Operators in western Europe seem to have stopped worrying about getting customers on to 3G networks, and started wondering how they can make profits from 3G services. But in eastern Europe the issue is still about connecting customers in the first place. And the situation does not look good. According to new data from Wireless Intelligence, a market-research company, just two countries – Poland and Romania – accounted for roughly half of the 31m connections across the region in the third quarter of this year. 3G progress in Russia and Ukraine, the two biggest countries, appears to have stalled badly.

As our special report on eastern Europe points out, both Russia and Ukraine have run into difficulties partly because of politics. Ukraine’s recent postponement of a 3G auction was a clear example of unprincipled electioneering by Viktor Yushchenko, the incumbent president (see 3G politics). In Russia, meanwhile, the defence ministry has been clinging on to spectrum needed for 3G services in Moscow, where operators generate most of their revenues (see Missing in Moscow).

Wireless Intelligence reckons there are just 500,000 3G connections in Ukraine, all served by state-owned Utel – the only operator licensed to provide 3G services. And it says there are only 4m 3G customers in Russia – representing about 2% of total connections.

Poland and Romania appear to have avoided any of the political scuffles that can hold up 3G. But they are flying for other reasons, too. Both launched services well before this particular recession took hold. And in both markets the licensees include foreign direct investors with experience of operating 3G services elsewhere.

In Romania, the market could even get a lift in the short term. Romania’s regulator has recently given the nod to a takeover of Zapp, a tiny operator with a 3G licence, by Greece’s Cosmote, a much bigger company without one (see The power of three). That should give rise to a company that can better challenge the might of Vodafone and France Telecom, the country’s two biggest players.

Yesterday’s Financial Times article about News Corp’s talks with Microsoft made interesting reading. It’s always been a curious fact that newspapers have been happy to see their news content on Google offered for free while their print circulation continues to drop. Why hasn’t the media discussed a Google lock-out before this?

I don’t have an answer for that but I do have one for why its organising now.  Rupert Murdoch’s print businesses - which own the esteemed Wall Street Journal and popular UK tabloid The Sun - reported a spectacular 81% drop in operating income from its newspaper operations in the three months to September.

And its not just Murdoch’s properties that are in deep trouble. According to the US Audit Bureau of Circulation, newspaper sales in the US in the six months to the end of September were down nearly 11% over the same period a year earlier. Similar declines have been registered in the UK.

Still, I can’t help feeling that the Murdoch/Microsoft talks look an awful lot  like shutting the barn door well after the horse has bolted. Microsoft’s search engine – Bing? Bong? - has a 10% share of online searches in the US, compared to Google’s 65%. The loss of links to news (not all, but some) will not cause Google users to desert the site they’ve come to depend on for maps, searches, online photo albums, email, IM chat, etc, etc. Rupert, here’s a news flash: People use Google for a lot more than news.

And looked at from the other side, Google has its uses. According to Experian Hitwise, Google delivers around 25% of the Wall Street Journal’s online traffic. The fact that Murdoch is thinking about walking away from this must mean that his managers haven’t figured out how to make it’s online business pay. And that’s despite the company’s much-admired pay wall. 

The problem, guys, isn’t Google. It’s the print business itself - a business that rather pompously ignored the impact of the web until it was too late.

Ofcom boss Ed Richards might look like he’s just graduated from high school, but he adopts a distinctly headmasterly tone when talking about the companies under his jurisdiction. “We’d be further on were it not for disagreements between operators motivated by clear self-interest,” he said at a London conference organised by the Financial Times this morning.

Mr Richards was talking about the intractable issue of spectrum. The US Federal Communications Commission has recently used the expression “looming spectrum crisis” when talking about it, and Mr Richards seems equally concerned there is a serious problem around the corner.

Evidently, he feels the disputes over the refarming of 900MHz spectrum, held by Telefónica O2 and Vodafone, have hindered progress. Currently used for 2G services, this spectrum could be repackaged and used for more efficient 3G services, according to Ofcom. But its current owners have been reluctant to part with it, arguing that Ofcom underestimates the cost of clearing 900MHz spectrum of 2G users.

Confusing matters further is the pending merger between Orange, owned by France Telecom, and T-Mobile, owned by Germany’s Deutsche Telekom. If it goes ahead, it will mean the UK’s biggest operator by customers controls a huge swathe of 1800MHz spectrum but none in the 900MHz band. Predictably enough, Hamid Akhavan, the chief operating officer of Deutsche Telekom, told conference delegates he saw no reason why competition authorities should oppose the merger, given that profitability has not risen (using measures such as EBITDA) in the UK since 2002. But Mr Richards is not so easily convinced, saying other factors need to be considered.

Spectrum, of course, is a finite resource. So if it’s not efficiently allocated and well managed, the market could suffer for years. Among other initiatives, Ofcom is calling for more R&D into devices that use spectrum more efficiently. But if its plan for using mobile broadband to serve isolated areas is to bear fruit, then more progress with the operators is paramount.

The Financial Times generally puts on good conferences so it was with high hopes that we accepted an invitation to today’s FT World Telecoms Conference. Unforunately, one of the key note speakers, Dr Hannes Ametsreiter, CEO, Telekom Austria, called in sick. So the first two sessions were combined, putting Senior EVP of Orange France Telecom, Olaf Swantee, and Michel Combes, CEO Europe, Vodafone, on the podium for two hours.

Both had pretty much the same thing to say – it’s tough out there but data will save us all. Mr Combes touted the Vodafone- Softbank-Verizon-China Mobile’s Joint Innovation Lab (JIL) project which will provide a platform for the development of mobile services for their combined global customer base of 1bn customers. Applications will range from health care services to mobile banking to shopping for everything from pizza to stamps, he says.

He also wanted us to know that the natural home of social networking is the mobile phone. Mr Swantee from Orange backed up the data story, saying that 24% of its the company’s clients are using 30 meg/month, up from 17% in February. “Data seems to be quite recession-proof,” he claimed.

This is all well and good except for the problem, as we pointed out in this article on our parent site, that data isn’t generating any profits. In the last quarter, for example, Vodafone showed that its data revenues jumped by an impressive 20%. And in the first half of this year, the company’s operating margin slipped by 2.1% and is predicted to drop by a similar amount in the full year.

Meanwhile, the company which invented the idea of a platform for developing services for mobiles (while the rest of the industry was sleeping) remains in rude good health. Note to FT conference organisers: invite someone from Apple next year?

Is there no stopping Huawei? Fresh from winning the contract to build just about all of Telenor’s next-generation network in Norway, the Chinese manufacturer is this week reported to be signing off a deal with Vodafone. OK, it’s only for the establishment of a new R&D centre in Milan – not a lucrative network rollout – but it will have its western rivals smarting all the same.

According to analysts at the Royal Bank of Scotland, the UK operator and Chinese manufacturer are to collaborate on the development of various core network technologies, particularly something called Evolved Packet Core. Sounds dull, but just about every mobile-phone operator thinking about LTE – a so-called ‘4G’ access technology – will be looking to upgrade their core networks, too.

Of course, the chances are high that Vodafone eventually becomes a customer of Huawei for these core-network products. Although a commercial relationship didn’t result from their work together on software-upgradeable base stations, it was largely because Vodafone would have had to replace so much existing equipment. That’s not the case now. And the likes of Nokia Siemens Networks and Alcatel-Lucent will find matching Huawei’s prices in this particular business just as hard as in others.

When telecoms equipment makers start berating countries for “slow progress”, you know those companies are in trouble. Having failed to turn a quarterly profit since its creation, Alcatel-Lucent didn’t need to remind investors of that fact. But it has done so anyway. In an interview with the Financial Times, Ben Verwaayen, the new-ish CEO, has made clear his displeasure with India’s lack of 3G – and drawn more attention to Alcatel-Lucent’s lack of 3G sales.

Even so, Mr Verwaayen has a point. Perpetual regulatory dithering over the terms and conditions of a 3G licences auction means India is now about six years behind western Europe on 3G rollout. It might not matter as much were India blessed with an alternative form of infrastructure for carrying internet traffic. But its fixed-line networks don’t go far. While the suggestion that every mobile-phone customer would want or be able to afford 3G is ridiculous, many Indians are clearly missing out.

Like others, Alcatel-Lucent will be desperately hoping an auction finally happens in January 2010, as currently planned. If it doesn’t, few would express surprise. But Alcatel-Lucent’s chances of reporting a first quarterly profit next year could take a serious knock.

Robert Mugabe’s sudden appearance at the ITU telecoms show being held this week in Geneva must have been a considerable embarrassment to most of the event’s organisers. Deflecting the suggestion that his attendance was ‘unheralded’ – the description originally used by Telecom TV, a website – an ITU spokesperson told the Economist Intelligence Unit that the UN agency knew all about his arrival in advance. It seemed most delegates didn’t, however. And the ITU’s failure/reluctance to publicise it was hardly surprising given his notorious reputation.

International sanctions, of course, prevent Mr Mugabe from travelling around Europe at his convenience. Paradoxically, though, he is allowed to attend UN events, and probably grabbed the opportunity to enter Geneva on this pretext, check his Swiss bank account and buy some chocolates for a few Zanu-PF zealots.

What made the ITU look particularly bad was its treatment of Mr Mugabe at the event. They couldn’t stop him from railing idiotically against the West (which, during a ministerial session, he nonsensically blamed for using the airwaves to destabilise Zimbabwe). But did they have to be so courteous? The spectacle of Houlin Zhao, the ITU’s deputy secretary general, graciously leading Mr Mugabe around the exhibition floor left a nasty taste in this attendee’s mouth.

But if the ITU came out of this badly, the behaviour of various government figures was truly disgraceful. Any minister worth his badge would have quit the session to which Mr Mugabe was invited. Disappointingly, a few were seen shaking him by the hand as he entered the room.

In Asia, the Middle East and Africa, where most of the population have never seen or used a fixed line, the mobile phone is more than a tool for communication. It’s a business tool, it’s a fashion statement and it’s becoming of a mobile social networking tool. And that’s where ringbacks come in.

Like mobile banking before it, the ringback phenomena has started in the developing world and is now moving east.  Ringbacks - alternatively called caller tunes, answer tones and CBRT (for callback ring tones) - are the tunes that are activated when someone calls you. So they hear this pre-selected music instead of the brrng, brrng that we’ve all been listening to since the very first call was made more than 100 years ago.

Even better for operators keen to maximise their revenue streams, ringbacks can be selected for each and every contact in a phone – or for groups of contacts. So when your mum rings, she gets 10 seconds of Chopin, but when your boyfriend rings, he gets T-Pain. This might like sound a must-have for people lives full of gadgets. But for people whose only gadget is a phone, it’s mega.  Asiacell in Iraq for example, launched Melody Service this month allowing customers to replace the traditional ringtone with songs and jingles of their choice

According to UK-based Juniper Research, ringbacks will soon catch on in the West. In fact, it predicts ringback sales will outstrip ringtones next year. Another piece of good news for operators  – and not a bad one for the music industry.

Say goodbye to your subsidised iPhone, your mobile-broadband deal that comes with a free laptop and levels of customer service that could disgrace even the finest international restaurants.

OK, the last is a gross exaggeration, but mobile-phone customers in the UK’s hyper-competitive market have certainly been treated to some extraordinarily generous deals over the last couple of years. Those could soon disappear if Germany’s Deutsche Telekom is eventually persuaded to sell off its struggling T-Mobile UK subsidiary.

According to today’s papers, each of the UK’s three other major operators – Vodafone, France Telecom and Telefónica – is holding out for a deal with its German rival that would make it the market leader by far. Vodafone and Telefónica are each reckoned to have made substantial cash offers of £4bn for T-Mobile UK. France Telecom, meanwhile, is involved in discussions with Deutsche Telekom about merging UK assets in a joint venture.

All would obviously hope to benefit from the cost savings that typically result from M&A activity. But a tie-up or takeover would also give an operator a lot more negotiating power with handset suppliers. With Telefónica’s exclusive deal for Apple’s iPhone thought to be up for discussion, that could be a critical motivator.

No doubt, the regulator’s preferred outcome would be for a joint venture between third-placed France Telecom and trailing T-Mobile. A takeover by Telefónica or Vodafone, after all, would give rise to a company controlling about 40% of the market.

Even so, any deal will upset regulatory plans for redistribution of spectrum, which had counted on there being five UK operators (including the smaller Hutchison 3). With mobile operators expected to play an important role in extending broadband access across Britain, authorities will fear the consequences of losing a competitor.

And so will savvier consumers.

One of the most interesting things about Apple’s deal to sell the iPhone in China is that it spotlights the shortcomings of China’s government in promoting a home-grown mobile-phone technology.

Apple, of course, likes to do its iPhone deals with operators that are market leaders (AT&T in the US, Telefónica in Spain and the UK, Deutsche Telekom in Germany and France Telecom in France). In China, the obvious choice would have been China Mobile – not only the market leader by far but also the biggest mobile-phone company in the world by customers.

China Mobile, however, is stuck with a unusual 3G technology called TD-SCDMA. While most emerging markets have been happy to run with the W-CDMA and EV-DO standards developed in the US and Europe, Chinese authorities preferred to come up with their own 3G standard. The hope was this would provide a boost to Chinese tech firms, and prevent the likes of Ericsson, Nokia and Motorola from taking over. It might also reduce the royalty fees that makers of 3G equipment typically pay to Qualcomm, a US chip company behind much of the technology used in the W-CDMA and EV-DO standards.

But the outcome has been a troubling one for China’s leaders. For a start, TD-SCDMA got off to a bad start, as any commercially unproven technology is likely to do, with customers complaining about service quality and a number of technical glitches.

What’s more, Huawei and ZTE, China’s two biggest hardware companies, have become international firms in their own right, buoyed by sales of EV-DO and W-CDMA equipment to operators around the world. At the same time, western rivals have made tentative investments in TD-SCDMA, preventing Huawei and ZTE from monopolising that space.

Ultimately, though, TD-SCDMA does not have the same degree of industry support as the two older 3G technologies, and that leaves China Mobile at a disadvantage. Its network equipment is likely to be more expensive, for one thing. And most of the world’s cutting-edge handsets have not been customised to work on TD-SCDMA networks. The iPhone is no exception.

For China Mobile, this would not matter as much if it weren’t for the fact that Chinese authorities – instinctively protectionist but worried about the consequences of protectionism – allowed China’s two smaller mobile-phone operators to compete using the international 3G standards. Telecom got an EV-DO licence, while Unicom was permitted to roll out W-CDMA.

The upshot is that Apple did its iPhone deal with China Unicom, giving the operator a huge advantage over its bigger rival in the nascent 3G market. Meanwhile, China Mobile is trying to persuade handset makers outside China to come up with more attractive TD-SCDMA handsets, while struggling to convince customers its 3G service is just as good as its rivals’.

All things considered, this is one government scheme that looks to have badly backfired.