Everyone wants to join the 4G
Chris Woodcock monitors the markets, keeping a careful eye on the biggest technology stocks in the world. Every fortnight he brings you the latest insights on market movements and more.
This week Chris reports from the battlefield for Europe’s next generation mobile networks
4G has out in the UK for nearly a year now and later this summer O2 and Vodafone will join EE in offering superfast mobile data connections.
It coincides with an active market for mergers and acquisitions in telecoms across Europe.
So active, in fact, that is has been compared to the period in imperial history when the European powers were playing games of real-life Risk across the Middle East, Asia and Africa. The modern version might not be as evocative, but the commercial and political manoeuvrings are just as complex.
Telefonica breaks into Germany
This week brought the third major announcement of the year, with Telefonica buying E-Plus in Germany from Dutch telecom company KPN for €8.1bn. Telefonica is one of the world’s largest telecoms companies with networks in Germany, Spain, the UK (O2) and Latin America as well.
The move for E-Plus combines the number three and four in the German market to become number one with 38% market share.
It is a direct countermove to Vodafone’s offer last month to buy Kabel Deutschland, a cable operator, for €7.7bn. And both moves are an attempt to stem the advances of Deutsche Telecom/T-Mobile with its integrated mobile and broadband network.
Liberty swoops in on Britain
Back in February Liberty Global, run by American media tycoon John Malone, bought Virgin Media for £15.5bn. Malone knows that Vodafone wants cable networks and has been sweeping them up where he can. It looks like he is dressing up Liberty for a marriage with Vodafone.
In the UK Vodafone are up against another telco veteran in BT. Although BT was forced to sell its Cellnet business in 2001, which eventually ended up with Telefonica as O2, it recently bought spectrum in the 4G auctions and has licenced that back to O2. It looks distinctly like BT wants its mobile business back, and Vodafone knows it.
Meanwhile the world’s richest man, Carlos Slim, is watching on. Owner of America Movil in Mexico, he took a 30% stake in KPN of Holland in 2012 and is quoted as saying he wants to ‘learn about the European market’.
He knows Telefonica from Latin America and probably fancies he can take them on again. At the same time, AT&T of the USA are reported to have made overtures to Telefonica in Spain.
And so it goes on. A total of €60bn has been spent in the last six months. The point of all this manoeuvring, aside from a healthy dose of megalomania, seems to be wireline fibre optic networks.
Until the iPhone came along over 70% of the cost of running a mobile network came from what is known as the air interface: the bit between the handset and the mast.
With the ‘explosion’ of data we hear so much about this has started to change. Bottlenecks are emerging in the backbone of the network. Operators are being forced to hook into fibre optic networks and pay costly fees to broadband providers to transport all the data. With the arrival of LTE and, eventually, LTE-Advanced this issue is only going to get worse.
And so the Great Game is set to continue until country-by-country a handful of fully integrated mobile and broadband providers emerge. In each country the race is on to get there first (or second), and if not to reluctantly leave it to others to share the spoils.
Unlike the 19th century, however, this should turn out better for the inhabitants. 4G may or may not deliver on its promises but by the time 5G comes along all this rationalisation means mobile networks should be a lot faster.