WEEKLY TELECOM ANALYSIS: Google, Motorola, HP make headlines

The week gone by has been an exciting one indeed, for the telecom sector. The week started with Google buying out Motorola Mobility for $12.5 billion, intensifying the pressure on Microsoft’s likely partnership with Nokia, and putting Google in the spotlight once more for wanting to become a monopolistic information giant – after it was in the news for competing with Facebook with its Google+ project. Questions were raised as to whether Google was feeling insecure now that its Android OS has gained number one status in terms of tablet OS, and hence thought a partnership with Motorola would help it gain patents and a host of other Motorola-linked benefits.  Another question raised was whether this was the beginning of Google’s venturing into the mobile space in a big way – even though it earlier denied allegations of its’ venturing into the MVNO or full-operator space.

Two days after the Google-Motorola Mobility deal, the world’s BIG question on how Apple would react to the news was answered.  Andy Miller, mobile advertising head of Apple stepped down after barely a year and a half in the organization. Miller was responsible for the iAd network, which placed ads inside the iPhone, iPod and iPad applications, and with no successor announced yet, this was no doubt a huge loss to Apple. On the same day, news came in that William R Hambrecht, who was on the board of directors for Motorola Mobility had stepped down, just after the completion of the Google-Motorola Mobility deal.


In India, the DoT decided to back indigenous telecom manufacturers 100 percent, with incentives and more for them to become self-sufficient and cut down imports of telecom equipment to 20 percent by 2020. This move, although heartening for the Indian manufacturing sector, which has been seeing troubled times, would mean a huge loss to international telecom equipment vendors and manufacturers like Nokia, Samsung, Huawei, Ericsson, Nokia Siemens Networks, and ZTE. Besides, till date, most cellular operators in India prefer to outsource telecom equipment that is cheaper, of higher quality and comes stamped with an established brand name.

In the same week, two low-cost tablets were launched in India. Reliance Communications came out with a 3G-enabled tablet at Rs 12,999, while Bharti Enterprises’ handset arm – Beetel Teletech, launched a tablet priced at Rs 9,999 – the cheapest in India till date. This has prompted a slew handset makers like Lava, Micromax, Zen, Olive, Fly and Huawei to launch similarly low-priced tablets in the Indian market – forcing consumers to sit up and become part of the smartphone trend.


Reliance Communications also hired UBS to sell its 95 percent stake in tower arm, Reliance Infratel to prospective private-equity firms for a sum of $5 billion. RCOM, which currently has a debt of $7.5 billion, has been trying to sell off its tower unit for almost a year. However, most potential bidders for the towers estimate the tower unit’s value to be much lower than the asking price of $5 billion, which is what is delaying the stake sale. GTL and Etisalat, who were earlier in the running for Reliance’s tower unit withdrew their offer, and RCOM is now hoping for a new buyer before its debt pay-off time goes dry.  

Last week also saw Russia having its dream of launching the world’s first telecom satellite into space shot down, when the newly-launched Express-AM4 satellite, lost contact with the Russian space agency, Roskosmos, within hours of being launched, spreading disappointment among DTH subscribers across the country, for whom the satellite was to provide digital TV services, besides telephone and internet services. It also raised questions about the repeated failures of Russia’s recent space missions, and about the abilities of newly-appointed space-agency chief, Vladimir Popovkin. The satellite was insured for $260 million by the Russian Ingosstrakh insurance company.


China and Bolivia also signed a contract to engineer their own telecom satellite project, set to be completed within three years, providing telecom services to Bolivia to support its educational and medical initiatives. The Tupac Katari satellite is being funded by the China Development Bank and is looked as a political move to enhance friendship between the two nations as well.

The week ended with yet another landmark announcement. HP announced its decision to spin off its Personal Systems Group arm, responsible for its PC and tablets business. While it has been suggested that the unit may be sold off, there are chances that it may be integrated into the Printing Group or Enterprise Group, two other main groups of HP. This announcement, coming barely months after HP launched its new Palm TouchPad tablet, shows that HP is feeling the heat of increasing competition in the tablet and PC space, which can also be seen from its steadily falling market share for the same. HP also announced that it plans to discontinue operations for its webOS devices – specifically the TouchPad and webOS phones and will explore options to optimize the value of the webOS software, that is based on Palm technology. This is part of its overall plan of internal restructuring that included its plan to acquire Autonomy, a UK-based company that makes database search software for the enterprise market for a sum of US$ 10 billion.

Industry analysts believe that the HP’s spin-off of its PSG business may attract buyers like Samsung and Lenovo – two of its biggest competitors in the PC market today. This acquisition may help them recover falling sales of PC shipments, which according to research firm Gartner, in the second-quarter grew 2.3 percent, well below the company’s previous forecast of 6.7 percent.


The coming week is set to witness further developments to these announcements.


By Beryl M