What’s up with… Vodafone UK & Three UK, T-Mobile US, CityFibre

• UK mobile merger plan goes under regulatory scrutiny
• Like its peers, T-Mobile US is cutting its capex for 2024
• UK altnet CityFibre is in bullish mood

In today’s industry news roundup: The planned £16.5bn merger of Vodafone UK and Three UK is now being probed by the country’s antitrust regulator; T-Mobile US is on course to reduce its network spending by 8% this year; UK wholesale FTTH network operator CityFibre claims to have turned a financial corner as it tops 3 million ready-for-service connections; and much more! 

The UK’s Competition and Markets Authority (CMA) has launched a formal investigation (Phase 1) into the proposed £16.5bn merger between Vodafone UK and Three UK, which was officially announced in June 2023. The CMA now has 40 days to assess the proposed deal and consider evidence submitted by the two companies as well as “early views from stakeholders” and decide whether the deal might have a negative impact on competition. If it thinks it might, then a more detailed Phase 2 probe will be initiated. Sarah Cardell, the CMA’s CEO, stated: “This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy. The CMA will assess how this tie-up between rival networks could impact competition before deciding next steps… The CMA’s remit, by law, is to assess the potential impact of a merger on competition. It cannot consider other potential effects that a merger might have, for example, on access to personal data. National security concerns are a matter for the UK government, which may choose to intervene under the National Security and Investment Act if it finds concerns,” she noted. The two operators marked the move by issuing statements supporting their planned merger. “By combining networks, Three UK and Vodafone UK will unlock £11bn of investment that will help the UK close the 5G gap with leading European countries and realise its ambitions to be a front-runner in digital connectivity,” stated Three UK CEO Robert Finnegan. “Thanks to this transaction, 95% of the population and every school and hospital will be covered by standalone 5G by the end of the decade. Joining forces will also yield more immediate benefits. From day one, our customers will enjoy faster, more reliable coverage over more of the country – and without paying a penny extra,” he claimed. Ahmed Essam, Vodafone UK’s CEO, added: “We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players. Our commitment to invest £11bn will build capacity to meet the exponential growth in demand for data and accelerate the rollout of Advanced 5G across the UK, delivering benefits to consumers and businesses throughout the nation.” If the two operators are given the green light to merge, they would create the UK’s largest mobile operator by customer numbers (not including internet of things connections), with more than 28 million customers and annual revenues of more than £8.4bn, and thus provide greater competition for BT’s EE division and Virgin Media O2. 

T-Mobile US has followed its major peers AT&T and Verizon in announcing plans to reduce its capital expenditure (capex) over the coming year. The operator, which added 5.9 million wireless customers last year to end 2023 with 119.7 million customers, says its capex for 2024 will be in the range of $8.6bn to $9.4bn (giving a mid-range of $9bn). In 2023, its capex totalled $9.8bn, which means that, at the mid-point of the forecast for this year, its capex would drop by about 8% and that’s further bad news for the vendor community that relies on telco spending for their revenues. The operator reported total revenues of $78.6bn for the year, down 1.3% on 2022, and adjusted EBITDA of $29.4bn, up by 5.8%. It expects its core adjusted EBITDA to improve by an impressive 9% this year. Its fixed wireless access (FWA) service continues to be popular with US consumers and businesses, as the operator added more than 2.1 million FWA accounts last year to end 2023 with 4.78 million. Read more. 

Alternative UK wholesale fibre network operator CityFibre is bullish that it will break even in the first half of 2024, having reported that it had more than 3.2 million ready-for-service connections by the end of 2023, about a million more than the 2.2 million booked at end of 2022. The company hit the £100m revenue mark in 2023, calling it “a significant milestone for the business as its scaling continues at pace.” The operator had previously struggled: It announced last year that its operating loss in 2022 had nearly trebled year on year to £114.8m. But now, the operator’s management is confident that the business’ earnings before interest, taxes, depreciation and amortisation (EBITDA) will hit a break-even point in the first six months of 2024. It also expects to add another million ready-for-service premises this year, through continuing to build and by “pursuing a well-developed pipeline of M&A opportunities”. “In spite of a challenging operating environment, CityFibre continues to go from strength to strength,” noted Greg Mesch, CityFibre CEO, adding that the company has also doubled take-up across its footprint and is now looking at opportunities to “transform our expansion ambitions in 2024 and beyond.”

Scrutiny over generative AI (GenAI) developments is mounting, with the US Federal Trade Commission (FTC) ordering Alphabet (Google’s parent company), Amazon, Anthropic (a GenAI developer company), Microsoft and OpenAI (the parent of ChatGPT) to provide information on recent investments and partnerships involving GenAI companies and major cloud service providers. In its statement, the agency noted that its inquiry will look into corporate partnerships and investments with AI providers to “build a better internal understanding of these relationships and their impact on the competitive landscape.” “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition,” explained FTC chair Lina Khan. Some of the areas of exploration include analysing the competitive impact from transactions, such as investments and partnerships in the GenAI domain, including information about market share, competitors and markets, and assessing competition for AI inputs and resources, including the competitive dynamics regarding key products and services needed for GenAI. The companies will have 45 days to respond to the inquiry. FTC’s move follows a number of collaborations and investments in the field, including Microsoft’s $1bn investment into OpenAI made in 2019, Amazon’s strategic collaboration with Anthropic sealed in 2023 and Google Cloud’s tie-up with Anthropic made the same year.

Intel’s share price dropped by more than 12% in early trading on Friday to $43.44 after it published its fourth-quarter and full year financial results late on Thursday. On paper, the reported numbers for the fourth quarter looked promising, with sales up by 10% to $15.4bn and the chip giant’s operating margin hitting 16.8% compared with a loss a year earlier, but investors reacted badly to the forecast for the first quarter of 2024, with revenues expected to come in at between $12.2bn and $13.2bn, about $1bn lower than Wall Street analysts had been expecting. For more details on Intel’s financial results, see this earnings press release.  

After dominating the show floor at CES 2024, AI is now shaping up to be a main element at this year’s Mobile World Congress (MWC) in Barcelona next month too. Japanese giant NEC will showcase “a wide range of AI and global network technologies” at the four-day event, in an aim to demonstrate its newest digital transformation capabilities. According to the company, visitors will be able to see how people, things and services can be connected through its technologies, including GenAI, network optimisations for industrial applications, and 5G and Open RAN collaborations and solutions. NEC’s CTO, Motoo Nishihara, will also give a keynote speech on the future of GenAI, including the concept of “AI orchestration” for enabling AI models to be “autonomously deployed and linked to solve social issues”. Find out more.

Three months after completing the acquisition of gaming giant Activision Blizzard for $69bn, Microsoft has unveiled plans to lay off 1,900 staff, about 9% of its Microsoft Gaming unit headcount, reports CNBC. 

- The staff, TelecomTV