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European Research Notes |
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European Research Notes |
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Convergent Communications Europe
by Justin Neville-RolfeEvents
Enron, which recently announced closure of its European communications offices, is being bought by Dynegy. Texas-based Dynegy, an energy utility, has also bought Extant, a U.S. carrier, and iaxis, a European fiber network and bandwidth provider, and has a strategic partnership with Telstra. But, despite the reach of this combined network, some parts of the network (e.g., that of iaxis) are unused, and much of the rest of the network is thin.
Analysis: Network for Sale, but Who Will Buy?
Enron Broadband (the telecommunications arm of Enron) was established to trade bandwidth via a network of leased fiber and so-called "pooling points." Enron hoped to capitalize on its expertise in the energy trading business. However, trading has been thin, and the division has made heavy losses. Dynegy has stated that it wants to sell Enron's European communications assets, which leaves it looking for a buyer.
Viatel, iaxis, Pangea, and 360networks have all collapsed with networks in Europe, and to date none of their fiber has been purchased or used by buyers except to service incumbent customers. Costs associated with operational management and inter-working with legacy networks have been too significant for prospective buyers. Even KPNQwest's recent purchase of the GTS Ebone network has raised doubts about the viability of inter-working the former Ebone network into the KPNQwest network, as against simply scrapping it. Furthermore, increasing capacity is not needed at present; the value of a carrier comes from acquiring its clients and Enron has little to offer in that regard.
The value proposition from the Enron network is further reduced because the majority of the European network is leased. Dynegy has bought Enron for its core business—energy—and the communications network is an "unfortunate" tagalong.
Recommendations
- Dynegy will find a buyer hard to find for Enron's European networks as few potential buyers will find value in the network. But the utility's in-house expertise in commodity selling may yet pay dividends when—as we expect—the commodity market for bandwidth picks up in a few years.
- Enron's bandwidth trading systems will also struggle to find buyers in an extremely difficult market.
- Enron's aspirations for a specialized content delivery network is a good idea that is ahead of its time. The idea should be kept alive while Dynegy waits for demand for streaming media to increase.
Internet Strategies Europe
by Andy GreenmanEvent Summary
Swedish broadcaster ETV Broadcasting is launching a t-commerce portal on Canal Digital’s satellite platform. The service is being hailed as the first true interactive TV service in the Nordics, and will be available to 1.5 million viewers across the region.
ETV's t-commerce portal is also distributed in Denmark via Tele Danmark's cable TV network in Copenhagen, and in Sweden, via Boxer, the DTT platform. ETV claims one in ten subscribers in Sweden has viewed the portal, of whom 40% made a purchase.
Market Impact
The Nordic region has uncharacteristically lagged behind other European countries that have led the way with ITV applications largely because of competition. With ETV launching its own branded t-commerce service, we expect greater competition in the Nordics as broadcasters develop interactive applications as a key differentiator for their service.
Pay TV subscribers in the Nordics will benefit from a broader selection of interactive services. To date, most Nordic pay-TV broadcasters have only offered Electronic Program Guides and on-demand movies.
Finally, this is another example of how ITV application development is maturing as third-party developer kits become widespread. Traditional ITV application vendors (i.e., set-top box manufacturers, middleware vendors, and ITV platform operators) have been joined by independent agencies (e.g., Static 2358), broadcasters (e.g., ETV), and even telcos (e.g., Energis). Typical applications include games, communications ( e-mail, SMS, and instant messaging), advertising, betting, and t-commerce. The impact will result in greater choice for broadcasters looking for killer TV content that includes some unique interactivity.
Recommendations
- ETV's experience in the Nordics will be a good measurement of how ITV will evolve in countries with high Internet penetration. ITV is often positioned as an alternative Internet technology where PC penetration is low. This is not the case in the Nordics, where PC penetration is high and online usage is well developed.
- In mature Internet markets, ITV will become a complementary service alongside dial-up, broadband, and mobile Internet access. Consumers will welcome the ability to perform online tasks like checking e-mail, banking online, and shopping from alternative devices.
- T-commerce in the Nordics will benefit from a user base already familiar with online shopping via a PC.
Wireless/Mobile Europe
by Philip TaylorEvents
Nokia is making news again. In addition to an "industry-wide" announcement on November 11, in which Nokia's Chairman, Jorma Olilla, stated that a major group of wireless carriers and handset vendors are to form a consortium to create a global set of open standards for mobile devices and data services, the previous week, Nokia signed a deal with Sony to work on an interoperable platform for the wireless Internet. Almost in the same breath, Nokia announced that it would be making available the source code for its mobile phones "openly and on equal terms." This effectively licenses components of its technology, including its MMS and SMS clients, WAP/XHTML browser, and a SyncML-based synchronization engine, as well as a semi-proprietary implementation of the Symbian platform, in a device reference design called "Series 60." Another day, another press release; November 14 brought more news, this time of collaboration between Nokia and NTT DoCoMo to jointly promote—no surprise—an open mobile architecture.
Market Impact
So is Nokia's perpetual motion PR machine merely "all sound and fury, signifying nothing," or are there real benefits to these pushes toward the utopia of global standardization, interoperability, and lower barriers to new entrants?
Conclusions
- The fact that the "global consortium" does not include Openwave, key architect of the M-Services initiative is revealing. Openwave is also migrating toward the WAP2.0/xHTML standard but will face a lot more competition in the market as a result of Nokia's shift to unified standards.
- While agreements on interoperability, roaming standards and service processes are in part being driven by a desire to increase roaming revenues, these initiatives can only mean a better platform for proliferating content, applications, and services for mobile data. It is high time that service providers increased the pressure upon vendors to move away from the proprietary model of product development toward greater standardization.
Wireless/Mobile Europe
by Declan LonerganEvent
On November 13, Vodafone announced its interim results for the six months to September 30. Its performance in this period was generally better than expected, though exceptional items continue to take the gloss off the company's impressive underlying operating performance. Before "goodwill amortization" and exceptional items, Vodafone reported an operating profit of US$4.75 billion, up from US$3.39 billion a year earlier, a 40% increase. Once exceptional items are added to the equation, however, the picture is less rosy, with the company producing a loss before tax of US$11.8 billion. The largest contributor to the exceptional items was a write-down of the value of Vodafone's investment in the German wireline operator Arcor.
Market Impact
Vodafone's results were well received by the financial markets, and rightly so. From a market valuation perspective, European mobile operators have already been severely punished for their over-spending on 3G licenses and associated network rollout. The negative sentiment created by this profligacy has in recent months been in danger of snowballing out of control, and thereby dragging down the entire wireless sector, and with it, all players looking to carve out a living in this space. Vodafone's results, along with those recently announced by some of its largest European competitors, have brought some much-needed and well-deserved positivism back to the wireless industry.
Conclusions
- As the Yankee Group has maintained for some time, industry consolidation has produced a handful of European wireless carriers that will reap enormous benefits from the growing acceptance (by consumers and business users around the globe) of the mobile phone as the preferred and dominant means of communicating and sharing information.
- Recent operating results from European carriers like Telefonica, Orange, and now Vodafone have gone some way toward rejuvenating the wireless sector. They have also reminded all concerned that, despite recent difficulties, this is still a healthy, growing business, and one that will continue to produce great opportunities for innovative and determined new-entrant technology providers over the next two to three years.
Convergent Communications Europe
by Amy RodgerEvent Summary
Cable & Wireless (C&W) and Energis each announced half-year results this week, and both remain among the most financially secure of European telcos. Cable & Wireless has a US$6.8 billion (£4.7 billion) cash pile, although announcements on special dividends and share buyback will cut into this amount. Energis has secured medium-term bank facilities of up to US$1226 million (£850 millon), securing an additional US$361 million (£250 million) funds since previous core facilities funds. While both are still running heavy losses, neither is likely to run into difficulties in the near future, and both are in a position to finance acquisitions in Europe.
Market Impact
In a market with more sellers than buyers, the two British companies are in a strong position to pick up network assets at relatively low prices. Both companies have a relatively strong story to tell, but each could benefit from further purchases, either to improve distribution channels or to cut operational costs.
Cable & Wireless is under the most pressure to buy. Its cash pile is being reduced considerably after Cable & Wireless announced today it will buy back up to 15% of its shares and offer its shareholders a special dividend of 16.6 cents (11.5p) per share. This movement will cost the company up to US$2.45 million (£1.7 billion). However, some financial analysts were hoping for more, and that means the company will face shareholder unrest if it doesn't use the rest of the money for something. The company could work either to improve its network's global reach in order to compete more effectively with market leader Equant, or seek assets that add value to its basic IP proposition, in applications, hosting, or systems integration.
For Energis the pressure is different: while its UK operation is performing strongly in some respects, its European operation could still benefit from further work. Cash could be used to improve the reach of its network or its distribution channels or both.
Recommendations
- Cable & Wireless and Energis are in an ideal situation to benefit from the bargains that are now available in the marketplace. However, given the wide range of potential targets, acquisitions should be carefully considered in line with their strategic focus and possible growth. Any deals should be cautious to ensure cash flow remains sufficient for the long term.
- IP-based products and other high-value services, such as hosting, should be considered as new/existing revenue streams. Hosting and related activities accounts for substantial revenues for both companies (21% of Energis's total revenues), and constitute a strong competitive platform. However, neither company has high enough visibility with European multinationals, and some attention (and money) should be directed this way.
- Potential sellers should focus on how their assets might augment Energis's and Cable & Wireless's basic propositions.
Siebel and ERM: A Primer on the Opportunities Surrounding a New Market Space
crmv3n13, Flash, November, by Devon Shea and Robert MiraniCRM in Retail Financial Services
crmv3n14, Report, November, by Brian JonesRemote End-Point Security Services: Defining a New Market
sssv1n14, Report, November, by Matthew KovarIT Spending: Taking a Momentary Breather, Before Reaccelerating
essv11n15, Report, November, by Andrew EfstathiouInter-Business Net: What CIOs Need to Be Prepared For
essv11n16, Report, November, by Larry BuchbaumMexico's Facilities-Based Hosting Service Provider and Enterprise Demand Profile
islav2n15, Report, November, by Felipe González CarrascoGNS 2001: Europe's Multinationals Push for Growth
ccev1n15, Report, November, by Camille MendlerSpain at the Crossroads: Perspectives in Supply and Demand
ccev1n16, Report, November, by Hector DonisGigabit Ethernet Services: Hot for a Few, Not for Many
ccev1n17, Report, November, by Graham FinnieAll of the Data, Some of the Information: An Introduction to Communications Data Warehousing
tebv2n15, Report, November, by David HawleySecurity and SMBs: Demand-Side Trends and Analysis
smbv5n15, Report, November, by J. P. GownderSMB Web-Hosting Market Update: 2001
smbv5n16, Report, November, by Helen ChanSMS Harmony: Canada's Wireless Industry Leads North America
cmsv5n14, Flash, November, by Jeremy DepowWavelength Services: Preliminary Feedback from the Field
wcsv1n14, Report, November, by Seth LibbyInfrastructure Capex in the Asia-Pacific Region
wmapv2n14, Report, November, by Shiv PutchaFrom Trio to Solo: AT&T After Concert
csnev2n14, Report, November, by Sandra PalumboUnified Communications Platforms: They Built Them, but Will They Come?
csnev2n15, Report, November, by Joe Gagan and Megan GurleyTV Portals: Opening the Door to Interactive Television
mesv5n17, Report, November, by Adi KishoreMobile Commerce in Asia-Pacific Forecast and Analysis, 2001-2006
wmapv2n15, Report, November, by Shiv PutchaRenewable Energy: A New Interest in Wind Power
eisv3n13, Report, November, by Margo DeBoerImage and Multimedia Management and Retrieval Searching Beyond Text
imsv7n17, Report, November, by Rob LancasterWireless Advertising: Assessing the Opportunity to Reach Wireless Device Users in the United States
mcsv1n9, Report, November, by Adam Zawel and Michelle PelinoScaling the Internet Mainframe
aispv1n6, Report, November, by Neal GoldmanGaining a Competitive Edge in the Corporate Wireless Services Market
wmlav2n14, Report, November, by Andy Castonguay and Daniella deSouzaTelecommunications Regulation in Japan
ccapv2n15, Report, November, by Koji OkiTelecommunications Regulation in Japan
jmsv2n13, Report, November, by Koji OkiAsia-Pacific Broadband Access: Forecast and Outlook, Part 1
ccapv2n16, Report, November, by Agatha PoonAsia-Pacific Broadband Access: Forecast and Outlook, Part 1
isapv2n11, Report, November, by Agatha PoonUsage-Based Billing and Chargeback: New Functionality Emerges for the Enterprise
bpasv2n15, Report, November, by Paul HughesElectronic Payments: Helping Individuals, Businesses, and Online Merchants Expand Their Horizons
bpasv2n16, Report, November, by Lisa CebolleroCollaborative Product LIfe-Cycle Management: Leveraging Design Resources Across the Value Chain
bcav6n16, Report, November, by Jon DeromeBack to Table of Contents
November 26 2001
An Internet Strategies Latin America Audio Conference
Latin America's Hosting Service Market: The Race for RevenueNovember 28 2001
A Wireless/Mobile Latin America Audio Conference
Topic to be announced shortlyNovember 29 2001
A BtoB Commerce & Applications Audio Conference
The Enterprise Net Connector Enables the Inter-Business Network: An Architecture For Competitive AdvantageNovember 30 2001
A Convergent Communications Europe Audio Conference
The European Global Network Strategies SurveyTo Register, to Get More Information, or
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