 million. Revenues of $539 million were up 32% on the previous financial year.

In January 2001, Vodafone bought 3G radio spectrum, which will enable it to provide more mobile services including videoconferencing and advanced messaging. In April 2002, it acquired a further block from TelstraClear.

Since launching, the company has pumped millions into the business, including $200 million over several years into the network and another $50 million into distribution. Part of this expenditure has gone on new facilities for Auckland, including eight new sites. During the 1998-2000 period Vodafone increased the number of cell sites around the country by 63%. The company also updated its call centre with the building of a $7 million switch.

In July 2001, Vodafone purchased spectrum in the 890MHz to 900MHz frequency range to, in its own words, ‘improve existing services, not to offer new ones.’

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SCORE CARD ON THE INDUSTRY’S COMMITMENT TO SELF REGULATIONS – JANUARY 2002

Tuesday, January 1st, 2002

In December 2001, the Consumers’ Association/CTN/SETEL announced their boycott of the industry self-regulation group ACIF. (See separate report: Australian Communication Industry Forum (ACIF)).

The organisations question the industry’s commitment to self-regulation. So far only some providers have signed up to some codes. The following is a scorecard produced by them, using the Code Publication Status page on ACIF’s own Website.

Scorecard A: signup to all codes

· Potential: all codes = 33; ACIF members = 10; thus potential total signup = 330.

· Actual: Telstra 11, Optus 2, Hutchison 2, MCI 12, PowerTel 8, Primus 4, AAPT 2, RSL Com 12, Others 2; total actual = 55 or 16.7%.

· Best performed: MCI and RSL Com, both 36.4%.

Scorecard B: signup to consumer codes (prices, terms and conditions; calling number display; protection of personal information; credit management; billing; customer transfer; complaint handling)

· Potential: consumer codes = 15; relevant ACIF members = 8; thus potential total signup = 120.

· Actual: Telstra 4, Optus 2, Hutchison 1, MCI 7, PowerTel 5, RSL Com 7, Others 2; total actual = 28 or 23.3%.

· Best performed: MCI and RSL Com, both 46.7%.

Not much of a strike rate really: 16.7% and 23.3%. Particularly when instances of enforcing the codes are few and far between.

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Telco wholesale market in 2002

Tuesday, January 1st, 2002

Because of the telco problems in 2000 and 2001 there are fewer wholesale customers at the start of 2002 than there were in 2001. While the situation has improved, new broadband based wholesale customers are entering the market from a very low base. At the same time competition in the market has increased. In all the dozen or so infrastructure players are all selling to the same 400 or so companies. This is leading to deals that are sometimes offered below costs. This of course can’t continue. The best way forward is of course to move out of the limited corporate market the players currently operate in and extend services to SMEs and residential users. However, this market is totally dominated by Telstra who so far has refused to open it up at commercial viable conditions, beyond it owns residential retail business. Furthermore, all players, including Telstra, will have to be far more focussed and sophisticated in their market approach, services and products.

Without any real prospect of a duplication of the national telecommunications infrastructure, Telstra will always remain the key player in this market. Optus started with a far more aggressive wholesale strategy in the 1990s, as they had fewer vested interests to protect, they were able to rapidly develop a substantial business. However, withy Telstra’s more aggressive approach, the gap between the two is rapidly growing.

Other players in the market, namely Powertel, WorldCom, UECom, Comindico and a few others have failed to make any significant inroads. They all ended up competing amongst each other (and amongst the other carriers in the market) for the very same customers: corporates in the CBDs; and ISPs and other telcos for their long-haul business. They failed to bring out their networks closer to the edges, where a far more eager market of SMEs and high-end residential are waiting to get connected to broadband networks, at competitive rates.

The market is far from developed, but significant changes will have to occur to move beyond the current unsustainable discounting race.

Cities, building owners and communities are seeing the importance of having broadband networks. They don’t want to be left in the hands of telcos who are unable or unwilling to provide these networks to them. Government organisations, companies and communities are looking at establishing dark fibre networks on which all participant can develop their own services, independent from vertical integrated telcos who do want to control all the elements themselves.

In the end fibre to the home will have to replace the copper based network, only at that stage might we see new competition arriving in the market, reaching beyond CBDs, the utilities could play a key role here (see: Australia – Carriers and SPs – Multi-Utilities Markets).

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ROAMING STILL LIMITED TO CDMA – JANUARY 2002

Tuesday, January 1st, 2002

In an unprecedented way, especially in the case of Telstra, (without court cases and/or regulatory intervention) we saw companies establishing roaming agreements on their CDMA network. This potentially turns mobile into a commodity, since there will be few differences to promote – add to this number portability and it doesn’t matter any more which company you select as your mobile operator as they all will, in one way or another, be able to offer services from the various players. The focus will then clearly turn to customer service, value-added services, data communications and so on.

Vodafone is a big unknown here. So far they have not signed any roaming arrangement and its previous CEO has even argued for regulatory intervention to prevent the establishment of virtual mobile operators. Such a restrictive vision doesn’t, of course, assist in the progress of this fast-moving and rapidly changing market. Their first more serious move here was the eisa agreement to develop Internet services based on WAP. With the collapse of both WAP and eisa, not much has eventuated from here. Vodafone has concentrated more on SMS developments, a move that in the end might prove to be a very good one indeed, as it is very simple, low cost and basically delivers most of the mobile data (messaging) services that people are prepared to use. The trick will be however, to turn this from a marginal- into a profitable business.

During the year 2000 roaming deals remained limited to CDMA, a system that we don’t see growing much beyond 10% penetration, towards the middle of this decade. No progress was made beyond this, and in the end roaming remained limited to a few smaller players which account for only a few market percentages.

A small breakthrough between the big players arrived in 2001, when Vodafone announced it will be able to offer roaming on its regional highway roads network that it is building for the government. But once again a very limited service will be provided. All of these initiatives are however, the start to a much wider deployment in the years to come.

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MOBILE VERSUS WIRELESS – JANUARY 2002

Tuesday, January 1st, 2002

It is important to understand the difference between mobile and wireless communication. Mobile is based around the well-known mobile phones that we carry around with us. By late 2001 they became our predominant tool for voice connection (it overtook the number of fixed-line subscriber numbers) and it will remain to continue doing so for the foreseeable future – perhaps until devices are built into our clothes or bodies!?

Wireless, however is another access technology mainly aimed at bypassing the incumbent fixed-line local loop networks. A wireless ‘black box’ in the house or office will receive the signal and devices such as phones, PCs and TVs, etc can be linked to this box to provide standard phone, Internet and entertainment services. The Bluetooth technology will be an important enabler of the Wireless Local Loop (WLL) market. (for more information on Bluetooth, see separate reports Wireless Communication).

We don’t see wireless technology as becoming a widespread medium however, initially not getting more than 5-10% market share, and possibly doubling towards the end of the decade.

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