BuddeBlog

MNOs have generally relied on connection for M2M revenues – network connectivity and connection management revenues represent up to 30% of the overall M2M revenue. Yet operators will need to provide more than basic connectivity to succeed, given the data requirements of many services. The genesis of this development has been evident in recent months, with a number of prominent operators providing managed services around specific market segments. Popular among these are transport services, surveillance, healthcare, consumer electronics and of course energy services, where M2M is a key part of Europe’s smart meter deployments.

A number of global organisations – such as that which brought together seven major telcos including Rogers, SingTel, Telefónica, Telstra and VimpelCom – have been formed to improve efficiency within the market, and to help make M2M technologies accessible to different industries.

Within Europe the main MNOs have been very active in recent months, showcasing the extensive range of services to which M2M can be applied. Telefónica has a deal with Dell to develop pay-as-you-go mobile broadband services using Telefónica’s SIM cards. Similarly, Deutsche Telekom has M2M deal with IBM to develop their ‘Smarter Cities’ solutions, with IBM providing IT systems and Deutsche Telekom providing M2M connectivity. The system enables people to make use of innumerable services within urban environments, such as traffic monitoring and keeping track of public transport networks and real-time updates on the whereabouts of trains and buses. Deutsche Telekom has also branched out to farms, signing an M2M deal with MEDRIA Technologies by which M2M monitoring on farms inform dairy farmers on the condition and needs of their herds.

TeliaSonera has an active Global M2M Services division which uses a platform built by Ericsson within its Nordic and Baltic markets. TeliaSonera estimates there will be more than one billion connected devices in the Nordic and Baltic countries alone by 2020.

The scale of M2M services appears to be limited only by people’s imaginations. For cash-strapped MNOs struggling with ongoing revenue decline, M2M provides some new source of revenue down the line.

Henry Lancaster
Senior Analyst

For more information on M2M developments see Europe – Mobile TV, Applications and M2M Market Insights

Optus is caught between a rock and a hard place in the Australia telecom landscape. The position which the company has found itself in – with its HFC network in limbo and being unable effectively to compete with Telstra in the mobile sector – has resulted in a poor financial showing for the last fiscal year. Its strategies for the future depend on mobile services, but here opportunities for growth are limited, and ARPU continues to slide in the face of stiff competition on pricing.

In the fixed-voice and broadband markets Optus manages the only significant fixed infrastructure competition to Telstra. Yet its HFC broadband subscriber base has shown stagnant growth for many years, stubbornly hovering at around 430,000. This represents only a fraction of Telstra’s broadband subscriber base, while Optus’s share of broadband revenue has declined steadily in recent years, now being about 12% compared to 45% for Telstra.

So Optus does not present serious competition in this market. Having been burned by Telstra some years ago in its ambitions to become an infrastructure-based competitor – when its investment in cable was overlayed by Telstra street-by-street – the company decided that it would make no further investment in its HFC network (though this network has at least been upgraded with DOCSIS 3.0). To reinforce this decision, Optus is aware that its HFC network will be replaced by the NBN’s FttP infrastructure, though the timetable for this migration would depend on whether or not the Coalition gets to form a government later in 2013. Optus is not alone with its HFC conundrum, of course: Telstra also has put minimal effort in developing its HFC subscriber base or infrastructure.

So Optus is largely limited to playing the mobile card. Here it is also at a disadvantage. In the recent spectrum auction Telstra managed to secure twice as much spectrum in the 700MHz and 2.5GHz bands as did Optus. This will place further distance between the operators in their ability to develop and extend mobile data services (the only real area of growth in the sector). The likelihood is that Telstra will attract more customers (new ones as well as those churning from Optus and Vodafone, which did not bid at the auction), and so be in a stronger position to develop its mobile business.

Optus’s recent performance is indicative of the brewing trouble. It reported a 4.6% fall in revenue for the year to March 2013, and a 7.5% fall in net profit. Revenue from the mobile business fell 5.9% year-on-year. The 1.1% growth in the mobile subscriber base (with the postpaid sector slightly offsetting prepaid losses) is largely immaterial, given that mobile services provide few opportunities to develop ARPU: indeed the 6.9% fall in blended ARPU in the period is indicative of how difficult it is for operators to squeeze much out of customers, given price competition among the players and the popular adoption by customers of off-net messaging and voice services.

Optus seems to be resigned to keeping up rather than challenging. The operator has effectively stopped hustling for new customers as it had done in the past, preferring instead to retain its existing customer base. Telstra, by contrast, added 607,000 new customers in the second half of 2012 alone. This is a reflection of customers wanting to tap into Telstra’s offerings delivered via its 4G network, which is fast approaching two-thirds population coverage. To compound these heady advantages, Telstra has placed considerable emphasis on customer services during the last three years. While customer complaints against Telstra fell again in 2012, those against Optus increased 47%, mainly related to faults, disputed charges and complaint handling.

These are difficult times for Optus. With no clear strategy for its HFC network, and with a passive role for its position in the mobile market, the outlook for the rest of 2013 may be ‘more of the same’.

Paul Budde

For more information on these developments see the reports:
Australia – Broadband – HFC Cable Networks;
Australia – Fixed Broadband – Statistical Overview;
Australia – Mobile Communications – Industry Overview;
Australia – Mobile Communications – Spectrum Auctions.

One of the ten countries which joined the EU in 2004, Slovenia has since lagged behind its peers in privatising state enterprises. This has been particularly true in the telecom sector, where revenue has fallen steadily since the high of 2008. Nevertheless, investment in the sector has risen year-on-year, mostly by operators developing fibre networks and upgrading mobile networks.

A key obstruction to further growth in the sector has been the lack of effective regulation and the political will to enforce it. Telekom Slovenije has strongly resisted competitors, as also the regulator, through the courts, and the majority state ownership of the company has long been viewed as an obstacle to effective regulation.

This is set to change. In the latest of a long line of failed privatisation schemes, the government has again announced plans to sell its remaining 52.5% stake in the operator. It had originally been envisaged that the first stage of privatisation would take place in 2000. This was set back to late 2001 then delayed indefinitely due to unfavourable economic conditions. Renewed efforts in mid-2005 resulted in only a 10% stake being privatised, while another attempt in 2007/8 would have seen the state retain 25%, though the bids proved to be too low and nothing came of it.

Nevertheless, Telekom Slovenije did remain one of the principal government holdings to be privatised, and the process being rekindled now (alongside state interests in a dozen or so other concerns) is perhaps evidence more of economic pressure than a willingness to reduce state control.

Telekom Slovenije used to be a handy source of revenue for the government, but this has not been so true in recent years, with company revenue having fallen steadily since 2009. In response to the financial turmoil of recent years the company has undertaken a range of measures to reduce costs, including the restructuring of operations in Macedonia and Kosovo (the merger with Mobitel, bought outright at the end of 2010, being a key development), the sell-off of non-strategic investments, the restructuring of business processes, the sale of real estate, and changes in sales and marketing. The Group’s business plan to 2016 also focuses on making the transition from being a provider of infrastructure-related services to a provider of IT and multimedia services. These processes will be better undertaken following privatisation, wherein the company can expect to utilise additional skills and investment.

For the government, the sale is part of a bid to reduce debt and avoid the bailout which has dogged other countries in the region: as recent examples have shown, the terms of these bailouts can be harsh. The government nevertheless has submitted to an EC reform package, and as this may provide a clean sweep to remove residual excesses which drain its coffers, so too may privatisation of the incumbent provide it with new vigour in an intensely competitive market.

Henry Lancaster,
Senior Analyst

For more information see the report Slovenia – Key Statistics, Telecom Market and Regulatory Overviews

Telecom market overview

Mexico’s economy swiftly recovered from the downturn in 2008, with the OECD predicting that GDP would grow 3.8% in 2013, following similar growth since 2010. Growth in the telecoms market has long outpaced broader economic growth, primarily driven by the mobile and broadband sectors, as well as broadcasting. Growth remains strong compared with many other global markets, particularly those in Europe. A telecom aimed at reforming the telecom sector will set up a new regulator with a wider remit and empowered to impose fines, control pricing, and put a break on an appeals process which has hitherto obstructed the effectiveness of its resolutions. The bill would also update the country’s long-standing law limiting foreign investment in national telcos, and would force phone and TV providers to sell assets if they control more than 50% of the national market share.

Mobile market

LTE services have been launched by two of MNOs, following considerable investments in network upgrades. Telcel’s network already covers about 65% of the population. This is complemented by Telefónica’s service, using the 700MHz band. Both operators will also utilise 2.6GHz spectrum which the government plans to auction later in the year. These developments will further encourage the rapid development of the mobile data sector, which is accounting for an increasing share of overall mobile services revenue for operators.

Key telecom parameters – 2010; 2013

(Source: BuddeComm)

Market Highlights

• Telcel’s LTE network covers some 26 major cities, reaching about 65% of the population. The operator is investing US$3.95 billion to 2014 in network upgrades, including at least US$1 billion in equipment for LTE alone.
• The electricity regulator CRE is looking to modernise the country’s existing grid with smart grids, thereby reducing the high power loss in transmission. The smart grid plan should be completed by late 2013, and will spearhead the multi-billion dollar investment in smart grid infrastructure required.
• Telmex retains a dominant market share of fixed lines, given that the vast majority of communities are unprofitable for other operators to build competing networks. The regulator has encouraged competition where viable, in 2013 fining the company MXN657 million for failing to provide interconnection services on inter-city routes.
• The government’s long-standing law limiting foreign investment in national companies is being addressed by the telecom reform package, which will allow foreign investors to own more than 49% of telcos’ shares.
• The telco Alestra is investing MXN1.2 billion in a fibre network to meet consumer demand for converged services. More than half of the funding is being spent on infrastructure projects. The fibre-optic network will be extended to about 17,000km across the country, covering some 50 cities.
• In late 2012 the Ministry of Communications and Transport contracted HNS to deliver an 11,000-site solar-powered broadband satellite network providing national coverage and aimed at areas underserved by existing fixed-line and mobile networks. The network, completed in early 2013, is centered on anchor site such as schools, hospitals, government offices, community centres across all 32 states. 

BuddeComm’s annual publication, Mexico – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media sectors of one of Latin America’s largest markets. The report includes the regulator’s market data to February 2013, telcos’ financial and operating data to Q1 2013 and market developments to May 2013.

For detailed information, table of contents and pricing see: Mexico – Telecoms, IP Networks, Digital Media and Forecasts

Growth in Guatemala’s telecom sector has been affected by the continuing global economic downturn, which has reduced spending power in both the residential and corporate markets. The fixed-line market shrank for the first time in 2009, a trend which has been maintained since. The broadband market has continued to grow but at a slower rate while the mobile telephony market has shown remarkably strong growth in recent years, largely stimulated by consumers finding an alternative to fixed-line communications. Indeed, poor infrastructure has led to the country having one of the lowest fixed-line teledensities in the region. As a result, broadband availability is limited. This has been exacerbated by very low GDP per capita, which has stymied consumer take-up of services where available, as also the popular use of computers. The outlook for 2013 and 2014 is characteristic of former years, with the fixed-line market likely to stagnate while the fixed broadband and mobile sectors develop steadily.

The anticipated growth in GDP per capita in coming years will provide more disposable household revenue and so stimulate demand for telecom and ICT services. This would be more marked should the country free itself from its legacy of violence, poverty, and corruption, factors which continue to inhibit prospective investors.

Among the poorer countries in Latin America, Guatemala’s telecom infrastructure has suffered from years of underinvestment from state and provincial governments. Network upgrades, in both the fixed-line and mobile sector, have largely been undertaken by the private sector. A number of key players, including Telefonia and América Móvil, are regional and global powerhouses which can tap into expertise and financial resources to bolster their Guatemalan businesses. Given the commercial impetus of these operators, insufficient government financial investment has resulted in many regional areas remaining with poor or non-existent services. Nevertheless, the country benefits from one of the most open regulatory frameworks, with all telecom sectors having been open to competition since 1996.

América Móvil controls about 70% of the fixed lines in service through its subsidiary Claro. Mobile telephony has been the most developed telecom market in Guatemala for several quarters and is likely to remain so for the next few years given the poor condition of fixed-line services. The intense competition amongst operators has helped to improve services and lower prices. Mobile penetration is on a par with the regional average, while the strong growth in the mobile subscriber base is a further indication that consumers are leaning to mobile telephony as an alternative to fixed-line services.

Key highlights:

• Telephony services range from the modern network in the city of Guatemala to non-existent infrastructure in many rural areas. As a result, teledensity remains low. Without regulator stimuli these commercially unviable areas are likely to continue depending on mobile telephony services in coming years.
• International mobile money remittance services are expanding, with Tigo launching services with Western Union.
• The wireless market has showed strong growth in recent years, with the number of subscribers increasing by some 550% between 2004 and 2011.
• Due to the deficiencies of the fixed-line infrastructure, WiMAX and mobile broadband have become important alternatives to meet Guatemala’s growing broadband demand.
• Digicel, which has an operating license in the 900MHz band, has yet to launch mobile services in Guatemala, though in 2012 it signed an agreement with Claro to integrate their networks in both Guatemala and El Salvador.
• A mobile wallet service from Movilway may pave the way for wider consumer use of the m-payment platform in coming years.
• In 2013 Telefonica signed an agreement with CMI, divesting a 40% stake in its Guatemalan subsidiary.
• Congress passed legislation in late 2012 extending existing license concessions for a further 20 years. Without charging for the extension, the State thereby lost out on significant revenue.

For detailed information, table of contents and pricing see:

Guatemala – Telecoms, Mobile and Broadband