With Henry Dewing, Henning Dransfeld, Katyayan Gupta, Brownlee Thomas, and Michele Pelino
Vodafone hosted its annual global analyst event in London recently, and it was a good event. Vodafone’s CEO Vittorio Colao kicked it off with a passionate endorsement of Vodafone’s enterprise ambitions. But will Vodafone’s market position as a leading mobile telco give it a tangible advantage in the broader enterprise global telecoms marketplace? We believe there is a good chance it will because:
Vodafone’s integrated pitch is credible. Vodafone comes up in nearly every conversation with Forrester enterprise clients that want to consolidate vendors for multicountry or “global” mobility services. Increasingly, our clients also are asking about Vodafone’s wired services. And those based in the UK and Germany are the most interested in learning about what’s available and what’s coming with respect to fixed-mobile bundling. Vodafone made a big play on fixed-mobile integration, most notably with the acquisitions of Cable & Wireless and Kabel Deutschland. Its network now covers 140 countries, 28 of which support MPLS networks for mobile backhaul. Vodafone also has big plans for refreshing and expanding its international IP backbone network to more than 60 countries.
Alas: It has finally happened. Vodafone has sold its 45% stake in Verizon Wireless to Verizon for $130 billion in a part cash ($58.9 billion) and part equity deal. The deal values the 45% stake at 9.4 times EBITDA. Markets had been speculating about this deal for years, so why has it taken place now? Arguably, the decision was made easier by Verizon’s share price, which is at a decade high, as well the the potential for rising interest rates. From Vodafone’s perspective, our main observations are that:
The deal is strategic for Vodafone and financial for Verizon. While the deal is a strategic transaction for Vodafone – it has decided to exit the US market – it is a financial transaction for Verizon: It already controlled Verizon Wireless through its 55% stake in the business. But after Vodafone’s exit, Verizon can keep the cash and no longer needs to pay out a dividend to Vodafone. It can instead use this retained dividend cash flow for capital expenditures and other investments to help boost its position in an increasingly competitive US wireless market (e.g., Softbank + Sprint; T-Mobile + MetroPCS).
Business Technology (BT) is a means to an end. BT is there to support the business objectives. Similarly, the task of IT leaders is to provide the most appropriate technological infrastructure to all employees so that they can pursue the business objectives most effectively. In other words: IT and business leaders should have the same perspective.
Yet, new Forrester survey data indicates several gaps in opinion about network infrastructure aspects between business and IT leaders. We see a risk that IT will purchase network and collaboration assets that do not address the demand by business lines. Similarly, there is a risk that business lines remain unaware of network and collaboration assets that IT has put in place. Under both scenarios, businesses waste valuable resources and end up with an inefficient network and collaboration infrastructure.
Drive communication infrastructure projects in collaboration with business and IT. Eight out of 10 IT and business leaders consider network and telecom technologies critical to driving staff productivity. Sourcing professionals should focus activities on driving the road map and jointly develop business cases.
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.
Recently we attended a Colt Technology Services analyst day in London. It was great to see a technology services provider who is trying to embrace both disruptive ICT trends and challenges facing enterprise IT. Here is a high level summary of our views from the event:
Dan: Colt views its network assets not as its key differentiators - but its IT services. Although IT services today account for only a small fraction of Colt revenues, Colt views its network infrastructure assets as a means to an end to support IT services. Whilst we agree that network infrastructure runs the risk of commoditisation, Colt’s network helps to differentiate Colt’s offering from both IT service providers without network infrastructure and carriers with a less impressive network footprint. Quality network infrastructure is the basis for developing reliable, secure, and compliant ICT solutions. Maybe Colt ought to view itself more as a communications integrator than an IT Services provider.
John: Colt’s provides a strong European IaaS offering. One of the presentations focussed on Colt’s European datacenter footprint. At Forrester we get many inquiries on hosting and IaaS-specific options for Europe as many clients have to address regulatory and business requirements for data to reside in specific countries. Colt has a substantial number of data centers in European countries including the UK, France, Germany, Spain, Italy, and Switzerland.
Dane Anderson, Dan Bieler, Charlie Kun Dai, Chris Mines, Nupur Singh Andley, Tirthankar Sen, Christopher Voce, Bryan Wang
Huawei is one of the most intriguing companies in the ICT industry, but its overall strategy remains largely unchanged: imitating established products and services, then adjusting and enhancing them, and making them available at an attractive price point. But to be fair: Huawei is pushing more and more innovative products.
In 2012, Huawei’s annual revenue growth slowed down to 8% to CNY 220 billion (about US$ 35 billion). During the same period, its EBIT margin remained flat at 9%, despite the changing revenue composition due to the growth of its consumer and enterprise business. Unlike last year’s event which was dominated by the announcement to push into the enterprise space, this year’s Global Analyst Summit in Shenzhen saw little ground breaking news. It was more of a progress report:
At the Cisco Live EMEAR 2013 event in London, Cisco brought a new down-to-earth dynamism to the table. The vision for how Cisco is intending to empower its clients in an evermore connected world is becoming clearer. In this blog, Forrester analysts Dan Bieler and Peter O’Neill discuss their take-home messages from the event:
Hosted Collaboration Solution is empowering its high-end channel partners.
Dan. HCS, Cisco’s hosted collaboration suite, allows carriers to offer cloud-based as-a-service solutions, comprising unified communications, telepresence, contact centre, as well as a range of communication features under the Jabber brand. In EMEAR, BT, Telefonica, and Vodafone are already selling HCS, primarily aiming it at MNC customers. It remains to be seen whether the HCS pitch is the right one for smaller carriers and SMBs, especially as Cisco remains committed to catering to SMBs.
Peter. They also need to think about being more attractive to the needs of midmarket system integrators and MSPs. That means they must provide different price configurations that are attractive to SMBs. Positioning themselves only to the national telcos is quite restrictive and doesn’t match the increasing demand we are seeing for these solutions across the market. But, of course, if they want to compete in the SMB segment, they’ll compete with Google and Microsoft and their pricing strategies. The best way to run two pricing strategies is to use two brands.
At the beginning of this year, I took the time to sit down with my colleague Thomas Husson, vice president and principal analyst on Forrester's consumer product strategy team and a specialist in the telecom space, to discuss the top trends that will affect the European telco landscape this year.
Although we believe that the business/consumer split is increasingly vanishing, we decided to split the top 10 carrier themes that will matter in the European telco market in 2013 by enterprise and consumer perspectives.
In the enterprise segment, we see five main themes:
Over-the-top (OTT) and app-based communication services will become part of the IT landscape. OTT voice, social media, and messaging will spread in the enterprise space at the expense of traditional services. Our research shows that professional workers who travel are the most likely to embrace application-based communication services, often irrespective of what their company’s official IT policy is. Still, 2013 will not be the year (yet) that sees rich communication suites (RCSes) becoming a B2B2C communications platform.
Cloud-based enterprise services by carriers will see increasing interest from businesses. Communication-as-a-service will receive increased attention by CIOs as they plan unified communications and collaboration (UCC) projects. However, as our research shows, carriers will not be perceived as the top choice of providers for cloud-based services. Mobile device management firms like AirWatch and MobileIron will offer reselling opportunities for carriers but limit the carriers’ ability to add value around device and app store management. Business models for cloud-based data analytics of end user demand will grow in importance in 2013 but will only begin to materialize on a larger scale in 2014.
This summer Switzerland’s incumbent carrier, Swisscom, launched a simple but revolutionary new mobile tariff, Natel Infinity. Infinity is a speed-based tariff that comes in the versions XS, S, M, L, and XL, which represent download speeds ranging from 200 kbit/s to 100 Mbit/s. Prices range from CHF59 to CHF169 per month (€49 to €139). Significantly, the tariff throws in unlimited national voice, SMS messaging services, and data usage without any additional charge (XL even comes with unlimited international calls to most destinations and SMS).
The idea is simple: The greater your urge for fast mobile services, the more you pay — irrespective of which apps you use and how you wish to communicate. All that matters is speed. In this respect, Swisscom has replicated for the mobile world a tariff approach that is already fairly common in the fixed-line world. I believe this move by Swisscom is noteworthy in two respects:
It effectively pulls the rug from under the OTT voice and messaging services like WhatsApp and Tango by removing the arbitrage potential created by time- or distance-based pricing schemes.
It brings in line capital spending on and actual demand for network infrastructure capacity.
Like millions of Americans who live along the Eastern seaboard, my family got hit by Hurricane Sandy.
Now don’t get me wrong: Compared with residents of New York, New Jersey, and several other states, we had it easy in our little suburb north of Boston. Even so, there were a few exciting episodes, like this tree that fell on my neighbor’s house.
And then there was this power line that came down on the sidewalk across the street from our home, about 4 feet from where I had been standing 20 minutes earlier (I had been talking to a firefighter).
What fascinated me, however, was what came after all the excitement: service recovery by our electrical utility and telecom provider.
Let’s start with our local electric utility, NSTAR. As you can probably guess from the above, our power had to be cut. To restore it, NSTAR needed to coordinate with both our local fire department and our local public works department in order to get that giant tree off the power lines before it could repair them.
When I looked at the job ahead for the utility, I guessed that we would be without power for at least a day. But exactly 12 hours after NSTAR cut power so that the burning lines wouldn’t pose a hazard, the tree was gone and our electricity was restored. In fact, NSTAR beat its own estimate by about 90 minutes.