What’s up with… Vodafone, Europe’s single market, Huawei

• Vodafone and friends pile pressure on the EC
• European single market report presses for new ownership and spectrum rules
• Chinese vendor launches new high-end smartphones

In today’s industry news roundup: Ericsson, Nokia, IBM and Intel join Vodafone in calling for urgent action to boost Europe’s digital services sector; EC report suggests new approaches to telecom market consolidation and spectrum allocation; Huawei launches its latest home-grown smartphones; and more!

Vodafone is once again employing scaremongering tactics, teaming up with telecom and tech big hitters Ericsson, IBM, Intel and Nokia to claim that Europe could fall far behind other regions in the digital era unless action is taken by the European Commission (EC). The quintet issued a joint statement demanding “urgent action” from the incoming European commissioners to stimulate the digital competitiveness of the region. According to the companies, policymakers “should strive to achieve a true digital single market, address the digital connectivity investment gap, and avoid introducing unnecessary regulatory burdens for companies operating in the digital ecosystem”. The quintet has asked for five key policy actions, including a modernised regulatory framework and a “fresh approach to merger control and spectrum allocation, involving longer licences and harmonised rules” between the member states, so that Europe has “healthy telecoms operators” with the scale to invest in 5G standalone (SA), fibre and, in the future, 6G. Furthermore, the companies believe that regulation on B2B and consumer-facing technologies should differ. “The policy environment must encourage trusted companies to thrive in Europe through trade, recruitment, and research. Cooperation between like-minded countries, including transatlantic cooperation, also remains essential to supporting a positive business environment,” they stated. Finally, the five companies recommend that the European authorities prepare for the quantum era “by promoting early-stage experimentation in industrial application and deployment, encouraging resilient supply chains, and incentivising private sector investment in Europe.” They also ask for better coordination of European research and development funding mechanisms. This statement comes several months after Vodafone warned of an alarming “connectivity chasm” between Europe and competing regions in terms of technological advancements, that “could leave EU citizens, businesses and society at risk of further economic decline”.

As anticipated earlier this week, a new report on the development of a single market for Europe has tackled the ongoing thorny issue of telecom operator consolidation. The report, ‘Much more than a market – Speed, Security, Solidarity’, written by the former prime minister of Italy, Enrico Letta, notes that the region’s digital services sector is rather lacking and that M&A rules enabling the formation of much larger pan-European service providers would be beneficial. “Further development to provide Europe with the innovation platform for the future digital services requires operators with a pan-European footprint and the existence of a true single market for electronic communications, recovering and delving into the principles that made it successful in the first place. Evidence indicates that telecom markets predominantly operate at the national level, with multiple operators offering commoditised communication services characterised by low levels of diversification. Consequently, insufficient value creation occurs within these national markets depressing the investment in advanced networks which are essential for a competitive economic landscape. Given this scenario, the mere establishment of a single market would not yield a discernibly different outcome unless it facilitates the growth of operators. Such growth is imperative to achieve economies of scale and scope, enabling cost reduction and fostering innovation. The primary objective is to facilitate growth and investment attractiveness for European operators. As markets still remain primarily national, cross-border consolidation could involve domestic markets making sure that competition law is respected. This must be viewed as a step in the development of European dimension cross-border operators. Establishing a single market for electronic communications with European operators capable of a global role is an objective which is not in contrast with the objective of keeping markets open and competitive. The scale of investments necessary in new technologies (for example edge/cloud, 6G, AI) implies that due consideration should be given to the necessity of some level of consolidation within national markets or strategic alliances between market players, including pro-competitive sharing of investments in key network elements,” stated the report. Is it possible that the region’s giant telcos might at some point benefit from less stringent M&A regulations? The report certainly suggests they should and, as we’ve already heard this week, the network operators are increasingly vocal about the need for greater scale so they can achieve a return on their capital investments – see Major telco execs lament ‘tough’ investment climate.

The report also suggested changes to Europe’s radio spectrum policy. “There are key elements of the regulatory framework that have hindered the spontaneous development of a single market for electronic communications and the emergence of healthy pan-European operators or at least multi-country operators. Radio spectrum policy needs to be much more unified in order to have an effective single market,” notes Letta, the report’s author. “Although this is a critical issue for member states and it is linked also to areas of domestic interest as, for example, national defence, it is of paramount importance for the European industrial sector to maintain the technological leadership and state-of-the-art excellence that it still preserves, notwithstanding the difficult economic sustainability incurred by telecom operators in Europe. Mobile telecommunications play a pivotal role, with their provision hinging critically on the availability of radio spectrum. However, the absence of harmonisation in rules governing spectrum allocation at the national level undermines mobile operators’ capacity to offer pan-European services. Consequently, European citizens and businesses are deprived of the opportunity to access innovative and high-quality connectivity and services.” But in what kind of timeframe might any potential changes be made? Probably not soon enough to make a difference to the operators grappling with their 5G strategies right now… 

Huawei has launched its latest suite of smartphones, dubbed the Pura 70 series, using in-house developed technology. The new devices run the vendor’s own operating system, HarmonyOS, and are rumoured to be powered by the Chinese vendor’s own Kirin chipsets, according to CNBC. The move is Huawei’s latest effort to challenge Apple in the high-end smartphone market. 

International enterprise communications services giant Tata Communications has reported revenues for the full fiscal year ending March 2024 of 209.7bn Indian rupees (INR) ($2.5bn), up by 17.5% year on year, though EBITDA dipped by 2% to INR 42.3bn ($506m). Managing director and CEO AS Lakshminarayanan noted: “We closed FY24 with strong execution and our digital fabric is witnessing increased relevance from enterprise customers. As we enter the next fiscal, our firm focus will remain on integrating our acquisitions, executing our strategies, and driving sustainable and profitable revenue growth.” Last year, Tata Comms acquired communications platform-as-a-service (CPaaS) specialist Kaleyra, eSIM developer Oasis Smart SIM Europe and immersive video technology firm The Switch Enterprises. 

Telecom Italia (TIM)’s pre-AGM battles with shareholders continue… The Italian national operator has published a statement to “dispute the serious and unfounded allegations about the existence of hidden pacts between TIM and its shareholders regarding the outgoing board’s slate… TIM urges the shareholder to rectify its statements so that they are truthful and not misleading… [and] urges Bluebell Capital Partners not to circulate misleading information and not to undertake in its own exclusive interest any blatantly baseless initiatives that could disrupt the proper conduct of the shareholders’ meeting.” The Italian operator’s annual general meeting (AGM) is scheduled for 23 April, during which a new board will be voted in by shareholders and tasked with helping to implement the telco’s ongoing asset divestment strategy. TIM has already faced opposition to its new board member nominations, with some investors (including Bluebell) proposing alternatives (though one activist investor has since withdrawn its proposal), so the 23 April meeting is shaping up to be very lively, especially as the operator moves ever closer to the sale of its NetCo (fixed access network) unit to private equity firm KKR and others in a deal valued at up to €22bn, a move that the telco’s largest single investor, French media giant Vivendi, has long battled and argued against.

Xavier Niel, the serial telecom sector entrepreneur who recently expanded his European empire by agreeing to acquire a near 20% stake in Tele2, will have been sifting through the Swedish telco’s first-quarter financials today to see if his decision was a wise one. And while he likely won’t be popping any champagne corks, he should be quietly pleased, as Tele2, which has operations in Sweden, Estonia, Latvia and Lithuania, reported a 4% year-on-year increase in service revenues to 5.3bn Swedish krona (SEK) ($487m) and a 2% increase in total revenues to SEK 7.2bn ($662m), though the operator’s profits before tax dipped slightly to SEK 1bn ($92m). “I am pleased to say that we are off to a good start in 2024,” stated Kjell Johnsen, president and group CEO of Tele2. “Having built momentum in our Swedish business in 2023, we now see continued growth while maintaining high pace in our 5G rollout and digital transformation efforts. Performance in the Baltics is also good, primarily led by a strong performance in Lithuania. The Tele2 model of unique capital efficiency continues to provide strong cash flows and low leverage even while executing significant upgrades of our technical capabilities. Moving into Q2, we are cautiously optimistic that consumer sentiment in our operations will gradually improve as we see reduced inflation and lower interest rates in our markets. These improvements should be supportive for the economy overall and our business over the next quarters.” The Tele2 share price jumped by 6.3% to SEK 98.46 on the Stockholm exchange following the earnings announcement.

Virgin Media is the most complained about provider of broadband, mobile (through Virgin Media O2), landline and pay-TV services in the UK, according to the latest figures from national watchdog Ofcom. The company has received the most complaints of all providers in the period from October to December 2023, although Ofcom suggested that it had seen “a sizeable fall” in grievances for broadband, landline and pay-TV services compared to the previously examined quarter. Dissatisfaction was mainly driven by the ways customer complaints were being handled. Virgin Media was also the most complained-about provider in the previous quarter and Ofcom noted that it is “currently investigating Virgin Media’s performance with regard to our rules on complaints handling and contract termination”. Sky continued to receive the fewest complaints for broadband and landline services, and in the category of pay-TV, it shared the number one position with the lowest number of grievances together with TalkTalk. In the mobile segment, Sky Mobile, Tesco Mobile, EE and Vodafone received the lowest number of complaints in the final three months of last year. Read more.

- The staff, TelecomTV