Hutch 3G Dumps Supplier

Hutchison 3G UK Ltd., in the final throes of preparing for commercial launch, has made a last-minute decision to sever relations with one of its OSS suppliers, TTI Telecom International Ltd. (Nasdaq: TTIL).

Although the system TTI was supplying is not essential to Hutchison's service launch, it was a key element in the operator's back-office operation in terms of managing the many elements of its 3G network. "I can confirm that we have terminated our contract with TTI Telecom," Ed Brewster, the carrier's head of corporate communications, tells Unstrung. "I can't comment any further or go into any details other than to say we have terminated the relationship with the supplier." TTI is equally tight-lipped, and is not even naming Hutchison as the operator involved (see Termination Troubles TTI). "Our legal department has not received approval to talk about this in public," says TTI investor relations officer Sanjay Hurry. "Once we have clearance then we can talk about how we could look to mend bridges and move on." Hey, no rush, Hurry. Hutchison 3G UK announced the contract with TTI back in February 2002, when it announced that TTI was to "deliver its integrated, state-of-the-art Manager of Managers (MOM) solution. It will initially be deployed in the UK and later made available in every country where Hutchison Whampoa has 3G interests." The TTI system was to "provide end-to-end system management functionalities, including fault, trouble ticketing, performance, configuration, inventory, Call Detail Records (CDRs) analysis and service management." This would "enable Hutchison 3G to understand how the different components in its network are interrelated, how they impact one another and how services are affected when failures occur. The system will monitor all the element managers in Hutchison 3G's network, which spans multiple domains and vendors, including radio access, core IP, transmission, IT infrastructure and systems application management." At the time of the award, TTI's CEO said the deal made his company "the premier company to address the network and service management needs of 3G operators." So we asked whether TTI had won any business from other 3G operators. "Until recently we had MobilCom AG," says Hurry. Oh dear (see MobilCom, Namedropper). "We are talking to others in Europe and Asia/Pacific," but no other deals have been struck to date. How much of an impact will this have on Hutchison? "It's an overall umbrella system that brings all the network information together," says Mark Basham, director, OSS, at consultancy RHK Inc. "Although it's not something Hutchison would need to launch its service, it is an important element in a 3G environment, as there are so many elements in the network. As well as the [radio network] infrastructure you have all sorts of servers, service nodes, and lots of other things that are all producing network data that needs to be filtered and correlated. It makes life easier for the network operator. The carrier needs a rationalized view of what's going on." And Basham says this will not have been a decision taken lightly by Hutchison. "It would normally require something quite serious for a contract to be terminated. Carriers are usually quite flexible with their OSS suppliers. They want them to succeed and get things right." So Hutchison would be looking to replace TTI software with an alternative. "Absolutely," says Basham. Possible names in the frame are Agilent Technologies Inc. (NYSE: A), Hewlett-Packard Co. (NYSE: HPQ) from the business that was Compaq Telecom, and Unstrung Top 25er Watchmark (see Unstrung's Top 25 Startups). Hutchison has plenty to think about at present, including its ongoing "friendly trials" of its dualmode handsets and apparently misleading media stories...

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For instance, rumors of 100,000 3G handsets in the U.K. shops before the year's end are bunkum, Brewster tells us. Someone, somewhere, has misused the 100,000 figure. That's the number of dualmode 3G handsets that suppliers Motorola Inc. (NYSE: MOT) and NEC Corp. (Nasdaq: NIPNY) have pledged to deliver to Hutchison Whampoa Ltd. (Hong Kong: 0013). Whampoa is the majority shareholder in the U.K. operator and 3G player in nine countries in total (Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy, Sweden, and the U.K., since you ask). Each will use the brand "3" for their 3G services (see Copywriters on Acid).

Earlier this week, Whampoa managing director Canning Fok said 60,000 have been delivered so far, though they certainly haven't been "delivered" in anything like those numbers to the U.K. "Obviously, at the moment, only Italy and the U.K. are in any position to do anything with those handsets, but to suggest they will be in the shops and available to purchase is misleading." So does that mean the "handsets in the shops" reports have been plain wrong? "They're not right," says Brewster, spinning frantically in his chair.

So far the U.K. operation has taken delivery of between 1,000 and 2,000 handsets (all from NEC), which are being tested by "friendly users" to find out what does and doesn't work (see Hutchison Inches Closer to 3G). Tweaks to the handset operating system are still going on, says Brewster. Hutchison Whampoa obviously believes the devices will sell well once the 3G operations are up and running commercially, as the Hong Kong-based conglomerate recently doubled its order of whizzy 3G phones from NEC to 2 million (see I'll Up You a Million). Motorola is a bit behind the game. It only cranked up its production line last month (see Motorola Fires Up 3G Production).

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So what is happening in the near future, then? "Well, there is no fixed timetable for what happens when. It's all dependent on our phased rollout. This business will not put anything into the market unless we are 100 percent happy with it," says Brewster. "Obviously we hope to have paying customers before the end of the year, but it all depends where we are in the phased rollout." So it looks as if Hutch's earlier stated goal of launching commercially before the end of 2002 could be eased gently aside. Something that will happen before the end of the year in the U.K. is the opening of "three flagship shops" (try saying that after a tequila or six…). "Two will be in London -- Oxford Street and High Street Kensington -- and one in Birmingham. So there will be three '3' shops where people can see the kind of thing we have to offer." Fok says 300 U.K. outlets will be open by the end of 2003, and these will be in addition to the outlets that will be incorporated into the chain of drug stores that Whampoa recently purchased (see 3G's Very Own Bull). The other recent rumor that Brewster is keen to talk around concerns the pricing of services. Executives from H3G, the Italian 3G startup operator in which Whampoa holds a 88.2 percent stake, "did a roadshow to visit and talk to retail channel partners," explains Brewster. "They outlined some services and some top-line, simple price packages that would be offered to the lucky first customers, but which will not be long-term offers. And they do not bear any relation to the U.K. pricing," details of which are still locked in the Hutchison vault. So what are these prices that Brewster is so keen to pay down? Well, they're pretty straightforward:
  • €85 (about the same in US$ at the moment) per month for 40 hours of voice calls and almost, but not quite, unlimited videoconferencing, Internet access, and messaging (text and picture). Then there's the €600 to €900 cost of the handset on top.
  • €140 a month for the same bundle of services, but you get a handset that can be upgraded each year at no additional cost.
Analysts at Gartner/Dataquest believe such introductory pricing would have been designed to attract "mid- to high-spending contract subscribers," and might even tempt people to abandon their fixed-line connections and use the mobile for all their voice needs. The Gartner folk, Ben Wood and Jason Chapman, also say the handsets are "very expensive, much bulkier, and have significantly shorter battery life," compared with current GSM devices, and that the rental option "reflects the high cost of handsets and their rapid evolution. The free annual upgrade option is a good move by Hutchison because it encourages users to take new handsets and increase their spending on new services. Users will perceive it as innovative in the previously unsubsidized Italian market." But if Brewster is "not wrong," those early adopters will need to jump on board early before the introductory offer is replaced. — Ray Le Maistre, European Editor, Unstrung www.unstrung.com
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