U.S. Mobile Market Share Now Hinges on Organic Growth, Not Acquisitions

The U.S. mobile market actually is far more concentrated than people usually assume. Though most would concede the leadership of the four national carriers, one might guess that there are still meaningful network assets to be acquired.

That actually is not true.

Assuming AT&T gets regulatory permission to buy Leap Wireless, something most observers suggest will be the case, the U.S. mobile market will include Verizon Wireless at 30 percent share, AT&T Wireless at 30 percent share, Sprint at 18 percent share and T-Mobile US at 14 percent market share.

That means the largest four mobile operators in the United States now account for nearly 92 percent of total U.S. mobile subscribers. So there still is eight percent more market share to be gained, some might note.

Yes and no. TracFone Wireless has about six percent share, but it is a mobile virtual network operator with a prepaid-only revenue model. If you add the MVNO non-facilities-based customers of TracFone to the four national carrier market share, you have 98 percent of total market share.

Yes, were TracFone a willing seller, a buyer would momentarily gain six percent additional share. But most acquirers who have done so, in any business, know that the odds of keeping those customers for the long term is quite difficult.

So the upshot is that TracFone’s market share would be “soft” in any acquisition by one of the four national facilities-based carriers.

That leaves only one percent or so remaining facilities-based service providers in the U.S. mobile market. Even if TracFone wanted to sell its business, it is selling customer accounts, not any network assets or spectrum licenses.

So how much more consolidation can happen in the U.S. mobile industry? Not much.

That means we are likely headed for a robustly competitive U.S. mobile market, as growth through acquisition now is largely off the table for the four major carriers.

Some would say the biggest possible merger would be between T-Mobile US and Sprint, the number four and number three carriers in terms of market share.

Fitch does not see that happening. “We expect only modest consolidation going forward as few material targets remain when operators and spectrum holdings are considered,” says Fitch Ratings.

Fitch believes it is virtually certain that the Federal Communications Commission would oppose any consolidation among the top four U.S. mobile operators, as in fighting the AT&T purchase of T-Mobile USA, anti-trust attorneys noted that the U.S. market already is far too concentrated.

Though the merger of AT&T and T-Mobile USA might conceptually be viewed differently than a combination of the number three and number four providers to create three contestants of roughly equal size, many have noted that the argument against AT&T’s purchase of T-Mobile USA suggests the U.S. Justice Department also would frown on such a deal.

So if the four leading firms cannot merger with each other, what is left? It’s a no-brainer that the regional players would eventually be taken out, for incremental growth.

“The long-term future for regional or small wireless operators is uncertain at best,” Fitch says.  “Fitch believes that these operators will eventually be acquired by larger wireless operators.”

But none of those deals alone will change existing market share very much. There is, after all, only eight percent share held by all the other mobile service providers other than the big four.

But there are other deals many expect to see. Dish Network, for example, owns valuable Long Term Evolution spectrum, but the value of that spectrum vaporizes unless Dish Network can get its network built by FCC deadlines.

Few believe Dish can do so without taking on a major mobile partner, one way or the other. That suggests either a major alliance with one of the four national carriers, or an absorption of Dish by one of the four.

Many expect T-Mobile US or AT&T logical candidates for such a deal. AT&T has been a rumored buyer of Dish for years, in fact. At this point, all the mobile service providers will have made a fundamental decision about whether they are buyers or sellers. Undoubtedly, Dish also has made such a decision, whatever its public statements.

Still, a Dish acquisition would be about getting spectrum assets, as Dish has no mobile customers at the moment.

Though consolidation in the communications business will continue, Fitch suggests the big wave of national and large regional provider mergers is over, in the domestic U.S. mobile business, for the time being.

DoCoMo Finally Gets the Apple iPhone

DoCoMo, the mobile business of NTT, finally is getting rights to sell the Apple iPhone in 2013, leveling the device playing field with rivals KDDI Corp and SoftBank Corp., which of which already sells the iPhone. 

For observers of the U.S. mobile market, which awaits an expected attack by SoftBank-owned Sprint, the big question is what Sprint might attempt, when it launches a new effort to take market share from rivals.

Based on SoftBank's track record in Japan, many expect a disruptive attack on pricing. But beyond that, most observers think Sprint also will try something else, creating a new sort of offer that offers uniqueness in the U.S. market.

Perhaps a large part of SoftBank's success in Japan was due to its exclusive rights to sell the iPhone. The same was true of AT&T, when the U.S. carrier had an exclusive right to sell the iPhone.

That obviously will not be a factor in the U.S. market when Sprint starts its attack. 

Microsoft Nokia Buy Puts More Pressure on BlackBerry

BlackBerry, the original market leader in smart phones, now has fallen from third place to fourth as the Microsoft Mobile operating system eclipsed BlackBerry in 2013. And though Microsoft once was a rumored potential buyer of BlackBerry, the potential pool of buyers has shrunk now that Microsoft already has Nokia.

That puts more pressure on BlackBerry to sell itself, and soon. With HTC struggling and Panasonic withdrawing entirely from the phone market, pressure on all contestants other than Apple and Samsung seems to be reaching the breaking point.

Majority of Android Handset Traffic Uses Wi-Fi, in 9 Countries Across North America, Asia and Europe

About 68 percent of Android data consumption occurs over a Wi-Fi connection, a study of users by Informa Telecoms and Media and Mobidia has found. 

The study shows that the most-balanced usage was in India, where Android users consumed about 53 percent of their handset data using Wi-Fi, both private and at public locations, though public locations represent just about one percent of consumption in India and just two percent in the U.S. market.

That data simply confirms the crucial role now played by mobile offload to third party access networks.

Mobile Accounts Outnumber Fixed Lines More than 6:1

Explaining what is going on globally, in the communications business, sometimes is a matter of nuances, and sometimes is drop dead simple.

The drop dead simple part is the role played by mobile services , which outnumbered fixed voice lines by about 4.5 to one in 2009, and now outnumber fixed connections by about six to one.

ITU Access LInes (Millions)
	2011	2012*	2013*
Fixed-telephone subscriptions
Developed	542	531	520
Developing	662	655	652
World	1,204	1,186	1,171
Mobile-cellular subscriptions
	2011	2012*	2013*
Developed	1,475	1,538	1,600
Developing	4,487	4,872	5,235
World	5,962	6,411	6,835

The nuances come when we are looking at total fixed network lines, for several reasons. There is, for example, a difference between the number of access lines or equivalents that might be available for use, and the number that actually are in use.

That roughly corresponds to the difference between a network that could sell a customer service at a location, and the number of customers that actually do so.

In some cases, there can be a difference between a voice line available, or in use, and a broadband line that is available, or in use.

And, of course, there is a difference between trends in developed regions, where the number of voice lines being used is dropping, and the developing regions, where capacity and usage often are growing. The offset, even in developing regions, is the use of lines exclusively for Internet access, irrespective of voice.

At a high level, one might say the number of lines physically able to be used is growing, globally. The number of lines in service seems to be dropping, overall, despite growth of usage in developing regions, simply because the rate of abandonment in developed regions is greater than the number of new lines being added and used in the developing regions.

According to International Telecommunications Union data, for example, the total number of fixed lines in use has declined since about 2006. But the number of fixed broadband lines in use has grown steadily.

Overall, the number of fixed network lines has grown steadily. What has changed is the willingness of customers to pay for a fixed voice service, not fixed services of any type.

Yelp Really Works, Study Finds

Merchant Warehouse research found that 93 percent of consumers who use Yelp go on to make a purchase with a company they researched on the review site.

A Boston Consulting Group survey of 4,800 business owners in March 2013)  found that small businesses with a free Yelp business owner's account saw an average increase in annual revenue of $8,000.

Can Microsoft Nokia Make a Dent in Apple Samsung Handset Lead?

Microsoft's purchase of Nokia has been justified as a way of strengthening Microsoft's bid to win a bigger place in the mobile operating ecosystem. Some would say it will not be easy. Markets tend to become quite stable in the mainstream adoption or mature market phase. 

In June 2013, Apple gained nearly one point of market share, BlackBerry lost a share point and Microsoft grew one tenth of a percent. And Gartner says Microsoft passed BlackBerry in operating system share by August 2013. 

Worldwide Smartphone Sales to End Users by Operating System in 2Q13 (Thousands of Units)

Operating System	2Q13  Units	2Q13 Market Share (%)	2Q12  Units	2Q12 Market Share (%)
Android	177,898.2	79.0	98,664.0	64.2
iOS	31,899.7	14.2	28,935.0	18.8
Microsoft	7,407.6	3.3	4,039.1	2.6
BlackBerry	6,180.0	2.7	7,991.2	5.2
Bada	838.2	0.4	4,208.8	2.7
Symbian	630.8	0.3	9,071.5	5.9
Others	471.7	0.2	863.3	0.6
Total	225,326.2	100.0	153,772.9	100.0

Source: Gartner (August 2013)

Nearly 142 million people in the U.S. owned smart phones (59 percent mobile market penetration) during the three months ending in June, up four percent since March. 

Apple ranked as the top OEM with 39.9 percent of U.S. smartphone subscribers (up 0.9 percentage points from March). 

Samsung grew its share 2 percentage points with the release of its new Galaxy S4 model, ranking second with 23.7 percent market share. HTC ranked third with 8.5 percent, followed by Motorola with 7.2 percent and LG with 6.6 percent. Microsoft's purchase of Nokia 

Top Smartphone Platforms 3 Month Avg. Ending Jun. 2013 vs. 3 Month Avg. Ending Mar. 2013 Total U.S. Smartphone Subscribers Age 13+ Source: comScore MobiLens
	Share (%) of Smartphone Subscribers
	Mar-13	Jun-13	Point Change
Total Smartphone Subscribers	100.0%	100.0%	N/A
Android	52.0%	52.0%	0.0
Apple	39.0%	39.9%	0.9
BlackBerry	5.2%	4.4%	-0.8
Microsoft	3.0%	3.1%	0.1
Symbian	0.5%	0.3%	-0.2

Study Confirms: Most People Watch One to 10 Channels

The conventional wisdom for many decades about consumer TV viewing is that most people watch relatively few channels. Some studies suggest the average is about seven channels. Others might peg the typical number of channels watched  ab it higher.

A new study by Digitalsmiths suggests that 86 percent of respondents watch the same channels, most of the time.

The study also suggests that 79 percent of respondents watch between one and 10 channels, on average, with a typical number at five to six channels, and a big spike at 10 channels.

Largest Price War in U.S. Mobile History is Coming

The biggest price war in the history of the U.S. mobile business is coming. We don't know precisely when it will begin, but it is coming.

The skirmishes already have begun as T-Mobile US has launched its "uncarrier" strategy. So far, the biggest impact has been on device purchase options, as T-Mobile US device installment policies have triggered competitive responses by AT&T and Verizon Wireless. 

That is probably marginally important to some consumers, namely those who routinely buy new devices frequently. But most users arguably have been more affected by shared data plans that are relatively incremental in impact.

SoftBank's Sprint probably has plans to do something more disruptive, and the other service providers will have to respond, in some way. 

Softbank launched just such a disruptive attack on pricing in the Japanese market after acquiring Vodafone's Japan business. 

Some would argue that Vodafone's willingness to sell its stake in its biggest market is evidence that it expects tougher and more competitive times in the U.S. market. That could be a problem for Verizon Communications, which is shelling out $130 billion to acquire the Vodafone stake in Verizon Wireless. 

Huge and Risky Bets are Being Placed in Global Mobile Business

In the wake of Verizon’s purchase of the 45 percent of Verizon Wireless that it does not already own, as well as the Microsoft purchase of Nokia's handset business, huge and risky bets are being placed about the direction of the mobile business.

Nokia is getting out of handsets entirely, to focus on mobile infrastructure. Vodafone is exiting its strongest and most significant revenue-generating global market. Verizon Wireless is making a huge bet on robust mobile revenue growth in the U.S. market.

And that is only the beginning. What will follow is a major wave of restructuring among leading suppliers in the European communications markets as well, as Vodafone deploys its newly liquid capital and as other leading carriers decide they must buy or sell.

Already, there is speculation that AT&T might try to buy all of Vodafone when the Verizon transaction is completed. Vodafone is said to be weighing a purchase of Liberty Global, which only recently swallowed Virgin Media.

Telefonica is buying E-Plus in Germany and America Movil still is trying to buy all of KPN. Other deals will be proposed, and many will happen.

Beyond that, AT&T seems to be interested in a “mobile only” approach that combines elements of confidence in Long Term Evolution prospects in Europe, as well as growth in emerging markets.

Vodafone thinks it will do better if it reinforces its mobile offerings with ownership of fixed network assets.

Microsoft, at the beginning of a process to pick a successor to Stever Ballmer, Microsoft CEO, is betting that owning Nokia’s entire handset business gives it an ecosystem it did not have before to drive the Windows Mobile business, but at the risk of alienating existing licensees.

And some might ask what Microsoft actually gets by buying Nokia, when it essentially “owned” much of the value of Nokia by virtue of being the exclusive supplier of operating systems to Nokia.

The point is that very big and risky bets are being placed about where growth lies in the global mobile business.

Microsoft Steve Ballmer Succession Now Could be Affected by Acquisition of Nokia Handset Business

Microsoft will be looking for a new CEO to replace Steve Ballmer. Microsoft has bought Nokia's entire handset business. That, in turn, means Nokia CEO Stephen Elop is an "internal" candidate for the job of Microsoft CEO, but might also make his selection harder, ironically.

Elop has been mentioned as among the logical candidates to replace Ballmer. Some have argued Microsoft needs somebody "from the outside" to reposition the company. Whether Elop should have been seen as "external" or "internal" was an issue before. 

Elop is well versed about Microsoft, and apparently already is returning to Microsoft as head of the devices team. 

But some investors and observers believe Microsoft needs an "outside" perspective. Now that Elop is back "inside" Microsoft, that could be a complication. 

How quickly events can turn.