Bullet Point Analysis: Sprint's RadioShack Store Deal - A Lot of Positives

What is it?

RadioShack's bankruptcy allowed Sprint to partner with General Wireless Inc., a subsidiary of Standard General LP, RadioShack’s largest shareholder (a hedge fund), to increase Sprint branded retail distribution by approximately 1,750 stores, more than doubling Sprint's current 1,100 company store count. The transaction is subject to approval by the bankruptcy court.

The plan at that point will be to establish co-branded (Sprint and RadioShack) stores where Sprint and RadioShack would sell their separate services. 

Analysis

Although it didn't make company's FY3Q14 earnings call deck, it's better late than never.  

The deal has many wins for Sprint since:

• Above all, the company expands their distribution base to help with gross additions (postpaid and prepaid brands) and get potential subscribers in the door interested in the much campaigned "Cut Your Bill in Half Event" that will continue into 2015.

• Distribution count will exceed surging rival T-Mobile. In the FY3Q14 earnings call, CEO Claure stated that Sprint was 500-600 less than T-Mobile. With the new stores, gets T-Mobile's count in one swoop, bringing the total Sprint count to over 2,800 retail points of distribution.  

• Those 1,750 stores have been cherry picked.  Logically, these new stores would not cannibalize existing Sprint retail traffic, and serve the right Sprint target demographic - Verizon and AT&T prime customers.

• The stores will be co-branded but Sprint is the primary brand. Sprint and RadioShack says that each brand's customers may be cross-marketed to but the ability to share lease space costs should not be overlooked. Sprint will only occupy a third of the store space so relative to operating a full store, Sprint in theory has lower costs.

• With all the negativity of a declining brand and controlling costs, headcount cuts have been an unfortunate tool. However, Sprint will need employees to operate these stores. RadioShack employees who are already trained at selling mobile devices and plans are logical candidates. In theory, it's an easy transition as reps will only need to focus on Sprint plans versus the many prepaid MVNO options and those of Verizon and AT&T. In fact, because of the breadth of knowledge, these reps will know what competitors' plan weak points may be. 

Yet there are questions. 

• Like many deals, the financial and commitment terms were not divulged so it's undetermined how good of a long term financial deal this is.  

• The deal needs the blessing of the bankruptcy court and if that is given in short order, this doesn't mean that Sprint can move in immediately.  The store rep human resources process will need to be address, planning the look and buildout of a third of every store will need to be done.  Given this, the impact of the 2015 gross additions look to be in the back half of the year.

• This last point can be both a positive and negative.   By taking over these 1,750 stores, Sprint takes out the same number of distribution points for postpaid rivals AT&T and Verizon (no T-Mobile) and Tracfone prepaid brands (US Cellular in some markets).  The big "BUT" is the amount of wireless business a declining RadioShack generated for competitors. If it's immaterial, then it's not that great of a loss for those competitors.

Overall, this deal is one of the best moves Sprint has jumped on since the beginning of CEO  Claure's tenure. 

Video: Auction 97 Discussion Before Results

The AWS-3 auction that began in mid-November 2014 mercifully ended today, January 29. The in-take was $45 billion in bids subject to discounting some bidding credits.  Many articles have been written on how it exceeded expectations, producing more than two times lofty projections.  The ink isn't dry on this and as of this writing, we don't know who the winning bidders were but it's safe to say that those carriers with positions in AWS-1 (e.g., Tier 1 - AT&T, Verizon and T-Mobile) will be the winners. It's also likely those with deeper pockets will likely control the major urban markets (e.g., Los Angeles, NYC, etc.)

Here are my thoughts with RCR Wireless' Dan Meyer in mid-January. Key things we discussed were deployment conjecture, spectrum clearing and sharing with the Federal government, implications for the 2016 broadcast incentive auction, and general idle chit chat.

What 2015 Brings

Originally posted on Fiercewireless just before the Christmas holiday.

2014 is nearly at and end and it's the time of the year when there are countless year-end review articles and 2015 predictions. While there were many highlights of 2014, I choose to hone in on network and competition.  Instead of predictions, my 2015 expectations have been laid out with technology paths and the previous year's events.

Network 

Every carrier knows that beyond service plan value and pricing, the network is the core of customer choice. It's no surprise that despite goals the carriers reach, improving, expanding and transforming the network will never really be done. Although AT&T Mobility and Verizon Wireless have reached their coverage targets, capital is still being expended to bolster networks for capacity and coverage. T-Mobile US and Sprint continue their breakneck pace to reach LTE network parity with larger competitors.   

AT&T met its 300 million POP coverage target in early September, surpassing its original end of the year target as it needed to close the gap against its main rival, Verizon. AT&T also needed to keep pace in its Voice over LTE introduction, albeit available in only in select markets. Aside from adding coverage, capacity, and expanding VoLTE in 2015, the company continues its ambitious transformation into a software-centric network by 2020.  Two big acquisitions, slated to be complete by the first half of 2015 will trigger network related work.  First, the DirecTV acquisition, the company will need to fulfill its promise to provide fixed wireless broadband to rural markets. With the acquisition of Mexican carrier Iusacell expected to close in the first quarter of next year, much of the remaining year should be laying a foundation for what AT&T touts to be the first North American mobile service area.

Sprint's 2014 travails from the "rip and replace" Network Vision program and turbulent corporate changes contributed to massive uncertainty and subscriber losses. Although the company ended the year with 260 million LTE POPs covered on its PCS spectrum, roaming deals with rural carriers is set to expand its own LTE geographic reach to 298 million POPs in 2015. Ironically, as competitors over delivered on coverage and timing, Sprint met its end of year 100 million 2.5GHz LTE POP target, despite skepticism. In August, the 2.5 GHz buildout strategy shifted to address the heavy data consumption markets, with the logic that the popular unlimited proposition is empty without a high capacity foundation. Still, Sprint hasn't disclosed any POP targets for 2015, as it has previously.   

T-Mobile over delivered and beat its own 2014 250 million POP target with 260 million covered LTE POPs. For 2014, the network story was one of aggressive execution by acquiring and deploying 700 MHz A-Block spectrum and refarming/implementing MetroPCS' spectrum to exceed its target. The company is very public about reaching an end of 2015 300 million POP target (without roaming) to close the network perception gap against larger competitors. In doing so, it will continue work to put in service remaining 700, AWS and PCS spectrum.  At the same time, to get better low-band breadth, it will opportunistically purchase additional 700 MHz spectrum. However, since some regional and rural carriers will implement the same A-Block flavor, LTE roaming agreements are logical.

Though Verizon Wireless technically met the 30 million POPs covered threshold in mid-2013, the company continued to deploy and put into service AWS spectrum for capacity and fill-in. Since reaching the 300 million mark, it added 8 million more by the end of 2014. Though it has already started refarming its PCS spectrum for LTE on a limited scale, this effort will likely continue as planned in 2015.

Technologies of Common Interest

• Carrier Aggregation: This LTE Advanced feature provides the capability to extend coverage, capacity and speed. AT&T has already started using the carrier aggregation feature mainly with its 700 and AWS assets. While AT&T does not have a national AWS footprint, it's logical that PCS spectrum that it is refarming would also be put into play.  As part of its 2014 2.5 GHz buildout, Sprint stated that it was rolling out two-carrier aggregation but eventually add another carrier (end of 2015) for three-carrier aggregation to raise the speed game.  T-Mobile has not said when it will deploy carrier aggregation, but it will be planned for the coming years to piece together its 700 and AWS and PCS assets.  Verizon Wireless will enable carrier aggregation to its national 700 (Band 13) and AWS footprint.   Given early PCS refarming and LTE deployment, there could be the technical possibility of 700 and PCS aggregation where appropriate.
  
  One likely byproduct of all this work will be increased speed, possibly allowing one carrier to best another nationally or in specific markets. Regardless, RootMetrics is the biggest beneficiary, as every carrier have used reliability and speed claims for public relations from their reports. Behind the scenes, it's certain that carrier in-house test organizations, third party specialists Nielsen Mobile and GWS will be busy verifying.

• VoLTE: AT&T, T-Mobile and Verizon Wireless all have implemented VoLTE. Only AT&T has not claimed nationwide capability but that hasn't stopped inter-carrier interoperability activity planned for 2015. Though T-Mobile was snubbed from the press release, it would be logical that they plug in eventually.  Sprint's CDMA-based HD Voice implementation and introduction leaves them out of the VoLTE club temporarily but it has a more important focus: expanding 800 MHz and 2.5 GHz LTE. 

• LTE Broadcast: Only AT&T and Verizon have committed to this technology and have high hopes to monetize their investment.  Business models will be tested for sure.

• Wi-Fi calling: While T-Mobile used an entire "uncarrier" number (7.0) on Wi-Fi calling, helped with iPhone, it's a low priority for the big two rivals. Still Verizon Wireless and AT&T expect to deliver this capability as it likely helps business and vacationers traveling abroad.

Competition

2014 was remarkable in the level of competition. Since space is short, we'll just focus on postpaid and prepaid. On the postpaid side, there were nearly 80 pricing actions and promotions from the top four carriers, not counting the numerous extensions of promotional offers. This was more than double that of 2013. Several standout service plan tools drove customer action; these included Early Termination Fee (ETF) credit, tablet data for life, double data promotions, and no money down equipment installation plans.  

Carriers departed from the past practice of constantly restructuring their rate plans, gaming the right price point with the right data level. Though AT&T and Verizon changed their plans in the beginning of the year (i.e., Mobile Share to Mobile Share Value and Share Everything to More Everything) and Sprint rebooted in August with its Family Share Pack and iPhone for Life, limited time promotions in the back half of 2014 drove postpaid volatility and grabbed all the media headlines. Promotions gave carriers a temporary lever to address competition without permanent price drops or higher data levels.

Entering the fourth quarter, this visual graph showed the postpaid net add trending in the previous three quarters, showing T-Mobile and Verizon Wireless with good postpaid net add energy.

Source: Carrier Reports

However, carriers' full 2014 results won't be known until late January or early February when fourth-quarter earnings calls are conducted.  What we do know has been telegraphed: due to intense competition, Verizon and AT&T warned that churn was a concern. T-Mobile increase its 2014 total net add guidance from 2.8-3.3 million to 4.3-4.7 million and Sprint was confident that they would deliver positive fourth-quarter postpaid net adds. 

Without full 2014 data, can we expect the same intensity of postpaid competition in 2015? It's obvious that competition will never cease in the wireless sector but there are some road signs that it won't lull.

• Sprint's need to grow: Sprint lost nearly 600,000 customers by Q3. They cannot stop the march to win back customers.  Going after AT&T's and Verizon's large postpaid bases will likely continue, but how aggressive will the campaign be – sustained intensity in each quarter or pick and choose?
• T-Mobile and Sprint will continue to employ a $350 ETF switching credit. For T-Mobile, it's an "uncarrier 4.0" tenet while Sprint will need it as a necessary tool to prevent T-Mobile getting all the switching spoils.
• AT&T and Verizon won't sit back and play defense. 2014 showed that the big two hit back with their own switching and double data promotions. However, they won't be instigators.

Yet the intensity may be tempered as there were signs of financial community/investor skittishness that dropped stock prices. Industry competition is great for consumers but the wireless sector's volatility impacts decreasing margins and perceived overpaying for future spectrum.  2014 will likely be a blowout year for T-Mobile but replicating that performance has already been downplayed at various recent investor conferences. Rather, the thrust was about stabilizing ARPU, retention and upselling. Still, T-Mobile won't stop given their momentum.   

Prepaid never sees the headlines that postpaid commands. Though growth wasn't what it was in previous years, it's still hotly contested and relevant.  In prepaid, there were about 70 price and promotion actions, not counting any extensions. This was up a hair from 2013. The prepaid graph illustrates TracFone (folded in acquisitions) and T-Mobile being the big winners up to Q3.

Source: Carrier Reports

Unlike the postpaid activity predominantly occurring in the first three months and the last four months of the year, prepaid promotions and actions were evenly spread across the year. The battles for high-value monthly users consistently apply among the various TracFone brands, AT&T's Cricket, T-Mobile's MetroPCS and Sprint's Boost and Virgin Mobile brands.  While price sensitivity has always been a prepaid hallmark, a shift in network and LTE marketing is broadening.  Meanwhile, legacy CDMA user migration is still on the plate for Cricket and MetroPCS as each seek to move those customers onto the parent's LTE networks. 

2015 competition should be spirited, as Cricket and MetroPCS will continue their head-to-head fight. Boost and Virgin will try to stay relevant in the fight while. Given postpaid's momentum, prepaid growth may be stymied at similar 2014 rates. Get the popcorn ready for next year.

T-Mobile's New International MVNO Partner - Vodafone! Slap in Verizon's Face?

What is It?

T-Mobile announced that it reached an agreement with Vodafone Americas for new MVNO-based services for Vodafone's 400 US based multinational customers and potentially 500 customers who do have a strong US presence. Availability for the service is expected to roll out in late fall 2015. 

Analysis

Clearly both parties benefit from this relationship.

For T-Mobile, this is a way to get more subscribers on its network. 400 US based multinationals get the carrier indirectly into enterprise where competitors AT&T and Verizon Wireless have long dominated. While the knee-jerk reaction is to focus on smartphones, the announcement helps T-Mobile's other wholesale segment, machine-to-machine (M2M). 

For Vodafone, the US-based mobile offering provides the operator to enable service bundling opportunities, including low cost mobile roaming across its 27 country footprint.   The T-Mobile agreement should be more than an overall US play as Vodafone Americas include Canada and Latin America.  The company will push this as part of Vodafone's OneNet solution which touts fixed-wireless solutions.  The solution bundles include the usual enterprise operator offerings such as cloud services, M2M, telecom expense management, security and access to a global IP-VPN network.

The question for T-Mobile is many total wholesale subscribers do 400 multinational customers come with? Perhaps, it doesn't matter since in wholesale, there is none of the high cost of customer acquisition as in its retail segment.  The benefit that carrier is also hoping for is to move enterprise multinationals from Verizon Wireless and AT&T.  

So given Vodafone's long history with Verizon Wireless, it does seem to be a slap in the face. After all, the 400 target customer accounts are all US based and the potential for the other 500 potential accounts have a strong US presence, which means some could be existing Verizon Wireless clients. But then like many multinational enterprises, deals with multiple vendors provides choice and negotiating leverage which means T-Mobile/Vodafone Americas may not have exclusive deals.

It's also telling that Vodafone did not cut the MVNO deal with AT&T since AT&T's current LTE US footprint is larger overall. But if T-Mobile's wholesale business unit follows its retail unit, being the low-cost value provider could be the swaying element on top of its expanding national LTE network message, one with a goal that meets 300M POPs by end of year 2015.

Video: Takeaways From 3Q14 Tier One Carrier Earnings

It's beginning to be like a regular thing - Dan Meyer from RCR Wireless and I talk about what we've learned from everyone's earnings reports.  No doubt there were tons of noteworthy details missed but we had 30 minutes....

RCR Article  - Verizon, AT&T, T-Mobile US, Sprint: what did we learn?

Straight to the video

The Addictive and Competitive Nature of Speed

Many in the industry assume that LTE is pretty much done and moved onto the next big thing.  Verizon Wireless and AT&T have messaged that their networks exceed 300 million people covered and T-Mobile and Sprint both have declared national LTE footprints.  At the CTIA Mobile Con convention in Las Vegas, panels were already talking up what’s next – LTE Advance and “5G.” In truth, LTE continues to be rolled out in the U.S. and globally. In contrast, at the CCA (Competitive Carriers Association) Convention, smaller carriers were grappling with LTE buildouts, launches, device access, and roaming issues in order to serve their markets and remain competitive.  

Still LTE has been a boon for the wireless industry. On the network side, the technology is more operationally efficient than 3G; it can deliver more bits and at faster rates to users with the same amount of spectrum resources.  On the customer acquisition and retention end, LTE has been instrumental in switching users’ rate plan decisions from voice to data.  Witness the movement from tiered minute bucket rate plans to tiered and unlimited data plans.  Data is sticky and competitive. This has been validated by carriers’ decreasing churn rates, the markedly increased data allowances in plan changes, and limited time data promotions in the first three quarters of 2014. Once users taste what they can do with data whether it’s browsing or through apps, they remain hooked.   Though data has been around since the 3G days, it’s speed and low latency that enhances our user experience. This phenomenon is similar to fixed line evolution. 56K modems gave way to DSL, which gave way to fiber-based internet access. In some lucky markets, Google and AT&T are going to offer 1 Gbps service.  Over time, we’ve become more productive with speed, we depend on it and now we expect it, not only in the fixed line but also in wireless.   

Yet in the U.S., we’re often reminded about how slow our mobile broadband speeds are relative to Asia.  There have been incendiary articles how we lag the Japanese or Koreans perhaps to ignite emotion and also action. Softbank Chairman Masayoshi Son said as much in his talk to the U.S. Chamber of Commerce in March.  There, he presented a slide that put the U.S. second to last with an average 6.5 Mbps LTE download speed (By the way, Australia was #1 with 22.5 Mbps).   To U.S. carriers’ credit, they continue to invest in their mobile networks to fortify capacity and speed out of necessity and to ultimately provide market differentiation.     

Speed has always been used as a competitive differentiation, aside from the usual network coverage.  In 2013, AT&T claimed the Fastest LTE Network based on some publications and drive tests. Remember the tagline “Faster is Better?” In early 2014, T-Mobile self declared that it of America’s fastest nationwide LTE network based on crowd sourced data. Its aggressive network buildout allowed for presentation of a “Data Strong” tagline and introduced “Wideband LTE” into the marketing lexicon.  Verizon Wireless has also entered with their own brand– “ XLTE” that runs on its AWS spectrum assets with the tagline “The Need for Speed.” For its part, Sprint Spark has potential but yet to be realized.  

Outside the carriers, publications such as PCMag and PC World conduct their own speed tests and declare winners. RootMetrics has been gaining carrier marketing credibility with its own independent drive tests.  In JD Power fashion, it awards winners in many categories including speed, which carriers happily have cited in their own public relations

releases.  The marketing speed card will never let up. Though we hear about network reliability, it’s speed that we can easily discern as we use our smartphones to watch the YouTube video, pull up a weather app or visit a webpage.  We have a multitude of speed test app choices including those from Ookla, OpenSignal, Sensorly and even the FCC to make our own validations. 

Carriers again continue to push the speed envelope as they employ different network and device techniques to improve the user experience.  Specifically, an exciting feature to be rolled out is carrier aggregation with other complementary alphabet soup hardware and current and future techniques such as CoMP, MIMO, and FeICIC.   If we use spectrum/channels as a roadway lane analogy, carrier aggregation allows for piecing different lanes into a superhighway. That may sound like hyperbole, complex, and fraught with execute challenges but it’s in the 3GPP standards releases and carriers say they’re committed.  For example, both AT&T and Verizon Wireless are looking to aggregate their 700 bands with their AWS bands in the future.  Down the road, T-Mobile may eventually aggregate their AWS and PCS bands.  However, in the near term, Sprint (under the Spark banner) says it’s implementing “2X carrier aggregation” on its 2.5 GHz band by end of year 2014 and 3X in 2015 with expected speeds of 100 and 150 Mbps, respectively.  We, of course, shall see since a whole host of factors can including distance from the signal source, network congestion, and physical terrain or blockage affect speed. The point is that the user’s speed experience is going to go up dramatically.  These speeds will exceed fixed line offerings and some Wi-Fi hotspots. In fact, it’s already happening.  

While attending the CCA Convention and CTIA, I routinely abandoned the hotel and airport Wi-Fi for a faster and lower latency LTE experience.  I was addicted to speed.   Recently, my not so fast follower friend, Bob upgraded to an iPhone 5s from a 4s (non-LTE) a couple of weeks ago. He said, “Wow! I can’t believe how fast LTE is.”  He moved to an increased data plan and setting to add his six grader son on soon with an iPhone 5c.  He and his son too quickly become speed addicts.

Bullet Point Analysis: The Significance of Sprint's New Family Share Pack $100 Promotion

WHAT IS IT?

After much speculation and talk, Sprint finally announced its new Family Share Pack plan, 12 days after new CEO Marcelo Claure took over for Dan Hesse. The new plan structure that begins August 22 mirrors that of larger competitors Verizon Wireless and AT&T in that:

• Account subscribers share a bucket of data (vs. individual levels (i.e., Sprint Framily & T-Mobile's Simple Choice Family)
• There are multi-tiered data options
• Subscribers have an access line charge per device but gets less expensive after a specific data threshold
• 'Phone' (feature & smartphone) access line charges differ in full pay (Easy Pay) vs. the traditional 2-year option
• Flexibility to add on devices (e.g., mobile broadband hotspots and tablets, maybe in the future wearables or cars) 

Promotion:  

• From August 22 to September 30, a family with up to 10 lines gets 20GB of Shared Data and Unlimited Talk & Text through 2015 plus an additional 2GB of data per line up to 10 lines for $100.  
• Waiving device access fees for plans >20GB, up to 10 lines (switchers only)
• Coupled its long running up to $350 switching credit (Sprint retail and telesales

ANALYSIS

• First and foremost, Sprint delivers on aggressive pricing. Its use of the $100 price point is easily understood and counterpunches against T-Mobile's lead family offer. At the same time, it presents an advertised $60 price gap against Verizon Wireless and AT&T.  
  
• Mimicking AT&T's and Verizon Wireless' data share plans is important as it signals Sprint's intention to go after larger competitors' subscribers.  While T-Mobile has formidable momentum, fighting against a competitor with just 24.5 million postpaid customers makes no sense. Rather the fruit is going after the combined ~174 million AT&T and Verizon Wireless postpaid base.  Now Sprint has a simple apples-to-apples comparison for sales reps to show both data value and a large pricing gap.  
• Mirroring competitors' data share plans is essentially adopting a "best practice."  Both AT&T and Verizon Wireless have discussed not only the the anti-churn merits of these data share plans, but also their subscribers' trend to add additional devices/lines. This bodes well for increasing data ARPU/ARPA/ABPU. 
• Family Share Pack allows for an easily understood way of adding connections for devices, in the short term tablets but in the future, automobile connections and wearables.
• The new plan structure de-emphasizes the previously touted Unlimited differentiation though that is to be expected to continue with the yet to be launched individual $50 unlimited plan. 
• Finally, the promotion comes at the right time in Q3 and not Q4:
• Sprint needed to get this plan in place before the new iPhone model(s) are announced and launched. Apple is supposedly unveiling its new iPhone (s) on September 9. Historically, these new devices are available about 10 days after announcement. For 2014, September 19 is interestingly a Friday and follows past availability trends.  Therefore having a new plan in place for this event is essential for retaining and switching the Apple loyalists and early adopters upgrading within two weeks of availability.  
• T-Mobile CEO Legere has put much stock into calling the new iPhone launch as a prime postpaid switching event for T-Mobile. With Sprint's new pricing and data value, it blunts T-Mobile's encroachment on to the Sprint base. Moreover, with a more price sensitive demographic (than AT&T and Verizon Wireless), T-Mobile may be vulnerable for those subscribers who want to chase price.
• The September 30 promotion end of life gives urgency to fence sitters to get a very low $100 price and generous amounts of data in the two sweet spot of iPhone upgrading.  Moreover, it neatly closes the door on Q3.  If Sprint doesn't market this urgency with marketing and sales rep training, then I'd be shocked and disappointed.

COMPETITIVE IMPACT?

• It's likely all competitors will hit Sprint's network and its poor speed performance. To be fair, Sprint's LTE  highway (5X5 MHz) in the PCS 800 MHz band doesn't help a speedy experience. The high speed potential 2.5 GHz markets are still in buildout mode and only 100M POPs covered by end of year 2014.  Competitors are already expanding their LTE highways (AT&T (no branding), Verizon xLTE and T-Mobile Wideband LTE are being advertised and marketed heavily).
• T-Mobile CEO has already started on the attack on the day of Sprint's announcement  A look at his Twitter feed telegraphs T-Mobile's likely competitive pushback in store rep messaging and likely advertising.  The fact that a well produced graphic and amount of attacks shows how serious T-Mobile is taking Sprint's move.  
• 
  

• UPDATED: Aug 21- T-Mobile has announced a bounty for Sprint subs, essentially giving its customer advocates unlimited LTE data for 12 months or for unlimited customers, a $10/month credit for a year. 
  
• It's unclear how AT&T and Verizon Wireless will respond beyond the easy attack on Sprint's network. These conservative competitors have not traditionally responded immediately against smaller competitors. The 2014 AT&T and Verizon Wireless plan moves have largely been against each other.  It's likely that they are feverishly working up plan response scenarios based on how the port-out view looks. Everyone in the carrier industry knows that Q4 and Q1 are hugely important battleground quarters and a strong response will be necessary.
• Can AT&T and Verizon Wireless be drawn into dropping price or providing more data? It remains to be seen. Looking ahead, Sprint promises this is but one plan move with more ahead, presumably the $50 unlimited individual plan.  Yet Sprint can do more if it has the mettle. That is to complement its plan pricing with device pricing. Sprint has already talked up Brightstar device buying synergies. If this can leverage to a lower phone and plan price selling strategy, it would be pretty formidable.  

Video: Talking about Sprint's New CEO Challenges on Bloomberg TV

Today, August 11 is the day that new entrepreneurial CEO Marcelo Claure takes the helm at Sprint.  The wireless industry is watching what he'll do. For me, it's how aggressive he will be in acquiring customers and accelerating the 2.5GHz buildout beyond its current pace.

One of the questions has been when these new price plans will come into the market place, Q3 or Q4? I argue that the big iPhone 6 announcement and subsequent availability ~10 days later will is a de facto deadline that kicks off Q4. The new plans need to be in place for Sprint to stay competitive.
Aug. 11 (Bloomberg) -- Bill Ho, principal analyst at 556 Ventures, and Bloomberg Intelligence’s John Butler discuss expectations for Sprint’s new Chief Executive Officer Marcello Claure and look at the challenges he faces as the head of the nation’s number three wireless company. They speak on “Market Makers.”

Sprint: Looking at Claure's Upcoming Moves

Sprint (or really Softbank) has named Brightstar founder/CEO and board of director Marcelo Claure as its new CEO.  Mr. Claure has a wireless background, is a successful entrepreneur and by all accounts from his background, a hard charging doer.  While he is an outsider, he has wireless and global experience. 

Mr. Claure is expected to move to Overland Park to take over the helm from Dan Hesse who has brought back Sprint from uncomfortable times, engineered the undoing of an AT&T-T-Mobile merger, fought off DISH's acquisition of Clearwire, and Sprint's acquisition by Softbank. Yet Mr. Hesse's turnaround wasn't fast enough for Softbank. T-Mobile's comeback and meteoric rise didn't help the situation at the expense of Sprint prepaid and postpaid.    

With a new sheriff in town, how will Claure approach his new role?  Similar to many CEOs taking over new organizations, he'll likely assess the operations and management team. History has shown that many CEOs replace predecessors' execs and replace them with his own trusted team. For Mr. Hesse, he brought in AT&T Wireless alums Steve Elfman, Bill Malloy and Bob (H) Johnson during his tenure. While it doesn't appear that Mr. Claure has an operating company operations background, he will have to be a quick study, including an earnings call debut for Q3 2014 this fall.  The question is how many Sprint executives will remain and how many Brightstar (or even for that matter, Softbank) executives will make a relocation to Overland Park?

The Sprint announcement perhaps telegraphs some upcoming moves. 

"..first priority will be to continue the build out of Sprint’s network by leveraging its strong spectrum holdings as well as ensuring that Sprint always maintains truly competitive offers in the marketplace."

Marcelo Claure: "In the short-term, we will focus on becoming extremely cost efficient and competing aggressively in the marketplace." 

Masa Son: “Marcelo is a successful entrepreneur who transformed a start-up into a global telecommunications company. He has the management experience, passion and drive to create the strongest network and offer the best products and services in the wireless industry.” 

The Network Vision Strategy - infrastructure: Can Mr. Claure affect the pace of LTE buildout? Everyone knows that Sprint has been touting the potential speed of Sprint Spark. However, this has been overshadowed by T-Mobile's deft network execution and unilaterally embracing speed as part of its marketing differentiation. John Saw replaced Bob Azzi ostensibly to accelerate the pace of Spark buildout, notably keeping intact the Network Vision strategy with still a disappointing 100M POP 2.5 GHz LTE target in 2015. In earnings calls and investor conferences, executives have stated that they're going as fast as they can and pushing infrastructure vendors as hard as they can.  Given this, does Mr. Claure have any room to push the buildout? Of course Sprint is flush with 2.5 spectrum and there had been previous media reports that Verizon Wireless was interested in some of it. Will this option be part of 'leveraging its strong spectrum holdings?"

Cost Efficiency: In the 2Q 2014 earnings call, Sprint's CFO stated that Sprint will continue to look to drive cost out of the business. This isn't really a surprise as it appears to be the similar refrain from competitors' CFOs. To some extent, larger competitors had somewhat formalized this. Verizon has long touted its corporate-wide Lean Six-Sigma program to gain efficiencies and drive out costs. AT&T's Project Agile has some of the same goals.  Sprint for its part had a very painful but some argue necessary draconian (no photocopying) era ushered in with former GE alum Bob Brust.  Sprint has already touted the synergies of volume device acquisition and pricing through Brightstar and Softbank as a positive impact on cost reduction.  How will Mr. Claure drive additional cost out of the business? Headcount immediately comes to mind but Sprint has also been on the path of personnel downsizing over the years.  Headcount reductions may be a core piece of 'containing' costs.

Aggressive customer acquisition & price wars: There is an expectation from the Softbank Chairman that Sprint should offer the best products and services in the wireless industry. T-Mobile's back from the ashes and customer growth story plays well to the media, regulatory and the financial community.  To some, they're giving the store away to drive the customer growth numbers at the expense of margins. This approach may very well be Sprint's next service move. To some extent, this is the Softbank Japan strategy in which it disrupted the Japanese mobile market at the expense of larger competitors KDDI and NTT DoCoMo.  To Softbank, this is operating from the same playbook.  Will Claure merely implement the Softbank plays modified for the U.S. marketplace?

Throughout his lobbying for an implicit T-Mobile-Sprint consolidation, Chairman Son had touted a populist message to bring a 'massive price war' to the American marketplace. While this may cringe the financial community since it will impact margins, it really shouldn't matter to Softbank as it has a much much longer view. Besides, Softbank owns a substantial/majority of Sprint anyway. The question from the services view is how aggressive Framily or new service plans will be in late Q3 and Q4 to spur turnaround customer growth. For Sprint it will have to be about price and giving more data in any tiered plans. Retaining unlimited is still an essential differentiator. 

Consolidation of a different carrier: Just throwing it out there - if the Carlson family is finally willing, can Sprint acquire US Cellular for additional presence? Similar CDMA infrastructure and 700 A block support (though US Cellular also operates 850 LTE).

The back half of 2014 will be indeed interesting to see what Sprint does and how competitors will respond, if necessary.   

Video: Key Points in Q2 2014 Tier 1 Carrier Results

Once again, I get together with Dan Meyer, Editor-in-Chief of RCR Wireless to talk about Q2 2014 carrier performance and key take aways from their earnings calls.

Bullet Point Analysis: T-Mobile's Un-carrier 5.0 & 6.0

WHAT IS IT?

On the evening of June 18, T-Mobile announced the latest Un-carrier initiatives – 5.0 and 6.0. Beyond these next levels of iteration that address customers’ ‘pain points,’ the network progress story provides the foundation for these and future T-Mobile moves. 

• The T-Mobile Network (specifically its LTE capability) has been expanding aggressive. T-Mobile stated that by the end of June 2014, The LTE network will cover 230 million POPs and by the end of the year, reach 250 million POPs. T-Mobile counts 16 markets with 15 + 15 MHz (AWS) spectrum – T-Mobile’s uses the moniker Wideband LTE for these markets. To take advantage of LTE, Voice over LTE (VoLTE) is in 15 markets (not the all the same markets above) covering 107 million POPs and national coverage by the end of 2014.

• Un-carrier 5.0, known as T-Mobile Test Drive allows consumers to receive (specifically) an Apple iPhone 5s for 7 (marketing tag – 7 Night Stand) days to use for free. After the test period (they return the iPhone to a T-Mobile store). Test Drives are limited to 1 time per year, per credit card, per customer. For business customers, instead of registering online and receiving the phone by mail, these customers will get their (up to 3) iPhone 5s units by a T-Mobile representative. Instead of one week, the business test drive period is two weeks. Both new and existing customers may participate.

• Un-carrier 6.0 is music focused. Coined Music Freedom, Simple Choice customers with 1, 3, and 5 GB allowance plans may stream audio without drawing from their data buckets. The initial ‘over the top’ music brands include Pandora, Rhapsody, iTunes Radio, Slacker, Samsung’s Milk Music, and yet to be launched Beatport. With customer input, additional music services may be added to list.

• Without an Un-carrier designation, T-Mobile partnered with Rhapsody to build an ad-free unlimited streaming music service known as unRadio. For Simple Choice customers get it for free or $4/month for other T-Mobile customers, and open for $5/month for non-T-Mobile customers.

ANALYSIS

• The Network (marketing tag – Data Strong) – It’s well known within the industry that a strong network and public perception is foundational to customer acquisition and retention. Coupled with competitive pricing and a strong device portfolio, customers are unlikely to churn. Both Verizon Wireless and AT&T have strong network perception, partly due to the reach of their lowband spectrum. T-Mobile’s approach is to fully take advantage of its spectrum portfolio piecing together its AWS properties using carrier aggregation and advanced MIMO antennas. In some markets, it has 15 + 15 MHz (FDD) and 20 + 20 MHz (in 90% of the top 25 markets) in others. What this all translates to theoretical ~147 Mbps DL/ 40 Mbps UL. Of course on a loaded network, customers will likely experience less. At the announcement, it reprised its America’s Fastest LTE Network claim. It’s a certainty that this will continue be a central marketing value proposition.
  

Bragging: Legere shared that T-Mobile’s consumers are the industry’s biggest data users with the following stats: T-Mobile users use 69% more data than the Verizon customer, 61% more against Sprint, and 100% more against AT&T. A network engineering person would initially cringe but these consumption stats speaks to how Neville Ray’s (CTO) team work – creating a network to specifically address speed and capacity. From a marketer’s lens, a fast network embraces the explosive trend of data consumption, particularly the growing millennial segment.

• Un-carrier 5.0 addresses two points and cements a partnership. Customer acquisition and dispelling bad network perception is behind the 7 (or 14 day for business customers) Test Drive. The postpaid market is furiously in a switching game as the number of these type of subscribers reaches saturation. Every Un-carrier move is about customer acquisition. 1.0 was about low priced no-contract plan, 2.0 (JUMP) addressed the ability to upgrade a phone, 3.0 paid the termination fees for switching and 4.0 gave 200 MB of LTE tablet data for life. With 5.0, a free ‘try before you buy’ is a huge marketing bet - specifically use iPhone 5s for competitors’ customers to try the network, without obligation. Engaged them daily with giveaways, contests and other promotions. The brilliant part of this is at the end in which the target customer enters a T-Mobile store to engage in a switching dialog. On the business side, it provides a strong lead generation tool for its infant business group. At the end of the two week test period, the business rep has a stronger position to talk about T-Mobile’s network and plans. T-Mobile is projecting over 1 million Test Drives over the next year.

Using an iPhone 5s gives Apple the opportunity to drive additional volume at T-Mobile. While T-Mobile finally got the iPhone in April 2013, it has set publicly that Android devices drove most of its sales. There is synergy here as Apple also benefits with Test Drive as a tool to convert Samsung customers with its halo device. Apple’s skin in the game is that it is providing all the iPhones. The logical psychology is that the target customer will be smitten with the 5s, benefiting T-Mobile’s iPhone volume commitments, helping to increase equipment revenues and fortifying the business relationship for future promotions.

• Un-carrier 6.0 is essentially T-Mobile zero-rating audio data. This is a good gamble as audio data is tiny compared to the popular data hog video. Legere claims that even if a T-Mobile customer exhausts their data bucket, they will continue to listen to audio without penalty. There are two messages here – to millennials (mostly) use streaming music to your heart’s content and a general one, our network can withstand this anticipated music deluge. In addressing net neutrality, T-Mobile states the zero-rating is unilateral and aside from technical integration cooperation, there aren’t any commercial agreements. However, customer voting on which future music services will be included, some may argue an exclusion and favoritism against emerging companies. 

• unRadio provides an alternative to the over the top streaming music services. For its young (and young at heart) subscriber base, it’s a ‘cherry’ on top of the continuing attractive features of being in the T-Mobile community. unRadio features differentiate from other internet music with features including ad-free listening, unlimited skips, customized stations, and a song ID (called TrackMatch) for music discovery. Therefore, unRadio blatantly provides an anti-churn tool for T-Mobile more so than a primary customer acquisition tool. 

COMPETITIVE IMPACT?

History has shown that most Un-carrier moves responsible for T-Mobile’s formidable subscriber growth and met by competitors in some cases.

- Un-carrier 1.0 - Simple Choice
Response: AT&T Mobile Share Value and Verizon More Everything

- Un-carrier 2.0 JUMP
Response: AT&T Next coupled with Mobile Share Value, Sprint Easy Pay, and Verizon EDGE coupled with More Everything

- Un-carrier 3.0 – Free unlimited international texting and data roaming (EDGE), Stateside International Talk & Text $10 Add-on

Response: AT&T Mobile Share & Mobile Share Value plans w/included unlimited stateside international messaging and $5 World Connect Value add-on and Verizon More Everything plans with free unlimited stateside international messaging

- Un-carrier 4.0 – Contract Freedom (Paying ETF &; Value of Phone)
Response: Limited time AT&T promotion, On-going Sprint switching promotion

Of the two announcements, 5.0 is more threatening as it couples a high-end iPhone with a no-obligation try before you buy opportunity. Fence sitters who are drawn to T-Mobile’s low pricing but concerned about network robustness are likely defectors. As Verizon’s and AT&T’s networks are proven robust, T-Mobile’s play will be pushing Test Drive participants towards the speed angle. As all carriers are in the next phase of LTE progress – carrier aggregation (to increase speed), the vulnerability will be customers with older and less capable 3G or LTE handsets and featurephones.

Video: Trends in 1Q14 US Carriers' Results

Dan Meyer, Editor-in-Chief from RCR Wireless and I talk 1Q14 US carrier results and any trends happening from the big 4. RCR Story Link