Suppose you’re a Tier-1 incumbent carrier with a dominant position in your own market, a major international presence both wired and wireline, and a marketcap larger than the GDP of a third world country. At a loss for a way to increase your mojo? What you need is obvious: collective buying power! Yep, that’s the news this morning anyway from Europe, where France Telecom (NYSE:FTE, news, filings) and Deutsche Telecom AG (ETR:DTE, news, filings) announced that they will form a joint venture later this year that will do the buying of smartphones and equipment for their mobile networks.
The two PTTs hope to save around €1.3B per year after three years, some of which they hope to pass on to their customers. Well, that last part was obligatory of course with the emphasis on ‘hope’ and ‘some’. The real aim here is to offset the cost imbalance that they and every other wireless carrier fears so much right now: the data explosion promised by LTE and devices that know how to use it. And it is their customers that will be doing that consuming.
In the end, you know, it isn’t the equipment providers and handset makers that are squeezing big telecoms and making a bundle in the process. (Well, except for Apple maybe.) It’s simply the fact that large wireless providers can’t work up the cajones to meaningfully tie their customers’ pricing to the bandwidth consumed, and thus they seek to shift a bit of the burden onto someone else instead.
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