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Check Mate

Once a conservative manufacturer of raincoats, UK fashion house Burberry decided a few years ago to push for a bit of brand diversity, bringing to market a range of clothes and goods featuring its trademark chequered pattern.

But instead of winning the hearts and minds of the rich and chic—those elevated types touched up with God’s own airbrush who are better than the rest of us and, most importantly, know how to use a bold check as part of a wider ensemble—Burberry became the choice brand of a stigmatised, iconoclastic lower class demographic.

So wholeheartedly did this demographic embrace Burberry as a brand that those within it could be seen strutting about dressed head to toe in the pattern, making it look ridiculous. It sold a lot of clothes but its brand became a bad taste badge—a garish, dissonant symbol of a lifestyle and attitude that was pretty much the polar opposite of what Burberry had been aiming for. It was really very funny.

The Informer mentions this only because Apple this week hired Burberry’s CEO to be its new head of retail. Angela Ahrendts will direct the expansion and operation of Apple’s physical and online retain environments and she joins fellow fashionista Paul Deneve, former CEO at Yves Saint Laurent, at the Californian tech firm.

Apple’s got more than a touch of the Burberry’s about it. Get out on the street and see how many iPhone users match Apple’s ideal of its own user. And then see how many angry mouth-breathers you can see swiping at the screen of an iPhone with their unmanicured sausage fingers. It’s great!

Even without buying in fashion glamour, Apple must be among the most aspirational brands in the world. But it too has been seeking to extend its reach, with the launch of the iPhone 5c last month its first visible concession to the slightly-lower-end of the market. While there had been much clamour for Apple to diversify downwards it seems the firm is damned if it does and damned if it doesn’t. Because the 5c isn’t selling.

It’s perhaps not surprising. This is a “budget” version of the iPhone that has a suggested off-contract retail price of $ 649 for the 32GB model. So you might as well get the 5s if you’re going to drop that kind of cash, and reports from Reuters and the WSJ this week claimed that Apple has cut production orders for the device.

After all, nobody wants a product that screams “Hey, everybody: I can’t afford what I want!” Most people can’t afford what they want but nobody wants goods that say so and many are happy to buy what they can’t afford in the hope that they will then look like they can afford it. This is how aspirational brands make money, of course, by exploiting the insecurities of the easily led.

Carlos Slim is one man who can afford what he wants. But you don’t get to be the world’s richest man by paying over the odds. Slim seems to think that Dutch incumbent KPN is worth no more than the €2.40/share he offered back in August. This week Slim’s America Movil stalked haughtily away from the proposed takeover blaming the KPN Foundation, which blocked the deal by exercising a share option shortly after Slim’s offer that gave it 50 per cent of the company.

The Foundation argued at the time that it was safeguarding the interests of the entire Dutch population, as well as those of a number of stakeholders more closely associated with the company. But America Movil claimed in a statement that its pledges in this regard went unacknowledged. The real sticking point was money, with KPN having maintained throughout that the offer undervalued it and Movil refusing to up the ante.

KPN CEO Eelco Blok said that the sale of its German operation E-Plus to Telefónica will keep it financially secure as it focuses on the Netherlands and Belgium, although Reuters reported Blok having suggested that Movil may return with an improved bid. So perhaps this is all just a bit of corporate theatre.

Telefónica may be looking to consolidate its position in Germany but it won’t be able to sleep at night until it gets its debt mountain down to a nice, manageable €47bn (which it has pledged to do before the year is out) and so it continues to look at divesting non core assets. This week the Spanish incumbent confirmed that it’s looking to retreat from the Czech market and is in discussions with local investment group PPF about the sale of its Czech operation. Reports suggest the firm’s 69.4 per cent holding in O2 Czech Republic could be worth €2.67bn, while the E-Plus deal is costing it €8.55bn.

Doing its own bit for the aspirational masses, Telefónica announced a JV with Spanish bank CaixaBank this week that will see the two offer consumer financing for smarphones. Like many of its peers the Spanish operator is trying to shift the burden of handset subsidy and the creation of Telefónica Consumer Finance helps it do just that. The new company will be the second largest finance company in Spain judged by volume of contracts, said the bank’s CEO Juan Maria Nin.

Telefónica also made a joint announcement with China Unicom this week, with the two firms to collaborate on the development of Network Fuction Virtualisation. The operators said they will be contributing to a range of standards processes around SDN and NFV and are focused on the virtualisation of the IP Edge, the mobile network, backhaul and CPE.

Not everyone in the West is into cooperating with the Chinese but the UK government certainly wants to encourage financial relations between the two countries. China got what is known in diplomatic circles as the right hump last year after UK PM David Cameron supped with the Dalai Lama but things have now been smoothed over and Chancellor George Osborne this week met with Huawei founder Ren Zhengfei in Shenzen.

At this meeting it was announced that Huawei will open a $ 200m R&D centre here in the UK and aims to up its R&D headcount from 80 to 300. Osborne described it as “one of the most exciting opportunities for collaboration” between the two countries and the UK Government is now swatting away questions about whether or not Cameron will ever go and see the Dalai Lama again. He won’t, because the Dalai Lama isn’t absolutely minted. Thankfully the Dalai Lama is a philosophical chap and will probably get over it. In fact, he’s probably relieved.

In other moneymaking news US operator Verizon announced an 8.4 per cent year on year increase in service revenues to its wireless business for 3Q13, generating $ 17.5bn for the quarter, and a 33.8 per cent operating income margin. Total revenues for the firm were $ 20.4bn in 3Q13, up 7.2 per cent year on year.

The operator said its wireless unit added 1.1 million net retail connections during the quarter, including 927,000 net retail postpaid connections. It also reported a low retail postpaid churn of 0.97 per cent; of the 101.2 million total retail connections it has, 95.2 million are retail postpaid connections.

But the end is in sight for global mobile revenue growth, according to Ovum. The firm is forecasting a drop in global service revenue in 2018, which will be an industry first. Revenues are set to grow at less than half the rate of connections to 2018 at which point they will begin to decline—unlike subscriptions. There will be regional opportunities for continued revenue growth, particularly in Africa, Ovum said.

There was a massive payday for Finnish tablet games developer Supercell this week, as 51 per cent of it was bought for $ 1.5bn by Japanese operator SoftBank and Softbank’s part-owned gaming vehicle GungHo. Supercell will remain in Helsinki and operate independently but its distribution will get a significant jolt.

CEO Ilkka Paananen said that when he met Softbank founder and CEO Masayoshi Son, Son told him of his 300-year vision for the tech industry. “When you meet someone like Masa you realize what it takes to build a global business that will last forever,” said Paananen, in a direct challenge to pop band Maroon 5 and UK hip hop artist J. Cole, both of which have argued passionately that nothing lasts forever.

“As a company, we are three years old so we’re only one per cent done if we plan for the next 300 years. I think more and more people in this country are realising that there is life after Nokia,” he added, in a statement that had a whiff of the dotcom bubble about it.

Softbank is also in talks to buy a stake in handset distribution specialist Brightstar. The Informer doesn’t know why this is but assumes that it will all become clear in 300 years or so. Keep an eye out for AWIW#150,500, where we will cover this in some depth.

In another operator-content provider tie up, Vodafone UK has teamed with Netflix and Nokia to give all new customers who buy a Lumia 1020 a 12-month subscription to the Netflix TV and film library. UK users can get six months of Netflix if they buy the 925 or the 625.

In the US Sprint has launched its own rich communications service for Android and iOS smartphones, which is compatible with non-Sprint subscribers’ handsets. Messaging Plus allows subscribers to connect with family and friends via text, instant messaging, group messaging and video chat through a single application. It also supports file sharing.

The app is powered by cloud communications company Jibe Mobile whose CEO Amir Sarhangi, believes that mobile users are likely to gravitate to one single app for all of their RCS needs, rather than using various different apps, such as WhatsApp, Skype, Viber, Kik or the industry-sponsored Joyn.

“There can only really be one connected world for mobile, when you pick up your phone and call any phone number and be routed properly through. Carriers must be able to support new features on top of their existing feature set, so that users can use these features without having to think about who they’re calling,” he said.

Finally this week, struggling Canadian device vendor Blackberry published an open letter to its “valued customers, partners and fans” reassuring them that it is still in business. This reminded the Informer of the full page advert that Cindy Crawford and Richard Gere took out in the Times in 1994, proclaiming the health of their marriage, their heterosexuality and their monogamy. They were, of course, divorced the next year.

“You trust your BlackBerry to deliver your most important messages, so trust us when we deliver one of our own: You can continue to count on us,” the firm said, almost certainly intensifying any concerns that its customers, partners and fans may already have had.

Take care

The Informer

Telecoms.com

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