Monday, September 24, 2018

MetroPCS to Metro by T-Mobile & Plan Changes

T-Mobile is rebranding its MetroPCS prepaid business unit with the new moniker Metro by T-Mobile. Honestly, it's time or should have been done maybe two years after the MetroPCS was acquired at the end of 2012 and closed in early 2013. The PCS part of the brand harkens back to the PCS spectrum the company was operating. Quite frankly, the industry shortcut nomenclature was always Metro, so BFT.

How we got here: T-Mobile CEO John Legere teased a series of Twitter posts last Friday, the 21st.

With T-Mobile and Legere promoting a "LegereForBatman" campaign, you'd think maybe another T-Mobile executive could have been the Riddler as a stretch joke. 

But long-time industry observers may have noted the Legere tweet's question marks were the MetroPCS colors. Even T-Mobile CFO (also ex-MetroPCS CFO) Braxton Carter weighed in on John's tweet:

Plan Changes

Aside from the Metro rebrand, the other announcement component is the revised plans.  The new $50 and $60 plans are more competitive not just for the additional hotspot data ($50 from 0 -> 5GB and $60 from 10 -> 15GB) but it's notable that marquee external partner value has been to the prepaid segment.  The inclusion of Google One storage and Amazon Prime membership in a plan is something out of a postpaid plan playbook.

But that's the point that T-Mobile is making; the lines between postpaid and prepaid are getting blurred. However, that's not entirely true. The fine print says that Metro subscribers will get throttled when there is congestion so that T-Mobile One (postpaid) users have data priority.  Still, the new plans validate a long standing effort to boost the prepaid average revenue per user by focusing higher plan price points.  Moreover, another trend is to promote family lines. The value proposition here, similar to postpaid, is that family plans decrease churn. Churn is especially critical in the prepaid sector, where the price sensitive customer has a tendency to jump providers for the best deal.  So the introduction of Google One and Amazon Prime membership are more anti-churn value components to sweeten the pot and to move the conversation away from the traditional lowest monthly cost mindset.

Big Picture

Step back and look at the macro view.  After blistering growth since integration, T-Mobile prepaid (predominantly MetroPCS) has cooled since 2Q17.  While Metro has slowed, arch rival AT&T's Cricket side has greater growth momentum than Metro.

Meanwhile, Sprint's and American Movil's Tracfone prepaid units continue to recover from staggering losses due to its earlier bets on the lifeline segment (Assurance and SafeLink).  In the near term, it's looking like a two carrier race.  We'll see what happens in 4Q if these plans can make an impact. The yea's not done yet; competitors may also get into the value race as holiday sales take shape.


Thursday, September 6, 2018

The Pros and Cons of Verizon's Ronan Dunne to Becoming BT's CEO

Ronan Dunne, the current CEO of Verizon Wireless popped up on the news led by an article in the UK's Telegraph business pages this past Saturday, Sept 2.  The gist of the speculation is that he was in the UK in the previous week supposedly interviewing for the BT CEO job.  His background seems right as he had been an O2 (BT's wireless carrier competitor)  since 2001 with stints as CFO in 2005 and ultimately the CEO from 2008 to 2016.

In 2016, he joined Verizon and how he got here to the States was a subject of an thorough  Independent piece.  Much has been speculated that he was looking for a new position after Hans Vestburg got the Verizon CEO nod.  I noted that he could have been a candidate for the the Lowell McAdam vacancy in an earlier June blogpost but there were stronger candidates.  

Here are some quick pros and cons for Dunne to take the BT CEO helm:

    • As a European and as a long time area telecom hand, he already has the knowledge base for the continent and appreciates the complexities and quirks of each country.
    • Dunne had a successful track record at O2 but in the year plus, he's gained the experience of running a far larger wireless operation with different challenges and buyer demographics (i.e. predominantly postpaid).  Under his watch, unlimited plans returned to the service portfolio and eliminated the stigma that Verizon was the sole non-unlimited plan provider.
    • Since American 5G planning and deployment has exceeded that of European counterparts, Dunne's competitive advantage will be the insight of getting ready for 5G fixed and mobile services.  
    • If BT takes Dunne on, he's be an experienced European CEO but with a fresh and valuable external perspective.

    • BT is more than a wireless company and Dunne doesn't have any direct landline operations experience.  While many telecom companies such as AT&T, Verizon and BT have integrated as 'one' company, the businesses are a bit different.  If it's like the American landline experience, he'd have to figure out a way to slow or reverse subscriber losses. 
    • According to the Telegraph article, Patterson, the ex-BT CEO was bogged down in regulatory fights. Although Dunne knows the European regulatory scene, he has also battled with them. His last regulatory fight ended with the denial of the Hutchinson of O2. 
    • Dunne's contract at Verizon may be the wild card.  Does it allow him to get out of his duties and with what penalties or forfeitures of substantial bonuses.  Is there a non-compete that will limit him? Will the Verizon Board and Vestburg make a play to retain him?
    On paper, Dunne as an experienced executive is fit to lead BT and like many job opportunities, it may be fit, chemistry and upside in the decision making process.  I guess we'll see soon what happens as BT needs to fill the vacancy quickly.

    Tuesday, June 26, 2018

    WatchTV - Building the Base to Enable Future Revenue Growth

    Is it still price competitive as in the old days? Yes and no.  The price leaders continue to be Sprint and T-Mobile while AT&T and Verizon continue to position themselves as the premium carriers.  Of course the big two's legacy network perception continues to play an integral role both in high-value customer retention and seemingly record low churn.  Despite T-Mobile's continuous poaching, the sky hasn't fully fallen at AT&T and Verizon.

    Make no mistake, T-Mobile was "the" catalyst that stimulated postpaid price wars and brought unlimited back at the big two.  Network and price continues to drive service provider selection but with over 120% wireless penetration, the game for several years has been one of switching. Number 3 and 4 players, T-Mobile and Sprint have been marketing their networks to be equivalent to that of the bigger two. Combined with price advantage, T-Mobile has seen greater success in building up its subscriber base.  However, the days of widespread price slashing at T-Mobile has stabilized.  While Sprint continues its price value leadership to acquire new customers and offset churn, the three other providers are moving to maintain or increase profitability.

    Now the shift is moving to embedded value, beyond pricing.  At T-Mobile, higher data thresholds on data prioritization, hotspot capability, texting and data abroad, T-Mobile Tuesdays and free Netflix are just examples for retention and acquisition.  To offset content, Sprint cut a deal with Hulu while AT&T rolled in HBO as a benefit of subscribing.  Verizon content play is Go90 but it's not a subscriber benefit as Go90 is an open to all.  However, AT&T's strategic vision is one that centers around content and the ability to deliver and monetize that.  AT&T's acquisition of DirecTV produced the over the top (OTT) DirecTV Now.  Now with quickly closing the Time-Warner acquisition, AT&T announced two new postpaid rate plans that bundle content value, anchored by WatchTV.

    WatchTV is a 'skinny bundle' that features well known video channel brands.  Customers on the new Unlimited &More and Unlimited &More Premium receive the base channels.   Premium users will be able to add HBO, Cinemax, SHOWTIME or STARZ as well as music streaming services like Amazon Music Unlimited and Pandora Premium.  For non-AT&T customers, the price is $15.

    When DirecTV Now launched, many knocked the limited content available but as the progressed, more channels were added; it's likely to follow a similar playbook to further WatchTV's value proposition. WatchTV is based on the same DirecTV Now platform which may borrow key features including a similar navigation guide, multi-platform access and cloud DVR.   This immediately conjures up the cannibalization issue of current DirecTV franchise of users. To offset this, a $15 credit is available to upsell or tamp down any video churn.

    The Rate Plan Comparison

    Surprisingly, a new portfolio swap comes in just over three months since the last price change. Inevitably the conversation moves to price.  This introduction is supposed to be on the week of June 24th yet as of this writing, the new plans have yet to be launched.  With some preliminary details on the new Unlimited &More and Unlimited &More Premium plans, they seek relative parity with the previous Unlimited Choice and Unlimited Plus Enhanced.  What has been shared so far is that Choice and &More is the same at 4 lines ($160) but $5 more with lines 1 to 4.

    For Unlimited &More Premium, the pricing remains with Plus Enhanced with lines 1-4 ($190) but $5 more for lines 5+.  To me, it's clear that AT&T covets the 4 line account as the 'bread and butter' profile of its users.  Still, there has been no price cuts so T-Mobile and Sprint remain the price leaders while Verizon remains the most expensive, especially withe introduction of the third aboveunlimited tier.  With some price increases, AT&T's challenge is to convert older unlimited and Unlimited Choice & Plus Enhanced account holders to these new plans with the feature value.

    Looking Ahead

    In the near term, WatchTV is about enhancing competitive postpaid plan value. It comes at the end of the second quarter and ready for steady promotion going into holiday selling. In the long term, the goal is to increase the video viewer base.  To help this, AT&T promises that WatchTV is but the beginning of many new offers to come as the result of the Time Warner acquisition.  Given the rapid pace of WatchTV rollout, there should be many of those promise offers should come by the end of the year.

    As AT&T has publicly stated, its long term strategy is to leverage its advertising and analytics business unit to drive future revenue.  A larger subscriber base certainly helps the cause but that advertising and analytics unit is making its own moves to create the necessary foundation to expand its ad tech expertise. The AppNexus acquisition valued at $1.6B is expected to close in the third quarter brings further global capability, something I believe wants to further expand its international portfolio.    CEO Randall Stephenson promised more smaller acquisitions to come after the Time-Warner close.  With the impressive pace of announcements and execution, it'll be interesting where the now media company will bolster its business units.  My money is on further content and ad tech.

    Tuesday, June 19, 2018


    As a long time industry analyst and wireless segment observer, I've witness short term/tactical carrier moves in price plans to increase competitiveness, the network technology generations positioning and rollouts and corporate strategic turns.  Experiencing this June's AT&T Shape conference in Hollywood validated to me, the ongoing reinvention of a telecom company into a global media company.     Of course, that was all set in motion with the 2014 DirecTV acquisition and now with the $85B Time Warner buyout, it's full speed ahead.  That has been the big media journey so far.  How the company lines up to this important goal is found in internal and external complementary changes.  One such change is the creation of the Shape conference.

    Rewind back to the time when smartphone adoption was ramping up. Device app development was exploding.  The internal AT&T investment to spur innovation through external collaboration created the Foundry concept.  AT&T's Palo Alto Foundry launched in 2011 to bring in Silicon Valley minds to work on cool ideas, at the time, app development was the low hanging fruit.  In conjunction, the AT&T Developer Summit had already started in early 2010. Always a couple of days ahead of the Consumer Electronics Show opening, the Dev Summit sought to capitalize on the tech CES attendee base.  The four day conference designed with speakers, a hackathon, prizes and parties spurred networking among AT&T, partners and developers.  As an aside, 2014 was maybe the most infamous due to the party crashing by T-Mobile CEO, John Legere.

    Fast forward to the increasing importance of content, mainly video and the influence of DirecTV and more importantly, DirecTV Now (launched in Fall 2016) as content delivery platforms.  

    With a 6 year run, AT&T ended the Dev Summit. It was time to move into the media and content community.  AT&T Shape 2017 (billed as a tech and entertainment expo) conference at Warner Brothers studios nods to AT&T's strategic imperatives of content and its ecosystem.  Yet the AT&T network, as in the Dev Summit, was a backbone topic.  Though a hackathon with cash prizes was still an event, spotlight shifted to the AT&T Film Awards.  With multiple winning categories, including a grand prize of $20,000 in the Best Short: Emerging Filmmakers category, filmmakers were now in the driver's seat.  Nevermind that the filmmakers spend much more than the grand prize to create their film, Shape provides a platform to catch the eyes of Hollywood execs, and (now) WarnerMedia, the AT&T content business unit.  
    At this year's Shape, AT&T Mobility & Entertainment President, David Christopher 'called an audible'  (impromptu) and declared all three finalists, winners (each winning $20k) in the Best Short:  Emerging Filmmakers segment, to the audience's approval. It was a nice move, one that filmmakers in the audience will remember as AT&T largesse.

    While tech and content speaker sessions packed interested audiences, the tech demos in the a Warner Brothers town square pushed a lot of 5G technology education and virtual and augmented reality companies.  While some of the demos were stretching one's imagination, it's the trajectory towards these VR/AR areas combined with 5G that is undeniable as future growth areas.

    Content is king. That has been punctuated with the rapid close of Time -Warner into WarnerMedia.  The next step in AT&T's strategy is to further monetize this content beyond the standard distribution and licensing agreements.  The four main business units under the AT&T corporate umbrella are Communications, WarnerMedia, International and Advertising & Analytics.  AT&T Chairman Stephenson has already spoken bullishly of the smart monetization potential of its burgeoning ad business, especially when the company has owner's economics on content.  Stephenson has also stated that there will be smaller ad/adtech acquisitions coming.  For Shape 2019, I am betting that this business unit will be more prominent, showing content creators and owners on how they may monetize their assets further.   

    Friday, June 8, 2018

    The Logic of Hans Vestburg's CEO Sucession at Verizon (with an update)

    Verizon announced that current CEO Lowell McAdam will be stepping down effective August 1, 2018 (a Wednesday). Hans Vestburg, former Ericsson CEO, who joined the company in April 2017 as CTO, will become CEO and work with McAdam in the transition.

    A couple of points when I read the news:
    • Surprise - In 18 months, the rapidity of elevating an outsider to the CEO spot seems to be unprecedented at a company that usually promotes from within. I was going to go with John Stratton as he was the logical choice, assuming the internal elevation approach.  Yet this is a new world in which the stakes are high for Verizon to execute on its 5G vision along with its big dollar bet on Oath.  Broader multi-company knowledge and experience is now expected. 
    • CEO chops -  Vestburg has global CEO credentials, over 6 years worth at Ericsson.  The Verizon bench also has their pick of former CEOs that have their own narrow expertise - Ronan Dunne (ex-O2 CEO for 9 years and its CFO for 3 years) and Tim Armstrong (ex-AOL CEO for 6 years until Verizon acquire it in 2015).   The graphic below, extracted from Verizon's 2017 10K filing, shows likely candidate pool that the Board of Directors may have been considering.  The officers with outside background have already been integrated into the officer fold.  As an aside, Vestburg's elevation makes sense for Marni Walden's October 2017 departure along with the rumors that she wasn't going to succeed McAdam. 

    • Age - Age is likely a consideration criteria in sucession planning as Vestburg is 52.  McAdam took the CEO reins in 2011 at age 57 but had CEO responsibility for the wireless business unit since 2006 at 52 years old.  The point here is that he can hang around for at least 5-8 more years.  
    • Technical Background - It's taken for granted that every CEO should have deep business background and experience, but as the telecom and ad company moves into 5G, it should have leadership that understands how the new technology can leverage into successful growth. Vestburg doesn't have McAdam's engineering background yet the lengthy tenure at Ericsson enabled him to slot into the CTO position despite a business degree. 

    Vestburg's Challenges
    • Understanding Operations - In the video,  Vestburg admits that he needs to delve into the operations and commercial side, the bread and butter wireless and wireline service provider things that bring in over $126B annual revenue. Of course there are the cadre of business unit heads that know their areas who will continue to work their areas.  
    • Vision Delivery - 5G is the hot topic that at times is overhyped but yet mutually agreed across the industry as the future innovation and revenue driver. Vestburg, in the old Ericsson role, pushed that vision across the service provider segment.  Now he'll be the focal point to execute and bring in the moolah (technical term) and prove McAdam and the Board of Directors made the right choice.  Oath's potential has been talked up a lot along with its global ambitions. In 1Q18, its revenues were $1.9B, compared to $21.9B in wireless and $7.6B in wireless.
    • Ericsson Baggage - Vestburg departed Ericsson with declining revenue trends.  Some of my infrastructure analyst colleagues have already noted with surprised that with such a bad tenure, he'd be able to guide Verizon's future growth.
    • Turnover - As with every company's transitioning to a new CEO, there may be turnover in the executive pool.  Marni Walden left. Will there be others.  Moreover, there has been precedence that new executives would elevate or bring in their own people from previous positions.  Will that happen and to what extent?  Now that the CTO and Stratton slot will be vacant, who will slide into those positions?
    • UPDATE - No sooner than the digital 'paint' on the Vestberg CEO announcement dry did Verizon announce John Stratton's retirement by the end of the year.  With over 25 years with the company, he's sure to get more than a belt buckle or television (inside Bell System joke). The link for the press announcement (hosted on the Investor Relations site) has the obligatory outgoing exec quote. 

    Monday, April 30, 2018

    Why T-Mobile Needs Sprint to Increase Business Revenue

    On Sunday, April 29, 2018, T-Mobile and Sprint announced their intent to merge creating a $146B transaction to hopefully close in 1H19.  During the call, CEOs John Legere and Marcelo Claure talked up the consumer benefits of a combined company and that with this new company, the US would take back 5G leadership from the Asians.

    There are so many areas to address in this proposed merger from regulatory hurdles, consumer benefits, job growth (or layoffs), the ‘mother of all networks,’ the winning brand, which executives came out ahead, etc.  I’ll start with the business service side because I’ve been asking this question to T-Mobile since the Un-carrier 9.0 announcement in March 2015 (Un-carrier for Business). The offering helped stimulate additional subscriber growth and impinged upon competitors’ specific business segments. Beyond the discounted plan structure, the ability to use free Wi-Fi during air travel, and free 2G global roaming, sophisticated higher revenue business services have not been in the T-Mobile portfolio.  

    Sure, T-Mobile’s SyncUp fleet management solution or DIGITS offer another layer but those products also compete with similar or more sophisticated services from Sprint, AT&T and Verizon. It’s probably safe to say that much of T-Mobile’s business growth are lines in the small-medium business segment.  

    For those who are wondering what sophisticated business services may be, here’s a Sprint example below: 

    With a strong consumer message, I continue to wonder what of the business prospects with the combined company.   To be sure, much of the T-Mobile’s and Sprint’s business revenue challenges are unique. T-Mobile either doesn't see the return on investment in creating a sophisticated business portfolio, as that wouldn't be relevant to its subscriber base or they were waiting on Sprint all along.  Sprint has the business services (wireless and wireline) but lack the network credibility of their competitors.   I'm happy they addressed my question on the merger call and followed up with this responding vague Tweet. 

    The low hanging fruit from the T-Mobile business expansion standpoint (and in their Twitter response) is rural America, bringing broadband competition to wireless and wireline incumbents. But that should already be on the T-Mobile radar, merger or not.  For Sprint’s part, the company’s 2.5 GHz 5G vision would be a compelling one in upselling and retaining its incumbent business base. Yet with capital constraints and other financial challenges, the pace, breadth and full realization of that Sprint-only 5G network is questionable (i.e., lots of major regions or national). Sprint is already in LTE catch up mode against competitors. 

    A far-reaching network is everything. Verizon and AT&T know this and have invested tens of billions in their networks.  Both companies have captured consumer and business marketshare as a result. A new T-Mobile with a true 5G national network, combining low (600 MHz), mid-band (2.5 GHz) and future millimeter wave assets will surely provide a formidable network competitor to the big two, and foundational to future business revenue expansion.  

    Assuming the deal is done and approved by 1H19 projections, it’s logical that parents, DT and Softbank, would increase capital (and not count on OpEx synergies) to accelerate the network vision (pun intended).  T-Mobile has a solid track record in integration (MetroPCS), network expansion and great execution. I’d expect no less from the combined Sprint and T-Mobile network planning and engineering teams. T-Mobile is already on track to plant a national 5G network flag thanks to its 600 MHz (albeit with thin dedicated spectrum), when that will be supplemented by the 2.5 GHz (>300M POPs) is the big question.   If the deal isn't approved, T-Mobile will need to build up its business portfolio to truly compete.   

    [[[updated May 2, 1018]]]

    On T-Mobile's 1Q18 Earnings Call, CEO Mike Sievert addressed the attacking the business segment at the new T-Mobile.   He stated: " Our business plan is funded for an expansion of our enterprise team. In year one, we’re going to take advantage of this set of capabilities and get after it and we funded our plan in year one to hire aggressively to get after the business market."

    Wednesday, March 7, 2018

    Here's How AT&T's Enhanced Unlimited Plans Are Competitive

    Well, it's the first quarter and carrier(s) historically have restructured its rate plans in order to remain competitive or gain the upper hand.  Restructuring is different than running short term promotions to goose up the quarter's number. T-Mobile and Sprint are already doing that. For this first quarter, we find AT&T 'enhancing' their two rate plans, formerly known as Unlimited Choice and Unlimited Plus. Now, the company adds the Enhanced moniker to lengthen the product names.  The announcement was buried in a press release about regional promotion offers and the new rate plans began life on March 1.

    The changes in a nutshell:

    Unlimited Plus Enhanced (pricing includes $10/month autopay/eBill credit): 1 Line – $80; 2 Lines – $150; 3 Lines – $170; 4 Lines – $190; 5-10 Lines – $30/line.

    Each line includes up to 15GB/month tethering. Each account includes free HBO for life regardless of whether customer subscribes to an AT&T video service and a $15/month video credit for DIRECTV or DIRECTV NOW. 

    Unlimited Choice Enhanced (pricing includes $10/month autopay/eBill credit):  4 lines for $160/month: 1 Line – $65; 2 Lines – $120; 3 Lines – $140; 4 Lines – $160; 5-10 Lines – $30/line.

    Full 4G LTE speeds (vs. 3Mbps previous). Each account includes free HBO for life regardless of whether customer subscribes to an AT&T video service and a $15/month video credit for DIRECTV NOW.

    Looking at the new versus the old:
    • the additional line rate went up 
    • the first/single line went down 
    • more GB for tethering 10 -> 15 GB
    • no more throttled at 3Gbps (DL) for Choice subs
    • $15 video credit - DTV or DTVNow
    Clearly, there are pros and cons. Some may view increased cost, some may view the changes gives more choice and features. Others will see that it's changing the tables (but continuing the strategy) for bundling wireless service and video.  It's all those things depending on one's own perspective. But the true test will be how competitive the 'enhanced' move is against other carriers, and which ones?  Let's face it, creating and refining rate plans isn't a simple task (hat tip to all price planners) but the final product needs to be an effective Swiss Army knife.  What's the holistic view and how do the Enhanced plans stack up?

     Those who long follow carrier competition, you know that typically the big two's rate plan moves are usually against each other.  Yet, in today's environment, T-Mobile's multi-year momentum needs to be addressed.  (Way back machine: In the late 2000s, AT&T went toe-to-toe against T-Mobile's value pricing. In an earnings call, then CFO Pete Richter said that it was a mistake and AT&T wasn't going to do it anymore.)  That was then, this is now.

    AT&T introduced Unlimited Choice to address potential and existing customers' price sensitivity and wanted the AT&T network (the same is true for Verizon's gounlimited plan). As the chart above shows, Choice Enhanced beats T-Mobile One on single line but stays in line up to line 4 (all non-promotional pricing).  Moreover, the new Choice Enhanced pricing beats that of Verizon's gounlimited.  The same holds true for Plus Enhanced against Verizon's beyondunlimited.  Both restructured plans provide a nice $10+ price gap against its Verizon counterpart.

    Moving forward, can T-Mobile stand losing out to price against AT&T? Maybe, as Magenta will argue that its real competitor is AT&T's Plus Enhanced plan which it beats. Sprint for its part remains the price leader and with its promotions, it just needs to acquire new subs.  Yet Verizon is in a quandary as this AT&T price move not only affects consumers but the more lucrative enterprise and other business segments.  First in my mind is FirstNet.  While AT&T is the lone FirstNet provider, it needs to bring the public safety entities into the FirstNet fold. What better tool than this more advantageous rate plan to help shift first responder accounts from Verizon onto AT&T?

    It's the third month of the first quarter.  How vulnerable are Verizon Wireless consumers and business customers to this change? The rate plan is only a week old but I suspect that AT&T on the feet sales folks have been talking the price savings up in business and potential FirstNet accounts. The question is will Verizon react this month or the next? The price gap is decent.  Tempus fugit. 

    Tuesday, February 27, 2018

    2017 Prepaid Roundup - Winners and Losers

    Yes, it's true. 2017 is two months behind us and the wireless industry is talking about the up and coming 5G.  While the US carrier sector focuses on the higher revenue and lower churn bearing postpaid segment, prepaid is often overlooked. Though prepaid experiences lower average revenue per user and higher churn, prepaid revenue and subs are still a formidable wireless segment.

    The big 5 prepaid players, some with flanker brands, dominate the net addition or loss numbers. Therefore, the focus will be on AT&T, Sprint, T-Mobile, Verizon and America Movil.


    It's pretty obvious from the above chart which company is the year's biggest loser. America Movil lost over 2.9M subscribers. According to the company, the dominant contributor was Safelink (government subsidized lifeline program) disconnects. America Movil wasn't the only company that bet big on the government program. Sprint's Assurance Wireless brand targeted the same segment and also suffered previous losses in its prepaid base.

    The second loser was Verizon prepaid. After what looked like an upward trend in 2Q and 3Q, the company crashed with 184K losses, mostly with prepaid basic phones. Verizon and America Movil are moving to increase revenue with smartphone subscribers, in essence deemphasizing the classic pay as you go customer.  These two companies are somewhat late to the party as that's been the strategy for T-Mobile's MetroPCS and AT&T's Cricket for several years.


    The clear winner in terms of sub adds is clearly AT&T's Cricket.  This flanker brand has been the steady growth catalyst since 2015.  What's important for AT&T is the momentum shift from 2016 in which T-Mobile (MetroPCS) dominated with over 2.5M adds versus AT&T's ~1.6M. It's likely the two company rivalry will continue. Despite losing the overall 2017 growth title, T-Mobile is a winner. Last but not least is Sprint with its major brands Boost Mobile and Virgin Mobile. Though Sprint came out 373K subs in the positive and paled in comparison to AT&T and T-Mobile, one needs context.  In 2016, Sprint lost about 500K subs and in 2015 the loss number was over 1.5M.  So 2017 was a win for Sprint in my book  


    Coming out of 2017, each player is focused on growing subscribers using the multi-line strategy. While the revenue per user part is less than a single line, the playbook is decidedly reminiscent of postpaid. Remember the old voice days when the financial community were shortsightedly concerned that carriers were leaving money on the table with meager $10/month add-a-lines?  The tradeoff obviously is in lower churn. More lines equals the less likelihood to churn.  The equation changes a bit with prepaid as price is also a main consideration.   At the end of '17 and also now, competitors are moving to the 4 lines for $100/month.   As this is tax 'refund' season (for some), competitors are throwing in the free phone promotion here or there.  But Cricket has somewhat escalated a price war with a $40/month unlimited single line price. The promo duration ends on April 12th. The fine print is that the plan price is only for one year.

    Surprisingly, competitors haven't matched as the equivalent plan is still $50.  Historically, the sub activity has  usually occurred in the 1st and 3rd quarters.  It's hard to say whether each competitor will be the instigator for more plan action but there is a balance between acquiring more subscribers while showing higher ARPU/ARPA/ABPU trends and increasing margin AND decrease churn. It's a tall order.

    Distribution will define further growth opportunities. MetroPCS can certainly ride the T-Mobile postpaid's coat tails as the company expands into the hinterlands with its 600 MHz spectrum.  Similarly, Cricket can expand its national brand footprint as it gains more dealers.  It's likely that AT&T and T-Mobile will dominate the prepaid scene as Verizon's focus has always been the more lucrative postpaid.  Sprint's tight corporate budget also suggests that its acquisition money should heavily favor postpaid to further its turnaround story (I'm still waiting for Virgin Mobile's 'game-changing' contribution.  Lastly, America Movil will likely continue to shed lifeline customers with incremental growth in the Walmart exclusive Straight Talk.  Let's see what happens.  

    Monday, February 5, 2018

    AT&T Prepaid - 4Q17, A Strong 2017

    AT&T's reinvigorated prepaid group has been plugging away after the Leap Wireless (Cricket) acquisition and integration in 2014. Rather than keep the then AT&T Aio flanker brand, Cricket's name had better traction in the prepaid sector.  While AT&T is more than just the Cricket brand (remember GoPhone?), Cricket brings in the lion's share of the additions.

    Overall, the Cricket unit has been a positive development, adding over 1.3 million (M) subs in 2015 and over 1.5M in 2016.  Its playbook mirrors its chief rival, MetroPCS which was acquired in 2012. The regionally limited MetroPCS brand expanded along with the T-Mobile national footprint, increasing the brand's distribution reach.  This has also been the case as Cricket increased its footprint and distribution.  With about a 1.5 to 2 year head start, MetroPCS has been the industry prepaid net add leader, with more than 1.3M in 2015 and over 2.3M in 2016.  Given this trajectory, one would expect them to lead in 2017.  However, for 2017, the overall prepaid net add leader is AT&T with just over 1M net adds to T-Mobile's 855 thousand.  

    The overall trend, based on the leaders' numbers, is that prepaid isn't growing as hot as it was several years ago.  4Q17's numbers for both companies seem anemic in a Year over Year comparison.  Yet more confounding for industry watchers, AT&T has incorporated prepaid IoT (they say vehicle connectivity) into its 3 and 4Q17 numbers. Those account for 152 thousand additions. If we remove those numbers, AT&T still wins 2017 with 861 thousand, barely edging out T-Mobile's prepaid group.

    Looking ahead to 2018, there are two things I'm looking for in the near term:

    1. 1Q18 net add numbers: Generally, carriers' 1Q numbers have been the year's strongest. Will these numbers be 2016 or 2017 levels? As of this writing, Boost, Cricket and MetroPCS's lead offer are similar - 4 lines for $100. 
    2. AT&T Prepaid IoT ramp:  AT&T has been building IoT connected vehicle business with auto manufacturers for several years now with the fruit of embedded connections for every vehicle. As new models and more manufacturers get online, the prepaid IoT numbers should increase. Churn and ARPU for this segment should be interesting if broken out (ideally).        

    Monday, January 29, 2018

    Verizon Prepaid - 4Q17 (More Cowbell, er ARPA!)

    Verizon's prepaid group is going through a roller coaster ride.   For many quarters, the company's prepaid group had been losing subscribers at an alarming rate. From 1Q15 to 2Q16, the losses totaled 758,000! A momentary hike of 83,000 net additions in 3Q16 reversed in the next two quarters of a low 26,000 losses. It seemed that with new plans, the prepaid group was going to be on the upswing with positive growth in 2Q and 3Q17.  However, 4Q17 saw subscriber losses again.

    To be fair, Verizon's retail wireless business is predominantly postpaid. Prepaid only accounts for less than 5% of the company's retail subscribers.  However for 4Q17, Verizon stated that its 184,000 prepaid sub losses were predominantly basic phone subscribers as it "deliberately reduced" focus in this area.  This makes sense as it's been the overall prepaid sector trend to cater to higher-ARPU bearing smartphone plans.  Some can argue that it took too for Verizon to come around to switch its tactics, in order to address an increasingly lucrative prepaid sector.  AT&T and others have long argued that given the no-contracts postpaid environment, prepaid and postpaid ARPUs were somewhat converging.  

    As evident by Verizon's prepaid plans, they are indeed trying to boost ARPU.  Though the minimum single line monthly is $40, the important point is that the company is emphasizing additional lines (as with competitors) to increase ARPA. It's clear that Verizon is not going to be the least cost provider but as wireless veteran observers know, that's not their strategy.  As with postpaid, the company conveys to the market that it is a premium provider with a formidable network.

    What will 2018 hold for the Verizon prepaid group? I have to think that there will continue to be basic phone losses but when will the smartphone plan additions outweigh the losses?  The prepaid subscriber base currently sits as about 5.4M, does the company care about increasing the sub count or keeping it level while trading it for newer subs that boost overall revenue? I suspect the latter.