Sprint dramatically expands distribution network with RadioShack deal

Sprint has announced a deal with RadioShack to build Sprint stores within 1750 RadioShack stores as part of RadioShack’s restructuring. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may be reached for further comment at jan@jackdawresearch.com or (408) 744-6244.

Sprint’s deal is a smart way to dramatically increase its footprint of company-owned retail locations. It’s lagged behind its three major competitors in terms of company-owned store footprint. Each of its major competitors has over 2000 company owned stores, and Sprint will now leapfrog to 2750 company-owned locations with the addition of the RadioShack stores. This gives Sprint both a much bigger opportunity to capture walk-in business from customers and a much better mix of owned versus indirect distribution, which should have a positive effects on a number of other metrics. Stores have been one of several major areas where Sprint and T-Mobile have both suffered from a lack of scale compared to AT&T and Verizon, and this deal is a cost-effective, rapid way for Sprint to make some rapid progress. In the process, it’s converting these RadioShack stores from multi-carrier dealerships to directly-owned, exclusive Sprint retailers. The fact that Sprint employees will be staffing the stores within a store is a major advantage, too, compared with third party retailers.

T-Mobile continues appeal to otherwise neglected customers with Smartphone Equality

T-Mobile today announced Smartphone Equality, a policy change which will allow the many customers who don’t have prime credit to nonetheless qualify for smartphone installment plans and other deals normally reserved for those with prime credit. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan can also be reached for further comment at (408) 744-6244 or jan@jackdawresearch.com.

When T-Mobile introduced Mobile Money, it was clearly targeted at a segment of the market largely ignored by the major carriers. This segment has lower incomes, poorer credit and often no access to traditional financial services, and T-Mobile demonstrated a willingness to go where other carriers had not. Today’s Smartphone Equality announcements is another example of T-Mobile targeting customers which are largely neglected by the big four carriers, and especially their postpaid services. It should reinforce T-Mobile’s appeal among this segment and help drive loyalty among these customers.

I’ve been concerned by some of T-Mobile’s Un-carrier moves from a business perspective, as they often sacrifice financial performance for short-term pursuit of growth. But Smartphone Equality is an example of a plan which both serves growth objectives while being well grounded in good financial sense. The plan is based on research from T-Mobile into which customers are most likely to pay their bills, and targeted carefully at customers who should present little or no additional risk. This is a smart move from T-Mobile, one that should both benefit customers and the bottom line. Unlike some of T-Mobile’s other moves, it’s not targeted at switchers but rather at existing customers, since a track record of paying bills on time is required to qualify. As such, this should help churn rates rather than simply boosting gross adds, which have been the focus of so much of T-Mobile’s efforts recently.

AT&T tries to retake ownership of Rollover Data concept

AT&T today announced that it will resurrect the Rollover concept it pioneered in the days when voice minutes dominated wireless service with Rollover Data. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan is also available for further comment via email at jan@jackdawresearch.com.

AT&T’s announcement will be seen as a response to T-Mobile’s Data Stash announcement from just before Christmas, but in reality it has been in the works and under discussion at AT&T for quite some time. Given that AT&T pioneered the concept of Rollover Minutes, it’s natural that it would want to own the concept and the brand in the data world too. AT&T’s version differs significantly from T-Mobile’s version. It’s less generous, with a single month of rollover rather than twelve months, but that should make it both easier for customers to keep track of and more manageable from a network load perspective. T-Mobile’s plan risks creating a situation similar to airline miles, where customers have a hard time keeping track of which miles (or Gigabytes of data) expire when. AT&T’s version also better mirrors the original concept, which was designed to give customers some flexibility about month-to-month usage rather than allowing them to accrue substantial unused allowances over time. But T-Mobile (and John Legere) will undoubtedly beat AT&T up about the perceived inferiority of its offer.

All of this is part of the broader escalation in the competition between the US wireless carriers that’s occurred in recent months. And as with previous moves, it’s focused on larger data allowances, which carriers have the flexibility to offer without occurring significant costs or reducing prices directly. It’s relatively low-risk for AT&T to offer, especially given the one-month limit, and fits well with its branding and history, so it should resonate with consumers. It will also increase pressure on Verizon to offer a similar deal, though Verizon has resisted recent moves to a greater extent than competitors, preferring to target discounts at individual users it considers at risk rather than sweeping discounts or widely-available offers. However, as all four major networks reach rough parity in LTE coverage over the next year or so, competition around offers and pricing will continue to intensify as a major source of differentiation, and Verizon will find it increasingly difficult to resist these moves.

Apple’s new iPads meet two of three goals for the company

Apple today announced new iPads, an iMac with a Retina Display, and a new Mac Mini, as well as providing more details on OS X Yosemite and iOS 8.1. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may be reached for further comment at jan@jackdawresearch.com or (408) 744-6244.

Apple had three jobs to do with its iPad announcements today: convincing people who own an iPad 2 or 3 to upgrade to a newer model, winning over new customers to the iPad, and convincing people who own an iPad but have stopped using it to buy a new one and start using it again. It achieved two of those three objectives with its announcements. The new iPads are a significant upgrade over iPads that are two or three years old, which is the main target base for upgrades. They’re thinner, lighter, much more powerful, with better cameras and a Touch ID sensor, and as such anyone upgrading from a two- or three-year old iPad will notice a major improvement in performance. About 3-5% of Apple’s iPad base upgrades every quarter, and these improvements together with the lower prices on the older iPad Minis may increase that number a little.

Apple also extended the bottom end of the iPad range down to $250 for the original iPad Mini, meaning that it now has a range of iPads that run the gamut from $250 to around $1000 – there’s something for almost everyone here. And with last year’s iPad Mini at $300, the entry point for a very good iPad is now lower than it’s ever been. Apple adds about eight to ten million new iPad customers each quarter, and the new iPads should help keep that momentum going, while expanding the addressable market somewhat at the bottom end.

However, there was nothing in today’s announcements which would convince someone who’s stopped using an existing iPad to buy a new one – the new iPads do the same things better, but don’t do anything dramatically new and different. For people who have found a large smartphone and a laptop sufficient, the new iPads won’t change the equation. One other interesting note is that, having effectively achieved parity between the iPad Mini and iPad Air last year, Apple has again opened up a gap between the two in terms of performance. While the iPad got thinner, gained a new, more powerful processor and a better camera, the iPad Mini remained largely unchanged except for the Touch ID sensor and software improvements. The iPad Mini is now again clearly the poorer of the two devices, and the $100 price difference between the iPad Mini 3 and iPad Mini 2 is somewhat hard to justify.

The iMac with Retina Display checks an important box for Apple’s community of creative professionals such as photographers, videographers and designers who need a higher-resolution display to do their work on a Mac. This is a marginal business in the grand scheme of things for Apple, but it’s an important segment for Apple to keep happy. That base is still waiting for a display peripheral with the same high resolution to use with the company’s new Mac Pro which launched last year, so that needs to be high on Apple’s to-do list for the near future.

Apple’s announcements will prompt its biggest year ever

Apple today announced new iPhones, the Apple Pay payment platform and the Apple Watch. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at jan@jackdawresearch.com or (408) 744-6244.

Apple’s new iPhones provided few surprises, with the size, new features and even the naming having leaked over the last few weeks. However, the new phones should dramatically expand the size of the opportunity for the iPhone, which has been artificially limited by its small screen size. The iPhone will now definitely have its largest quarter ever in Q4 this year, and its biggest year. It will significantly move the needle on shipments, and will further dent Samsung’s shipments in the coming months. The iPhone 6 will be the biggest seller, but the iPhone 6 Plus will be a big seller too both among people who want a bigger screen, and those who want the top of the line experience. The iPhone 6 Plus will be particularly important in China.

The Apple Watch was far less detailed in rumors and provided some big surprises. The device is first and foremost a watch. Despite the name, this distinguishes it from other smartwatches, which have focused first and foremost on notifications and fitness, neither of which have mass appeal. Apple’s watch handles these too, but does them in a different way. The smartwatch market has been limited by a lack of imagination and a focus on these two tasks, and only a truly disruptive new entrant could change things. Apple now promises to do that, with a focus on a new user interface that makes more sense for smartwatches, and truly attractive and fashionable design. Others have created smartwatches as technology products, but Apple has created a smartwtatch that’s a fashion product, and that will make a huge difference. Apple is defined as much as anything by the markets it chooses not to keep in, and by pricing the watch at $349, Apple will limit its addressable market. But it’s also likely to be the first Apple product people may buy several of for their own personal use. There’s a significant range of options between the three main lines, the five types of straps, and a variety of colors. This is critical for mass appeal among those who can afford to spend $349 or more on a watch.

Apple’s new payments platform will be a huge success over time, but it’ll be a slow burn, as it will take some time for enough retailers to support the platform to make it widespread. Apple’s focus on security and privacy is in keeping with a theme we’ve heard a lot from the company in recent months, as it seeks to set itself apart from Google and to an extent Amazon. Both those companies capture significant data about transactions when their payments platforms are used, but Apple is protecting user data both from itself and from retailers. Despite the iCloud hack fallout, Apple is reinforcing its position as the company that won’t ever sell your data, and in this case won’t even collect it in the first place. Mobile Payments have suffered from the lack of a clear reason to use them instead of traditional methods. Apple’s improved security and privacy in addition to the convenience of using Apple Pay should finally change that.

Motorola’s last pre-Lenovo hurrah

Motorola today announced what will likely be its last big set of devices before the Lenovo acquisition closes, in the form of revamped Moto X and Moto G smartphones, the Moto 360 smartwatch, and the Moto Hint bluetooth earpiece. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at (408) 744-6244 or jan@jackdawresearch.com.

Motorola’s new smartphones build on the success it has had with its smartphones over the past year, particularly that of the Moto G, which has been Motorola’s best selling device in years. The Moto X, which was previously awkwardly positioned at a premium price point without specs to match, has received a significant upgrade. At least on paper, it now seems worthier of the company it keeps in the premium category, while receiving a price cut to make it significantly cheaper than comparable devices. But even though Motorola claims that it makes money on each device it makes, it’s losing money as a business unit under Google. Only with significantly increased scale can Motorola start to become profitable as an enterprise, and that’s where the Moto G comes in. A big seller in India and other markets, and also more surprisingly in several mature markets, the phone has been a surprise hit for Motorola. Motorola has retaken market share in countries like the UK where it has been a non-entity for several years, and has become the number two brand in smartphones in Brazil. For a company which briefly seemed on its way out, this is something of a resurrection, and the Moto G is a big part of that success.

The Moto 360 is the latest Android Wear smartwatch, and arguably the most anticipated, as Motorola has cleverly stoked interest since its early reveal at the Android Wear launch announcement. The looks are striking, and it sets itself apart nicely in that department from its major competitors. Motorola is attempting to position this device as first and foremost a watch, rather than a smartwatch, although the underlying platform is the same as other recent entries in the category. However, with a $249 price point and single-day battery life, the Moto 360 suffers from the same shortcomings as other smartwatches already in the market: they fail to meet the basic criteria for a successful product in a market for which there isn’t much demand to begin with. It will probably sell better than most Android smartwatches, but that isn’t saying much in a category that’s been underwhelming from the start. (For more on smartwatches from Jackdaw Research, see this blog post: http://techpinions.com/grading-on-a-curve-smartwatches-in-2014/33599 and this report: http://jackdawresearch.com/smartwatches/).

Where Motorola is really beginning to set itself apart is in adding value to the generic Android experience across these devices, and in making them work together particularly well. The sensibly renamed Moto Voice, Moto Assist, Moto Display and Moto Actions are real value-adds on top of Android, and will help to set the phone apart. But the Hint will extend these functions in a useful way and set the headset apart in a category which has become positively stale.

The biggest question at this point is to what extent Motorola’s strategy over the past few years will come to an end with its acquisition by Lenovo, and to what extent some of its innovations will continue under its new owner. What’s clear is that Lenovo sees significant value in the Motorola brand and carrier relationships outside of China, but what’s less clear is how much it will embrace the strategy exemplified by the Moto X and Moto G.

Microsoft’s devices strategy begins to emerge

Microsoft today announced several new devices in the form of the Lumia 830 and 730 smartphones, the Microsoft ScreenShare device and the Nokia Smart Wireless Charger. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at (408) 744-6244 or jan@jackdawresearch.com.

Microsoft’s first big mobile announcement following the acquisition of Nokia is a reminder that the company is in transition. The mixed branding on the devices announced, somewhat confusingly combining the Nokia and Microsoft names, is a sign of the work still to be done in folding Nokia into Microsoft proper. Nonetheless, Microsoft’s strategy for the mobile business it has acquired is beginning to emerge.

Nokia’s devices had come to represent 95% of the installed base for Windows Phone devices, and as such Microsoft now very much controls the destiny of Windows Phone from both a software and hardware perspective. Nokia’s success in the past year or so has come almost entirely at the low end of the market, with the Lumia 500-series devices outselling all others by quite a margin. The challenge is to achieve the same success at higher price tiers, but Microsoft has wisely chosen to forego attempting to launch a flagship into the current maelstrom of device announcements from almost every other major vendor, including Apple next week. Instead, it’s targeting the “affordable flagship” range with the 830 and 730. Both devices are solid successors to previous entrants at this price point, boosting specs and performance and adding some nifty software features, especially around imaging. Their price points are competitive, continuing one of the best features of the Lumia 500 series devices. But there’s relatively little here to suggest that these phones will be standouts in the market. Microsoft’s past devices and services strategy left some confusion about how it would set its phones apart when it also offered its services on Android and iOS. But it’s now becoming clear that Microsoft won’t so much offer a better Microsoft-centric experience on these devices as use its newly integrated business as a way to bundle in those services at more competitive price points on its own devices. We’ll see more of this in the coming months in both the smartphone and tablet categories.

Of the other two devices Microsoft launched today, the ScreenShare is by far the more important. Google has had huge success with its Chromecast device, and despite the success of the Xbox Microsoft has lacked a mass-market TV device until now. The ScreenShare could become that device, but in its current iteration it has several flaws. Firstly, it’s priced more like the Apple TV than the Chromecast, even though its functionality is very Chromecast-like. Secondly, unlike Apple’s well-publicized AirPlay strategy, there’s been no big push around the Miracast technology from Microsoft either in the context of the Surface or Windows Phone devices. As such, many of those at whom the ScreenShare is aimed won’t even know their devices are capable of working with it. The ScreenShare should have been priced much lower, and ideally should be bundled with Windows Phone and Surface devices for at least a few months to raise awareness and demonstrate the value. At the current price it’s unlikely to be a big seller at all. But this is an important step into the home for Microsoft for the non-console crowd, and it’s hopefully the first of a bigger strategy in this space from the company.

Sprint’s new CEO gets aggressive on data pricing

Sprint’s new CEO, Marcelo Claure, kicked off his tenure by announcing new shared data pricing on Monday. The headline is that Sprint will double the data available for $100 compared with competitors’ pricing. The following comment may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research.

In introducing Marcelo Claure as Sprint’s new CEO, Masa Son suggested Sprint would quickly move to get more aggressive on pricing, and Claure has now begun to deliver. The focus is on giving away more data for the same price, rather than lowering prices per se, and with all the capacity available on the Sprint network, Sprint can afford to do so. Most customers will not come anywhere near using 20GB in a month even across four lines, so there’s little risk involved for Sprint. Paying off customers’ early termination fees early will be slightly riskier, and will also have a negative short-term financial impact for Sprint, as it did at T-Mobile when it began paying ETFs for customers. Sprint is also finally embracing the shared data plans both AT&T and Verizon introduced over a year ago, and which Sprint has criticized in its marketing since then. It’s a sign that Sprint is bowing to the inevitable both in embracing shared data plans, which are becoming the industry norm, and in competing on price when its network is not yet up to the challenge. Sprint’s been losing subscribers for the last few quarters, and desperately needs to start turning around the negative trend. Sprint’s former CEO Dan Hesse had resisted the urge to compete aggressively on price, so this is the first sign that Claure will be more aggressive.

The new pricing plans are somewhat complex, with different prices for discounted and non-discounted phones, long-term pricing and promotional pricing, and so the overall impact is a little more complicated than Sprint’s “double the data” headline suggests. However, it’s undoubtedly a better deal for most customers than competitors’ equivalent data plans. These moves from Sprint are also likely to make it significantly harder for T-Mobile to achieve John Legere’s goal of catching up with Sprint in terms of total number of subscribers by the end of the year, which was always going to be a bit of a stretch. I now believe it will be very tough for T-Mobile to achieve that goal. It looks like Sprint has more pricing moves coming later this week focused on individuals, so this is likely not the end of Claure’s initial moves to get Sprint back in the game. But he will also need to focus on ongoing network upgrades, which are critical to getting Sprint’s long-term growth back. As T-Mobile has demonstrated, price discounting and giveaways can provide a useful boost to short-term growth, but longer-term growth will require better underlying network performance too.

Google I/O – Google reasserts control over Android

Google today held the keynote for its I/O developer event. It previewed a new version of Android for smartphones and tablets as well as detailing narrower user Android-based interfaces for the car, wearables and the TV. The following comment may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan can also be reached at jan@jackdawresearch.com or (408) 744-6244.

The overriding theme of the I/O keynote was Google reasserting control over Android. The core objective of Android has always been to provide the widest possible audience for Google’s services, but over the last several years Google has seen a variety of device vendors customize, tweak and fork Android in ways that either submerge Google’s services beneath their own or strip them out entirely. Google has achieved its objective of creating a very widely used mobile operating system, but it’s a very Google-light version of Android which is driving that growth. Android One is ostensibly about expanding the availability of cheap smartphones using Android in emerging markets, but Android is already the default operating system for cheap smartphones. The problem is that it’s often a version of Android which has very little to do with Google. Android One will re-enshrine Google’s services at the center of these devices, which will run stock Android and be free from the sorts of customizations so popular with the largest Android manufacturers, notably Samsung.

Google’s increased control over Android extends to Android Wear, Android Auto and Android TV too. As shown at I/O, the Android user interfaces in each of these new domains will be standard Google interfaces, and won’t be customizable in the way Android on smartphones and tablets has been. Google’s search and voice control, Google-provided location and other contextual data and other Google-centric services will be at the heart of these devices in a way they’re currently not on many Android smartphones and tablets.

Another theme was Google’s attempt to promote web apps versus native applications, since Google dominates web search but has failed to replicate that dominance in mobile apps. Extending App Linking to all developers allows Google to include links to specific points within apps in Google’s web searches and will therefore bring the world of apps into Google search. Promoting individual web browser tabs to the level of native apps in the recently used apps screen also gives web apps a new prominence. Google will also include deep linking within search results in the Google search box on Android devices. All of these together are attempts by Google to redress the disparity between native and web apps on mobile and reassert its dominance.

Google also laid out its vision for increasing integration between its various platforms, echoing a theme from both Microsoft’s Build and Apple’s WWDC. Each of these companies, though, is approaching that integration in a different way. Microsoft is focusing on the top and bottom of the stack – the user interface at the top and the code at the bottom. Apple is focusing on back-end services and a common user experience rather than a common user interface. Google, in turn, is borrowing elements of both, with Continuity-like features between smartphones and Chromebooks, a common design language across all of Google’s services and so on. The smartphone is clearly at the center of Google’s integration strategy, as it is for Apple, whereas Microsoft’s is still more focused on the desktop and to a lesser extent the tablet, where it’s comparative strengths lie.

Overall, what’s striking is the way each of these three major companies – Google, Microsoft and Apple – are seeking to participate across four key domains: the home, the car, the body and the mobile world at large. Each now has a stated strategy in each of those domains and it will be interesting to see how they shape up against each other. Those strategies are remarkably similar, with Apple departing from its usual hardware-centric approach to take more of a platform approach in the home, car and wearables. But they’re also different – Google made much (rightly so) of its many partnerships with car manufacturers, TV vendors and smartwatch makers, and continues to go broad rather than deep. Google and Apple now have very similar-sized bases – Google has over 1 billion active monthly users, while Apple has around 800 million iTunes accounts, and likely a similar number of total devices in use. But Apple’s ecosystem continues to be far more lucrative for developers, generating over $9 billion in revenue for developers in the past twelve months, while Google generated just $5 billion.

T-Mobile’s Uncarrier 5 and 6 is more of the same

On Wednesday, T-Mobile announced phases 5.0 and 6.0 of its long-running Uncarrier strategy, including a free seven-day test drive of an iPhone 5S running on its network, and zero-rated music services on its data plans. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may also be reached at (408) 744-6244 or jan@jackdawresearch.com.

T-Mobile’s latest event – and the announcements it made there – were more of what we’ve come to expect from the carrier. There was brash, foul-mouthed trash-talking of T-Mobile’s competitors from John Legere, and announcements which combine giveaways with clever marketing. The test drive offer resurrects an age-old concept in the US wireless market, one all the major carriers have long since put to bed, but it does it with a new twist, lending the customer a high-end device instead of signing them up for a contract on a trial basis. T-Mobile badly needs to convince the US population as a whole that its network has got better and is now very competitive in certain markets, and the best way to do that is to get live devices running on the network into consumers’ hands. The new test drive offer is a fantastic, low-risk way to do that, and it should be met with significant demand, especially because of the lure of using an iPhone 5S for a few days. It would have been easy to use a cheap Android device for the testing to reduce costs, but the partnership with Apple is a win-win for both companies, as Apple gets some marketing out of the deal and may increase its penetration of the T-Mobile base in the process. The downside is that, for all the progress T-Mobile has made in major metropolitan areas, its overall network coverage still lags competitors significantly, and in-building coverage can be spotty even in markets where it does well outdoors. Some people who try the test drive may merely confirm what they already suspect: that T-Mobile doesn’t cover their area very well. But overall the test drive program will likely lower the barriers to switching still further and help keep T-Mobile’s conversions from other carriers going.

The music initiative is above all else great marketing. For a carrier which talks up its unlimited plans, it’s somewhat surprising for T-Mobile to promote a feature that’s mostly appealing to those on limited tiers. The genius is in the fact that video, and not music, is what really causes people to go over their data plans. Sandvine data suggests that the most-used music service on mobile only accounts for 5% of downstream traffic, while YouTube and Netflix combined account for over 20%. Zero-rating music services (i.e. carrying them without dinging the customer’s data plan) is therefore a low-risk strategy which will have relatively limited impact on T-Mobile’s costs while making for good marketing material. It also announced a partnership with Rhapsody to provide a new radio service for free to T-Mobile unlimited data customers, who of course don’t benefit from the free music streaming offer. T-Mobile therefore joins AT&T and Sprint as carriers who’ve signed deals with major music streaming services, though the only one that isn’t offering a fully-fledged subscription music service. Verizon is now the lone holdout among the major carriers in forming such a partnership, though it’s likely that it will have limited impact on its growth.