Telecom Monthly – July 2014 Newsletter




July 2014 Edition – www.telecommonthly.com

Things are heating up in the telecom industry as summer arrives.

You may be getting ready to head off on vacation, but companies are as busy as ever with new products, acquisitions, and mergers. Sprint continues to pursue a merger with T-Mobile, while Amazon finally unveils its smartphone and Google reveals three new smartwatches running its Android Wear operating system. It’s all here, so kick back and catch up on these hot stories.

Speculation about Amazon entering the smartphone market has been around a while and the Internet retail giant confirmed rumors with the unveiling of its Fire Phone. The Fire Phone will go on sale starting July 25 and customers can pick up a 32GB model for $199 or a 64GB model for $299 with a two year contract through AT&T. Though Amazon won’t be knocking Apple and Samsung off the top of the market any time soon, its existing services mean the Fire Phone has a much better chance than offerings from other newcomers. Amazon Prime members will be able to access media streaming services and the company already has its own app store with around 240,000 apps available. The smartphone will also include a new program called Firefly, which allows users to scan objects, images, and music and then receive more details on the item or be directed to a page to purchase it from Amazon.

Samsung is far from a newcomer to the smartphone business, but it also announced a new smartphone, the Samsung Z. What makes this device different than the many, many other Samsung phones out there is that it’s the first smartphone running the company’s own Tizen operating system. The phone will launch in Russia in the third quarter of the year and then expand to other markets at a later date. Samsung is, of course, known for being the largest maker of Android smartphones and Tizen is its attempt to break away from its reliance on Google’s operating system. The Tizen OS is already being used in the company’s newer Galaxy Gear smartwatches. However, Android will remain the core of the company’s offerings; Samsung will reportedly consider Tizen a success if devices running the OS can account for just 15% of annual mobile shipments.

Even with Tizen on the horizon, Android isn’t going anywhere as it remains the number one operating system for smartphones. However, Google isn’t content to just ride its success and is working on the next version, known only as Android L. A preview of the new OS has been released to developers and some details about features included in the update have been revealed. L features an improved notification system, with notifications that will show up on the lock screen to allow users to quickly check messages without having to put in their password each time. Depth and animations have been added to objects on the screen to make operations more intuitive and apps will apparently run twice as fast. Camera controls, network monitoring, and Bluetooth have also all received improvements. To get the most out of phones, a power-saving mode is included with Android L to allow phones to go for much longer before having to be charged.

Along with Android L, Google also has Android Wear, an operating system for smartwatches and other wearable devices. Three watches running the OS were unveiled at the Google I/O developer conference in San Francisco: the LG G Watch, Samsung Gear Live, and Moto 360. LG and Samsung’s watches are scheduled to be released on July 7 and will sell for $229 and $199 respectively, while Motorola’s device will launch later in the summer. The specific features will differ depending on the watch, but Android Wear promises heart rate monitors, pedometers, voice commands, and music controls for a paired phone running Android version 4.3 or later. While smartwatches are receiving a lot of hype, they have yet to distinguish themselves as truly must-have gadgets. For companies seeing the smartphone market becoming saturated, wearables represent a new market into which to expand.

The key to smartwatch success will be apps, as the latest mobile app report from comScore shows that mobile app usage is at an all-time high. In the month of May, mobile apps accounted for 51% of users’ total digital media time. The most popular category of apps was digital radio, which had 96% of user engagement coming from mobile devices. Another category with 96% of its activity coming from mobile was photos, with apps such as Instagram and Flickr leading the pack. While social networking only had 70% of its activity coming from mobile, comScore described it as possibly the most important category due to its rapid growth of 55% in the past year. Additionally, 31% of all growth in total Internet engagement in the past year was due to social networking on mobile devices.

While Facebook is responsible for a lot of mobile growth, it certainly knows how to test its users’ loyalty. Recent reports revealed that Facebook conducted an experiment on almost 700,000 of its users for a week in 2012 by manipulating their news feeds to show more positive or negative posts. The goal of the study was to see whether the tone of posts on a user’s news feed affected the tone of posts made by the user. People are understandably upset at the emotional manipulation and being included in an experiment without giving informed consent. Facebook has always taken a wide-ranging view of how it can use people’s personal information, but turning users into guinea pigs is a new low for the company.

Of course, when it comes to violating privacy, Facebook barely registers next to the National Security Agency’s spying program. That scandal has had its first direct telecom fallout as the German government has cancelled its contract with Verizon Communications. Though Verizon’s German unit said that it is a German company and abides by German laws, its connections with the U.S. carrier were enough to cause the government to take its business elsewhere. Germany has been particularly affected by the NSA revelations, as it came out that U.S. intelligence agencies were reportedly tapping the personal cell phone of Chancellor Angela Merkel. Verizon provided telecom services to many agencies within the country, a job that will now be taken over by European carrier Deutsche Telekom.

Deutsche Telekom is best known stateside as the parent company of T-Mobile, which is apparently still on track for a merger with Sprint. The latest reports suggest that Sprint will offer around $40 per share for T-Mobile, or about $31 billion in total. Deutsche Telekom will receive a 50% cash and 50% stock deal for its 67% stake in T-Mobile, leaving it with a 15% share in the carrier. The companies will also set a breakup fee for the deal somewhere between $1 billion and $2 billion. Though regulators have made clear their opposition to a merger, it appears that a bid from Sprint could emerge within the next couple of months. If the carriers do merge, another rumor pegs T-Mobile CEO John Legere as the likely head for the resulting combined company.

In other acquisition news, AT&T is selling off its 8.3% stake in America Movil as part of its conditions for purchasing DirecTV. Inmobiliaria Carso and Control Empresarial de Capitales will purchase AT&T’s stake for $5.57 billion. America Movil and DirecTV are competitors in the paid television market in Latin America and so AT&T said previously that that it would sell its stake to make the DirecTV acquisition more palatable to regulators. The sale also nets AT&T more cash to finance the $48.5 billion purchase. If AT&T manages to get all the necessary regulatory approvals to acquire DirecTV, it will gain a 41% stake in Sky Mexico, the largest satellite TV provider in Mexico.

With all these deals on the horizon, the Federal Communications Commission is going to be busy over the summer. However, the agency will also reportedly be taking the time to consider whether to change the definition of broadband from 4 Mbps to 10 Mbps or possibly even 25 Mbps. Currently, broadband is defined as 4 Mbps, which no longer makes sense given how Internet usage and technology has changed. For example, Netflix requires a 5 Mbps connection at minimum to stream high-definition video. Beyond bringing the definition up to date to reflect the current state of technology, the change will allow the FCC to more accurately review broadband availability in America and see where providers need to improve their network speeds.

Summer is just beginning, but it’s clear already that it’s going to be a scorcher. Don’t get burned by missing out on the latest news. You can find all the hottest stories, rumors, and more as usual at TelecomMonthly.com.

Cheers,

-The Telecom Monthly Crew

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