T-Mobile US ditches streaming for aggregator TV play

After T-Mobile acquired Layer123 back in 2017, the US has been holding its breath for another Uncarrier move to disrupt the content world, but its not going to be as glitzy as some would have hoped.

Speaking on the latest earnings call, the management team indicated there will be a foray into the content world, but it appears to be leaning more onto the idea of aggregation than creation and ownership.

“It’s subscription palooza out there,” said COO Mike Sievert. “Every single media brand is, either has or is developing an OTT solution and most of these companies don’t have a way to bring these products to market. They’re learning about that. They don’t have distributed networks like us. They don’t have access to the phones like we have.

“And we think we can play a role for our customers as I’ve been saying in the past at bringing these worlds of media and the rest of your digital and social and mobile life together. Helping you choose the subscriptions that makes sense, building for those things, search and discovery of content. We think there’s a big role for our brand to play in helping you.”

The T-Mobile US management team might be antagonistic, aggressive and disruptive, but ultimately you have to remember they are very talented and resourceful businessmen. A content aggregation play leans on the strengths of a telco, allowing the business to add value to a booming industry instead of disrupting themselves culturally trying to steal business.

Content streaming platforms have been an immense successful not only because of our desire to consume content in a completely different way, but also due to the companies who are leading the disruption. The likes of Netflix, Hulu and Amazon are agile, creative and risk-welcoming organizations. Such a disruption worked because the culture of these businesses enabled it. Telcos are not part of the same breed.

However, this is not a bad thing. The basic telco business model is connecting one party to another and this can be of benefit to the content segment. Telcos own an incredibly valuable relationship with the consumer as most people have an exclusive relationship with a communications provider (not considering the broadband/mobile split) and a single device for personal use. The telcos own the channel to the consumer.

Sitting on top of the content world, providing a single window and, potentially, innovative billing services and products could be immensely valuable to the OTTs, as well as securing diversification for the spreadsheets internally. The content aggregation model is one which is functional and operational, perfectly suited to the methodical and risk-adverse telcos.

Specifics of this Uncarrier move are still yet to emerge, but the T-Mobile US management team are promising to do something with the Layer123 acquisition sooner rather than later. It might not just look like what most had imagined initially.

Legere and T-Mobile running riot again

He might be wild-eyed, egotistical and unconventional, but you can’t argue with the results T-Mobile US CEO John Legere is delivering shareholders.

Reporting 2018 full year financials, T-Mobile US has continued the rip-roaring success of the last few years. Total revenues for 2018 finished at $43.3 billion, up 7% year-on-year, alongside 7 million net customer additions, 4.5 million of which were in the lucrative branded postpaid segment.

“This never gets old,” Legere proclaimed. “T-Mobile finished another year with record breaking financials and our best-ever customer growth. Record revenues, strong net income, record Adjusted EBITDA, our lowest-ever Q4 postpaid phone churn that was better than AT&T for the very first time.

“T-Mobile is competing hard and winning customers – and we continue to deliver results beyond expectations. Our 2019 guidance shows that we expect our incredible standalone momentum to continue.”

All this, and the telco still hasn’t launched the much-anticipated TV offering.

When Legere first walked into the room as CEO in September 2012 investor jaws must have hit the floor. This is not a man who looks like a business leader in one of the most risk-adverse and stuffy industries on the planet, and when the first Uncarrier move was announced in 2013, a few must have been close to passing out.

Going against everything which everyone knew in the industry, March 2013 saw the introduction of the first Uncarrier offer. A new streamlined plan for customers which dropped contracts, subsidized phones, coverage fees for data, and early termination fees. This was certainly a break from the status quo and since this point numerous new Uncarrier moves have been introduced almost doubling revenues (2012 full year was $22.5 billion). It might not be traditional, but this is a success story like few others.

At the end of the three-month period, T-Mobile had a total of 79.6 million customers and a postpaid churn rate of 0.99%. This is still a company which should be considered a challenger, but T-Mobile US is making steady progress. It is not accelerating towards the leadership duo of Verizon and AT&T, but it certainly is not slowing up either. The big question is whether this momentum can be maintained.

With 5G on the horizon, the team certainly have the raw materials to create another few Uncarrier plays. Deployment of 600 MHz is setting the scene for a launch, with the team promising the network will be ready for the introduction of the first standards-based 5G smartphones in 2019. By the end of 2018, T-Mobile US claims to have cleared spectrum for approximately 135 million POPs and with the ambition to clear spectrum covering 272 million POPs by the end of 2019.

All this and the team still hasn’t done anything with the Layer123 purchase of December 2017. Alas, a TV Uncarrier move is just something we’ll have to look forward to over the next couple of months.

US charges Huawei with a litany of crimes

The US Department of Justice has hit Chinese telecoms vendor Huawei with a 23-count indictment, covering allegations ranging from bank fraud to theft of trade secrets.

This dramatic move is the culmination of a process that was publicly initiated when Huawei’s CFO Meng Wanzhou was arrested in Canada at the behest of the US in early December 2018. It was soon revealed that the reason for the arrest was suspected fraud related to attempts to conceal business being done with Iranian companies in violation of US trade sanctions.

The Iran stuff constitutes the majority of the charges filed in New York against Huawei, Meng and its alleged unofficial Iranian affiliate company Skycom. Specifically they are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud.

In addition Huawei and Skycom are accused of violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to violate IEEPA, and conspiracy to commit money laundering. On top of that Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the grand jury investigation in the Eastern District of New York.

It seems a bit redundant to come up with a separate charge of conspiracy to do the crime you’re also accusing someone of doing, but there you go. Maybe conspiracy is the consolation prize if you fail to make the main charge stick.

Bank fraud is fairly self-explanatory; it concerns attempts to commit fraud to a bank. Wire fraud seems to be an archaic way of describing fraud committed by electronic means. The IEEPA is the process through which the US was able to impose the trade sanctions on Iran. Money laundering concerns financial transaction with proceeds that were generated from certain criminal activities, among which some or all of the above presumably are.

But that’s not all. In a separate rap sheet the DoJ announced ten additional charges filed against Huawei Device Co and Huawei Device Co USA. They consist of theft of trade secrets conspiracy, attempted theft of trade secrets, seven counts of wire fraud, and one count of obstruction of justice.

According to the accusation Huawei started trying to steal information about a T-Mobile US phone-testing robot called ‘Tappy’ in 2012. This allegedly included violation of NDAs,. Taking illicit photos of it and even nicking bits of it so they could do a bit of good old fashioned reverse engineering back in China. Apparently TMUS caught them in the act and Huawei claimed it was down to ‘rogue actors’ rather than a corporate thing. The US reckons it has evidence to the contrary.

“As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States,” said Secretary Kirstjen Nielsen of the U.S. Department of Homeland Security. “They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behaviour will not be tolerated.”

“The charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace,” said FBI Director Christopher Wray. “To the detriment of American ingenuity, Huawei continually disregarded the laws of the United States in the hopes of gaining an unfair economic advantage.”

A bunch more officials got to make statements on how out of order Huawei has been, which you can see in the video below. Huawei, unsurprisingly, doesn’t see things in quite the same way. It gave Telecoms.com the following statement.

“We are disappointed to learn of the charges brought against the company today. After Ms. Meng’s arrest, the company sought an opportunity to discuss the Eastern District of New York investigation with the Justice Department, but the request was rejected without explanation.

“The allegations in the Western District of Washington trade secret indictment were already the subject of a civil suit that was settled by the parties after a Seattle jury found neither damages nor wilful and malicious conduct on the trade secret claim.

“The company denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion.”

That remains to be seen, but at least the process is likely to be public and transparent. The Chinese state reckons this is just an extension of US President Trump’s trade war with China. Uncharacteristically the Donald has yet to tweet on the matter but even if he does it will presumably be to echo the DoJ position. He is apparently meeting Chinese trade officials tomorrow, so that should be an interesting chat.

The US isn’t playing around here. By charging Huawei with most known crimes short of cattle rustling it’s demonstrating an unflinching determination to defend itself regardless of (or perhaps encouraged by) the political implications. It’s not yet clear what the consequences of guilty verdicts would be but the US is seeking Meng’s extradition and she would presumably do some time.

ZTE nearly got driven out of business by the US for violating its Iranian trade sanctions. It follows therefore that the US would apply a similar level of punishment to Huawei if it found it guilty of committing the same acts. Huawei is a much bigger company and is working hard to minimize its reliance on US suppliers, but it would surely at least be severely diminished by such an outcome.

 

T-Mobile US won’t be rushed on TV proposition

The T-Mobile US TV launch has been anticipated for some time now, but we’ll have to wait until at least mid-2019 for this dream to become a reality.

After closing the Layer3 acquisition at the beginning of this year, it was assumed T-Mobile US would sharply enter the TV market with another ‘Uncarrier’ move. These disruptive plays have formed the foundation of T-Mobile US’ rise through the ranks in recent years, luring customers away from the still dominant duo of AT&T and Verizon.

But for those who were eagerly anticipating the launch of a TV service, don’t hold your breath. The launch has been kicked back, with no concrete commitments made. Why? Because CEO John Legere has high standards.

According to Bloomberg, people working on the project have suggested the wild-eyed CEO has set the bar so high, the team are struggling to meet expectations. This is not necessarily a bad thing and demonstrates Legere has the patience to produce a good product instead of being rushed to market due to the pressure of other players.

The first moments of life for this product could be the beginning and the end. Such is the competition in the ‘cord-cutter’ space, bringing a poor product to market could result in the venture failing before it has even started. If T-Mobile US wants to make a splash in this pond, he’ll have to meet consumer expectations, most of whom are dissatisfied at the moment.

While cable has had a place in the hearts of consumers for years, this trend is ending with the cord-cutting generation of today. Digital alternatives are wanted by the consumer, though with expensive and sub-standard options on the market as it stands, there is the opportunity for disruption. This is a perfect storm for Legere and the magenta army, but only if the proposition is right.

It’ll have to be cheap enough to attract interest, expensive enough to allow for future content investment, stylish enough to meet the visual and experience demands of the digital natives and have the content depth to attract a broad range of customers. This is a complicated equation to get right, but the rewards are potentially massive. We’re pleasantly surprised the team is taking its time and getting the proposition right.

Another factor to consider is the increased competitive threat from Disney. Disney has already shown its intention to go toe-to-toe with Netflix on the content battlefield, though should this entertainment heavyweight get its own OTT service right upon launch next year, the content gains for everyone else will get considerably smaller.

With a host of services already on the market, and more to come in 2019, T-Mobile US will have to make this Uncarrier move perfect if it wants to cash in on the content bonanza. Consumers are fickle and un-loyal enough to mean late-comers to the market can make a splash, so don’t expect Legere to be rushed with this challenge to the status quo.

T-Mobile/Sprint edge towards finish line following Huawei snub

T-Mobile US and Sprint are reportedly rubbing regulators the right way, in the continued effort to get the prolonged merger approved, by overtly shunning Chinese kit vendor Huawei.

The statement should be viewed as more symbolic than anything else, as considering the clauses which have been inserted into the Defense Authorization Act during August, it would have been highly unlikely the pair would have considered Huawei for any meaningful work in US networks. What this could be viewed as is a PR move from the pair, allowing the US to demonstrate to the world how serious it is about the espionage claims.

According to Reuters, Deutsche Telekom and Softbank, parent companies of T-Mobile US and Sprint respectively, have confirmed they will not be working with Huawei moving forward. Neither US telco currently has any Huawei kit in its network, though it is hoped this statement from the international telcos will have the bureaucrats hand edging closer to the green button for the $26 billion merger.

For the US government, this is somewhat of a PR win. The Trump administration has been incredibly aggressive in making moves against the Chinese, and this could be viewed as a medal credited to the crusade. Not only can the US government effect change in its own telcos and other governments around the world, it can also influence non-domestic private firms. The long arm of the Oval Office is tickling opinion in places it really shouldn’t be able to.

Unfortunately for the US, each incremental step taken in the trade war against China seems to question how dearly the White House holds principles and values. All of these individual circumstances are starting to look like pawns in President Trump’s game of chess against Beijing. Trump is living up to his reputation as a deal-maker, with the promise of aiding the battle against the Chinese enough for the President to make concessions elsewhere.

The evidence being stacked up against the T-Mobile/Sprint merger was starting to climb pretty high, though perhaps this might be enough of a ‘concession’ to twist the White House’s perspective on the transaction. Trump has already shown he is capable of looking at the big picture, with the recent arrest of Huawei’s CFO another excellent example.

Having been arrested in Canada while in transit back to China, Trump promised to intervene in the court case should it help his pursuit of a more favourable trade relationship with China. This statement from Trump makes somewhat of a mockery of the whole arrest and demonstrates how little he thinks of the Canadian judicial system. If there is a benefit to the US economy, Trump can talk to the right people and make the whole saga disappear. It questions the validity of the arrest in the first place, but also the credibility of the Canadian courts; why does Trump believe they can be convinced to drop the case so easily?

Trump is starting to show his heritage; anything for the deal. This is a businessman in control of the White House, and his ability to ignore small print give the impression of a wheeler-dealer.

T-Mobile/Sprint merger finds a new enemy in mysterious lobby group

A new non-profit organization called ‘Protect America’s Wireless’ has emerged, seemingly with the sole objective of hurling spanners at the T-Mobile US and Sprint merger.

Details on the group are relatively thin at the moment, it was only founded last month, though a press call introducing the group and its mission statement on the website both seem to give the same message; the T-Mobile US and Sprint merger will be bad for the national security of the US.

“We must protect our networks from foreign spying,” the team announces on the websites homepage. “Our greatest concern is the pending Sprint T-Mobile merger, which could give countries like Saudi Arabia, China, Germany, and Japan direct access to our networks through the use of foreign-made networking equipment and billions of foreign money. We call on President Trump, Congress, and the FCC to protect American national security by denying these foreign interests access to America’s wireless communications.”

On the press call, David Wade, Founder of Greenlight Strategies, suggested a merger of the two telcos would open up the US to a Chinese ecosystem, while also suggesting any business working closely with Chinese vendors would effectively handover data to the Chinese government. While it is true Sprint owner Softbank has collaborated closely with Huawei and ZTE in the 5G R&D journey, this seems to be taking the conspiracy theory up another level. Deutsche Telekom, parent company of T-Mobile US, also has ties to Chinese vendors, but there aren’t many telcos who don’t.

The theory here is a merger between the two telcos would be bad for national security, effectively handing China a key to the backdoor. There have certainly been objections from a competition perspective, but this is the first we’ve seen with this angle. It’s difficult not to be suspicious about who the puppet master actually is.

Interestingly enough, the group has declined to discuss where funding is emerging from. As a 501c4 non-profit, the team do not have to disclose funding or ownership details, though they are permitted to attempt to influence politics as long as it isn’t their main area of focus. While the groups attempt to tackle US security is a thinly veiled attempt to demonstrate ‘social welfare’, as long as the group isn’t spending more than half of its funds on political-related activities, it can continue to operate half-hidden by shadows.

Finding out who is funding this organization is key to figure out what the angle is and whether this is yet another example of propaganda, though it is not necessarily a simple task. 501c4 non-profits have to complete a Form 990 for the IRS, on which any donations above $5,000 have to be disclosed. Unfortunately, due to the efficiency of the IRS, there is usually a 12-18 month lag on this information being made publicly available.

Until the influencers and donors of this group have been identified, this could be a very dangerous source of misinformation. Statements being made might very well be true, but without transparency it would be safe to be suspicious.

T-Mobile US finds a new way to troll AT&T and Verizon

T-Mobile US is testing out a new way to mock AT&T and Verizon by inviting the duo to its own TEX Talks seminars and panels on how to improve customer service.

Taking place on 24-25 October at its Charleston customer experience centre, T-Mobile US will host various companies from around the US, offering advice on how to improve relationships with customers and reduce churn. Of course, never missing a chance to poke fun at AT&T and Verizon, CEO John Legere has made it clear they are invited to the event, even if they are currently ignoring his calls.

“As the Uncarrier, we’ve always been about changing this industry for good…with Team of Experts, we’ve done it again,” said Legere. “And we won’t stop with wireless. Customer service is utterly broken in this country – it’s a mechanized mess. We’ve completely changed the game for customers, and we hope every brand steps up to do the same.”

While Team of Experts might not be the most exciting of Uncarrier moves, it certainly seems to be having a notable impact on the business. T-Mobile US has stated Net Promoter Score (NPS) is up 60% since introducing the new focus on customer service, while asynchronous messaging with care is up 34% and churn of customer service staff is down 48%. It’s not the headline grabbing Uncarrier move of yesteryear, but goods things are happening.

Announced back in August, the aim of the Team of Experts Uncarrier move was to revamp customer services and improve loyalty. The industry has come to expect big things from wild-eyed Legere when launching new Uncarrier moves, though this is not exactly the blockbuster we’ve gotten used to. However, three months on, the ‘rock star treatment’ for customers does seem to be working.

It might not be the venture into the world of content many were expecting, though it is a welcome surprise. The telco industry is traditionally awful at customer services, choosing to lock in customers with long contracts and create a red-tape maze for those who want to leave. Loyalty was enforced by making churn so difficult as opposed to creating a proposition customers want to be a part of. This move seems to be challenging the status quo.

Customer services can be a differentiator moving forward as the price wars seem to have come to a conclusion. There will continue to be undercutting and promotions, though the telcos cannot go much lower on tariffs and maintain the profit margins desired by investors. T-Mobile US has done a great job of disrupting the industry and capturing subscriptions, but momentum will run low if the same message is played on repeat.

There has been signs across the world telcos are starting to care more about their customers, Vodafone is a great example in the UK with its own customer services initiatives, though these are still the exceptions not the rule. More work needs to be done to correct years of wrong-doing.

That said, Legere’s trolling is always a bit of fun.

Legere casts wild eyes over to the world of banking

SEC-filings have emerged suggesting T-Mobile US is looking into creating a banking product for its customers which could be launched in a matter of weeks.

The documents, which have been filed by Customers Bancorp, describe a partnership which has been in place since September 2016, with the two parties coming together to build the relevant technology and products since. Details are relatively thin on the ground as it stands, though in naming T-Mobile in the documents it is a pretty sure sign of diversification from the telco.

With more customers showing readiness to adopt mobile banking solutions the idea does make sense. T-Mobile US is constantly looking for new opportunities to laud over the ‘duopoly’, as CEO John Legere describes AT&T and Verizon, so it should come as no surprise the team are looking for new ways to engage customers.

Although T-Mobile US would not be considered a challenger brand in the same way as Iliad in Italy or Jio in India, the shake-up of the business under Legere’s leadership has created a similar disruption. T-Mobile US has continuously boasted of collecting new customers with ease quarter after quarter, but such momentum can only last so long; new ideas are needed.

In India, Jio has diversified into content and also hinted at an assault on the broadband market, though T-Mobile US has resisted such pleasures to date. The introduction of financial services is simply another tool in the shed for T-Mobile US to maintain its current course. The last few Uncarrier moves have not been the earth shakers of yesteryear, though this would certainly capture the attention of the masses.

With a huge customer base, 73 million subscribers, and a sound relationship with said customers, churn was 0.95% during the last quarter, the foundations are steady. However, the big question is whether the T-Mobile US brand, led by the eccentric and wild Legere, can present itself as a business in which consumers would be confident in dealing with for their finances.

Banks do not generally present themselves as fun or charismatic brands mainly because dealing with an individual’s money is a serious matter. People will want their cash handled by a man who looks like a stereotypical accountant, not a 40 year-old frat-boy. This is perhaps one of the issues T-Mobile US will have to assess, as Legere does not give the impression of the most trustworthy banker.

FCC drafts in external opinion to figure out the T-Mobile-Sprint conundrum

Perhaps realising the gravity of the situation, the FCC has drafted in outside help to assess the impact of the T-Mobile-Sprint merger on the US economy.

David Sibley will help the team as an outside consultant reporting into David Lawrence, who is leading the merger taskforce. This should not be seen as an unusual move from the FCC, though perhaps such external opinions should have been brought in earlier considering the impact this merger will have on the telco landscape and competition.

“We are fortunate that Professor Sibley is bringing his considerable economic experience and expertise to bear in this review,” said FCC Chairman Ajit Pai. “Rigorous economic analysis plays an important role in all of the Commission’s work and will be essential to a thorough investigation into whether approval of this transaction would be in the public interest.”

This is the big question. The merger will bring the number of national telcos down from four to three, but is this a good or bad move. There are arguments on both sides.

The bad side of the argument is a simple one. Removing one of the major telcos from the ecosystem will reduce competition and hurt the consumer through higher pricing due to a lack of choice. This is not a complicated point to make and a genuine concern, especially in a country like the US which where telcos do not operate everywhere. The risk of monopolies or duopolies in certain areas increases.

On the positive side, while the number of massive telcos decreases, competition increases as the merged entity would offer a more valid threat to AT&T and Verizon through the combined scale. T-Mobile US CEO John Legere often refers to AT&T and Verizon as the duopoly, and while this is an exaggeration, they are miles ahead of T-Mobile and Sprint in third and fourth place. T-Mobile and Sprint are not at the right scale to compete with the leaders individually, but together the merged organization would offer greater scale. The theory here is reducing competitors would make the market more competitive, therefore better for the consumer.

This is the conundrum which the FCC needs to decide on. Evidence and experts will be aplenty on both sides of the argument, though Sibley certainly adds some expertise to the team.

Sibley is currently the John Michael Stuart Centennial Professor of Economics at the University of Texas at Austin. Prior this role, Sibley worked Head of the Economics Research Group at Bell Communications Research, as well as the Deputy Assistant Attorney General for Economic Analysis in the Antitrust Division of the US Department of Justice. He also represented the US in OECD discussions.

As it stands, the merger shot clock is currently on pause, with the FCC deciding it does not want to be rushed. The approval or rejection of mergers and acquisitions are targeted to be completed within a 180-day window, though the FCC is offered the luxury of taking longer if it is a particularly complicated case. This is proving to be one, with the FCC requesting input from competitors of the pair recently, most notably from players outside the mobile ecosystem, suggesting it is investigating the impact on such segments as broadband.

T-Mobile gives prepaid customers the 5G luxury

T-Mobile has become the first US telco to commit the 5G euphoria to its prepaid customers, alongside unlimited plans which will feature Amazon Prime and Google One.

Previously known as MetroPCS, the prepaid brand has been shortened to Metro, and is the first service to commit to 5G as a prepaid offering. Starting from $30 a month and heading up to $60, the various plans are data-centric, aiming to appeal to teenagers and millennials.

“When we talk about 5G for All, it’s not just nationwide 5G service but it’s all shades of T-Mobile, Magenta and Purple,” said Neville Ray, CTO at T-Mobile. “5G is going to be huge. It’ll transform the wireless experience. Metro by T-Mobile customers deserve access to the latest technology, and we’ll make sure they get it.”

The new offers will be available to customers as soon as 5G-capable phones hit the market in mid-2019, though that hasn’t stopped the Magenta Army from preaching the benefits today. Prepaid services are often viewed with an air of distaste, though committing to 5G services certainly adds to the blur between prepaid and postpaid.

The basic difference between prepaid and postpaid is simply the billing function, though postpaid are more attractive to the telcos due to the lower risk of churn. With this enforced loyalty, benefits have traditionally been directed towards this segment, i.e. subsidised devices or value-adds such as free subscriptions, though the landscape does seem to be shifting. Benefits are being offered irrelevant of whether a customer is prepaid or postpaid.

Customers of the top two tiers of these tariffs will receive a free Google One 100 GB cloud storage account, while those selecting the top-tier will also get an Amazon Prime subscription. The 5G commitment from T-Mobile US is just another example.

“I couldn’t be more proud of today’s launch and what it means for our customers and potential customers,” said Tom Keys, President, Metro by T-Mobile. “Truly nationwide and unlimited service on the most advanced LTE network and now with Amazon Prime and Google One. There’s not a better value in wireless. And with a commitment to bring 5G to life in 2019, we’re making it crystal clear: Metro by T-Mobile customers aren’t making a compromise. They’re refusing to make a compromise.”