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Need to Know U.S. Wireless: Lifewatch Umbrellas
Written by Dave Burstein   
Monday, 27 August 2012 23:32

Snow White and dwarfs Became IBM and BUNCHWhile many forecast disaster for #3 Sprint and #4 T-Mobile, one scenario finds them a profitable niche. The high and increasing prices at the Big Two may provide room for #3 & #4 to charge enough to be comfortably profitable while also offering more value. Sprint offers the iPhone with ‘unlimited’ data for about the same price as the Big Two demand with a low cap. T-Mo had to do similar, especially because they probably won't have the iPhone until their LTE network is ready late next year. 

    Sprint’s stock has doubled in value since May, especially after they reported Q2 ARPU increased $4.31 ‘the largest quarterly year-over-year increase on record for the U.S. wireless industry.’  Their LTE network is on target to cover half the U.S. population (12,000 sites) by yearend 2012 and 90% of the population by the end of 2013, so their performance will be competitive. T-Mobile is a little further behind but should also be similar to AT&T's network by late 2013. Verizon, which is running LTE to 97-98%, will probably be slightly better, but the other three carriers have very similar basic networks. Sprint and T-Mo may have slightly fewer megahertz for LTE but their networks will be less lightly loaded. They have a potentially brilliant capacity plan for 2014-2015, putting Clearwire's LTE to work in any city they have capacity problems. 

   Sprint and T-Mobile have been losing customers by the millions for several years, leading to fears they can’t survive. Cormac Foster at ReadWriteWeb recently put T-Mobile USA on deathwatch,  Many have longed feared Sprint can’t survive. Sprint’s market cap early this year was only about $6B, remarkably low for a company with $34B in annual sales and valuable spectrum. A price that low only makes sense if default is a real possibility.

     There’s a good chance TMo and Sprint will be squeezed between the Bells and the cheap prepaid guys. But the market is starting to recognize another possibility, similar to the peaceful co-existence long enjoyed by IBM and the BUNCH of other mainframe computer makers.  IBM priced so high the BUNCH (Burroughs, Univac, NCR, Control Data, Honeywell) could be 10-30% cheaper and make money. That lasted until mini and micro-computers changed the market.
     T-Mobile USA profits were up 19 percent Q2 and boosted parent DT’s stock price. They will be well along in LTE next year and then get the iPhone. Tough times until then are likely, but DT is a hundred billion dollar company that can afford to think ahead.