Thursday, February 15, 2007

MARKETS://Growth v. dividends

There is always a bit of an ambiguity when a company produces a big fat dividend. Sure, excess cash is nice to have (cash is king), but why do investors bother at all investing in the stock, if all they really want is to get all excess funds out?

Make up your mind: do you want to invest in the business or don't you?!?

A comparable kind of ambiguity came out of Reed Elsevier today. They will sell Harcourt (the educational arm), but the proceeds will be paid out to investors. The remaining business will be high growth, and yet management cannot see how the money could be wisely reinvested to earn a decent return. So now investors buy the stock (it's up 6%) because they applaud management not holding on to the money.

Why buy when you don't have high esteem of the management?!?

WVOIP://Start the net neutrality debate in wireless

Back in November I took a look at wVoIP to see why it's not working. Also, I linked innovation to the net neutrality debate. In the meantime we've had pretty disruptive products from 3 Group (X-Series) and Vodafone (a string of internet deals). I said that 'there is no net neutrality debate in wireless (yet)'.

Now that could be changing, as RCR, Ars Technica and report, referring to a report from Timothy Wu.

Tuesday, February 13, 2007

OFFLINE://Internet on the move

CONSOLIDATION://Orange NL for sale

A newspaper in the Netherlands reports France Telecom has hired Lazard to shop Orange NL around. The unit has 600k BB subs and 2.0m mobile subs and should bring in EUR 800-850m.


  • Fixed NL: KPN is forcing a choice upon altnets, building its All-IP network: retreat (or be a reseller) or step up investments to make SLU work, as the old paradigm (FTTEx + ADSL2+ = LLU from up to 1300 exchanges) is replaced by a new one (FTTN + VDSL2 = SLU from up to 28k street cabinets). The outcome is still up in the air, as OPTA seems to be backtracking on earlier support of KPN's plans, but Orange seems to think neither option is very attractive. Telecom Italia, through bbned, and Tele2/Versatel seem to be committed to the Dutch market.
  • Mobile NL: The mobile market is going to a three-player model if T-Mobile or Vodafone moves in. T-Mobile could even go from a mobile-only strategy (as in the UK) to a triple play offering (as in France). Unless of course China Mobile, Weather, Telefonica, Telecom Italia, Belgacom, Swisscom, CPW or TeliaSonera (cf. Xfera in Spain) deems the time right for a new market entry.
  • France Telecom: Going from 5 to 4 countries for its triple play offering (France, UK, Spain, Poland).

Consolidation is continuing, driven by a need for scale economies in mobile and LLU (not to mention SLU). More units could be put up for sale (DT France, DT Spain, Tiscali UK, Tiscali Italy, SFR). What is intriguing is:

  • Companies are abandoning saturated markets, like Scandinavia and now the Netherlands (the Tiscali NL sale to KPN is pending at the NMa) and are turning to emerging markets.
  • Vodafone, according to the newspaper, wouldn't be interested in Orange NL. Puzzling. Could this be the first step of Vodafone putting even more focus on emerging markets?
  • If T-Mobile isn't interested, they might as well leave the market altogether.
  • Telefonica is definitely a consolidator. Will they bid for Orange NL, or target the bigger prize: KPN?
  • Will this be the European entry of an 'eastern' company (after Hutch and Weather)?
  • As PTTs are fighting each other in their home markets, could this sale mark the formation of a pan-European kartel, e.g. FT and DT getting out of each other's markets?

UPDATE: obviously, existing players could strengthen their current presence:

  • Telecom Italia: to add a retail business (and mobile) to their bbned offering.
  • Tele2: to gain scale and a mobile license, in order to migrate their current reseller business.
  • Scarlet: to mirror Tele2's strategy of turning into a facilities-based operator.
  • Cableco: to add mobile and to sell the fixed business to somebody else.

Wednesday, February 07, 2007

MONETISATION://MySpace playing divide & conquer after all

While Google and MySpace are renegotiating their search/ads deal, eBay may be stuck in the middle. According to the Wall Street Journal (which doesn't necessarily mean it's true), Google would like keep eBay off of MySpace. Google and eBay compete not only for commerce leads, but for listings and payments as well.

Under a MySpace/eBay deal, the latter would add 'peer commerce' and payments to the former (and what about Skype?).

The interesting thing is in the negotiations part of the story. A MySpace/PayPal deal was on the cards long ago. It looks like it would allow MySpace to stay in control and demand a large cut of any revenue sharing deal by using a basic divide & conquer strategy after all.

Tuesday, February 06, 2007

KPN RESULTS://New definitions used to hide worsening performance

Results 06Q4: somewhat weaker than expected. Even mobile is down. Net line loss, as concocted by KPN, is down to 130k for the quarter, but regular line loss (as defined previously by KPN) is up to 357k (from 267k the previous quarter)! Access lines (PSTN + ISDN) are down 9% qoq and 21% yoy!

Guidance 2007: weaker than expected. Revenue and EBITDA to be flat. Share buy-back EUR 1bn as expected. Dividend LOWERED to EUR 950m (from EUR 1bn over 2006). Free cashflow EUR 2bn v. EUR 2.4 bn in 2006.

All-IP Network: real estate value lowerd to EUR 1bn (from 1.0-1.5), capex 2007 lowered to 0.9bn (from 1.0-1.5).

Monday, February 05, 2007

MOBILE DATA://Operators into search?

The Telegraph reports that Vodafone, Orange, Telefonica, T-Mobile, Hutchison, Telecom Italia and AT&T plan a Google/Yahoo! rival for the mobile environment.

One may hope this isn't true. First, Google and Yahoo! have algorithms and advertiser networks that are hard to replicate. Second, mobile operators can demand a large slice of the pie, possibly 80-90%. Why such an expensive and non-core effort, just to get to the other 10%?

Possibly these efforts are aimed at something else, like standardisation, security and spam.

Thursday, February 01, 2007

USER INTERFACE://A big leap at NYU

You have to see this short film on YouTube. It's part of this article on

Jeff Han works at NYU.

"Google should have something like this in their lobby."