Topic: Wireless
★ Sprint Reports Revenue Growth From Selling Old Phones, Announces Network Plans (May 3, 2017)
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★ T-Mobile Announces Plans for Rapid Nationwide Rollout of 5G in 600MHz (May 2, 2017)
T-Mobile this morning announced plans to roll out 5G services nationally starting in 2019 on the 600MHz spectrum it acquired in the recent FCC auction. T-Mobile is here taking a different tack from the other US operators and many international operators, which are instead using high-band millimeter wave spectrum to test and eventually roll out 5G. T-Mobile’s approach is very much more incremental in nature, not providing the kind of dramatic speed and latency benefits which have been associated with previous generational shifts in mobile, in contrast to the fiber-replacement services being tested by AT&T and Verizon. On the other hand, T-Mobile will be able to claim that it has widespread 5G coverage long before the other carriers, which will have to roll out the infrastructure-dense high-band version much more slowly. There’s a danger that T-Mobile’s more modest ambitions for 5G set low consumer expectations for the technology and that other carriers will have to work hard to raise those expectations with their own rollouts, and there’s a certain irony to the prospect of T-Mobile building a network with the broadest coverage but lower speeds given its current reputation for providing a fast but not ubiquitous LTE network. Some of the other non-speed-related aspects of 5G will still be realized, which should allow T-Mobile to launch some interesting new IoT services, which will helpful as its growth from phones continues to slow. See also my longer comment for media here.
via T-Mobile
AT&T Starts Using 5G in Marketing for LTE Services (Apr 25, 2017)
AT&T announced today that it’s bringing what it calls 5G Evolution to over 20 metro areas by the end of the year, starting with Austin. However, as I’ve said before, 5G itself hasn’t been standardized yet, so the best anyone can claim to have today is pre-5G technology. But what’s more worrisome about this AT&T announcement is that it’s actually using that 5G Evolution brand as an umbrella term that includes some technology that has nothing to do with 5G, notably the faster LTE technology in the new Samsung Galaxy S8 and S8+. What we’re starting to see is the same marketing-led muddying of the water over a new wireless generation we saw with 4G a few years back, when Sprint, T-Mobile, and AT&T all used the term 4G to describe non-standard 4G network technologies (WiMAX and HSPA+ specifically). We’ve also already seen the gigabit LTE label thrown around, and though it’s technically accurate in terms of maximum throughput, it’s likely to disappoint consumers who actually use it. While carriers might want to steal a march on competitors, this does nothing for consumers, who will likely require significant education when real 5G does launch without being further confused by labeling non-5G technology with a 5G-related moniker. It also means that when 5G does launch, consumers will wonder what they’ve been using all this time, making it hard to develop strong marketing messages around real 5G. I’m hoping this doesn’t spread, but past experience suggests it will.
via AT&T
★ T-Mobile Releases Q1 2017 Earnings, Improving Margins, Slowing Sub Growth (Apr 24, 2017)
T-Mobile released its Q1 earnings today, and there were quite a few familiar trends: strong revenue growth, improving margins, and lots of talk about how awful TMO’s competitors are. But this quarter also saw a return to the slowing subscriber growth we saw in the first half of last year, which is indicative of T-Mobile’s business today: it’s doing very well within what’s a rapidly slowing market with very little additional headroom. All four of its major customer categories (postpaid, postpaid phones, prepaid, and wholesale) saw lower net adds year on year. In the case of both prepaid and wholesale, the decline was signifiant, and wholesale net adds were negative for the first time in recent memory. T-Mobile said it did very well against AT&T in the quarter, which means for AT&T itself to have done well overall it will have had to hold its own much better against Sprint (which hasn’t yet reported) and Verizon (which has, and had a horrible quarter). T-Mobile continues to invest very heavily not just in spectrum but also in store expansion – it’s now targeting 3000 new stores this year, split evenly across its T-Mobile and MetroPCS brands, up from 2500 at the start of the year. So far, the strategy continues to work reasonably well, but there’s a ceiling on growth in the categories T-Mobile targets, especially with Verizon and AT&T getting back into unlimited, so I’m curious to see how much growth slows in 2017, though it appears margins are going to continue to improve anyway (though they’re still way below those of the two big carriers).
via T-Mobile (PDF)
★ Verizon Reports Poor Q1 2017 Results, Offset a Little by Unlimited Reintroduction (Apr 20, 2017)
Verizon today announced its Q1 2017 results, and they completely explained the company’s unexpected and rapid reintroduction of unlimited wireless plans in the quarter. Before it reintroduced those plans, it was on a trajectory for by far the worst postpaid phone losses it’s ever seen, and even with the little bit of growth it saw after the launch, it still had its worst quarter ever by some margin. Tablets also shrank for the first time ever, which in turn led to the company’s first-ever postpaid net losses in a quarter. Churn was up, average revenue per account was down… this was a terrible quarter for Verizon, only salvaged partly by the unlimited launch. Q2 and the rest of the year should be quite a bit better, but it’s clear that Verizon has been suffering recently, most likely at the hands of both T-Mobile and Sprint, which has explicitly targeted it in its advertising. Outside the wireless business, things weren’t that much better – wireline revenues were fairly flat, while margins improved a little. But there’s really no growth driver in the business at the moment, as essentially every part of the business is flat or declining, though the whole thing is still highly profitable.
via Verizon
Verizon CEO Indicates It’s Open to Mergers with Several Players (Apr 19, 2017)
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T-Mobile, DISH and Comcast Among Big Winners in FCC Spectrum Auction (Apr 13, 2017)
The FCC recently held an auction of spectrum to be freed up by broadcasters and made available for wireless services, in the 600MHz band, which is well suited to long-distance and in-building coverage. T-Mobile was the only wireless carrier among the big winners, with the two largest carriers having cleaned up in the previous auction, and a cash-constrained Sprint sitting this one out too (AT&T did win licenses worth $900 million, but T-Mobile spent $8 billion). The other big bidders were DISH, which spent nearly as much as T-Mobile ($6.2 billion), and Comcast, which recently announced its wireless service based on Verizon’s network but could eventually launch its own network. Though T-Mobile has always crowed about how much spectrum it has per customer, that was always more of a reflection of its smaller number of customers rather than a massive spectrum trove, and it lacked low-band spectrum. It has now made big strides in solving that problem, and plans to put at least some of that spectrum to work right away (though much of it will be unavailable for several years while the broadcasters go through the process of vacating it, with much of that unavailable spectrum covering the densest markets). It’s also worth noting that no phones in the US today support the 600MHz band – that support is likely to come early next year with a new Qualcomm modem, so even if T-Mobile does put a third or so of its new spectrum to work this year, it won’t do anyone any good until then. So, if you’re a US wireless customer today, none of this makes any difference for now, and it’ll only make much of a difference a year or several down the line if you’re a T-Mobile customer (or in limited cases an AT&T customer). Or as and when Comcast and DISH decide to put that spectrum to use.
Comcast Introduces Its Mobile Service (Apr 6, 2017)
Comcast today finally unveiled the wireless service it’s been working on for years off the back of a long-standing agreement to use the Verizon Wireless network as the underlying carrier. It should be a compelling offering for at least some customers, especially the premium 25% or so of its base to whom Comcast will offer preferential pricing. However, the unlimited offering caps out at 20GB per month before throttling kicks in, whereas the traditional carriers’ throttling kicks in at higher points and only in times of congestion, making Comcast’s unlimited in name only. WiFi is a major selling point from Comcast’s perspective, but I’m very skeptical that it’ll be a big part of users’ experience, given how few hotspots Comcast actually has in places where people spend time out of residential neighborhoods, and the fact that WiFi is often now slower rather than faster than LTE. Comcast is going to keep costs down by selling online and in its existing stores and marketing through existing channels, as well as keeping bad debt expense down by marketing to existing customers who pay their bills on time and offering only auto-billing on credit cards. Comcast will likely sell this service to up to 10% of its base in the next couple of years, which will be a nice boost to its revenues and profits, but will make only a tiny dent in the overall US wireless market – 10% penetration of its broadband base would be just 2.5 million customers, which is less than the number of new customers the big four carriers added last quarter alone.
via Comcast
Sprint Ditches 50% Off Promotion and Focuses Exclusively on Unlimited (Apr 6, 2017)
There were reports earlier this week that Sprint was ditching its 50% off promotion, which has run since 2015, and it has now confirmed that news. Instead, Sprint is now focusing exclusively on unlimited services, ditching its tiered plans as well, and offering a $10 per line discount through June 2018 on new plans, making them in some cases 30-40% cheaper than equivalent Verizon or AT&T plans. Sprint’s 50% off plan became untenable when the two larger carriers reintroduced unlimited plans, because in practice under the promotion Sprint had seen most customers keep their spend at the same level as at their previous carrier while moving to a higher speed tier, which isn’t possible when switching from unlimited, meaning Sprint really would be charging 50% less for the same service. Instead, then, it’s competing on price in a less dramatic way going forward, but it’s worth remembering that price discounts in wireless have a direct correlation to perceptions of network quality. As such, these ongoing price discounts are a recognition that Sprint can’t be competitive unless it’s charging quite a bit less than competitors, because of poor perceptions of its network, perceptions that are unlikely to change at its current historically low network investment levels.
via Sprint
AT&T wins FirstNet network contract – RCR Wireless News (Mar 30, 2017)
This contract has been in the works for an extremely long time, and even now the award was almost derailed by a lawsuit from a losing bidder. The concept of FirstNet arose out of incidents like the 9/11 terrorist attacks, in which general purpose communication networks were knocked out or overwhelmed and first responders were left without interoperable means to communicate with each other. AT&T has therefore won the contract to build a national communications network for first responders alongside the traditional mobile network it operates. That’s worth a good chunk of money up front but should also lead to a decent revenue stream over the long term too – and it had better, because AT&T is apparently going to be spending $40 billion to build and maintain the network over the next 25 years.
Verizon: Unlimited Data Plan Lures Sprint Customers – Fortune (Mar 8, 2017)
The reintroduction of unlimited plans by AT&T and Verizon in February makes this one of the least predictable periods in the recent history of the US wireless industry. The presence of unlimited plans at Sprint and T-Mobile and their absence at the two larger carriers has been a defining characteristic of the market for so long that the rapid turnaround is likely to lead to quite a bit of change in competitive dynamics and growth rates. Here’s the first evidence of that in the form of comments from Sprint’s CFO at an investor conference that churn will be stable rather than down this quarter as originally anticipated. T-Mobile hasn’t really commented yet, but has been introducing a set of promotions throughout the second half of the quarter in an attempt to keep its own growth going at previously expected rates. The impact in Q1 will actually be a little muted because the changes didn’t kick in until halfway through the quarter – it’s in Q2 and the rest of the year where we’ll see the biggest impact, though the exact scale and nature of that impact is still up in the air.
via Fortune
GM First to Offer Unlimited Data Option for Car Owners – DSLReports (Mar 3, 2017)
This is an interesting but not altogether unexpected step. There’s an analogy here to Amazon’s discounted Echo-only music service, which takes advantage of the same limitations to offer a lower price for something that would normally cost more. GM is now offering $20 for unlimited data, which is the same as it used to charge for 2GB of in-car WiFi data. AT&T continues to sell in-car connectivity to carmakers at a rapid rate – about a million subs per quarter – but these subs are mostly extremely basic at the outset, covering just in-car telematics for a few dollars a month. Only if subscribers actually start buying the additional features such as OnStar and this kind of in-car WiFi does AT&T start to generate a more meaningful revenue per user, so being more aggressive about the pricing, especially as AT&T reintroduces unlimited plans for its own services, makes a lot of sense. And of course since GM gets a cut, it’s strongly incentivized to sell these services too.
via DSLReports
AT&T undercuts Verizon, T-Mobile with new unlimited plan – CNET (Feb 27, 2017)
I think there’s actually more going on with these new plans than most of the coverage I’ve seen suggests. Firstly, the unlimited plan AT&T currently sells is going away as an option for new customers, so these two new plans are AT&T’s unlimited offer going forward. Secondly, I suspect it’s also going to lead with these over its tiered data plans going forward, even though those tiered plans will remain available for at least a while. What’s really happened here is that AT&T jumped in quickly by opening up its existing unlimited offer two weeks ago when Verizon opened that can of worms, but this is the offer it really wants to put in the market from here on out. And that’s important, because when AT&T opened up its offer, that had two implications: no more benefits from bundling AT&T and DirecTV service, which had been an important driver of net adds for DirecTV, and a cap on revenue per user for those switching to unlimited. These new deals restore the benefit for bundling with DirecTV (it’s now a $25 bill credit every month), and provide a structure which allows for an up-sell over time between two tiers of unlimited service. That allows AT&T to continue to differentiate on its unique selling point, which is wireless-TV bundles, while also creating the idea that all unlimited isn’t created equal. For now, there’s basic unlimited with SD video and a 3Mbit/s speed cap, and then premium unlimited with tethering, the bundle discount, and HD video. That opens the door to other unlimited tiers or options down the line as well, and therefore increasing ARPU over time. I do think competitors are going to aim at that 3Mbit/s speed cap in their advertising, and if you look at the details of these plans they’re still overly complex, but these new plans should definitely help AT&T sell both more wireless and TV subs.
via CNET
5G Schedule Moves Up to 2019 – PCMag (Feb 27, 2017)
As I expected, 5G seems to have been a big theme at MWC this year, with lots more marketing type announcements but also some actual products being announced, albeit ones which should technically be described as pre-5G. The headline here is a bit funny, because of course it’s in these companies’ interests to suggest 5G is more imminent than previously thought, but it’s not up to them how quickly the technology gets deployed – that’s entirely up to the carriers, and I’m still very skeptical that we’ll see 5G available to more than a handful of locations before 2020 in the US (or probably anywhere else). And of course the idea that Qualcomm’s 5G modem would premiere in an iPhone seems laughable – Apple has been deliberately slow to adopt both previous wireless generations (3G and 4G), because the early trade-offs between performance and battery life make early entry unappealing. I don’t see that changing with 5G. But as a previous piece suggested, 2017 is going to be the year of pre-5G commercial trials, which is an important step along the path to eventual mainstream rollout and adoption.
via PCMag
T-Mobile Continues to Boost Capacity for Customers with LTE-U Launching in Spring 2017 – T-Mobile (Feb 22, 2017)
T-Mobile has been touting LTE-U as a potential extension of its current LTE capabilities for several years now, but needed FCC permission to begin actually deploying the technology, which operates in some of the same bands as WiFi. It now has that permission and will apparently begin rolling out the technology to customers in the Spring, though none of the devices currently in T-Mobile customers’ hands actually support LTE-U – those will start arriving later this year, CTO Neville Ray told me. The technical marketing lead for Qualcomm’s LTE and 5G modems tells me that devices carrying the new Snapdragon 835 chip and X16 LTE modem will support it. So until there’s widespread adoption of new devices capable of supporting the technology, and widespread support in the network, this isn’t going to have much consumer impact. In the meantime, there’s good marketing fodder here about being first (as with Verizon’s 5G announcement earlier).
via T-Mobile
Verizon offers taste of 5G as it expands network trials – CNET (Feb 22, 2017)
Though the headline doesn’t do it, the article itself makes appropriate use of quotation marks around “5G” – there is no official standard for 5G yet, so everything being rolled out or trialled in the meantime is pre-5G based on companies’ anticipation of what the standards will say. We’re very much in the marketing phase of 5G at this point – for the reasons just stated, no-one can actually roll out 5G yet, and everything that is being rolled out is very much in the trial stages rather than production rollout, but that’s not stopping companies like Verizon from issuing lots of press releases about it as a way of establishing perceived leadership in this space. As with previous generations of mobile technology, there are multiple phases that need to happen before real people start seeing real benefits in real numbers: the standards have to be finalized, network equipment vendors need to release standards-based equipment, carriers have to deploy that equipment into their networks at scale, and most importantly end user or customer premise devices need to begin incorporating the technology. We’re years away from mass deployment still. The good news is that LTE has tons of runway left ahead of it in terms of increased speeds; the bad news is that we’ll all get so bombarded with 5G marketing in the interim that many people won’t recognize it when it actually arrives.
via CNET
SoftBank eyes Sprint, T-Mobile deals – CNBC (Feb 17, 2017)
This isn’t a huge surprise – ever since Donald Trump won the US presidential election in November, the odds of a deal involving Sprint and T-Mobile have gone way up, because the incoming administration is likely to be much friendlier to consolidation. However, that’s no guarantee that a deal will get done – last time around SoftBank was the driving force behind the deal and very keen to control the resulting entity, whereas at this point it seems a lot less committed to its US wireless adventure. At the same time, T-Mobile USA is performing much better as an investment for Deutsche Telekom, making it less likely to sell. One option would be for Deutsche Telekom to take over Sprint, but it’s far from clear that it wants to (and it would certainly be awkward regardless given TMO CEO John Legere’s constant belittling of Sprint). Then, of course, there’s the question of whether a merger is a good idea. On the one hand, scale continues to be enormously important in the market, and Sprint and T-Mobile have a big disadvantage here, but on the other T-Mobile has been pretty well anyway by itself, while Sprint has been doing far less so (or growing by sacrificing margins and revenues). And it will be very hard to argue that a merger at this point would be good for competition, even with Republicans in charge at the FTC, DoJ, and FCC.
via CNBC
AT&T Expands Access to Unlimited Data (Feb 16, 2017)
Well, that didn’t take long at all – at the beginning of this week neither of the two largest US wireless carriers offered unlimited data plans to all customers, and by the end of the week both will. This has financial implications for both carriers, though they’re hard to predict – both have had unlimited customers before but have been slowly weaning them onto tiered data plan, and taking the limits off again could lead to dramatically higher usage especially if many users switch to these new plans, which are fairly aggressively priced. At AT&T, though, there’s another impact, which is that it has been using unlimited data as a marketing strategy to drive DirecTV subscriptions, because that was the only way to get on one, but that will now go away, so we may see lower DirecTV net adds going forward (AT&T added 1.2 million of these bundled subs in Q4, and had almost 8 million at the end of the year). Next quarter’s earnings season for the wireless carriers will be very interesting – it’s going to be one of the hardest ones to predict in a long time.
via AT&T
T-Mobile US Reports Q4 2016 Results (Feb 14, 2017)
T-Mobile reported its Q4 results this morning – the last of the major US wireless carriers to do so – and as usual it’s beating all the others handily on postpaid phone subscriber growth and making decent progress on growing its margins. It added several times as many postpaid phone subscribers as any other carrier, but in other categories like tablets and “connected devices” (think cars, machine to machine, connected utility meters) others were ahead, with AT&T leading the market in both those categories. T-Mobile says it has seen much higher porting ratios (the ratio of subscribers won versus lost from a particular carrier) against Verizon this quarter, which would help explain the latter’s rapid shift in stance on unlimited plans. T-Mobile continues to be quite a bit smaller than the big two, and that’s a big driver of its lower margins, but the fact that it’s willing to take those lower margins enables it to win subscribers with aggressive pricing, especially since its network performance and coverage is constantly improving. I continue to be skeptical that T-Mobile’s strategy is sustainable over the long haul – it’s very focused on phones, which aren’t growing much anymore, and hasn’t invested as its two largest competitors have in newer growth categories, but for now it continues to capture lots of attention and make the other carriers look bad.
via T-Mobile (PDF release)
Verizon joins the unlimited wireless data party – USA Today (Feb 13, 2017)
The challenge for the two largest US wireless carriers has been to strike an appropriate balance between responding to the price-based competition from the smaller carriers and preserving revenue per user and margins in their massive existing bases of customers. On the one hand, failing to respond aggressively enough to competitive moves risked customer losses, and on the other responding too aggressively risked reducing revenue per user and margins for the base. On the whole, AT&T and Verizon have chosen to be more conservative, largely preserving prices while tinkering at the edges with temporary promotions and in AT&T’s case using its prepaid brand Cricket to compete more aggressively on price. But that conservatism has come at a cost – AT&T has seen postpaid phone net losses for two years now, and Verizon’s phone net adds have also dropped considerably below past levels, though their margins are better than ever. This move today by Verizon suggests that it’s finally reached a point where it doesn’t feel it can hold off any longer on unlimited plans and intends to compete more aggressively. That will likely be good for subscriber numbers, but potentially bad for margins as it caps revenue per user upside from a data plan perspective. I’m not yet convinced that AT&T needs to follow suit with broad-based unlimited data plans – I think they’re happy to keep their all you can eat plans limited to DirecTV customers, at least for now.
via USA Today