Telecoms

Ian Livingston, chief executive of BT, told me last week more than a third of the telecoms group’s staff are now engineers – a higher proportion than ever. But whereas their expertise once covered mainly the maintenance and repair of an analogue telephone network, he now expects them to do more.

To read the scathing condemnation of Chinese telecoms equipment suppliers fired from Washington this week, you would think we still lived in another world. In that world, telecoms networks were built by national monopolies such as AT&T, France Telecom and British Telecom, and outsiders stayed away.

Andrew Hill

US national security concerns apart, China’s Huawei has one of the strangest governance structures of any multinational company: a “panel” of three chief executives each of whom rotates into the top executive role every six months.

On the issue of Huawei’s links with the Chinese military, the telecommunications equipment company has proved the equal of any western counterpart when it comes to using spin-doctors to push out a strong and consistent message that it has been maligned. But when it comes to the rotating CEOs, its founder, Ren Zhengfei (who is one of the trio), is remarkably frank that the arrangement is a bold experiment. “Even if we fail, we will not regret our choice because we have blazed a new trail,” he said in the most recent annual report

Andrew Hill

In the 1980s, British radio presenter Steve Wright used to stage phone-ins to his show from a ranting imaginary listener, “Mr Angry from Purley”.

Well, the phone lines from Purley are burning up, judging from some of the reactions to Vodafone’s agreed £1bn cash takeover of Cable & Wireless Worldwide, which was created by the demerger from Cable & Wireless in 2010. It’s rare to find a deal that has got up so many people’s noses.

CWC:LSE

Underwater: C&W – privatisation to demerger*

Investors may be happy with a 38p-a-share bid, compared with the 19.8p at which CW&W stock languished in February before an approach was made. But they are angry about the drop in CW&W’s share price since demerger, and those who enjoyed the growth spurt of the late 1990s are even angrier about the overall decline of the once-mighty Cable & Wireless group, a descendant of the Victorian consortium that laid the first submarine cable across the Atlantic . One City fund manager told the FT recently that Cable & Wireless Group was “the worst stock he ever bought“. 

Andrew Hill

Fujitsu’s plan to enter the European smartphone and tablet market has a 1980s ring to it. By the early part of that decade, Japanese companies had already grabbed large shares of the markets for televisions, hi-fi units, calculators, electronic toys and digital watches. These days, Europeans are more used to hearing about new Chinese, Taiwanese and South Korean entrants.

But in phones, Japanese manufacturers have largely concentrated on domestic consumers, using country-specific technology and features. It will be interesting to see how many of these features travel, and how many have to be tailored to local tastes, as Japanese phone makers break out of their national silo. (There have been reports that Panasonic is also planning to launch a mobile phone for the European market* and Sony Ericsson – already present – is, as of last week, wholly owned by Sony.) 

I’ll say one thing for co-chief executives: two scapegoats are better than one. Since Research in Motion’s fortunes took a sharp turn for the worse last year, its dual-leadership structure has taken a beating. With the BlackBerry-maker’s decision last week to revert to one chief executive, the double-edged knives really came out for Jim Balsillie and Mike Lazaridis.

John Gapper

The initial noises out of the shake-up at Research in Motion, although it was more far-reaching than had been expected, are not especially encouraging for the investors and analysts who want radical action.

Mike Lazaridis and Jim Balsillie, the joint chairmen and chief executives of the maker of BlackBerries, have relinquished both roles. But they have handed over to an insider who looks determined to stick to the same course.

Thorsten Heins, the new chief executive, told the FT:

“I want to maintain the focus on enterprise, but we need to communicate a bit more with our consumers. We need to do more marketing.”

 

Andrew Hill

It’s more common to cite strategic than structural differences as a reason for resignation. But Carla Smits-Nusteling – one of the most prominent women in Dutch business – is quitting KPN, the telecoms group, because, in the words of Tuesday’s statement, “she does not agree with the internal governance of the company in the new executive structure”.

Ms Smits-Nusteling, KPN’s finance director, sat on its management board (which is itself overseen by a supervisory board, in the continental European style). KPN has expanded that board from three people to 12, by bringing in all the divisional heads.

This could be about power. After all, a one-third say in decisions about a company’s operational direction is different from a one-twelfth say. Jos Versteeg, an analyst at Theodoor Gilissen, a Dutch bank, told Dow Jones:

The new management structure might compromise some of [Ms Smits-Nusteling's] executive authorities, handing over more power to the CEO, which could be the reason for her dissatisfaction.

 

John Gapper

AT&T has spent the past few weeks denying that it was about to drop its bid for T-Mobile USA, despite the heavy regulatory opposition. It has now done precisely that.

I was originally against the deal, arguing in March that:

The US performs badly in fixed-line broadband services in terms of price and speed compared with other countries, hurt by Verizon and AT&T having shrugged off the imposition of competition. The last thing the US now needs is AT&T, which already has mobile operating margins of more than 40 per cent, pulling that trick again.

Come on, DoJ. Just say no.

The US Department of Justice subsequently came out against the deal, along with the Federal Communications Commission. AT&T has taken the medicine, paying the proposed deal’s $4bn break-up fee and going back to square one. 

American Airlines finally plummeted into bankruptcy last week, eight years after workers’ wage concessions seemed to have helped parent AMR plot a route out of disaster. Managers hadn’t wrung enough from the workforce in 2003, some claimed. The staff hadn’t pulled their weight since, said others. Many concurred that the “discipline” of bankruptcy would have been good for American.

John Gapper

The news that AT&T is taking a $4bn charge to cover the break-up fee it will owe to Deutsche Telekom if its takeover of T-Mobile fails is concrete evidence of how badly it has done in its campaign to convince regulators. To which I say, good.

I have been against the AT&T and T-Mobile deal from the start, arguing that it would enable AT&T and Verizon to replicate in mobile the duopoly that they and the cable companies enjoy in fixed line telephony and broadband. 

John Gapper

Research in Motion’s offer to compensate its users affected by the BlackBerry network failure of the past week with $100 of free applications is a neat idea in that it costs the company far less than the apparent gain to its customers.

Given the zero cost of distribution and the fact that RIM only has to pay the wholesale cost to publishers of games such as Sims 3 – as well as gaining the benefit of hooking BlackBerry users into its ecosystem, it is a modest price to pay. 

Andrew Hill

I think most obituaries of Robert Galvin – who helped take Motorola from a family firm to a $11bn leader in mobile phones – understate his contribution to management practice, for he was, at the very least, the godfather of Six Sigma.

The omission is understandable. Six Sigma – which focuses managers obsessively on improving quality and eliminating defects – was the process improvement technique of choice for large companies in the 1990s, but it seems to have faded from public view recently. I spent a day at General Electric’s Crotonville leadership development centre in September and I didn’t hear Six Sigma mentioned once. Yet 15 years ago, when Jack Welch was in his pomp, the air would have been thick with boasts about how many “black belt” leaders of Six Sigma initiatives GE had bred. 

Andrew Hill

For people unable to communicate easily via BlackBerry, BlackBerry users are making a lot of noise. Faced with a third day of disruption to BlackBerry services around the world, they’re venting their outage outrage on Twitter and in the blogosphere. Many are reaching the same conclusion: this is a communications crisis for Research in Motion.

Well, no. As one of BP’s advisers commented last year when the oil company was being lambasted for its response to the Deepwater Horizon explosion: “It’s not a PR crisis; it’s a crisis.” 

Andrew Hill

It’s little surprise that Spain’s industry minister should emphasise the Spanishness of Telefónica. On Tuesday, Miguel Sebastián said the important point to take from the telecoms group’s radical reorganisation was that its headquarters would stay in Spain. So far, so predictable.

What’s more extraordinary is how calmly Spanish politicians seem to be handling news that the national champion is, in the FT’s words, “to axe its Spanish division as a standalone business”. Mr Sebastián actually went on to point out that the fact that Telefónica’s newly created digital division would be based in London was a sign that the telecoms group is ever more global.