Telefónica entered into an exclusivity agreement with Hutchison Whampoa regarding Hutchison's potential acquisition of the Telefónica subsidiary O2 UK for £10.25 billion in cash, valuing the deal at an estimated 7.5 times 2014 EV/EBITDA. The Hutchison-O2 UK deal — should it complete — will entirely redraw the telco landscape in the UK in terms of market shares. The acquisition of O2 UK will transform Hutchison from the smallest mobile operator with 7.5 million customers to the largest with 31.5 million customers and reduce the number of mobile operators in the UK from four to three.
This development follows on the heels of the announcement by Orange and Deutsche Telekom that they have entered into exclusive negotiations with BT Group regarding a potential divestment of 100% of their shares in EE, their joint venture in the UK. The increased merger activity is not surprising, and we predicted as much in our report Predictions 2015: Telecoms Will Struggle To Align To The CIO's BT Agenda. Still, these deals raise important questions for the European telecoms markets:
with Brownlee Thomas, Ph.D., Henning Dransfeld, Ph.D., Bryan Wang, Clement Teo, Fred Giron, Michele Pelino, Ed Ferrara, Chris Sherman, Jennifer Belissent, Ph.D.
Orange Business Services (Orange) recently hosted its annual analyst event in Paris. Our main observations are:
Orange accelerates programmes to get through tough market conditions. Orange’s’ vision in 2013 is essentially the same as the one communicated last year. However, new CEO Thierry Bonhomme is accelerating cost saving and cloud initiatives in light of tough global market conditions. The core portfolio was presented as connectivity, cloud services, communication-enable applications, as well as new workspace (i.e., mobile management and communication apps).
Orange proves its capability in network-based services and business continuity. Key assets are its global IP network and its network-based communications services capabilities. In this space, Orange remains a global leader. These assets form the basis for Orange taking on the role of orchestrator for network and comms services, capabilities that have (literally) weathered the storm, proving its strength in business continuity.
Orange’s CEO mentioned during a business show on French TV that Orange is receiving money from Google for transmitting Google’s traffic (most of which stems from YouTube). No details about the financial arrangement of the year-old deal were disclosed.
So, does the Orange-Google deal mean that Orange has won a true victory and that the balance of power between carriers and OSPs is restored? Does the deal really address the challenges of the carrier world? Hardly.
Carriers rely on video content that drives demand for high broadband connectivity. Moreover, consumers already pay the carriers for their broadband connectivity. In my opinion, there is a valid argument that those end users who want high-quality video should be able to have it at extra cost. But this extra fee could be paid directly to the carrier in the form of a high-end broadband connection fee. Alternatively, the carrier could offer wholesale connectivity to OSPs, allowing the OSPs to offer content that comes with embedded high-quality connectivity.
This is a guest post from Myriam Da Costa, a researcher serving eBusiness & Channel Strategy professionals.
France has been quick to embrace mobile banking. Banks like BNP Paribas and Société Générale were among the pioneers of mobile banking in Europe and since 2009, all of the big French banks have launched iPhone mobile banking apps, so most French banks now offer several forms of mobile banking. The first wave of mobile banking was about getting the basics down and offering customers functionality like balances, transaction histories and SMS alerts. The second wave now focuses on money transfers and payments.
As we wrote in our report on The State Of Mobile Banking In Europe 2012, mobile banking is the foundation for mobile payments. France's banks and mobile operators are moving fast to seize the opportunity. In the past two years there has been a wave of new mobile payment initiatives in France: Buyster, Cityzi, Kwixo, Kix and S-money.
In mid-July, my colleagues and I attended Orange’s annual analyst event in Paris. There were no major announcements, but we made several observations:
ORANGE is one of the few carriers with true delivery capabilities. Its global footprint is a real advantage vis-a-vis carrier competitors, in particular in Africa and Asia. At the recent event, Vale, the Brazilian metals and mining corporation, presented a customer case study in which Vale emphasized the importance of ORANGE’s global network infrastructure for its decision to go with ORANGE as UCC and network provider. ORANGE’s global reach positions it well to address the opportunity in emerging markets, both for Western MNCs going into these markets and also to address intra-regional business in Africa and Asia. Another customer case study with the Chinese online retailer 360buy, focusing on a contact center solution, demonstrated ORANGE’s ability to win against local competitors in Asia.
Dan Bieler, Bryan Wang, Pascal Matzke, Jennifer Belissent
ORANGE held its annual analyst day in Paris recently. There were no major announcements, but we made several observations:
ORANGE is one of the few carriers with true delivery capabilities. Its global footprint is a real advantage vis-a-vis carrier competitors, in particular in Africa and Asia. Vale, the Brazilian metals and mining corporation, presented a customer case study in which Vale emphasized the importance of ORANGE’s global network infrastructure for its decision to go with ORANGE as UCC and network provider. Its global reach positions ORANGE well to address the opportunity in emerging markets, both for Western MNCs going into emerging markets and also to address intra-regional business in Africa and Asia. Another customer case study with the Chinese online retailer 360buy, focusing on a contact center solution, demonstrated ORANGE’s ability to win against local competitors in Asia.
Corporate CIOs should not ignore the network-centric nature of cloud-based solutions when developing their cloud strategies and choosing their cloud providers. And end users should understand what role(s) telcos are likely to play in the evolution of the wider cloud marketplace.
Like many IT suppliers, telcos view cloud computing as a big opportunity to grow their business. Cloud computing will dramatically affect telcos — but not by generating significant additional revenues. Instead, cloud computing will alter the role of telcos in the value chain irreversibly, putting their control over usage metering and billing at risk. Alarm bells should ring for telcos as Google, Amazon, et al. put their own billing and payment relationships with customers in place.
Telcos must defend their revenue collection role at all costs; failure to do so will accelerate their decline to invisible utility status. At the same time, cloud computing offers telcos a chance to become more than bitpipe providers. Cloud solutions will increasingly be delivered by ecosystems of providers that include telcos, software, hardware, network equipment vendors, and OTT providers.
Telcos have a chance to leverage their network and financial assets to grow into the role of ecosystem manager. To start on this path, telcos will provide cloud-based solutions that are adjacent to communication services they already provide (like home area networking and machine-to-machine solutions), such as connected healthcare and smart grid solutions. Expanding from this beachhead into a broader role in cloud solutions markets is a tricky path that only some telcos will successfully navigate.
We are analyzing the potential role of telcos in cloud computing markets in the research report Telcos as Cloud Rainmakers.