Out of the Blue

Helio and Wireless Retail Stores

Annual reports to the SEC have come out, and the Earthlink filing is insightful. They originally struck a 50:50 JV with SK Telecom to create the Helio MVNO, which launched a few years ago. You’d have to be living in a cave to not know Helio is hemorrhaging cash. Without going too deep into the numbers, Helio ended last year with slightly more than 180,000 subscribers. To date, Helio has posted total losses of $560 million in its three years of operations. That’s $3,111 in losses for every subscriber, which doesn’t sound like a business to me! The Earthlink filing notes they’ve already made $210 million in cash investment in Helio, and are getting diluted down from their original 50:50 JV with SK Telecom such that their Helio investment might not be successful.

Every time I see a Helio store, I stop and check it out. I’ve been to Helio stores in Palo Alto, San Diego and Santa Monica. They’re as big and flashy as Apple’s stores, with one big difference — there aren’t any customers! With $327 million in losses this year, one has to wonder why they keep these high-rent, low-traffic stores open. Based on my observations, they can’t be producing much in the way of subscribers.

This raises a larger issue for the entire industry. Helio is not alone. Why are providers building and operating fancy retail stores? Is this the most efficient way to sell wireless? Every time I stop in a carrier retail store, it seems that more customers trying to resolve handset and service problems than signing up for service. When traveling in Europe and Asia, I’m always amazed at the High Street wireless dealers, several on every block, most usually filled with customers. Then there are the great Carphone Warehouse stores, and other high-end retailers, always crowded. This seems to be a far better and more efficient way to sell subscribers than company stores, and market penetration numbers seem to confirm this. Maybe this works better in a GSM world than in the US market.

My new interest is on the viability and wisdom of mobile operators building and running retail stores. Your thoughts are always welcome!

Tags: Helio, Earthlink, SK+Telecom, Apple, Telephony, Carphone+Warehouse

Connectivity Trend -- Unlimited Voice Joins Unlimited Data

Verizon Wireless pulled a pre-emptive strike today, announcing an unlimited voice plan for $99.99/month available immediately. AT&T followed with its own $99.99/month unlimited voice offering, to become available on Feb. 22. And T-Mobile quickly jumped in with its matching offer, available on Feb. 21. Last year, Sprint rolled out a combined unlimited voice, data and messaging plan in select markets at $120/month, and earlier this month, rolled it out nationwide; they had been rumored to be readying an unlimited voice plan akin to the VZW, AT&T and T-Mo plans to help stem losses and win new subs. And aggressive pricing is the only way to catch up, so if Sprint wants to attract new subs, look to them to introduce a sub-$100/month unlimited voice plan.  

With unlimited data plans commonplace, unlimited voice plans both in prepaid (e.g., Boost Unlimited) and now postpaid are moving the operators closer to unrestricted connectivity. I’ve written about the transition from the Telecom Services Model to the Internet Service Model in earlier posts. Today’s introduction of unlimited postpaid voice joining unlimited prepaid voice and unlimited data plans hasten this transition. Increasingly, end users will look to a range of providers for mobile connectivity solutions, and today, we moved one step closer.

Tags: Sprint, Verizon, unlimited, Boost, AT&T

First Unlimited Data Plans, Now Unlimited Voice Plans?

I’m a firm believer of unlimited data plans, and have commented extensively on them. Unlimited data plans have dramatically changed the dynamic of mobile web browsing, especially with improved browsers like that on the iPhone. Mobile users can finally surf the mobile web the same way they do on computers at their home, office or wherever, without counting bits and bytes. The best evidence of this might be the news today from the UK, in which Vivek Dev, chief operating officer of Telefonica O2 Europe, said: "Our Apple iPhone is already driving unheard-of levels of mobile Internet usage, and the introduction of flat rate data tariffs is expected to increase this further.” I rest my case.

Speaking of flat rate plans, Sprint is believed to be readying flat rate pricing for unlimited voice. Desperate times call for desperate measures. According to UBS, this move will add to pricing pressure in the high end of the market, as operators seek to lock in high usage, high margin subs. Where this unlimited voice plan is priced is key, and anxious eyes will be watching. Anything below $100/month for unlimited voice will be highly disruptive.

Did someone mention iPhone? Late last week, it was reported that Apple earned a 6.5% share of the worldwide converged device market, based on 4Q2007 sales. That ranks Apple third worldwide, trailing Nokia (52.9%) and RIM/Blackberry (11.4%), and just ahead of Motorola. For 4Q2007, Apple’s iPhone owned 28% of the US smartphone market, trailing only RIM/Blackberry which had 41%. In addition to closing in on RIM in just six months, by the fourth quarter, the iPhone passed all Windows Mobile devices in the US (28% share for Apple vs. 21% for WM). This is stunning news, given that Apple only launched the iPhone in late June 2007 in the US, and in UK, France and Germany in November. Watch out RIM, here comes Apple! 

In the global handset market, which accounted for more than 1.1 billion units last year with some projecting nearly 1.5 billion units in 2008, Apple’s overall share may seem miniscule, but given how quickly they’ve penetrated the smartphone market, this is a tremendous achievement. In fact, a recent study by Understanding & Solutions noted “a marked shift towards mid and high end handsets in developed regions, and the emergence of new form factors to stimulate the market. This has had a significant effect on the smartphone segment, which grew by over 50% in 2007, with Nokia and Apple leading the charge in bringing these multimedia devices to the consumer market.”

How’s that for a handset which isn’t even one year old yet?

 

Tags: iPhone, Apple, RIM, smartphone, Nokia, Sprint, unlimited

Microsoft and Yahoo!

In thinking about the proposed Microsoft-Yahoo deal, I wonder how merging two bureaucracies, both struggling with strategy and execution issues, is good for anyone (other than Yahoo’s shareholders, who will receive $31/share in the transaction)? Forget about antitrust concerns, and the high likelihood that at least the EU will scrutinize this deal with a full proctological exam. Most see this deal eventually going through. Is this a new powerhouse in the making? Is anyone at Google losing sleep over the prospects of a Microsoft-Yahoo juggernaut? No doubt Google will object, simply because Microsoft objected to its DoubleClick deal. Nevertheless, I suspect few are losing sleep tonight, at least few at Google, at every Yahoo shareholder’s house and at Microsoft’s deal architects in Redmond, who needn’t worry about a rival bidder. Come to think of it, everyone should sleep well tonight, except Microsoft’s shareholders. Because if this deal is consummated, it will clearly rival the AOL-Time Warner merger as the biggest corporate trainwreck of the last decade. Do mergers solve the kind of problems Microsoft and Yahoo face? More often than not, they amplify and exacerbate them! 

FULL DISCLOSURE: I am not a shareholder in any of the above companies mentioned. I am a disgruntled Microsoft customer, having just uninstalled Vista 64 and “dumbed down” my desktop back to Windows XP at considerable and unnecessary expense.

Tags: Google, Microsoft, Yahoo, Time+Warner, AOL, merger, antitrust, strategy