Amex Launches $100 Million VC Fund

On the heels of the creation of a venture capital fund by France Telecom and Publicis, and Telefonica's recent restructuring that created a new digital business unit, American Express has also created a $100 million fund to “identify and develop innovative technologies that will help accelerate the company’s digital transformation.” 


The company, which was founded in 1849, is now establishing a Silicon Valley office to stay on top of the latest developments in mobile and finance technologies. 


The new office and fund will be led by Harshul Sanghi, the former head of Motorola Mobility Ventures. Amex launches VC fund All of those initiatives point to the growing strategic importance of mobile, mobile commerce, payment, mobile wallet and mobile content and transaction applications and services. 

France Telecom and Publicis SA are setting up a venture-capital fund focused on European technology startups. Initially capitalized at about $139 million (100 million euros), the companies will seek additional investors to raise a fund of perhaps 300 million euros ($411.5 million). 

As you might guess, the sorts of companies that might receive funding are of interest to both a mobile service provider and an advertising firm.

Likely sectors include online marketing, e-commerce, mobile content and services, online gaming and social networks, as well as their associated technologies and infrastructures such as middleware, cloud computing, security, and online payments. Likely investment areas

The venture, and the likely investment themes, illustrate the perceived importance of mobile advertising to both France Telecom and Publicis. 

According to Ofcom, the U.K. communications regulator, over the last decade, average monthly household spend on communications has increased by just 12.8 percent in real terms, to £93.10 (£83.01 in 2000) and has fallen consistently year on year since 2005 (£106.50).

Total operator-reported telecoms revenues fell by two percent in 2010. Retail revenues from mobile services increased slightly (up one percent, having fallen for the first time in 2009), but those from fixed voice and fixed Internet services continued to decline, down by three percent and six percent respectively.

Total annual communications industry revenue in 2010 was £53.4 billion. On an inflation-adjusted basis, industry revenues were £54.3 billion in 2000. Read more from Ofcom here.

BT’s share of voice call volumes fell to under 20 percent during 2010. BT’s share of total fixed and mobile voice call volumes fell to 19.4 percent in 2010. BT’s share of fixed voice call volumes also fell to under 40% for the first time during the year. 

In that regard, the most-significant action by a tier-one provider in the past several weeks has been the application by Rogers Communications to become a bank under the Canadian federal Bank Act. If approved, the proposed "Rogers Bank" will focus mainly on credit, payment and charge card services. There is an obvious relevance for Rogers as a provider of mobile payments, but that might not be the immediate application. Banking, advertising, M2M

Some of you should have the logical reaction of “I thought telecom companies were in the communications business?” And that would be a good question. But some might have wondered why telcos were in the video entertainment or advertising businesses as well, and both those businesses now are seen as logical for large telcos. 

It might now be more accurate to say that telecom companies are in a growing variety of businesses that use networks. Rogers to become a bank.

The move by Rogers is highly significant, as it illustrates an important point about where large tier-one providers must look for revenue growth. For an organization such as Rogers, which might book $12 billion in 2011 revenue, even interesting new lines of business that produce scores of millions to hundreds of millions worth of new revenue are too small to "move the needle" overall.

The problem is even worse for organizations such as AT&T or Verizon that book $30 billion to $40 billion a year in revenue. Simply put, there are few realistic new lines of business large enough to matter. That is why you hear so much about machine-to-machine communications, mobile advertising, mobile banking and enterprise-oriented cloud services. Each of those businesses could, in principle, produce $1 billion a year in incremental revenue for any single contestant in a national market.

Keep in mind the scale requirements. A business has to be big enough to produce $1 billion in incremental revenue for each contestant that wishes to compete in the business. By definition, any new line of business must be capable of generating global revenue in the scores of billions of dollars.

To repeat, Rogers will become a bank. It will do so because "banking" is a business big enough to be interesting, and Rogers has customer and other assets that will help it compete. 

There is another important observation, however. Many service providers are looking at ways to build a mobile payments or mobile wallet or mobile commerce business in some way. Rogers seems to be signaling that even "mobile payments," with a transaction revenue stream, might not produce enough incremental revenue to be interesting. In other words, a percentage of a transaction fee shared with other issuing banks might not produce enough revenue to be worth the effort. Rogers is signaling that it has to capture the full transaction fee, and cannot afford to share that fee with other issuing banks with which it might partner. 

At some point, even Isis might have to consider whether it must become a bank, or that its partners separately might have to become banks. That would still leave them as partners with Visa and MasterCard. The point is that the payments ecosystem might not be robust enough to "feed more mouths." Though it might be strategically wise to contemplate a "partner" approach rather than a "displacement" approach, telcos might not ultimately have a choice. 

Telcos might have to displace one or more participants in the payments business, rather than adding one more link in the chain, to create an attractive, or at least reasonable, revenue stream. 

Many service providers outside the United States probably are "running the numbers" and coming to similar conclusions. "Why does Rogers want to be a bank?" is a good question. The fact that it is a serious, practical question tells you quite a lot about where telecom is headed.

France Telecom to Shift to "Orange" as Retail Brand

France Telecom is finally poised to become plain "Orange," a brand which could gain increasingly broad global recognition as the telco pushes into emerging markets.

The move illustrates one facet of how the global telecom business has changed in recent decades, with most "national" telecom companies being compelled to look for growth outside their original service territories.

At a more local level, the same process has affected small rural telcos and competitive local exchange carriers, all of whom have had to consider growing footprint outside original service areas to fuel growth.

France Telecom aims to transition all its businesses to the Orange brand, currently used for its mobile and triple play activities, within the next 12 months.

France Telecom becomes just 'Orange'

Verizon Grows Annual Revenue 5x More Than Average

Verizon's revenue growth over the last year tops, by a substantial margin, revenue growth for nearly all other service providers among the 30 largest in the world.

Annual revenue growth of about 1.6 percent is the average, says TeleGeography.

Verizon grew revenue by 10 percent. Vodafone, China Mobile and Deutsche Telekom were the other stand-outs.

Orange UK: Still Looking for Killer App

Mobile Web appears to be the most-frequently-used mobile app, according to new data from Orange U.K.(France Telecom).

Orange U.K. has 1.4 million broadband wireless customers, but the single most-used application is text messaging, which doesn't require broadband access. Orange U.K. customers send or receive about 71 text messages a day (more than 2,000 a month) but just about 4.3 Multimedia Message Service (MMS) messages a day (129 a month) for users who take advantage of MMS, and most do not.

About 58 percent of Orange U.K. customers can use MMS and six-month usage growth was 37 percent.

In the mobile search area, Orange saw about 250,000 repeat visitors each day, on a base of 1.4 million users. One might therefore estimate that about 18 percent of the base uses mobile search daily.

Orange users downloaded about 7,680 games a day across the user base, up about 3.4 percent over the last six months. Music downloads grew about 15 percent over the last six months to about 3,280 a day.

Orange mobile TV usage is said to be growing at double the management forecast, but one suspects the numbers still are fairly low, as the actual numerical results were not released. Mobile video clip downloads averaged 5,211 a day.

Downloads of logos, wallpapers and pictures averaged 3,233 a day. On the other hand, users are uploading about 23,333 photos a day to online photo albums.

So far, the story would seem to be consistent with what many would have expected: lots of niche applications but no single “killer app” beyond text messaging, which doesn’t require a 3G network. Orange U.K., like other mobile service providers, remains in a “throw it on the wall and see what sticks” mode, watching to see what apps are most compelling to users of 3G services.

So far, no other mobile carrier has discovered the elusive application that users intuitively understand and that is capable of driving 3G access. Right now, that’s the point: keep experimenting.

So far, one would have to conclude that mobile Web usage is the leading app, in terms of daily hits.

at&t Forecasts Strong 2008 Growth

In a forecast that, in some ways, resembles France Telecom's, at&t executives now say the company will achieve double-digit adjusted earnings growth in 2008. Where the forecast resembles France Telecom's projections is the full-year wireline segment, where at&t forecasts 2008 earnings before interest, taxes, depreciation and amortization in line with 2007. France Telecom executives recently projected 2008 cash flow consistent with 2007.

at&t also expects 2008 wireless EBITDA in the low 40-percent range.

For its U-Verse Internet-based TV project, at&t said it expects to reach more than one million subscribers by the end of 2008.

Longer term, at&t expects adjusted earnings growth in the double-digits and mid-single-digit or better revenue growth. That's another area where at&t and France Telecom have common views. Where 2008 might just keep pace with 2007, growth will accelerate after that.

France Telecom: Flat Organic Cash Flow for '08

In confirming its 2007 organic cash flow target of 7.5 billion euros and setting the same level for 2008, France Telecom executives also point out how hard it is for large incumbent service providers to achieve organic growth inside their present service territories, without expanding out of region.

France Telecom says it will achieve organic cash flow at this level as long as it also hits the same operating margin and maintains investment expenditure at about 13 percent of revenues and maintains the same 2007 dividend distribution rate at between 40 and 45 percent of organic cash flow.

Growth will occur "beyond 2008 and over the medium term," France Telecom executives say.

But growth might not be a problem only the largest incumbents have. SureWest Communications has acquired an out-of-market broadband provider, Everest Broadband, in Kansas City, marking SureWest's first-ever move outside its metro market, aside from the competitive local exchange carrier operations SureWest conducts in the broader Sacramento market, where it competes with at&t.
Growth, despite a management team's best efforts, seems now to be a matter of expanding out of territory. The corollary might be that internal, organic growth is stalled. Presumably, internal new services initiatives will have time to catch on while most companies look to acquisitions to fuel near-term growth.

30,000 Orange iPhones Sold in Less than a Week

France Telecom's subsidiary mobile carrier Orange saysit has sold 30,000 Apple iPhones since they debuted in France less than a week ago. In addition, nearly half of the sales are resulting in new subscribers for the carrier. Orange has a year-end target of 100,000 unit sales.

European VoIP Market Soars

Though VoIP might largely be driven by cable companies in the U.S. market, the 22 million-plus VoIP subs in the European market bear witness to dramatically different market dynamics. In part because of robust local loop unbundling rules, independent broadband competitors have had quite a field day, both as providers of broadband access and VoIP services.

In the French market, for example, France Telecom (Orange) is "the number two provider of VoIP in the world," says Carlos DeSilva, France Telecom director. "In France, 30 percent of all calls are VoIP and it is used by about eight million customers."

Orange, Apple Nail Deal for France iPhone Sales

After what appears to be a delay caused by commercial disagreements, Orange and Apple have settled on a deal whereby Orange is the exclusive distributor of the iPhone in France. Under the original deal, Orange agreed to pay Apple 30 percent of revenues generated from iPhones sold with mobile contracts. it appears Apple wanted more, to offset lower margins on phones sold unlocked, as French law requires. There is no public word on how the original deal might have been modified.

Carrier Fiber Plans Accelerating?

Ofcom, the U.K. communications regulator, hasn't come to terms with BT about ways to speed up fiber to customer investments in the U.K. market. Up to this point BT has objected to earlier proposals that would have applied relatively robust wholesale requirements to new optical access plant. Perhaps there is new hope for some compromise that reassures investors, speeds up fiber deployment and yet offers some hope of a return.

Around the world, fiber to customer deployments seem poised to accelerate, but both competitive providers such as Illiad in France and Verizon in the United States have been punished by the financial community for daring to proceed with such deployments, which are costly, no doubt. U.S. cable companies have the same problem. Every time there is a hint that capital spending plans might intensify, equity values get hit. Comcast appears to be under that cloud as well at the moment.

Irrespective of the competitive elements of such decisions--obviously the providers making the investments want to keep the rewards, if they can be had--these networks can only be built by private capital. And private capital keeps making clear concern about the payback, whether those investments are made by cable companies, incumbent telcos or competitive providers.

At this point it is a simple fact that the investment framework has to reassure the capital markets. Yes, competition is desirable. But that has to be balanced against capital markets that actually loathe competition. Let's hope Ofcom and BT can thread this needle.

Telcos and Web Communications: Who Wins?

Attention might not be the basis for every revenue model, but it clearly underpins most media businesses. It might underpin other businesses as well, including communications.

So note changes in how and where people in France are spending their "communications" time. Since 2000, attention and time spent have been shifting towards Web-based applications and pursuits, and away from telephone-based communications. To be more precise, 53 percent of "communications" or more might be said to originate in some Web related activity, not a classic "pick up the phone" activity.

Time isn't exactly money, so attention and usage do not translate immediately into revenue. But attention sooner or later will create the possibility of revenue. And if this sort of shift in how people communicate continues, revenue opportunities and potential inevitably will shift.

That doesn't mean revenue-generating endpoints such as mobile phones, other communicating devices or "access" services will stop proliferating. It simply is to point out that when so much communications activity originates in Web-based things, whether enterprise or consumer driven, something new will happen, revenue-wise. It has to.

Global Voice Traffic Keeps Growing

Despite all the new ways people can talk to each other, and all the other ways people can communicate using text, global voice traffic keeps growing at a steady rate, according to TeleGeography.

Orange Gets iPhone in France

France Telecom's Orange has sealed the iPhone deal, it appears. France Telecom CEO Didier Lombard says the iPhone would be distributed in France "before Christmas, probably in November." Orange does not appear likely to subsidize the handset.

Global VoIP Keeps Chugging...

Worldwide VoIP service revenue jumped 66 percent to $15.8 billion in 2006 after more than doubling in 2005, and is expected to more than triple by 2010, says Infonetics Research. Worldwide revenue from residential hosted VoIP services jumped 68 percent between 2005 and 2006 while managed IP PBX service revenue grew 45 percent.

Hosted VoIP services continue to outpace managed IP PBX services by far, with residential services fueling the market, but the business segment is also growing, and will continue to, Infonetics says.

“Asia Pacific has been leading the VoIP services scene for a couple of years, with Japan’s SoftBank pioneering the service and taking a strong lead, but the EMEA and North America regions have gained some ground at the expense of Asia in the last two years. The Latin American-Caribbean region is also posting impressive growth and gaining share,” said Stéphane Téral, principal analyst at Infonetics Research and lead author of the report.

The number of worldwide residential/SOHO VoIP subscribers nearly doubled between 2005 and 2006, to 46.5 million, 46 percent of which are in the Asia Pacific region.

About 71 percent of worldwide VoIP service revenue came from residential/SOHO customers in 2006, 29 percent from business customers.

SoftBank is the world's largest VoIP service provider with 18 percent subscriber market share, followed in order by NTT, Vonage, France Télécom, and Time Warner Cable, Infonetics says.