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

Bullet Point Analysis: Boost Mobile Moves Defensive - The Battleground 40, 50, 60 Price Points

WHAT IS IT?

On May 6, Boost Mobile replaced its old monthly plan portfolio with a new Unlimited Select plans at three price points and specific data thresholds.

ANALYSIS

The prepaid sector is often characterized by high churn profiles and low credit scores. However, it is also a sector with high revenue and subscriber growth potential, courting feature phone upgraders (either prepaid customers or postpaid users looking for better deals in prepaid).  Sprint has made big bets on prepaid as a corporate growth engine. Prepaid subs represents 28% of the overall Sprint customer base.  Various sub brands (Assurance, Boost Mobile, Virgin Mobile) address specific prepaid demographics.  Yet 1Q14 was a bad quarter for prepaid with 465K losses, most of it blamed on Assurance brand losses. Boost's unlimited plans (along with Virgin Mobile's Beyond Talk plans) that garner higher monthly ARPU is clearly an important revenue component to Sprint's prepaid strategy and needs to be protected.  

Now with Boost's new plans at $40, $50 and $60, these numbers are the magic competitive price points to wage the prepaid war in mid to late 2014.  Boost Mobile is merely catching up defensively to rivals that already presented those price points and sometimes the same data thresholds.  

• AT&T's flanker brands Aio/Cricket is in integration mode but Aio's price points and data thresholds match directly with the new Boost plans.  AT&T has been very vocal about being aggressive in attaining growth at the 'low end' using Cricket and will be a threat Boost.   Tactically, it's likely that the unified Cricket portfolio will come out with the added lower $40 price point (Currently $50-$70).  Moreover, AT&T's mid-April GoPhone plan action added a $40/500 MB plan to match T-Mobile's $40 Simple Starter launched earlier 10 days earlier.

• T-Mobile's MetroPCS plan portfolio already has the same price points and always has been a strong competitor to Boost. By T-Mobile's 1Q14 prepaid earnings metrics, MetroPCS is doing well and though T-Mobile doesn't break out its contribution, the company added 465K prepaid users.  T-Mobile's internal code word in launching new markets is Apollo. The company is up to 30 new markets and continuing.  This Metro expansion has not only eaten into Cricket marketshare, it certainly has impacted Boost.    

COMPETITIVE IMPACT?

Every competitor has its own differentiation despite the same price points. The challenge is to communicate this to the target audience and cut through the usual selection criteria of device and plan pricing.

• AT&T's GoPhone portfolio has the advantage of built-in international calling and messaging while rivals MetroPCS and Boost need international package add-ons.  
• The new Cricket has high hopes and promise for its parent. Its primary focus is to recapture lost ground from MetroPCS and Boost will be impacted in the mix. It's uncertain if Muve music, which was an apparent differentiator, will continue to be promoted.  UPDATE: Muve Music is said to be on the auction block. Certainly, at a minimum, the expanded underlying AT&T LTE footprint and perhaps speed will be touted.
• MetroPCS continues to expand in an effort to migrate its legacy CDMA users (featurephone) to new LTE handsets on top of expanding its distribution to grab marketshare in new markets.  Boost's plans again are catching up to MetroPCS.

Boost Mobile needed to make its latest portfolio change to keep up with its main competitors.  There aren't any features in the new Unlimited Select plans that stand out against competitors. Boost Shrinkage discount approach is unique but how well does that retain a fickle customer segment?  Cricket and AT&T plans stand out as unlimited international texting (and limited international calling for GoPhone) are baked in.  Metro and Boost need to figure out if these features are competitively substantial in winning prepaid monthly adds.   
     

Bullet Point Analysis: AT&T GoPhone Adjustments, Defensive & Offensive

WHAT IS IT?

On April 18, AT&T announced two smartphone GoPhone prepaid plan adjustments and introduced a Wal-Mart specific plan:

• The $60 plan increased data from 2 to 2.5 GB + enabled Wi-Fi hotspot capability + unlimited talk 

• The $40 plan increased data from 200 to 500MB + 500 minutes of talk 

• Available at Wal-Mart stores nationwide, a new plan with 1GB of data for $45 a month + unlimited talk

Existing $40/$60 plan customers will automatically receive these increase data levels.  Moreover, not announced, the smartphone $50 unlimited calling and texting plan with WiFi-only (no data allotment) is no longer available. Though the plans are supposed to kick off on April 25, the changes are already available online.

ANALYSIS

The plan action with three components are a mix of defensive and offensive moves.  Anytime a company makes a change, there are clearly causes and effects.  

• As I wrote in my previous post on T-Mobile's newly launched $40 Simple Starter, that plan threatened prepaid competitors.  Eight days later, AT&T shored up its entry $40 GoPhone plan seemingly in a defensive move to match Simple Starter data threshold of 500 MB.  On the surface, it's merely a match but AT&T provides a differentiation for a specific segment of prepaid audience, those who text internationally. Still, Simple Starter addresses the needs of the talker as the plan offers unlimited calling; AT&T only provides 500 anytime minutes.  Against Verizon's $45 ALLSET, $40 price point comes out ahead for the price sensitive though Verizon's add-on data options offer better value. 

While the $40's nemesis was T-Mobile, the $60 GoPhone plan goes up against the Sprint's prepaid SmartPlus unlimited plan at the same price point with the same 2.5 GB threshold (throttled to 3G afterwards).  Sprint's other prepaid brands Boost and Virgin Mobile match other competitors such as MetroPCS and Cricket best.

• Finally, the tell tale sign of an offensive against Tracfone's Straight Talk is a Wal-Mart only plan. The $45/1GB plan matches the price point exactly though StraightTalk is unlimited and throttled after 2.5GB. The AT&T brand, WiFi hotspot tethering, as well as LTE access could be a differentiation but traditional value Wal-Mart shoppers may simplistically look at more data.  

• The ace in the hole for GoPhone is international messaging that competitors do not offer for the respective price points. This will appeal stronger to a specific subscriber demographic.  Provided that AT&T heavily markets this either in niche advertising or social channels, it may be lost.

AT&T's prepaid moves should be construed as urgent since it has lost prepaid subs for the last two quarters ( -32K 4Q2013 & -50K 1Q14).  Though the year-over-year view (-166 4Q12 & -184K 1Q13) looks better, the long and short of it is AT&T lost subs. By contrast, Verizon Wireless has had positive prepaid growth for the last eight quarters, decent for a primarily postpaid company whose prepaid subs are less than 6% of the retail/branded customer base.

COMPETITIVE IMPACT?

• AT&T's GoPhone move is just one component of a reversing prepaid strategy which mainly hangs it hat on the new Cricket market expansion. T-Mobile's MetroPCS brand had been targeting AT&T and Cricket heavily with the 'Apollo' market launches.  In the 1Q14 earnings call, AT&T said that the new Cricket will re-launch at the end of 2Q14, likely targeting T-Mobile and MetroPCS trying to reacquire lost subs. T-Mobile's entry plan featurephone switching growth may be blunt if AT&T markets heavily against that segment.

• Sprint overall needs to consider international messaging for postpaid and SmartPlus given this AT&T action. It may be too early to see how Sprint branded prepaid performs since Sprint doesn't specifically break out brand performance. 

• Verizon's ALLSET plan's $45 price point doesn't match well but it may be unlikely that a plan change is unnecessary unless AT&T makes inroads for a couple of quarters and attains notable marketshare.

Bullet Point Analysis: T-Mobile's $40 Simple Starter Threatens Competitors' Prepaid As Well

WHAT IS IT?

On Wednesday, April 8, T-Mobile announced a new plan called Simple Starter aimed at the individual entry smartphone data user.  Specifically with the following features: 

• 500 MB of LTE data 
• Unlimited Talk and Text
• The subscriber has ability to add on data when 500 MB has been reached
• For an additional $5, the customer can add 500 MB/day or $10 for the next week

ANALYSIS

There are benefits for T-Mobile but this minor plan introduction isn't likely to shake up the industry, hence no UnCarrier X.0 associated with it.  Even its previous plan adjustment (31 days prior), that offered additional data and expanded the Simple Choice portfolio from three plans to four and Stateside international texting did not warrant a X.0 or 4.1 moniker.   

T-Mobile Benefits: 

• From a portfolio viewpoint, T-Mobile now has a lower price point to grab entry data users who aren't sure how much data they may use.  

While T-Mobile has an opportunity to upsell its featurephone users, its designs are at other carriers' postpaid featurephone base. As of 4Q13, Verizon Wireless has 30% of its postpaid subs not on smartphones while it's 23% at AT&T and around 20% or less at Sprint.  This is helped by T-Mobile's $650 switching offer (UnCarrier 4.0) launched in January. On pure out-the-door price perspective, T-Mobile bests even the lower and equivalent pricing (recent price moves at the entry end) from AT&T ($25/1GB) and Verizon Wireless ($30/500MB) simply because of the device access charge ($25/AT&T NEXT, $30/Verizon Wireless EDGE). Sprint's $55 single line Framily plan also comes in higher.  Given the target featurephone customer is likely to be price sensitive, T-Mobile may be successful with this segment. 

• T-Mobile also has an opportunity in converting prepaid users to postpaid.  Let's face it, the 'no-contract' has some of the hallmarks of prepaid but it's still postpaid.   Simple Choice and Simple Starter plans do not have the 'handcuffs' that come with subsidized two-year contracts, however, most T-Mobile customers will take advantage of the equipment installation plan (EIP) with 24 month device financing (a different type of contract lock).  A quick scan of the leading monthly prepaid offerings suggest that the $40 price point for Simple Starter has the potential to make inroads into the prepaid sector.   Looking at the table below, most competitors are at the $45 and greater price point.  Note that the only prepaid offerings at $40 are MetroPCS (T-Mobile brand) and Net10 and Simple Mobile (Tracfone that also buys wholesale from T-Mobile).   

Logically, competitors may provide more data than T-Mobile's Simple Starter, but there may also be an element of brand aspiration and effective T-Mobile marketing momentum beyond features and price to help adoption.  

Looking at Simple Starter, the plan is characteristically old school prepaid. That is, if a customer runs out of data, they can refill. In the olden days, it was minutes, now it's data.  Verizon Allset and AT&T GoPhone plans do just that. Innovation-wise and addressing 'users' pain points and frustrations,' Simple Starter is unremarkable. 

• If T-Mobile is successful with drawing price sensitive entry postpaid switchers and prepaid (that's where the industry growth is), T-Mobile has one of several upcoming elements to help drive to their 2014 2-3 million postpaid net add target. 

COMPETITIVE IMPACT?

• It's clear that Tier 1 competitors' featurephone bases are the targets of Simple Starter, helped with the UnCarrier 4.0 switching proposition. As T-Mobile is offering a out-the-door lower price, it will be tough for rivals to drop pricing, especially at AT&T and Verizon because they want to maintain premium network brand positioning.  At Sprint, Framily from a single line price viewpoint is vulnerable. If T-Mobile had been feeding off Sprint users in the past, it will continue to do with the remaining featurephone base. Sprint's equivalent switching promotion may help stem the bleeding in possibly attracting gross adds.  If the T-Mobile postpaid brand aggressively targets the prepaid segments that MetroPCS doesn't, this could spell trouble for Tracfone, AT&T, Verizon Wireless and Sprint's prepaid group.  

• T-Mobile claims to have additional minor and major announcements to come. All those are components to reach or exceed their 2014 goals.  By all rumors, T-Mobile will post stellar postpaid net adds for Q1 2014 (1million+?). Let's see how T-Mobile does Q2 and Q3 go for gross and net adds.  

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More U.S. Spectrum Thoughts with RCRTV

RCR followed up the previous U.S. spectrum webinar with a RCRTV session in which Dan Meyer (Editor in Chief of RCR Wireless News) , Jeff Silva (Medley Advisors) and I go into different topics. Some of these included the H-block spectrum auction/DISH strategy, unlicensed spectrum/3.5GHz, regulatory progress, Cable WiFi, etc.

RCR Wireless Webinar on Spectrum (U.S.)

I took part in an RCR Wireless Webinar entitled : Spectrum Economics - The Emerging New Paradigm of Spectrum Use

Spectrum is the lifeblood of the wireless telecommunications space, and with a finite resource straining to serve an increasingly data-hungry consumer base, the pressure is on to free up new assets, for carriers to get their hands on what’s available and for equipment vendors to find more efficient ways to use what’s available. RCR Wireless News will take a look at the current spectrum market, from the ways the federal government is trying to free up spectrum, to the importance of current spectrum auctions and looking at developments in technology and small cells designed for greater efficiency.

What You Will Learn: 

How the wireless industry values wireless spectrum and ways in which vendors and wireless carriers are trying to squeeze more efficiency out of current supplies. Also a view on how the federal government is looking to free up more spectrum for non-conventional uses.

Who Should Watch: 

Those involved with network planning, including small cells and non-traditional networks. Also, those involved with roadmap planning for wireless carriers, vendors and equipment providers. 

Moderator: Dan Meyer, Editor-in-Chief, RCR Wireless News 
Analyst Angle: William Ho, Principal Analyst, 556 Ventures
Panelist: Jeffrey S. Silva, Sr. Policy Director, Telecommunications, Medley Global Advisors
Panelist: Steve Berry, President and CEO, Competitive Carriers Association

Register at RCR Wireless here to hear it.

Bullet Point Analysis: AT&T's Quick & Expected Mobile Share Value Adjustment

WHAT IS IT?

On Saturday March 8, AT&T announced several minor adjustments to its Mobile Share Value plans that went into effect the next day.   Specifically, 

• The 2GB plan's pricing was reduced from $55 to $40
• The 1GB and 8 GB plans were retired.
• AT&T cloud storage (AT&T Locker) increased from 5GB to 50GB.

ANALYSIS

This minor adjustment was expected as AT&T moved to offset an outstanding vulnerability against Verizon Wireless' More Everything launch on February 13.  To recap, Verizon adjusted some price points, introduced stateside international messaging and increased Verizon Cloud storage to 25GB. With this Saturday announcement, AT&T has now responded specifically to one up/change the playing field against its largest competitor. 

Let's look at the responses:

• Domestic international messaging - In about 12 days, AT&T responded and automatically included this feature into its Mobile Share Value plans.

• Subscriber cloud storage now 50GB, is double that of Verizon's 25GB.  Moving from 50GB from 5GB is substantial, and if the carrier can position itself as an attractive alternative to OTT players [OneDrive (7GB), Google Drive (15GB), iCloud (5GB), Amazon Cloud Drive (5GB), etc.] and get users to actively use the cloud, it can help the subscriber churn profile.  

• Finally, the meat of the pricing move - the $40 2GB level.  Recall Verizon's More Everything launch created a competitive pricing vulnerability with AT&T's two levels - 1 and 2 GB. These levels were $5 more expensive than Verizon and in the premium carrier switching game, this is significant.

• Rather than taking from the tired price parity playbook, AT&T changed the value proposition and doubled the data at the same price point (see below chart).  Now it is at a pricing advantage. To help the cause, the 1GB plan has been retired. This gives direct retail and channel sales reps a no-brainer price savings proposition to close their deals.  Also interestingly, the $90 8GB level has been removed as the absence of the data tier and price point helps the carrier push the 10GB level that it has been running in commercials and advertisements. The price value advantage is further expanded as AT&T's Next per smartphone price (>10GB) is $15 versus Verizon's $20 (>8GB).

• Oddly enough, the price vulnerability at the $130 price point is untouched. Whether the subscriber base hasn't moved to that level of shared consumption or competition may be an explanation. However, small/medium business accounts may be playing in that range.  This level bears watching.

COMPETITIVE IMPACT?

• Verizon will likely respond now that it has a pricing disparity.   On the rest of the portfolio, while Verizon can position itself a giving more data plan choices with 17, AT&T's portfolio has now simplified to 10. Plan rationalization is the logical step.  All these choices may be too many for the entry data customer(s). These entry data customers that are migrating from feature phones or standard 3G customers are good targets for AT&T.  Verizon has over 50 million of these customers and if AT&T (or competition) can bleed off a percentage of this, this would be worrisome for Verizon Wireless' 2014 smartphone growth/upgrade trajectory. The stakes are high. 

• T-Mobile doubled its data allowances a day ahead of AT&T's adjustment. Its entry offering of 1GB is stronger coupled with its price leadership. However, T-Mobile does not have any cloud storage offering. It stands to reason as it hasn't made a huge cloud storage infrastructure bet as AT&T and Verizon has made in the past 2-3 years. These competitors have owners economics in its infrastructure. If it is a big deal, then T-Mobile will partner with a provider (T-Mobile Netherlands works with Google to give 5GB). 

• Sprint now has seen a great deal of competitive action since its January Framily launch. That Framily campaign centers on 1GB usage and over time, will 1GB be obsolete? Clearly, the upsell to these customers is going to the Unlimited, My Way plans. The bigger worry and expected move will be domestic international messaging.  All competitors include this with their plans and Sprint does not. It's an add-on.  In the cloud storage war, though Sprint got in the game in late January with a partnership with Pogoplug, it now  provides a measley 5GB (compared to AT&T and Verizon) but its $5 unlimited storage add-on is compelling for some.  Finally, with all this competitive noise, Sprint needs to complement its Framily marketing to fight the increased marketing from all competitors.  

• All competitors will still have to deal with T-Mobile's announcement (Odd there wasn't an UnCarrier number associated with it) of free international in-country texting. This little detail will be significant for multinational business accounts whose employees roam.  Competitors have until March 23 when this gets implemented.

It's likely that the wireless landscape will continue to evolve in 2014 and adjustments will continue until an inflection point happens when everyone realizes that margin erosion will dampen their 2014 guidance. But then again, many CFOs explain that competition is already baked into these numbers. 

Bullet Point Analysis: AT&T Domestic International Messaging & Calling Move - Responding to Verizon Wireless & T-Mobile

WHAT IS IT?

AT&T announced it is proactively baking in unlimited international messaging (text and picture) from the US to the 'world' for its Mobile Share and Mobile Share Value customers. The feature will be available on Friday, February 28th.

AT&T is also introducing a new international calling package called World Connect Value where a customer can call 'over' 35 countries from the U.S. for one cent per minute. This package is priced at $5 per month.   

ANALYSIS

Just like that, AT&T's single move addresses vulnerabilities brought about by competitors' moves last week and the week before.

• AT&T's quick move comes at the heels of Verizon Wireless' new More Everything plan adjustment on February 14th and T-Mobile's new Stateside International Talk and Text plan options ($10/$15) on February 20th.

• Domestic based international benefits are becoming table stakes in the subscriber retention/acquisition war. Though it overtly benefits consumers with friends and family abroad, other beneficiaries are business/enterprise users who choose to use their smartphones for immediate international contact instead of standard email and landlines.

• All mobile carriers' unlimited stateside international messaging fights, to some extent, the free OTT applications that perform voice and messaging including, WhatsApp, Skype and Tango.  

• AT&T Mobile Share & Mobile Share Value plans are now at stateside international messaging parity against Verizon Wireless' More Everything plans. However, it is still at a $5 pricing disadvantage at the 1 & 2 GB options when looking for Verizon Wireless switchers. Additionally, if it looks for further plan parity, it is missing 500 MB and 3 GB options.  

• The international calling changes the playing field against T-Mobile. T-Mobile's plan is looking for a $15 price point that provides unlimited mobile-to-mobile calling to 30 countries, unlimited landline calling to 70 countries coupled with unlimited text messages. AT&T offers a lower $5 price with 1 cent/minute to mobile and landlines in 35 countries. Clearly it's difficult to do an apples-to-apples comparison and the benefits are user dependent. 

• AT&T's World Connect Value plan meets the same $5 price point as Verizon Wireless' International Long Distance Value plan though Verizon claims 230 destinations.  Note that destinations as a code word may not include country.   

 COMPETITIVE IMPACT?

• Verizon Wireless really doesn't need to do anything as AT&T is just reaching international messaging parity against the More Everything plans. One possible decision is whether to proactively give its Share Everything subscribers this feature or just move them to the new More Everything plans without fees.

• T-Mobile just made a move and competitors' responses don't really undercut it. This may or may not be an issue as it tries to acquire multinational business customers.

• Sprint already has a $15 International Freedom Call and Text.  It now needs to decide whether meet larger competitors' $5 price point and include unlimited messaging as part of its domestic plan structure or stay the course to be on par with T-Mobile.  

• These Tier 1 carrier moves are at a brisk pace that may impinge on regional carriers, chiefly US Cellular. Can they keep up?

Unlike the old days where it took a month or more to react to competitive vulnerabilities, large carriers have shown that it can react rather quickly. In this case, AT&T did it in about 11 days.  But AT&T still seems to be mulling over the 500 MB, 1, 2 and 3 GB options, whether to match its long standing rival or let it ride for a while. Let's see what happens.  

Tier One Carriers' Chief Marketing Officers - New Player at Sprint

This is an update of a new CMO at Sprint.  You can find the old posting listing other Tier 1 Carriers' CMOs here.

Sprint is a company in transition and catch up mode. After Softbank's completed its purchase of Sprint in July 2013, the inevitable organization shake up was to be expected.  In September,  Advertising Age reported that Bill Malloy was going to step down as Chief Marketing Officer. 

Sure enough, in early October the new executive landscape was somewhat disclosed. Yet the new Chief Marketing Officer had yet to be announced.  Of course there is some internal etiquette in deference to the incumbent but as of January, Sprint has been in a low visibility CMO transition.  Still, industry watchers could have seen this back in January within the texts of Sprint's Framily plan launch and this month's Framily plan announcement for small businesses. 

Sprint's new Chief Marketing Officer is Jeff Hallock and it's likely that a formal announcement will come about soon once Bill Malloy exits in March.  <Note - this is what should happen in light of the many questions on investor calls on how Sprint marketing will breakout its differentiation.  One would think a new CMO (similar to Mike Sievert at T-Mobile) will articulate his and the company's marketing strategy.>

Mr. Hallock is a Sprint veteran with at least 15 years in product marketing and channels. His latest two year tenure with media and advertising positioning rounds him out for overall CMO credentials.  Education: BS at Wake Forest and MBA at UNC-Chapel Hill.

Jeff Hallock in 2005 touting Sprint Music - Picture from CNET

Given owner Softbank is very aggressive in Japan, it'll be interesting to see what develops from Sprint under Mr. Hallock's tenure. 

Bullet Point Analysis: Verizon Wireless' More Everything Plans

WHAT IS IT?

Verizon Wireless modified their postpaid rate plans. There are 4 key elements of the announcement.  

1) More Everything plans are the new face of postpaid plans. The old plans (likely still in the system) were named Share Everything plans.  Below are the new data thresholds  and associated price points.

2) Unlimited international messaging to complement unlimited domestic messaging will be included in these More Everything plans.

3) Each More Everything plan line receives 25 GB of cloud storage (a.k.a. Verizon Cloud), an upgrade from the norm of 5GB, which also happens to be the standard offerings from AT&T and Sprint. 

4) High-value Verizon Edge customers will get a break on per smartphone "access" pricing, $10/month off monthly smartphone access for data allowances up to 8 GB, and $20 off monthly smartphone access on plans of 10 GB and higher. 

ANALYSIS

There are plenty of media analysis looking at the consumer, and I won't replicate that.  The takeaway for this new action is that it's focused on AT&T.  Verizon Wireless and AT&T have long been each other's primary competitor as both companies position themselves as premium carriers.

Verizon Wireless' More Everything move follows a series of back and forths in industry rate plan adjustments.  Many can argue T-Mobile's UnCarrier 1.0, 2.0, 3.0 started it all off in 2013.  However, AT&T's Mobile Share Value plans launched on December 5, 2013 help start the ball rolling with Verizon Wireless. AT&T's and T-Mobile's (UnCarrier 4.0) Paid switching programs joined by Sprint's January Framily plan announcement also added to the competitive atmosphere.   Though there was a minor Verizon adjustment in January, that was to help to upgrade their featurephone base.  However, things got a bit more complicated at the beginning of February when AT&T announced $15 per smartphone line for non-2 year {Next or customer supplied) Mobile Share Value plans with 10 GB or greater thresholds.     

• Looking at More Everything side by side against Mobile Share Value plans, Verizon Wireless  did a quick turnaround on their 250 MB plan by dropping the price $5 less than a month after introduction.  It also provides some logic to double the price point to get to the next data level (250 MB/$15 --> 500 MB/$30).   

Aside from the new plans under $60, Verizon Wireless didn't touch the rest of the portfolio. Verizon now opens the battleground on lower data thresholds with 5 options below $70 compared to AT&T's 3 choices.  At the same data levels of 1 & 2 GB, Verizon Wireless turned a pricing disadvantage to one that beats AT&T by $5/month.    

• Unlimited international messaging is a feature coup.  Whether consumers do or do not have international contacts, a lot of marketing mileage can be drawn from this feature.  The segment to possibly benefit in this feature are the business/enterprise customers who are more likely to have international contacts.  This also helps somewhat to negate some OTT lock but it'll take time to wean users off free OTT (e.g., WhatsApp, Viber, Tango, Sykpe, etc.) services.

• With 25 GB included storage, Verizon Wireless clearly bests competitors' 5 GB but does it matter?  

• Next and Edge monthly smartphone "access" pricing.  AT&T Next customers were paying $25/smartphone for any data plan below 10 GB, otherwise they would be at $15/smartphone. Verizon's move doesn't match Next pricing. For 8 GB and below, Edge customers pay $30/smartphone whereas 10 GB or higher plan customers pay $20/smartphone.  Regular two year contract (subsidized device) pricing remains at $40/smartphone for both carriers.

COMPETITIVE IMPACT?

• AT&T is now at a disadvantage and needs to respond. Matching price at 1 and 2 GB is the logical route. Whether they match with a new 3GB tier and the $60 price point is up in the air and something they have to analyze their customers' data consumption habits at the 2 and 4 GB tiers.  
• Unlimited and free international messaging is serious and all carriers business/enterprise accounts are now potentially vulnerable and at a disadvantage.  This feature provides Verizon Wireless enterprise reps some differentiating factor to tout.  The playing field may be changed, however, with in-country unlimited messaging if a business plan can be justified.  
• Competitors with baked-in cloud storage may not have to take any rash decisions as consumers have abundant OTT options (e.g., Google Drive, Microsoft OneDrive, Apple iCloud, Amazon Cloud, Dropbox, etc.) at their disposal.    The unifying challenge for carriers is to make their own carrier cloud storage relevant.
• Since Edge isn't as high of a priority for Verizon (AT&T in comparison is more aggressive with Next) the new smartphone price points help the existing base but price-wise won't do anything to help switch AT&T Next customers.   

Timing wise, we're midway through 1Q14. The ink is still a bit wet on AT&T's early December Mobile Share Value plans but we've seen these monolithic corporations become quite nimble in providing rapid competitive responses.  The stakes are too high these days.

Want to talk about this and other carrier moves more? Contact me at william.ho (at) 556ventures.com.

Bullet Point Analysis: Verizon Wireless' Share Everything Plan Minor Adjustment

WHAT IS IT?

Several tech news and blogger outlets have reported that Verizon Wireless will add a new 250 MB plan (at $20) level to its Share Everything plans as of January 21, 2014.

ANALYSIS

Big data users invariably dismiss this 250 MB level as miniscule, and it is. But there are two  areas why this makes sense. 

• First - Migrate the featurephone base to Smartphones and Share Everything Plans.  The Share Everything plan is now the only postpaid plan vehicle to migrate customers off legacy voice-centric plans (e.g., America's Choice - remember that?).  The new data-centric plan is also inexplicably linked to smartphone penetration.  Since 1Q2013, an Share Everything plan slide has been every quarterly earnings presentation deck.   

In 2Q 2013

 

In 3Q 2013

Verizon Wireless wants steeper curves on smartphone penetration and postpaid Share Everything account migration.  Here are the illustrative results since 3Q 2012. 

Since 4Q 2013 earnings is around the corner, it's likely to assume that smartphone penetration should cross 70% given the company's track record.  We can also safely assume that once Verizon Wireless nears the 100% Share Everything plan goal, there will be another more important growth slide to take its place. 

 

• Second - Provide a lower price point for featurephone users to convert to data. Previously, the lowest data price point was at $40 and provided 500 MB. Logically and in sales positioning, $20 and 250 MB is half.  While veteran smartphone users cringe at the low data level, Verizon Wireless is betting that once a non-data user starts to use data, they will get hooked and move up subsequent next tiers.  Increasing data usage is closely linked with helping increase Verizon Wireless' average revenue per account (ARPA) metric.

COMPETITIVE IMPACT?

Some may believe that this is Verizon Wireless' action against AT&T revamping its Mobile Share plans back in December 2013.  When laid out, we find that the new plan is in fact less competitive to AT&T. AT&T still has the advantage for Verizon Wireless switchers at the low data levels.    Given the above logic, the new $20/250 MB level will not get featurephone switchers. Those who are making the smartphone jump are likely to have explored T-Mobile or Sprint.

Still Verizon Wireless' opportunity may be in the existing range of data bucket choices with more price points and advantage in addressing the small business and high data use consumer accounts.   

Looking ahead, if history repeats itself, Verizon and AT&T users will start getting a handle of monthly data consumption and adjust accordingly. Once that happens, the number of data levels should shrink and (ideally for customers) price points will decrease.