Monthly Archives: April 2008

France Telecom moves for Nordic rival

France Telecom has announced it is in initial talks to purchase Nordic telecommunications company TeliaSonera.

The move to buy TeliaSonera would be the biggest deal for France Telecom’s since purchasing Orange for £27.8bn ($55.1bn) back in 2000.

According to France Telecom negotiations had not yet started, but the they did comment that the two companies complimented each other.

The news hit France Telecom shares, which fell 2.01% to 19.46 euros in morning trading in Paris – making it the main stock index’s biggest loser.

France Telecom finance director, Gervais Pellissier, said they would probably pay for any deal of the size of TeliaSonera in a combination of cash and stock.

He said the company would stick to its cash dividend policy, but warned it might miss debt targets.

France Telecom’s European expansion in the 1990s resulted in a huge debt burden.

Springtime for Nyberg

The suitors are lining up for TeliaSonera under CEO Lars Nyberg (whence the title). Norway’s Telenor, an old flame of Telia (1999) who was left at the altar (or stormed away, forgot which) is back, according to press reports. France Telecom is mulling how to bid for the Swedish telco with enough cash in the offer to attract finicky TeliaSonera shareholders. A merger with Telenor would create a real Nordic giant, though still mid-sized by global standards.

This may leave the half-mother of Lattelecom with less time and energy to deal with the wackbat* Latvian government, so she may just take any deal on offer. In other words, do the share swap using the Latvian State Radio and Television Center, get its 100 % of mobile operator LMT (the most profitable of all of TeliaSonera’s subsidiaries, I believe) and forget about any covenants in the deal to functionally seperate Lattelecom into wholesale and retail units. By the time the Latvians get around to doing it — late 2009 is for the real Pollyanna optimists, to my mind– the European Union will decree functional separation in any case. So it doesn’t matter. What matters is to get the f**k out of bed with the government, get LMT and start turning it into a full service telco (including wireline, DSL, LTE wireless internet, etc. in the next couple of years).

*an amalgam of wacko and batshit. I like it.

TeliaSonera to cut staff in corporate services

Finnish-Swedish telecommunications operator TeliaSonera announced Monday that its corporate sales unit and DataInfo, which serves corporate clients, were to downsize by a maximum of 105 workers.

As customary with TeliaSonera, the workers will not be fired but rather transferred to the company’s learning centre through which they can be placed in other positions within TeliaSonera.

The TeliaSonera corporate sales unit employs at present 400 people of whom at most 80 will be transferred. DataInfo employs just under a hundred of whom 25 or less will be moved.

The units have offices at different locations around Finland

Last year 277 employees were transferred to the learning centre and 80 people from the centre received new positions at TeliaSonera. At present there are 99 employees at the learning centre.

Much time, no honcho

The owners of Lattelecom (the Latvian government 51%, TeliaSonera 49%) failed yet again on April 25 (?) to agree on a candidate for managing director of the company to replace Nils Melngailis, who resigned and left his post on April 1.

The stakeholders want more information on the candidates — the current finance director and acting managing director Juris Gulbis,  network services director Valdis Vancovics and Gatis Kokins, a former executive of Parex Bank, currently in his own business.

Whoever gets the job will still face the uncertainty of who will finally control Lattelecom  and what strategy the fixed-line operator will follow. This may be a reason why international executives have not been swarming to apply for this position. If Lattelecom is sold to a third party, say, Blackstone, the new owners may want to see their own man or woman in the CEO position.

TeliaSonera considers sweeping up more Turkcell crumbs

TeliaSonera, the Nordic region’s biggest teleco, said on Thursday it was considering purchasing a further 4.1% stake in Turkey’s biggest mobile operator Turkcell. Media-to-energy conglomerate Cukurova has instructed JP Morgan to sell the Turkcell shares to international investors to provide funds to reduce its debt burden. At the current price of TRY10.0 a share, the stake is valued at TRY902 million (USD700 million).

TeliaSonera currently owns a 37% stake in Turkcell, either directly or through Turkcell Holding, which has a controlling 51% stake in Turkey’s biggest mobile operator. After the sale Cukurova will still retain control as it holds a majority stake in Turkcell Holding. TeliaSonera spokesman Ola Kallemur stated, ‘What we aim for is of course eventual control. This stake that’s been flagged for sale now is not of a size that would give us control’. In 2005 Cukurova agreed to sell TeliaSonera a 27% interest in Turkcell but then sold half of that stake to Altimo, the telecoms arm of Alfa Group. Since then, TeliaSonera has waged a legal battle to try to get hold of as much as possible of the shares it had planned to buy originally.

TeliaSonera Profit Gains on Growth in Russia, Turkey

TeliaSonera AB, Sweden’s largest telephone company, reported a 12 percent gain in first-quarter profit on demand from Russia and Turkey and said it will need to cut more costs as growth at home slows.

Net income rose to 4.47 billion kronor ($752 million) from 3.98 billion kronor a year earlier, Stockholm-based TeliaSonera said today. Sales climbed 7.4 percent to 24.4 billion kronor. Analysts surveyed by Bloomberg predicted profit of 4.04 billion kronor on sales of 24.2 billion kronor.

“The report was good, this is what is wanted from companies in today’s market environment,” said Mika Heikkinen, a fund manager at Glitnir Asset Management in Helsinki, overseeing an equivalent of $4.7 billion euros, including TeliaSonera shares.

Chief Executive Officer Lars Nyberg, who has announced 2,900 job cuts since taking office in September, said the company needs to improve efficiency as customers cancel traditional phone lines and competition weighs on prices for high-speed Internet services. TeliaSonera has relied on growth from Eurasia with countries including Kazakhstan, Azerbaijan, and Georgia, where it added more than 5 million subscribers in the period.

TeliaSonera shares gained as much as 2.3 kronor, or 4.8 percent, to 51.5 kronor in Stockholm, and traded at 50 kronor as of 11:59 a.m. in the Swedish capital. Before today, the stock had lost 8.9 percent in a year. Telenor ASA shares have declined 13 percent in the same period.

French Interest

France Telecom SA said April 17 it was exploring an acquisition of TeliaSonera or Norway’s Telenor, which has overtaken TeliaSonera as the region’s largest phone company.

TeliaSonera’s largest shareholder is the Swedish state, which owns 37.3 percent of the former telephone monopoly. The government sold 8 percent of its shares in May and has said it plans a further divestment. Finland owns 13.7 percent.

“I did know that the states declared a wish to sell their stock,” Nyberg told a press conference in Stockholm. “It makes it natural for companies to look at Telia. I have confidence in the board to find the right decision.”

TeliaSonera reiterated net income this year will likely be “somewhat higher” than in 2007, excluding a gain of 2 billion kronor in 2007 and other potential gains in 2008. The company also aims to maintain the margin level of earnings before interest, taxes, depreciation and amortization from 2007.

First-quarter Ebitda, excluding one-time items, rose 2.3 percent to 7.76 billion kroner, while the margin fell to 31.8 percent from 33.4 percent. The Ebitda margin at the Eurasia unit fell to 49.3 percent of sales from 55.5 percent because of more competition and regulatory changes, TeliaSonera said.

Turkey, Russia

Sales from the Eurasia region gained 32 percent to 2.72 billion kronor, and growth in affiliates in Turkey and Russia also fueled earnings. Turkcell Iletisim Hizmetleri AS’s contribution rose 28 percent to 848 million kronor, while income from Russia increased 32 percent to 1.02 billion kronor.

The push into some emerging markets has not always been without stumbles and TeliaSonera has been locked in battles for control of some of its holdings.

TeliaSonera is in a legal dispute over control of Turkcell, of which it owns 37 percent, with shareholders Cukurova Group and Russia’s Alfa Group. TeliaSonera is also in a dispute with Alfa over control of Russia’s OAO MegaFon, Russia’s third-biggest mobile-phone company, in which it has a 35.6 percent stake.

Sales at the company’s mobile services unit rose 9.4 percent to 11.52 billion kronor, while revenue was little changed at 11.02 billion kronor at the broadband services business. Nyberg said he will seek to push television offerings to increase the appeal of faster Web-based services.

The mobile unit had 1.28 million more customers at the end of first quarter, while users at the broadband unit rose by 280,000. In total, TeliaSonera had 119 million subscriptions. Fornebu, Norway-based Telenor, which reports earnings on April 30, had more than 140 million wireless users at the end of 2007.

“Fixed line is going down, it’s going down in every country and it’s going down here,” Nyberg said. “It’s a fact of life.”

Luca Takes No Prisoners

Luca Passani is a mobile tech guru and the guy behind WURFL – if you don’t know, WURFL is an open source project that allows mobile developers to identify which mobile phone a mobile web page is being viewed on. In layman’s terms (the only way I understand it), this allows developers to optimise the user’s viewing experience.

WURFL works by reading the headers in the mobile web page.

Some operators have recently decided to transcode web pages viewed on their networks by a mobile phone. Their motivations for transcoding might range from pure – genuinely believing that this creates a better user experience, to frankly, rather sinister if you’re a publisher. In other words, they want to serve ads around other people’s content. Actually, this is naive as it’ll just lead to a deluge of legal cases for many years to come. Publishers believe that only they have the right to sell and benefit from advertising revenue around content they have paid to create. If you think no one could be this dim, TeliaSonera recently ran headlong into a whole bunch of trouble in Sweden for trying this very naivety.

When companies transcode, they normally use a a third party technology. And these vendors make the decision whether or not to remove the headers, upon which WURFL and thousands of developers rely. It’s not necessary to do so – it’s a choice. I believe that removing the information must make the transcoding less challenging technically, otherwise what’s the motivation, assuming you’re not going to try packaging your own ads around others’ content?

When Vodafone deployed Novarra’s transcoding technology, they did remove the headers, although there’s no suggestion that Vodafone were thinking about placing their own advertising on other people’s content at this time. Luca flipped and published a very angry rant in various public forums. He also drew up a petition “Rules for Ethical Reformatting: A Developer Manifesto” and demanded very aggressively and vociferously that the main transcoding vendors signed up and pledged themselves to his rules.

Luca attracted a lot of criticism within the mobile community. Many felt that his passion was going to backfire and that appeasement, gentle negotiation or even just resignation to fate was required. After all, that’s the approach people usually tried and if it didn’t work so well historically, maybe it would this time. Luca was told to back off and let other more moderate voices try to persuade these giant companies that they were wrong.

But conventional wisdom has proved emphatically wrong. Two of the major players, OpenWave and InfoGin, to their great credit and vision, listened to the argument, did the right thing and have actually signed the manifesto. This puts the other players, namely Novarra and ByteMobile in a very unenviable position indeed. They can either try to fight the whole developer community and explain why they take this stance to future potential purchasers of their technology. Or they can do the right thing in turn – albeit every day they delay, the more embarrassing it will be when they have to admit that they’re wrong.

While the mobile tech angle is important, it illustrates for me a very human lesson. If you really believe in something, you can change the apparently impossible. As Tim O’Reilly reminded us in an inspiring keynote at Web 2.0 today, we should all be going after the big hard problems and not settle for second best and compromises.

Declaration of interest: AdMob uses WURFL to help us serve and target advertising.

France Telecom defends takeover bid for TeliaSonera

France Telecom defended its possible takeover of Nordic rival TeliaSonera, as its shares hit an 8-month low on concerns the deal would be risky and could destroy shareholder value, a Reuters report said.

The Reuters report quoted the French telecoms operator as saying that TeliaSonera would bring economies of scale, strengthen its position in Western Europe and expand its footprint in emerging markets such as Russia and Turkey.

“We believe TeliaSonera represents a strategic opportunity,” France Telecom finance director Gervais Pellissier told reporters on a conference call. “Critical mass is an important factor.”

“France Telecom and TeliaSonera are complementary, share a common strategic vision and both have significantly transformed their business models,” he added.

France Telecom stock fell nearly 3% last week.

“We believe that an acquisition of TeliaSonera or Telenor by France Telecom would be value destructive, but are more worried that FT’s interest in this deal signals larger weakness in the domestic business,” Bernstein Research wrote in a note.

Orange eyes up TeliaSonera

France Telecom (Orange) has confirmed it’s looking at linking up with Scandinavian operator TeliaSonera, after rumours of a possible merger surfaced in the Le Figaro newspaper yesterday.

TeliaSonera is partly owned by the Swedish and Finish governments, who have 37 per cent and 14 per cent stakes, respectively, and was created in 2002 by the merging of operators Telia and Sonera.

A merger with France Telecom would give the firm the chance to fully privatise the company, something the Financial Times reports it’s been wanting to do for a while.

Any merger would require the agreement of all three governments (18 per cent of France Telecom is still in French government hands), so it’s unlikely to happen quickly.

TeliaSonera has extensive interests in emerging markets such as Russia, Turkey, Ukraine, Lithuania, Latvia and Estonia. Combining with Orange/France Telecom would create one of the largest European operators, but with such diverse markets it’s unclear if the merger would reduce costs.

France Telecom’s finance director Gervais Pellisier told the FT: “If you ask me whether we are examining a number of companies, including TeliaSonera, I would say yes, … But if you are asking whether this is a full-blown examination, we are not there yet.”

Le Figaro reports that any deal would be a share swap, to avoid increasing France Telecom’s already-impressive debt.

With Orange and France Telecom still fitting together, and Telia and Sonera not achieving the synergies they had hoped from their merger, it might seem foolish to throw them all together.

TeliaSonera’s shares jumped ten per cent at the news, while France Telecom saw a six per cent drop in its value.

I believe doing business should be about bringing value and serving not just about making money

France Telecom officially confirmed that they are in negotiation to purchase Norwegian Telenor and Swiss TeliaSonera. Both Nordic operators are big players on former Soviet republic’s telecom market and a great portion of France Telecom interest roots probably exactly in this feature.

France Telecom is Europe’s third telecom operator in terms of capitalization ($86.9 billion), yielding only to Vodafone and Telefonica. The 2007 revenues reached $82 billion. The company owns assets in Eastern Europe, including Romania, Moldova and Russia (the Orange brand with services rendered to corporative clients exclusively), as well as in the United States, Central Africa, China and Vietnam.

The market capitalization of TeliaSonera equals $38 billion and Telenor has $35 billion. In Russia, TeliaSonera owns 40.8 percent in MegaFon, it also has cellular assets in Uzbekistan, Tajikistan, Kazakhstan, Azerbaijan, Georgia and Moldova. Telenor holds 33.6 percent in VimpelCom and has 56.5 percent in Ukrainian Kyivstar.

I think France Telecom will pave the way to Russia for a few big telecom brands. “Russia has been long the blank spot on the map of Europe’s biggest telecom brands, though France Telecom, Vodafone and Telefonica are present in the overwhelming majority of European states. One of the reasons why France Telecom wants to buy out one of two Scandinavian operators, is perhaps, the chance to promptly turn into a noticeable player on the markets of Russia and CIS, where the actual penetration of cellular communication is much less than in Eastern Europe.

In case the deals happens it will give inspiration to other big telecom companies to try to hold firm presence in respectable markets, since most of them are growing economies.

On the other hand Russian government recently made it clear that it won’t allow big companies to dominate the market and have M&A with other companies. I am certain it’s a right policy for now. As we can see in Korea there are only three major companies: SK Telecom, KTF, LG Telecom, we could say there is not much competition, no price wars. Monthly plans are almost same with minor differences and the basic cost of commuting is very expensive with other countries.

I am convinced that telecom companies in Korea are working unethically, since they have highly advanced technologies just like in Europe and US and charge more. I believe doing business should be about bringing value and serving not just about making money.