What’s up with… Deutsche Telekom, Telenor, Qualcomm & Intel

• Deutsche Telekom demos satellite-to-smartphone comms
• Telenor appoints acting CTO
• Qualcomm cools on Intel

In today’s industry news roundup: DT teams up with GEO satellite operator Skylo and Qualcomm to trial direct-to-smartphone services; Amol Phadke has stepped down as group CTO at Telenor; Qualcomm has lost its M&A interest in Intel, according to reports; and much more!

While many telcos are partnering with low-earth orbit (LEO) satellite constellation operators, such as Starlink And AST SpaceMobile, for their satellite-to-smartphone connectivity needs, Deutsche Telekom (DT) is taking a slightly different approach, having teamed up with geostationary orbit (GEO) satellite operator Skylo Technologies, as well as Qualcomm, for a trial that involved sending SMS text messages from regular smartphones via a GEO satellite. Skylo is not a new partner for DT – the German telco giant has already hooked up with the GEO operator for IoT services. According to DT, this is “the first time in Europe that an operator’s terrestrial mobile network has been integrated into a satellite network to enable texting based on the 3GPP Release 17 specifications for direct-to-handset (D2H) connectivity.” The trial was conducted by DT’s Greek operator subsidiary Cosmote. “Our customers want to always stay connected. Direct-to-handset will be an add-on to our mobile networks, allowing our customers to easily text from anywhere on their regular devices without any separate apps,” said Antje Williams, SVP of business creation, group technology at Deutsche Telekom. “We aim to bring this technology into the hands of our customers. The successful effort of our team, together with our partners, to integrate the satellite and cellular network is just the beginning,” she added. Operators around the world are keen to enable satellite-to-smartphone connectivity so they can provide services (albeit very limited at first) to their customers beyond the reach of their terrestrial mobile network infrastructure. 

Having made a strategic impact since he joined in the autumn of 2023, Amol Phadke has stepped down from his role as group CTO at Telenor for personal reasons. The operator thanked Phadke for his “significant contributions to Telenor in driving forward the Group Technology agenda around cloud, AI, IT and open networks during his tenure.” From day one, Phadke was focused on making Telenor an AI-first telco and has been instrumental in brokering key relationships with the likes of AWS, Google Cloud and Nvidia over the past year. His interim replacement is Cathal Kennedy, who is currently senior VP of cloud and AI within the Telenor Group’s CTO office. Kennedy “will continue to drive forward Telenor’s vision for being an AI-first and cloud-first Ttelco,” the operator noted in this announcement. 

Wireless chip giant Qualcomm is losing interest in acquiring its once-dominant and now troubled competitor Intel. In early September, Reuters reported that San Diego, California-based Qualcomm was considering the potential acquisition of specific units of Intel and then, a few weeks later, The Wall Street Journal reported that Qualcomm was mulling a bid for the whole shebang. Had the deal gone ahead, it would have been one of the biggest buyouts ever in the global technology sector. Only last week Qualcomm announced that it is seeking to diversify its interests to meet its highly ambitious target of generating an additional $22bn in annual revenues by its fiscal year 2029. However, although initially hot to trot on the deal, Qualcomm’s ardour seems to have gone off the boil, ostensibly, according to Bloomberg, because of the “complexities involved” in buying Intel. Presumably, Qualcomm’s accountants and lawyers would have factored any and all such complexities into its acquisition calculations, so it is not immediately apparent just what additional intricacies and entanglements have emerged to cool Qualcomm’s jets. Intel, founded in 1968, was for many years a behemoth astride the semiconductor industry. It was on the Fortune 500 list of the largest US corporations by revenue between 2007 and 2016, but since 2020 Intel’s star and stock has waned as the company faced increased competition and loss of market share. To make matters worse, Intel made a spectacular misstep when it failed to appreciate the potential importance of artificial intelligence (AI). In 2017, the company declined to take a stake in OpenAI, which was then a small non-profit research outfit working on the nascent concept of generative AI. Intel had the option of buying a 15% share of OpenAI for $1bn and had a further opportunity to take an additional 15% stake. It did neither and, as they say, the rest is history. Intel is now worth less than $100bn, while AI chip giant Nvidia, with its astonishingly expensive but utterly vital graphics processing unit (GPU) parallel processing chips, is worth more than $3.3tn. Meanwhile, Intel doubled down on its belief in the good old central processing unit (CPU) chips which, although they had made the company multiple fortunes over 20 years, are not well suited to AI applications. Since 2019, Intel has tried and tried again to produce a viable AI chip to compete with the likes of Nvidia and AMD but, so far, it has failed to do so. Since 2021, Intel’s share price has fallen by 56%. In August this year, the chip vendor announced a quarterly operating loss of almost $2bn and said it would cull 15,000  jobs, cut capex to the bone and reduce its costs by $10bn over the course of 2025. Then, on 1 November this year, Intel was relegated from the Dow Jones Industrial Average. To rub salt in the gaping wound, Intel’s place was taken by Nvidia. Intel is obviously exposed enough to be an (expensive) takeover target and may still be bought by someone, however, Qualcomm is rumoured to have been put off the deal following mutterings from Wall Street analysts to the effect that a takeover now appears to be particularly risky given “uncertain returns” on the putative investment and could have a deleterious effect on Qualcomm’s bonds. Of course, having put the takeover on the back burner doesn’t mean it will be there forever; Qualcomm could try again at some time in the future and might also try to buy the choice parts of Intel that would fit better with its diversification strategy. And so could other interested parties.

It is with good reason that much has been made of the current oversupply of fibre-to-the-premises (FTTP) alternative networks (altnets) in the UK. Rollout of FTTP technology across Britain used to be sluggish and very limited, with the incumbent telco, BT (via its wholly owned wholesale fixed access network infrastructure subsidiary, Openreach) taking its own sweet time to do not a great deal until regulatory changes kickstarted it into action. Now things are very different, with BT’s retail services and Openreach facing fibre access network competition from the likes of Virgin Media O2, CityFibre, Netomnia, Hyperoptic and a host of other FTTP hopefuls. And by host, we mean scores. As billions of pounds were poured into the UK communications infrastructure sector, the number of UK fibre altnets grew to around 150 (of varying sizes) and it was evident that not all of those hopefuls would survive what seemed likely to be several waves of acquisition and consolidation. The market was yet another example of the veracity of the old adage, “It’s the pioneers that get the arrows and the settlers who get the land”. According to GlobalData, the London-headquartered market research and consulting firm, many British FTTP altnets are now struggling in the face of particularly intense competitive pressures from established telcos. Despite the considerable infrastructure investments that the altnets have sunk into the ground, many of them are struggling to achieve profitability in the face of the aforementioned competition and poor economies of scale. There has already been some consolidation, but further waves seem inevitable. As Robert Pritchard, principal analyst for enterprise technology and services at GlobalData, noted, “Although the number of FTTP altnets has shrunk from about 150 to 100 or so, very few are looking viable. Having spent so much on infrastructure rollouts, many have revenues only in the few tens of millions of pounds.” The report indicates that to be able to survive, altnets must achieve 30% penetration of their addressable market. Not many do. Pritchard says this is because “FTTP altnets have focused so much on expanding their networks, many seem to have neglected acquiring customers – business customers in particular. This is the fundamental reason behind ongoing market consolidation.” He concludes, “Being one-trick fixed fibre connectivity purveyors is a fundamental problem. Finally, the penny is dropping that customers do not buy technology but services. Success depends on teaming up with the most effective resellers and internet service providers. If they are not generating revenue, networks have no purpose.” The UK FTTP altnet seems to be proof positive of his bleak analysis. That said, it was only three months ago, as TelecomTV reported at the time, that the research house Point Topic was claiming that UK altnets were “keeping pace on FTTP”. In its quarterly update on UK ISP and network supplier metrics ending on June 30 this year, Point Topic found that where growth rates were concerned in retail FTTP connections, Britain’s altnets “when viewed collectively” seemed to be holding their own compared to bigger and better established ISP rivals. The problem seems to be, though, that the competitive contribution from the altnet sector is coming from a few stronger players and not so much from the vast majority of struggling minnows. 

Another Mexican revolution is underway. In a dramatic move, the country is to abolish its current telecom and competition regulators and will replace them with a single new authority, Reuters has reported. The contentious reform, which came after some widely opposed changes to Mexico’s judicial system, establishes that telecom and broadcasting regulation will become the exclusive responsibility of the new Agency of Digital Transformation and Telecommunications (ATDT), which itself will be an executive branch of the Mexican government. The timetable to bring about the change is remarkable given the legendary lassitude of the members of the massively bureaucratic Mexican legislature, as the change has to be completed within just 180 days, an unprecedented turn of speed that will be a once-in-a-lifetime litmus test of whether or not political and administrative efficiency can remain fully focused over such a comparatively short timeframe. The Mexican Congress, under the leadership of country’s current ruling coalition led by the Movimiento de Regeneración Nacional (Morena), has approved the constitutional reform required to scrap the existing (and independent) Federal Institute of Telecommunications (IFT) and the Federal Competition Commission (Cofece) and do away with them as autonomous constitutional bodies. The ATDT will emerge from the ashes as part of the executive branch of the Mexican government. The original plan was to create a new Authority of Free Competition and Concurrence, which would have combined the aspects of Cofece and the IFT, but that was abandoned at a late stage. The government claims that the new authority will possess its own assets and “be endowed with” technical and operational independence in terms of its decisions, organisation and operation. There will, apparently, also be full separation between those investigating telecom irregularities and malfeasance and the unit that determines outcomes and responses. The reform, first mooted by former president of Mexico, Andrés Manuel López Obrador, was introduced as a “natural organic simplification”, but that has mutated to the point that two previously autonomous and independent agencies operating outside the shifting political partialities of the executive branch of government have now become an integral part of it and subject to direct governmental control. The Mexican government had planned to abolish several regulatory bodies other than telecom, including the national energy regulator CRE, the oils and hydrocarbons regulator CNH, and the public information and data protection office, the INAI. However, as Reuters reports, the recent election of Donald Trump to the US presidency – he will take office on 20 January 2025 – sharpened minds when it was realised that such moves could increase tensions with the US and severely damage Mexico’s credit ratings. So, in short order, the majority of the regulatory reforms were shelved to ensure the country remains in compliance with the United States-Mexico-Canada Agreement (USMCA) of 2020. Strangely enough, the scrapping of the telecom regulator was already known to be in breach of the USMCA, but it went ahead anyway. It remains to be seen how the incoming Trump administration will react. Former President López Obrador’s argument had been that abolishing the IFT and Cofece and combining their functions into a single new regulatory agency would save Mexico some $5bn a year and “reduce corruption”. Critics said that such an action would strip funding from important telecom projects, increase opacity, reduce oversight and concentrate powers with the government executive. It looks like the last part of the prediction (at the very least) is about to come to pass. Meanwhile, concerns are mounting that the rate of activity at the IFT and Cofece, where many employees will lose their jobs, will slow down to less than a crawl. You can bet your bottom peso it will!

– The staff, TelecomTV