WCA July 2007

Telecom News

In other telecom news . . . Indian regulators have approved Vodafone’s $11.1 billion purchase of a majority stake in Hutchison Essar. The British company will buy Hong Kong-based Hutchison Telecommunications’ 52% holding in the Indian mobile company and also gain control of another 15% stake separately owned by Indian investors. Officials in New Delhi had held up approval until they were satisfied the deal did not violate Indian investment rules, nor place too much of Hutchison in foreign hands. Vodafone Group, the largest mobile telecommunications network company in the world, is looking to emerging economies like India for earnings growth as the markets of the US and Europe become saturated. Paris-based Alcatel-Lucent on 25 th April warned of continued losses and weak sales, casting doubt about the long-term outlook for the world’s biggest telephone equipment maker. Four months after completion of its transatlantic merger, Alcatel-Lucent said first- quarter operating losses would be about $353 million and that sales would drop about 12% to $5.3 billion – the second consecutive quarterly decline. While an immediate drop in share prices was quickly recouped, reflec- ting upbeat investor sentiment about the company’s orders and growth, even so analysts said the results showed that the combination of Alcatel, of Paris, and Lucent (Murray Hill, New Jersey) was hurt by overlapping product lines and weak demand for wireless tele- com equipment in a fast-changing market. Official results, including an outlook for the full year, were released on 11 th May. Telecom New Zealand has com- menced work on a $6.1 million project that will complete a fibre optic ‘ring’ around the Coromandel Peninsula, with telecom traffic scheduled to commence early in 2008. The fibre optic cable is being laid alongside a state highway by methods including mole-ploughing, rock-sawing, and directional dril- ling, in an initial phase expected to be completed by September. ✆ ✆ ✆

The second phase of the project will involve the installation of a series of STM64 terminals at telephone exchanges in 10 centres around the fibre ring. The terminals would handle communications traffic at up to 10 Gigabits per second and provide up to 64 times the capacity possible on the existing core network, as well as boost the strength of the core network for those centres with major traffic directed over it. On 11 th April, project planner Mark Fendall said: “The new network will be self-healing in the sense that it provides the ability to re- route traffic between centres on the ring and thereby reduce the risk of service disruption if there is damage to the fibre optic cable.” In the wake of its fourth-quarter 2006 loss of nearly $1.18 billion, Deutsche Telekom is looking abroad for growth and will shed units related to its core business. The German company said that about 500,000 customers dropped its services in the quarter, handing it the first quarterly loss in two years. Telekom, which earned $4.2 billion in the year, down 43% from $7.4 billion in 2005, will move as many as 50,000 jobs from its fixed- line business, T-Com, into new ‘independent subsidiaries’ that would bring employee compen- sation ‘into line with the market.’ The new companies will handle technical services, company call centres, and customer relations, Telekom said. The work-week will also increase to 38 hours, from 34: a step that has already been taken by a great many German companies as well as in the country’s public sector. BCE, the parent of Bell Canada, said on 17 th April that it was considering going private with three Canadian pension funds and a private equity group. The announcement by BCE, the largest telecommunications company in Canada, came after reports that its principal stockholder, the Ontario Teachers’ Pension Plan, was forming a consortium to make a similar bid. BCE has a market value of $27.54 billion. A buyout of the 127-year-old company would be the largest ever attempted in Canada and could reach $45 billion. Because Canadian law limits foreign

ownership of telecoms to 46.67% of voting equity, Kohlberg Kravis Roberts, the private equity firm, is a minority partner in the bidding group. Recent foreign takeovers of Canadian companies in the steel and mining industries have made foreign ownership a sensitive issue in the country. The consortium, led by the Canada Pension Plan Investment Board, emphasised its predominantly Canadian composition. French, British, and Dutch citizens who bought Vivendi shares in the period during which the French media-to-telecom group was near- ing collapse will be permitted to join a US class action against the company brought by Vivendi shareholders. The relevant time frame, as determined by a federal judge in New York, is 30 th October 2000-14 th August 2002. The suit was initiated in July 2002 by two French shareholders who claimed that Vivendi executives offered false information to conceal the company’s financial condition. The Paris-based company, which promptly dismissed its chairman and began a severe restructuring, is entitled to appeal the ruling. To help relieve telecom operators of heavy costs and facilitate their expansion into rural areas of India, the country’s telecom regulator has recommended that companies be permitted to share such infrastructure as mobile phone towers. On 11 th April the Telecom Regulatory Authority of India (TRAI) said it had submitted its infrastructure-sharing proposals to the Department of Telecommuni- cations, which must give final approval. TRAI estimates that India – the world’s fastest-growing mobile phone market – will require about 330,000 towers by 2010, more than triple the 100,000 now in service. South Korea’s largest wireless carrier, SK Telecom, has been expanding its overseas operations, entering the US as well as China, Vietnam, and Mongolia as it seeks to develop revenue sources beyond the saturated home market. Four out of five people in South Korea carry mobile phones. The company said on 9 th April that its overseas operations could reach the break-even point in four to five years, helped by the increasing popularity of its mobile convergence services.

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Wire & Cable ASIA – July/August 2007