Christmas comes a year early for Telecom

Unfortunately it's not good news.Christmas offers for 2008 arrived in 2007...

Handsets offered for this Christmas are pretty much the same as last Christmas.

It really seems as though bridges were burned with CDMA handset suppliers - nothing of note to be offered this year at all.

 This will be very easy for Vodafone to trump should they choose to.

Sadly I pick about about 4-5% market share loss between now and T-Day. That is going to take a couple of years to win back.

Add your WiFi hotspot to the iphone / ipod Touch database

I have been looking around for a way to do this.

Apple don't run this database themselves - it's managed by a company called Skyhook. Given Apple's descent into evil that might provide some comfort to you non-Apple fanboys out there.

It's easy.

Go to this link.

Enter your address and fiddle with the marker to locate it correctly.

Enter the MAC address of your WiFi router - you'll probably need to google the model of your router to do this.

Wait 7 days - when you use the maps application on your iPhone / iPod Touch, hit the center button on the lower left and Boom - there you are.

Will probably help a bunch of other apps that use this data - would love to know what they might be!

Delay to Telecom NZ WCDMA launch is good for shareprice

Stuff reported today that ABN Amro analyst Geoff Zame suggested that if Telecom did not complete a marketing launch of its WCDMA network this year that it would be detrimental for the share price. The reported reason is that Telecom would be on the sidelines when the rush for Christmas connections comes through.

I disagree.

Everything that I have read suggests that the network is currently not fit for launch. That is not surprising. I know that there are a lot of people in Telecom who are working damned hard on getting this network up and running. I don't think this is an execution issue -its a reality issue.

Telecom announced that it was going WCDMA in June 2007, suggesting that build would not commence until late that year that it would be in market by Christmas this year. 

That's  12 months - gutsy stuff.

By comparison, the deployment of CDMA in 2001 / 02 took 15 months (that was an extremely aggressive and well managed deployment) and was voted telecommunications project of the year by TUANZ. That was on existing sites.

Vodafone's 3G deployment was of the order of  15 months after signing Nokia up - and they were hit pretty hard by customers reacting to coverage issues. 

In Telecom's case they are rolling out 2 networks

1. 2100 MHz WCDMA

2. 850 MHz (either GSM/EDGE or WDCMA)

The 2100 MHz network in particular requires new sites and resource consents. To go from 'hmm I think I'd like a new site in this area' to having property and resource consent in the bank takes about a year. A year was always going to be too short.

You would have to be doing well to do both of these in 15 months - not forgetting Telecom have operational separation, Next Gen broadband and all the rest happening.

If Telecom were beholden to a pre-Xmas date, this network would look more like MobileMe.

It will be much better for the long-term shareprice for Telecom to get coverage right for this new network as opposed to try and bank a short-term win, and then brand damage based on a sub-standard network. And to think that there would be significant uptake on the new network before it was bedded in pre-Xmas is optimistic to say the least. One can only hope Telecom has some CDMA offers to go out that are sharp enough to stay competitive this Xmas.

Reynolds has already announced in last week's result that there will be no EBITDA growth until 2010. Good to see him stick to the long-term plan - this approach will start to turn Telecom around from a dividend stock to a growth stock. That's the real issue for the analysts - the dividend payout made Telecom a very attractive part of their portfolios in the past. Now that Telecom are focussing on longer term bets this stock is no longer easy money. There is the possibility of still quite good dividend payouts and (if you are risk embracing) the possibility of longer term share price growth. 

Key issue now is when to get in.

Telecom 850 WCDMA - more developments?

Juha posted on the rumours of a delay to the launch to Telecom's WCDMA network. I have no further detail but it's got me thinking some more.

I've been doing a lot more sniffing around on the handset situation for Telecom should they decide to move to 850 WCDMA as part of their UMTS roll-out.

Based on my last post suggesting it needs to be driven by coverage, handsets and pricing for customers, it's clear that there is a potential long-term coverage play for Telecom in all of this. However handsets are the key.

It's my opinion that, should Telecom go down this path, they should only look at one radio spec for their handsets. That is quad-band GSM and a least dual band WCDMA (850 / 2100). Throw in 1900 WCDMA if you can get it, but given that is primarily a US driven requirement and they have rolled 850 WCDMA there 1900 is not a mandatory requirement.

The reason behind choosing a single spec handset is that Telecom can then run a very simple and effective long-run campaign for its customers : 

Buy any Next Gen Mobile Telecom handset and you can roam anywhere around the world and have the best coverage for voice and data here or overseas. Period. 

Very strong coverage position to take and one that could put Vodafone on the backfoot for quite a period of time.

My reasoning for this spec, as opposed to a local spec for 850 only devices and 850 /2100 devices for 'Worldmode' is simple. 

1. Remove a confusing choice for customers about whether they might or might not want to travel somewhere in the world with their mobile. With this spec they can travel anywhere. The last thing you want a customer to have to check is what band their mobile is before they travel - there is usually too much to do anyway!

2. Take a position on coverage that Vodafone can't match - Fastest data here and around the world, where-ever you go.

Key driver for this is handsets. A couple of days of searching the 'net and this is a mixed picture.

On the positive side there is the number 1 handset vendor globally, Nokia, who have a range of 13 devices that meet this criteria. Not bad until you see that their overall range for GSM 900 / UMTS 2100 stands at 58. Still, much better than the days of TDMA and CDMA where the Nokia devices available were around 3-4 vs. 50 -60. The other positive is around iPhone. Will provide great coverage for the 3G iPhone. However this will probably neutralise Vodafone locally at best as they will have mopped up most of the early adopters, notwithstanding supply chain issues from Apple.

On the negative side - there just aren't very many other providers of this spec. A look at GSMArena shows Sony Ericsson has 6, Samsung has 1 and these are out of ranges of around 40 for Sony Ericsson and 70 for Samsung. HTC also has a few and then the numbers dwindle after that.

Overall the answer is that the range is good enough, however there is very little negotiating leverage for Telecom with such a small range of providers. That will probably drive up cost of sale temporarily. The temptation for Telecom will be to buy a cheap handset that reduces cost of sale. That is a short term game. 

Do. Not. Do. That. 

If there is one thing that I have learned from 15 years of deploying AMPS, D-AMPS, CDPD and CDMA it's that as soon as you bow to this short-term demand then you are forever trying to paper over the cracks.

Thinking long-term would mean the following

1. Build strong and deep relationships with 4-5 handset vendors. Don't nickle and dime them.

2. Don't launch until you have a nationwide NZ 850 WCDMA network - start with a superior local coverage position and hold it all the way through.

3. Buy a handset spec that gives best global roaming. And only one spec please!

4. Price data on a 10 year return on infrastructure, not 3.

The pain will be taking a hit on Mobile market share until this launches. Given how low the share-price is now, I think this is probably priced in already according to Valuecruncher.

Why would Telecom NZ launch an 850 MHz UMTS network?

Mauricio posted this rumour earlier today that Telecom is looking at UMTS at 850 MHz on a nationwide basis. I have no idea if this is true or not but I thought I'd assess it in advance on the off-chance it is true.

In my experience over the last 15 years with Mobile network deployments there have been a bunch of hypotheses about what you can do to attract customers to your network. These have included products and services, video, social networking - all the 'next big things'. 

In the end, it does not matter about differentiating on features and services if you haven't got three basics at the same level as the rest of the market. In order, they are

1. Coverage (Where can I use it?)

2. Handsets / Devices (What devices are available?)

3. Price (How much does it cost? Can I afford it?)

This is what customers repeatedly have told me when I have asked them what is important. In fact, given the benefits of mobility customers surprisingly rate Price significantly lower than coverage or handsets.

Most of Telecom's strategic errors around mobile have been when they have forgotten about these 3 fundamental truths - in particular the first. I consider roaming as part of coverage - and Telecom has been on the back-foot here for about a decade. In particular, apart from a period recently when these elements were equal, most of Telecom's major losses in market share have occured when the people involved in setting strategy have been too worried about the economics and trying to engineer a short-term position. But I am off topic now.

Back to the rumour - Why would Telecom look at this particular path?

Marketing wise, they have been saying that they have the best nationwide data network (true - CDMA in NZ is still the best natiowide mobile data networ) and a global roaming proposition (true). The issue is that it's a very limited range of devices that can handle this and when it comes to data, a key part of mobile now, the global proposition is non-existent for UMTS. Worldmode phones, while great, only operate on GPRS as far as I know. And there is a very small selection - 3 at my count out of the portfolio of 24.

This position gets even worse with the current stated proposition for WCDMA. 3 urban cities at launch and  nationwide EDGE network. Not good enough. It reminds me of BellSouth's entry into the NZ market. Lots of marketing and a very inferior coverage proposition. Many years after Vodafone bought BellSouth and had pretty much equalised on coverage , I still had Telecom customers tell me they were still with Telecom because of the vastly superior coverage. Power of brand...

So a quick assessment of the speculated 850MHz nationwide network. Why would Telecom do this?

1. Coverage - given the current plan this would provide a massive boost for local data coverage, allowing Telecom to switch off its CDMA network earlier. It doesn't add anything significant for global roaming. The global roaming game is at 2100 MHz for WCDMA - end of story. Anyone trying to convince you of anything else is dreaming.

2. Handsets - This is the tough one to swallow. This strategy does not help the handset situation at all. It means a more specific spec for handsets which means less range to select from. My guess is that Telecom will be forced to run a reduced portfolio compared to Vodafone locally. All they can do is ensure they have a set of choices for each price-point . Shouldn't be an issue at the mid-range but I would anticipate issues at the low-end and the high-end. Telecom may try and offer low-end at CDMA. This would follow the same path tried for trying to maximise the value of the TDMA network. That didn't work. This won't either. Don't do it!!!

3. Price - Telecom will have a relatively empty WCDMA network. Where they could really do well is if they do what Vodafone didn't do when they launched their 3G network. Offer a really sharp data plan. 

So, if you are an investor in Telecom stocks consider the following

1. If Telecom announce an 850 MHz network AND can talk to a reasonable set of handsets tomorrow then this is very good news. Especially if the focus is coverage and handsets as opposed to video services etc. If CDMA closure is announced, even better. Means that the long-term picture for Telecom's mobile business is built on a reasonable foundation. 

2. If there is no word on 850 MHz network then it is too late for this to be available for launch - doesn't rule it out but means another year of pain in Mobile. Whether you hold or sell will depend on the commentary around mobile.

3. If the rumour is squashed and the focus is all on ecosytems of products and services then be very very worried. Those don't matter if you don't have coverage and handsets sorted. Value down the mobile component of the business and cash-out while you can.

If it was me, I'd do the following

1. Roll out 2100 UMTS as far as you can - aim to make this the core of the network. take the capital hit now and a long-term view on return

2. Backfill with 850 UMTS - necessary evil and provides a short-term coverage advantage if you go full nationwide. Or worst case equalises this position.

3. Aim to close down CDMA in 3 years. Most customers will swap out their handsets in this period anyway. Find ways to make this work without blowing cost of sale.

4. Introduce an all you can eat data plan that goes where Vodafone can't easily follow  - look for their profit pool and nuke it. Great for customers and great for the revenue line.