Recent Analyst Observations, Carrier Acquisitions & Monetization

About 9 months ago I wrote a blog on IBM Mobile Insights discussing what is on the horizon for B2B mobility, and one of my observations was the carrier becomes less relevant and CONTENT becomes king. As we can see from recent acquisitions by the carriers (Verizon/Yahoo and AT&T/Time Warner) that these predictions are becoming a reality. The issue is the current offerings, service revenue and profitability metrics are becoming less consistent to the carriers' bottom line, and the ONLY way to  stay relevant and reach the customer base is to do that with interactive content and changing customer experiences. The devices we use every day are really only important to use because of the things we can do with them, the content we can access, and the business and productivity benefits that can be obtained. We do expect the carrier community to drive offers, services, and reach new revenue streams with content, and that includes access to music, sports, entertainment, movies, television, games, news, and yes even business content. Sprint's Claure also mentioned he has a content deal in the works, and T-Mobile currently lures customers by providing free media and content to its customers. Most of the early term content offers are expected to be very consumer driven, but we expect for B2B content partnerships and offers to also come into play, as again CONTENT is KING!

T-Mobile just produced an amazing Q3 presented recently in their earnings call, yet AT&T's news about the Time Warner acquisition has been distracting, especially to the investor community. T-Mobile essentially beat all carriers on net adds, and is continuing to show growth and claims it may surpass AT&T in 5 years. I think Legere may be challenged with this goal, as it currently is producing about $250M in quarterly net income compared to AT&T's more than a billion. Even though T-Mobile had such a great quarter, its overall net income was not as impressive, despite revenue growing more than 17 percent. T-Mobile would only have a chance to grow by taking advantage of the fact that AT&T will be distracted with DirecTV, AT&T Mexico, and AT&T/Time Warner M&A activities, and secondly T-Mobile needs a better business approach. T-Mobile's focus on the 5 to 25 line business segment is limited to the Small Business market, and by not reaching the Fortune 1000 customer base, you are limited to developing enterprise partners and offers that reach the larger end of the business market. T-Mobile has a long way to go to provide salient offers for the enterprise, and also lacks the structure and deal flow on the IoT side as well.

Other observations is around the subsidization of devices....we are starting to see creative offers to provide clients the illusion that they are getting a new device for FREE. This is being done by offering bill credits if and only if the customer commits to a term equipment installment plan (EIP) and that term might be 24 months. In some cases the carrier will offer the full value of the device in bill credits, but customers may not get those bill credits until a few years and the carrier is banking the fact that consumers are wanting to upgrade earlier and possibly before the 24 month period. We witnessed a string of iPhone deals about a month back to lure customers for the bill credits deals, and now we are seeing this with the LG phone as well (see T-Mobile's Business site).

Lastly, where will the carriers focus for growth and monetizing over the next few years? We believe Verizon will focus further around Intelligent Transportation and Smart Cities (but mostly trial and early stages now), business mobility specific to the SMB market and retention of the enterprise client base, developing enterprise and content offers through partnerships and acquisitions, and remain the price leader. AT&T will continue to develop around the Connected Vehicle and will dominate in this space, further build-out its Mexico and Latin America operations, push its AT&T Partner Exchange and Emerging Business resellers and partners, and focus around salient and differentiated content offers leveraging DirecTV and in the future Time Warner. Sprint continues to make improvements and we expect them to focus very heavily on the SMB sector for the business market, leverage its major brand portfolio and offers for the consumer, and continue to grow through wholesale and affiliate relationships and focus on future partnerships for new offers. Sprint's prepaid business is struggling, so there definitely should be some focus around this customer base but it seems Sprint is focused around its postpaid business in the near-term. Lastly T-Mobile, as mentioned above T-Mobile will need to push forward in the SMB market and provide offers "up-market," meaning it should build out its B2B strategy and product portfolio around mid-sized businesses and the enterprise. T-Mobile could also seek out partners to help provide a better position around its IoT and M2M business, as it has not performed well compared to AT&T who it says it will be going after over the next 5 years. T-Mobile may need to seek out a business content partner, and totally disrupt the market but most of everything we have see with T-Mobile is focused around its consumer business.

Also, don't count out other companies to disrupt the current mobile market in the states. Vodafone is expected to expand in the states (keep a close eye on this), and LeEco (the Chinese Software & Content) company also launched this October in the U.S. and will be doing it all....think mobile devices, IoT/M2M, consumer electronics, Connected Vehicles/Bikes, Music, Media, Content, Applications, Customer Experience. This company is just scratching the surface to replicate its China business in the states, so if you have not checked them out yet, well you better start! LeEco has been buildings its West Coast team, has been busy with the analyst community, launched its smartphone, showcased many other products, but is emphasizing that it is not a "device" company, it is a Software company. This company gets it...my whole notion that content is king is exactly what this company is basing its foundation on, driving business through content, media, movies, and other entertainment interactive experiences.

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