US Celllular Carriers Are At Risk Of Being Marginalized Into Nothingness Unless They Learn To Think Outside The Box... Yesterday

Reggie Middleton's picture

Observations on AT&T and US cellular business in general, per the CNBC stock picking exercise...

  • The company has been making slow but steady growth in its revenues and profits
  • The US market is nearing saturation, resulting in increased competition with Verizon Wireless and Sprint Nextel Corp. This cannot be over-emphasized, since mobile computing growth is THE place to focus energies and resourced for at least the next 5 years. Google's Android has allowed companies to tranform dead industries by making use of Google's negative margin tech and business model to jumpstart failing business models. A perfect example of this is Barnes & Noble. @paidContent: At $1.7B, Nook's worth more than Barnes & Noble itself - as per GigaOm:

Microsoft and Barnes & Noble have buried the patent hatchet and teamed up to compete against Apple and Amazon in the eBooks business. The new partnership sees Microsoft investing $300 million in a new Barnes & Noble subsidiary. (My colleague Laura Owen has the complete breakdown of the deal over on PaidContent.)

The $300 million investment in the  Nook subsidiary of Barnes & Noble gives Microsoft about 17.6 percent ownership of this  business unit. That values, this business at about about $1.7 billion. Before the markets open this morning, the Nook business was valued about $900 million more than Barnes & Noble itself.

Update: Barnes & Noble stock zoomed at the opening bell – and is now trading at about $9 a share, giving Barnes and Noble a total market cap of $1.3 billion — which is still less than the Nook subsidiary itself.

  • Net attributable income rose to $3.6 billion, or 60 cents per share, from $3.4 billion, or 57 cents per share in the year-ago quarter.
  • Consolidated revenue rose nearly 2 percent to $31.8 billion
  • The company has been witnessing growth in its ARPU and subscribers numbers, although moderate.
    1.  The U.S. mobile provider added 187,000 subscribers in the quarter
    2. Average monthly revenue per AT&T contract subscriber, or ARPU, increased 1.7 percent to $64.46

Stock performance (YTD:  +3%, 6M: 12%)

US carriers need to reinvent themselves, and they need to do it yesterday. Webiste share with us...

1) There are now 1.2 billion mobile Web users worldwide, based on the latest stats for active mobile-broadband subscriptions worldwide; Asia is top region.

This means there will soon by more business on handset communictions then there will be in the desktop business.

2) South Korea and Japan lead in mobile broadband penetration with 91 and 88 percent respectively.

This means there's plenty of room for the US to grow. The only question is how?

3) Mobile devices account for 8.49 percent of global Website hits.

Here's an opportunity right here, but will the staid management of cellular carriers see it to capitalize on it.

4) Many mobile Web users are mobile-only, i.e. they do not, or very rarely use a desktop, laptop or tablet to access the Web. Even in the US 25 percent of mobile Web users are mobile-only.

BINGO!!! Carriers should not be looking to be the traffic tolls or gatekeepers of mobile content (which is there current mindset). They should be aiming to be THE content, as well as the end to end enablers of such: apps, media, intelligence and all.

5) The drivers of mobile Web and mobile media are:
(i) Web-enabled handsets - by 2011, over 85 percent of new handsets will be able to access the mobile Web. In US and W. Europe, it is already surpassed that. Lots of new handsets support 3G (fast Internet).
• N.B. smartphones are only a fraction of Web-enabled phones.
(ii) High-speed mobile networks - almost one in five global mobile subscribers have access to fast mobile Internet (3G or better).
(iii) Unlimited data plans - Widespread availability of unlimited data plans drove mobile media in Japan, now it’s driving the US; but in W. Europe, lack of availability is holding up progress.

Re: (i) Carriers DO not think outside the box. One of the CNBC stock draft contestants recommended RIMM his top pick. While I don't agree with him, per se, the value in RIMM and Nokia is certainly there for those players who need a massive strategic boost in this mobile computing game, translated as EVERYONE besides Google and Apple. The only one who seemed to have gotten the message was Microsoft when they purchased (synthetically) Nokia, and recently part of the Nook Franchise. Deutsche Telekom should look into TMobile buying the assets out of RIMM and specializing in end to end enterprise solutions as well as consumer prodcuts right outside of the feature phone level. That's where the growth will spurt, as the rest of the world graduates from feature phones to full fledged smartphones.

Re (ii) and (iii) Instead of creating ingenious ways to force people to pay for things they already have been trained against paying for (and therefore may ever pay for), the telcos should look into adopting Google's methodology of cross subsidizing  high demand services with revenue from SMBs and institutions. Basically, Google cost shifts. They take revenue from adSense and use it to fund gmail, etc.

Telcos should create real, attractive, functional and useful apps/cloud systems and bundle them tightly into their services. As the front end, they have an advantage and if they do a good job, not only will most not bother to avoicd said service, but will actually opt for said service while recommending the same to their friends. Why in world didn't AT&T or Verizon create Dropbox before there was a Dropbox? Even if they didn't have the creativity, they could have simply bought Dropbox.

Yes, the business would have driven high bandwidth usage, but isn't that would they would have wanted???? Don't they sell bandwidth? A viral campaign and cost shift strategy of offereing free storage AND a free week of cell service/data plan for every Dropbox referral customer successfully signed up would have made Sprint a number carrier and data service provider.

A web-based office front end would have rounded out the deal, ex. buying web-based company like Think-Free office, you know... Just like Google did. They same viral offers could have applied. Selling a packaged cloud-based voice mail system could have had Sprint profiting from Verizon and AT&T accounts they don't even have to pay the infrastrcuture for. A good example would have been Grand Central, which Google bought and turned into Google Voice. Spint could have done this and sold it not only to its customers but to Verizon, AT&T and T-mobile customers as well. Making money from all angles, again with that viral marketing slant.

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hairball48's picture

Verizon's 3G wireless internet least in my neck of the woods. I paid the penalty and got rid of it.


BidnessMan's picture


Generally like your stuff, but the following line reminded me of Bud Fox in the movie "Wall Street" with his three point plan for jacking up the value of BlueStar Airlines.  "Our reservation system is terrible - We'll modernize it!".  As if it were that easy to do.  The Master of the Universe has had the brilliant insight.  The rest is implementation details for the IT proles.  

Telcos should create real, attractive, functional and useful apps/cloud systems and bundle them tightly into their services. 

If it was that easy, don't you think they would have already done it?  And why do you think the risk averse Bell-Shaped-Head people at the telcos have the capacity to do that?  The folks who could do that are already doing it on their own through the App Store and for Android.  They are certainly not working at a Telco, or would ever consider working at a Telco.  

Telco beancounters won't spend the money to expand the inadequate backbone bandwidth between the towers.  They don't really care if your connection crawls - they get your monthly fee regardless of how bad the service is. The Telcos have already been marginalized, but the cozy "competition" keeps prices up, so they can rotate subscribers indefinitely in a Big 3 world like the auto companies of old.  And with wireless there is little chance of an outsider like Toyota or Honda spoiling the party.   

tinylittleguy's picture

get in a wave at for $19 mo with no contract (will have to buy their modified phones using Android-styles TBA for $199 that includes first month service), no limits on data so no overages because service uses WIFI as much as possible and bounce to cell service when wifi is unavailable (Sprint's network is who they contracted with, but everything is thru republicwireless, so Sprint doesn't throttle). Supposed to be open to public this summer and has been in BETA since las Nov.

Buck Johnson's picture

Do you use this phone and cell phones as our home phone or do you have another phone for the house?  I've been thinking about getting rid of my land line because I pay 60 bucks a month essentialy for nothing.

tinylittleguy's picture

I won't be giving up a landline if I can help it as I have a medically involved child and if I need 911, I want to pick up a phone without fail. I haven't had any outages in my landline in 30 years, unlike cable and cell service.

This is only in BETA phase with release to public scheduled for later this year. It's got some bugs to work out and some better phones to come online (scheduled in this next wave they have opend up to start shortly), but it works well in Sprint coverage areas, so keep that in mind. Once it goes public, I can see more people using it as their primary.


ispeedtoo's picture

I cancelled all my cell service!

I use an Itouch and VOIP and have never been happier.


I will never sign another cell contract again!

DosZap's picture

A T & T is already maxed out...................limiting band usage,along with more customers than it can handle seems to make this a moot point.

Verizon,(and maybe Sprint/Nextel,if they use the same system), have a distinct DISADVANTGE with folks like me.

They do not USE GSM phones.(with a SIM card)

With AT&T,you can buy any phone you pretty much want Unlocked, off the NET,and simply transfer your SIM to enable Ops.

This is huge (IMHO) advantage over Verizon..........and the ONLY reason I have never sought to change carriers.


heresy101's picture

We have had T-Mobile for about 10 years and have had no complaints with the service. It has the cheapest family plan for a carrier with a "sim" chip in the phone.

I looked at Boost and Sprint when AT&T was going
to buy T-Mobile but they are not GSM. One good thing
that government did was to block the AT&T and T-Mobile merger.

Whoa Dammit's picture

First, the telecoms (and cable companies) have to overcome their inability to properly describe and market the sevices they are currently selling.

Their web pages have 2 or three nebulous geek words for their products & the "savings" you can get for the first six months by bundling things into one high price. Bundling sucks. It's just the old GM idea of when you want to buy a car with leather seats, but can't get them without also paying for a sun roof and an appearance package. 

Their customer service is typically abysmal, whether one wants to buy a product or has a billing problem. They also have a lot of hidden "gotchas" that are never disclosed until you recieve a whopper of an unexpectedly high bill. Just try to get that resolved.

"Good" deals are only for new customers.They do absolutely nothing to retain existing customers. They only care about new customers added, because this is what Wall Street focuses on. Ten years ago, it cost $350 in marketing, not including handsets for each customer added. I'm sure that figure is much more today. The cost of keeping existing customers is marginal. This is why churn is such a problem within the industry.

If te telecoms are unwilling to innovate and improve in even these simple areas, I doubt if they will explore other ideas.




The Alarmist's picture

How can I be unique if I can't have an iPhone like everyone else, and for that I need one of the dinosaur wireless providers.

Dr. Kenneth Noisewater's picture

<-- cheap, dumb packet passers

<-- "value added" service providers


Me, all I want from a telco is the dumbest, cheapest, and fastest packet passing I can get, unlimited, for a pittance.  Incidentally, the only Android phone worth owning is the Google Galaxy Nexus, as its software updates are not beholden to shitass carriers, nor are any Android features disabled for their profit-making convenience (such as integrated SIP/VoIP or Wifi tethering).

Ying-Yang's picture

Reggie... just switched my wife and I over to Consumer Cellular from T-mobile. My bill went from $160 to $45 a month. No more unlimited data that I had with T-mobile but now use Wifi for selective high bandwidth use at home or work and don't miss a beat.

It will become increasing harder for telcos to rape users with high cost plans without offering more than they do now.

By the way Consumer Cellular have competent people on the phone to help. AT&T has crap for service.


TheMuppet's picture

The business model of US Telcos is build entirely around a government sponsored anti-competetive toll/rent levying cartel arrangement (thank you Bill Clinton).  The is the basis of their "stagnant" mindset.  That's why their customer service sucks.  They don't really produce anything - the "bandwidth" is already there, the telcos just sit on it.  They are the biggest bunch of parasites outside of "health care", "higher education", and of course our lovely banksters - also government sponsored cartels.  Logically, why wouldn't the telcos extend the same mindset to end user customer services?  Why should they "innovate"?  They hate competition!  And in any case, Congress has got their backs!

SwingForce's picture

Ah, Reggie, I thought you were working the Clearwire angle. Nobody needs "cellphone" service anymore- we need WIRELESS DATA service. Then, I can run Skype (MSFT) on my Nook (MSFT) tablet with a microphone. No $100+/mo. plans, just a $55/mo data plan (4G btw) and I can do what I want- talk, surf, or use the Clearwire thingy to connect my desktop to the internet when I get home. Ironic how you had Android installed on a Nook over a year ago.....

boogiedown's picture

Hello? their name is still American Telephone and TELEGRAPH!!! How can they innovate in mobile strategy?!

I can't see where Japanese mobile operators cost shift; they charge crazy amount for voice calls and I had a hard time explaining "free nights and weekends" to my friends there. Maybe Asian companies acheived high market penetration because they offered cool AND cheap phones -- even granny would ooh and ahh and wonder if she should get a phone because she could look up a difficult word by taking a photo of it! USA have the "cool" part down but no one is working on the "cheap" part of that formula.

Can't stand AT&T, their customer service is a horrible joke, dropped calls, poor speeds, poor voice quality. Let them continue to stagnate, I will be trying Metro PCS soon!

disabledvet's picture

The fact is "e readers" access the web through McDonald's so "no carrier is
Needed"Period. Hence "I'll take a bookstore with that." The problem of course is "the nature of the information or data being collected." since the only valuable stuff is illegal that means"buy ATT" as "it's legal if AT&T does

Tom Terrific's picture

Carriers think of ONE thing ONLY.  How to suck as much fucking money for as long as possible from the "Johns."

Ripped Chunk's picture

"I'm sorry you feel that way sir. Your fee to get out of your 2 year contract early will be $689. No sir, when you used your phone the day you picked it up you were agreeing to all of the terms of the contract which we mailed to you 2 months later. Yes sir, I will try to have a shitty fucking day. Is there anything else I can help you with today?"

donsluck's picture

Like a credit card application, where they don't tell you the actual terms, but let you "apply" and pretend you have a signed Contract with them when they mail the card, at terms they decide unilaterally. This situation is called a Request for Proposal, since a Contract cannot be binding without both parties knowing the actual terms.


greyghost's picture

yes yes yes....mama and i are getting real tired of the constant drain of funds from cell phone companies...cable companies etc. etc. anyone notice how many nonsense chares are in the favorite is "administrative fee". cell phone company for seven months kept billing an extra $9.99 for "data" access on one line only and a different line each month. we don't have any need for "data" access nor signed up for that or used it. every company is extracting and or mining for the max nickel and dimes...endlessly. here in calif on the last electric bill was the insert in the bill asking for a rate i read every page and lo and behold the last page of the bill is another request for a rate increase....two? one bill????? i want to know where my rebate from the gas company and electric companies are. the cost of natural gas has fallen more than 85% since 2005. don't they owe us?????

donsluck's picture

No problem here with Virgin.

seventree's picture

by 2011, over 85 percent of new handsets will be able to access the mobile Web.

Is that a typo or is this an old recycled article? If so why am I reading it now?

Tom Terrific's picture

Hey you stole my picture, you bastard.  :)