Verizon, the US telecom giant, announced a huge hit to its fourth-quarter earnings, revealing a $5.8 billion write-down attributed to the devaluation of its declining wireline business. <o:p></o:p>

According to Reuters, this move comes as part of Verizon's strategic reassessment of its Business unit, a key segment catering to businesses and government clients.<o:p></o:p>

&nbsp;The wireline business, encompassing traditional voice and data services, has faced considerable challenges stemming from intense competition, economic uncertainties, and the ongoing industry-wide shift toward wireless services.<o:p></o:p>

Verizon's decision to re-evaluate its Business unit underscores the persistent challenges in the wireline business, which has experienced a decline in revenue. <o:p></o:p>

The five-year review prompted a downward adjustment in the financial projections for this unit, which contributes to over a fifth of Verizon's overall revenue. <o:p></o:p>

The competitive landscape, economic conditions, and the increasing popularity of wireless alternatives have collectively impacted the wireline segment. <o:p></o:p>

As a result, Verizon has recalibrated the value of its Business unit.<o:p></o:p>

After the $5.8 billion write-down, the goodwill balance of the wireline unit stood at $1.7 billion as of December 31. <o:p></o:p>

Verizon's shares responded to the announcement with a decline of over 1 per cent. <o:p></o:p>

Verizon's upcoming fourth-quarter results, scheduled for release on January 23, will provide a detailed overview of the impact of this strategic move on its overall financial performance.<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

Verizon, the US telecom giant, announced a huge hit to its fourth-quarter earnings, revealing a $5.8 billion write-down attributed to the devaluation of its declining wireline business.

Verizon, the US telecom giant, announced a huge hit to its fourth-quarter earnings, revealing a $5.8 billion write-down attributed to the devaluation of its declining wireline business. According to Reuters, this move comes as part of Verizon's strategic reassessment of its Business unit, a key segment catering to businesses and government clients. The wireline business, encompassing traditional voice and data services, has faced considerable challenges stemming from intense competition, economic uncertainties, and the ongoing industry-wide shift toward wireless services. Verizon's decision to re-evaluate its Business unit underscores the persistent challenges in the wireline business, which has experienced a decline in revenue. The five-year review prompted a downward adjustment in the financial projections for this unit, which contributes to over a fifth of Verizon's overall revenue. The competitive landscape, economic conditions, and the increasing popularity of wireless alternatives have collectively impacted the wireline segment. As a result, Verizon has recalibrated the value of its Business unit. After the $5.8 billion write-down, the goodwill balance of the wireline unit stood at $1.7 billion as of December 31. Verizon's shares responded to the announcement with a decline of over 1 per cent. Verizon's upcoming fourth-quarter results, scheduled for release on January 23, will provide a detailed overview of the impact of this strategic move on its overall financial performance. (With inputs from Reuters)

Verizon faces $5.8 billion write-down as wireline business struggles

US telecom companies and airlines have been fighting for weeks over the potential impact of 5g services on aircraft. Here's some background on the dispute and a detailed report on the problems..

United States: Telecom companies and airlines been fighting for weeks

Disruption-the term and practice in vogue- in the business world is usually associated with startups. The ‘story’ goes as: Young and dynamic startup firms disaggregate the value chains of existing industries or firms, find a niche and build a robust business. (The problems usually associated with startups are that of scaling up). But contra the prevailing and conventional wisdom, established firms- especially conglomerates, can be disruptive too.&nbsp;

One example of a conglomerate disrupting an industry is Reliance that essentially totally disrupted India’s telecommunications industry leaving competitors scrambling.

Before dwelling on the nature and form of Reliance’s disruption of the telecommunications industry, it may be useful to recall some concepts and practices that pertain to conglomerates. Often times, these firms, in an attempt to expand took recourse to vertical integration (VI). This meant buying and owning both or either upstream and downstream activities of the industry. The well-known example of VI is that of oil firms. Many big ones like Exxon, Shell, bought and owned but the input, supply and refining side of the industry and the upstream one of retailing.&nbsp;

These firms kept these aspects and functions in the house with the aim of efficiency, effectiveness, cost savings, and economies of scale.

While the rationale of VI sounds eminently sensible, but barring episodic attempts at this in the 1970s and 1960s, the overall success of conglomerates is debatable. Obiter dictum, it is held that conglomerates work well mostly in developed or emerging economy contexts.

Another strategy that firms usually of a larger size took recourse to was diversification. The rationale and the premise was growth and expansion. Diversification could be related or unrelated. With respect to the former, a given firm diversified into a related industry and in terms of the former, the diversification was totally unrelated. The doyens of business and industry held that related diversification offered a greater opportunity as opposed to unrelated diversification.

Against the generic backdrop of vertical integration, conglomerates, related and unrelated diversification, it is interesting to posit Reliance’s strategy of being all of the above and disrupting the Indian telecommunications industry. How did the firm do it?

It would appear that Reliance – being a family-controlled conglomerate- created an internal capital market, aggregated cash flows from its extant (sometimes unrelated businesses) and ploughed them into its telecommunications arm, Reliance Jio. Essentially, the firms cross-subsidised Reliance Jio from its various businesses. With such ‘deep pockets’, Reliance not merely took on extant competition in the telecommunications space but created what Chan Kim and Renee Mauborgne, in their book, ‘Blue Ocean Strategy’ call uncontested market space by making the competition irrelevant. While some competition in the Indian telco space exists like Airtel and some other minor players, but these firms are totally on the defensive and struggling to catch-up with Reliance Jio. In this sense, Reliance strategy does not entirely fit Chan Kim’s and Mauborgne’s premise but approximates it.

Reliance made both data services and calling extremely cheap forcing incumbents and competitors to catch up. The only option left for incumbents was to engage in a price war with Reliance Jio, but they could only do this at great cost to themselves. While Reliance could absorb initial losses with the aim of gaining and capturing market share from competitors, for the incumbents it could only mean bleeding extensively in the rules of the game set and created by Reliance. While at some point in time Reliance Jio will raise the Average Revenue per User (ARPU), but for now for its competitors, it was a blood bath as more likely than not competitors like Airtel match or craft a new strategy to overcome Reliance -which seems unlikely. Shorn of something drastic, Reliance Jio is likely to emerge as the leader in the telco space of India, if it already has not.

The key takeaway or even lesson of the disruption caused by Reliance strategy is that disruption can also be caused by established players – even conglomerates. And that it is not only the prerogative of startups. If, ultimately, the name of the game in a given industry, by a given firm, is to create value, the disruption could be a viable strategy for large firms and might be even more potent given that these firms, by virtue of deep pockets, can scale up faster and without hassles than startups. All this is not to discredit startups.&nbsp;

They remain important in their own right especially as drivers of innovation and path-breaking practices. It is only that disruption can be taken recourse to by conglomerates as well. Reliance Jio and its disruption of the telco space proves the point. 
 
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) &nbsp;

Disruption-the term and practice in vogue- in the business world is usually associated with startups. The ‘story’ goes as: Young and dynamic startup firms disaggregate the value chains of existing industries or firms, find a niche and build a robust business.

Disruption-the term and practice in vogue- in the business world is usually associated with startups. The ‘story’ goes as: Young and dynamic startup firms disaggregate the value chains of existing industries or firms, find a niche and build a robust business. (The problems usually associated with startups are that of scaling up). But contra the prevailing and conventional wisdom, established firms- especially conglomerates, can be disruptive too. One example of a conglomerate disrupting an industry is Reliance that essentially totally disrupted India’s telecommunications industry leaving competitors scrambling. Before dwelling on the nature and form of Reliance’s disruption of the telecommunications industry, it may be useful to recall some concepts and practices that pertain to conglomerates. Often times, these firms, in an attempt to expand took recourse to vertical integration (VI). This meant buying and owning both or either upstream and downstream activities of the industry. The well-known example of VI is that of oil firms. Many big ones like Exxon, Shell, bought and owned but the input, supply and refining side of the industry and the upstream one of retailing. These firms kept these aspects and functions in the house with the aim of efficiency, effectiveness, cost savings, and economies of scale. While the rationale of VI sounds eminently sensible, but barring episodic attempts at this in the 1970s and 1960s, the overall success of conglomerates is debatable. Obiter dictum, it is held that conglomerates work well mostly in developed or emerging economy contexts. Another strategy that firms usually of a larger size took recourse to was diversification. The rationale and the premise was growth and expansion. Diversification could be related or unrelated. With respect to the former, a given firm diversified into a related industry and in terms of the former, the diversification was totally unrelated. The doyens of business and industry held that related diversification offered a greater opportunity as opposed to unrelated diversification. Against the generic backdrop of vertical integration, conglomerates, related and unrelated diversification, it is interesting to posit Reliance’s strategy of being all of the above and disrupting the Indian telecommunications industry. How did the firm do it? It would appear that Reliance – being a family-controlled conglomerate- created an internal capital market, aggregated cash flows from its extant (sometimes unrelated businesses) and ploughed them into its telecommunications arm, Reliance Jio. Essentially, the firms cross-subsidised Reliance Jio from its various businesses. With such ‘deep pockets’, Reliance not merely took on extant competition in the telecommunications space but created what Chan Kim and Renee Mauborgne, in their book, ‘Blue Ocean Strategy’ call uncontested market space by making the competition irrelevant. While some competition in the Indian telco space exists like Airtel and some other minor players, but these firms are totally on the defensive and struggling to catch-up with Reliance Jio. In this sense, Reliance strategy does not entirely fit Chan Kim’s and Mauborgne’s premise but approximates it. Reliance made both data services and calling extremely cheap forcing incumbents and competitors to catch up. The only option left for incumbents was to engage in a price war with Reliance Jio, but they could only do this at great cost to themselves. While Reliance could absorb initial losses with the aim of gaining and capturing market share from competitors, for the incumbents it could only mean bleeding extensively in the rules of the game set and created by Reliance. While at some point in time Reliance Jio will raise the Average Revenue per User (ARPU), but for now for its competitors, it was a blood bath as more likely than not competitors like Airtel match or craft a new strategy to overcome Reliance -which seems unlikely. Shorn of something drastic, Reliance Jio is likely to emerge as the leader in the telco space of India, if it already has not. The key takeaway or even lesson of the disruption caused by Reliance strategy is that disruption can also be caused by established players – even conglomerates. And that it is not only the prerogative of startups. If, ultimately, the name of the game in a given industry, by a given firm, is to create value, the disruption could be a viable strategy for large firms and might be even more potent given that these firms, by virtue of deep pockets, can scale up faster and without hassles than startups. All this is not to discredit startups. They remain important in their own right especially as drivers of innovation and path-breaking practices. It is only that disruption can be taken recourse to by conglomerates as well. Reliance Jio and its disruption of the telco space proves the point. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

How Reliance Industries strategised its growth in the telecom sector

The Indian mobile industry will consolidate further if the government does not offer a material relief on adjusted gross revenue (AGR) liabilities, regulatory levies and potentially a floor on pricing, according to Kotak institutional equities.

Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).&nbsp;

According to the DoT, the calculations should incorporate all revenues earned by a telecom company – including from non-telecom sources such as deposit interests and sale of assets. The companies, however, have been of the view that AGR should comprise the revenues generated from telecom services only and non-telecom revenues should be kept out of it.

&nbsp;A 'no material relief' scenario would be an industry-structure-altering one, it added.

Even as the massive AGR-case-related payout is a meaty gross negative for Bharti airtel, the potential gross positive from industry consolidation will likely result in a net positive outcome, it said adding that Bharti could be a net beneficiary.

Credit Suisse noted that Vodafone's idea faced "another operationally weak quarter" and that the government relief measures are "key to sustain". Meanwhile, the Indian telecom industry scenario of heavy losses continue day after details of.&nbsp;

Losses incurred by Reliance communications in the second quarter of 2019-2020 were made public, reliance communications on Saturday said Anil Dhirubhai Ambani resigned as the company's director. Along with him, four other senior officials of reliance communications have also stepped down from their posts. These are Chhaya Virani, Ryna Karani, Manjari Kacker and Suresh Rangachar.

In the second quarter of 2019-20, reliance communications' consolidated loss stood at Rs 30,142 crore. This data was released on Friday.

The Indian mobile industry will consolidate further if the government does not offer a material relief on adjusted gross revenue (AGR) liabilities, regulatory levies and potentially a floor on pricing, according to Kotak institutional equities.

The Indian mobile industry will consolidate further if the government does not offer a material relief on adjusted gross revenue (AGR) liabilities, regulatory levies and potentially a floor on pricing, according to Kotak institutional equities. Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT). According to the DoT, the calculations should incorporate all revenues earned by a telecom company – including from non-telecom sources such as deposit interests and sale of assets. The companies, however, have been of the view that AGR should comprise the revenues generated from telecom services only and non-telecom revenues should be kept out of it. A 'no material relief' scenario would be an industry-structure-altering one, it added. Even as the massive AGR-case-related payout is a meaty gross negative for Bharti airtel, the potential gross positive from industry consolidation will likely result in a net positive outcome, it said adding that Bharti could be a net beneficiary. Credit Suisse noted that Vodafone's idea faced "another operationally weak quarter" and that the government relief measures are "key to sustain". Meanwhile, the Indian telecom industry scenario of heavy losses continue day after details of. Losses incurred by Reliance communications in the second quarter of 2019-2020 were made public, reliance communications on Saturday said Anil Dhirubhai Ambani resigned as the company's director. Along with him, four other senior officials of reliance communications have also stepped down from their posts. These are Chhaya Virani, Ryna Karani, Manjari Kacker and Suresh Rangachar. In the second quarter of 2019-20, reliance communications' consolidated loss stood at Rs 30,142 crore. This data was released on Friday.

Indian Mobile industry to consolidate further if government doesn't offer material relief

India's telecom giant Bharti Airtel Ltd today posted its lowest quarterly profit in 15 years as the high-profile price war with Mukesh Ambani-led Jio in the past year finally began to show up in the bottomline.

The company posted a 78 per cent drop to register net profit of 83 crore compared to Rs 373 crore net profit in the quarter ending March a year ago.

The Sunil Mittal-led telecom company also witnessed a 10.5 per cent drop in net revenue of 19,634 crore in the fourth quarter of 2017-18 compared to Rs 21,935 crore in the corresponding period last fiscal.

Not just the tariff war, Airtel was also hit because of its decision to cut international termination charges (ITC) from 53 paise to 30 paise.

"The telecom industry continues to witness below cost, artificially suppressed pricing," Gopal Vittal, Bharti Airtel`s managing director and chief executive for India and South Asia, said.

For the full fiscal year ending&nbsp;March 2018, Airtel's net profit was&nbsp;1,099 crore&nbsp;which is over 71 per cent lower than Rs 3,800 crore in FY 2016-17.

Not just the tariff war, Airtel was also hit because of its decision to cut international termination charges (ITC) from 53 paise to 30 paise.

India's telecom giant Bharti Airtel Ltd today posted its lowest quarterly profit in 15 years as the high-profile price war with Mukesh Ambani-led Jio in the past year finally began to show up in the bottomline. The company posted a 78 per cent drop to register net profit of 83 crore compared to Rs 373 crore net profit in the quarter ending March a year ago. The Sunil Mittal-led telecom company also witnessed a 10.5 per cent drop in net revenue of 19,634 crore in the fourth quarter of 2017-18 compared to Rs 21,935 crore in the corresponding period last fiscal. Not just the tariff war, Airtel was also hit because of its decision to cut international termination charges (ITC) from 53 paise to 30 paise. "The telecom industry continues to witness below cost, artificially suppressed pricing," Gopal Vittal, Bharti Airtel`s managing director and chief executive for India and South Asia, said. For the full fiscal year ending March 2018, Airtel's net profit was 1,099 crore which is over 71 per cent lower than Rs 3,800 crore in FY 2016-17.

Jio effect: Bharti Airtel's profits at 15-year low

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