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KPN is on the Move But to Where?

Yesterday KPN CEO Mr. Ad Scheepbouwer expressed in interest in mergers and acquisitions in central and eastern Europe. A reader in Holland called my attention to the following additional material.

“Scheepbouwer does not hide that the advance of cable, now that Casema, Essent & Multikabel have merged with the Dutch branch of UPC already a major player has made it to most feared competitor. Now he says that KPN was wrong in perceiving discounters like Tele2 as a threat. “I have said some pretty bad things about Tele2″, said Scheepbouwer about the company that now is a large customer of KPN renting a lot of capacity.”

“With hindsight Mr S. regrets KPN’s policy of spending years discouraging competition. ‘It was not very smart of us not having opened our network before. We should have done that 10 years earlier’, said the KPN CEO. When it sells wholesale network capacity KPN makes a profit of 40%, whereas it on a retail customer only makes 12%. KPN would have been wise years ago to have opened its network to cable companies. Now these have been forced to invest in adding voice capacity to their own networks, and KPN is able to sell them nothing.”

“Scheepbouwer has been forced to think again because of the example of BT. This company, lead by Dutchman Verwaayen, even has thrown its wireline division out of the house and now earns “tons” of money with innovative services. Mr Scheepbouwer emphasized that KPN’s profit growth in the long term will have to come out of services in health, education, security and E-government.”

Another reader provided this counter point to seemingly progressive stance of The KPN CEO: “Telecom watchdog Opta will soon have to decide if KPN is offering a good deal to it’s competitors who want to use the All-IP network, and so it’s good timing to lament now that you have not been as open in the past as you should have been and thereby suggesting that from now on your network will be as open as possible. I’d say: let’s wait and see what KPN will do in the next couple of months.”

Suddenly a Very Different Angle: KPN -> Germany (WINGAS) -> Russia (Gazprom)

Today KPN issued a press release: KPN and WINGAS join forces: WINGAS to market fibre optic cables in Germany

“Frankfurt/Kassel. One of Europe’s leading telecommunication companies, Netherlands-based KPN, with an office in Frankfurt, and natural gas company WINGAS GmbH are bundling their expertise and strengths. Effective immediately WINGAS will market the fibre optic cable networks of both partners in Germany.” [snip]

According to their joint press release, WINGAS is nothing more than “a European energy company which supplies natural gas to customers in Germany, Belgium, France, the UK, Austria, Denmark and the Czech Republic. (…) In developing its pipeline grid WINGAS backed the use of cutting edge glass fibre technology right from the outset. Initially, data transfer was focused on controlling and monitoring the pipeline system but with the liberalization in the telecommunications markets in 1996 WINGAS was one of the first companies to begin marketing its fibre optic network. Today WINGAS counts many well-known companies in the telecommunication and IT industries among its customers.”

But Russia? Well here we find that “WINGAS GmbH is a joint venture of Wintershall Holding AG in Kassel, the largest German producer of oil and natural gas, and the Russian company OAO Gazprom. . . . The world’s largest producer of natural gas, the Russian company Gazprom and Wintershall, a subsidiary of BASF, teamed up 15 years ago for the joint marketing of natural gas. The aims of the two partners were to supply natural gas on competitive terms, to optimize its use and to secure its supply in the long term.”

“Within the scope of the intensified cooperation with Gazprom the Russian company will increase its interest in WINGAS GmbH to 50% minus one share. Currently, Gazprom has a 35% interest in WINGAS, and BASF subsidiary Wintershall holds 65%.”

“In the UK, the development of our natural gas storage capacities is proceeding as planned. This will safeguard WINGAS’s growth strategy in the British natural gas market. Investigations into the conversion of the Saltfleetby gas field - which was purchased at the end of 2004 - into a gas storage facility have been completed. Construction work will begin after the official approvals have been issued. This project will be implemented together with ZMB Gasspeicher Holding GmbH, a Gazprom subsidiary.”

Vladimir Putin is certainly looking for more power and capital. Russia has been humiliated greatly in the last 20 years.

An article in last week’s New Yorker described in a very disheartening way Putin’s alliance with a narrow group of oligrach’s where Gazprom stands above all the rest. What Putin has done is reminiscent of the armed retainers of the tsars in the 16th century – the streltsy . The streltsy had become a hereditary military caste by the mid-17th century. The tsar depended on them heavily. Putin rules with a group of critical streltsy-like allies of which Gazprom is the most important. Gazprom does pretty much what it wants these days. It is building a skyscraper in St Petersburg – Russia’s jewel on the Baltic where the tallest structure has been only 60 meters. No more. The new skyscraper will tower 1200 feet. Gazprom is currently the world’s fourth-largest company by stock value, worth more than $250 billion.

Russia to protect itself need only sit aside the energy supplies needed by the West. AND the communications.

See Will Sweden Sell Telia to Russia? And here Russia Building State of the Art Fiber Web to Link European and Asian Economies

I can only shake my head in dismay at the lack of strategic understanding and wonder what Mr Scheepbouwers is truly thinking. For example talking about historic parallels there of course is this as well…

“Declining empire” theories Scroll down til you find: Heather

“Peter Heather offers an alternate theory of the decline of the Roman Empire in the work The Fall of the Roman Empire (2005). Heather maintains the Roman imperial system with its sometimes violent imperial transitions and problematic communications notwithstanding, was in fairly good shape during the first, second, and part of the third centuries A.D. According to Heather, the first real indication of trouble was the emergence in Iran of the Sassanid Persian empire (226-651).” [Big Snip] Follow the link.

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