OPINION:Two days of corporate brainstorming on European wireless takeover targets can lead to a lot of feather-fluffing on assets that won't help businesses make money, but might make it look like growth.
When you see a pigeon fluffing out its neck feathers and trailing its tail feathers on the ground, you will recognize a male, trying to impress what it thinks is a female.
When large telcos start inviting analysts to important meetings in exotic cities, and then have nothing much to say except some obviously inflated revenue figures, you can recognize a company desperate for growth to impress its investors, and pursuing what it imagines is a "good match" for "market growth."
Of course, pigeons, rather like large telecommunications organizations, often dress themselves up when theres nothing suitable in sight. Male pigeons seem not only to have trouble distinguishing male from female, but even pigeon from human, and will quite often put on the full pavement-sweeping display for a startled postman and similarly, a journalist can sometimes find himself the target of the full ego-burst from a wireless carrier.
What distresses me about these mating displays, is not the random nature of the target selection, but the sheer idiocy of the approach.
One medium sized corporation contacted a colleague recently to announce their intention to acquire a similar-sized operation in a different Far Eastern country. My colleague rang me in some distress: he had to fly out to Singapore on a Friday (he told me) in order to talk sense into a board which told him his job was to "draw up strategic plans for after the takeover."
Thats what he does, of course. Nothing odd about that.
What was incredible was that the decision to buy the other company was founded on two days of corporate brain-storming. Theyd simply sat down on a beach somewhere and talked themselves into the idea: "It would be great if...!" without doing the slightest due diligence beyond sharing industry gossip. There was no match, no market advantage, and quite probably (I suggested) a long list of excellent reasons why the pigeon they were trying to impress would cost them their future.
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Whether something of this nature is now going on with Hutchison in Europe, is hard to say.
The signs of fluffy feathers are certainly there. Back in the first half of the year, the company began advertising its 3G services as data services.
Nothing strange about that? Well, there is: WCDMA works pretty well as a wireless data medium, yes; but Hutchison, trading as "3" in Europe and Australasia, doesnt do data the way you or I might imagine.
Open your "3" phone up and browse the web and youll quickly find that all the sites are "3" sites. You want something beginning with "www" and youll be told (in Germany) "nein, nein, nein" which, by coincidence is the number 999, which you dial for emergency assistance instead of 911 in the UK.
If you can only get into the walled rabbit hutch, why is Hutch advertising internet data? Answer: it plans to have this available later this year. It is erecting new masts, and upgrading its network like mad, and generally preening the appearance of the outfit.
All the signs of a takeover fever are there; and yet, my sources assure me, there is no target. Hutchison Whampoa doesnt want to sell "3." Quite the opposite! It wants to buy it. Its shareholding is close to the level of absolute control, and it wants to get that control.
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Is this a smart strategy? Beats me... but what it means for the market is ominous, because it means that the last high-value revenue stream available for mobile operators premium data is about to be muddied by huge price competition.
Im predicting that by the end of 2005, Hutchison will be selling "3" data in a market which currently asks well over $100 a month (more like $150) for half a gigabyte of data download and will be asking around $50 a month, for 20 gig.
In one sense, this is a perfectly logical strategy; you cant get large-scale data usage at the sort of prices you ask people to pay at the top of the learning curve. What bothers me, however, is the questions of just how profitable the data will be at that rate.
Currently, "3" is outselling all other networks in its chosen territories, simply by charging lowest prices for voice. Its original plan was to sell its own servicesnews, video, and so on out of its walled hutch. The service, however, was never good enough and frankly, it will be at least this time 2007 before Id predict that there will be enough in-building signal strength to carry the sort of data that would lift this to the levels that would make it profitable. And thats making some big bets on the availability of terminals (as I warned last week).
In the short term, however, Id start buying Sierra Wireless stock. Of all the 3G data cards I know, their design looks the most likely to be usable; they have distribution in a market which is pretty demanding (North America) and many of the bugs out of the drivers.
One thing I do think is certain: At the prices which 3G operators will have to charge to compete with "3" it will be a very tempting alternative to finding a Wi-Fi hotspot and drinking lethal levels of coffee.
At least, for a year or so, until there are more users than bandwidth. But by then, who knows what wireless data will be like?
Contributing columnist Guy Kewney has been irritating the complacent in high tech since 1974. Previously with PC Mag UK and ZDNet UK, Guy helped found InfoWorld, Personal Computer World, MicroScope, PC Dealer, AFAICS Research and NewsWireless. And he only commits one blogforgiveable, surely?
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