Mobile Ecosystem Value and Revenue is Shifting to App Providers

Most of the revenue growth in the U.S. mobile ecosystem arguably is going to application providers, one might argue after reviewing estimates made by Chetan Sharma. Voice service revenue was down between 2013 and 2014. Access revenue (mostly mobile data) grew significantly. But total mobile service provider revenues did not grow as much as app provider revenues.  

U.S. Mobile Will Consolidate into 3 National Providers

The U.S. mobile market will consolidate into three providers, analyst Chetan Sharma predicts. There just is not enough margin to support the four leading national providers.

In 2015 so far, Verizon and AT&T have earned roughly $17 per account per month while T-Mobile US and Sprint have collectively lost $0.39 on every subscription per month, according to Chetan Sharma Consulting.

Us wireless market_q3_2015_update_nov_2015_chetan_sharma_consulting from Chetan Sharma

T-Mobile US Launches "Un-carrier Unwrapped" Promotion

T-Mobile US has launched a new “Un-carrier Unwrapped” promotion, starting with three full months of unlimited LTE data for T-Mobile US postpaid Simple Choice customers at no extra charge.

The promotion will feature a different gift coming each week. customers. T-Mobile US also teases that will be offering holiday gifts to Sprint, AT&T and Verizon customers as well: one carrier per week.

“But that’s not all….we know that Verizon, AT&T and Sprint customers need some holiday cheer, too - so we’ve got presents coming for them. Just wait!” said John Legere, T-Mobile US president and CEO.

Cable TV Could Lead Future Fixed Networks Business

There are a number of reasons to speculate on future roles of cable TV companies in the broader telecommunications business, and equally important reasons to sugg est that legacy telcos might not forever be the dominant providers. Some might argue they already have lost that role.

U.S. cable TV companies already are the dominant suppliers of high speed Internet access and entertainment video, and share the fixed network voice market with telcos.

But there are other reasons to wonder. A traditional rule of thumb for telephone networks serving consumers is that suppliers make money in the suburbs, lose money in the rural areas and break even in the urban areas.

With the caveat that services for business customers make a difference, those rules of thumb largely remain useful.

What sort of services provider historically concentrated first on rural areas, then moved to suburban areas and only lastly on urban areas? Cable TV networks is the answer.

Networks first were created to import distant TV signals from urban areas to rural areas, meaning network economics had to account for the high cost of building fixed networks in low-density areas.

Later, when the business model changed from “signal access” to “provide more choice,” the suburban areas were wired. The last stage was extension to urban cores, something that happened in the 1980s.

The point is that network economics were tweaked, from the start, for the worst business case. That tends to extend to every other part of the business.

In the end, network economics always are a balance between expected revenue and expected capital investment to garner those revenues.

So if gross revenue starts to be an issue, as it now is, the lower-cost provider is going to have advantages. Since all triple-play providers now sell the same products and services, that matters.

Network economics plays a role in fixed service provider strategy, the perhaps longest-running example of that being the decision when and where to invest in fiber to home platforms and when to use some other next generation network platform, for the moment.

In that regard, cable TV hybrid fiber coax networks have an advantage: they do not yet require as intense a fiber deployment as do fiber to home networks, but can deliver services that might otherwise require FTTH.

For example, Morgan Stanley surveyed 2,500 U.S. households during August 2015 and September 2015 on broadband and TV services, and found "U-verse and AT&T DSL had especially weak satisfaction results," compared to cable TV customers.

Cable customers reported an average speed of 38 megabits per second, while DSL subscribers said they had 21 Mbps service on average.

Verizon Communications FiOS customers on average had nearly 30 Mbps service and were happier, despite price hikes, says Morgan Stanley.

There are new questions we might raise. As customers increasingly find they can substitute use of one platform for another, and as new suppliers enter existing markets, market positions can change.

Substitution of mobile for fixed voice and messaging provides one example. Use of mobile Internet access does affect demand for fixed Internet access. And a coming shift to mobile video likely will provide another challenge.

At the same time, new suppliers are entering and reshaping the market, especially gigabit-providing independent Internet service providers such as Google Fiber and a growing number of third-party suppliers.

It no longer is absurd to consider a future where former telcos are unable to compete in fixed network markets.

Apple Still Earns Most ot the Money in the Smartphone Business

Apple had about 13.5 percent of shipments, but accounted for as much as 94 percent of profits in the smartphone business, in the third quarter of 2015. That is a problem for all the other suppliers, as sooner or later, profits must be made or the effort is not sustainable.

To be sure, some firms are deliberately pricing to take market share, with the expectation that profits can be generated later. That is a workable strategy, up to a point.

At some point, smartphones likely will be the only phones sold, globally. So, sooner or later, sustainable pricing levels must be reached. There simply is not room, long term, for all the current providers, in a market where most suppliers do not generate sustainable revenues.

source: Business Insider

source: Mobile News Archive

Data Plan Prices Will Drop 15% to 20% in Indian Market in 2016

Data service plan prices will fall by at least 15 percent to 20 percent when Reliance Jio enters the mobile market sometime in 2016, analysts at Fitch Ratings predict.

“We expect competition  to intensify as Reliance Jio  enters the market with likely cheaper and faster data-focussed tariff plans armed with sufficient spectrum and access to funds,” Fitch Ratings said.

“We expect blended monthly ARPU to fall by five to six percent to around Rs 160 (2015: Rs 170) due to a decline in data tariffs, which will more than offset the rise in data usage,” Fitch Ratings said.

Fitch expects industry revenue to grow by low single digits compared to the 2015 level of nine percent growth, driven solely by data services. That might be a significant prediction. Up to this point, voice revenues have driven perhaps 80 percent of mobile service provider revenues.

A shift to mobile data as the “sole” driver of growth would indeed be significant.

Mobile data will rise to around 25 percent to 27 percent of total revenue in 2016, compared to the 2015 level of 18 percent to 20 percent, on a doubling of data traffic volume.

But the biggest four mobile service providers will experience a drop in earnings before interest, taxes, depreciation and amortization (EBITDA).

EBITDA will narrow by 0.1 to 0.2 percent in 2016, partly a result of higher marketing spend and lower mobile data prices.

On the other hand, 2016 industry capex/revenue could rise to 19 percent to 20 percent, up from the  2015 level of 18 percent, in part because of investments to improve call drop performance.

But there should be upside as well. Lower prices tend to drive higher consumption of desired products. So more affordable mobile Internet access prices should lead to higher buy rates, and a higher volume of consumption as well.

Fitch Ratings said weaker unprofitable mobile operators  including Videocon, Aircel and Tata could exit the industry as they make operating losses and lack key spectrum assets and financial flexibility to invest in data networks and five to six operators emerge from the industry shake-out.

“The top-four--Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications--are likely to raise revenue market share to 80 percent,” said Fitch Ratings.

Fitch Ratings also lowered  telecom sector outlook to “negative” from “stable” for 2016.

The agency expects the 2016 credit profiles of the top-four Indian telcos to come under pressure amid tougher competition, larger capex requirements and debt funded mergers or acquisitions.

Comcast and Time Warner Cable Garnered 71% of Net New Internet Access Accounts Over the Last Year

Just two U.S. Internet service providers--Comcast and Time Warner Cable--got 71 percent of the three million net new high speed Internet access subscribers added in the U.S. market over the last year, according to Strategy Analytics.

In the third quarter of 2015, Comcast and Time Warner Cable led the growth in U.S. high speed Internet access subscriptions, adding 552,000 net new subscribers.  

In the third quarter, AT&T lost a net 106,000 subscribers and Verizon added only 2,000. The problems for those carriers is two-fold. Gains powered by fiber access services (FiOS and U-verse) grew, but both service providers lost digital subscriber line accounts.

In the third quarter average revenue per account grew between two percent and seven percent.

High Speed Internet Access ARPU, 3Q14 to 3Q15
	3Q14	4Q14	1Q14	2Q15	3Q15	Y-o-Y %
AT&T	$44.04	$44.13	$44.69	$45.42	$46.48	5.5%
CenturyLink	$33.87	n/a	n/a	n/a	$36.13	6.7%
Charter	$46.62	$46.86	$48.87	$49.92	$49.88	7.0%
Comcast	$43.86	$44.20	$45.36	$45.84	$45.61	4.0%
Time Warner Cable	$47.24	$47.30	$47.82	$48.04	$48.17	2.0%
source: Strategy Analytics

Separately, Leichtman Research Group reports that U.S. cable TV companies accounted for all the net growth in high speed Internet access connections in the third quarter, adding about 788,000 net accounts. U.S. telcos lost a net 143,000 accounts in the third quarter.

AT&T had a negative net rate of growth for its Internet access services in the third quarter of 2015, adding U-verse connections but losing copper connections, as has been the case for some years. Verizon added about 2,000 net connections, according to Leichtman Research Group.

CenturyLink and Windstream also lost customers, on a net basis, in the third quarter.

Collectively, the top U.S. cable TV companies have 61 percent of the installed base of customers, while the top telcos have about 39 percent of the installed base. Cable TV companies have steadily gained share in the high speed access market over the past several years.

The 17 largest cable TV and telephone providers in the United States, representing about 94 percent of the market, acquired about 645,000 net additional high speed Internet access  subscribers in the third quarter of 2015.