Wednesday, August 6, 2008

Deutsche Telekom's 1H08 Revenues Decline 3% to EUR 30.1 billion

Deutsche Telekom's reported revenue for the first half of 2008 declined by three percent to EUR 30.1 billion. On an organic basis, i.e. adjusted for exchange rate effects and changes in the composition of the Group, revenue would have increased slightly by 0.3 percent to EUR 30.8 billion. At EUR 9.5 billion, the Group's adjusted EBITDA was down 0.5 percent on the previous year. On an organic basis, EBITDA would have increased by 0.5 percent to EUR 9.7 billion.

Four factors in particular contributed to these positive results.

Deutsche Telekom said that T-Home's domestic fixed-network business improved slightly year-on-year, mainly on the back of cost savings from the "Save for Service" program and a substantial slowing of the revenue decline in the second quarter. T-Mobile Deutschland increased adjusted EBITDA in the first six months of the current year, lifting the margin from 36.4 percent in the first half of 2007 to 38.2 percent. In addition, T-Mobile USA further increased its earnings performance, with a higher EBITDA margin of 28.7 percent in the first half of 2008 compared with 28.0 percent in the prior-year period. And the mobile communications companies in Poland, the Czech Republic and Slovakia posted double-digit growth rates for both revenue and adjusted EBITDA.

"We made good progress during the first half of the year in achieving our strategic objectives, both in operations and with our cost savings. This leads us to assume that we will reach our financial targets in the 2008 financial year," stated Deutsche Telekom's CEO, René Obermann.

Some highlights:

Mobile Communications

  • T-Mobile Deutschland increased its profitability in a fiercely contested market, lifting its adjusted EBITDA margin to 39.6 percent in the second quarter of 2008 from 36.9 percent in the previous year.

  • T-Mobile Deutschland is the exclusive seller of Apple iPhone in Germany. T-Mobile has also been selling the iPhone 3G in Austria and the Netherlands since June 11.

  • T-Mobile USA had 31.5 million customers as of June 30, 2008, 4.6 million more than a year earlier. Between April and June, this company recorded 668,000 net additions. The decrease compared with the prior-year figure of 857,000 can be mainly attributed to higher churn among contract customers following the expiration of the first two-year fixed-term contracts that were introduced for new customers in April 2006 for the first time. At 3.2 million in the second quarter of 2008, gross additions were again above the high level achieved in the previous year. In the second quarter, T-Mobile USA added more than one million MyFaves customers, pushing the number of customers who use this community rate to over 6.5 million.

  • T-Mobile UK recorded a decrease in revenue of 11.5 percent in the first six months to EUR 2.07 billion compared with the same period in 2007. Measured in pounds sterling, however, revenue rose by 1.7 percent. In addition to exchange rate effects, this development reflects the fierce competition in the UK market.

Broadband/Fixed Network

  • In its domestic market, T-Home recorded stable earnings and a decrease in revenue in line with expectations. The year-on-year revenue decline of 4.4 percent to EUR 4.73 billion in the second quarter of 2008 was at the lower end of the forecast of minus four to minus six percent. In the first quarter of this year, revenue had decreased by 6.1 percent.

  • On the German broadband market, T-Home has a market share of over 40 percent of new DSL customers for the seventh consecutive quarter. This corresponds to 340,000 net additions in the second quarter. The number of T-Home DSL retail customers has thus grown from 8.0 million to 9.9 million in one year. Around a quarter of a million customers have now opted for an Entertain package with fast Internet access and IPTV.

  • In addition to line losses resulting from competition and regulatory changes designed to reduce the market share, since the beginning of the year losses have also included reductions that are primarily a result of the migration of DSL resale customers to All IP. Line losses in the first half of 2008 were also largely attributable to this second factor. Consequently, the total number of line losses cannot be directly compared with those in the previous year.

  • As announced in March, Deutsche Telekom expects the number of lines in Germany to decline by between 2.5 and 3.0 million in the full 2008 financial year. At 1.2 million in the first half of the year, the decrease in the number of lines is at the lower end of the range expected for 2008 as a whole. In the second quarter, the total number of line losses was around 650,000. This quarter-on-quarter increase was primarily attributable to the stronger impact of resale customers migrating to All IP. The number of resale lines decreased by around 230,000 in the second quarter.

Business Customers

  • T-Systems' international business grew by 3.2 percent in the first six months of 2008 to EUR 1.2 billion. This development is primarily attributable to major international outsourcing contracts such as those concluded with Siemens and Shell. In Germany, by contrast, revenue fell by 13.6 percent to EUR 4.0 billion.

  • The Business Customers segment reported a decline in revenue of 10.2 percent to approximately EUR 5.3 billion, due to the realignment with the sale of Media & Broadcast at the start of the year and the reassignment of Active Billing to T-Home.

  • Another factor was the reduction in intragroup revenue, which fell 17.8 percent year-on-year. This decrease illustrates T-Systems' substantial contribution to Deutsche Telekom's cost-cutting program. In organic terms, i.e. adjusted for the revenue from Media & Broadcast and Active Billing in 2007 and exchange rate effects, total revenue decreased by 3.0 percent in the first half of 2008.

TANDBERG TV Supplies Encoding for Olympics Coverage

TANDBERG Television, part of the Ericsson Group, is providing a range of MPEG-4 AVC and MPEG-2 compression equipment and professional receivers to a number of major broadcast organizations across the globe including the Host Broadcaster, EBU and Televisa.

"With an estimated 4 billion potential viewers and 5,000 hours of coverage, the Beijing Games represent the pinnacle of broadcast television, live television and sports broadcasting rolled into one," comments Dario Choi, VP and General Manager of TANDBERG Television Asia Pacific. "With so much fast-moving live action and color, this event was made for HDTV. As the recognized leader in HD video compression and content distribution we are honored to be playing such a central role in making these Games the first to be fully broadcast in high-definition."

TANDBERG Television is supplying the Host Broadcaster of the 2008 Beijing Games with a range of MPEG-4 AVC video compression equipment and professional receivers for broadcasting of the Games. The solutions include TANDBERG EN8090 MPEG-4 AVC HD encoders and the RX1290 multi-format Professional Receivers. The system will be managed by nCompass Control. Live high-definition feeds will be encoded in full 1080i resolution at two bit-rates simultaneously to fit different IP transmission paths. At the same time, each HD source will be internally down-converted inside the encoder, offering up to full resolution standard-definition MPEG-4 AVC.

Level 3 Supplies CDN for Germany's Sueddeutsche Zeitung

Level 3 Communications has been selected to provide content delivery services to Sueddeutsche Zeitung, one of Germany's leading national newspapers. Level 3's content delivery network (CDN) will be used to deliver all video and pictures for the newspaper's Web portal. Specifically, Level 3 will deliver caching and download services to support ongoing demand growth at http://www.level3.com

Huawei Cites 100% YoY Growth in UMTS/GSM Shipments in 1H 2008

Huawei Technologies reported that its UMTS and GSM transceivers (TRXs) shipments recorded over 100 percent growth in the first half of 2008 as compared to the same period last year.

In the GSM space, Huawei delivered 800,000 TRXs, more than the total number of shipments for the whole of 2007 in the first six months of 2008. 400,000 TRXs were delivered in China and India alone. To date Huawei has secured 111 UMTS/HSPA commercial contracts and continues to lead the market with 25 new contracts in first half of 2008.

Huawei Opens Training Centre in South Africa

Huawei Technologies opened its first training centre in South Africa. The facility aims to transfer skills and share expertise in next generation telecom technologies with employees, local partners and the industry. The facility is located in Woodmead. Huawei also has training facilities in Nigeria, Kenya, Egypt and Tunisia.

Dell'Oro: China's Telecom Restructuring to Impact Mobile Infrastructure Market

The recently announced restructuring of the telecom industry in China is expected to greatly benefit the mobile infrastructure market over the next five years, according to a new report from Dell'Oro Group. According to the report, growth in China will help WCDMA market revenues and base station shipments surpass those of the GSM market in 2011.

"We believe the restructuring of the Chinese telecom industry will be completed by the first quarter of 2009," stated Scott Siegler, Analyst of Mobility Infrastructure research at Dell'Oro Group. "Once the restructuring is complete, we expect 3G licenses to be issued to the three mobile operators. China Mobile will be issued a TD-SCDMA license. The reorganized China Unicom is likely to be issued a WCDMA license, and we forecast the operator will begin deploying its WCDMA network beginning in 2010. In addition, we believe in the second half of 2009, the CDMA market will begin to benefit from increased investment by China Telecom, as it focuses on its single CDMA network, rather than the GSM and CDMA networks China Unicom has been maintaining. We also believe China Telecom will begin launching its CDMA 1X network beginning in 2010. This new growth of CDMA in China will help to offset the declines of CDMA in North America, Korea and Japan," continued Siegler.

Occam Posts Q2 Revenue of $22.8 Million

Occam Networks reported Q2 revenue of $22.8 million, up 19 percent from the same quarter a year ago and up 16 percent compared with the prior quarter. The sequential increase in revenue was primarily due to higher sales to new customers. Gross margin improved to $10.1 million, or 44% of revenue, compared with $8.4 million, or 43% of revenue, for the prior quarter and with $7.1 million, or 37% of revenue, for the second quarter of 2007. Net loss (GAAP) attributable to common stockholders for the second quarter of 2008 was $2.7 million, or a loss of $0.13 per basic share, compared with a net loss of $4.5 million, or a loss of $0.23 per basic share, for the first quarter of 2008 and with a net loss of $946,000, or $0.05 per basic share, for the second quarter of 2007.

"The second quarter marked solid progress toward our goal of returning to profitability," said Bob Howard-Anderson, president and CEO of Occam Networks. "As planned, we executed on trials for our new GPON products and have received positive customer feedback. In addition, we recorded initial sales to our recent Northern New England FairPoint win. We believe that new customers and innovative products -- such as GPON -- bolster Occam's market position and will continue to foster our growth."

Acme Packet Posts Q2 Sales of $25.7 Million, Expands Stock Repurchases

Acme Packet reported Q2 revenue of $25.7 million compared to $27.0 million in the same period last year. Net income for the second quarter of fiscal year 2008 was $0.8 million, or $0.01 per share on a diluted basis, compared to $4.6 million, or $0.07 per share on a diluted basis, in the same period last year. The company also announced that its Board of Directors has authorized the expansion of the company's common stock repurchase program from $20.0 million to $55.0 million. The company has repurchased approximately $15.1 million of stock under the common stock repurchase program announced in February 2008.

TokBox Raises $10 Million for Free Video Conferencing Website

TokBox, a start-up based in San Francisco, raised $10 million in series B venture funding for its web-based video communication service that offers consumers free video calling.

TokBox, which launched in October 2007, lets consumers talk face to face using either a web-based client or a downloaded client. It requires no configuration. It can also be integrated into Facebook.

The new funding round was led by Bain Capital Ventures. Sequoia Capital, which led the Series A investment in TokBox, also invested in the new round.

TokBox said it will use the new funding to build out its executive team and drive continued expansion of the company's user base both in the U.S. and worldwide.
  • TokBox is headed by Nick Triantos, who prior to joining the company in November 2007 was a Partner at Quantum Technology Partners, a technology-focused venture capital firm. Before that, Nick has spent 8 years in software engineering and engineering management roles at NVIDIA.

Verizon Wireless Completes Rural Cellular Acquisition

Verizon Wireless completed its purchase of Rural Cellular Corporation, doing business as Unicel, for $2.66 billion in cash and assumed debt.

The acquisition will expand Verizon Wireless' licensed coverage area by 4.7 million people, and will add licenses covering markets in Maine, New Hampshire, Massachusetts, Alabama, Mississippi, Minnesota, North Dakota, South Dakota, Wisconsin, Idaho, Washington and Oregon. The company will continue to use the Unicel brand for the next several months, as it works to integrate networks, and deploy CDMA technology and high-speed wireless broadband service. Verizon Wireless will maintain Rural Cellular's existing GSM networks to continue serving the roaming needs of other GSM carriers' customers.

Verizon Wireless expects to realize approximately $1 billion in synergies in reduced roaming and operations expenses.
  • Verizon Wireless announced its agreement to acquire Rural Cellular in July 2007, pending regulatory approval. The FCC approved the transaction earlier this month.

NEC Selects Chelsio 10GbE Adapters

NEC has selected Chelsio Communications' 10-Gigabit Ethernet (10GbE) adapters and ASIC solutions as the high-speed interconnect for its SIGMABLADE Server Blades, enabling server networking, storage networking and clustering on the single platform, which is targeted at medium- and large-sized enterprise environments.

NEC is utilizing Chelsio's S320EM-SB-C mezzanine card, a dual-port 10 Gigabit Ethernet (10GbE) adapter with PCI Express interface. It has the capabilities to offload TCP/IP, classification, virtualization and traffic management processing from the host systems, freeing up host CPU cycles for other applications.

Tuesday, August 5, 2008

Motorola Invests in Amobee Media Systems for Mobile Advertising

Motorola Ventures has made an equity investment in Amobee Media Systems, a start-up developing advertising solutions for mobile operators. Financial terms of the investment were not disclosed.

The Amobee Media System can dynamically insert targeted, interactive advertisements into all types of mobile entertainment and communication channels, including videos, music, messaging, games and WAP, using a single, telco-grade ad-serving infrastructure. The companies said the Amobee system offers mobile operators a new revenue stream by delivering one unique entry point to agencies and advertisers who wish to buy, deploy and monitor campaigns across all mobile channels, while providing the most relevant advertising experience to mobile customers.

Amobee Media Systems, which is based in Redwood City, California and has offices in the UK and in Israel, also enjoys strategic investments from Cisco, Telefonica and Vodafone, as well as financial backing from Accel Partners, Globespan and Sequoia Capital.http://www.amobee.com

Motorola Wins US$431 Million GSM Contracts with China Mobile

Motorola announced multiple contracts worth US $431m with China Mobile Communications Corporation (CMCC) for its GSM network upgrades and expansion. The contracts were signed in the first half of 2008 and approximately 50% of the revenue from these contracts was recognized in the first half of 2008.

Under these agreements, Motorola will supply CMCC with GSM network equipment and a range of services. The expanded and optimized GSM networks will then be deployed across 16 provinces and municipalities within the coverage area of CMCC, namely Beijing, Tianjin, Sichuan, Zhejiang, Henan, Hunan, Guangdong, Yunnan, Fujian, Hubei, Shanxi, Jilin, Liaoning, Jiangxi, Anhui and Guizhou. These contracts also enable China Mobile to deliver enhanced and value-added multimedia functionality and services.http://www.motorola.com

Nominum Protects Against DNS Cache Poisoning and Pharming

Nominum announced that its ISP customers, which serve more than 120 million broadband Internet users, are protected against the new DNS vulnerability . Nominum's new software adds additional security measures, including UDP Source Port Randomization, to its existing set of security measures that have been designed to protect global broadband subscribers from DNS cache poisoning and pharming attacks.

"The events of the last five weeks highlight the profound importance of DNS to the proper functioning of the Internet and the critical role Nominum plays in protecting it," said Tom Tovar CEO of Nominum. "Our customers around the world demonstrated an extraordinary commitment and ability to address this problem quickly and efficiently. Their confidence in Nominum, built on a long history of stable and predictable software releases, allowed them to upgrade rapidly, without disrupting their networks or operations."

Nominum supplies its DNS software to major cable operators, DSL broadband carriers and Internet service providers around the world. The company's DNS software is used by nearly half the global wired Internet broadband users.

Cisco Collaborates with HP on Unified Communications.

Cisco and HP are expanding their relationship to include the delivery of Cisco Unified Communications (UC) to customers around the world. The expanded relationship includes investments by both companies for training and building global marketing and sales programs. This expanded relationship builds on the established Cisco and HP strategic relationship serving global customers, such as the Johor State Government, Malaysia; Heritage Valley Health System, United States; Parts for Trucks, Canada; and Electro Sonic, Canada. Buckinghamshire New University, England, recently selected HP to deploy Cisco Unified Communications.

HP has global strategic alliances with both Cisco and Microsoft, and HP has a wide range of expertise in deploying both companies' unified communications solutions.

Tekelec Reports Q2 Revenues of $116.4 Million, up 6% YoY

Tekelec reported Q2 orders of $122.9 million, up 45% compared to $84.7 million for the second quarter of 2007. Revenue from continuing operations for the second quarter of 2008 was $116.4 million, up 6% compared to $110.0 million for the second quarter of 2007. Backlog from continuing operations as of June 30, 2008 was $387.6 million, up from $381.2 million at March 31, 2008. On a GAAP basis, Tekelec reported income from continuing operations for the second quarter of 2008 of $15.3 million, or $0.22 per diluted share, which includes a one-time tax benefit of $3.7 million, or $0.05 per diluted share, from the utilization of certain capital losses generated by the sale of the company's switching business in 2007.

Frank Plastina, president and chief executive officer of Tekelec, stated "We were very pleased by our strong operating performance for the second quarter and first half of the year. Our level of new orders was particularly strong compared to a year ago and reflects our continued success in generating new customer wins and in responding to demand from existing customers for signaling capacity and other Tekelec products. We were also pleased by the continued strength of our operating margins and strong cash flows during the first six months of 2008."

Sprint Nextel Posts Q2 Revenue of $9.1 Billion, Trims CAPEX

Sprint Nextel reported Q2 revenues of $9.1 billion and a diluted loss per share of 12 cents.

"We are seeing signs of progress from our efforts to improve the customer experience, rebuild the Sprint brand and increase our profitability," said Dan Hesse, Sprint Nextel CEO. "Our company-wide retention efforts, which include Simply Everything plans, our Now Network campaign and the launch of the Instinct handset are proving to be effective retention tools, particularly for high-value customers, and this is beginning to have positive impacts on churn and ARPU. Our sequential improvement in post-paid churn is the best reported by any national wireless carrier since 2004, and it equals Sprint's best-ever churn performance post-merger."

The company is cutting its CAPEX, trimming external labor costs, and streamlining distribution channels to improve its bottom line.

Some highlights for the period:

  • Capital investments of $646 million were made in the second quarter. These investments were 61% lower than a year ago, due primarily to reduced spending in the Wireless segment. The company recorded approximately $100 million in capital expenditures related to the deployment of WiMAX.

  • Net debt at the end of the period was $19.5 billion, consisting of total debt of $23 billion, offset by cash and marketable securities of $3.5 billion. The company used $1.3 billion in cash in the second quarter to retire all of the 6.125% Senior Notes due in November 2008.

  • The company served 51.9 million wireless customers at the end of Q2, compared to 54.0 million at the end of the second quarter of 2007.

  • For the quarter, total wireless customers declined by 901,000, including losses of 776,000 post-paid customers and 250,000 traditional prepaid users, partially offset by gains of 112,000 Boost Unlimited customers and a 13,000 increase in the number of wholesale and affiliate subscribers.

  • At the end of the second quarter, the company served 38.9 million post-paid subscribers, 4.2 million prepaid subscribers and 8.7 million wholesale and affiliate subscribers.

  • Subscribers by network platform include 35.5 million on CDMA, 14.6 million on iDEN and 1.7 million PowerSource users who utilize both networks.

  • Wireless post-paid churn of just under 2.0% improved by over 45 basis points sequentially and was in line with the year-ago period. The improvement reflects a sequential decline in the number of deactivations among both CDMA and iDEN subscribers.

  • The company reported significant sequential improvements to voluntary and involuntary churn, while the year-over-year metrics were unchanged. Involuntary churn benefited from a better credit mix and seasonality. Voluntary churn benefited from the company-wide focus on improving the customer experience, retention initiatives, strong customer response to Simply Everything and better performance in customer care.

  • For the quarter, the churn rate for CDMA subscribers was slightly below the average post-paid churn rate and iDEN was modestly higher.

  • Boost churn in the second quarter was 7.4%, compared to 9.9% in the first quarter of 2008 due to lower churn for traditional Boost pay-as-you-go subscribers, slightly offset by higher churn for Boost Unlimited.

  • Wireless service revenues of $7.0 billion declined 11% year-over-year and 2% sequentially. The year-over-year decline was due to lower ARPU and fewer subscribers, while the sequential decline was due to fewer wireless subscribers. Wholesale, affiliate, and other service revenues were flat sequentially and were down compared to the year-ago period due to the mix of wholesale customers.

  • Wireless post-paid ARPU in the quarter was stable at $56 as compared to the first quarter 2008 due to improved retention of higher revenue subscribers and a more favorable impact from rate plan migrations. Wireless post-paid ARPU declined by 7% compared to the year-ago period reflecting continued pressure on access and overage revenues, partially offset by data revenue growth. CDMA ARPU was slightly higher than the post-paid average, while iDEN ARPU was modestly lower.

  • Data revenues contributed more than $12 to overall post-paid ARPU in the second quarter, led by growth in CDMA data ARPU. CDMA data ARPU increased nearly $1 from the first quarter, to more than $15, and now accounts for approximately 27% of total CDMA ARPU. The increase was driven by strong take rates on bundled data services, such as those included with Simply Everything, as well as continued growth in data cards.

  • Prepaid ARPU in the quarter was approximately $30 compared to $31 in the year-ago period and $29 in the first quarter of 2008. The sequential increase reflects a growing contribution from Boost Unlimited subscribers, while ARPU of traditional prepaid users did not change significantly from first quarter levels.

  • Wireless equipment revenues of $479 million declined on a sequential and year-over-year basis primarily due to lower handset sales volumes and increases in rebates.

  • Wireless capital investments were $393 million in the second quarter, significantly lower than $918 million spent in the first quarter of 2008 and $1.4 billion spent in the second quarter of 2007. This trend reflects reduced spending on several key projects, including: EVDO-Rev A network expansion, the development of Nextel Direct Connect on CDMA, and the company's Unified Billing Platform. Capital investments in the quarter were primarily targeted at increasing capacity within existing wireless coverage areas and maintaining network quality. In the quarter, dropped and blocked calls declined at a double-digit rate on both the CDMA and iDEN networks, compared to one year ago.

  • Wireline revenues of $1.6 billion were slightly lower sequentially and year-over-year as legacy voice and data declines exceeded Internet revenue growth.

  • Internet revenues increased 42% from the year-ago period and 6% sequentially due to strong demand for Global MPLS services from Enterprise customers and the increasing base of cable subscribers which utilize our VoIP services. Internet revenues as a percent of Wireline revenue have increased from 23% to 33% year-over-year. At the end of the second quarter, the company supported nearly 4 million users of cable partner VoIP services. These services are now available to more than 30 million MSO households.

  • Legacy voice revenues declined 5% sequentially and 14% year-over-year. Retail business voice services declined by 10% compared to the first quarter, but the declines in wholesale, inter-company and consumer revenues were significantly more moderate.

  • Legacy data revenues are being impacted in part by customer transitions to IP services. These legacy services declined 19% compared to the second quarter of 2007 and 6% quarter-over-quarter.

Juniper Extends EX-series Ethernet Switch Interoperability

Juniper Networks is extending interoperability of its EX-series Ethernet switches to network management platforms from AlterPoint, CA, EMC, HP, IBM, InfoVista and SolarWinds. This will allow enterprise customers to achieve greater operational efficiency and simplicity while accelerating the deployment of applications and services.

Support for Juniper's EX-series Ethernet switches is scheduled to be available on the following platforms in Q3 2008: AlterPoint NetworkAuthority v6.5; CA eHealth Network Performance Manager; EMC Smarts v7.03; HP Network Node Manager 7.5 software and HP Network Automation 7.2 Software; IBM Tivoli Netcool/OMNIbus v7.1; InfoVista VistaInsight for Networks v3.0; and SolarWinds Orion v9.0.