Wireless Operator Strategies

Wireless Operator Strategies provides both a deep and broad perspective of the operator market, combining granular operator-level and market-level data with ecosystem-wide understanding of wireless operator challenges and opportunities.

July 15, 2013 21:15 Phil Kendall

Leap provides a good boost to AT&T’s spectrum position.

Leap principally owns PCS and AWS spectrum, the latter being an area where AT&T does not have much spectrum depth. As an extension of AT&T’s recent acquisition of WCS spectrum as part of a longer term wireless services opportunity, Leap represents a good short-term boost to AT&T. Leap has approximately 2.2 billion MHz POPs covering 136 million people. It has built out services to 96 million, of which 21 million are covered by 4G LTE. It would give AT&T the immediate ability to supplement 4G LTE services to those 40 million licensed but not covered  and, similar to the T-Mobile/MetroPCS deal, a Leap customer base with a relatively high churn and upgrade rate which could be rapidly migrated to a new network platform to make better use of the available spectrum.

The deal does not include Leap’s single 700MHz license, covering the Chicago area. Leap retains the right to sell this license and distribute the proceeds to its shareholders.

AT&T gains a stronger position in the AYCE prepaid market, with a sudden multi-brand strategy here.

Leap’s 5.2 million prepaid customers, of which 4.9 million are on its Cricket all you can eat (AYCE) brand, represent a significant boost to AT&T’s current 7.1 million prepaid customers. Strategy Analytics forecasts healthy growth in the US prepaid market and greater engagement from AT&T is a positive here. It has recently been building up the presence of its own sub-brand, Aio Wireless, to target the AYCE segment and this acquisition represents a significant boost to its prepaid operations and a good opportunity for knowledge transfer into Aio. To go from having no presence in this space to two brands, both of which will need significant support, may stretch AT&T’s resources, though Strategy Analytics does not expect the merger of these brands.

While Leap has not performed well in recent years, in particular pulling back from its expansion into mobile broadband services and, in the last year, discontinuing new connections to its PAYGo prepaid brand, its core Cricket brand has been relatively stable. Its Muve Music download service has proven popular as a benefit for subscribers. Yet both Cricket and MetroPCS have seen slow growth over the last three years as AT&T and Verizon Wireless have increased their share in the market, boosted by smartphones and 4G LTE, though they have begun to build healthy smartphone (and 4G) businesses of their own. With a better platform to extend the Cricket brand nationwide (without relying on wholesale deals), AT&T provides a good cost base from which to revive Cricket’s fortunes and compete against increasing pressure in the value segment from T-Mobile US.

Implications:

  • Pressure on Verizon Wireless: With AT&T strengthening its positioning along with T-Mobile US and Sprint in targeting AYCE and no-contract space, Verizon Wireless may feel more pressure to engage with the AYCE market. Verizon Wireless has hinted at potential use of its 3G network with a separate brand, but could find that LTE AYCE offerings from competitors make an EVDO value proposition a weaker option.
  • Prepaid gets boost with another brand moving nationwide: The acquisition could provide a further boost to growth of prepaid and some potential economies of scale in migrating the Cricket brand away from CDMA. AT&T would do well to expand the innovative service offering nationwide
  • US Cellular the next to go? Now the only mid-size carry with more than 1 million customers so the only acquisition opportunity offering any meaningful market share gains. C Spire Wireless, a private company that is one of the larger remaining Tier 2 operators, has been focusing on personalized service and rewards to seek to create a more differentiated position as consolidation has increased competition from Tier 1 operators.

 

 

 

-Phil Kendall and Susan Welsh de Grimaldo, Wireless Operator Strategies (WOS) service


July 3, 2013 16:49 swelshdegrimaldo

We are always on the look out for innovative ways operators are promoting LTE service and more mobile data usage - and thought these examples from SK Telecom in South Korea fit the bill. 

Most marketing material and website content around LTE focuses on "faster", which is of course a benefit of LTE that customers can observe and appreciate. And most data plans focus on tiered data options, with promotions mainly offering initial entry period discounts. 

One fun (or is it dangerous?) promotion comes from SK Telecom, one of the world's leaders in LTE with its newly launched LTE-Advanced network, and offers a way to earn free data access to add to the users data allocation on their plan. 

With an app targeted at youth (between 13 and 24), subscribers to SK Telecom can earn points by moving or whirling the handset with the app installed. The points can also be earned by taking part in several quest programs in ‘눝퀘’(LTE Quest). Users can use this application five times a day (each "play" lasts 30 seconds) to earn the maximum 10 points a day. Those accumulated points can be exchanged for additional data access: 100 ‘눝’ (LTE) points can be exchanged for 100MB. It would be possible to create up to 1GB on a monthly basis.The following Youtube video clip--a TV ad in Korean--depicts the concept (one of my Korean colleagues notes "we may hurt our arm or leg by doing this" - or perhaps need to buy a new phone if it goes flying!) 

http://www.youtube.com/watch?v=TYMbwyFuhHc

SK Telecom has also announced some new value added services that potentially could have broader appeal to take advantage of its new LTE-A network--services it plans to launch in July:

  • A Full HD 1080p Mobile IPTV service - B TV Mobile
  • An application for split-screen viewing of professional baseball games to watch two games at once - T Baseball Multi-View
  • Group video calls with 12x clearer picture and 2x better audio
  • A mobile FLAC(Free Lossless Audio Codec) MelOn music service

See: http://www.skt-lte.co.kr/contents/ltea/service.jsp for more detail.

And look for our upcoming Wireless Operator Strategies service report with more examples of LTE marketing and pricing approaches, which will be published later this summer.

Susan Welsh de Grimaldo, Director


June 28, 2013 01:12 swelshdegrimaldo

Verizon stated this week that it is interested in entering the Canadian mobile market, and reportedly has made an offer for Wind Mobile (currently owned by Vimpelcom) and also approached Mobilicity.

Verizon sold off international assets after previous ventures, including divestiture of its interest in TELUS in Canada in late 2004 as part of a strategy to focus on its core wireless and broadband business in the US, so why now look at international again? With the US market maturing (although with continued growth potential), the timing may be ripe to revisit select opportunities in other markets, just as Softbank and others are looking at US investments to diversify.

Why Canada?

With a total of 27 million cellular subscriptions in the entire country at the end of 2012—less than a third of Verizon Wireless total subscribers—Canada would appear to offer only a small growth opportunity.

Yet Canada is attractive market for US carriers:

  • Relatively low mobile penetration for a developed market, with mobile Subscription Penetration by end 2013 under 82%, compared to nearly 116% in the US, as forecast by Strategy Analytics Wireless Operator Strategies service. In fact, mobile penetration in Canada is lower than in Mexico, which will reach just over 90% penetration in 2013 (see Worldwide Cellular User Forecasts, 2012-2017 )
  • High ARPU - Strategy Analytics Wireless Operator Strategies projects ARPU per subscription in Canada will be at US$56.45 compared to $45.61 in the US at the end of 2013.
  • Upcoming auctions for 700 MHz spectrum that may provide economies of scale and roaming with US carriers using 700 MHz bands for LTE, and provide opportunities for new competition with the leading three Canadian operators Bell, TELUS and Rogers
  • A market that is important for roaming to and from the US

 

With deadlines for applying to participate in the Canadian spectrum auctions looming in mid-September, Verizon and any other operators from the US or Europe eyeing the Canadian wireless challengers will have a busy summer working to clarify any acquisitions or investments.

Susan Welsh de Grimaldo, Wireless Operator Strategies


April 9, 2013 09:46 Phil Kendall

EE announced upgrades to its LTE network today, doubling bandwidth for its 4G services starting in the next couple of weeks.  It will be allocating 2x20MHz of its 1800MHz spectrum to LTE services in 10 cities by the Summer, extending that to 98% of the UK population by the end of 2012. This will see its top speeds increase to 130Mbps and average speeds increase from the current 8-12Mbps to over 20Mbps.

The roll-out will be phased as EE matches the extra radio capacity with backhaul upgrades needed at some sites. No consideration needs to be made for phasing upgrades in order to protect GSM services in the 1800MHz band, with the remaining 2x25MHz more than sufficient to deliver high-quality voice services into the remaining 2G customer base.

EE is also planning field trials of LTE-Advanced and VoLTE before the end of 2013, with LTE-A seeming to be the greater driver at the moment: its current CSFB-based voice services are performing very well and the operator would like to see much greater VoLTE device availability before making a commitment there.

For the first time, EE has also discussed customer targets for LTE, aiming for 1 million postpaid customers by the end of 2013. It released two useful statistics about current subscriber growth:

  • 1 in 4 new consumer and SME customers are picking LTE;
  • 30-40% of Orange and T-Mobile customers with 4G phones in areas where EE has deployed 4G are upgrading to 4G (for an extra £5/month) when this offer is made to them by the customer care teams.

We view 1 million as a very achievable customer target. In fact, EE could probably go a lot higher. It had 2.7 million postpaid gross additions in 2012, so only a modest increase in the current 25% LTE share would see it hit 1 million this year. The key here is LTE needs to fit in with other targets, in particular its aim to increase EBITDA margins from 21% in 2012 to 25% by 2014 and “buying” LTE growth through aggressive device subsidies or removing the service price premium is not going to help there.

Strategy Analytics' Wireless Operator Strategies team will be releasing a more detailed competitive assessment of this announcement for clients later today.


October 4, 2012 15:43 swelshdegrimaldo

Merging T-Mobile USA and MetroPCS makes sense on many fronts. For stakeholders, René Obermann, Chief Executive Officer of Deutsche Telekom, explained this merger “feels like unboxing a new smartphone to you” – discovering all the benefits. Strategy Analytics looks at some of the potential benefits—starting with spectrum as the main driver:

Spectrum:

Both companies needed additional spectrum for stronger LTE deployments, and their contiguous AWS spectrum makes a good fit. As MetroPCS chairman stated in a call to go over the merger details, this deal allows for “minimum cost, time, and risk associated with acquiring spectrum”. For T-Mobile, they also get the benefit of PCS spectrum in some of their most spectrum constrained markets. The combined spectrum position, which will allow for 20x20 MHz LTE deployments in many markets, was noted by company leaders as “fundamental to deliver enhanced customer experience.”

Seamless Migration and Network Evolution, not Disaster of Combining Disparate Networks:

Both companies were very clear that they are not planning to “smash together two networks”. The companies will focus on migrating MetroPCS customers to T-Mobile’s HSPA+ network, which has sufficient capacity, in order to refarm MetroPCS spectrum, with a target to close the MetroPCS network by the end of 2015. With T-Mobile network upgrades already underway for its LTE launch in 2013, the timing is also good for migrating MetroPCS subscribers to TMO-US LTE as it is launched.

With 60-65% of MetroPCS customers upgrading their handsets each year, the new company will use this rapid upgrade cycle to their benefit to have customer-driven transition. They anticipate heavy users will self-migrate first, freeing up spectrum for refarming faster, and expect some need for incentives in the last 12 months to encourage remaining customers to upgrade, but most of upgrades will be driven by customers.

Of the US $6-7 billion in synergies identified, 5-6 billion will be in the network - decommissioning of redundant sites as refarming occurs is big part of that savings.

Personally, I agree with them calling Neville Ray, CTO of TMO-US, a “rock star” – he has done a lot of work on refarming TMO 1900 spectrum for HSPA+  to target iPhone owners, planning for LTE upgrades with newest technology innovtions, and did a superb job of tackling backhaul upgrades to support 4G RAN evolution.

It will be interesting to see how the combined entity leads network innovation to support new services, as each had key strengths:

  • TMO-US: strengths in refarming and preparing for industry leading LTE migration based on release 10 and using remote radio heads and strong fiber backhaul
  • MetroPCS: network innovation focused on maximizing minimum spectrum with DAS, early use of six sectors per cell site,  and world leading VoLTE launch to migrate voice to LTE to support spectrum refarming

With less urgent need to migrate to VoLTE to move voice to LTE to be able to refarm PCS spectrum (a main driver behind MetroPCS early VoLTE launch), the new company should be able to focus  on how to use VoLTE along with RCS and IMS to create service value propositions,  particularly for SME focus of TMO-US and the high-tier users at MetroPCS—who have been  used to having extra content/services bundled into their unlimited.

Marketing and Target Segments:

For TMO- US, the merger with smaller MetroPCS has several main benefits in terms of market positioning:

  • closes half the gap in subscriber base to number 3 operator Sprint, by going from TMO’s current 33M subs to 42M combined subs for the new company
  • more importantly, should go a long way to support the rebuilding of T-Mobile’s brand equity in the US after its failed merger with AT&T
  • should help to stem some of its customer losses to AYCE offerings
  • prepares it for stronger LTE play
  • positions both companies to continue to drive unlimited as a key differentiator (and target Sprint head-on)

DT and TMO suggest looking at contract, no-contract as a continuum of offerings and highlighted that the new company will have wider range of offerings including SIM-only  for bring-your-own-device and  handset financing plans (see the TMO blog)

For MetroPCS, the merger will stem churn based on users moving outside of their network areas. It will also will extend the value proposition of MetroPCS AYCE plans to more people—a benefit  TMO identified as an “upside” to the merger, stating that probably only 25% of the US has benefitted from MetroPCS plan innovation and they will be able to provide wider distribution.

As a combined company, the ability to position as an aggressive challenger is one of the main competitive benefits of the proposed merger. As company leadership noted, “we haven’t fired all our weapons yet…we will be a very innovative, edgy marketing machine, especially as our [LTE] networks come up.”

Impact on the Industry:

For vendors: Ericsson should be in a relatively good position, as a main vendor to both companies as LTE deployment work continues and as a main vendor behind VoLTE rollout at MetroPCS. NSN could benefit the most, as TMO was its first LTE win in US and it has a strong play with Liquid Net and refarming support.  Most impacted could be microwave vendors, as MetroPCS was playing catch-up with backhaul upgrades and had planned to focus on microwave.

For Other Carriers: Sprint could find itself the most affected, as it has been focusing on its unlimited LTE play. AT&T and Verizon Wireless may find they now have a stronger competitor in the SME and M2M space, particularly as TMO has its HSPA+ network to back up its leading-edge release 10 LTE deployment, and may also find it harder to grow in the prepaid arena. Smaller carriers like Leap’s Cricket service and US Cellular may also find themselves struggling more to retain customers with a stronger value player in town. MVNOs in the US may find they have another network that looks more appealing for wholesale, but could also find it harder to carve out a niche as an AYCE no contract play.

-Susan Welsh de Grimaldo, Director, Mobile Broadband Opportunities


May 30, 2012 17:56 David Kerr

Strategy Analytics predicts global cellular subscriptions to exceed 7 billion by the end of 2013. Asia Pacific continues to be the largest single region, representing half of the world's cellular subscriptions. LTE will be the most important growth category and global 4G subscriptions will soar over the next five years.

GSM/WCDMA/TD-SCDMA will dominate the wireless ecosystem, with LTE in particular gaining good traction over the next five years.

Cellular subscriptions are outpacing unique users. How many unique users does 2012's 6.6 billion subscriptions represent?

A combination of inactive accounts, individuals using multiple SIM cards in one handset, and the emergence of more multi-device users will drive the subscription/user gap even higher.

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More than one quarter of all subscriptions will be on 3G or 4G networks by the end of 2012, with 2G systems witnessing their last year of subscription growth before declines commence in 2013

2012 will see the emergence of LTE as a global 4G technology with total connections growing from 9 fold year on year. The US, Japan and South Korea are the current growth engines for LTE, but which regions and countries will drive the next wave?

Greater scale in the global handset market will help to put LTE on a more rapid adoption curve than seen by WCDMA.

This report forecasts cellular subscriptions by protocol in 6 global regions and 13 major automotive countries from 2007 to 2017. Major protocol forecasts for each major automotive market include

? CDMA (CDMAOne / 1x / EV-DO),

? 2G GSM (GSM / GPRS / EDGE

? 3G GSM (WCDMA / HSDPA / HSUPA / HSPA+ / TD-SCDMA)

? 4G LTE (LTE)

Client reading


May 14, 2012 17:39 Phil Kendall

 

The growing availability of LTE smartphones has delivered a significant boost to the technology over the last 6 months and Strategy Analytics has upgraded its forecasts to one billion LTE connections by early 2017. The US, South Korea and Japan are leading the way in 2012, with greater global scale achieved in 2013. By 2017, LTE will generate over one -third of mobile service revenues. Strategy Analytics' report "Worldwide Cellular User Forecast: 2012-2017" provides global forecasts of subscription, technology and revenues, with detail for 82 individual countries.

There will be over 6.6 billion cellular subscriptions worldwide by the end of 2012.

The market continues to slow as a more regions approach levels of saturation. Over 80% of subscriptions added between 2012 and 2017, will come from Asia-Pacific, the Middle East and Africa.  

Cellular subscriptions are outpacing unique users by 48%

Worldwide cellular service revenues will increase by 4% in 2012, a slight decline on the 5% growth witnessed in 2011.

Cellular Subscriptions

(M)                                  2011       2012       2017

W Europe                         556.7      576.0     624.6

CE Europe                        537.6      556.3      583.9

N America                        363.2      386.5      493.2

CL America                      642.3      697.1      841.8

Asia-Pacific                     3019.4    3357.7    4453.4

M East & Africa                 920.3     1026.8    1462.6

Additional questions answered in this forecast include:

How large will the subscription/user gap be in 2013 and 2017?

What share of users and revenue will be from business in 2012? 2017?

How will usage minutes grow from its 2011 level through 2017?

How significant will TD-LTE be in the next five years?

How will users, subscriptions, postpaid vs prepaid, service revenues, churn rates, traffic and ARPU vary across the 82 countries covered?

Client Reading


 


April 11, 2012 17:18 David Kerr

Churn rates have risen consistently in the mobile industry with average customer lifetimes little more than two years now, half their level a decade ago.

Prepaid churn is the main culprit here, driven by promotional SIM activity in developing markets (prepaid churn in Asia-Pacific is almost 100% per annum): operators should focus on pushing out targeted promotions to existing users to build longer-term, more valuable customer relationships.

By contrast, the postpaid market, which accounts for the majority of operator revenues, has seen churn improve, though this has become costly to manage as smartphone subsidies stretch operator resources.

Strategy Analytics Wireless Operator Strategies service examines key questions such as:

What is the average lifetime value of customers by prepaid, postpaid and blended?

How strongly has postpaid churn recovered from its worst at the peak of the recession?

What are the trends in prepaid churn rates in Europe? Asia?

Which operators have been most innovative in addressing churn and the handset subsidy issue?

Client Reading:

https://www.strategyanalytics.com/default.aspx?mod=reportformatsviewer&a0=7252

https://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=7250


March 1, 2012 12:25 Phil Kendall

We posted on Monday about some LTE network launches which were announced at MWC, or in the week running up to the show. These were mainly FDD-based network plans. A few more network plans have emerged during the course of the week, with a welcome showing for TDD-based deployments.

Momentum continues to grow for the use of unpaired spectrum for LTE services, with a real mixed bag of countries having commercial networks - Brazil, Japan, Poland and Saudi Arabia are all up and running. In many cases these are examples of operators who do not have sufficient clear paired spectrum to launch FDD-based LTE networks, but own unpaired spectrum. The US will join the commercial TD-LTE market in 2012 with Clearwire's planned deployments, though China and India are the big markets to watch.

At MWC this week we heard from:

  • China Mobile, which plans to have 20,000 TD-LTE base stations in operation on test systems by the end of this year and 200,000 base stations for a commercial service by the end of next year. It's TDD-based 3G services (using TD-SCDMA) have left it isolated globally, so the operator is keen to be one of the early volume players in TD-LTE. The operator also confirmed plans to launch dual-mode FDD/TDD LTE services in Hong Kong following its acquisition of 2.3 GHz spectrum there last month;
  • UK Broadband, which switched on its TD-LTE network in London on Wednesday, with commercial services planned from May. The network uses Huawei kit and operates in the 3.5-3.6 GHz spectrum bands. UKBB holds 124 MHz of spectrum and will ultimately deliver TD-LTE across 6x20 MHz channels, perfectly highlighting that it is not just the "traditional" mobile operators who have cornered the market for usable spectrum;
  • Bharti Airtel, which announced a contract with Nokia Siemens networks to build and manage its TD-LTE network in Maharahstra. The 2.3 GHz network will launch before the end of this year.

An honorable mention should also go to ZTE, who has been highlighting its TD-LTE achievements. It unveiled its multi-mode TD-LTE/WiFi pico base station and ran a live connection to 3 Sweden's dual-mode FDD/TDD LTE network in Stocholm. With a number of chipset vendors showcasing dual-mode LTE chipsets at the show, TD-LTE network opportunities are looking very positive.


February 27, 2012 22:42 David Kerr

Day one of MWC was dominated by the usual array of sexy devices with ever increasing feature lists and ever diminishing true differentiation. Today, we saw more of the same with some more color on tablets plus Microsoft and Nokia driving down the Windows Phone specs and price points to potentially enable the next 1B smartphone users.

More significant for me today were the reactions and statements of leading operators. Operator alliances to promote TD-LTE as well as branding RCS under the Joyn moniker as well as significant discussions of privacy issues were all front and center in Barcelona today.

Joyn apps for Android are being shown off at MWC, and in the coming months they will be joined by iOS apps and devices with the capabilities built in.

There is clear consumer demand for enriched messaging and voice services, and Rich Communications provides mobile

network operators with solutions to address these consumer needs.

? Anne Bouverot, GSMA

We also see the industry moving forward on privacy guidelines issues today by the GSMA being a much needed initiative given the tsunami of apps and the inevitable rising tide of opportunities for abuse.

Further evidence of operators and service providers looking to partner to grow the entire mobility pie can be found in the m-payments arena where Vodafone was top of mind with planned global offering partnering with Visa for NFC.

The operator keynote panel which included China Mobile CEO Li Yue, Vodafone CEO Vittorio Colao, and Ralph de la Vega, CEO of AT&T's mobile business as well as Franco Bernabe, CEO of Telecom Italia painted a picture of an industry with significant challenges in declining arpu, escalating investment costs, growing competition from OTT players and of course those pesky regulators.