T-Mobile Goes 5G, It's Expected Except with its 600 MHz

The wireless path for all wireless carriers beyond LTE is 5G. Everyone in the industry knows this.  Conventionally, the spectrum associated with 5G talk has been in the millimeter wave (mmW) realm.  That's why Verizon purchased XO because they had 28 and 39 GHz.  That also can be said with AT&T's purchase of FiberTower (24 and 39 GHz) and its interest in StraightPath (28 & 39 GHz).  There are many on-going trials on the vendor side and carrier side as well in mmW bands.   The width of the mmW spectrum availability is in the order of hundreds of GHz rather than the tens of MHz in each that carriers have today.

T-Mobile has also pursued mmW 5G trials. In September '16, Ericsson announced it achieved 12 Gbps   with T-Mobile in the 28 GHz band.  So with T-Mobile's announcement that it seeks to deploy 5G in the newly acquired 600 MHz spectrum (31 MHz covering 325M POPs) is a true departure from the conventional 5G talk and norm.  Why?

While 5G is the front and center of the announcement, what is lost is that T-Mobile seeks to use some of that spectrum for LTE deployment.   In the 1Q17 earnings call, Neville Ray (CTO) touted that the company wanted to put the spectrum to use quickly, with buildout ready by end of year 2017 along with handset support (Samsung & another vendor).  Two points that T-Mobile have shrugged off:

1) The spectrum needs to be cleared.  T-Mobile's initial 600 buildout will be where there are no clearance issues. It's also the geography where their 700 doesn't cover, so apparently it's a win.  The implication is that it's closing the coverage holes and getting to network and geographic parity with AT&T and Verizon, negating the "Verizon map" marketing advantage.

2) 600 ecosystem cost and support is costly.  It's clear that T-Mobile will be the first mover in 600 LTE and they painted similarities to delving into AWS spectrum.  They claim it's no different.  However, T-Mobile's modus operandi is and has always been pushing the technical and marketing envelope.  It has a good track record.

So the conventional playbook says that 600 will bring geographic and network parity against AT&T and Verizon.  More importantly, it will expand T-Mobile's sales and distribution footprint to greenfield markets traditionally served by AT&T and Verizon because they were the only game in town.

BACK TO 5G

To T-Mobile's credit, they're not ahead of the market as they anticipate buildout in 2019 with commercial service ready in 2020 along with a national footprint.  This is not aggressive but along the conventional standards and industry timeline.  Again, what is unconventional is its use of 600 MHz, unexpected in many tech circles.

The problem with this and conventional 5G talk is from a speed perspective is that it won't make the multi-Gbps targets as so many trials have demonstrated.  Moreover, 31 MHz is going to be divided with its earlier 600 LTE implementation.  This 5G implementation will likely pick up more spectral efficiency in delivering speed relative to LTE but again, as standalone 5G, the operating bandwidth is limited.  So what's the play?  There are two for now.

1) In a conference call with industry analysts, Neville and his network execs talked up rural IoT.  The argument goes that standard 5G mmW IoT is limited by the spectrum and really a play in urban areas due to the propagation characteristics.  While it's out of character with over three years of direct consumer wins, this feels more like a business play.  To be sure, T-Mobile has kicked off its IoT effort in January 2017 and it shouldn't end with 3G and LTE (NB).  IoT connected numbers in the billions and  every carrier wants a piece of the pie. With low or no per unit acquisition costs along with sustained recurring revenue, each connection has an excellent (industry term) customer lifetime value.  The money potential will preset itself in 2020 and beyond but for now, the announcement gives T-Mobile business and IoT force some roadmap to present compared to AT&T and Verizon, which have a substantial lead.

2) T-Mobile's 2020 national 5G network target is a pure marketing win. Again with conventional 5G talk with mmW, this conventional implementation will not have a 5G national footprint. While that is true, competitors can claim greater 5G speed compared to T-Mobile's 600 5G speeds.  The only caveat is that T-Mobile is likely going into mmW 5G as well.  So looking ahead, another related component will be the ongoing mmW spectrum acquisition race.

In closing, all the industry talk, other spectrum bands are likely to be refarmed into 5G.  I'm counting on Sprint to announce its 5G foray using its 2.5 GHz resources soon.

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. 

MetroPCS Q4 and 2012 Results - Ouch

MetroPCS released their Q4 2012 and year to date 2012 results ahead of the Q4 earnings call later in the month. What stands out is the surprise subscriber loss over the year. 

With over 93K subs lost in what is supposed to be a hot Q4 holiday selling season,  the results suggest that the prepaid sector is as cut throat and competitive as ever. The result of these losses invariably is a function of its gross additions.  The simple theory goes, if you have a good distribution and acquisition network, you can help offset the subscriber losses and in an optimal scenario, come out ahead.

MetroPCS' gross additions were also down in Q4 and end of year compared to 2011.  Churn is down a small bit at 0.1% or 10 basis points in financial speak. It's a small win.  There are other metrics that can help tell the story of what's going on such as EBITDA/OIBIDA margin, ARPU, CPU and CPGA but we'll have to wait on that.  While this may look bad, one can give MetroPCS the benefit of a sliver of doubt assuming that they could be letting go of low-value or high-risk users for more profitable customers.

Yet the prepaid sector is very competitive with many similar offerings from Tier 1 competitors (Verizon Wireless, T-Mobile, AT&T, and Sprint prepaid brands Boost Mobile and Virgin Mobile) and MVNOs such as Tracfone's Straight Talk and Net10.  Another worry may be any hint of distributor apathy ahead of the mid-2013 T-Mobile-MetroPCS transaction. While T-Mobile intends to retain the MetroPCS brand, MetroPCS better figure out how to reverse subscriber losses before the deal is consummated.

Raining Tablets at AT&T? A Portfolio Status Report

Earlier in the month, we took an initial look at the AT&T tablet portfolio to determine the progress of consumer choices there were.  Since that post, one addition, the iPad mini joined the portfolio on the 16th of November.  

Here's how the tablet portfolio looks (online without refurbished models).

Manufacturer	Models & WWAN	OS
Apple	iPad 2 (3G) 16GB,  iPad (current gen LTE) 18, 32, 64GB,  iPad mini (LTE) 16, 32, 64GB	iOS
Asus	vivoTab RT (LTE)	Windows 8 RT
Pantech	Element (LTE)	Android
Samsung	Galaxy Tab 8.9 (LTE),  Galaxy Tab 10.1 (LTE),  ATIV (LTE) SmartPC (LTE)	Android Android Windows 8  Windows 8

To AT&T's credit, the portfolio has 8 tablet models and many memory level iPad choices. So rather, AT&T has 7 iPad models to sell.  This expands the portfolio to 13. At this snapshot in time (after Black Friday), will there be additional announcements ahead of holiday shopping? There may be one or two in the wings but any more tablets creates too many choices which is a problem itself.  Carriers wish to optimize its inventory and SKU count, balancing choice with carrying costs.

While AT&T has high tablet net add hopes, let's look at Verizon Wireless' online portfolio (without refurbished models).  There is a similar apples-to-apples comparison since this carrier also offers a shared data plan.  

Verizon Wireless Tablet Portfolio     

Manufacturer	Models & WWAN	OS
Apple	iPad 2 (3G) 16GB,  iPad (current gen LTE) 18, 32, 64GB,  iPad mini (LTE) 16, 32, 64GB	iOS
Motorola	DROID XYBOARD 8.2” (LTE) DROID XYBOARD 10.1” (LTE)	Android Android
Samsung	Galaxy Tab 2  7” (LTE),  Galaxy Tab 2 10.1” (LTE),	Android Android

Verizon Wireless' portfolio offers the same choices on Apple products but is limited to Android support. This isn't that much of a surprise as the carrier has just started supporting Windows Phone 8 smartphones. Verizon Wireless' 11 models isn't far off from AT&T's 13.  What is different is each carrier's approach. AT&T is offering an aggressive $100 discount while Verizon Wireless has no such incentive. However, the $100 discount requires a two year contract whereas Verizon Wireless allows month to month.

From the carrier view, a two-year subsidized plan is good for overall churn reduction and ensures customer data use. Of course US consumers have yet to be acculturated to tablet data and like smartphones it will be a multi-year endeavor to create the demand. 

Verizon Wireless Double Data Comes to a the $80 Prepaid Smartphone Plan

Verizon Wireless seems to be building up to drive Q4 2012 and Q1 2012 prepaid net additions.   Coming off a decent prepaid Q3 with 228K net additions, the prepaid group looks to better 2011 Q4's 250K net additions.  How does the company get there? 

Given the smartphone adoption trends, the company wants to take advantage of this in the Q4 holiday selling period. To accomplish interest, Verizon Wireless has taken a page from its postpaid double data promotion it ran in 2011 and early 2012.  The plan under the limelight is the Prepaid $80 Smartphone plan that normal provides 1 GB of data along with unlimited talk and text. This is already competitive with postpaid but now with a 2GB.

Here are the plan terms in minutaie but the highlighted points are the important ones:

• For a limited time only, customers who purchase the Prepaid $80 Smartphone plan will enjoy 2GB of data for the price of 1GB when they purchase and activate a new Smartphone between 11/18/2012 through 1/31/2013.
• Unlimited Talk, Text & 2GB Data Plan includes unlimited domestic calls only, texting* to anyone on any network in the U.S. and participating carriers in Canada, Mexico, and Puerto Rico and 1GB Data.
• Purchases and activations on the Unlimited Talk, Unlimited Text & 2GB Data plan will receive 2GB as long as the plan service remains active.
• The Unlimited Talk, Unlimited Text & 2GB Data plan will not be available after 1/31/2013. Any activation on or after February 1, 2013 will not receive the promotional benefits.
• If you have a sufficient balance for your monthly access, enjoy the benefits of your calling plan. If you don't have enough funds to cover the monthly access, you will be charged 25¢ per minute, 20¢ per text, 25¢ per picture or video messaging sent (per recipient) and received and 5¢ per MB.
• 1GB Data Package – An optional data overage package is available for $20 for customers who have reached 100MB or less remaining on the 2GB data allotment. An optional data overage package for prepaid customers is not available for purchase at the point of sale. Customers can add the 1GB data package through the IVR, My Verizon Mobile and My Verizon online once 100MB or less remaining of the 2GB data allotment.

Target Customer Segment

Value-seeking smartphone customers who want the Verizon Wireless network. 

Pros
- Continue to drive prepaid net additions 
- Keep filling the 3G network with high-value users.
- Better than a postpaid deal, addresses the postpaid value switchers
- Double data for free and a limited time offer has an excellent track record at Verizon Wireless. 
- Users get to keep the plan as long as they keep their plan active. 

Cons
- Only 3G smartphones, no latest and greatest LTE smartphones
- There are less expensive similar options over at all you can eat competitors Boost Mobile, T-Mobile, MetroPCS (even with LTE) and Leap.