What’s up with… Verizon, Nokia, Howard Watson

• Verizon cuts its capex by up to $1.8bn
• Nokia chosen to build infrastructure for lunar economy project
• BT’s Howard Watson sticks the rural boot into his rivals

In today’s industry news roundup: It’s bad news for the vendor community as Verizon slashes its capex budget for 2024 by as much as $1.8bn compared with 2023’s total; Nokia nabs job to design communications services infrastructure framework for lunar economy establishment; BT’s chief security and networks officer, Howard Watson, takes a swipe at his UK telco rivals over their shared rural network (lack of) progress; and much more! 

Gird your loins, telecom equipment vendors, because 2024 is looking to be as rough as, if not even worse than, 2023… Major US telco Verizon Communications has published its full year 2023 financial report, which shows that its capital expenditure (capex) last year totalled $18.8bn, down significantly from the $23.1bn it splashed in 2022. The really bad news for the network technology supplier sector is that Verizon expects its 2024 capex spending to come in at between $17bn and $17.5bn – a year-on-year reduction of between 9.6% and 6.9%. For vendors such as Ericsson, which today reported that it isn’t sure when telco purse strings might open wider again following a brutal 2023, this is tear-inducing news. Verizon won’t be smiling either: Its full year revenues in 2023 were down by 2.1% to $134bn, while its operating profit sunk by almost 25% to $22.9bn and its net profit declined by 44% to $12.1bn, impacted by the recently reported $5.8bn goodwill writedown associated with its business services division. The operator’s earnings report is full of details about all its lines of business, but one worth noting is the continuing demand for the operator’s fixed wireless access (FWA) broadband service, which added 375,000 customers in the fourth quarter of last year alone and ended 2023 with more than 3 million users in total. Verizon says its “ahead of schedule to achieve its goal of 4 to 5 million [FWA] subscribers by the end of 2025.” Read more.  

Nokia has been selected to take part in the design of an “integrated multi-service architecture to support a thriving economy on the moon in the next decade and beyond”. The initiative in question is the 10-year Lunar Architecture (LunA-10) programme by the US Defense Advanced Research Projects Agency (DARPA), which aims to build the “essential infrastructure framework” to cater for industrial activities, as well as scientific discovery on the moon. The Finnish vendor will be tasked with recommending a “reliable, high-performance communications infrastructure”, and will collaborate with 13 other companies participating in the scheme to ensure that infrastructure “may be efficiently transported and built on the lunar surface and that it would have reliable power sources once installed”. According to the vendor, its expertise in designing future network architectures and “leadership in lunar surface communication technologies, stemming not only from its current mission to build the first cellular network on the moon but also from Nokia Bell Labs’ long history in space innovation dating back to the Mercury Program”, helped it land a role in this project. The goal of LunA-10 will be to establish the infrastructure needed for commercial operations on and around the lunar surface by 2035. Communications are expected to play a critical role in all use cases and applications, as networks “would allow astronauts to freely communicate directly and with mission control on Earth”, while transmitting video and telemetry data from cameras and sensors spread across the moon and integrated into space suits, vehicles, structures, and scientific experiments. Networks are also set to supply the connectivity necessary to control robots and automate dangerous tasks on the lunar surface. As part of another initiative, NASA’s Tipping Point, Nokia is working on the deployment of the first cellular network on the moon in 2024.

According to the UK government calendar, Wednesday 24 January will herald a parliamentary debate focused on the state of Britain’s Shared Rural Network (SRN), which has been jointly developed by the country’s four big mobile network operators (Three UK, Virgin Media O2, Vodafone and the incumbent national telco BT/EE) in partnership with the government. That impending event has spurred Howard Watson, the chief security and networks officer of BT Group, into composing an official blog in which he takes his professional rivals to task and favourably contrasts BT/EE’s SRN delivery performance against those of its competitors. The SRN initiative was inaugurated in March 2020 and contains legally binding clauses that 4G coverage must cover 95% of the UK land mass by the end of 2025. It provides for severe financial penalties for those not meeting their obligations. In the tellingly titled Why delivering on the Shared Rural Network matters, Watson writes that EE had fulfilled its SRN promise by last week, more than six months ahead of the mandated deadline for 4G coverage to be in place across at least 88% of the country by the end of June. Furthermore, it has succeeded in doing so “in the face of tough economic conditions, a global pandemic and a wide range of digital transformation within our own networks.” Then comes the sting in the tail. Watson adds, “Which is why it’s surprising to see those very same problems being used as an excuse by other networks for their slow progress.” The author then takes as an example of his competitor’s inefficiencies what has happened in Scotland, where, he says, “Despite government funding to build 55 brand new sites, two networks have managed just under a third of sites between them, while the fourth has managed to add 4G to just a single site over the past three years.” He adds that the CTOs of two of the other service providers have told the government that they will miss their targets by two years or more if they don’t get immediate extra financial support from the UK government, whilst the third company has simply given up and admitted that it will miss its targets anyway, whatever they are and whenever they are supposed to be hit. He says BT/EE met its delivery obligations by “fully understanding the deployment environment and the difficulties we would undoubtedly face” and designing its programme “to mitigate risks and delays to our rollout”. The implication being, of course, that other signatories to the agreement failed to be sufficiently forward thinking and flexible enough to surmount obstacles as they arose. Watson continues: “During the programme, we also made difficult decisions to divert spend and resources from other network programmes to overcome issues in a timely manner, given the importance of meeting the deadline to our customers and due to the clear financial penalties for non-delivery. In other words, delivering legally binding commitments like these to government takes a concerted effort and strategic sacrifices; there is always a choice for how, what and where a business chooses to invest. And given the involvement of taxpayer money to fund coverage, it’s hard to blame the wider investment environment for missing this licence commitment.” Then the boot goes in again, thus: “EE’s efforts shows where there’s a willingness to prioritise investment to meet the coverage promises you’ve made, it should be delivered.” Ouch. It will be interesting and probably entertaining to see what responses Three, Vodafone and VMO2 make – if any. In June, the UK regulator Ofcom will publish its own review of the SRN programme’s progress. It will make uncomfortable reading for some of the players but, presumably, will suffuse BT/EE in the comforting glow of merited official approbation. We’ll see…

The allure of 5G services continues to gain speed in China. The country’s three major telcos have published their latest subscriber numbers, including those for 5G, as of the end of December 2023. China Mobile ended last year with 794.5 million subscribers to its 5G package (contract), while its total mobile subscriber base reached 991 million. China Telecom had a total of 407.7 million mobile users, of which 318.66 million had signed up to a 5G package (up by 50.7 million during 2023). China Unicom’s 5G package subscriber total hit 259.6 million by the end of last year, though disclosure on total mobile subscribers has not been provided. The Chinese operators specifically report numbers for 5G packages, rather than citing 5G service users or connections, as while customers may have signed up for a 5G service package offer, that doesn’t necessarily mean they have a 5G-enabled device that enables them to hook up to their network operator’s 5G network, or indeed that their service provider is offering 5G services in their area just yet. 

In addition to the growing 5G market in China, the fixed broadband segment is also eye-wateringly large. China Mobile had a total of 298 million wireline broadband customers at the end of December 2023, and throughout the year it added a total of 26 million fixed customers. China Telecom had 190 million fixed broadband subscribers by the year end, having added a total of 9.26 million wireline broadband users in 2023. China Unicom’s operational statistics for the last month of 2023 did not provide a breakdown of broadband customers.

Another cryptocurrency company bites the dust. Six-year-old Terraform Labs, a blockchain protocol and payment platform used for algorithmic stablecoins and the company behind the crashed and burned TerraUSD and Luna tokens, has filed for Chapter 11 bankruptcy protection in the US. The tokens collapsed in May last year and lost US$40bn of their value. The company’s co-founder, the 32-year-old South Korean, Do Kwon, is currently in jail in the tiny European country of Montenegro having been convicted of forgery for attempting to leave the country on a fake passport. When arrested, forged Costa Rican and Belgian passports were also found in his possession. He is now awaiting extradition to either the US or to his home country, where he will face further charges. It all sounds so depressingly familiar. Do Kwon owns a whopping 92% of Terraform Labs, while his co-founder, Daniel Shin, owns an 8% stake. A US judge has ruled that Do Kwon should be extradited to the US within the next two months to be tried by a jury on federal charges, brought by the US Securities and Exchange Commission (SEC), of financial fraud and selling unregistered securities on the financial markets. If found guilty, he will face many decades in prison. According to the Chapter 11 filing, Terraform Labs has $100m in assets and $500m in liabilities. Do Kwon, who, when he was riding high, was often referred to as the “King of the Luna-tics” by his fanbase, is widely blamed for the destruction of TerraUSD and Luna tokens when, on 9 May 2022, TerraUSD broke its pegging to the real US dollar, and all hell broke loose. The value of the tokens plummeted and more than 99% of the company’s value was wiped out in two days. The debacle was a prime cause of the crash of the entire cryptocurrency industry that followed. Estimates are that the sector lost upwards of $400bn as a direct result of what is euphemistically referred to as Do Kwon’s “mismanagement”.  We’ll be hearing a lot more about that.

- The staff, TelecomTV