Optical/IP Networks

IPTV in Iceland

This week in Euroland we tackle a slew of contracts and some serious cost-cutting from as far west as Iceland to as far east as Russia. You see, just like the European Commission, we can stretch this continent out almost indefinitely.

The news runs the gamut, from Cisco Systems Inc. winning some nice business at Swisscom AG (NYSE: SCM) to Icelanders gearing up for IPTV.

Cisco cinches Swisscom
Let's start with the good news. Take Swisscom AG (NYSE: SCM) – please! It has decided to base its next-generation core IP network entirely on Cisco Systems Inc.'s (Nasdaq: CSCO) terabit terror, the CRS-1, as it gears up to launch its IPTV services later this year (see Swisscom Chooses Cisco's CRS-1 and Swiss IPTV Trial Hits 'Glitches').

That "multimillion-dollar" announcement comes on the back of Cisco's recent CRS-1 success at BT Group plc (NYSE: BT; London: BTA), while the vendor has previously said that Telecom Italia SpA (NYSE: TI) is also putting the router through its paces (see Cisco's CRS-1 Gets Edgy and Cisco Unveils the HFR).

Swisscom has been lining up its next gen-systems suppliers during the past few months and reckons it'll need massive capacity in its IP backbone once its IPTV services are live, especially once the carrier starts offering HDTV (high-definition TV) streams, which require twice as much bandwidth as regular TV. (See Swisscom Picks Alcatel for IPTV, Swisscom Picks Siemens for VOIP, Swisscom Deploys Kagoor's VoiceFlow, and Swisscom Picks Sylantro, Siemens.)

IPTV in Iceland
Elsewhere, Iceland Telecom (Síminn) – yes, that is part of Europe – has caught the IPTV bug. It has launched a TV-over-broadband service, and to cope with the bandwidth demands is upgrading its access infrastructure with Alcatel's (NYSE: ALA; Paris: CGEP:PA) ISAM multiservice access hub, which was designed with triple-play services in mind (see Vendors Claim DSLAM Breakthrough).

The Icelandic incumbent is not using Alcatel's IPTV middleware, though, nor the software from Alcatel partner Microsoft Corp. (Nasdaq: MSFT). Instead it is using a system called SmartVision TV from Thales Broadcast & Multimedia, delivered in conjunction with Thales partner IBM Corp. (NYSE: IBM).

Thales has had other IPTV successes, most notably at France Telecom SA (NYSE: FTE) and with Télégenève SA, the cable operator in Geneva.

Alcatel does have an IPTV middleware success story to boast about today, though. Its Open Media Suite software is live and kicking at Russian service provider Sistema JSFC, which is launching its IPTV service this month (see Sistema Launches Triple-Play Service).

Huawei tags Telefónica
Finally, it looks as if Huawei Technologies Co. Ltd. might have jumped the gun by telling Dow Jones Newswires that Spanish incumbent operator Telefónica SA was certain to become a customer this year.

The Huawei spokesman who boasted of the impending deal is now keeping schtum on the matter, but we suspect he may have been alluding to a deal the Chinese vendor may have struck with the Spanish carrier's German subsidiary, Telefónica Deutschland GmbH, which provides broadband access services to business customers.

Telefónica didn't answer the phone when we called.

Huawei's getting pretty good at finding a way into the European incumbents these days, having recently added BT and Deutsche Telekom AG (NYSE: DT) to its list of conquests (see BT Unveils 21CN Suppliers and Huawei Lands Deutsche Deal).

Other new systems contracts of note include:

C is for cost cutting
Cutting costs is still the name of the game for many of Europe's large carriers, with analysts keeping as close an eye on the operators' operational expenses as they do on earnings, revenues, and margins.

For example, the team at Lehman Brothers is impressed with the cost management regime at Dutch operator KPN Telecom NV (NYSE: KPN), which has just announced its first-quarter results (see KPN Reports Q1).

On first glance, the numbers don't look good: Revenues, operating profits, and earnings are down compared with a year earlier. But Lehman's Graeme Pearson notes that operating expenses in the carrier's fixed-line division were down 7.5 percent, while KPN managed to grab a healthy 68 percent of new DSL customers in the quarter. In addition, the carrier recorded strong mobile subscriber growth in its home market, though its German mobile operator, E-Plus Mobilfunk GmbH, is still a concern [ed. note: Isn't it always?]. Overall, Pearson reckons the latest set of figures makes KPN "more of an M&A target."

The opex reductions in KPN's fixed-line division were expected after the operator announced earlier this year its dramatic plan to shed the majority of its fixed-line staff as it migrated to a single IP network (see KPN Lays Out IP Migration Plan). In the first quarter alone KPN's fixed division recorded restructuring charges of €16 million (US$20.5 million).

Also as part of its IP services plan, KPN is installing ADSL2+ DSLAMs, and it plans to launch its fixed-line VOIP service later this month and IPTV services later this year (see KPN Upgrades Its Alcatel DSLAMs).

There have also been some jobs cut further south at Telecom Italia in the past year. The operator noted in its first quarter numbers that just about everything (revenues, profits, capital expenditure, espresso consumption) was rising, but that its total headcount in March was down from a year earlier to 87,180 from 93,041 in March 2004 (see Telecom Italia Reports Q1).

And talking of job cuts, Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) announced its first tranche of headcount reductions following its failure to land any 21CN deals at BT (see Marconi to Cut 800 Jobs). The company is desperately trying to remind people that it does have other customers, but the gossip here in the U.K. is whether the vendor's management can find anyone prepared to acquire a shrinking company (see Marconi to 'Pursue All Strategic Options', BT Shuns Marconi for 21CN, and Could Huawei Buy Marconi?).

Other news of interest from Euroland recently includes:

Eurobites is going on a bit of a tour in the coming weeks, so look out for reports from Stockholm and the the south of France, where we'll be picking up gossip, poking at petit fours, and getting lost after too many shots of Pernod. Until then, au revoir!

— Ray Le Maistre, International News Editor, Light Reading

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