BusinEss analysis fOR tElEcOMs pROfEssiOnals lEadER

November 2010

cOntEnts
news in brief

MORE FOR LESS

As operators endeavour to squeeze more out of their existing networks, we look at transforming technologies and markets
elecoms operators share a common problem: endusers are increasingly demanding. As customers call for more capacity and higher speeds, operators are looking for new ways to get the most out of their existing networks and to keep capex down for new rollouts. And these challenges took centre stage at broadband world forum (bbwf) in Paris late last month. fibre access networks will give users significantly greater bandwidth to their homes, but new figures from idate presented in Paris show that operators are still dragging their heels, especially in western europe. two of the conti-

3 Timeline
A roundup of some of the major stories reported in our daily news service, www.totaltele.com.
content strAtegies

Mary lennighan Editor Total Telecom

Telcos will continue to stretch the life of copper networks

nents biggest economies, germany and the uk, failed to make it into idates ranking, which lists countries in which penetration of fibre-to-the-home or building is above 1% of households. deutsche telekom cto olivier baujard illustrated the quandary for operators. on the positive side, end-users are still willing to spend, he said. However, the fibre capex wallis a real wall. bbwf included much talk of dynamic spectrum management

(dsM) techniques that enable telcos to provide high-bandwidth services over their copper networks. At&t was arguably the most vocal backer of dsM in Paris, having deployed the technology as long ago as 2004 to support its iPtV rollout. idates figures show us fttH/b household penetration at over 7% and growing, backing up the assertion by chinas Zte that telcos will continue to stretch the life of their copper alongside rolling out fibre for some time to come. Zte and domestic rival Huawei feature in our analysis on p.10, which charts their rise in global managed it services. Advances in fixed networks will also provide much-needed backhaul for mobile data services. europes Mnos used the bbwf stage to express their shared opinion that lte simply will not be enough to solve the mobile capacity crunch. small cells, such as picocells and femtocells, will be key, they claim. However, the wifi offload option brings with it another set of challenges, most notably a lack of control over the user experience. developments in mobile operating systems have enriched that user experience. but our feature on p.6 shows that smartphone os makers face an uncertain future as calls for consolidation grow. consolidation is one driver behind renewed M&A activity in telecoms, and on p.16 we round up some of the big recent deals and likely ones ahead. n

6 Smartphone OS competition
google and Apple are making inroads in the smartphone os market. A fierce battle now looms in the face of rocketing growth and consolidation.
network strAtegies

10 Managed services
chinas leading vendors Huawei and Zte are making strong headway into providing managed services to operators.
tecHnology trends

14 Data centre transformation

in part two of our key briefing on data centres, roy rubenstein looks at standards transforming data centre networking.
business And finAnce

16 M&A activity
Private equity companies are circling as some telcos streamline operations; others are buying into rising service segments.
stAtistics

17 Prime numbers
developing economies share of global wireless connections, VoiP growth and wireless backhaul.

Insurance

Financial Services

Communications

Public Sector

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tiMElinE

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

BuSiNESS
Etisalat moves for Zain
united Arab emirates operator etisalat entered into an agreement to buy 51% of kuwait mobile operator Zain, paving the way for one of the biggest corporate transactions of recent times in the Middle east.

value added tax on triple-play bundles of tV, broadband and telephony. operators will now be required to pay VAt of 19.6% on full triple-play service revenues, compared to the current rate of 5.5% on the tV service alone.

will still be available from 3, telekom Austria and orange.

Mobile launch in South Africa

south African fixed-line operator telkom launched mobile services to become the countrys fourth mobile operator, joining Vodacom, Mtn and cell c.

TI raises stake in Argentina

telecom italia increased its stake in sofora telecommunications, the company that controls telecom Argentina, to 58% from 50%. it follows a long battle with the regulator over the italian operators share in sofora.

India demands Vodafone tax

the indian government has told Vodafone essar to pay inr 112.1 billion (E1.8 billion) in taxes within a month for the acquisition of Hutchisons mobile venture in 2007.

TerreStar files for Chapter 11

Mobile satellite services provider terrestar networks has filed for chapter 11 bankruptcy protection in the us.

Qualcomm axes TV service

Qualcomm confirmed it will shut down its flo tV mobile broadcast service next spring, but will continue to explore strategic options for the network and spectrum. Qualcomm has suspended sales of devices that use the service.

Jajah opens Facebook calling

telefonica company Jajah launched a mobile application to enable direct VoiP calls from social networking site facebook. the application, called Jajah social call, initially will only be available on blackberry devices.

Nitel sale approved

the nigerian government approved the us$2.5 billion sale of state-run operator nitel to a consortium led by china unicom, following an auction in february. nitel has fast been losing share and is now fifth in the fixed-line voice market.

New MVNO in Spain

spanish tV broadcaster sogecable has launched MVno cuatro Movil on kPns network.

3G launches in India
tata teleservices said it will launch 3g mobile services in nine circles in india on 5 november, while bharti Airtel said it will launch in its 13 circles by year end. Vodafone essar subsequently said it will launch 3g in the first quarter next year. they will follow the 3g launches of state-owned operators bsnl and Mtnl in 2009.

Verizon faces big payout

Verizon wireless will pay $25 million to the us treasury and refund a minimum $52.8 million to about 15 million customers it wrongfully charged. regulator the fcc says the payment to the government is the largest ever.

NETWORKS
BT must open fibre networks
uk regulator ofcom ruled that bt must give competitive providers access to its new fibre networks, including its underground cable ducts and telephone poles, so they can build their own last mile fibre infrastructure. bt, which already provides wholesale access to its fibre broadband offering, will be able to set its own access prices.

DVB-H suffers further setback

in another blow for dVb-H mobile tV services, broadcasts in Austria will finish at the end of this year. streamed 3g services

Available colocation space in key cities

0% Amsterdam Chicago Frankfurt Montreal New York Los Angeles San Francisco Washington London Average Range | Average
Source: TeleGeography

10%

20%

Average space available 30% 40% 50%

60%

70%

Hungary next for telecoms tax

Hungarys parliament passed a proposal to tax the telecoms sector 61 billion forints (E225 million) per year between 2010 and 2012 to ease budget deficits. but the eu has queried the tax and could rule it illegal, as it did with similar proposals in france and spain this year.

French network sharing

nokia siemens networks will upgrade and expand french mobile operator sfrs HsPA+ radio access network, which will then be available for use by subscribers of rival operators orange and bouygues telecom.

France raises bundling tax

frances national Assembly passed a measure to increase
November 2010 www.totaltele.com

New data from TeleGeography shows that colocation service providers are struggling to keep up with demand. Despite significant new construction, some 41% of sites surveyed by TeleGeography were at least 80% full by mid-2010, up from 34% of sites a year earlier. Operators added 1.5 million square feet of new colocation space and 124 megawatts of power in the year to mid-2010, but some key cities are showing less than 25% available space.

Italy broadband pricing probe

the ec asked regulator Agcom to review the prices that telecom italia can charge for wholesale
3

tiMElinE

access to its network. telecom italia had planned to raise its wholesale broadband prices by 24% over two years to fund nextgeneration network build.

Next-gen broadband projects

several countries last month announced plans to extend high-speed broadband coverage. the german government plans to provide 75% of households speeds of up to 50 Mbps by 2014. telecom italia continued its fibre deployment and aims to make 100 Mbps services available in six cities by the end of this year. And softbank floated a JPy500 billion (E4.5 billion) plan to build a nationwide fibre network in partnership with rival operators ntt and kddi.

KPN names new CEO

eelco blok will become kPns next ceo and chairman when Ad scheepbouwer retires next April. blok has been on kPns management board since 2004 and has worked there since 1983.

German network sharing

german mobile operators deutsche telekom, Vodafone germany and o2 germany entered talks to roll out a joint lte network in the country, having acquired spectrum in May. deutsche telekom will also launch its own lte services using 800-MHz spectrum by year end.

Microsoft departures continue

Microsoft chief software architect ray ozzie became the latest executive to leave the company, following the departures of business division head stephen elop to nokia, platforms and services chief kevin Johnson and cfo chris liddell.

syMBian fORtunEs

T-Mobile launches LTE

t-Mobile Austria launched commercial lte services in innsbruck, just four weeks after the completion of the countrys spectrum auction in september.

End to 3G sharing in Australia

telstra will end its 3g network sharing agreement with Vodafone Hutchison Australia in 2012, after eight years.

T-Mobile USA changes

Philipp Humm took over as ceo of t-Mobile usA in october, five months ahead of schedule, replacing robert dotson. further changes see cto cole brodman becoming chief marketing officer, and chief network officer, neville ray, will become cto.

NSN/Ericsson India contracts Singapore 3G spectrum

the singapore government will allocate 3g spectrum to singapore telecom, starHub and M1 after there were no other bidders for the s$20 million slots. nokia siemens networks and ericsson won contracts to supply, build and manage infrastructure for the 3g networks of Vodafone essar in india.

PTC gets new CEO

Polish mobile operator Ptc named Miroslav rakowski as its new ceo from January, replacing klaus Hartmann. rakowski is currently chief sales officer and director for crM at t-Mobile czech republic.

UK 3G spectrum reversal
uk regulator ofcom ruled that the refarming of spectrum in the 900MHz and 1800MHz bands for 3g services will not impact competition, reversing its previous decision. that could open the way for o2 and Vodafone to use the spectrum, in line with european legislation.

PEOPLE
Executive remembered
dean olmstead, president of echostar satellite services, has died aged 55 after a battle with cancer. olmstead worked for the us federal government and nAsA before a 26-year career in the satellite industry holding senior positions at ses global, Arrowhead global solutions, loral space & communications, directV and Hughes electronics.

OTE appoints new leader

Michael tsamaz was appointed ceo and chairman of greek operator ote, moving from his position as head of otes mobile arm cosmote.

Denmark awards 3G spectrum

3 denmark was awarded licences in the 900-MHz and 1800-MHz bands for dkk 12 million (about E1.6 million).

ITU reappoints head Nokia job cuts

nokias new ceo stephen elop announced the company will cut 1,800 jobs. the changes will come at the symbian smartphones unit, where the focus will be on creating a common developer ecosystem and streamlining software development, and also in services. Hamadoun tour of Mali has been elected as secretary general of the international telecommunication union (itu) for a second four-year term.

Telecom NZ bids for NGN

telecom new Zealand submitted a new plan to become part of the countrys ultra-fast broadband initiative. the operator is proposing operational and structural separation.
4

Telstra job cuts

telstra said it will cut 950 jobs, mostly in executive and middle management areas.

The Symbian Foundation received a much needed boost when the Artemis Joint Technology Initiative, a public-private partnership that includes the European Commission, agreed to invest E22 million in the non-profit organisation. Just weeks earlier Symbian Foundation executive director, Lee Williams (pictured), resigned and was replaced by CFO Tim Holbrow. David Wood, a co-founder of Symbian, left the Foundation a year ago. Williams was appointed executive director in October 2008, a few months after handset maker Nokia announced plans to take full control of Symbian and turn it into the open source Symbian Foundation. His resignation is the latest blow to the Foundation as it struggles to regain the initiative from smartphone rivals Apple and RIM and in the face of strong growth of Googles Android operating system (see story p.6). His departure comes less than a month after Sony Ericsson confirmed it would not develop handsets based on the new version of the operating system, Symbian 3, mirroring Samsungs decision to abandon the platform. Both handset makers were key financial contributors to the project. Symbian is still the leading smartphone operating system, but its market share declined to 41.2% in the second quarter from 51.0% in the same period of 2009, according to Gartner. Strategy Analytics, says Nokias smartphone market share slipped to a low of 34.4% globally in Q3, even though it shipped a record 26.5 million units. Apple and RIM gained ground, shipping 14.1 million and 12.4 million units respectively.
www.totaltele.com November 2010

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cOntEnt stRatEgiEs

sMaRt WARS

S M A RT P H O N E O P E R AT I N G S Y S T E M S

Google and Apple are making strong inroads in the smartphone OS market. A fierce battle now looms in the face of rocketing growth and consolidation. By nick Wood
he increasingly fragmented smartphone operating system market is heading for a showdown that could lead to some well-known platforms disappearing altogether over the next five years. the survivors will embark on what promises to be a fierce battle for the attentions of handset makers, developers and customers. Microsoft and nokia both have introduced long-anticipated new versions of their smartphone operating systems windows 7 and symbian 3in the run-up to christmas, all the while that google and Apple continue to make strong inroads with their respective Android and ios platforms. but analyst numbers indicate its still all to play for. According to gartner, one in five of the 325.56 million handsets sold in the second quarter this year was a smartphone; in the second quarter of 2009, smartphones accounted for just one in seven handsets sold. High growth coupled with low penetration suggest there is still a sizeable opportunity for a smartphone player to claim substantial operating system (os) share. latest figures, from strategy Analytics, show that global smartphone shipments grew by 78% in the third quarter to reach 77 million units, representing 23% of total worldwide handset volumes. that growth compares to 50% in Q2 and just 5% in the third quarter a year ago. canalys records 80.9 million shipped units in Q3, representing 95% growth over the quarter a

year earlier. (gartner is due to publish its Q3 figures in mid-november.) so why are some already saying there isnt enough room in the market for everyone? its a two-horse race, says erik Huggers, director of future media and technology at the bbc. currently, Android and ios have the most traction. i think there are two platforms that have the momentum needed to reach escape velocity, he adds. Apple grew its share of the smartphone market to 18.3% in Q3 from 13.5% in the previous quarter, according to strategy Analytics (see table above right), shipping 14.1 million units. the analyst company says leader nokia is also facing increasing competition from Android players such as samsung, Htc and sony ericsson. Huggers oversees how the bbc delivers its content via the internet, interactive tV and mobile devices, and leads the broadcasters research and development activities. during februarys Mobile world congress in barcelona he unveiled the bbcs first official smartphone application and rallied against fragmentation in the smartphone os market. i used that opportunity to tell the [mobile] industry how much trouble theyre causing us, says Huggers. He explains that the bbc has an obligation of universality that means it has to make its mobile services accessible on as many devices as possible, including smartphones. its tough when you have to work with multiple standards, he says. we find it

Worldwide Smartphone Sales to End Users by Operating System, (000s)

company symbian Research in Motion android iOs Microsoft Windows Mobile linux Other Operating systems total 2Q10 units 25,386.8 11,228.8 10,606.1 8,743.0 3,096.4 1,503.1 1,084.8 61,649.1 2Q10 Market share (%) 41.2 18.2 17.2 14.2 5.0 2.4 1.8 100.0 2Q09 units 20,880.8 7,782.2 755.9 5,325.0 3,829.7 1,901.1 497.1 40,971.8 2Q09 Market share (%) 51.0 19.0 1.8 13.0 9.3 4.6 1.2 100.0
Source: Gartner

rather cumbersome. Huggers believes the vast majority of developers and content producers will end up supporting no more than three smartphone platforms, and that means some will lack the ecosystem needed to survive. ultimately, consolidation will take place and we will be left with probably two, he says. but not all analysts believe considerable consolidation will take place any time soon. idc forecasts mobile phone vendors will ship 269.6 million smartphonesor what it calls converged mobile devices in total this year compared to 173.5 million units in 2009. in the companys latest worldwide Quarterly Mobile Phone tracker, idc senior research analyst, kevin restivo, says: idc believes the market will comfortably support up to five os players over the next five years. shorter replacement cycles and an ample feature phone-to-smartphone upgrade opportunity means the smartphone os market will remain fragmented but healthy for the foreseeable future. certainly, most developers have the luxury of being more selective than the bbc. developers focus initially on one platform, familiarise themselves with it, and then look to see which other platforms they can develop for, says dominic lobo, head of the orange Application shop. He says in some cases variances in smartphone os characteristics mean some developers are reluctant to focus on making apps that are portable between different smartphone platforms. theyre targeting what they think will give them good reach, says lobo. it depends on how much marketing push there is behind [the os], how easy it is to develop for, and whether there are a lot of operators [putting it in their ranges]. indeed, handset makers as well as software developers have the potential to make or break an operating system. ultimately our strategy is about fulfilling the expectations of the consumer, and
www.totaltele.com November 2010

cOntEnt stRatEgiEs

the os forms an important part of that, says Aldo liguori, head of global communications at sony ericsson. the company has a policy of not preannouncing new devices, but it made headlines in late september when it confirmed it has no plans at present to develop further phones based on symbian, the current market-leading smartphone operating system by some distance (see table p.8). sony ericsson says it will favour Android for the majority of its new devices. given the tremendous growth of the Android community its clearly an os thats really moving, says gustaf brusewitz, spokesman for sony ericsson. reflecting that growth, both gartner and informa forecast that Android will overtake symbian to become the leading smartphone operating system in terms of market share some time in 2014. sony ericsson is by no means the biggest influencer on the market: in Q2 the vendor had a 3.4% share of total handset sales globallyequal with research in Motion (riM)compared to 34.2% for nokia and 20.1% for samsung, according to gartner. but smartphones now make up more than 50% of sony ericssons total salesup from 13.6% in the second quarter and just 5.8% in 2Q09as it shifts its focus to higher-end devices. in october ceo bert nordberg said the company also has no plans in the short term to develop smartphones running on windows Phone 7 (wP7), adding that it aims to be the worlds number one provider of Android handsets. (sony ericsson had a 13% share of the global Android device market in the second quarter, says gartner, behind Motorola with 26% and Htc with 41%.) such narrowing of focus, effectively to one smartphone platform, does not augur well for operating system companies with falling market share. but vendors are understandably reluctant to make predictions. i dont know what is the optimal number of operating systems, says liguori. Maybe two or three. And brusewitz adds: two years ago everyone was talking about symbian and Android didnt exist; its a fast-moving industry. whats more, mobile operators could
November 2010 www.totaltele.com

q3 2010 global Smartphone Shipments and market Shares

global smartphone vendor shipments (millions of units) nokia apple RiM Others total global smartphone vendor market share % nokia apple RiM Others total Q3 09 16.4 7.4 8.5 11.1 43.4 Q3 09 37.8% 17.0% 19.6% 25.6% 100.0% Q4 09 20.8 8.7 10.7 13.7 53.9 Q4 09 38.6% 16.1% 19.9% 25.4% 100.0% 2009 67.8 25.1 34.5 47.3 174.7 2009 38.8% 14.4% 19.7% 27.1% 100.0% Q110 21.5 8.8 10.6 14.5 55.4 Q110 38.8% 15.9% 19.1% 26.2% 100.0% Q210 23.8 8.4 11.2 19.0 62.4 Q210 38.1% 13.5% 17.9% 30.4% 100.0% Q310 26.5 14.1 12.4 24.1 77.1 Q310 34.4% 18.3% 16.1% 31.3% 100.0%

Source: Strategy Analytics

Global Smartphone Shipment Growth

100%

80%

78%

60%

54% 32%

50%

40%

17%
20%

8%

5% 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10

0%

1Q09

Source: Strategy Analytics

Two years ago everybody was talking about Symbian, and Android didnt exist
hit back if they feel they are becoming marginalised. in september reports suggested orange, deutsche telekom (t-Mobile), telefonica (o2) and Vodafone were considering the development of a common platform for mobile devices, in the face of the rising influence of Apple and google in the mobile space. unfortunately for people like Huggers at the bbc, the number of competing smartphone operating systems is still growing. Microsoft in october unveiled nine windows Phone 7 handsets, all of which will ship in various markets across the Americas, europe and Asia Pacific in time for christmas. Microsofts take on the smartphone user experience has been generally wellreceived. unlike all the other solutions, wP7 is not a sea of application icons, says richard windsor, global technology specialist at nomura. instead, wP7 is more like a series of folderscalled hubs by Microsoftthat carefully organise content in a way that aims to reduce clutter and provide quick access to content. windsor says Microsoft has focused on integrating applications with web-based services more heavily than its rivals, a move which he says has clearly differentiated wP7 from alternative offerings. He has a warning, however: it is still unclear how much developer support wP7 will capture, or whether operator retail channels [will] actively push its devices over rival solutions.
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Worldwide Converged mobile device OS market Share Forecast

Operating system symbian BlackBerry Os android iOs Windows Mobile Others total 2010 Market share 40.1% 17.9% 16.3% 14.7% 6.8% 4.2% 100.0% 2014 Market share 32.9% 17.3% 24.6% 10.9% 9.8% 4.5% 100.0% 2014/2010 change -18.0% -3.5% 51.2% -25.8% 43.3% 8.3%

Source: IDC Worldwide Quarterly Mobile Phone Tracker, September 2010

Global Forecast, Android and iOS Usage in Smartphones

140 120 100

n Android n iOS

80 60 40 20 0

2010

2011

2012

2013

2014
Source: iSuppli Corp.

Meanwhile nokia at the end of september finally began shipping the first of its symbian 3 handsets, the n8, in an attempt to regain some momentum in the smartphone space. According to gartner, symbian had a 41.2% share of the smartphone operating system market by sales in the second quarter, down from 51.0% in the same period a year ago (table p.6). during that time Androids market share by sales grew from just 1.8% to 17.2%, placing it third behind riM (18.2%) and notablyahead of the other big grower Apple ios (14.2%). comparing just Apple and Android, isuppi expects the latter to overtake ios by usage in smartphones in 2012 (see bar chart above). but unlike gartner, idc forecasts symbian will retain its number one position through 2014 with 32.9% market share. it expects Android to grow its share from 16.3% to 24.6% by that time (see table top). nevertheless, handset makers including samsung, Motorola and sony ericsson, which once were symbian stalwarts, have
8

all but abandoned the os to focus on devices based on rival platforms. the symbian foundation is confident it can maintain its position. the forecasts weve seen to 2014 still show symbian as first or joint first, [and] thats a worst case scenario, says ian Hutton, manager of the symbian foundations technology roadmap team. but he admits that the os market cant sustain everyone. i would expect to see some consolidation over the next couple of years or more, he says. the foundations future is being questioned by some after executive director lee williams resigned last month after two years in the role. nokia has since denied speculation that it could bring the development of symbian back in-house. Hutton argues that open source operating systems like symbian stand a better chance of surviving compared to vertically integrated environments like Apple and riM. He points out that the symbian foundation doesnt have to cover the cost of developing handsets, and can attract developers on the promise of

offering a consistent application environment and user experience to a broader range of users. its a set-up that makes more sense in the long term, says Hutton. closed platforms are relatively expensive and hard to maintain profitably compared to open platforms. He says that working in an open source environment with a range of contributors also allows the symbian foundation to draw on a broader set of skills. in october Apple ceo steve Jobs hit back at suggestions that Apples approach to ios is closed, in particular attacking google which it now trails for os market share. we find this disingenuous and clouding the difference between our approaches, he said. closed versus open is a smoke screen for whats best for the customers. Jobs maintained that the Android market is increasingly fragmented, giving the example of mobile twitter platform provider tweetdeck developing its product for 244 handsets and over 100 versions of Android, compared to the iPhone which has just two versions of software. the symbian foundation, along with nokia, has also been criticised for taking too long to develop a new operating system that can compete with the likes of Apple and Android. Hutton denies it is related to the symbian foundations corporate structure. doing everything as a community doesnt necessarily mean being slow and cumbersome; its not software development by committee, he says. theres an implication that doing everything in-house is quick and efficient, but i dont think thats necessarily always the case. Meanwhile symbians vertically integrated competitors have more than once expressed their reasons for controlling the user experience from top to bottom. were able to deliver a more compelling user experience, says rory oneill, senior director of business marketing for riMs eMeA activities. He argues that closer integration between hardware and software enables a higher level of sophistication and therefore results in a richer user experience. nothing gets thrown in the bin faster than a smartphone that doesnt
www.totaltele.com November 2010

Millions of units

cOntEnt stRatEgiEs

work, and nothing gets deleted faster than an app that doesnt work, he says. riM in August unveiled the blackberry torch, powered by its new operating system blackberry os 6. the company believes its enterprise pedigree, its secure email and messaging services, as well as its loyal prosumer following will remain valuable differentiators going forward. were focused on how we can help companies make the most of what we call the consumerisation of enterprise devices, oneill says. unchecked, that can cause problems for it departments trying to manage multiple devices. People are bringing into work devices that are more advanced than what their company hasthe lines between work and play are more blurred than everso were working with companies to find ways of giving their employees the freedom to use their own smartphones while at the same time enabling the corporation to maintain some control

over what theyre used for, says oneill. All the while smartphones are generating burgeoning traffic. new research from informa says smartphones account for 65% of all mobile traffic worldwide. it says average traffic per smartphone user per month will increase 700% to 2015, rising to 776 Mb from 85 Mb now. Meanwhile Huggers at the bbc has a clear vision for how the smartphone os of the future should take shape. the most successful os will be the one that truly embraces HtMl5, he says. currently under development by the world wide web consortium, HtMl5 will become the latest revision of the HtMl standard for displaying internet content. it will enable developers to incorporate rich multimedia content and more advanced functionality into web sites without the need for additional plug-ins such as Adobe flash. the ecosystem for the web already exists, continues Huggers. [developers] dont need to

download sdks, learn new [programming] languages or any new tricks. but for now, at least, Huggers and his contemporaries will have to contend with a fragmented smartphone os market. And for consumers, at least, that is not necessarily a bad thing. competition is great for consumers, he says. it gives them more choice and lowers prices, and all sorts of other things like that. one well-known gadget lover, who has made no secret of his admiration for products like Apples iPhone, summed up the consumers point of view during Microsofts wP7 launch in london in october. i think you have to be very stony-hearted not to welcome a new player, argued actor and comedian stephen fry. i want biodiversity in this market, and all of us who love it probably do toothe more players there are in it, the more it drives creativity and innovation and the more thrilling a space it becomes. n

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EastERn PROMISE
Chinas 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 providers face a mounting challenge from Huawei and Zte to capture spend on managed ict services. chinas bright stars are gaining ground fast, and in particular when it comes to operator spend on managed infrastructure services, but they have yet to gain traction in the more lucrative areas of software, it and consultancy services. taking into account just network equipment providers proportion of ict services revenues globally, in the second quarter Huawei took a 13% share among its peers, according to latest figures from ovum (see chart opposite page, right). that was just a whisker behind Alcatel lucent (14%) and nokia siemens networks (16%), although still some way behind leader ericsson (26%). stphane tral, a principal analyst at infonetics research, says chinas suppliers will continue to make large strides in the global managed services market, and before long will rival their network equipment provider (neP) counterparts from the west. they will get there, he says, because they already have a strong reputation with their technology. they are no longer just competing on price. Although the market shares of Huawei and Zte are still small within the bigger ict services picturetaking into account spend from all industry vertical sectors and across all service providers they are growing fast (see box opposite page). from 2Q 2007 to 2Q 2010, Huawei grew its share of the total ict services market from 0.9% to 2.3% says ovum. Ztes share grew from 0.14% to 0.60% over the same period. but it is spend from operators where chinas vendors currently major: ovum estimates Huawei derived 99% of its ict services revenues from telecoms service providers over the 12 months ended 30 June 2010, compared with 85% for Alcatellucent and 75% for ericsson.
10

maNagEd SErviCES

spending by operators on ict services has held firm during the economic downturn, and there are signs that the market is beginning to pick up again. According to ovum, operators globally spent us$64.4 billion on ict servicesinfrastructure services (including managed network services), software and it services (sits), and business process consultingduring the 12 months to the end of June this year. that is not far below the us$66.8 billion ict services spending peak recorded during the 12 months through to 3Q 2008, just before operators started to rein in spending following the collapse of lehman brothers in september 2008 that sent financial markets into a tailspin. since the fourth quarter of 2009, the 12-month rolling periods (to the end of each quarter) have seen increased levels of ict service spending by operators after a year of decline. that appears to be a vote of confidence by operators that suppliers, in general, can meet their key performance indicator (kPi) targets and deliver on their opex-reduction promises. And when it comes to making headway in the operator segment, Huawei stands out from its rivals. ovum says Huawei generated us$5.1 billion from operators spending on ict services in the 12 months ended 30 June 2010, giving it a share of around 8% in a highly fragmented market (nearly 30 suppliers are tracked by the analyst company). ericsson is again the market leader in the operator segment with us$8.1 billion of revenues

into second position behind ericsson with ict services revenues from operators totalling us$1.43 billion (ericsson drums up nearly us$2 billion). when ovum first compiled its 12-month ict services revenue figures in the operator segment in 2006, Huawei had us$1 billion income from ict services in a market that was worth over us$47 billiona meagre 0.02% market share. if you strip out sits and business process consulting from the ict services revenue mix and focus just on infrastructure serviceswhich includes managed services, or the day-to-day running of networksthen Huawei claims an even bigger market share of operator spending, rising from 5% in Q2 2007 to 12% in Q2 2010, says ovum. (ericsson is still the leader here, but only just with a 13% market share.) Zte also starts to become more visible when the parameters are limited to infrastructure-related services, growing its market share from 1% in Q2 2007 to 3% in Q2 2010. the growth of chinese suppliers [in operator ict services] is due in part to the relative strength of chinas economy, says John lively, chief forecaster at ovum. As telecom spending did not fall as much in china as it did in europe and north America, Huawei and Zte have benefited from having a large share of chinas telecoms market. but that is not the whole picture. lively points out that expansion into europe and emerging markets over the last few

Chinas vendors have a strong reputation with technology. They are not just competing on price
from ict services, followed by nokia siemens networks (us$5.8 billion), ibM (us$5.6 billion) and Alcatel lucent (us$5.2 billion). whats more, Huawei continues to make ground. taking the second quarter of this year in isolation, Huawei moves yearsand the opportunity for relationship-building with operators through the supply of equipmenthave provided a more solid international platform from which Huawei and Zte can persuade operators to take on additional services. Huawei, for example, has won managed
www.totaltele.com November 2010

nEtWORK stRatEgiEs

services contracts from service providers in germany (telefonica o2), spain (Jazztel and ono) and the uk (Virgin Media). And while Zte has not been as successful as Huawei in making inroads into europe, it is doing well at winning equipment deals in some emerging markets, particularly in Africa. Zte is building a lot of cdMA networks in Africa, so there is a strong likelihood they will be able to make a strong play in managed services there in the future, as well as in some parts of eastern europe and russia, says tral at infonetics research. it takes a while to build a trust with operators, and suppliers usually need equipment deals to win that trust before they can move into managed services. infonetics says telecoms service providers paid network equipment vendors us$50.4 billion in 2009 for outsourced services worldwide, and forecasts that will rise to $73.2 billion by 2014. it says the outsourcing vendors with the largest revenue gains in 2009 were HP, ericsson, Huawei and Zte. certainly, managed services deals are rolling in, but the biggest contracts are still being won by western nePs. in september, ericsson announced a fiveyear agreement with Vodafone germany to manage its fixed and mobile networks. the deal, which marks the first time Vodafone germany has outsourced any part of its telecoms network operations, will see ericsson manage the field services of the operators transmission network, as well as fixed core network nodes. And earlier this year, russian operator Mts announced what it claimed to be the first full network outsourcing contract signed in the country. the deal was not won by Huawei or Zte, which already had experience as network suppliers to sistema (the majority shareholder of Mts) via its Mts india subsidiary, but by nokia siemens networks. nsn in July also won an eight-year, us$7 billion outsourcing deal to deploy and manage the forthcoming nationwide lte network of us company lightsquared. nevertheless, operators give Huawei and Zte hope for winning greater managed services business outside china.
November 2010 www.totaltele.com

iCT services market shares

To date, Huawei and ZTE have yet to branch out beyond the operator segment in the ICT services space, so despite Huaweis considerable progress it does not appear in Ovums pie chart for the top players in overall ICT services (below left). Ovum identifies a US$281 billion 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 $83 billion. Of the total $281 billion, telecoms providers account for spend of US$64 billion, with government and educational providers generating US$42 billion, and the remainder made up from a range of different industry verticals. NSN and Alcatel-Lucentamong Huaweis main Western network equipment rivals in the managed services spaceare also not among the top ten players when the ICT services market is viewed as a whole, underlining the exceptional progress made by Ericsson, which commands a 4% share. A measure of Ericssons increasing sway in other sectors, for example, came in November 2009 when it won a ten-year managed services contract with 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 below right), Huaweis inroads into the telecoms segment are deep enough to give it a 13% market share of ICT services revenues generated by this sub-group. NEPs generated revenues of US$42.3 billion in the year from the third quarter of 2009 to the second quarter of 2010, says Ovum.
total $281 billion annual revenues (rolling) nEps share of services market: $42.3 billion 3Q09 through 2Q10

iBM 20% H-p 13% Others 26% accenture 8% fujitsu 9% dell/perot systems 3% capgemini 3% nEc 4% csc 6% t-systems/ dt 4% Ericsson 4%

amdocs 7% Others 6% Huawei 13% cisco 18%

nsn 16%

Ericsson 26%

alcatellucent 14%

Source: Ovum

younes benchekroun, network services sourcing manager at orange, stresses the need to have multiple suppliers. if all elements [equipment and managed services] are provided by the same vendor, the risk is being stuck with that one vendor, he says. its better to separate the two equipment and managed servicesto challenge vendor proposals, unless of course there is a considerable economic advantage in opting for one supplier. yet operators desire to use different suppliers can also work against Huawei and Zte in regions where they are the more dominant suppliers of infrastructure. Mts india, a mobile operator that uses equipment from both Huawei and Zte, in september awarded the two

chinese companies a managed services deal, but it also brought in ericsson as part of a three-way agreement. ericsson is also making an impact in their own back yard: in July it won a substantial managed services deal from china Mobile, which involves the provisioning of field maintenance services in Hebei province. to have a credible managed services proposition you need a lot of experience running networks, to go through a learning curve and to learn from your mistakes, and that is something we have done, says Valter dAvino, head of managed services at ericsson. the depth of that experience is something that really cant be copied. dAvino emphasises network management experience, and the number of soft
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nEtWORK stRatEgiEs

Vendor revenues by task, worldwide

$35 $30

n Network maintenance n Operations

$25 $20 $15 $10 $5 $0

CY06

CY07

CY08

CY09

CY10

CY11

CY12

CY13

CY14

Source: Infonetics Research

Worldwide equipment vendor revenue from professional services to carrriers

110

CY08

CY09

CY10

CY11

CY12

CY13

Source: Infonetics Research

issues surrounding people management that need to be addressed. when operators hand over part or all of their day-to-day network operations to a third party, which can include the transfer of staff from operator to supplier, dAvino identifies the successful merging of the often very different cultures of the operator (service-based) and supplier (technical) as key to making outsourcing deals work. we have 40,000 staff associated with managed services in some form or other, with around 20,000 coming from operator customers, says dAvino. we also have a presence in 175 countries, which gives us a very strong local reach. from Huaweis perspective, the scale and reach cards can be overplayed by the more established western suppliers. A lot of these arguments are totally irrelevant, says Adriana rodriguez, Huaweis VP of services sales in the eu. while
12

conceding that Huaweis track record of running networks is not as long as most other major western nePsthe chinese supplier entered the managed services market in 2005, a full ten years after ericsson made its first concerted push into this spacerodriguez points out that strenuous efforts have been made to make up for lost time. Huaweis service infrastructure now includes more than 130 branch offices globally (14 in the eu), including an eu regional network operations centre (noc) with which to remotely manage network elements for operators. it also has 20,000 service staff globally, 1,200 of which are based in europe. weve hired lots of local people for our eu operations, so there is really no cultural or language gap, continues rodriguez, who is a former senior manager at ericsson and based in the netherlands.

Hiring local experts with network management experience is one way Huawei believes it can catch up with the leaders on the international outsourcing stage. A year ago Huawei employed bt chief technology officer Matt bross to bolster its international operations, working out of the us. Huawei is aiming to make inroads in the us marketinitially though equipment deals and from there into managed serviceswhere the government has expressed security concerns over the vendor. bross is heading up a national security committee to try to allay those concerns, and the company has enlisted the help of former government officials to lobby its case. Huawei already is working with cox communications on the companys 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 confirms, for example, that Huawei has yet to secure a managed services contract with an operator that doesnt already use some of its equipment. Although rodriguez says Huawei is building up extensive multivendor network equipment management experience, the Huawei and Zte brand names still are not strong enough to win services contracts from customers that do not use their infrastructure. by contrast, ericsson continues to win these types of customers. one of the most notable deals was the agreement it struck with sprint in July 2009 for the day-to-day management of its wireless cdMA and fixed-line networks over a seven-year period. the contract is reportedly worth around us$5 billion for ericsson. nevertheless, rodriguez claims she is seeing a changing attitude among operators to Huaweiat least in europewhich could see the significant breakthrough of managing a network comprised fully of other vendors kit. instead of me asking operators about whether they would be interested in our professional and managed services, they are asking me, she says. it is quite a turnaround. n
www.totaltele.com November 2010

Revenue in US$ billions

Revenue in US$ billions

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tEcHnOlOgy tREnds

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 techniques is causing an upheaval in the data centre. Virtualisation is being used to boost server performance, but its introduction is having a profound knock-on effect, first on storage (Total Telecom Plus, October 2010) and now on data centre networking. this is the most critical period of data centre transformation seen in decades, says raju rajan, global system networking evangelist at ibM. data centre managers want to accommodate variable workloads, and that requires moving virtualised workloads between servers and even data centres. that is leading to new protocol developments and network consolidation, all the while making it management more demanding, in turn requiring greater automation. standards to meet the networking challenges created by virtualisation are close to completion and are already appearing in equipment. in turn, switch makers are developing architectures that will scale to support tens of thousands of 10-gigabitper-second (gbps) ethernet ports. but industry experts expect these developments will take up to a decade before they become mainstream. we are all marketing to a very distant future, while most users are still trying to get their arms around eight virtual machines on a server, says stephen garrison, VP of marketing at force10 networks. we are on a long hard path; it is going to be a really challenging transition. ibM points out that its customers are used to working in it siloes, selecting subsystems independently. new work practices across divisions will be needed if the networking challenges are to be addressed. for the first time, you cannot make a networking choice without understanding the server, virtualisation, storage, security and the operations support strategies, says rajan. A lot of the future value of these various developments will be based on enabling
14

d aTa C E N T r E S

it automation. that is a big hurdle for it to get over: allowing systems to manage themselves, says Zeus kerravala, senior VP at yankee group. do i think this vision will happen? sure i do, but it will take a lot longer than people think. networking provides the foundation for servers and storage and, ultimately, the data centres applications. fifty percent of the data centre spend is servers, 35% is storage and 15% networking, says Andy ingram, VP of product marketing and business development, fabric and switching technologies group, Juniper networks. the key resources i want to be efficient are the servers and the storage; what interconnects them is the network. traditionally, applications have resided on dedicated servers, but equipment usage has been low, at 10% commonly. given the huge numbers of servers deployed in data centres, that is no longer acceptable. Virtualisation splits a servers processing into time-slots to support 10, 100 and even 1,000 virtual machines, each with its own application, improving server usage by 20%70%. that could result in significant efficiencies when you consider the growth of server virtualisation: in 2010, deployed virtual machines will outnumber physical servers for the first time, claims idc. in enterprise and hosting data centres, servers are typically connected using three tiers of switching. the servers are linked to access (top-of-rack) switches that sit above them, which in turn connect to aggregation switches whose role is to funnel traffic to the large, core switches. the rise of virtualisation impacts data centre networking profoundly, with applications no longer confined to single machines but shared across multiple servers for scaling. nor is the predominant traffic north-south (client-to-server) across this three-layer switch hierarchy. instead, virtualisation promotes greater east-west (server-to-server) traffic, across the same tiered equipment.

the network has to support these changes and it cant be the bottleneck, says cindy borovick, VP, enterprise communications infrastructure and data centre networks, idc. the result is networking change on several fronts. currently, it staff have to manage separate networks: ethernet for the lAn, fibre channel for storage and infiniband for high-performance computing. to migrate the traffic types onto a common network, the ieee is developing the data centre bridging (dcb) ethernet standard (see box). A separate fibre channel over ethernet (fcoe) standard, developed by the international committee for information technology standards, enables fibre channel to be encapsulated onto dcb. yet while dcb is starting to be deployed, networking convergence remains in its infancy. fcoe seems to be lagging behind general industry expectations, says ibMs rajan. for many of our data centre owners, virtualisation is the overriding concern. network convergence may be a welcome cost-reducing step, but it introduces risk. so the net gain [of convergence] is not very clear yet to our customers, says rajan. but the net gain of virtualisation and cloud is absolutely clear to everybody. Another protocol, the internet engineering task forces transparent interconnection of lots of links (trill), promotes large-scale ethernet networks. its primary role is to replace the spanning tree protocol that was never designed to address latest data centre requirements. spanning tree disables links in a layertwo network to avoid loops arising and ensure that traffic has only one way to get to a port. but closing off links can disable up to half the available network bandwidth. trill enables a large layertwo network linking the switches that avoids loops without losing bandwidth. trill treats the ethernet network as the complex network it really is, says Mike benjamin, a vice president at global
www.totaltele.com November 2010

tEcHnOlOgy tREnds

Consolidating data centre networks

Data Centre Bridging (DCB) is designed to enable the consolidation of many networks to just one within the data centre. A single server typically has multiple networks connected to it, including Fibre Channel and several separate 1-Gbps Ethernet networks. DCB standard components include Priority Flow Control, which provides eight classes of traffic; Enhanced Transmission Selection, which manages the bandwidth allocated to different flows; and Congestion Notification which, if a port begins to fill up, can notify upstream along all the hops to the source to back off from sending traffic. These [three components] are some 98% complete, waiting for procedural things, says Broadcoms Ilyadis. As a result, DCB can now be safely encapsulated in silicon and can transport Fibre Channel in a lossless fashion (Fibre Channel is intolerant to loss and can take minutes to recover from a lost packet). That means critical storage traffic such as FCoE, 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 virtualisation. Since higher server usage results in extra port traffic, virtualisation promotes the transition from 1-Gigabit to 10-Gigabit Ethernet ports. No-one is coming to the market with 10 Gigabit [Ethernet ports] without DCB bundled in, says IBMs Rajan. The 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 over $800 last year, says Rajan. The upgrade is attractive when the alternative is using several 1-Gigabit Ethernet ports for server virtualisation, each port costing $50-$75.

crossing. if you think of the complexity and topologies of iP networks today, trill will have similar abilities in terms of truly understanding a topology to forward across, and permit us to use load balancing, which is a huge step forward. it vendors are also developing flatter switch architectures to reduce the switching tiers from three to two to ultimately one large, logical switch. this not only promises to reduce the overall number of platforms and their associated management, but also switch latency. global crossings default data centre switch design is a two-tier switch. unless that top tier starts to hit scaling problems, at which time we move into a three-tier, says benjamin. A two-tier switch architecture really does have benefits in terms of cost and low-latency switching. Juniper networks is developing a single-layer logical switch architecture that will support tens of thousands of 10-gbps ports and span the data centre. Juniper says the design will be based on a 64 x 10-gbps building block chip. we have some customers with very difficult networking challenges that are signed up to be our early field trials, says ingram. Meanwhile, brocade is set to launch its virtual cluster switching architecture, which supports trill and dcb. there will be 10 switches within a cluster and they will be managed as if it is one chassis, says simon Pamplin, systems engineering
November 2010 www.totaltele.com

pre-sales manager. we have the ability to make much larger, flat layer-two networks which ease management and the mobility of [servers] virtual machines. kash shaikh, ciscos group manager, data centre product marketing, argues multi-tiered switching is needed for system scaling and separation of workloads: sometimes [switch] tiers are used for logical separation, to separate enterprise departments and their applications. However, cisco itself is moving to fewer tiers with the introduction of its fabricPath technology within its nexus switches that support trill. Another networking challenge caused by virtualisation is switching virtual machines and moving them between servers. A servers software-based hypervisor that oversees the virtual machines comes with a virtual switch. but the industry consensus it that hardware is better at doing the switching. there are two standards under development to address the virtualisation requirements: the ieee 802.1Qbg edge Virtual bridging (eVb) and the ieee 802.1Qbh bridge Port extension. the 802.1Qbg camp is backed by many leading switch and network interface card vendors, while 802.1Qbh is based on cisco systems Vn-tag technology. Virtual ethernet Port Aggregation (VePA), part of 802.1Qbg, is the transport mechanism used. in terms of networking,

VePA allows traffic to exit and re-enter the same server physical port to enable switching between virtual ports. eVbs role is to provide the required virtual machine configuration and management. the network has to recognise the virtual machine appearing on the virtual interfaces and provision the network accordingly, says nick ilyadis, chief technical officer for broadcoms infrastructure networking group. that is where eVb comes in, to recognise the virtual machine and use its credentials for the configuration. the common goal of both [802.1Qbg and 802.1Qbh] standards is to help us with configuration management, to allow virtual machines to move with their entire configuration and not require us to apply and keep that configuration in sync across every single switch, says global crossings benjamin that is a huge step for us as an operator. our view is that VePA will be needed, says gary lee, director of product marketing at fulcrum Microsystems, which has just announced its first Alta family switch chip that supports 72 x 10-gigabit ports and can process over one billion packets per second. Malcolm Mason, eMeA hosting product manager at global crossing, says the upshot of these new protocols and flatter, more scalable networks will be less data centre equipment doing more, which will save power and require less cabling. it will also enable more stringent service level agreements to be met. the end-user wont notice a lot of difference, but what they should notice is more consistent application performance, says yankees kerravala. from an it perspective, the cost of computing should fall quite dramatically; if it doesnt fall by half we will have failed. Meanwhile data centre operators are hard at work understanding these new technologies. i get a lot of questions about end-to-end architectures, says borovick. they [data centre operators] are very cognizant of the fact that they are sitting in the middle of the battle of [it vendor] giants and they want to make the right decisions. n
15

BusinEss and financE

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
ts buying season again as mergers and acquisitions in the telecoms sector show marked signs of accelerating in the run-up to christmas. M&A research firm Mergermarket says the telecoms sector accounted for 9.7% of all M&A deals worldwide in the first nine months of this year: 135 deals were completed with a total value of $138.3 billion. the technology, media and telecoms (tMt) sectors together accounted for 16.3% of activity, with 1,257 deals yielding a total value of $232.3 billion. As ever private equity firms will play a key role in the consolidation. Pyramid research cites Privateequityinsight.coms calculation that a total of 12 transactions over E5 million were completed by private equity and venture capital firms globally in the tMt sector in the first seven months of this year. Pyramid says the total could reach 25 transactions before the end of the year, which would represent a near 100% increase over 2009 when a total of 13 transactions were completed by private equity (Pe) companies. that is still well short of the 40 or so deals each year in the 2006-2008 period when debt was cheaper, says Pyramid. [nevertheless], cVcs acquisition of

mErgErS aNd aCquiSiTiONS

swiss mobile provider sunrise from tdc incorporated the largest leveraged loan component to a Pe deal witnessed in europe for two years, say the analysts. A return to the good old days it is not, but it certainly signals an increased appetite from banks to provide large debt financing packages for the right assets. Mergermarket says average debt financing on Pe buyouts across all sectors has increased to 44.3% of total funding per deal this year, up from 30.4% in 2009. Many of the telecoms deals taking place point to another round of consolidation in some of the most intensely competitive markets and regions, but some are concerted bids to buy into rising technologies and fast-growing segments such as mobile payments, cloud computing and location-based software (lbs). Motorola in september bought Aloqa, a developer of lbs, for an undisclosed sum. And creativity software claims eight of nokias last 10 acquisitions were lbs assets; it says Apple and google invested over half a billion dollars in lbs acquisitions in the six months to the end of september. indeed google is among the biggest buyers this year, completing 40 acquisitions worth us$1.6 billion during the first

nine months of 2010 according to its quarterly regulatory filing. googles largest three acquisitions so far this year are mobile advertising start-up AdMob for us$681 million, social networking application developer slide for $179 million and video software maker on2 technologies for $123 million. the numbers dont include travel software company itA software, which google agreed to acquire for $700 million in July. one of the biggest potential sellers is Vodafone. in september the mobile operator sold its 3.2% stake in china Mobile for 4.3 billion, 10 years after establishing its presence in a country where subscriber numbers are still rising sharply. Vodafone as part of a corporate restructuring placed non-core assets Verizon wireless, sfr, Polkomtel and bharti Holding in a separate division overseen directly by ceo Vittorio colao. Many see it as a precursor to Vodafone selling its minority stakes in Polish operator Polkomtel, in which it holds 24.39%, and french mobile operator sfr, in which it has a 44% share (see box). Moreover, there has long been speculation that Vodafone could sell its 45% share in Verizon wireless to partner Verizon communications. n

Recent deals: selected acquisitions (subject to approval)

sEptEMBER n Vodafone sold its 3.2% stake in China Mobile for 4.3 billion. n France Telecom signed a deal to buy a 40% stake in Moroccos second largest telecoms operator Meditelecom for around E650 million. n Private equity firm CVC Capital Partners bought TDCs Swiss operator Sunrise Communications for 3.3 billion Swiss francs (E2.4 billion). n Greek mobile operator Wind Hellas was acquired by a consortium of its major bondholders. n Swisscom paid E256 million to acquire the remaining 17.9% share in its Italian business Fastweb. n Telekom Austria acquired Bulgarian cable operators Megalan Network and Spectrum Net for E80 million. n H-P bought security software company ArcSight for $1.5 billion.
16

OctOBER n Russian mobile operator Vimpelcom struck a US$6.5 billion deal to merge with most of the telecoms assets of Weather Investments. The deal includes Italys Wind and 51.7% of Orascom. n United Arab Emirates operator Etisalat agreed to acquire 46% of Kuwait mobile operator Zain for US$11.7 billion. Zain sold most of its assets in Africa to Bharti Airtel in a $10.7-billion deal completed in June. n Russian mobile operator Megafon agreed to acquire St Petersburgbased fibre network operator Metrocom, in a deal worth 2 billion roubles (US$67 million). Earlier this year Megafon bought long-distance operator Synterra for US$745 million. n NTT agreed to buy solutions provider Dimension Data in a US$3.3

billion cash deal. NTT Data then agreed to acquire IT services firm Keane for an estimated $1.2 billion. n Carlyle Group bought mobile technology company Syniverse Technologies for US$2.6 billion. n Global Crossing acquired global video services provider Genesis Networks for $27 million. n US operator Windstream bought managed hosting/cloud provider Hosted Solutions for $310 million. in tHE RuMOuR Mill n Vodafone is preparing the sale of its 45% stake in SFR to media group Vivendi for around 6 billion. n A string of private equity firms, TeliaSonera and Turkcell are lining up to buy Polkomtel for up to E4 billion. n Singtel and AT&T are considering bids for Cable & Wireless Worldwide.

n Etisalat is preparing to buy Indian mobile operator Idea Cellular. n Deutsche Telekom is seeking to increase its stake in Greek operator OTE, in which it holds a 30% stake. n AOL and private equity firms could team up to make a bid for Yahoo. n Telekom Austria, Deutsche Telekom and France Telecom are all eying a 51% stake in Telekom Srbija, for sale at around E1.4 billion. n Qualcomm is talking to Indian mobile operators about selling its Indian TD-LTE business for a minimum of US$1.1 billion. n BT is planning to sell a part or all of its 30.9% stake in Indian software company Tech Mahindra for about $663 million. n Apple and Google are vying to acquire US mobile payments firm Boku for up to $450 million.
www.totaltele.com November 2010

pRiME nuMBERs

cOntacts
EditORial

Developing economies driving mobile growth

wireless intelligence says the developing world now accounts for four out of every five mobile connections worldwide. figures to the end of september showed developing markets accounted for 3.98 billion of the worlds 5.15 billion total connections. whats more, developing economies grew their mobile subscriber base by 19.1% year-on-year in Q3, compared to growth of just 4.39% in developed economies. based on world bank definitions both china and india are classed as developing economies and together account for almost 30% (1.5 billion) of the worlds total mobile
top ten developing Economies by Mobile connections (millions) Q3 2010 Rank Market connections Overall Rank 1 china 812.5 1 2 india 692.8 2 3 Russia 219.6 4 4 indonesia 197 5 5 Brazil 191.1 6 6 Vietnam 123.9 7 7 pakistan 100.9 10 8 philippines 89.3 12 9 Mexico 86.2 13 10 nigeria 85.1 14 2,598.4

connections. the top ten developing economies for mobile connections have a combined 2.6 billion connections, over half of the global total. by contrast, the top ten developed economies total less than a billion connections, with the us accounting for about a third of that total. developing economies accounted for seven of the top ten largest mobile markets by connections in Q3; the developed economies were the us (third), Japan (eighth) and germany (ninth). Mobile penetration is 112.7% in developed countries (population 1.04 billion) and 68.78% in developing countries (5.78 billion).
top ten developed Economies by Mobile connections (millions) Q3 2010 Rank Market connections Overall Rank 1 us 296.1 3 2 Japan 115.4 8 3 germany 108.5 9 4 italy 90 11 5 uK 74.6 15 6 france 59.9 20 7 spain 54.8 23 8 saudi arabia 51.1 25 9 south Korea 50.1 26 10 poland 44.8 28 945.3
Source: World Bank, Wireless Intelligence

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tablet devices forecast to ship in 2010, rising to 129 million units in 2015. (IMS Research)

21 million

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Voip continues to surge

More than one in five consumer broadband lines worldwide now comes with a voice over IP service, according to new statistics from Point Topic. Globally, 12 million VoIP subscribers were added in the first half of this year to reach more than 112 million. In France more than 90% of broadband subscribers have VoIP bundled with their service offering, and over 70% of French households now have a VoIP service available to them. But elsewhere there is plenty of room for growth: In China, the worlds largest broadband market, only one in 20 broadband subscriptions comes with a VoIP bundle. The US is the largest market in absolute terms says Point Topic, with almost one in three broadband subscribers taking VoIP, mainly due to cable companies offering their customers a voice service based on the technology.
Broadband subscribers with VoIP service bundled, Q2 2010 100% 80% 60% 40% 20% 0% France Slovenia South Korea Canada Germany Denmark Japan Netherlands Sweden Italy

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MicROWaVE cOOls
Infonetics says the worldwide microwave equipment market yielded revenues of US$1.3 billion in 2Q10, down 4% from the first quarter, with the most marked slowdown in Asia Pacific. Ericsson regained the lead for market share from NEC. A full 80% of microwave equipment purchased was for mobile backhaul network deployments, with the remainder for transport applications (such as trunking and metro access) and first-mile access. In a separate report the research company forecasts service providers will spend US$36 billion on mobile backhaul equipment between 2010 and 2014.

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homes in Asia receive pay-TV services (50% penetration). (CASBAA)

363 million

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Source: Point Topic