Free: alea jacta est

Unsurprisingly, Virgin Mobile / Numericable / Bollore & Co didn't bid for France's 4th 3G license*, leaving Free Mobile as the only official candidate.

"Free Mobile" is neither Free nor Iliad but a special vehicle (100% Iliad) likely to welcome new investors on board... should it win.

Losing a beauty contest of one would be embarrassing. Not finding MNOs eager to invest and bring some know-how after winning could be even more embarrassing.

ORASCOM dropped from the race earlier this month but remains as deep-pocketed as a few days ago. Other players stay tuned, including MVNOs.

French regulator ARCEP should give its verdict by Christmas. Free targets a Time To Market 18 months later.

French consumers also expect gifts from the new entrant, but incumbents will probably anticipate as well, donning brand new Santa Claus suits a few months before #4's arrival on the market.

mot-bile 2009

* see Iliad's 20091028 communique

License IV

France went for a hybrid or double-stage solution to their 3G dilemma : since no 4th operator could enter the market without a ticket discount for all players (see "3G license part III - France's fourth wedding or a funeral ?"), the Government and NRA ARCEP decided to split the remaining spectrum.

The potential new entrant will get 5 MHz of 2.1 GHz + 5 MHz of 900 MHz (call for tender expected by EOY 2009), and lawmakers will discuss about what to do of the last 10 MHz of 2.1 GHz, probably putting back incumbents in the loop (friendly auction ?), and about how much this license will cost. I guess a little bit more than the EUR 10,000 a year needed for a Licence IV, which allows bars to sell alcohol without dishes (I mean dishes for food, not for satellite access).

The almost concomitant consultation about 4G allows incumbents to fry some fish or remain one step ahead. Analogic TV spectrum (the 2.6 GHz and 790-862 MHz bands favored by LTE) will be freed in November 2011.

An ambitious new entrant should position itself on both 3G and 4G, as well as on the fixed broadband last mile, where ARCEP is carefully monitoring the development of FTTH / FTTO : trials are under way (until March 31st), and a precise regulatory framework will be published before this summer.

Without a claim by Iliad/Free, the Regulator wouldn't have reserved 3M numbers starting with 06 for the new entrant, who would then have mostly to rely on 07 numbers, soon to be devoted to the same purpose.

Strong of more than 4M subscribers and on the way to 5M by EOY 2011, Iliad-Free remains the front runner and main lobbyist for the 4th license. The company already brought major disruptions to the French market, starting with their ISP business model as none Networks, and most dramatically by introducing the successful home "box" concept, now implemented by all incumbents (Orange Livebox, SFR Box, Bouygues Bbox). In an agressive lobbying campaign, Free announced 1,000 euros savings per year per household with 3 mobile subscriptions. With brand new pipes to fill, unlimited offers seem likely.

But it may take a new and wealthy partner (not a commodity nowadays) to build the said pipes : optic fibers were already a major challenge on the fixed access with a EUR 1bn CAPEX planned by 2012, but covering a country as geographically challenging as France with a 3G network is quite another.

That, or another disruptive "none Networks" model... not to mention "other networks" : Free already holds the only national WiMAX license*.

Or "another player", or course. Foreign (ie Orascom and the usual suspect...), national (some day, Carlyle will have to monetize Numericable's 4M subs), or more probably a combo of the two. But the deepest pockets could hesitate between player #4 and player #3, should Martin Bouygues seize the opportunity of this reshuffle to sell its mobile arm.

Yet another scenario ? No one goes for the network. Incumbents won't accept too cheap a price tag nor too loose coverage obligations for the new entrant... even if Bouygues Telecom was not precisely crushed for being behind schedule.

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addendum 20090205

The price tag is eventually EUR 206M per 5MHz, similar to the 619M paid by each incumbent for their 15MHz load. Free may only take 5MHz, but the Government reminded the audience the existence of coverage obligations, insisting on a contribution for rural areas...

Korea : 2G WiBro South, 3GSM North

North Korea (or at least certain parts of the hermitest kingless kingdom) has been enjoying 2G GSM since 2002. And for an even more restricted public since 2004, after the train explosion rumored to be an assassination attempt against KIM Jong-il.

Now the Dear Leader can enjoy movies on the go even outside of his personal bunker-train. CHEO Technology (a Korea Post & Telecommunications / Orascom - 25% / 75% - JV) was awarded a 25 year 3G W-CDMA license earlier this year and obviously started investing ($ 400 M for the network and the license).

Cross the border, China Unicom has been stripped of its CDMA network. New investments in online gaming (30% of Hong Kong's Magicgrids Networks and partnerships with its mainland China Magic Tech Network subsidiary) did not make up for this great loss for SK Telecom.

But the Dear South Korean Mobile Leader announced this week a successful real-time HD video trial of its Wibro Wave 2 : this 2G WiBro claims rates of up to 10Mbps / 37Mbps (up/downlink) will be rolled out across the capital (TTM H2 2008).

SKT wants to market Wibro Wave 2 cheaper than 1G WiBro. KT started its service much later but leads the market. Besides, it is merging its customer service units with KTF and the merger of the two companies seems everyday more probable.

And the competition is raging, forcing MNOs to slash prices for data (ie -30% for SKT phone-mail) and increase marketing expenses (+30% YOY for SKT 2008Q1 - handset subsidies frenzy is back). No wonder SKT's operating income went down 16.3% in 2008Q1.

The worst may be coming : as of July, USIM lock will end and Koreans will at last enjoy the fun of handset and operator switch.

At the count of 3, Hutch disappears and FOMA turns 20

3 added one million subs between Oct. 7 and Jan. 7, reaching a grand total of 11M : +10% over last quarter, the sales department can be proud... but how about the CFO ?
Hutchison Whampoa Limited are giving up the lead in Hutchison Telecom International Limited : Orascom Telecom* took 19.3% of it, leaving HWL right under 50% (49.8%). They may want to strenghten their wireless activity, they obviously don't want to consolidate it anymore.
Especially after HWL and HTIL secured (two weeks ago) a 5.1 bn rupee loan supposed to "enable the companies' two indirect non-wholly owned units, JayKay Finholding (India) Pvt Ltd and Usha Martin Telematics Ltd, to acquire shares to be issued by Hutchison Essar Ltd (HEL) pursuant to a rights issue"...
Now liberated from the Orange brand, Hutch Essar (formerly known as Hutchison Max) claim 10M subs and push their own new brand : "Hutch", symbolized by an ugly drooling dog. The name definitely has something to do with HWL, but the logo doesn't look 3ish at all. Furthermore, the color switched from orange to pink. Now whenever T-Mobile wants to make it into India, they'll have to tame this pet from HEL.
Vodafone badly wanted to make it into India and that made sense : Arun Sarin wasn't born in Helsinki, India is all the rage for investors worrying about a reverse Chinese syndrom, and Master Voda just loves winners (see how they dumped ManU for McLaren ?). So after wolfing Telsim down, Vodafone take another small slice of another big cake (after China Mobile, 10% of Bharti Tele-Ventures).
NTT DoCoMo with they could rule over China and India as well as they rule over Japan : they reached the 20M FOMA users mark right after reaching the 50M subscribers plateau. As expected, they will soon take over KDDI as the 3G leader at home : their 40% migration rate** should be compared to KDDI's 95%+ (nevermind Vodafone KK's 15%).
What wasn't expected from the beginning was the time it took them to catch up : they lost about 6 months to glitches that could have been avoided. And there, I'm not talking about the baby steps. Oh, by the way... did you notice how DoCoMo now claim they launched FOMA in October 2001 instead of May 2001 ? Another example of revisionism this side of the "Sea of Korea"...

* The Egyptian operator is growing ambitions : 14.5M subs 12/2004 end of 2004, 17,5M on March the 31st, 30M end of 2005. They keep advertising on CNN International, target 50M subs end of 2006 and should open new joints after Egypt (MobiNil), Algeria (Djezzy), Pakistan (Mobilink), Iraq (IraQna), Bangladesh (Banglalink), Tunisia (Tunisiana) and Zimbabwe (Telecel Zimbabwe).
** Also : 45.4M i-mode subs (90% of all customers) of which 32.5M have i-appli enabled kentais (70% of i-mode customers).