Deutsche Telekom in arranged marriage for T-Mobile USA through reverse acquisition by MetroPCS

Dan Bieler

 

Deutsche Telekom is leading its daughter T-Mobile USA down the aisle for a second time in less than two years after the previous marriage attempt with AT&T collapsed in light of regulatory objections (see http://goo.gl/hgCrm). But T-Mobile USA will not leave the house altogether. Should the deal go through, Deutsche Telekom will own 74% in the NewCo. The NewCo will operate as one company with two brands, similar to how Everything Everywhere was run. MetroPCS Shareholders will own the remaining 26%.

The financial plan is that scale effects will translate into $6-7 billion of cost synergies from enhanced scale and scope. Deutsche Telekom pitches the deal as creating a wireless value leader in the non-contract (pre-paid) segment, with the goal of targeting a growing market segment. The ambition for the NewCo is to generate compound annual growth rates of 3-5% for revenues, 7-10% for EBITDA and 15-20% for free cash flow over the next five years.

The deal raises several issues for me:

  • Targeting a market opportunity requires ongoing investments. In my view, the goal for growth looks ambitious based on the proposed value proposition. Whilst I do see a market opportunity for unlimited data plans (i.e. NewCo’s value proposition), I believe that ongoing investments beyond the existing ones are required to ensure QoS and customer experience. The completed network modernization to the tune of US$4 billion LTE investment including site upgrades and spectrum re-farming provides a good starting point. But more capex is required in the years ahead as data traffic continues to explode. In turn, this could undermine free cash flow growth ambitions.
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Five Lessons From Dreamforce 2012

Nigel Fenwick

DreamforceIt’s been a couple of weeks since Dreamforce ended, and in between client engagements and research I’ve had some time to digest the event — so I’d like to share some lessons from Dreamforce 2012:

1. If you build it they will come (no, really)

Setting a record for attendance at a vendor-led technology conference, Dreamforce 2012 was BIG. With over 90,000 attendees, it was hard not to be impressed by the logistical efforts taking place behind the scenes. Think of it ... How do you feed 90,000 people in a couple of hours? Not to mention the enormous bandwidth issues for Wi-Fi and even 4G providers when you put this many social people together. Back when I was running marketing at a tech vendor, I was planning events based on how many square feet of conference space we would we need ... the Salesforce team plans on a scale of how many conference centers will they need. This was an amazingly large event with very few crowd control issues. And the mobile app for the conference made everything much easier, despite occasional Wi-Fi outages. My hat's off to the conference team at Salesforce for pulling this off.

2. Salesforce.com has adopted a business strategy which embraces social business

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Key Takeaways From Forrester’s India CIO Summit

Manish Bahl

Forrester held its first CIO Summit in New Delhi, India on September 26, 2012. The theme of the event was “From IT To Business Technology (BT) And Beyond.” There were more than 100 attendees, and it was truly a memorable experience interacting with everyone. By the end of the day, I had received encouraging responses from attendees, as many CIOs expressed their willingness to work with Forrester. They found that no other research firm focuses on understanding how changing customer expectations affect what the business needs from them or helps them make better decisions to become successful and influential leaders. We had a great mix of analyst and CIO presentations, and the panel discussion on “Taking Your First Business Technology Steps” with our guest CIO speakers was complete bliss.

The key takeaways from the summit:

·         IT/business alignment doesn’t necessarily equate to success. The consumerization of IT and fast-changing business dynamics make it challenging for CIOs to continue to align their IT organizations with the business. The reality in today’s world is that IT must become an integral part of the business and CIOs need to develop their IT strategy in conjunction with business leaders.

·         Disrupt or be ready to get disrupted. According to Forrester’sForrsights Budgets and Priorities Tracker Survey, Q2 2012,customer expectations are the top concern among business decision-makers in Asia Pacific. Today, customers are redefining differentiation for organizations in the age of the customer and are setting the stage for rapid digital disruption.

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Is Microsoft Rising To The Challenge(s)? — Notes From The Asia Pacific Analyst Summit

Dane Anderson

Forrester attended Microsoft’s Asia Pacific Analyst Summit in Singapore last week for a comprehensive and very timely strategy update with less than a month to go before the launch of Windows 8. Organized under a general theme of Microsoft’s New Era, the update highlighted Microsoft’s strategy for remaining dominant in the post-PC era, where mobility, consumerization, social, and cloud have driven massive IT industry innovation and disruption. Three key observations from our analysts in attendance:

  • Azure is emerging as a key strength as organizations increasingly leverage hybrid cloud approaches. As both a leading provider of public and private cloud services (directly and via hosting partners) and a strategic platform provider within enterprise data centers, Microsoft is very well positioned to embed hybrid cloud capabilities within its platform. This will benefit organizations of all sizes seeking to lower the cost of computing and increase business agility. While we were encouraged by how software license-agnostic Azure’s business leaders appear to be, we believe Microsoft can do a better job of leading with Azure in the enterprise market instead of leading so consistently with its traditional licensed software products.
  • Windows 8 devices will help boost Microsoft’s standing in the mobility market. Microsoft showcased a number of prelaunch Windows 8 devices from its OEM partners, and it’s clear that consumers will have a much better lineup of mobile devices to choose from in the future. Microsoft also presented several Windows Phone 8 smartphones from Nokia and Samsung and has wisely implemented a strategy to identify the top mobile apps in each Asia Pacific country and support app developers in creating versions for the Microsoft platform.
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Is the US Bureau of Economic Analysis Undermeasuring the Tech Economy?

Andrew Bartels

 

When I do my US tech market sizing and forecasting, I start with the data on business investment in computer equipment, communications equipment, and software in the quarterly National Accounts of the US Bureau of Economic Analysis (BEA).  As Forrester’s recently published report on the US tech market noted (see September 28, 2012, "US Tech Market Outlook Dims For 2012 To 2013 -- US Tech Market Spending Will Maintain A Mediocre 4% to 5% Pace"), the BEA in July revised the historic data on these categories of business investment going back to 2009, significantly reducing the size of tech investment in this period and lowering the growth rate of business tech investment to a pace not appreciably faster than the growth rate in the US economy.

While I adjusted my tech market sizings and forecasts to these lower numbers from the BEA, I have been wondering whether the BEA in their data collection is missing key segments of new technology, and thus understating the level of tech buying that is actually going on.  We have no good way of answering this question since the BEA has not publicly indicated that there have been any changes in data sources and aggregation methods that would signs of undermeasurement.  Still, here are the questions I would ask BEA if I had the chance.

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US Tech Market Growth Slows As Election And Political Uncertainties Dampen Economic Growth And Tech Buying

Andrew Bartels

Earlier in 2012, I was fairly bullish about the US tech market, expecting growth of 7% to 7.5% for the near depending on whether or not telecommunications services was included (see April 24, 2012, "US Tech Market Outlook For 2012 And 2013 -- Improving Economic Prospects Create Upside Potential") .  But economic growth has been weaker than I assumed, coming in at 1.3% in Q2 2012 compared to my expectation that real GDP would grow by around 2-1/2%. In addition, the US Bureau of Economic Analysis revised downward its estimates for growth in business investment in computer equipment, communications equipment, and software.  These revisions eliminated the evidence for my thesis that the US was in a new cycle of tech innovation and investment that was causing tech investment to grow twice as fast as the economy.  Instead, the revised data showed that tech investment was growing at about the same rate as the US economy in 2010 and 2011, not faster as earlier data had shown.  Tech innovation is clearly going on, but at least in the official data tech investment has not responded in kind.  So, with nominal GDP growth for 2012 shaping up to be about 4%, our tech market growth outlook for 2012 in our latest US tech market forecast report (see September 28, 2012, "US Tech Market Outlook Dims For 2012 And 2013") is about the same, that is to say, in the 4.5% to 5% range.  

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What Keeps CIOs Up At Night?

Marc Cecere

We’d like to know what job responsibilities give CIOs insomnia, either by responding to this blog or by contacting us directly to be interviewed. The interviews will take less than an hour and go over this question as well as others including:

  1. What decisions do you regularly make?
  2. What sources of information do you use?
  3. What IT decisions are made by IT versus the business?

We are in the early stages of interviews, but the initial responses to the question of what keeps CIOs up at night were very interesting. Some, as expected, focused on tactical and immediate problems. They included:

  • Security: “I don’t ever want to see [my company’s] name in the paper for a security problem.”
  • Small mistakes: “A tiny piece of code could have brought the organization to its knees.”
  • Turnover: “We have two people maintaining one of our ancient core systems, and both could retire soon.”

But there were unexpected responses in that they focused on the long term. Some of these long-term insomnia inducers were:

  • Investments: “Does the money I’m putting in now make sense for the future?”
  • Staff leadership: “Do I have the right mix of outsourced and internal staff?”
  • Reality: “I’m struggling matching reality with where we’re heading.” 
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How Is Your IT Department Assisting The Organisation With Innovation?

Tim Sheedy

Data from the Q2 2012 Forrsights Budgets And Priorities Tracker Survey shows that for nearly 70% of Australian and New Zealand organisations, the top IT management priority is to increase IT capacity or resources to drive business innovations. This focus on innovation has been reflected in numerous discussions I’ve been having with CIOs. At a panel session on innovation towards the beginning of 2012, the audience were pretty evenly split between those who believed IT has a key role to play in business innovation and those who thought innovation was not IT’s job. Now, however, innovation seems top of mind with most CIOs I speak to.

So what can your IT department do to help drive business innovation? Well – really there are lots of ways – but most importantly you can help by implementing processes that help drive “sustainable innovation”. Sustainable innovation is not small changes – and not the big changes – it is everything in the middle. I call it the “gut feel” innovation – i.e. “I have this idea and I think it could help improve the business. The thing is that I don’t have the stats to prove it can help – hence I can’t build a business case – hence we can’t put this idea through the traditional business investment process.” In a scenario like this, what you need is a process to quickly test and measure the idea to give you the data to put into the traditional business process to either move it forward or discard it as a bad idea. If fewer than 45% of your ideas move from ideation to reality you are probably testing too many “bad ideas” and you need to tighten your process to get rid of more bad ideas earlier – and on the flip side, if more than 70% of the ideas are being commercialised then you probably aren’t testing enough ideas.
 
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Microsoft Is Still The Biggest Brand Used For Work

Philipp Karcher

When we asked 10,000 information workers globally what brands are on the devices, operating systems, and software they use for work, it came as no surprise that Microsoft dominates. More than 90% of employees rely on something Microsoft to get their jobs done (and we didn't even ask about office productivity suites). What's interesting and new, however, is the pervasiveness of other brands besides Microsoft in the workplace.

 

Note: We asked about desktop, laptop, smartphone, and tablet manufacturer; PC, tablet, and smartphone operating system; web browser, email, IM, and webconferencing  software.

 

Our data shows Apple and Google have joined tech stalwarts Dell and HP as the top five brands employees use at work. Google particularly has made major strides and is now second only to Microsoft in terms of pervasiveness in Asia Pacific and Latin American workplaces. The brand ecosystem differs outside of North America and Western Europe in other ways as well -- Lenovo is big in China, and Acer and Asus are big in Russia.

 

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Why Apple Had To Do Maps: A Mobile Engagement Analysis

Ted Schadler

I was pretty sure that the v1 (beta?) Apple Maps would have gaps and gaffs, and of course it does. Mapping is hard to do as this excellent analysis from Adrian Covert at Gizmodo makes clear. (If Apple had it to do over again, it might have pushed harder to keep the Google Map app in place while Apple launched a beta map alongside it. Maybe it still can.)

But Apple had to do maps. It had no choice, really. The reason is simple: maps are the place where mobile matters most. Here's the logic:

  • First, maps are where the physical context of our daily lives and reality intersects the digital intelligence we access online. It is precisely because maps are where the physical best intersects the digital that Apple had to offer maps. Maps are extremely valuable to customers, hence to Apple. It couldn't outsource it to Google forever if it wanted to develop a unique mobile engagment experience to customers. For that matter, Microsoft has to do (and is doing) exactly the same. It's also why Nokia purchased NAVTEQ in 2008  for $8.1 billion.
  • Second, developers are finding fabulous ways to exploit maps in their applications. Overlaying just about anything on a map makes the map more valuable. Shoppers benefit. Cyclists benefit. City planners benefit. Even the military benefits. Anybody dealing with physical locations needs maps in their app. And that means great APIs to access the map, a way to put layers over the map to show important things, and a way to crowdsource new information. Flickr's photos on maps in a great way to explore a vacation spot before getting on an airplane. All because of great map apps.
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