What’s up with… Cape, KDDI, Netflix

• ‘Security-first’ mobile operator raises $61m
• KDDI chosen by ministry as key GenAI platform provider 
• Netflix ramps sales and profits

In today’s industry news roundup: A new US mobile service provider called Cape is looking to take on the cellular incumbents with a security-focused offering; KDDI is to get state funding as it invests in a GenAI cloud platform certified by the Japanese government; Netflix goes from strength to strength; and more!

Cape, an Arlington, Virginia-based startup that describes itself as a “privacy-first mobile carrier,” has raised $61m from a range of investors led by A* and Andreessen Horowitz. The company says it will use the money to “build a nationwide mobile network that provides premium wireless coverage which, unlike traditional carriers, masks personal identifying information like names, numbers, and locations.” That sounds like a big task with that level of funding, but Cape is not deploying its own physical radio access network: Instead it will be the “first consumer cellular service to be built on top of UScellular’s enterprise-grade multicarrier full MVNO Revolution infrastructure,” explains Cape in this announcement. Combining 12 separate national and regional cellular networks, the MVNO infrastructure “forms the country’s densest overlapping coverage to maximise resilience,” noted Cape. “UScellular has built a highly differentiated network for their quickly growing industrial and commercial business,” stated Cape CEO John Doyle. “We are the first to layer voice service on top of it, and are excited to offer premium access on this unique, resilient network to our subscribers,” he added. Cape says its move comes as “top US officials raise the alarm on lax cybersecurity by the major telecommunications carriers, which leave them vulnerable to compromise by foreign actors. Hackers can use telecommunications networks to collect personal information, pinpoint users’ locations, and plant spyware, jeopardising freedom of the press, human rights, and national security. Russia’s use of cellular networks to hack NATO officials and target Ukrainian troops has shown the relevance of these vulnerabilities to modern conflict,” noted Cape, which officially launched earlier this week and aims to start offering its services later in 2024. 

KDDI has pledged to invest 100bn yen ($649m) over the next four years in a “large-scale computational platform for the development of generative AI” following its selection by Japan’s Ministry of Economy, Trade and Industry to be a certified provider of a cloud platform for GenAI research and development.  “Based on the Economic Security Promotion Act, we have designated ‘cloud programs’ as important suppliers and, in order to ensure their stable supply, we will develop computational resources in Japan that can be used by a wide range of developers, especially for generative AI. The government has decided to certify the plan and provide support,” noted the ministry in this announcement (in Japanese). KDDI will receive up to 10.24bn yen in government funding towards the development of its platform. The telco says it will partner with AI startup Elyza, in which it recently invested, to “accelerate the development of Japan's highest-performance large-scale language models (LLMs) and domain-specific LLMs.” Four other companies were selected as certified cloud program developers, including cloud services specialist Sakura Internet.    

Video streaming giant Netflix continued its growth trajectory in the first three months of 2024, with revenue up 14.8% year on year to $9.37bn and net income rising around 80% year on year to $2.3bn. The company also added 9.33 million paid net subscribers globally in the period, taking its total paid membership base up by 16% to 269.60 million. Alongside the results, Netflix announced it will stop reporting quarterly membership numbers and average revenue per membership (ARM) because the company is mainly focusing on revenue and operating margin. “In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we’re generating very substantial profit and free cash flow (FCF). We are also developing new revenue streams like advertising and our extra member feature, so memberships are just one component of our growth. In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company noted in a letter to shareholders. For its fiscal year 2024, the streaming platform expects yearly revenue growth of somewhere between 13% and 15% and, to help achieve this, plans to enhance its portfolio with more TV shows and movies, a “stronger slate of games and must-watch live programming.” It will also focus on product innovation, marketing and scaling ads.

Belgian operator Proximus is looking to bulk up its 5G spectrum through a new deal with domestic IT group NRB. The agreement would see Proximus acquire an additional 20MHz in the 3600MHz frequency band, which will bring the operator’s total tally to 120MHz of 5G spectrum. According to the telco, this will allow it to “add more capacity when needed, greatly reducing any risk of saturation” while improving the performance in terms of throughput and latency, in addition to greater security of data flows on private mobile networks. The purchase is made possible as NRB, which acquired a licence and 20MHz of 5G spectrum in the auction conducted in 2022, has decided that it “no longer wishes to roll out its own mobile network, but aims to continue offering 5G services to its customers as a mobile virtual network operator through a possible partnership with Proximus”, which is currently being negotiated by the two companies, according to Proximus. Instead of running a mobile network, NRB has decided to “refocus on its core business” which currently is to provide ICT services and solutions. “For us, this decision opens up new prospects for sustainable growth as it allows us to free ourselves from the constraints imposed on 5G operators, enabling us to refocus on our core business as a value-added service integrator,” explained Laurence Mathieu, managing director of NRB. The spectrum deal has been given the green light by the Belgian telecoms regulator the Belgian Institute for Postal Services and Telecommunications (BIPT), but it is subject to the effective transfer of rights, which is to take place after the publication of a new call for applications for the 3410-3430 MHz band in the Belgian Official Journal. During the 5G auction, Proximus invested €600m for spectrum for a 20-year period. Read more.

WOM is facing yet more hardships… Earlier this month, WOM Chile filed for bankruptcy protection and now its Colombian unit is following suit. According to BNamericas, WOM Colombia has declared bankruptcy to the local companies’ regulator in order to pay its debts. It was required to do so to fulfil commitments it made with the government and its suppliers, although at the end of 2023 the telco claimed to have guaranteed financing sources for 2024 and future years. WOM Colombia’s CEO Ramiro Lafarga was cited by the news service as saying that the Colombian operator’s main shareholder, alongside Deutsche Bank, was looking at alternative ways to obtain the required financing and to ensure its sustainability, adding that WOM is a business for the future, which will continue providing investments and telco services to Colombians. Meanwhile, the company has highlighted challenges in a highly competitive, capital-intensive sector with declining average revenue per user (ARPU), noting that bankruptcy protection would be the path to ensuring continuous operations. In a translated LinkedIn post, WOM Colombia confirmed that the telco will continue delivering services to its more than 6 million customers.

Swisscom has won an appeal in an antitrust case filed by rival Sunrise related to a 2008 tendering process to set up a broadband network at Swiss Post sites. In a ruling on 5 March, the Federal Supreme Court of Switzerland concluded that “Swisscom’s conduct in the 2008 tendering process for the broadband networking of Swiss Post sites was fair”, Swisscom announced in a statement. As a result, a penalty decision of the Competition Commission (COMCO) from 2015, which ordered Swisscom to pay a fine of more than 7m Swiss francs (CHF) ($7.7m), has now been overturned. The legal battle dates back to 2008 when Swiss Post kicked off a tender process to set up a wide area network between its sites, with bids coming from Sunrise, UPC and Swisscom. After Swisscom’s bid was accepted in January 2009, Sunrise filed a complaint with the competition authority, claiming that Swisscom had violated the Swiss Cartel Act by abusing its market position. Naturally, Swisscom dismissed the allegations, claiming that it “did not force unreasonable prices on Sunrise or Swiss Post and demonstrated fair conduct in the setting of prices for wholesale products. Moreover, the prices charged by Swisscom for these wholesale products were not inflated”. According to the Federal Supreme Court’s conclusion, cited by Swisscom, the telco “had not imposed a margin squeeze on Sunrise and did not demonstrate anti-competitive conduct”.

- The staff, TelecomTV