Telefonica, America Movil Both Covet the German Market: Both Will Get Stakes

Telefonica is trying to acquire Royal KPN NV ’s German mobile business, and of course requires KPN's approval. But that also means Telefonica has to win the backing of KPN's biggest investor, America Movil, which owns 29 percent of KPN. 

The potential complication has been that most observers believe America Movil wants a position in the German market. So an exit, by way of sale of the KPN E-Plus business, would be a set back.

But a new deal proposed by Telefonica apparently now has been accepted by America Movil and KPN.

Telefonica has agreed to give KPN a bigger stake in the combined operations of E-Plus and Telefonica Deutschland. Under the modified deal, KPN have 20.5 percent ownership of the new company, up from the 17.6 percent originally proposed stake.

As always, regulatory approvals are needed, so the deal could still change, or fall apart. If the deal is approved, though, Telefonica, KPN and America Movil would continue to have an equity stake in the German mobile market. 

Among the noteworthy implications is the face that arch rivals Telefonica and America Movil will cooperate in the German market, though competing fiercely in Latin America. 

The Difference Between 2000 and 2013

At least so far, no firm that has dominated one era of computing technology has had similar leadership in the following era. This comparison has to be seen in context, given the huge run up in equity values during the "dot com" years. 

The best illustration is the drop in equity value of AOL, which mostly reflects a drastic change in market valuation, not the underlying fundamentals of the business. 

Still, the equity valuation of Apple, Google and Facebook in 2013 tells you something about perceptions of leadership a decade after the peak of the Internet bubble in 2001. 

Will LTE Displace Public Wi-Fi?

Does Long Term Evolution change user behavior? And if so, does behavior change in ways that help mobile service providers make more money? Also, could the substantial use of public Wi-Fi lessen as users shift Internet access back to the mobile network?

A study by U.K. service provider  EE suggests some behavioral changes are happening. Basically, the faster 4G speeds seem to encourage people to use the mobile network more, and public Wi-Fi networks less, for access.

To the extent that use of 4G involves a price premium for identical usage cap plans, service provider revenue is, by definition, higher on 4G, compared to 3G.

What is not yet clear is the potential creation of important new revenue-generating  apps.

It does appear that 4G users on EE’s network are using both public Wi-Fi hotspots and home broadband services less. In April 2013 about 27 percent of respondents surveyed said they did not use public Wi-Fi, or were using it less.

By the end of July 2013, about 43 percent of respondents indicated they were using public Wi-Fi less.

Likewise, where in April 2013 about 21 percent of respondents indicated they were using their home broadband (fixed connection) less, by the end of July 2013 23 percent of the 4G users reported using the fixed connection less.

Those trends--less use of public Wi-Fi and less use of at-home fixed connections--could have implications for average revenue, beyond any price premium paid for a 4G plan, compared to a 3G plan.

As users find their 4G connections more useful, they might start using more data on the mobile network, compared to public Wi-Fi and fixed broadband. That could encourage users to buy larger usage plans, which would generate more revenue for mobile service providers.

At the very least, that could mean heavier reliance on mobile broadband access, compared to Wi-Fi access. At a larger level, there could be implications for mobile broadband substitution of fixed network access.

A pattern of lower usage is one indicator of possible customer churn.

The study also shows people are sharing videos and pictures over 4G, leading to network upload traffic overtaking download traffic at key events. Think of the example of people at a sports event or big concert. This is another example of “faster speed” changing behavior.

Also, the study suggests 33 percent of 4G users stream more video over 4G than

they did using 3G, with BBC iPlayer, Netflix and Sky Go the favourite TV services.

On the other hand, people  are  using some apps less. The study shows a drop in music and app downloading and streaming, for example. Where in April about 15 percent reported music or app downloading or streaming, just 11 percent did at the end of July 2013.

What isn’t completely clear yet are behavior patterns on smart phones and tablets.

Though people seem to browse the web on 4G phones as much as they do on a fixed connection, streaming patterns on tablets diverge from fixed network behavior.

In other words, iPhones get used all day, while tablet usage rises to a peak in the evening. “The pattern of 4G is generally more variable than 3G,” EE reports. “We also see bigger relative peaks on the commute home and in the evening, largely because of streaming activity.”

“4G is being used at peak times for data-intensive activity, such as streaming, social media activity and apps that makes the most of 4G speeds, EE says.

Though most of the attention will be paid to ways traffic shifts between Wi-Fi and mobile networks, use of tablets also is an issue. Since many tablet users routinely rely on Wi-Fi only as their access method, any greater use of mobile network access will translate into revenue for mobile service providers.

It will come as no surprise that the notebook or desktop computer is used most heavily on an at-home fixed broadband network. But tablet use of at-home roughly mirrors PC usage patterns. 

Licensed Wi-Fi?

Amazon reportedly has tested spectrum that could support either mobile or untethered network access, using Globalstar spectrum originally licensed for satellite applications, but which Globalstar now has asked to reposition as the foundation for a terrestrial network featuring Long Term Evolution for mobile services.

But Globalstar also is interested in a different concept for at least some of its spectrum. Terrestrial Low Power Service is a proposed new 802.11 based service that enables a privately managed extension to the 2.4 GHz 802.11 band and is compatible with the existing 802.11 ecosystem of devices.

Basically, TLPS would add a new licensed Wi-Fi channel of 22 MHz that is adjacent to the existing Wi-Fi spectrum in the 2.4 GHz frequencies. At least in principle, that means Globalstar could offer a managed, quality-assured version of Wi-Fi that most likely would not provide mobility service, but could support in-home, in-building and public Wi-Fi service.

Though still using a traditional licensed spectrum approach, TLPS leverages the ecosystem of adjacent unlicensed Wi-Fi spectrum devices. In principle, a firmware change would allow any Wi-Fi device to use the licensed TLPS spectrum, plus all the unlicensed Wi-Fi spectrum.

That still represents a licensed spectrum approach, but in a new way, leveraging the installed base and popularity of unlicensed Wi-Fi devices and usage scenarios.

The TLPS approach is one new example of a larger trend, namely the blending of application and business cases for services that use both licensed and unlicensed spectrum. One clear example is the way Wi-Fi now gets used to offload perhaps an overwhelming majority of mobile data traffic from the mobile to the fixed network.

Some studies suggest that 80 percent of data used on mobile devices is consumed using Wi‑Fi connections to fixed networks, OECD says.

In fact, the potential value of TLPS is precisely that it would allow firmware-upgraded devices to use a managed-quality version of Wi-Fi with perhaps three times the range of traditional Wi-Fi, with quality of service assurances in some cases.

Traditional licensed service providers, such as mobile operators, might not be too keen on greater availability of unlicensed spectrum, though additional shared spectrum generally is viewed positively.

But experience has shown that even when unlicensed spectrum operations appear to be competitive with services based on licensed spectrum, such unlicensed operations actually are complementary to licensed access.

The ability to offload traffic to Wi-Fi means mobile operators can save on capital investment that would be necessary if 100 percent of traffic were carried on the mobile network.

As regulators and policy makers ponder the additional licensing of new spectrum, using both shared and unlicensed approaches, the natural tendency to oppose issuance of new unlicensed spectrum might need to be examined.

As Wi-Fi already has shown, unlicensed local distribution, and perhaps even unlicensed access, can be highly complementary to operations using licensed spectrum.

While LightSquared Lawsuit Remains Unresolved, So Does a Test of Spectrum Sharing

While the fate of bankrupt LightSquared remains unresolved for the moment, also unresolved is a spectrum sharing plan proposed by LightSquared that could give a boost to LightSquared plans to emerge from bankruptcy, but also would be important for any new owner of the asset.

Lenders holding some $1.4 billion in claims against bankrupt satellite-communications firm LightSquared have joined a lawsuit by by Philip Falcone, LightSquared CEO, who alleges that DISH Network is trying to secure LightSquared licenses to valuable radio frequencies at a discount.

The lawsuit involves a complicated set of financial transactions in which two entities controlled by Charlie Ergen, Dish Network chairman, are alleged to have acted in ways that favor either Ergen or Dish Network, in Dish Network’s effort to buy LightSquared.

In part, that is because an entity controlled by Ergen secretly bought enough LightSquared debt to become a “secured lender” to LightSquared, which means that since LightSquared is in bankruptcy, Ergen has the ability to influence decisions by LightSquared.

Aside from those issues, LightSquared still is hoping the Federal Communications Commission will act on a request by LightSquared to trade about 10 MHz of spectrum that causes interference with GPS devices, for access on a shared basis to 5 MHz of spectrum now used by the National Oceanic and Atmospheric Administration (NOAA).

That request is viewed by some observers as a key test of how well spectrum sharing between commercial and government entities actually can work.

If LightSquared is able to demonstrate that its proposed spectrum sharing does not cause problems for NOAA, other spectrum sharing efforts likely will get a boost. The National Telecommunications and Information Administration (NTIA) has created a program to evaluate such spectrum sharing concepts.

The federal government has called for releasing about 500 MHz of government spectrum for shared use by mobile and fixed wireless providers.

10% of U.K. 5-Year-Olds have Mobile Phones

About 10 percent of all children five years old have  mobile phones, according to a new study. Some of you may realize this means those youngsters have mobile phones before they can read.

The typical age at which a U.K. child gets a mobile is 11. Some studies have found that U.S. kids tend to get their first phone at about age 12. 

Children spend an average of £11 a month on mobile costs, less than the parental average of £19, though just a quarter of parents cap their offspring's mobile phone bill, rthe study, conducgted by uSwitch.com, showed.

More than a million current under-16s had their first phone aged five, the study of 1,420 parents suggested.

When shopping for handsets, parents spend an average of £246 on themselves, more than the £125 they typically spend on the children's devices, uSwitch said.

How 1 Philippines Telco Monetizes Over the Top Messaging

Mobile service providers globally face big problems in the messaging space, as users are showing high preference for no incremental cost over the top messaging services, and less interest in paying for text messaging services.

But the issue for an access provider is how to monetize over the top apps. Globe Telecom in the Philippines thinks it has an answer. It sells access to a bundle of over the top apps including Viber, Facebook Messenger, Kakao Talk, WhatsApp, WeChat and Line, for 30 peso ($0.70) a day.

That fee also provides unlimited texting and unlimited calls to other Globe/Touch Mobile users.

In other words, Globe Telecom has created a low cost communications service including voice, text messaging and messaging app access, without requiring a bigger subscription to a full data plan.