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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Tier One Carriers' Chief Marketing Officers

The U.S. wireless landscape continues to evolve with elevated competition. The stakes are higher now as postpaid subscriber growth of years past now declines. Postpaid switching (stealing subscribers) is the new battleground while, in parrallel, acquiring high-value prepaid customers has stepped up in urgency.  Add to this, increasing the wholesale customer base, which includes MVNOs and machine-to-machine (including the nascent automobile infotainment), is an added necessity.

While the Chief Executive Officers and Chief Financial Officers get the limelight of quarterly earnings calls and investor conferences, the Chief Marketing Officer (CMO) has the responsibility to further/preserve the corporation's brand equity, and create strategies to help grow the customer base.  With the ultra-competitive nature of the American wireless sector, let's see who is steering the Tier One carriers' marketing and directing campaigns against rivals. The following biographies are taken off the respective corporate websites:

AT&T Mobility - David Christopher 

David Christopher, chief marketing officer, AT&T Mobility, leads product strategy, marketing and execution across AT&T’s extensive portfolio of branded wireless communications services and devices.

His responsibilities include overall product direction and planning for branded wireless services, including voice, data and cloud products, devices and accessories and network marketing; national, channel and field marketing – including the marketing strategy and merchandizing for AT&T’s more than 2,400 company owned retail stores; youth and diversity marketing; market research; customer lifecycle management; promotions and pricing; and national advertising and strategic sponsorships.

Christopher also oversees the award-winning AT&T Developer Program and its more than 25,000 members, leading the team that determines and delivers the tools and training developers need to build new and innovative applications.

Previously, Christopher served as chief marketing officer for AT&T’s Mobility and Consumer Markets, which included leading all marketing and product functions that drove the company’s three-screen strategy across wireless, TV and broadband products. He also served as vice president of product management for AT&T’s wireless unit, Cingular Wireless.

Before joining AT&T, Christopher worked at Palm, serving most recently as vice president – Product Marketing and Management with responsibility for the team that defined, developed and managed all Palm-branded product lines worldwide from concept through end of life.

Prior to Palm, Christopher worked for Sara Lee Corporation in Barcelona, Spain and Gent, Belgium.A native of Winston-Salem, NC, Christopher earned a bachelor’s degree from the University of Virginia and a Masters of Business Administration from the Kellogg School at Northwestern University.

Christopher serves on the Ad Council’s board of directors and its executive committee and on the Facebook Client Council.

Sprint - Bill Malloy

Bill Malloy joined Sprint in September 2011 as chief marketing officer.

Malloy brings to Sprint more than 30 years of experience in senior operating roles with marketing, media and wireless companies ranging from start-up ventures to large corporate entities.

He has been involved in the wireless industry almost since its inception in the mid-1980s, holding key marketing and operational leadership positions with McCaw Cellular and AT&T Wireless.

Most recently he was a venture partner with Ignition Partners, a venture capital firm based in Seattle. He joined Ignition in 2002 and during the next seven years was a member of the firm’s wireless communications team. In addition to working on early-stage investments, he represented the firm from 2004 to 2009 as chairman and CEO of Sparkplug Communications, a company created from within Ignition that later merged with Airband Communications. Before Ignition, he served as CEO of two Internet companies, Peapod and Worldstream Communications.
 

During his tenure at McCaw Cellular and AT&T Wireless he served as executive vice president of U.S. operations for AT&T Wireless, leading the team that created and launched AT&T’s Digital One Rate, the first national wireless calling plan. Before that, he was president of the company’s central region and led the build-out and launch of AT&T PCS markets. He also served as regional vice president of McCaw Cellular’s operations in Oklahoma, Arkansas, Kansas and Missouri and led national marketing for the company during the launch of Cellular One, the first national wireless brand for independent carriers, and the North American Cellular Network (NACN), the first national wireless call delivery network.

Malloy began working with McCaw in 1985 when he was a partner with the company's advertising agency. Before joining McCaw Cellular, he had an 11-year career in senior operating and partner positions in advertising firms and media companies.

Malloy is a graduate of Washburn University and Northwestern University’s Kellogg Graduate School of Management where he graduated from the Kellogg Management Institute.

T-Mobile -  Michael Sievert

G. Michael (Mike) Sievert, age 44, serves as our Executive Vice President and Chief Marketing Officer. Mr. Sievert is responsible for strategic development and execution of all marketing, product development, and pricing programs and activities for the Company. Mr. Sievert has also served as Executive Vice President and Chief Marketing Officer of T-Mobile USA since November 2012. Prior to joining T-Mobile USA, Mr. Sievert was an entrepreneur and investor involved with several Seattle-area start-up companies, most recently serving as CEO of Discovery Bay Games, a maker of accessories and add-ons for tablet computers, from April 2012 to November 2012. From April 2009 to June 2011, he was Chief Commercial Officer at Clearwire Corporation, a broadband communications provider, responsible for all customer-facing operations. From February 2008 to January 2009, Mr. Sievert was co-founder and CEO of Switchbox Labs, Inc., a consumer technologies developer, leading up to its sale to Lenovo. He also served from January 2005 to February 2008 as Corporate Vice President of the worldwide Windows group at Microsoft Corporation, responsible for global product management and P&L performance for that unit. Prior to Microsoft, he served as Executive Vice President and Chief Marketing Officer at AT&T Wireless for three years. He also served as Chief Sales and Marketing officer at E*TRADE Financial and began his career with management positions at Procter & Gamble and IBM. He has served on the boards of Rogers Wireless in Canada, Switch & Data Corporation, and a number of technology start-ups. Mr. Sievert received a Bachelor’s degree in Economics from the Wharton School at the University of Pennsylvania.

Verizon Wireless - Ken Dixon

Ken Dixon is vice president and chief marketing officer for Verizon Wireless, the largest wireless company in the United States, with responsibility for all brand management and marketing initiatives for the company, including the management and development of mobile products and services, media buying, agency management and website integration. A premier technology company, Verizon Wireless operates the nation’s largest and most reliable 4G LTE network.

Previously, Dixon served as president, Midwest Area for Verizon Wireless, where he was responsible for the company’s operations in the Great Plains, Illinois/Wisconsin, Kansas/Missouri, Michigan/Indiana/Kentucky and Ohio/Pennsylvania/West Virginia regions.

Dixon has also served as region president for the company’s Georgia/Alabama, Upstate New York and New England Regions where he was responsible for overseeing general operations and sales leadership. He also served as vice president of Operations and Distribution in the Mid-Atlantic Area and managed business and indirect sales in the Upstate New York and New England Regions.

Dixon joined the wireless industry in 1992 and has since held several management positions in both sales and operations.  He earned a bachelor’s degree from Syracuse University in Syracuse, NY.

Observations

Tenures:

• AT&T's Christopher has been at the helm since April 2007 when previous CMO Marc LeFar (now Vonage CEO) resigned. He has product, service and marketing stints in his past. From that perspective, he understands the mobility business as well as the fixed line consumer side. 
• Sprint's Malloy became Sprint's formal CMO in April 2011. The position had been vacant ever since Dan Hesse took the helm in 2007. In the years running up to 2011, Hesse had not appointed anyone into the title. But Bill Morgan (now SVP - Marketing at Motorola Mobility) had the overall marketing responsibility until 2011. As an old AT&T Wireless, McCaw Cellular hand, he understands the services and products space. Moreover, his internet/start-up/VC and advertising background gives him well-rounded overall marketing credentials.
• Mike Sievert, seemingly, is the newest CMO in this peer group also with product, services and software background.  The T-Mobile CMO job has relatively high turnover compared to other Tier Ones. He came on to the scene replacing acting-CMO Andrew Sherrard (still an SVP in Marketing and replaced Cole Brodman May 2012) in mid-November 2012, a month after CEO John Legere took the helm. 
• Verizon Wireless' Ken Dixon replaced Marni Walden (now Chief Operating Officer who took the post in 2010). There aren't any new releases on when Dixon took the position. As late as February 2012, he was the President of the Midwest region so presumably, it was in 2012 or 2013. Ken Dixon's stints in multiple regional president roles give him both regional and national operational (sales and service) and marketing sensitivities, since regions have the autonomy to do complementary local marketing.  

Each companies marketing organizations have their own strengths and challenges but that will be for another post.

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Analysis: T-Mobile’s "Boldest" Move - JUMP and Simple Choice forFamilies

What is it?

• T-Mobile announced an equipment upgrade program known as  JUMP!™, which enables people to upgrade their phones when they want, up to twice a year as soon as six months from enrollment. The monthly outlay is $10/month with equipment warranty (theft, lost, broken, or when one wants another phone).
• The Simple Choice for Family plan (4 lines of unlimited talk, text and web(500MB) for $100/month) was also announced allowing access to discounted  plans without a credit check. The caveat is that payment must be in advance (prepaid).

• JUMP Details: 
• Enroll in JUMP for $10/month. Have to wait for 6 months until the first 'JUMP' to get a new device. 
• If in 'Good Working Order' (powers on, no screen cracks, no visible water damage), customer can get the next latest and greatest. If customer is financing it (Equipment Installment Plan (EIP)), remainder of payments are waived. Customer can enter a new EIP plan.
• If not in 'Good Working Order,' a deductible will be paid ranging from $20-$170, depending on device,
• Customer can upgrade twice a year. It could be as early as the next day. 

What it means for consumers:

• For T-Mobile consumers who are early adopters and want the latest and greatest, Jump should be very compelling.
• For T-Mobile customers who don't care for upgrading and are price-sensitive, they're not likely to enroll in JUMP as the enrollment tallies to $120 a year.  
• For credit challenged family customers who want access to discounted postpaid rates, this should spur them on.
• The JUMP plan should appeal for early adopters in other competitors. Since T-Mobile is targeting AT&T, it would be logical for T-Mobile to step up some anti-AT&T marketing as it has done so already.

 What it means for T-Mobile:

• JUMP is an interesting anti-churn tool that appeals to a segment of customer who is willing to switch to get the latest and greatest. For this reason, it comports with T-Mobile's public comments stating that 2013 is going to be a year to stabilize.
• JUMP may be an effective switching tool. If T-Mobile can convince potential switchers that the T-Mobile network is just as good as everyone else's that would help customer acquisition.  
• The long term impact of JUMP 'trade-in' devices will help its MetroPCS unit.  These turned in devices will be refurbished and pushed into the MetroPCS portfolio as refurbished. For the MetroPCS customer who normally pays full priced for a phone, access to nearly the latest and greatest smartphone at a lower cost increases service stickiness. As T-Mobile wants to transition MetroPCS customers from their CDMA phones anyway, this move can potentially help accelerate the migration to the LTE/HSPA network and refarming of MetroPCS PCS spectrum. 
• Depending upon the JUMP subscriber size, the $10 monthly fee may be a factor in lifting postpaid ARPU.
• Simple Choice for Family should also help T-Mobile acquire subscribers. The price point is compelling. This plan could draw price sensitive postpaid family subscribers from competitors as well as transition families dealing with individual prepaid plans. How much this will hit Tracfone brands like StraightTalk and Simple Mobile remains to be seen. Of note, Simple Choice is LTE accessible whereas MVNO plans are still 3G/HSPA (okay 4G-ish). 

·          

Which companies will feel the most impact?

• AT&T as the very public target should see the most marketing against its subscribers. Other competitors may experience some leakage from their early adopter community as well, especially those whose ending contracts. 
• T-Mobile warranty companies should be busy depending upon how well JUMP is embraced.
• Handset makers (likely with halo devices) will likely see more volume coming out of T-Mobile. With increased volume, T-Mobile may leverage this to attain more favorable pricing. 

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DISH Folds & Some DISH Options

Poker 

As the long multi-hand poker game with Sprint, DISH, Softbank and Clearwire dragged on with DISH upping the ante, forcing Sprint and Softbank to push, DISH folded on both deals in the end.

DISH's game to takeover Sprint ended on June 18, 2013 when they withdrew their offer. The press release language implied that they will devote their resources to win Clearwire. It didn't look bad when the Clearwire board recommended DISH's offer back on June 12. 

But with a higher Sprint offer on June 20, the coup de grace came several days later on June 24 when the Clearwire board reversed its DISH recommendation for Sprint's offer.  

DISH folded on its second poker hand with yesterday's June 26 announcement. Many including me, expected another run, upping the ante, given DISH's playing profile but what did it have to gain? Really - nothing.

DISH's Options

The near term scenario is that DISH needs to get service up and running. Any time you're delayed means lost future revenue opportunity. With its core business slipping, there is urgency to get into the mobile space. Given this line of thought, it needs to bury the hatchet with Sprint and move to spectrum hosting.

A long term scenario is that DISH can wait until an alternate hosting provider comes on line. T-Mobile has been bandied about as that partner.  But why not Verizon Wireless and AT&T? Everyone wants access to new spectrum and if the deal is right, anything is possible. 

Regardless of scenario, DISH and a partner(s) need to seed the mobile ecosystem on DISH's bands. Technically, it may not be a stretch. However, the lead times to quickly  create/productize the chipsets and integrate into production hardware (device and infrastructure) are still an issue. Once it joins the mobile service provider club, DISH can upsell its own customers on mobile broadband (either fixed or mobile) and wholesale its capacity.  

Looking ahead, DISH is looking for another game but it may not be poker. 

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The Finish Line is Close for Sprint

No one expected the level of drama and the maneuverings among Sprint, Clearwire, Softbank and DISH. To be sure, the stakes were high for all parties. A poker game analogy is appropriate as this corporate soap opera has seen its share of raised bids and stare downs.

DISH with Charlie Ergen at its helm played the classical disruptor, raising the stakes on its bid on both Sprint and Clearwire. It's logical since the DISH core business is sliding and DISH has no access to any mobile opportunities (revenue).  Though DISH has its own spectrum, it doesn't have the ability to launch service on its own. With Sprint's Network Vision strategy, DISH can ride the Sprint host with lower capital expenditure than if it built a network from scratch. But Sprint has a revenue generating subscriber base and direct sales channels that DISH can tap into if it own Sprint.  However, with a deeper pocketed Softbank raising the ante, DISH needed to fold and focus on a less capital intensive deal - Clearwire.

However, Sprint "pulled a DISH" and raised its bid for Clearwire at the last minute $5/share vs $4.40.  This reversed a Clearwire board recommendation for DISH. Let's face it, money talks and with that, the activist investors were placated. After all, they were looking to maximize any bid anyway. What didn't hurt was Sprint's lawsuit against DISH and Clearwire citing the illegality of the DISH offer.   Sprint is near the finish line to realize 100% ownership of Clearwire, unless DISH "pulls another DISH." 

The real question if the Sprint-Clearwire deal makes it is what are DISH's options to get into the mobile space and monetize its spectrum? Will Sprint and DISH bury the hatchet? In my view, they have to. DISH still needs to make use of its spectrum and Sprint is the logical partner (at this moment) since Network Vision was created for spectrum hosting. Though Sprint said in the past, wholesale revenue wasn't totally baked into the Network Vision model, any wholesale money (a fleeting LightSquared) will help its return on investment. Of course DISH can court T-Mobile, but they're focusing on its own LTE buildout. Moreover, they haven't planned for spectrum hosting. We shall see............. 

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T-Mobile Takes PR Advantage of Early Q1 2013 Metrics

T-Mobile is probably the earliest to report Q1 2013 numbers, over a month ahead of the May 8, 2013 Deutsche Telekom formal release date. Only after 4 days since the first quarter closed, they reported some specific subscriber and churn data through their press release.

Here's a full look (2012 and Q1 2013) at the metrics on a table (click on the graphic for a bigger view). 

Why So Early?

T-Mobile needs to show that its strategy is succeeding. A key part of the 2013 goal/strategy is to stabilize the postpaid subscriber base.  By all accounts, Q1 2013 is going well in the ~ 60% range decrease in postpaid losses sequentially and year-over-year.  Though the company is still bleeding postpaid subs, the trend is positive. Q2 will be a crucial quarter as the iPhone goes on sale and the marketing to push AT&T switchers increase.  The trajectory looks good and the question for T-Mobile is which quarter the company crosses a positive net addition.

Wholesale to the Rescue

The pickup in MVNO and machine-to-machine subscribers have been saving the company's bacon for several quarters. Both categories account for 576K net adds.  The irony is that the MVNO partners such as Tracfone's StraightTalk and SimpleMobile are vying for the same price sensitive prepaid base is in the running for.  However this is likely to be a similar prepaid segmentation strategy that Sprint is employing.  When MetroPCS is complete, there will likely be additional rejiggering of the strategy.

Missing Data

We'll all have to wait for the financial numbers to be released in May. Aside from overall revenue and EBITDA margins, ARPU will be somethings that I'm looking for include the direction of CPGA and ARPU for postpaid and prepaid.   

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Revisiting T-Mobile USA's 2013 Value Plan Only Move

FierceWireless quoted T-Mobilenews.com's posting on the introduction of handset trade-in options.  While this may be news to some, the game plan had been somewhat laid out back at DT Capital Markets Days in December 2012.  At that conference, CEO John Legere talked about moving to an all Value Plan (vs the "Classic" phone subsidized plans) portfolio in 2013. A crucial element of that plan and subscriber adoption was the device trade-in value proposition.  

Let's recap the postpaid Value Plan.  Essentially, the plan is a less expensive monthly outlay than the traditional Classic plan. In order to get the lower monthly price, the customer either brings their own device (read iPhone) or buys a device from T-Mobile. While these devices could be $300+, T-Mobile has long offered an Equipment Installment Plan or EIP (financing for the credit eligible).  T-Mobile's argues that Value Plans offer upgrading and flexibility.  That is if you upgrade, you don't have to change (extend) your contract.  The company hopes a new trade-in program will provide customers an easy way to take the device's value towards a new device or the service.  

However, trade-in programs aren't new. They've been in the industry for a while and all tier-one carriers have existing programs. 

Even T-Mobile has a current program.   Big box retailers such as Best Buy, Walmart, and RadioShack also have trade-in programs.  So it appears that some companies advertise it more as a means to generate sales and traffic than others.  If a T-Mobile trade-in program already exists, we'll have to see how a new one differs.  Perhaps it may be just greater advertising and customer awareness?

Regardless, the focus of this post is T-Mobile's view on its 2013 strategy to Value plans. At the January Consumer Electronics Show, CEO Legere reinforced its Value plan strategy, separating "the device and rate plan."

  
With Value plans already in existence in the T-Mobile portfolio since September 2011, what's the logic behind getting of the old Classic or subsidized plans.  It comes down to profitability and market positioning.  On the surface, the lower price points (vs competitors) and unlimited proposition should be the main points T-Mobile should be driving home. They differentiate with their yet to be fully launched "Uncarrier" campaign.  The profitability logic was revealed as Legere pushed his case to investors/the financial community back in December.  Here are some highlights cited and other value propositions:

While the standard ARPU and service plan margin seems counter intuitive, the  bottom line calculus in revenue and overall margin has obviously passed the internal business case.  Moreover, churn reduction and postpaid subscriber stability were stated 2013 goals.  Conceptually, the Value plan strategy should deliver this. Yet the company is experimenting and trying to change embedded wireless (postpaid) customer behavior.  I think I am stating the obvious by saying that buying a device at full price is counterculture in the US market where inexpensive devices rule.  A less painful upfront cost has proven appeal.  T-Mobile has an formidable challenge ahead to move its base to the new plans and to attain switchers.  

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4Q2012 Prepaid Carrier Trends – Be Warned – It’s A Long One

Now that the Q4 2012 earnings are done, let’s look at the segment that had been driving a lot of the wireless growth in the past few years – prepaid. Rewind back to 2007/2008, Leap and MetroPCS were strongly acquiring subscribers with their unlimited propositions. The subsequent years saw similar flat rate introductions from the likes of Boost, Virgin Mobile, Tracfone’s StraightTalk and NET10. With the pressure from the monthly prepaid plans, Tier 1 carriers Verizon Wireless, AT&T and T-Mobile also joined the mix. The commonality in competition is for the high-value user. The traditional pay-as-you-go (PAYG) user’s contribution is far less. These users range from ‘glove box’ (low use) to moderate users. They also tend to be highly price sensitive and have a higher churn profile. The opposite is true to monthly plan users. These users while also price sensitive are heavier users and are fine with a flat rate model for predictability. They often have a lower churn profile relative to the PAYG user. That’s not to say they’re in the postpaid sub 2% churn territory. But for the prepaid segment, these monthly users are lower churn. 

Smartphones have been appearing in the prepaid segment for the last two years. While the companies want to offer the same capabilities as the postpaid segment, the prepaid model calls for low to no subsidies on devices. Of course companies strive to find low cost providers (e.g., Huawei and ZTE) to fill that niche and to leverage price against existing suppliers (e.g., Samsung, LG, Kyocera, HTC, etc.). The goal of course is to drop the smartphone price so that buyer can perceive that they’re affordable. However, prepaid providers walk a fine line for inexpensive devices because if a device is perceived as almost a throwaway, the likelihood of churn increases. For those reasons, expensive halo devices like a Samsung Galaxy S3 or the Apple iPhone keep the carrier sticky. 

With this as a backdrop, let’s look at how the players fared? Purely on net addition numbers, we can see that the regional unlimited players that ruled the day back in 2007/2008 are in trouble with Leap Wireless in the poorest shape with over 300K in subscriber losses. In Leap’s earnings call they noted that they are de-emphasizing their pay-as-you-go and mobile broadband business. There is logic in this as mobile broadband users eat more bandwidth (leaving less for monthly users) and PAYG are less revenue generating. MetroPCS though with less subscriber loss follows the same loss trend that has plagued Leap for many quarters. The company claims that they’re de-emphasizing CDMA growth but this tactic has resulted in an overall 5% loss in the base. This meshes with the long term strategy anyway once T-Mobile integrates and eventual use the 1900 CDMA to convert to 1900 HSPA+. By contrast, Tracfone’s net additions are by far the most impressive. The company buys wholesale from many carriers and has a large mix of PAYG and a growing base of monthly users. Presumably StraightTalk is doing well for the company as evident in ARPU. Several years ago, Tracfone ARPU was 10. In Q4 2011, it was 16 and in Q4 2012, it is now 18. APRU just doesn’t jump like this by growing a purely PAYG product. 

While Verizon Wireless had a tremendous Q4 in the postpaid side with over 2.1M net adds, the positive prepaid numbers indicate their competitiveness. Despite a down from a year ago and the previous quarter, it speaks to their premium brand messaging and perhaps a new November double data plan promotion. This is pretty decent for a predominately postpaid company. AT&T on the other hand is on a steeper downward slide. In Q3 2012, the company added 77,000 users with those gains erased with the 166K lost in Q4. AT&T is still a postpaid company with prepaid making up around 7% of the total subs. It will be interesting to see which way the direction turns for AT&T in Q1 2013. Another predominately postpaid carrier doing well in prepaid is US Cellular. Though the regional carrier continues to shed postpaid subscribers, the new U Prepaid plans that it has partnered with Alltel may be helping the cause. 

Moving onto the rest of the carriers, Sprint’s prepaid numbers have been down relative to previous quarters because the Assurance brand that had been driving huge subscriber count has been slowed due to FCC’s revamping of the subsidized Lifeline program in 2012. The company has already warned of a 1.2-1.3M subscriber loss possibly in Q2 2013 due to the revamping of rules. Regardless, the company indicated that the Boost and Virgin Mobile brands have contributed to the positive numbers. At the same time, the company is actively trying to migrate older Boost iDEN users off ahead of the iDEN network decommissioning. Finally, T-Mobile’s prepaid business is offsetting continued losses (550K) on the postpaid side. Again the above numbers are branded prepaid. T-Mobile counts MVNO (wholesale) net additions as prepaid as well. Branded prepaid at end of year 2012 represented 17% of the overall T-Mobile base. Looking ahead with the combination of MetroPCS’ prepaid subs, branded prepaid will transform to 45% of T-Mobile’s subscriber count. Given the higher churn profile of prepaid and lower revenue, it’ll looks challenging for future higher revenue contribution. But that’s months away…. Q1 2012 typically continues Q4 sales momentum. We’ll visit that to see what develops.

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US 4Q2012 Carrier Results - Google Hangout with RCR Wireless

Dan Meyer, Editor in Chief of RCR Wireless asked me to discuss Q4 2012 carrier results and some thoughts on some future direction.

http://www.rcrwireless.com/article/20130307/carriers/breaking-q4-wireless-carrier-results/

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Tier 1 Q4 2012 Smartphone Growth and the iPhone

Now that three Tier 1 carriers have reported their Q4 results, here are some observations and commentary on smartphone growth.  As most industry people know, smartphones are the hot user commodity. Smartphones serve many purposes from a churn reduction tool, to ARPU uplift (offsetting voice revenue decline) to increasing operational efficiency (move data consumption to a more data efficient (capacity and throughput to the LTE network). But the old 3G network also has legs so for now, wholesale (MVNOs & M2M) and prepaid can extend return on old investment there.

iPhones have been a catalyst for increased carrier data revenue. AT&T's past  iPhone exclusivity has allowed it to accumulate a massive customer base that proven to be low-churn and loyal. With the exclusivity gone, other carriers (through Apple's deal-making and carriers' realization that an iPhone is competitive table stakes) also jumped on the iPhone bandwagon.  The notion that iPhone is such a powerful sales acquisition and retention tool has played out again in Q4 2012.

For the big three, AT&T, Sprint, and Verizon Wireless, smartphones sales/activations continue to be on a positive track.  AT&T reported 10.2 million smartphone sales in Q4, while Verizon Wireless came close at 9.8 million, and Sprint posting 6.1 million. These added up to 26.1 million smartphones.  The interesting observation is how many of these smartphones were iPhones.

• AT&T - 8.6 million
• Verizon Wireless - 6.2 million
• Sprint 2.2 million

As a percentage of the overall Q4 smartphone sales, iPhones activations accounted for:

• AT&T - 84%
• Verizon Wireless - 63%
• Sprint - 36%

On the whole among the three Tier 1 carriers, the iPhone accounted for 65% of smartphone activations. 

Impressive stats for sure. With contenders from BlackBerry (BB10 OS), Microsoft (Windows Phone 8) and Android, can the iPhone in the U.S. continue its run?  I submit that this hinges on Apple innovation.  As I've said previously, Apple needs to innovate, as its user interface (UI) is aging with incremental innovation.  Customers have a lofty expectation of radical things for each iPhone (and iPad) model.   Apple needs to deliver in 2013 or the early adopters (and then the mainstream) will move on.   

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