Posts Tagged ‘telecoms’

AT&T eyes 25% stake in India’s BSNL as 3G comes to the fore

att-logo-orangeAccording to the Economic Times of India, domestic US telecom giant AT&T is in talks with state controlled Bharat Sanchar Nigam (BSNL) regarding placing an investment, that would see the company make a comeback in one of the fastest growing telecoms sectors. With mobile penetration advancing from 2% in 2005 to over 40% in 2009, still leaving plenty of room for growth.

AT&T (NYSE: T), which has been expanding its mobility business globally, quit the Indian mobile sector in 2005, selling its 33% stake in Idea Cellular following it’s merger with Cingular Wireless. It received around $250 million from the stake in Idea,that stake would now be valued at circa $3.5 billion. So a strategic mistake, that the New Jersey based company looks keen to repair. CEO Randall Stephenson spent much of 2008 in acquisition talks with Reliance, Idea and Aircel Cellular parent Maxis Communications, demonstrating a real desire to take a piece of the action.

BSNL has suffered from lackluster performance, as it’s monopoly has been slowly eroded over time, with new entrants carving up the market, especially in the mobile sector. The launch of 3G licences this year has seen heavyweight MNC telcos taking a greater stake in this huge growth market. Vodafone (UK) acquired Essar, Mobile TeleSystems (Russia) entered the market via Shyam Teleservices,  DoCoMo (Japan) has formed a joint venture with Tata Teleservices, whilst Telenor (Norway) has taken a passive route by acquiring shares in Unitech Wireless & SingTel (Singapore) has also invested heavily in Bharti Aircel, alongside Telia (Sweden) & BT (UK).

The Indian government reiterated plans to publicly list BSNL in July , although a firm time frame has not been committed to. Earlier that month, BSNL chairman Kuldeep Goyal said that the company was exploring a possible stake sale to a foreign firm to raise funds to help it compete better against its domestic rivals; however, he didn’t comment on how large the stake would be.

According to BSNL’s FY 2008 accounts, the value of the company is circa $17Bn. MTNL, the second of the telecom monopolies, which operates purely in Delhi & Mumbai, currently trades on the Bombay Stock Exchange  at Rs95 ($1.95) per share. BSNL would be expected to attain a much hirer premium, as it is the only current national carrier & market watchers have stated that post IP the company could be worth anything from $13Bn & $16.3Bn 65,000. Sources state that AT&T is interested in a 25% stake, so would need to buy in with $3Bn / $4Bn to make this work.

At present BSNL is the leader in all services in its license area, with over than 49 million mobile subscribers (17% market share), 35% fixed line subscribers (85% market share) & 2.5 million broadband subscribers.

I can see this coming off, as AT&T can offer extended network services & serious technical know how to BSNL, an area in which the company has lagged. AT&T India also operates a state of the art IP MPLS network across India that will also help the Indian company to expand it’s offerings into the burgeoning Enterprise market. With the Indian mobile market set to double by 2014, this would also give access to a potentially huge subscriber base of 100 million & dare I say it, a potential launch pad for iPhone.

For BSNL, this could be a great route to forestall the new & legacy players across the sub-continent, particularly in mobile & broadband, more importantly with infrastructure restrictions, LTE could play a defining role for any telecoms carrier in India.

Granted, this is all pure speculation at this point, however, if the rumoured talks firm up, I’ll be taking a long hard look at AT&T again.

Original post can be found at MyStockVoice.com

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Ukranian power plays could benefit Turkcell

ukrtelecomUkraine‘s telecommunications sector is, potentially at least, in line for a major shake up, with plans to privatise a controlling stake in state-owned landline operator Ukrtelecom. Proposals to sell off Ukrtelecom have been around since the 1990s, with different formulas and percentages being floated at various times, along with varying assessments of the company’s net worth.

In the latest version of the plan to privatise Ukrtelecom, an open joint-stock company that holds a 70% market share of local landline operations, the government has proposed selling off it’s block stake of 67.79% of Ukrtelecom’s shares. Currently, the state has a 92.79% stake in the company, with the company’s employees holding a further 7.14%.

The government’s plan, announced in February by the State Property Fund (SPF), initially foresaw the privatisation process beginning in March, though this did not take place, casting some doubt on the timeframe for the sale.

Although it did not meet its own deadline to start the process, the government has recently put Ukrtelecom back on the agenda. During a visit to South Korea in mid-July, Prime Minister Yulia Tymoshenko called South Korean firms to place a bid for Ukrtelecom,as she pushes to attract Asian investment into the Ukrainian economy. This is part of a wider drive by Timoshenko to privatise a number of state owned assets, including 5 regional energy companies.

However, the government may have missed the boat if it is hoping for a substantial cash windfall from the sale of Ukrtelecom, with the company’s overall value having slipped badly in the past year. The stake in the company that is to be sold off was estimated to be worth around $3bn in 2008; current pricing puts it at around $940m, mainly due to the sharp fall in the local currency.

Its attractiveness as an asset has not been helped by Ukrtelecom recording a $194m loss last year, compounded by a further $32m worth of red ink in the ledger for the first quarter of 2009, a turn around from a net profit of $33m at current rates in 2007.

More likely to give potential suitors pause than the telco’s financial statements is the political cloud that hangs over the proposed privatisation, with President Viktor Yushchenko staunchly opposed to the sale. In February, after the plan to privatise Ukrtelecom was unveiled, a senior official of the president’s office said Yushchenko would do everything possible to block the sale.

Yushchenko and Tymoshenko, formerly close allies, are at loggerheads over numerous issues, including management of the faltering economy, combating corruption & ties with Russia. Having repeatedly blamed the Tymoshenko-led government of failing to protect the economy and the Ukrainian people from the fall out of the global financial crisis, it is no surprise that the president has opposed the sale of Ukrtelecom.

According to the SPF, there are at least 10 companies interested in bidding for the Ukrtelecom stake, though this assessment was made in March, and could be optimistic given the present variable political and economic climate. “Climate change” notwithstanding, one interested party is Turkey’s largest mobile phone operator, Turkcell (NYSE:TKC) which already has a presence in the Ukrainian telecoms sector, owning a controlling interest in Astelit, the country’s third-largest mobile services provider, which services 20% of the mobile market.

In mid-February, as discussions over the privatisation of Ukrtelecom again gained momentum, Turkcell’s chief executive officer, Sureyya Ciliv, said his firm was considering making a bid for the landline operator.

“It is an interesting situation but we need to understand the terms of the deal, and our teams are studying that. Based on the study, we will make a decision if we are a serious interested party who is willing to bid.”

What could be of more interest for Turkcell & the Ukrainian goovernment, is TeliaSonera looking at gaining a greater stake in Turkcell. The Swedish multi-national is eager to penetrate new markets in Eurasia & already has a growing fibre network building out in Ukraine. My view is that this has a greater chance of success than courting Asian investors to come into the Ukranian market, time will tell.

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Vodafone steps up to the plate, backed up by Emerging Markets

vodafoneLast week Vodafone Group (NYSE:VOD) released an interim management statement that considering the current economic climate, I consider to be pretty upbeat. I have been a long term holder of Vodafone stock on the London Stock Exchange & have over the last year traded the NYSE traded ADR up & down on swings. However with the current market, I am now looking for some growth & value plays. Looking a little closer at the report & doing some quick analysis of some of the major themes contained, I am now quite bullish on VOD going forward & will be picking up some shares for my investment portfolio. As of writing Vodafone was trading at £121.00 in London & $19.64 in New York.

Comment from : Vittorio Colao, Chief Executive

“In the first quarter the service revenue trend in Europe was consistent with the previous quarter and we continued to see good growth in India and South Africa. Our total communications strategy is delivering well, with organic data revenue up 19% and organic fixed line revenue 7% ahead of the comparative period. Free cash flow generation was strong at £1.9 billion, up 21%. The Group has reaffirmed its guidance for the full year.”

Highlights from the report :

  • Group: Revenue £10,743 million, up 9.3%
  • Group data revenue of £888 million, up 19.4% on an organic basis
  • Free cash flow of £1,896 million, up 21.2%; net debt at 30 June 2009 of £31.2 billion
  • Cost reduction programme on track
  • Proportionate mobile customer base of 315.3 million; 8.0 million net additions during the quarter
  • Europe: Service revenue up 4.4% driven by FX benefits. Data revenue up 17.8%. Fixed line revenue up 5.7%
  • Africa & CEE: Service revenue up 26.3% including Vodacom acquisition,Vodacom organic growth of 5.2% offset by weakness in CEE
  • Asia Pacific and Middle East: Service revenue up 21.8%
  • India service revenue growth of 23.0%

Interesting to see Vodafone making a point of mobile data revenues & 19.4% grwoth is a pretty impressive statistic. Much of this being driven out of Europe, where one of the big booms in mobile data is the popularity of 3G wireless broadband dongles (USB sticks) on “Unlimited” packages, which all the major operators have adopted. Vittorio Collao announced a major cost cutting initiative last November 2008, targetting cost reductions of $1.45Bn by  the end of the 2011 financial year in order to offset the pressures from inflation and the competitive environment and to enable investment in revenue growth opportunities. Savings of more than 65% of this target are expected to be generated by the end of the current financial year.

Vodafone has been at the forefront of network sharing, originally this started in the UK with Orange, now the group has signed a pan-European deal with Telefonica-O2, which will see network sharing being implemented in Germany, Ireland, UK & Spain. Analysts see this as a huge positive, as the deal is set for a ten year term & should save each company in the region of $350 million per annum. The growth figure of 8 million subscribers runs in line with analysts global forecasts for 2009 of circa 13%, as Vodafone is one of the higher value operators in each of its markets, the fact that it is expanding subscribers in a high churn market is positive.

“Old” Europe is the only area where Vodafone operates both fixed & mobile services, predominantly in the UK, Ireland, Spain, Potugal & Germany, where it is the second largest provider of broadband via its Arcor business unit. Having already discussed the cost savings initiative with Telefonica, the main story here is on how Vodafone are manbaging to reduce churn & promote ARPU via new services. Vodafone is far & away the leader in all of these markets regards business services (excepting Germany, which is dominated by T-Mobile), with consumer playing a strong supporting role, crucially the majority of these accounts are postpaid, which is reflected in higher service revenues than is the norm in this sector.

Another area that Vodafone is finally catching onto is the machine-to-machine market, or M2M. The company has made some recent investments in this sector & is set to benefit as the market grows from $4.2Bn in 2008, forecast to rise to $12.5Bn by 2012. It’s not all good upbeat news though, as recent EU intervention in roaming charges has had a detrimental effect on voice service revenues aceross the board. Retail termination costs have hit this part of the business very hard, with only Netherlands showing minimal growth of 0.6% mainly due to MVNO operations, whilst at the other end of the scale, Greece voice revenues sank by 15%.

In “new” Europe (CEE) & Africa, the atypical Emerging Markets,  we are presented with a mixed bag, however the region saw service reveues grow by 26.5%, mainly due to Vodacom (of which more later). Vodafone has seen serious competition in Romania, where no less than 6 operators are competing for one of the lowest ARPU generating populations in Europe, the situation not being helped by the extremely poor performance of the Lei versus the Euro. Similarly, Turkey has not been the shining star that Vodafone had expected when it launched their in 2005. However, now that 3G services are finally being launched, Collao today announced that the company would be investing up to $675 million in network infrastructure over the next 12 months, as Turkey has very low fixed line connections, mobile broadband is set to be a revenue enegine. I also have a feeling that as & when Turkey accedes to the EU, plenty of “rural” grant funding will be made available for the three network operators to provide near 100% coverage. At time of writing, there are some rumours of Turkcel & Vodafone entering into limited network sharing on 2G (GPRS) services, but these remain unconfirmed.

Meanwhile, Africa has seen a real boost this year, with Vodafone finally acquiring a majority interest in Vodacom South Africa from Telkom, as we discussed earlier this year in Consolidation hits Rainbow Nations telecom sector; Vodacom is now the flagship Vodafone brand in sub-Saharan Africa & has recently listed on the Johannesburg Stock Exchange. Another hit in this region is Vodafone’s 40% majority holding in Kenya’s Safaricom. Jointly the two companies launched the mobile payment platform M-Pesa back in 2007 & it has gome through a number of modifications & upgrades since then, winning a United Nations award along the way. The service has 5.75 million users signed up in Kenya & now that it has been proved & tested, look to Vodafone to launch M-Pesa in a number of new regions in Africa, such as Nigeria, Ghana & South Africa. An interesting video on Safaricom & M-Pesa can be viewed here : Michael Joseph

Vodafone’s controversial investment in Essar , seems to be paying off handsomely, as the Indian carrier now operates in all 26 mobile circles across the sub-continet. Service revenues jumped by 23% with the subscriber base leaping 56%, or  by 77 million subscribers in the last year. Vodafone will also be launching M-Pesa in India this year & it is thought that up to 17% of the subscriber base will ustilese the m-payment system. Vodafone-Essar recently applied & was granted both a national Internet Service Provider & National Long Distance licences, from the Indian Government, as expectations run high on the “last mile” being finally opened. The NLD licence will have an immediate effect, as Vodafone will now be able to backhaul its own national STD voice traffic & not have to rely on local carriers, which will be a welcome development since mobile voice terminations have fallen by 5% in India in the last year.

In Asia Pacific, there is only one big story & that is the merging of Vodafone Australia & Hutchinson Whampoa’s 3 in order to create a realistic competitor to government owned Telstra. The new Vodafone-Hutchinson Australia is a 50-50 JV, which will carry the Vodafone brand & now has a combined cutomer base of just over 6 million users. Vodafone will be looking to leverage its Vodafone Live! content platform here & significant cost savings on network (roaming charges) can be expected, the combined networks now have 98% coverage of metropolitan areas across the country. Vodafone will also receive a deferred payment of AU$500 million from Hutchison-Whampoa, to reflect the difference in the joint business assets (network).

So all in all, a home run for Vodafone in its first quarter of the current financial year. Considering the global economic environment, I feel that this is a great performance (although possibly helped along by currency rates) & that if the management team can keep a firm grip on the operating companies, Vodafone should be one of the strongest performing telecoms companies for 2009-2010. Continued expansion in both India & Africa, along with the introduction of services such as M-Pesa will attract & hold valuable customers. I’m long on the ADR, having bought in last week at $18.68 & am looking for it to exceed $23.50 within three months.

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MTN-Bharti : a long winding road from India to South Africa

bharti-airtel-mtn-mergerIndia’s Bharti Airtel & South African operator MTN returned to the bargaining table this week, over a merger that could create a $20 billion mobile giant. The potential deal is attractive for both parties & if successful, would create a leading telecommunications service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations. Combined operations would result in the group enjoying leading positions in three of the fastest growing wireless emerging markets ; India, Africa & the Middle East, with no overlapping footprint & subscriber base of circa 200 million.

Under the terms of the deal Bharti will acquire a 49% shareholding in MTN, in turn MTN and its shareholders would acquire a 36% percent economic interest in Bharti, of which 25% would be held by MTN, the remainder held directly by MTN shareholders, with the long term goal being a fully merger. The two companies have agreed to continue exlusive discussions until the end of July, at which time any issues will be resolved or other potential partners will be engaged.

Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders.”

“The rationale for this potential transaction between MTN and Bharti is highly compelling,” said Phuthuma Nhleko, CEO of MTN. “We are excited at the prospect of teaming up with Bharti, India’s number one wireless operator and one of the most strongly capitalised players amongst its emerging market peer group. This would create a highly visible commercial partnership between South Africa and India,”

Bharti & MTN have been here before, almost exactly a year ago. Previous talks were torpedoed by a lack of clear understanding on control between the two companies. At the last minute, MTN proposed a different structure where Bharti was to become a subsidiary of MTN. Bharti retreated from the deal on the basis that it felt MTNs position was a way of gaining indirect control of the combined entity, which would have compromised the minority shareholders of Bharti. This time round it has been made clear from the start that Bharti will be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East. Most importantly, Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN.

When this was announced earlier this week, I decided to hold off on posting, as I wanted to see what would forthcoming once the dust had settled & also to get a better feel for some of the more convoluted relationships involved. One of the potential major hurdles to this deal from my perspective was the stance of Singapore Telecom (SingTel) which owns a 30% stake in Bharti Airtel. Bloomberg reported that SingTel would end up with a diluted position of 20% at the end of any full merger between the two. However it would seem that this could be offset by synergies across all of the combined networks of Bharti, MTN & SingTel. In addition to its strong domestic business, SingTel owns Australian carrier SingTel Optus & holds significant stakes in carriers in Bangladesh, Indonesia, Pakistan, Thailand, and the Philippines, commanding upwards of 290 million subscribers themselves. In the same Bloomberg report, SingTel spokesman Peter Heng states that “SingTel will remain a significant shareholder and strategic partner in Bharti post any successful transaction. We will continue to equity account for Bharti, in its enlarged form post the transaction if this is successful.”

Another potential challenge that was aired, is opposition by minority shareholders in MTN, however it has been reported today that the Mikati family which owns a 10% stake in MTN via the M1 Group, has said it will back the deal. The majority shareholder in MTN is South Africa’s state pension fund PIC, with a holding of 13.5%, to date there has been no statement from them. Other minority shareholders of MTN include Allan Gray, Polaris, Coronation and Stanlib, it would seem that these companies are not so bullish on the deal, at least not until further details come clear.

The South African press also gave some weight to the position of the highly politicised trade union federation COSATU (Congress of South African Trade Unions) which recently tried to scupper the full takeover of Telkom’s stake in Vodacom by Vodafone. However, COSATU spokesman, Mr Patrick Craven, has said the MTN deal was a different situation to that of the national carrier ;  “Telkom has always been 50% owned by the public & the move was part of our policy agenda against privatisation. MTN has always been a private company”

So it would seem that conditions are favourable to the potential transaction going forward, which would bring to fruition a long held ambition for Bharti to move into Africa, which remains the most underdeveloped of emerging markets regards telecoms. By leveraging across the combined networks of Bharti Airtel, MTN, SingTel & the Bridge Alliance (11 major operatots in Asia-Pac), the new Bharti-MTN will become a major powerhouse & definitely a very attractive investment for those involved in Global & Emerging Markets.

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Nokia gets thumbs up from China

china-mobile2Following on from the distribution of 3G licences earlier this year for China’s three mobile networks, China Mobile, China Telecom & China Unicom, along with the convoluted technology demands imposed by the regulator, signs are that Nokia will be sitting a little higher up the table at the tea party, as Chinese news portal Xinhua reports :

“China hopes Nokia will enhance cooperation with China’s information sector and play an active role in developing China’s TD-SCDMA industry, Chinese Vice Premier Zhang Dejiang said”

As we reported earlier this year, China looks to 3G networks to help stimulate economy, each of the operators is working on a different standard, China Telecom will work on the US standard CDMA 200, Unicom has gone down the W-CDMA route, whilst China Mobile (NYSE : CHL) has invested a veritable fortune in its home-grown standard TD-SCDMA.

From a political standpoint, it is pretty much a given that TD-SCDMA will not be allowed to fail, as the government is very much behind these moves. So what does this mean for equipment vendors ?

Basically, it has resulted in Western vendors like Alcatel-Lucent & Ericsson being marginalised when it comes to participation. Alcatel (NYSE : ALU) has managed to win business in 14 regions to partially satisfy China Unicoms requirements, whilst also signing $230 million worth of contracts with China Telecom.

“The drive for 3G (in China) is a very important stimulus for what I think is a very exciting market to come,” Ben Verwaayen, chief executive of Alcatel-Lucent, told reporters in Beijing yesterday. “If you look to the market and the economic crisis today, it is good to see that China is going to play a more prominent role than ever before.”

Ericsson (NYSE : ERIC) has stated that it has picked up 30% of China Unicoms 3G network requirements, leaving Chinese vendors Huawei & ZTE to fight over the spoils, with Huawei reportedly being the big winner.

So what about Nokia ?  Back in March, Nokia-Siemens Networks (NSN), a subsidiary of the Finnish mobile giant, announced the signing of framework agreements with both China Mobile and Unicom for up to US$1.1 billion in orders. NSN is one of the less recognised parts of Nokia’s business, however, it is definitely a division not to be ignored, Q1 2009 showed that NSN contributed  34% of group revenues.

Nokia has already provided major infrastructure deployments on China Mobile’s Phase II deployment of 3G network, on its testing rollout in Hainan province. Now with equipment currently being deployed across 28 major cities throughout China, Nokia Siemens Networks has provided the top performing city networks based on 3G TD-SCDMA commercial readiness, as laid down by the Chinese telecoms regulator.

“We are very confident of our 3G TD-SCDMA solution and feel proud to showcase its capabilities. Nokia Siemens Networks has provided us such tremendous on ground support, that our 2G and 3G TD-SCDMA networks are optimized and ready to handle high throughput and access rates demanded by cutting edge applications,” said Zhou Chengyang, President of Hainan MCC. “We have laid a solid foundation to launch commercial services in the Hainan province and are looking forward to working closely with Nokia Siemens Networks towards large scale and high quality TD-SCDMA services.”

So the expectation is that this suuccess will bleed over into Nokia’s main revenue driver, handsets. China Mobile is now becoming more of a commodity player with regards to handsets, as it is now looking to more rural areas for subscriber growth. My expectation is that Nokia will play a major part in this area, as discussed in a previous post, Nokia has a very strong back-catalogue of handsets to pick from & also enjoys higher margins in the low end sector than its competitors.

Having picked up on the Nokia ADR (NYSE : NOK) earlier this month & also enjoyed the $0.52 dividend yesterday, I had planned to drop 50% of my holding to place elsewhere. With this mornings news on official support for Nokia, I will now be holding a little longer term, looking for a target of $18.50 towards the end of the year.

China Mobile starts to push 3G strategy & partnerships, good news for Dell ?

china-mobile1Following on from the 3G licence distribution that we reported on MyStockVoice late last year, China looks to 3G market to stimulate economy, market leader China Mobile has unveiled a number of new partnerships & device releases that show the direction it is taking in the medium term. After the on-off discussions with Apple regarding the iPhone, the wireless carrier seems to be pitching heavily into the PC hardware vendors, as well as choosing suppliers to expand its TD-SCDMA network to cover rural mainland China.

China Tech News reports this morning that China Mobile (NYSE : CHL) has selected six PC makers, including Lenovo Group, Founder Technology, Tongfang, Haier, HP, & Dell, as its 3G netbook partners. What is more interesting is the strategy behind this, following Western mobile operators who have been pushing mobile broadband dongles since 2007, China Mobile will offer subsidies to users who buy its 3G netbooks. Consumers will be able to enter  the serial numbers of the device and the numbers of the built-in TD-SCDMA module of the netbook, with their mobile phones to activate the 3G services.

Dell (Nasdaq : DELL) have already announced their first joint hardware offering with CHL, the Inspiron Mini 10. Dell is obviously keen to tap into the huge potential of the Chinese mobile internet market, IDC has forecasted that the market will explode by 276% in 2009 alone. This carries on from existing deals Dell has struck with Vodafone, AT&T, Starhub & Maxis.

“Dell actively listens to its customers to provide highly stylized, personalized products with unparalleled connectivity. China Mobile’s fast mobile broadband 3G service perfectly complements the wireless and entertainment capabilities of the sleek, portable Inspiron Mini 10.” — Michael Yang, vice president & general manager of Greater China Consumer

“China Mobile is China’s only operator solely focusing on mobile communications with the world’s no. 1 network and the largest customer base. We are happy to add Dell’s Inspiron Mini 10 to our growing number of 3G mobile broadband devices, providing travelers and social networkers with easy and convenient wireless Internet access.” -– He Zhili, Marketing Director of CMCC

Now with the Chines propensity to build homegrown standards, TD-SCDMA being a prime example, China Mobile looks as though it is ready to turn its back upon the traditional handset vendors. Rumours abound that it is looking into releasing its own mobile operating system, Open Mobile System (OMS), which is based on Google’s Android, however utilising operator specific variations at all layers. In a final snub to Apple, CHL is also rumoured to be building it’s own app store to support OMS. As Dell has not made made any significant inroads, to date, into the Western mobile markets, China Mobile could provide a much needed distribution channel. There are positives for both parties, Dell is new to the handset game & so would be expected to be flexible in how it develops handsets, China Mobile has a distribution base of more than 470 million subscribers, a very juicy number.

Market research firm Interfax has reported that Lenovo has already been tapped up to partner with China Mobile on an Android based handset :

“We will collaborate with China Mobile to launch an Android phone, and we will cooperate closely over research and development relating to the open source platform,” Wang Yan, a brand manager at Lenovo Mobile, said.

Meanwhile, China Mobile is forging ahead with its network rollouts, AsiaInfo Holdings, Inc. (Nasdaq : ASIA) has announced that it has been selected to provide networking equipment with 11 China Mobile subsidiaries, to support China Mobile’s Phase II TD-SCDMA rollout. The new system will support wireless broadband service, data card service, mobile video and other 3G-related services. In 2007, AsiaInfo provided BOSS software for Phase I of China Mobile’s TD-SCDMA network construction, thus becoming the first vendor to develop billing and customer relationship management software to accommodate China’s 3G rollout.

“Pushing forward the construction and operation of the TD-SCDMA network is one of China Mobile’s key goals for 2009, and our longstanding relationship with the carrier brings us a number of opportunities in the 3G realm,” said Steve Zhang, AsiaInfo’s president and chief executive officer.

Spending on wireless infrastructure equipment in China is expected to rise to $6.2Bn in 2009, up 13.2% from $5.5Bn in 2008. In contrast, global carrier spending on wireless infrastructure gear in 2009 is expected to decline by 3.5%to $39.7Bn, down from $41.1Bn in 2008. It is clear that a lot of companies are banking on 3G in China & China Mobile’s dominance of the sector to see them through to 2010, when the wireless markets will look to expand in resppnse to consumer demand. Dell’s courting of China Mobile could be a big pay day for the computer manufacturer, as traditional routes to market dry up on declining retail spending in Western markets, China could provide a much needed fillip. Personally I am not ready to move on Dell just yet, however, it will be interesting to see what falls out of this relationship & I will be monitoring closely.

Serbia seeks to liberalise fixed line market in 2009

Lack of competition for fixed line monopoly Telekom Srbija has left Serbs complaining of a poor quality service, which is partly analogue, partly digital, with many households still sharing lines, so that only one can use the phone at the same time.  According to the regulator’s figures, landline penetration was around 38 percent in 2007, while GSM penetration was almost 112 percent, a discrepancy explained by long waiting times for landlines to be installed.

Presently, only the mobile sector in Serbia is fully liberalised , earning an estimated €1.8 billion in turnover. Norway’s Telenor bought local operator Mobi 63 in 2006 for €1.5 billion euros & currently services approximately 39% (3 million users) of the market, while Mobilkom, the mobile telephony arm of Telekom Austria , paid €320 million to acquire the third mobile licence bringing an approximate market share of 5% . The remainder is controlled by Telekom Srbjia’s mobile arm MTS which claims more than 5.6 million subscribers, as of November 2008, Telekom is a joint venture 80% owned by the government, with the remainder held by Greco-German OTE Net (Deutsche Telecom recently acquired a 25% in the Greek carrier for €3.2 billion)

Serbia made the first moves towards opening the telecoms market in 2005, by establishing an independent regulatory body, but the process has been stalled by political turmoil caused by frequent elections and long periods without a government. The projected opening of the landline market in 2009,  will come a year before the government launches an expected initial public offering for Telekom Srbija. With the IPO having been postponed postponed to 2010 due to the global financial turmoil, Telekom Srbija raised prices in November, in all too familiar bid to attempt to expand its network before competition arrives. Telekom, who are being advised by Morgan Stanley on the offering,  is currently estimated to be worth €2 billion, based on 2006 accounts. On completion, the new Telekom will be dual listed on the Belgrade & London Stock Exchanges.

Minister of Telecoms Jasna Matic has said to local press that she expects ‘several’ companies to participate in the tender for the second fixed line telephony licence, scheduled for the summer. In a statement Matic said that the introduction of competition to the fixed line telephony scene would lead to ‘expedient improvement’ of the market. She added that a tender for fixed wireless telephony concessions covering rural areas was also in the pipeline. At present no companies have expressly come forward to state participation, however a roll of contenders is not difficult to imagine.

Deutsche Telecom has a track record of buying into Balkan operators, with branded operations already running in Hungary, Croatia, Montenegro, Macedonia & Greece (via OTE). Greek operators Cosmote has also been making inroads, having picked up licences in Romania & Bulgaria, however they may be put off by the level of capital expenditure required to compete effectively. Telekom Austria are also a likely competitor for a fixed line licence, as they are already active in country via Mobilkom & have ongoing operations in Slovenia, Croatia, Macedonia & Bulgaria. More interesting to me is the opportunity to roll out fixed wireless broadband services in to rural areas, something that has been ongoing in recent EU entrants such as Slovakia, Croatia & Slovenia, independent telcos such as Swiss based  WiMAX Telecom, which operates rural infrastructure in Austria as well as the aforementioned, could form part of a larger bid with Telekom Austria. As ever, a watching brief.