Tuesday, February 28, 2006
A Double Platinum club mega-uber value reader writes in with disturbing news - he uses Feedburner and since Friday hasn't seen any new posts from this humble bloglet [2.0]. Anyone out there experiencing similar problems (I guess this might be akin to asking a school class, "If anyone's absent, raise your hand.")? I use Bloglines, and my vanity feed (used purely for the maintenance of five nines QoS for my many highly valued mega-uber value readers) works fine. Maybe I need to call the Accounts Receivable department of some non-net-neutral telco on the cutting edge...
Monday, February 27, 2006
I believe it was the great Sammy Davis, Jr., who once said, "Ouch, babe, I really mean it."
Today the FTSE100 closed near a five-year high, and our beloved Pan-European telecom sector fell off a cliff - down 1.34%. That's something like EUR7bn in capitalization sucked down the crapper of history. The chief culprit, Vodafone, announced an impairment review, adjusting the carrying values of assets bought back at the bubbliest part of the Bubble, none of which is particularly surprising. What has people spooked, rightly, is that all the previous assumptions upon which the company has been justifying these valuations, have deteriorated to the point where there was no more hiding. And we ain't even talking 3G yet.
For an industry already suffering a very protracted self-esteem collapse, the really depressing thing for the sector in today's development is stated in my first sentence: "Today the FTSE100 closed near a five-year high, and our beloved Pan-European telecom sector fell off a cliff - down 1.34%." As the largest EuroTelco by a significant margin, and also a major constituent of the FTSE100 index, it speaks volumes about the state of the sector that Vodafone can fall nearly 3% and still not hold the broader market back. EuroTelco can't even cause trouble anymore...
Friday, February 24, 2006
My glavniy chelovek and long-time Zolotoi Klass mega-uber value droog Alistair has written an interesting post in response to my fiber musings. This concept of technology leapfrog is something which I seem to be increasingly encountering in my limited dealings with the former Soviet constituents and associates, and I think it's something which perhaps Western Europeans generally are fairly blind to. Ignore it at your peril.
A couple of days ago I was speculating idly that maybe the Euro mega-utilities would jump on the fiber bandwagon. Well, a Diamond-Encrusted Palladium Club charter mega-uber value member has written in with some timely research on the two German FTTH stories discussed here in the past two days - and as we'd say down in the German-speaking part of Texas whence my ancestors hailed from, it's scheisse heiss.
First, Netcologne, which yesterday announced a EUR200m FTTH plan. The City of Cologne owns 100% (90% indirect, via a 100% subsidiary company, and 10% direct) of a company called GEW Koln AG, and this company in turn owns 100% of Netcologne, already a credible broadband player in the local market. What's interesting is that GEW Koln AG also owns 80% of a utility company called Rheinenergie, with mammoth RWE as the 20% minority partner. So here we have a nice nexus between municipal government, municipal utility and a European power giant (by association).
Second, the Schwerte project comes under the auspices of (Stadtwerke Schwerte, or Cityworks Schwerte) Ruhrpower, which is 47% owned by the municipality of Schwerte, 23.5% by the City of Dortmund, and 23.5% by, whaddayaknow, RWE again. (The other 6% is owned by a joint venture vehicle owned by the three partners.) Ruhrpower's ISP/telco is Ruhrnet, majority owned by Ruhrpower, with a local collective bank and Versatel as minority partners.
What makes this even more interesting is that RWE has been one of the key European proponents of Powerline in the past, and even more intriguigingly, both E.On and Endesa (which it is trying to buy) have also both had PLC aspirations (E.On dumped it, Endesa has been a lot more serious about it). I'm inclined to think that the intentions are still there, but perhaps the enabling technology has changed.
Like I said, I sense that the buzz we got from VoIP three years ago (just for the record, I didn't inhale) is being revived on fiber this year. A couple of Double Platinum mega-uber value readers have pointed me towards recent developments in Germany and France which further make the case.
First, the local utility in the small town of Schwerte in Nordrhein-Westfalen is deploying an FTTH network. If the barbaric online translation I have read is even close to accurate, it appears that an upcoming program of sewer system inspections and revamps offers the opportunity to push fiber into every home. It's an unpleasant thought, but that's exactly the advantage that the utilities will have - common construction/maintenance functions and rights of way (let's go back underground in Vienna and see - in some cases they use robots.)
Secondly, a couple of weeks back, Parisian VDSL player Erenis raised EUR22.5m to expand its coverage. Salient points: fiber coverage and depth improves, and projects are attracting capital.
Thursday, February 23, 2006
I don't know how many uber-value readers will remember the classic Reagan-era US soap about greed and ambition, which is what this title refers to. Anyway, here's a slightly different take on the soap opera formula from a German telco perspective. German speakers will get a lot more out of this than those of us reliant upon machine translation, but then again I think imagination can fill in a lot of blanks.
I've got a song going round in my head, and I think it contains the lyrics:
"And all the stars that never were,
Are parking cars and forming VoIP start-ups"
Wish I could remember the title.
Thankfully, I do know the way to San Jose - turn left at Greenland (someone I used to work with actually met Ringo Starr years ago at a Mr. Donut in Hamamatsu. They ended up taking their donuts and Ringo back to their apartment and chatting for hours about basically nothing. Neither she nor her boyfriend were the least bit interested in the Beatles, as it happens. That is a true story. But I digress).
I will be speaking at VON on 15th March. To be honest, I look at some of the other speakers on the list that morning, and I feel like my presence must be a typo. Needless to say that, following Tim O'Reilly, I won't be sourcing any research from Long or Short Capital. As previously, Jeff has slotted me in just before lunch - I suspect this is a conscious effort to cut back on catering costs by inducing mass indigestion among the attendees. Or maybe it's because he suspects that everyone's biorhythms will be tanking and in need of endorphin-stimulating comic relief. Either way, I hope not to disappoint.
In case any Europeans were feeling neglected watching the Net Neutrality debate in the States from afar, despair no more. We have our own Euro-battle to fight now. A Double Platinum mega-uber value reader directs me to some ominous comments from DT's CEO (IHT coverage here in English, WirtschaftsWoche in German here). Let's hope they're just trying to be fashionable.
One thing which is ironic about this is that when I put together my "Let's Get Ready to Rumble" slidepack on net neutrality back in November, the only European CEO I included on the cover was none other than Mr. Ricke. Wish my stock calls were as prescient.
Oh well, another day, another aggressive FTTH deployment, this time aimed at DT, and happening just down the road from the big magenta T. Netcologne (it's not geek aftershave, but an alternative carrier in Cologne) plans a five year, EUR200m investment program to connect every household in the city, which it considers to be favorable to paying DT for copper access - this costs the company between EUR28 - 30m annually at present.
I don't recall seeing these referred to elsewhere, though I apologize if someone's already posted on this. However, the Mother of All mega-value uber-readers points me towards Skype financials prior to the eBay deal. Interesting reading. The 2004 statements give a pretty detailed breakdown of costs ($887k in travel expenses?!) and assets ($282k in furniture, fixtures, and office equipment, $32k in leasehold investments). In the first six months ending 30 June 2005, the company had $20.9m in cash, six month revenues of $23.7m (which means the company really motored in H2), capex of $341k (more than double the total for the previous full year), and net fixed assets of $532k.
There's more of interest related to capitalization, but I haven't had time to go through it yet in detail. Both filings also contain an intriguing set of statements on related party transactions.
(UPDATE: a reader asks, "What's your point?" Well, I find the consultancy and license fees interesting given the size of the company and its payroll at the time. More importantly, the wording of the license makes me wonder whether eBay actually controls the underlying Skype technology beyond the relatively limited uses for which it is defined.)
Here's the 2004 version:
"In November 2003, Skype signed an agreement with a software development company [could this be the one?] which granted Skype a perpetual non exclusive license on its software, with exclusive use of the software for the limited purpose of providing P2P telephony, multi-directional video communications between end users via the internet. The founders of this software company are also founding shareholders (and senior management) of Skype.
In remuneration of license rights granted to Skype, the software company receives a royalty fee which was $38,316 in 2004 (2003: $ nil) and which is capped at $2.0 million per year.
In addition to the license rights, in 2004, the Company also received consulting services from the same related party in connection with the development of their software and also applications. Costs incurred in relation to these consulting services, amounted to $1.6 million for the year ended December 31, 2004 (2003: $0.6 million).
As of December 31, 2004, the amount payable under this contract is $0.1 million (2003: $ nil). During the year 2004, a total amount of $1.5 million has been paid in relation to the above contract."
Here's the 2005 version:
"In November 2003, Skype signed an agreement with a software development company which granted Skype a perpetual non exclusive license on its software, with exclusive use of the software for the limited purpose of providing P2P telephony, multi-directional video communications between end users via the internet. The founders of this software company are also founding shareholders (and senior management) of Skype.
In remuneration of license rights granted to Skype, the software company receives a royalty fee which was $0.4 million for the period ended June 2005 (for the period ended June 2004: $ nil) and which is capped at $2.0 million per year.
In addition to the license rights, the Company also received consulting services from the same related party in connection with the development of their software and also applications. Costs incurred in relation to these consulting services, amounted to $0.1 million for the period ended June 30, 2005 (for the period ended June 30, 2004: $1.1 million).
As of June 30, 2005, the amount payable under these contracts is $0.3 million (2004: $48,187). During the period ended June 30, 2005, a total amount of $0.3 million has been paid in relation to the above contracts. "
Up in Norway, Thomas has done a good job of eviscerating the marketing strategy of utility-backed fiber in the local market, at least as it is currently being rolled out. He observes, as I did previously, that pricing is way high, but it's the added context of local market knowledge (catch the comments on TV viewing habits) which really makes this valuable.
The good folks over at the ITSPA have issued a "cautiously optimistic" response to OFCOM's consultation on VoIP issued yesterday. What really gets me going about this is the force with which they're apparently putting forward the case for naked DSL (see the bottom of the release). As I think I might have said previously, I think FMC products are inevitably going to lead consumers to demand this anyway, but it's also nice to see someone forcing the issue in such a public way. Viva desnudez!
Wednesday, February 22, 2006
An idle thought ahead of a busy day light on blogposting. With all the excitement currently surrounding EuroUtility consolidation, all the cash washing around the utility sector generally (sector dividend yield is above 4% currently), as well as the need to maximize the size and scope of these massive companies (at a combined EV of EUR130bn, E.On and Endesa would be the size of one-and-a-half to two EuroTelcos), I wonder what potential there is for the giants in the sector to follow the smaller players in Scandinavia (and Austria) into the open FTTH world?
Monday, February 20, 2006
A little detective work by a Prix d'Or mega-hyper value reader has uncovered a user forum in France where a member has found details of France Telecom's fiber offer: 100/40Mbps access, with lots of bells and whistles and free installation, for EUR960 per year, or EUR80 per month. My French is bad, but it looks to me as though there is also reference to a test of higher speed access (looks like up to 800Mbps), but perhaps a French mega-uber value reader can lend a hand here.
Apparently much of the audience at Steve Ballmer's 3GSM keynote last week was preoccupied with concerns of having to dodge furniture at some point, and thus missed a key statement on VoIP strategy. Add this to the fact that the mainstream financial press seems to have gotten on board the VoIP train decisively now, and we're back to a world of EuroTelco pain following a couple of weeks of M&A-led rally. Meanwhile, a Titanium Class mega-uber value reader writes in with a response to my post on IBM:
"IBM doesn't get mentioned because not many bloggers have a direct connection to the company. Skype, Microsoft, Google, Apple, etc., bloggers touch every day. IBM simply isn't a consumer-facing company. IBM learned (and it took them a looooong time) that they are not good with the consumer. Everything they do now is focused on corporates, something most bloggers don't really care about. IBM will be a force in corporate VoIP, but they will have a much smaller impact on the consumer. Their offerings, as your reader pointed out, are focused around business communication needs. And this is where IBM is so dangerous to other VoIP providers looking at getting into business VoIP - IBM is a trusted company within the corporate space. The old adage "Never get fired for buying IBM" still holds. Corporations, even those without IBM equipment or services, have an innate trust of IBM. Not to say IBM doesn't sometimes miss the boat (MSDOS, Ethernet to name two). But I can't remember of hearing of a case when IBM has screwed up an outsourcing contract. Unlike so many other outsourcers. Skype, et al, will face not only an uphill battle for acceptability in the corporate world but also will be facing a 1200 pound gorilla with a firm grip on corporate communications already. IBM is the only company that can give legitimacy to VoIP in the corporate world in a very, very short time. Look what happened with Linux. Had IBM not given Linux their blessing it would not have penetrated as far and as officially into the corporate world as it has. Simply put, IBM is a force for change in the corporate world. When IBM comes out in favour of VoIP particular as it rolls out its VoIP platform, particularly through the IBM Global Services arm, the current hemorrhaging of the telcos is going to seem like a minor cut. IBM blessing plus the savings of VoIP (or more accurately a converged IP network) will convince many corporations to jump whole heartedly into the converged IP camp."
This one made me wince. I don't know how Net2Phone shareholders are expected to accurately assess the value of their company when the information available doesn't even give them the basis for a crude EV per sub calculation. Here's the granular detail on subscribers:
"Net2Phone has routed billions of VoIP minutes globally, servicing more than 100,000 users in the US as well as hundreds of thousands of more overseas."
I guess Vonage at least may be relieved about this. The lack of a relevant read-across from the M&A world might take a little pressure off the IPO valuation. Then again, it probably won't be any consolation that a company potentially half its size is being valued at just $161m.
Thanks to the ever-excellent Avant Gaming, I stumbled across this last night - the latest innovation in World of Warcraft, and something I think telcos can viscerally relate to. My favorite passage of the description is:
"You and your second head will naturally be spending a lot of time together, and you may find one of your biggest challenges to be learning to cooperate and coexist with your lifelong soul mate. While you have full and absolute control of your head and its associated arm, both players will have simultaneous control of equipment and inventory management, both legs, and character locomotion. This can make it somewhat difficult to travel anywhere in particular if that particular destination at all differs in the mind of either player. Thus, good communication and well-defined roles are essential to the successful Two-headed Ogre. To facilitate this communication, each Two-headed Ogre will get its own [/body] channel so that both heads can better make personal decisions and confer privately about things like what quest to do next, what monster to target, and what direction to move in."
The other thing this drives home for me is the yawning gap between the strategy of MMORPG developers and telco media strategies. The former know that to extend the lifetimes of their products they have to continually throw up challenges and dilemmas for their users, and if they're smart, occasionally allow a little anarchy into the mix, or maybe even let the virtual world be self-organizing. Getting it right means gaining mindshare at the expense of the very medium the telcos are obsessed with right now.
Friday, February 17, 2006
What a week. It's all fading into an impressionistic haze, but here are some highlights. For my money, France Telecom really nailed the state of visibility in the sector on Tuesday when it discussed plans to shorten internal reporting lines and cycles (the latter to weekly). The Financial Times discovered that financial analysts have apparently discovered a need to cross sector silos (I done told ya and told ya). Vodafone followed T-Mobile's lead in admitting that it's Google's world and we're just living in it. M&A feeding frenzy moves into higher gear with Tele2 (whose Russian assets might make an interesting way for Telenor to exert some pressure on unruly Russian partners) and KPN (given Telefonica's balance sheet and strategic priorities, I wouldn't be surprised if this was a breakup exercise involving some private equity partners) now moving into the crosshairs.
A Platinum Club mega-uber value reader on the front lines of the industry writes in to ask:
"I was wondering why is that there is no comment in the blogs about IBM's role
in the VoIP space. They claim to have some 128 Million Notes users. They offer
an integrated same-time interface with an independent client and web access for
IM, VoIP and other presence applications. Works very much as the GTalk client
and is also integrated with the Notes e-mail and collaboration tool. They use
GIPS. It's based on open standards like, JAVA, SIP... and it's interoperable
with GTalk, MSN Messenger... It has a click to call functionallity incorporated
(with click to call servers). It has break-in and break-out integration through
these previously mentioned agreements. It's integrated in the Blackberry client
for the full set of functions, including VoIP. That means you have a flat fee
for mobile voice through your Blackberry service. For me, as a Telco man, this
presents a much more important shift than the Skypes of the world, as it
means that all the transactions (voice included) between corporates can be done
with no cost in a secure and trusted way (and higher quality, more
Sounds serious to me. Look for it in Q2.
Lastly, another Platinum Club mega-uber value reader, himself one of my telco analyst brethren, writes in with a much-needed morale boost:
"I have been reading your blog for over a year now - your analysis is very
insightful and with all the stuff we have to read, it helps me keep on top
of lots of developments - keep it up!"
Will do, and as it happens I have a raft of meetings and calls lined up next week which should yield some interesting posts. That is, if I survive my weekend hunting trip with Dick Cheney...
Thursday, February 16, 2006
Apologies for the lack of posts in the past days. I have had a few post-surgical complications, which combined with the results reporting season nightmare, has meant that I have been totally sapped. This situation will be redressed, I promise. Anyway, now waiting for the Telenor call to begin. This company plays the best pre-conference call music around, but the new logo uncannily reminds me of the Roomarang. Oh dear.
Friday, February 10, 2006
Just this second received a press release saying that BitTorrent, NTL and CacheLogic are teaming up for a trial of legal video download services on NTL's network using BitTorrent, with CacheLogic tweaking network performance to ensure efficiency. As an NTL customer, I am looking forward to this, and will report my findings if I am lucky enough to be involved. Then again, NTL hasn't offered even the most basic interactive services in my area in seven years, so maybe I shouldn't get too excited.
Om has burnt the midnight oil analyzing Vonage's S-1 filing, coming to the conclusion that, while churn may not be as ugly as people thought, it's still cause for concern, and apparently intensifying. His point at the end about definitions is particularly good, as excluding cancellations in the first 30-days is undoubtedly flattering to the numbers.
The net present value of Vonage's lifetime customer revenues is an issue which VoIP-watchers have long speculated about with trepidation - what if marketing spending, churn, and price competition combined to form a toxic soup which fatally poisoned the economic proposition for access-independent VoIP? In other words, if the discounted lifetime value of a customer's expenditure is not considerably greater than the cost of marketing and delivering the service over that period, then what incentive is there for investors to get involved, because the business is unsustainable?
Looking at some of the metrics Om is writing about, let's take a stab at a valuation. ARPU in the first nine months of 2005 was $26.63, and with churn of 2.11% (excluding the 30-day cancellations), we get lifetime revenues of $1278. These should be discounted over the lifetime of the subscriber at an appropriate discount rate, let's charitably say 8%, which gives us a net present value of lifetime revenues of $1143 per sub. That's a $1.6bn valuation based on current subscriber numbers! But wait, this only works if pricing stays stable, and Vonage's ARPU fell at a CAGR of 20% between Q3 2003 and Q3 2005. Plug that assumption into the subscriber lifetime of four years and net present value of lifetime revenues drops to $879. Increase churn to 2.5%, and it falls to $792. Take churn to 3% and it's $708, which suggests a market valuation of $991m for the company. With very little effort, and some frankly benign assumptions, we've nearly halved the value of the company. Pick your own assumptions about competition levels, pricing, marketing expenditures, discount rate, and you can come up with all manner of scenarios ranging from a decent return to complete annihilation. I assume this is what potential investors are going to be doing over the coming weeks, and my gut feeling is that the $1bn mark is what will be aimed for.
My nagging question is why didn’t Vonage move earlier, while it still had the momentum of being market leader and the undivided attention of adoring potential investors everywhere? I first spoke to Vonage in the autumn of 2002, and wrote about the implications of the business model and technology (as well as Jeff Pulver’s Free World Dialup) for Europe at that time. It was an eye-opener for clients, and they were both appreciative and intrigued. By the following autumn, Vonage fever was in the air, and in October I accompanied John Rego and Brooke Schulz from Vonage on a mini-roadshow of our clients in Europe, not because we were angling for a banking mandate (we assumed that any forthcoming Vonage offering would be too small to involve a Japanese tranche), but rather because I knew our clients would be eager to meet the company and it would score some Brownie points for us. Visibly enthusiastic fund managers greeted us everywhere we went, and in every meeting the question of an IPO came up. One very bright fund manager stressed his view that, despite the small subscriber numbers of the time, the market would be inclined to be generous in its assumptions of future growth, and accordingly he thought the company would command a valuation of $1bn.
This was late 2003, Skype had just been born, and there was little inkling in the broader market of how the voice proposition was about to be turned upside down (though some would have said that the writing was already on the wall). Vonage was only 1/20 the size it is today, but it was the state of the art at the time. Perhaps $1bn would have been attainable given the attention the company was receiving at the time, as well as investor views of the likely progression of voice services in the future. In the intervening 2.5 years, however, all hell has broken loose, in Europe the alternative DSL and cable players are running away with the market for the most part, and employing some of the disruptive tactics of access-independent players in lowering costs and eroding legacy telco pricing (we will see more and bigger peering deals, mark my word). And legacy telco pricing, after all, provides the essential raison d’etre for access-independent VoIP as a commercial proposition. Once it goes, there is no model.
I think the smart money has already moved away from this issue, realizing that the next chapter of value creation is in integration of voice with other applications/behaviours, where presence, identity, collaboration, search, commerce are all essential and natural ingredients. I don’t see an easy migration path for Vonage into this new world. So, an uncharitable view of the situation would be to say that the long term business model for access-independent VoIP as a standalone proposition has to be an exit strategy. Fair enough, I just don’t understand why Vonage has waited so late to begin the exercise. I don’t necessarily think the ultimate fate of the company would have been any different, but I do believe getting the deal to fly would have been a lot easier three years ago than it may be today.
French enfant terrible Free has reported Q4 revenues and KPIs. At 149k DSL net additions, the company is just behind the combined behemoth NeufCegetel, with 156k. More significant for those bullish on service bundling is the revelation that 13% of Freebox subs are paying for additional services, and that the company has done 150k VOD transactions in the past six weeks. What I find really telling is that the company, the original standard-bearer for VoIP in Europe, doesn't even bother to discuss VoIP itself in the release, from which I conclude that subscriber base = VoIP users, end of story.
Thursday, February 09, 2006
I just checked and there's no sign of it yet on their website, but Level3 just sent out a press release saying it has signed an agreement with Apollo Submarine Cable to purchase 300Gbps of additional capacity on its Transatlantic route. The press release states that prior to this transaction Level3 had 480Gbps of lit Transatlantic capacity, of which 85% was being utilized, but also that Transatlantic traffic had doubled in the past 12 months. Today's deal also includes an option on a further 300Gbps of capacity. What does that tell us about the future knock-on effects of currently explosive European broadband growth? I am going to hazard a guess that Level3 sees Transatlantic capacity pricing only going one way and is getting in early, but this is not a market I have looked at in any great detail for a long time. Any observations or alternative views are, of course, welcomed.
I saw two interesting/perversely funny things this afternoon. One, from the back of a taxi, was a BT Openreach van which had been unsympathetically clamped by the police (so much for getting Britain broadbanded up in a hurry!), the other of which was this news on UK consumer attitudes towards 3G from Netonomy/YouGov, which is unfortunately timed.
It's actually BT Group's Q3 results today, but anyway, here are some highlights:
Broadband adds were strong at 699k Wholesale/217k Retail, which takes BT's share of retail net adds to 31%, the highest level so far this fiscal year.
BT also claims that it is currently selling 2,000 Fusion products per week, with the total standing at 13,000 as at the end of last week.
Nevertheless, as in previous quarters, there are some KPIs which should still cause concern. The MVNO business lost a further 21k subs in the consumer segment, indicating that subscriber loss is accelerating.
Overall sequential voice line loss on an annualized basis was better at 6.7% in the quarter (Q2 -8.2%, Q1 - 6.6%), though this is largely down to a better performance in the business market. Consumer line loss on an annualized basis was 7.3%, better than 8.1% in Q2, but still worse than 6.6% in Q1.
Wednesday, February 08, 2006
About this time last year I wrote something about Samsung's aspirations in Europe, and today brings another intriguing development in the wireless space. I'm aware there are a lot of potentially messy spectrum issues to be resolved, but it's nice to see some attempts at harmonization taking place.
If it's Wednesday, then it must be time for the regular update from the UK Advertising Standards Authority, with a couple of great examples of telcos meddling in one another's advertising strategies - this week focusing mainly on product availability and coverage. Like I say, focus on the little things - big things take care of themselves...
Tuesday, February 07, 2006
The Financial Times London edition's Mudlark column this morning had a fantastic item about Sky employees receiving Sky Gnome devices last week (presumably as some sort of morale-building exercise to coincide with the half-year results) and turning around and selling them immediately on eBay. That really is buying into the corporate vision, eh? - then again I wonder how many Imperial Tobacco employees actually smoke? At this writing I can see no fewer than 21 listings on eBay. Any internal audit/compliance/corporate morale person worth their salt would sniff out the malcontents and lay down the law, especially the two ingrates who have put theirs up for sale at a mere 99 pence. The rest of you out there, hurry to secure a valuable piece of future retro-futurist wampum.
The, ahem, IT gurus here have decided to block access to webmail since last week. Until this idiocy is resolved, if mega-value readers wish to contact me during normal business hours, please do so here. (I have Gmail set up to forward to this account, but it doesn't seem to work so far. I suspect that it is clever enough to recognize that I also have my work account forwarding to my Gmail account, and thus refuses to get involved in a circular forward. Impressive, but not exactly what I want it to do.)
UPDATE: It turns out that this little exercise in backward-looking internet policy is being driven, not by the lovable people in IT, but by the internal audit and compliance police at the mother ship. I can understand why they would want to restrict certain communication channels in the interest of best practice, especially where those involved are conducting financial transactions, but that's not me. Looks like we have another example of a "one-size fits all" internet policy in need of some fine-tuning by job function and affiliation. No doubt I will have an interesting conversation or two with some important person in coming days, to explain why blocking sites like the Skype Forums is counterproductive for someone like me - who allegedly adds value by researching just this sort of thing...
Interesting that the FON news comes one day before the net neutrality caca hits the Congressional fan. I'm very curious to see what scope there is for Google Secure Access to become the VPN of choice for Foneros everywhere, obviously for security, but also to get around some pesky telco T&Cs. I never believed that the ability to download and use GSA outside the Bay Area was an accident, rather I think it may have been a thinly coded message, and a timely one at that.
KPN Q4 results out today: big compression in fixed line margins (two percentage points in consumer, nearly four points in business), a 25k decline in customers tied in with call packages, annualized line loss at nearly 11% in Q4. It's difficult to disaggregate specific factors, but I assume that at least some of this is the more visible effect of cable VoIP. The company reckons that 9% of all broadband connections in the Dutch market had a VoIP subscription at the end of of 2005, giving a very precise estimate of 362k subscribers (75% cable/25% DSL-based) though we have strong reason to believe this is already ancient history, as recent reports point to cable alone having at least 450k subs at the end of Jaunary). The slide pack for this afternoon's presentation also includes (not before time!) municipal fiber as a new competitive variable it has to contend with. Posting may be somewhat sporadic over the next few days as I try to dig myself out.
UPDATE: Only one fairly anemic question on muni-fiber in this afternoon's presentation, from a bulge bracket broker, which I felt CEO Ad Scheepbouwer somewhat fumbled and mumbled his way through. The reply, as I understood it, was, "We are part of these discussions, sometimes in, sometimes out... we don't just want to put our money in some place where we don't know what the hell we are getting for it." He also asked Eelco Blok, head of Fixed Line, if there were any other recent developments worthy of note, and the answer was no.
Monday, February 06, 2006
Thanks again to all the various mega-uber value readers who have written/phoned in with kind words, particularly the friend/former-client who seems to think that I can claim some retrospective vindication in the rampant bearishness which has recently seized many of my buyside brethren/sistren, given that the first EuroTelcorama note (focusing on, among other issues, a four-letter word called "VoIP," and what happens when/if guerilla WiFi gets more organized/social) was published three years ago. Very nice to hear it, though the self-satisfied chuckle I let loose tugged at my stitches, as if to say "Don't get cocky - what have you done for me lately?"
I guess one alternative explanation for how I got my (second) hernia might be that I find myself literally bursting with excitement whenever I come across something which challenges conventional wisdom or telco dogma. For example, this brilliant observation on broadband reality from Sascha (via a Palladium Club charter member). Tee-hee (Ouch!).
Back in the office today, albeit sitting at an odd angle, I have a lot of catching up to do. Firstly, thanks to all the mega-uber value readers who wrote in with kind words and wishes. You have all been automatically upgraded to Double Platinum Extreme Unlimited readership status, with all the attendant perks and privileges.
Also thanks to those who continued to send in interesting bits of information: this is a fascinating piece by Lee "if it's Tuesday, this must be Edinburgh" Dryburgh on a presentation by France Telecom's head of Research in its Home (fixed line/broadband) division at eTel. This is the sort of presentation that would really get investors going in my view, if they were ever exposed to it, and it further underlines my oft-stated sense that investors and analysts would be better served by going to industry-facing events with presenters from the coal face, rather than the more generalized and conventional fare on offer at "investor" conferences with "superstar" presenters. Another interesting piece of analysis comes from Brough Turner at NMS Communications, who has done some technical digging on xG Technologies and likes what he sees.
I think this week should be pretty ugly for the space, with three of Europe's most embattled telcos (KPN, BT, TeliaSonera) reporting, a general sense of bad karma about (I remember back during the downturn that Jim Crowe used to write to shareholders very candidly to explain his reasons for selling stock before the fact - how times have changed!), and a prominent competitor bank capitulating and cutting the sector to underweight this morning (I guess 21% underperformance last year wasn't compelling enough...).
Thursday, February 02, 2006
As seems to often be the case with nimble start-ups, who presumably spend more time on getting things done than on managing their PR flow, there's no sign of it on xG Technologies' own site, but Reuters' wire service is reporting this morning that the company has appointed CSFB as advisors. I presume this relates to a trade sale rather than an IPO, which the story states is not on the cards. I think this may be another case in point of what Tom Evslin was writing about a few days back: "The VC industry has been disrupted by compression of the time between when a company first needs money and the time it is an acquisition candidate."
This company pretty much operated in complete stealth mode for three years, up until a few months back, when it began making some select xMax demonstrations for the tech press (and presumably the industry), and claims to have raised only $19m to date, from a group of not terribly well-known investors, including Mooers Branton, Swiss brokerage AHC, Ehf (which I guess might be the German semiconductor research center, as opposed to the European Handball Federation, but that's unclear), and Thorvaldsenstraeti (which as far as I know is a street in Reykjavik). Now it appears to me that it may be on the way to an early trade sale, minus the rash of Flarion-esque partner trials, carrier evaluations, and press releases (the Reuters story quotes the company as saying xMax products will be available in mid-'06). My own picks for interested parties would be Intel, Motorola, Qualcomm, Cisco, Alcatel, roughly in that order. Any other ideas out there? Send them my way.
UPDATE: A Palladium Club mega-uber value reader writes in to remind me rightly that this company has been surrounded by more than a bit of mystery and skepticism. However, he also adds that, assuming everything is validated to the market's satisfaction, we would almost certainly have to count Samsung among those with more than a passing interest.
Wednesday, February 01, 2006
Well, I survived and am now the proud father of a second four-inch scar! Blogging will therefore be limited to only really critical posts, and Rotterdam's announcement today of a FTTH network certainly qualifies. To be honest, having met with some of the Dutch fiber advocates in September last year, this announcement does not surprise me at all. It is going to be intriguing to watch another project evolve independently. From the press release, it looks as though Rotterdam is looking to involve the social housing corporations subsequent to the announcement, unlike Amsterdam, where they were announced as shareholders at the beginning. Nevertheless, the overall orientation and goals seem to be the same:
"...future proof data infrastructure is for Rotterdam just as important as a good connection by means of water, road and railtrack. A fiber network has proven to be an important settlement criterion for young professionals, knowledge-intensive companies, port-related companies and companies in the medical-technological sector. A high-quality communications network is essential as well for cultural institutions."
I'm also curious to see how the service provider response picks up. From what I understand, the Amsterdam project is already at 75 service providers (I believe all from within the Netherlands, leading me to suspect that there are an awful lot of non-traditional players involved - financial services, consumer/retail, media companies?). With one common wholesale network provider, the OSS/BSS and provisioning processes are uniform, so anyone with the confidence of their brand behind them can presumably play. I think I've said so before, but this is going to prove a fascinating testbed for how telco brands compete when stripped of the benefits of legacy advantages in the access market.