Bullet Point Analysis: Verizon Wireless' Share Everything Plan Minor Adjustment

WHAT IS IT?

Several tech news and blogger outlets have reported that Verizon Wireless will add a new 250 MB plan (at $20) level to its Share Everything plans as of January 21, 2014.

ANALYSIS

Big data users invariably dismiss this 250 MB level as miniscule, and it is. But there are two  areas why this makes sense. 

• First - Migrate the featurephone base to Smartphones and Share Everything Plans.  The Share Everything plan is now the only postpaid plan vehicle to migrate customers off legacy voice-centric plans (e.g., America's Choice - remember that?).  The new data-centric plan is also inexplicably linked to smartphone penetration.  Since 1Q2013, an Share Everything plan slide has been every quarterly earnings presentation deck.   

In 2Q 2013

 

In 3Q 2013

Verizon Wireless wants steeper curves on smartphone penetration and postpaid Share Everything account migration.  Here are the illustrative results since 3Q 2012. 

Since 4Q 2013 earnings is around the corner, it's likely to assume that smartphone penetration should cross 70% given the company's track record.  We can also safely assume that once Verizon Wireless nears the 100% Share Everything plan goal, there will be another more important growth slide to take its place. 

 

• Second - Provide a lower price point for featurephone users to convert to data. Previously, the lowest data price point was at $40 and provided 500 MB. Logically and in sales positioning, $20 and 250 MB is half.  While veteran smartphone users cringe at the low data level, Verizon Wireless is betting that once a non-data user starts to use data, they will get hooked and move up subsequent next tiers.  Increasing data usage is closely linked with helping increase Verizon Wireless' average revenue per account (ARPA) metric.

COMPETITIVE IMPACT?

Some may believe that this is Verizon Wireless' action against AT&T revamping its Mobile Share plans back in December 2013.  When laid out, we find that the new plan is in fact less competitive to AT&T. AT&T still has the advantage for Verizon Wireless switchers at the low data levels.    Given the above logic, the new $20/250 MB level will not get featurephone switchers. Those who are making the smartphone jump are likely to have explored T-Mobile or Sprint.

Still Verizon Wireless' opportunity may be in the existing range of data bucket choices with more price points and advantage in addressing the small business and high data use consumer accounts.   

Looking ahead, if history repeats itself, Verizon and AT&T users will start getting a handle of monthly data consumption and adjust accordingly. Once that happens, the number of data levels should shrink and (ideally for customers) price points will decrease.

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LTE Speed Titles

AT&T has already taken the LTE speed mantle for 2013.  I think that speed will continue to be an important marketing differentiation.  Sprint Spark, based on 2.5 GHz spectrum as that opportunity to break Sprint out of its downward slide.  

My article in RCR Wireless entitled LTE Speed Crowns and Network Dependencies lays out some of my thoughts.  A key piece in increasing speed is when carrier aggregation kicks in. In a nutshell,   it's the ability to piece together disparate pieces of a carrier's spectrum portfolio to make a 'fatter pipe' in order to deliver to the user, a faster speed (and lower latency) experience. Of course there are a lot of hardware dependencies that go into it.

While speed is exciting, what looks to be a Sprint win may be a marketing and revenue loss in the non-metropolitan areas.  That is due to 2.5 GHz's poor propagation characteristics.  It just cannot reach out there and Sprint's problem is that thought it has a lot of the frequency, in order to make it effective nationally, they would have to expend a LOT more money to blanket the U.S. geography. This is a similar argument that you don't see a fully geographic national PCS network.  Verizon Wireless and AT&T will have that advantage with their sub-1GHz portfolio. When these larger carriers piece their deep cellular bands with their 700 spectrum, they will have the ability to deliver greater speed than Sprint outside of the metropolitan areas.  This won't happen for a couple more years late 2015-2017, perhaps.   

Sprint will need to execute on its 2.5 GHz Spark buildout to have a shot at the standard speed surveys that Root Metrics (various metro updates over the course of the year) and PC Magazine (May) performs. It may be that Sprint will win some important metros but may not get the 2014 title until those survey cities are 'Sparked.'  Throwing a monkey wrench in 2014 will be Verizon Wireless and T-Mobile tapping their deep AWS assets. T-Mobile has already been reported to have a 20 X 20 (20 MHz down/20 MHz uplink) in the Dallas area while Verizon Wireless has turned on  20 X 20 in New York.

When Spark reaches some critical market threshold, I fully expect Sprint to turn up the marketing to push speed and unlimited.(And introduce a deep Tri-band device portfolio). It should definitely appeal to the technology forward users.  I'm also thinking that the tech blogs should help the cause. Of course, it depends on getting that network going. 

2014 will be an interesting speed year.  

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Talking about the AT&T Mobile Share Value Plans & Carrier Holiday Outlook

Dan Meyer of RCR Wireless and I discussed the implications of the new AT&T Mobile Share Value plan and what the carriers and handset vendors are doing to get the edge in holiday sales.



Dan's article here.

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Bullet Point Analysis: New AT&T Mobile Share Value Pricing - Not Only About T-Mobile

WHAT IS IT?

There were two elements in the announcement:

1. AT&T announced a no-contract option (known as Mobile Share Value) for both consumers and business customers that provides customers with plan and device discounts.     New plans go in effect on Sunday, December 8. The announcement does not provide any service plan details though the carrier has stated that every smartphone added will be a flat $25/month instead of the sliding scale depending on data tier (ranging from $30-$50) on a contract offer. Also, featurephones/quick messaging devices (QMD) are now $20/month instead of $30/month.  All other add-on pricing for tablets, internet devices, wireless home phones, and gaming devices remain the same.
2. AT&T is adding a new Next plan 18 month upgrade option coupled with the ability to spread  payments over 26 months. 

ANALYSIS

TAKEAWAY:  IT'S NOT ONLY ABOUT T-MOBILE BUT ALSO HITS VERIZON WIRELESS

The easiest conclusion when viewing this announcement is that AT&T is responding to T-Mobile's success of the Simple Choice no-contract plans. As T-Mobile has been very public about targeting AT&T customers, it makes sense. Yet when pricing is extracted, the results reveal interesting moves.

Back to the analysis - though the announcement lacks service pricing details, BGR.com seems to have an advance look and crafted a value chart (below) running one and two smartphone scenarios.  

Graphic/table via BGR.com article.  

Not surprisingly, the gist of BGR's findings is that there are indeed savings.  The most surprising discovery of the BGR chart (assuming the prices are correct) is that Contract customers also receive some savings relief, noted in the third column as New Price (Subsidized). This is made possible by leaks in other media that the contract smartphone device add-on is now a flat $40/month.  With this as a guide, the new Value service pricing can be broken out. While there seems to be an increase at the 1 and 2 GB levels, there is some logic (explained in the Verizon Wireless impact below).

Existing AT&T business/enterprise & heavy users electing for >10GB will see the most service price savings if they make the switch.   

WHAT'S IN IT FOR AT&T?

• Though AT&T scoffs at following T-Mobile's no-contract reduced service pricing lead, the disruptive competitor has shown that the marketplace likes it. The fact that T-Mobile's last two quarters had formidable postpaid net additions helped push the AT&T decision to offer a Value plan. AT&T had to counter with something while preserving its premium brand.
• The new Mobile Share Value plans give AT&T more pricing levers. The holidays are coming up and industry insiders know that the bulk of the service providers' transactions are in Q4 and Q1. AT&T cannot allow T-Mobile (and nemesis Verizon Wireless) go into the holiday selling season with any sort of momentum.
• The new Value pricing helps the fight at the important high tier plans. This is particularly important given the target segments are heavy consumer data users and enterprise accounts, which Sprint and Verizon Wireless also covet. Moreover, these are high-value (ARPU bearing) customers that AT&T cannot afford to voluntarily churn out. 
• Smartphones are where the customer and revenue growth is in the near term. By discarding the smartphone device sliding scale pricing simplifies a sales reps' ability to close a transaction. By offering a flat $40/month contract and $25/month no-contract add-on pricing, things are 'not complicated.'  
• AT&T allows its contract customers to move to the new Value plans right away with fees or penalty. Contract customers will just have to remain with the carrier for the number of billing cycles they have remaining. However, they also benefit from the reduced pricing right away. While risky, this ability offsets churn, especially for those customers who don't want/need to upgrade to the latest devices at contract end.

WHICH COMPANIES WILL FEEL THE MOST IMPACT?

• T-Mobile may not get as many AT&T switchers as in previous quarters given AT&T's new No-Contract plan option. Though dismissed as expensive, AT&T's new 26 month payment extension helps to drop the per monthly device financing cost.  In business accounts, T-Mobile can no longer tout that it is the only carrier with no-contract reduced service pricing.
• Verizon Wireless - In the 2 year contract world, Verizon Wireless now sees greater competition. At the low end AT&T still appears to be ahead at the 1 and 2 GB levels despite the price increase.  How AT&T wins at these tiers is the new $40/mo smartphone pricing that matches Verizon Wireless'. In the old contract plan, smartphone add-ons were $45/month. In a single smartphone scenario, the 1 and 2 GB options would be $85 and $95. In the new contract plan, the same result occurs and still bests Verizon Wireless' $90 and $100.  Why do it then? In order to get to a flat $40 smartphone add-on price, pricing planners needed to increase service pricing specifically at these tiers. AT&T's new 8 GB tier now allows provides price parity at the 4 GB to 10 GB range.

With the above chart it is abundantly clear that AT&T was fixing non-competitive pricing against Verizon Wireless at the 6 GB to 50 GB range. Now it is at price parity in the bread and butter 2 year contract battle. Additionally, with a No-Contract option, Verizon Wireless is vulnerable for those high-value customers who want to shift over to a lesser no-contract option but won't consider T-Mobile. 

• Sprint is likely to be impacted in business accounts where it is competing heavily against AT&T and Verizon Wireless. It can't be too soon to have its Spark program rolled out to present a service differentiation.

COMPETITIVE RESPONSE?

• T-Mobile doesn't have any more pricing levers as its Simple Choice plans are fairly aggressive. Its ARPU metrics have been on the decline already and it has said that ARPU will stabilize along with churn. Along with this stability is the margin that also comes without playing the device subsidy game. Marketing and PR positioning will likely be the most logical step, marrying the value playbook with undercurrents of bolstered speed and its growing national LTE network footprint. Of course there will be the campaigns that says AT&T is copying T-Mobile.
• T-Mobile and Sprint's family plans are not shared data plans which has its own competitive merits. T-Mobile and Sprint positions the ability to assign a lesser or more data amount per user.  Moreover, Sprint's unlimited proposition and lower price points still stand out compared to larger competitors Verizon Wireless and AT&T. 
• Given AT&T's move into the No-Contract game, Verizon Wireless is forced to go on the same path.  AT&T's no-contract $25/month smartphone add-on is fairly aggressive; Verizon Wireless would unlikely undercut this as it doesn't want to stimulate a price war. A logical and conservative scenario is to roll out a matching no-contract plan.  In all likelihood, Verizon Wireless may add its own twist.

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Sub-1GHz Spectrum in the U.S.

Today, RCR Wireless posted an Analyst Angle article that I authored on the desirability of sub-1GHz spectrum. Within the article there are some well illustrated graphics on where the top three Tier-1 providers stand in terms of coverage and spectrum depth. Here is an example for Verizon Wireless.

(Thanks to Mosaik Solutions for their graphics & database work)

The control of this sub-1GHz has been long argued as a legacy competitive advantage that AT&T and Verizon Wireless has over competitors Sprint and T-Mobile.  The latter carriers have decent hi-band spectrum but in order to have broad national geographic coverage, the poor propagation characteristics of 2.5 GHz (EBS and BRS) and AWS (1.7/2.1GHz) make it capital intensive and costly to mirror the sub-1GHz footprint of larger rivals.

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3Q13 U.S. Tier 1 Carrier Results - A Conversation

I had a chance to talk to RCR Wireless' Dan Meyer on Tier 1 third quarter carrier results.

Read it at RCR Wireless here:: AT&T & Verizon Wireless

View it:



Read it at RCR Wireless here: Sprint and T-Mobile 

View it:

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Bullet Point Analysis: T-Mobile's Un-carrier 3.0 - The International Card

WHAT IS IT?

T-Mobile announced its Un-carrier 3.0 initiative. The 3.0 portion follows the Un-carrier strategy that the company unveiled in March 2013 to address "customers' pain points" and ultimately set the company on track to retain and grow marketshare.

As a recap, this slide from the 2013 Q2 earnings release summarizes the company's Un-carrier moves thus far.

 

 

Un-carrier 3.0 in a nutshell:

 

• Starting on Halloween, Simple Choice (new Uncarrier 1.0 plan) will include unlimited data and texting when roaming in 100 "Simple Global" countries.   
• Voice calls are not unlimited, rather it's $0.20/minute when roaming in the 100 Simple Global countries/
• Highlights the $10 International Talk & Text add-on which allows unlimited calls to landlines in 70 countries and unlimited texts to 200 countries. Otherwise, calls are at $0.20 (or less)/minute to other countries' landlines and mobile numbers.

 

WHAT'S IN IT FOR T-MOBILE?

• Strategic Promise, Disruption and Differentiation: T-Mobile is delivering on a strategy that addresses customers' pain points. Previous iterations were doing away with contracts, early handset upgrades and lower service pricing by decoupling the overt handset subsidy. From a marketing viewpoint, this provides more advertising fodder to drive customer acquisition attack ads.
• Growing the Business Subscriber Base: Let's face it, T-Mobile has always been a consumer centric brand. Prior to its network buildout thrust, its network could not compete against larger competitors AT&T, Verizon Wireless, and Sprint, who had the business sector sewn up, especially globe trotting enterprises. In the 2Q 2013 earnings call, CEO John Legere subtlely telegraphed B2B as an area of 'coming attractions.'  Legere even admitted that the "percentage of gross additions were too small to get concerned with..." With this as a backdrop, the international roaming angle of Un-carrier 3.0 is a boon to target globe trotting business customers to grow its B2B business.
• Driving International Calling: While stateside international calling can be costly for T-Mobile, one should be reminded that its prepaid brand, MetroPCS announced unlimited stateside "international" calling for $5 back in 2009. So a cost-effective (some believe VoIP-based) infrastructure is already in place.
• Impacting Profitability?: One would think before any of these moves gets off the ground, there are business cases supporting the effort. While unlimited data roaming may sound like a money loser, it's all relative for several reasons. First, the roaming impact may be thought as the cost to acquire a coveted business subscriber base that is less price sensitive than the consumer segment. The business base and the additional lines (and the overall customer spend) may offset the cost of data roaming.  Second, there are parallels to the introduction of unlimited calling where a steady state and predictable monthly consumption develops. It's unlikely to think business travelers are constantly streaming video abroad - more consumer behavior. For consumers, a slower abroad data experience may provide frustration and curtail that behavior. Finally, the $10/month stateside international calling tacks helps offset some of the overall costs. Besides, as the slide above states, T-Mobile is targeting to have the lowest cost structure in the industry.

WHICH COMPANIES WILL FEEL THE MOST IMPACT?

• Clearly T-Mobile is going after its bigger competition, AT&T, Verizon Wireless and Sprint to grab business switchers.  This segment tend to have higher ARPU/ARPA than consumers. The proposition is formidable as anyone who has traveled and paid for roaming can attest. Magnify this to multinational enterprises in which roaming is a substantial expense and expense managers will quickly look at T-Mobile's Uncarrier 3.0 option.  T-Mobile business sales teams now have this and a growing domestic LTE national network to provide credibility in sales calls.  
• It's likely that competitors will see some business subscriber leakage with a compelling offer as unlimited international data and text roaming.  Competitors are already playing up slower roaming data experiences but unless they can prove that a T-Mobile roaming customer receives a slower experience than their own roaming partners, they're in the same boat (held hostage as the destination's partner network). Yet the percentage of global travel will determine an organization's business case for switching. Further, it will depend on the generation of handset for higher speed support abroad.  LTE roaming is almost non-existent so the default will be HSPA+ (in some countries dual carrier HSPA+ is possible) or EDGE roaming.
• A possible scenario may be that T-Mobile 'lines' will be purchased for international business. This approach will provide a known US number for easy contact rather than to purchase an in-country SIM card. So the customer may have both a domestic and international phone/line.  Either way, T-Mobile stands to gain subscriber lines and if they can prove domestic network parity in the long term, total switching will become a viable scenario.
• On the stateside international calling front, VoIP providers such as Skype may feel some impact as the simple ability to direct dial can trump launch an OTT app on a computer or handset.    

COMPETITIVE RESPONSE?

It remains to be seen if competitors will match T-Mobile's unlimited data and text roaming offer. To some extent, they are handcuffed as their enterprise bases are large and international roaming revenue, decently profitable. Loyalty and network breadth (domestic and international) will be a piece of the counter argument. However, Un-carrier 3.0 is a formidable challenge that will need to be addressed. Key indicators will be customer inquiry for a competitive response, roaming revenue declines and customer voluntary churn.  What form it will take and how quickly a solution rolls out depends on customer defection.  Regardless, product planners will be in meetings to figure out their company's response alternatives. 

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