This is my last daily commentary for today. And it’s going to be tech again here. I have a bunch of Tech links at the end but the big highlight here is the mobile telecom space.
I keep going on and on about how mobile is where the technology industry is moving. So clearly the access/telecom end of that is going to be important. The T-mobile move to unbundle the handset subsidy from the telecom monthly fee is a bold move forced onto the company by its lack of scale and resulting subscriber losses. Nevertheless, I think this is going to usher in a new period of margin erosion in both the hardware and access markets.
I am a T-mobile customer. So let me tell you about my history as a mobile user in the US. (I have used Vodafone and T-mobile in Europe – in the UK and Germany – for the past 15 years, by the way). I started with Sprint over a decade ago. And they were god-awful. In fact, somehow my phone imprint was duped and someone spoofed my phone to make $300 worth of calls in the first month of service. Sprint’s response was to act like they didn’t care. Going to the Sprint store was a shock because it was like going to the Department of Motor Vehicles – terrible customer service in person and on the phone. I switched within two months.
That got me onto T-Mobile. They were good and had good customer service. And because I travelled back to Europe a lot, I needed GSM. Somehow though I was convinced to switch to Cingular. And I was OK with them. However, they were bought out by the horrendous AT&T, which was another god-awful customer service fiasco. So I mercifully switched back to T-Mobile 5 years ago. And I have been with T-Mo since.
Here’s the problem. T-Mobile’s coverage sucks. I go anywhere out of a major metropolitan area and I get nothing. My wife who has AT&T is fine. My friends on Verizon are fine.I get nothing. About five or six months ago I got fed up with this. And I was also fed up with the lame T-Mobile G2X handset I bought on contract in 2011. I decided to switch to prepaid. I did the research and decided to go with Simple Mobile which simply piggy backs off of T-Mobile’s network and offers a low pre-paid rate. I bought an unlocked Samsung Galaxy S3 from Simple and got ready to switch.
By the time I was ready to move, the Un-carrier thing was on at T-Mo. So they persuaded me to move to a T-Mo prepaid plan that is $45 per month with unlimited voice and data instead of moving to Simple Mobile. And that’s where I am. T-Mo claims they are fixing the network. Let’s just wait and see. Otherwise I am happy. They have good customer service. I get good data speeds and service in urban areas and the price is cheap.
What do I extrapolate from my experience? First, T-Mobile’s network sucks and people are leaving in droves for that reason. The company simply does not have the scale to make the capital investment to have a true nationwide network and that has become a problem. But, if they offer a lower price, people will stay and might even switch to T-Mo, especially if they do try to make upgrades to 4G LTE.
What I am seeing, therefore, is a company that has been forced into a corner. They have been forced by circumstance to unbundle their handset subsidy, which most US and European mobile telecom operators, simply tack on to the monthly fee. Basically you get charged $20 extra per month to buy that handset at the cheap price – and that’s why you have to sign a two-year contract or get an early termination fee. What T-Mo has done is give users the ability to see through the pricing and decide how they want to bundle or unbundle the subsidy. Users can get an iPhone at the subsidized rate and get the $20 fee tacked on for the next two years, replicating the pricing of the 2-year fee. Or they can buy the handset full price upfront. The interesting bit is that you can still take your handset with you anywhere else even if you pay on layaway. You’re no longer under contract.
I believe this kind of pricing strategy will erode margins. First, it will cause telecom companies to lose fees, especially as customers lengthen their upgrade cycle. Right now, the contracts lock us into upgrade cycles. But with the new structure, we are able to upgrade whenever we want. And given the price and the amazing speed of new phones, I anticipate the upgrade cycles will lengthen. That will hurt revenue for T-Mo. But it will also hurt revenue elsewhere because I believe this is going to be the beginning of a trend. Once one carrier unbundles, the others will be forced to do so as well. Let’s see how subscriber numbers evolve first. But I believe unbundling is a pandora’s box that will hit all mobile telecom operators.
And as the subsidies for handsets disappear, this will put more price pressure on handset makers. More and more, people will move down market to lesser phones at full cost that have still superb features – *MP cameras instead of 13MP, dual-core processors instead of quad-core and so on. This is going to be worst for Apple since it is most dependent on the high end. It could be a boon for Nokia as it has started to hit the bargain basement bin to take share. Samsung plays in all markets so it will be less affected. But revenue will be impacted as upgrade cycles are lengthened and the mix moves down market.
Bottom line: I see this as a great boon for consumers, a potential life line for T-Mobile and a problem for mobile telecom companies and handset makers.
The rest of the tech links are below.
“In a note to clients, analyst Philip Cusick said Verizon boss Lowell McAdam had said he did not believe a premium would be required to buy Vodafone’s 45 percent stake in the highly successful Verizon Wireless business, because Verizon already had control through its 55 percent holding.
Shares in both groups are up over 20 percent this year on speculation Britain’s Vodafone could finally exit the leading wireless business in the United States, a partnership the two firms’ formed in 2000.”
“John Legere honed his skills as a cost cutter at Global Crossing, the fiber-optic network operator he spent a decade leading out of bankruptcy court to an eventual sale in 2011.
Mr. Legere cut capital spending at Global Crossing to about $250 million in 2002 from $3.2 billion the year before, reduced the company’s workforce by more than half and relocated its headquarters from Beverly Hills, Calif., to New Jersey—first to upscale Madison, but then to lower-cost Florham Park.
“I have the philosophy that it should not only be cheap, but it should look cheap,” Mr. Legere said.
Those habits could make him a good match for T-Mobile, which may be trading publicly in the U.S. for longer than its former parent and biggest shareholder, Deutsche Telekom AG, had hoped. Mr. Legere’s conservative approach to cash is being paired with decisions that will require heavy investment.”
“T-Mobile US Inc.’s struggles continued in the first quarter, as revenue dropped 7.1%, although less-severe customer losses were a bright spot.
The No. 4 U.S. wireless carrier is attempting a turnaround of its long-declining business, saying Wednesday that it now targets cost cuts exceeding $1 billion for 2013, part of a strategy shift aimed at boosting profitability. The period showed slower defection of the most valuable kind of customers, so-called postpaid customers—those that pay after using the service, as opposed to “prepaid” customers—but T-Mobile still lost about 1.8 million postpaid customers in the past year.”
“May. 1, 2013– Deutsche Telekom AG (XETRA: DTE; “Deutsche Telekom”) and T-Mobile US, Inc. today announced the completion of the combination of T-Mobile USA, Inc. and MetroPCS Communications, Inc., uniting two wireless innovators with one common vision: to bring wireless consumers exciting new choices while delivering an exceptional experience. The combined company, T-Mobile US, Inc., will begin trading on the New York Stock Exchange today under the ticker “TMUS.””
I switched to a T-Mobile Pre-paid plan this month. I was going to go with another company but T-Mobile’s un-carrier promotion caused me to stay – mostly because they waived the early termination fee.
“A gain in prepaid customers offset a loss in T-Mobile’s postpaid subscriber base, bringing a branded net add of customers for the first time since early 2009. But the iPhone and LTE network is more likely to help in the future.”
“Groupon just reported its earnings for its first financial quarter of 2013. The company, which is still looking for a new CEO after the ouster of Andrew Mason in February, posted a $0.01 loss per share but says its non-GAAP EPS, excluding stock-based compensations, was $0.03. Its revenue was significantly higher than expected with $601.4 million in sales, compared to $0.02 earnings per share (EPS) on $559.3 million of revenue in the year-ago quarter.”
““We’re still chugging along steadily in revenue, and we are brainstorming about new sources of income (stay tuned),” Sullivan wrote. The site had raised $680,000 as of Tuesday, up from $653,000 as of March 25.
“The most passionate readers have already joined. It gets harder after that,” Sullivan wrote. As he noted at the paidContent Live conference in New York last month (see video below), he is not taking a salary for the first year.”
“There are endless systems for achieving a clean inbox but, like diets, most everyone ends up failing. The answer then is accepting that it’s impossible, and then finding peace of mind by focusing on what matter most.”
This is a big social and mobile App that is right up Facebook’s alley. It would definitely be a big win for Facebook to get. It’s not clear to me that it’s not something Google can’t replicate though.
“News reports out of Israel say Facebook is in talks to acquire traffic-information service Waze for as much as $1 billion, but Google will be making a big mistake if it doesn’t try to top that offer.”
“The startup could bring know-how for helping Yahoo differentiate its travel.yahoo.com site from competitors as it focuses on the small screen. While MileWise itself has shut down and its search engine can no longer be accessed, its functionality could certainly end up in a Yahoo travel app. In the meantime, MileWise users will receive an email with instructions for exporting their data.
MileWise co-founders Nicholas Meyer and Vinay Pulim previously founded Reble.fm and later sold it to Playlist.com. These flexible, seasoned entrepreneurs are just the kind of talent Marissa Mayer is looking for. She wants to focus on user experience, and these guys know how to deliver something simple and easy but that adds unique value.”
” “Milewise created a great app to make travel planning easier and personalized. They have joined our New York mobile team.”
GoPollGo, which was launched in 2011 and has received some $425K in funding from IdeaLab and CrunchFund (the VC run by TC’s founder Michael Arrington), has run millions of polls in its time. In January this year, after launching an iOS app, the company released a beta of a premium service it called Promoted Polls. Like Twitter’s Promoted Tweets, this let pollsters pay a little extra to insert their questions into a stream of other, non-paid polling questions.”
Clearly Marissa Mayer thinks mobile is important.
“In its ongoing quest to snap up every small mobile startup around, Yahoo said today that it had bought travel rewards app MileWise and GoPollGo, a social polling app. Both services will be shut down, and staff will be integrated into the Silicon Valley Internet giant’s burgeoning New York mobile team. In recent months, Yahoo has acquired Stamped, Summly, Astrid and more, as part of its efforts to build out its mobile offerings.”
I don’t believe this is the right conclusion at all. It will be just as easy, easier even given this initiative, to hide the really classified stuff. And that’s the point.
“While we may never get the full extent of government spying on citizens in machine-readable formats, the Census, FDA testing, EPA and myriad other data will offer a treasure trove of information for years to come. And by making it open and machine readable, it will presumably be harder to bury such data in physical warehouses or behind crazy fees.”
“Smashwords’ findings suggest that those $2.99 authors should price up by a dollar: “One surprising finding is that, on average, $3.99 books sold more units than $2.99 books, and more units than any other price except FREE. I didn’t expect this. Although the general pattern holds that lower priced books tend to sell more units than higher priced books, $3.99 was the rule-breaker. According to our Yield Graph, $3.99 earned authors total income that was 55% above the average compared to all price points.””
“Today, we’re making it possible for you to go back in time and get a stunning historical perspective on the changes to the Earth’s surface over time. Working with the U.S. Geological Survey (USGS), NASA and TIME, we’re releasing more than a quarter-century of images of Earth taken from space, compiled for the first time into an interactive time-lapse experience. We believe this is the most comprehensive picture of our changing planet ever made available to the public. “
Mobile gaming takes on a new look with Android-based consoles, as opposed to gaming on Android phones. This shows Android moving into Xbox territory. Microsoft should not like this one bit. $99 price tag. Will it appeal to the mass-market though?
“Ouya, the Android-based game console that received nearly $8.6 million from its Kickstarter campaign, is getting more money to put toward game development and its upcoming retail launch.
The Los Angeles-based startup announced today that it has raised $15 million in new funding, led by Kleiner Perkins Caufield & Byers. Other investors include the Mayfield Fund, Nvidia, Shasta Ventures and Occam Partners.”
When I see this, I think acquisition. LinkedIn is heavily getting into content for example.
“Since the launch of personalized magazines this March, social magazine maker Flipboard has added 6 million new users to its platform, bringing its total number of users to 56 million – and that’s before the feature even arrived on Android, which now comprises roughly half of Flipboard’s user base. Today, that changes as the personalized magazine option arrives on Android phones and tablets, alongside the launch of a new web-based magazine editor designed with the needs of curators and publishers in mind.”
My takeaway here is that the Internet is a huge price discovery mechanism, even more so with mobile.
“among smartphone owners, some 79% can be classified as “mobile shoppers,” using their devices for some aspect of the shopping experience, from finding store locations through to finding goods. On top of that, among those who use smartphones for any kind of shopping or browsing, some 84% do so in physical stores”
“Lots of people say they want to break up the bundle — the economic model that keeps the TV Industrial Complex intact — but no one has been able to do it. Can Congress?
Senator John McCain is going to try, via legislation he is set to introduce soon, perhaps today.”
“MailChimp wasn’t always a big data company, but 12 years into its existence the company is using its mountains of email data to do everything from modeling spam to connecting subscribers.”
“LinkedIn has been making some significant moves towards becoming a media entity focused on business news, and the launch of new magazine-style channels of content is just the latest example of this.
Whether or not this is just another attempt by LinkedIn to make the site more “sticky” and get users to spend more time there, it has the potential to become a real competitor to other news aggregators and providers.”
“LinkedIn, now at 225 million users, continues to introduce more features to its site to keep people returning to it and staying there for longer. Today it’s the turn of LinkedIn Today, its social news page, which is getting a new feature called Channels. Channels is rolling out starting today to English-speaking users. LinkedIn says that it plans to announce the service formally on Wednesday. Update: here’s the formal announcement.”
“Trulia Inc. (TRLA), a property-information website, said it plans to acquire software maker Market Leader Inc. (LEDR) for $355 million, expanding its offerings to real estate agents.
The deal includes $6 in cash and 0.155 share of stock for each share of Market Leader, San Francisco-based Trulia said today in a statement. The $11.33 per-share price is an 18 percent premium to Market Leader’s close yesterday.”
“Online real estate company Trulia has announced it plans to acquire real estate SaaS CRM provider Market Leader for approximately $355 million. The SEC filing is here.
Trulia said the combined company will have some 46,000 “premium subscribers” — or more than “any other online real estate marketplace” (likely an indirect reference to rival Zillow).
The pair said the rational for the merger is to create a “combined platform” that covers both house buyers and real estate agents — aka “the entire real estate market, from consumers to brokerages, agents and franchisors” — with Trulia’s front end listing businesses being complemented by Market Leader’s back-end SaaS CRM.”
“The Washington Post posted discouraging earnings Friday, with revenue and circulation down from a year ago.”