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Monthly Archives: September 2015

Top Events of the Third Quarter (Part 1)

 

lead pic (7)Beginning of fall, mid-season Texas football (pictured), and end of quarter greetings from Austin, Dallas, and Seattle.  This week, we will examine five of the top ten developments for the quarter and determine their short and long-term effects on the telecommunications industry.  These events are in no particular order, and several of them have been suggested by Sunday Brief readers.

 

Apple Launch:  Quién es más macho?

sprint logoAlmost a month before the iPhone 6S announcement, Sprint launched their iPhone For Life promotion.  In this program, new and eligible Sprint customers traded in their phones in August and Sprint provided them with a $15/ month iPhone 6 or 6 Plus lease.  The customer could then upgrade their iPhone 6 (Plus) to the iPhone 6S (Plus) by the end of the year and keep the $15/ month rate (as we discussed two weeks ago, Sprint gets carrier aggregation in the iPhone 6S model).  At the next upgrade (after Dec 31), the lease price would revert to $22 with an eligible trade in.

 

While the iPhone for Life title was catchy, the program was harder to sell in the stores than expected (and, as many of you asked in follow-up comments, Why would Sprint want to encourage upgrades during the Holiday season?  This question is still unanswered).   Sprint responded with an aggressive plan on September 11 which allowed iPhone 6S customers to lease a new device for $15/ month with a smartphone trade-in (iPhone 6S Plus is $19).  This plan includes one eligible upgrade per year (at the new upgrade price).

1000px-T-Mobile_logo.svgT-Mobile responded with an aggressive promotion on September 22:  If the customer turned in an iPhone 6 (or most Samsung Galaxy S6 models), they would get a new iPhone 6S for $5/ month (for an iPhone 5S, the new monthly payment would be $10/ month).  This was met with an enthusiastic response – not only would existing customers get a discount on their equipment payments (up to $22/ month), they would get a 700 MHz Band 12 capable phone (the iPhone 6S is the first device with this band included – see this link for the 700 MHz map)

 

Sprint responded with a headline that read “Not so Fast, T-Mobile!” on September 24.  They dropped their lease rate on an iPhone 6S with an iPhone 6 trade-in to $1/ month ($5/ month on for the iPhone 6S).  No other rate discounts were offered on other devices (the iPhone Forever rate of $15 held through the end of 2015).

 

While these rates pair well with the general Apple hysteria that accompanies a launch, there is a more fundamental point here:  Without  a device that is capable of accesing faster network technologies, customers will not enjoy their benefitsWithout these benefits, there are few reasons to move from AT&T and Verizon to Sprint or T-Mobile.   This phenomenon has existed ever since the first network upgrades (3G and then LTE-capable smartphones), but the rammifications are much greater today.  Sprint’s speed claims ring hollow (pun intended) unless you have a Samsung Galaxy 6 (Plus, Edge, Edge +), Note 5, LG G4 or G Flex 2, HTC One M9, and now the iPhone 6S.  And, with Sprint having this faster network deployed in 41 markets (see leaked Reddit post here), there’s a good shot that many customers will see a dramatically different experience.

 

The result is a marked increase in many waiting times for all iPhone devices vs. those reported in last week’s Sunday Brief (times as of 5 p.m. ET September 26):

apple iphone available change chart

T-Mobile has experienced the largest changes — which is not a surprise given their “10 GB for All” promotion in addition to both the attractive phone rate described earlier and the fact that Apple Music playing does not count toward MB levels.  AT&T’s increase in availability is also not much of a surprise given their large iPhone base.  The immediate availability of some Sprint iPhone 6S Plus devices is a bit of a surprise, but could be a reflection of supply chain improvements due to their relationship with Brightstar.

 

The implications of device turn-ins are not well known at this time.  However, refurbishment supplies are going to go up in the fourth quarter and, to a (much) larger extent, in 2016.   Compressed cycles mean big opportunities for newer companies that specialize in retailing devices, such as Glyde and Gazelle.  This also puts pressure on device manufacturers to continue innovation and development.

 

Bottom line:  The iPhone 6S launch is helping everyone (including third parties like Best Buy), but T-Mobile appears to be experiencing longer waits for both models.  It’s definitely a Top 10 event.

Can Starting a 180-Day Shot Clock Qualify as a Top 10 Event?

frontier-expanded-improvementYes, and FCC actions qualify for two of the Top 10 events in the quarter.  First, on September 2nd the FCC approved Frontier Communications’ purchase of Verizon’s California, Texas, and Florida properties (Frontier announced this acquisition on Febuary 5 – to see a map of Frontier’s territory including their most recent acquisition, click here).  This is a very quick turnaround for a transaction of this size, and to many (including The Sunday Brief), was an indication that the FCC would likely move on other mergers as well.

 

Second, on September 11, the FCC started the informal 180-day shot clock on the Time Warner Cable (TWC)/ Bright House Networks (BHN)/ Charter Communications three-way merger.  There continues to be wrangling over the FCC’s ability and willingness to keep content deals out of the public eye (the FCC should honor the protective order if they ask the cable providers for confidential and proprietary information), and the FCC has asked for information about the quality/ throughput/ treatment of on-line streaming providers such as Netflix and Hulu (see Bloomberg article here).  The three merging parties appear to be ready for the questions, however, and few see the prolonged approval process that plagued the TWC/ Comcast proposed merger.

 

Cablevision’s French Savior

The news that Cablevision was acquired by Altice did not surprise most – it was the perception that they paid a hefy premium for the pioneering but geographically constrained property.  Bloomberg Intelligence pegged the $17.7 billion offer (includes debt) at an EBITDA multiple of 9.64 and at $6,712 per video customer (a snapshot figure only as video value would not be a reason for acquiring any cable company).  These figures compare to a peer group EBITDA multiple of 9.35 and per video values of $7,138 to $8,040.

 

On the face of it, Altice paid a competitive multiple. But what about Cablevision’s long-term growth prospects (as M&A B-school classes teach – the “value of g”)?  If second quarter earnings are any indication, Cablevision is in a dog fight for subscribers with Verizon FiOS, and Verizon’s management team is redirecting their focus to more competitive local Northeast operations.  Over the very short term, there may be additional subscribers that switch due to the changeover from AT&T to Frontier, but those issues are largely considered to be behind them.

 

Where does that leave Altice?  Anticipating this question on a conference call, Altice CEO Draghi showed the nearby chart to explain the cost savings synergy strategy (full investor presentation from Altice Investor Relations here).  Some implementation details came at an investor confernece where Altice’s CEO, Dexter Goei, revealed that 300 employees at Cablevision make more than $300,000 annually.  “There’s a new sherrif in town…  We will probably run things a bit differently.”  Added Drahi, “My model is to bring U.S. ARPU to Europe and European expense to the U.S.”

 

cablevision cost picWithout a doubt, Long Island is one of the more expensive places to live in the United States.  And 300 represents about 2.2% of the total employee base.  But cutting 50% of the 300 employees would only represent a $45-60 million annual reduction (again, this excludes senior executive pay which will undoubtedly be less than the $40+ million paid out to Jimmy and Chuck Dolan earlier this year).  These changes alone would meet the majority of the G&A target laid out in their investor presentation.  Is Altice’s strategy to attract talent in less expensive Suddenlink strongholds of St. Louis and Dallas/ Tyler, TX?  Or is this the typical elimination of overlapping positions?

 

The answer to these questions (as well as Altice’s ability to wring out $300 million in annual network operating savings) determines the premiums paid if and as Altice rolls up the rest of the industry.  Definitely a trend to watch for the rest of 2015 and 2016.

 

Samsung Gears Up for VR

samsung gear vrAmid all of the iPhone hype, Samsung announced a $99 version of their Gear VR available for the Holiday Season.  Full details on the Oculus-powered device are here.  One of the most important features is that it is 22% lighter than the previous version.  As Gizmag states in their hands-on review, “It’s not that we ever thought the previous model felt heavy, but the new Gear VR does get you closer to completely forgetting that you have a mask strapped to your face.”

 

This feeling just became a lot more important as the Oculus store just landed Netflix, Fox, and Hulu (coming soon) for streaming video.  There’s a terrific blog on Netflix describing how VR will impact movie viewing experiences (it would take another Sunday Brief to summarize the article so I’ll just include the link here).  Bottom line:  $99 price point will lead to increased adoption and additional content.  Oculus store titles will get more play on Facebook (I have already seen sponsored ads on my news feed within a day of searching).  An Oculus/ Steam relationship could be around the corner.  And it’s more portable (albeit less powerful) than the Rift.  Best of all (to Samsung), Apple does not have it – yet.

 

Next week, we cover the second half of the top events that are shaping third quarter results.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Go Royals!

Lowell McAdam’s Growth Dilemma, and John Legere’s Donald Trump Moment

 

End of summer greetings from Charlotte and Dallas.  This week we will cover comments from two wireless CEOs as well as update on the latest iPhone 6S Apple ship dates.

 

Apple Orders:  Thank You, China!

In a couple of events related to last week’s Sunday Brief on Apple, it appears that iPhone 6S and 6S Plus sales are off to a good (but not great) start.  With the inclusion of China in this year’s pre-order pool, Apple is “on pace” to surpass the initial weekend sales from the iPhone 6.  A quick check of the carriers’ websites seemed to back up the claim that sales are good (all data as reported by carrier site as of Saturday, Sept 19, at 5 pm ET):

  • Verizon’s ship date for the 6S is 9/30 and 6S Plus is 10/7;
  • AT&T: 6S = 9/24; 6S Plus = 10/23;
  • T-Mobile: 6S = 9/25 except for Rose Gold (add three weeks for this color); 6S Plus is around 10/7 except for Rose Gold (also add three weeks);
  • Sprint: 6S = 9/25; 6S Plus = week of 10/5 except for Rose Gold which is week of 10/27

 

For those of you who remember previous launches, iPhone 6S volumes will probably be closer to the 6/ 6 Plus levels of last year and not a disaster like the 5c (as Apple historians will remember, the 5s was not available for pre-order).  This is driven both by strong carrier switching incentives (e.g., AT&T’s $500/ line offer to current DirecTV customers) and also by T-Mobile loyalsts who know that this is the first Apple device to have 700 MHZ Band 12 capabilities (hear T-Mobile’s John Legere explain more about Band 12, a.k.a. Extended Range LTE, here).

 

Keeping up with expectations amid a weak upgrade cycle (the 5c/5s initial purchases were tepid and supply-constrained) is not easy.  However, as discussed last week, the iPhone 6S series is a sizeable improvement to last year’s iPhone 6 models.

iPad-mini-4-main1Last week, we also mentioned that “the real headline is not the iPad Pro, but the increased functionality and attractive pricing of the Apple iPad Mini 4.”  This week, several reviews have emerged (such as this one from Ars Technica) which support our thesis.  Sometimes the smaller headlines (including Apple’s push into leasing and increased carrier-neutral marketing) at Apple events have bigger impacts than expected.

 

CEO Chatter (Part 1):  Lowell McAdam’s Growth Dilemma

McAdam_Lowell_photo-2This week was the Goldman Sachs annual telecom conference, and, with the exception of Randall Stephenson of AT&T (who was well represented by CFO John Stephens), all of the wireless CEOs were speakers.

 

Lowell McAdam of Verizon was the first wireless carrier CEO to speak (materials here).  After McAdam’s conference appearance, Verizon released a statement with a preliminary outlook on 2016.  Because of hard wireline comparables related to the sale of California, Texas, and Florida properties to Frontier, as well as impacts due to “commercial model changes” in wireless (more installment plans resulting in lower service revenues) and EBITDA-impacting investments in Go90 (video) and Internet of Things (IoT), 2016 earnings will plateau before resuming their steady rise in 2017.

 

This is a big statement to be making in September given the many other multi-billion dollar business units under Verizon’s control.  What about enterprise growth, led by Terremark?  What about wireless growth from increased movement form “Medium” to “Large” (and “Extra Large”) plans?  What about FiOS growth from increased investments in  current franchise areas?  Basically Verizon said “everything nets out at the end – the upside of the waterfall chart offsets the downside of the waterfall chart (or, without being too sarcastic, there’s less low hanging fruit to pick up from Sprint).

 

Add to the muted expectations this interchange between Brett Feldman, lead telecom analyst for Goldman, and McAdam:

 

Brett Feldman – Goldman Sachs – Analyst When we are sitting here again next year and we are thinking about how Verizon is positioned into 2017, what are we going to be talking about? What will have been the big things you will expect to have accomplished by then and what are you going to be optimistic about as you look into the following year?

 

Lowell McAdam – Verizon Communications, Inc. – Chairman and CEO Well, I hope we are sitting here talking about how wildly successful our mobile video product has been and how we’ve added additional facets to that product that make it even more interesting. I hope that we will also be doing something similar with over-the-top broadband into the home at that point. I think that we will be — I am fairly confident — we will have significant revenues coming from the Internet of Things and I think we will be up here talking about applications in areas of healthcare and transportation and energy management that people are going wow, that’s really cool. And then I fully expect there will be a third area that we have no idea what it is today that we will come up and we will say, wow, this is the big idea that will propel us into 2017 and 2018. And I think 5G will be part of that and I think we will be reporting out on some of the early returns on that and I think we are probably going to be pretty optimistic about what it will do for the industry.

 

Lowell’s statement encapsulates Verizon’s growth dilemma.  McAdam had just finished telling the audience how puny IoT was ($320 million out of $64.2 billion for the first half of 2015), but it’s now a 2016 headline?  I get Go90, but it’s an advertising play with some marginal pull through revenues for Verizon customers – could that generate even $300 million in advertising growth in 2016?

 

The third headline needs to be big – a $1-2 billion organic growth initiative that has a close relationship to the core networking business.  More fiber, more data, more throughput, more data centers, more global, more service excellence, more customer trust.  Playing the “our future is moving so fast our next revenue source could be anything” might play well for a company presenting at next week’s TechCrunch Disrupt, but not at Goldman Sachs.

 

CEO Chatter (Part 2):  John Legere’s Donald Trump Moment

t-mobile vs vs stock priceTo close out the Goldman Sachs conference, John Legere (CEO), Neville Ray (CNO) and Braxton Carter (CFO) presided over a lengthy Q&A session (Webcast link here).  They used the occasion to give an update on their net add performance for the quarter:

 

  • Postpaid branded net additions of 1 million or more (960K as of the conference day)
  • Postpaid branded phone net additions of at least 760K (equaling 2Q)
  • Prepaid branded net additions of at least 500,000 (triple second quarter)
  • Total branded net additions in excess of 2.1 million

 

This is in keeping with our view that as T-Mobile expands their LTE network (at the 1900 MHz, AWS and at the 700 MHz spectrum bands), they are going to reach their current 17% market share much faster than the historical 1% per quarter penetration.  Neville Ray disclosed that they have deployed 165 of the  190 million POPs where T-Mobile has 700 MHz spectrum.  Of equal importance, T-Mobile has deployed or will deploy more than 1 million square miles of coverage in 2015 (fewer metro areas = more traditional macro cell deployments).

 

Another interesting note from T-Mobile’s disclosure is that some portion of the postpaid phone net additions had to come from current prepaid customers (the Smartphone Equality program was introduced in late January).  T-Mobile appears to be replenishing these prepaid customers at a faster rate in the third quarter than in either the first or second quarters.

 

All of this prior to their first super-fast iPhone (band 12) activation which will have a slight impact on the remainder of the third quarter but a big impact on fourth quarter results.

 

trump tweet to legereAt the end of the session, Feldman asked John Legere the same question that he had asked Lowell McAdam.  John’s response: “I may not be here because I may end up being the communications secretary for President Trump… when pigs fly.”  Several of the news reports missed the last three words of this quote and have little memory or appreciation of the Twitter fight Legere and Trump had in April, which resulted in Legere checking out of Trump’s hotel (full details of the what caused the fight here – it’s worth the read).  Makes you wonder how folks like Trump and Legere communicated prior to Twitter.

 

Bottom line:  T-Mobile is truly in the catbird’s seat.  They’ve completed the conversion from subsidy-based to equipment-installment plans.  They’re growing postpaid branded (including phone) subscribers at industry leading rates, and they’re growing their retail prepaid base at an equally amazing rate.  They are (re)introducting themselves to many communities with faster speeds on the latest iPhone.  And they are stockpiling cash to grow even stronger in the upcoming 600 MHz auctions.  It’s a good day in Seattle.

 

Next week, we cover the half of the top events that are shaping third quarter results.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Go Royals!

The iPhone 6S and 6S Plus: Excellent Feature Upgrades, Bold Distribution Changes

13 Sept 2015Labor Day and early September greetings from Austin and Dallas.  Because of upcoming non-stop travel over the next two months, I took a hall pass from this year’s CTIA Super Mobility show.  There was plenty of news, however,  from Verizon’s announcement of its 5G strategy and establishment of 2016 testbeds (more here), to AT&T’s announcement to equip Jaguar Land Rover North American vehiches with their LTE technology (more here), to Sprint’s continuing saga with AT&T/ DirecTV concerning Sprint’s ability to advertise a standalone (and potentially free) wireless service to existing satellite subscribers (more here).  Also, if you want to check out the latest in M2M developments, the Sequans team (disclosure: I am a Board member) had several great announcements at the show including this one with T-Mobile.

 

The most impactful news of the week, however, came from Apple’s product announcements on Wednesday.  While the focus of this column will be on the Apple iPhone 6S and 6S Plus, there were a lot of other meaningful product announcements.

 

The iPad Pro:  Is Bigger Better? 

First up:  Apple’s largest tablet to date – the IPad Pro.  Its introduction expands the addressable market for more complex and intricate enterprise applications (Apple demonstrated Microsoft PowerPoint – a bold move since many of us were asking the question “How does this compare to the Surface Pro 3?” during the Apple unveiling – see 33:26 in the attached Apple video for Microsoft’s demo).

 

No doubt about it – the Apple iPad Pro is going to cause many current Mac users to think twice about the frequency of their laptop (versus tablet) upgrade.  With price points converging with Apple’s own laptops (an iPad Pro with 128 GB, Apple Pencil, and a very Smart Keyboard cover keyboard will set you back $1,348; a 13 inch MacBook Pro with Retina Display will set you back $1,299 and is only 1.5 pounds heavier – see full comparison here) Apple may have created the Mac’s biggest challenger.

 

PencilThis brings us to the Apple Pencil.  As late as 2010, Steve Jobs made the comment that “if you see a stylus, they blew it.”  The Apple Pencil is far more than what was envisioned as a stylus in 2010, and it’s introduction is certianly going to be intriguing to many who use a stylus today. Apple faces competition from Wacom, the established market leader in pen-based tablets (more on Wacom here and price points on Amazon here).

 

I was watching the video of the Apple Pencil here and could not help but be amused by the trademark Apple marketing spin.  Here’s Jony Ives’ narration that accompanies the video:

 

Touch, of course, is the primary method of interaction with iPad.  To enhance what’s possible with Multi-Touch, and to allow for a new level of precision with iPad Pro, we’ve designed Apple Pencil.  This began by reenginering the touch system of the display to measure both finger and stylus input on the same plane with optimal accuracy… Highly responsive sensors built in to the tip of the Apple Pencil work with the iPad Pro display to detect precision, force, and tilt.  With force data, you can press lightly to get a thin stroke or press harder to get a darker, bolder stroke.  Signals emitted from two locations in the tip calculate the angle and orientation to produce broad or shaded strokes.  It’s uniue tip signature allows it to be used simultaneously with your finger.  And with incredibly low latency, it has responsiveness that feels like a true writing or drawing instrument.

 

I truly felt after watching this video that I could recreate Michelangelo’s Last Supper with Apple’s latest accessory.  Without a doubt, there are going to be those who will truly appreciate its features (see this Engadget article on the initial reactions from illustrators and designers), but will a super stylus really accelerate demand?

 

Based on Wednesday’s presentation, I am less optimistic that Apple has a hit from iPad Pro than I have been about previous iPad introductions.  It’s a beautiful piece of electronics, but I am confused about its target audience and use case.  Is it a laptop replacement for enterprises (bad for Mac sales)?  Is it a Wacom replacement for illustrators and designers (which may involve software changes)?  Is it an expensive way to watch Netflix (four speakers and video demonstrations indicate that this was a contemplated use)?  Or will a new multi-screen, stylus-dependent, large-screen required application that has not been invented drive adoption (and why would someone develop this application solely for the iPad Pro and not also Mac OS X)?

anazon kindle DXI am definitely jaded by the introduction (and re-introduction) of the Amazon Kindle DX.  It was a tablet that admittedly did not have iOS and the App Store.  Despite aggressive marketing, few could justify the price as the smaller versions more than met the clarity and speed requirements of the masses.  Amazon even tried to resurrect the device in 2013 as consumers warmed up to larger tablets, but to no avail.  In my opinion, the real headline is not the iPad Pro, but the increased functionality and attractive pricing of the Apple iPad Mini 4.   It’s a one-handed, stylus-free version packing an A8 chip, super high pixels per inch (ppi), and all of the camera you will (or should) ever need for a tablet.  For those of you who doubt this assessment, look at the side-by-side comparison here and help me understand why bigger is better (especially versus a Mac upgrade)?

 

Bottom line:  The iPad Pro is bigger, but not necessarily better for Apple.  A $99 stylus has limited segment application, and the iPad Mini 4 will have a far greater impact on Apple’s volumes until the development community can design applications that take full advantage of the iPad Pro’s features/ functionality.

 

The iPhone 6S and 6S Plus:  Excellent Feature Upgrades, Bold Distribution Changes

Apple’s event was capped off by their announcement of the iPhone 6S and 6S Plus (the narrative starts at about 1:23 in the video).  Typically, the “S” (or, in the case of the Apple 5 series, the “C” and the “S”) releases build on the capabilities of the previous (major) release.  For example, with the Apple 5s and 5c release, there were questions about whether new price points, plastics, colors, processors and fingerprint scanners would boost sales (more in this Sunday Brief article from the archives).    As a result, industry and Wall Street analysts fret about the “S effect.”

iphone-6s-shoplemonde-01It’s pretty clear that Apple had this on their mind as the 6S and 6S Plus models look a lot more like a major release and a lot less like a typical “S” product.  The jump in camera capabilities (12 MP camera functionality, better auto focus, low light image quality) had me thinking about the leap that Apple made when moving to the 4S from the 4.  Adding the ability to record in 4K format, which has been a staple of the Samsung Galaxy lineup for over a year, is a welcome upgrade with these new models.  Apple did a great job with their introduction of Live Photos ,which captures 1.5 seconds of activity before and after the primary image capture.  Because Live Photos will be the default phone seting, it will likely change how we look at pictures, especially on lock screens and on watches.

 

The most important feature change on the iPhone 6S for T-Mobile is the inclusion of their latest network in the device (Band 12 of 700 MHz spectrum – see map of national availability  here).  Having used a Samsung Galaxy 6 Edge over 700 MHz for the last six months, I am confident that the 6S and 6S Plus are going to have a big effect on T-Mobile’s network usage (this includes reducing the strain on the 1700 MHz and 1900 MHz networks for older devices).  In Dallas, my speeds routinely top 50 Mbps and can exceed 90 Mbps during non-peak periods (using a Galaxy S6 Edge) compared to Sprint’s 8-15 Mbps (using an LTE-equipped Galaxy S5).

 

Sprint is also a winner here as the network includes a new LTE Advanced function called carrier aggregation.  The best analogy I have for this is that customers can get higher data speeds because there are more avenues to deliver content to the device – kind of like getting your favorite radio station across AM and FM depending on which frequency is best for you.  The impact in 2015 and 2016 for Sprint will be less noticeable than T-Mobile, however, as Sprint’s iPhone users already have unaggregated 2.5 GHz network speeds with the iPhone 6 introduced last year.  However, as Sprint deploys more of their high band capacity, speeds could accelerate rapidly (see Reddit post on the topic here).  All of this assumes that Sprint has the financial flexibility to deploy $15-25 billion in coverage enhancements over the next three years.

 

Before digging into distribution, however, it’s important to give a head nod to Apple’s 3D Touch announcement.  While camera upgrades will be the most talked about new iPhone feature by consumers, 3D Touch is the functionality that will have the developer community buzzing.  “Touch and Hold” is a common feature on many Android applications already (any of us who have used Google Mail or Messaging have enjoyed the benefits of this for some time).  But to open up this capability to “go deeper” without switching screens is a big deal for developers (Force Touch has one level, and 3D Touch has multiple levels – see Wired article here on the topic).  Because 3D Touch involves changes to hardware (they outline this in painstaking detail in their presentation), it’s not going to have the same mass adoption that is typically seen with iOS released-based functionality updates.  But 3D Touch is going to change how we access applications.  It will be interesting to see which applications begin to market themselves as “3D Touch enhanced.”

 

iphone payment plansThe big deal from the Apple Event from a wireless carrier perspective was Apple’s announcement that they were going to sell an unlocked version of the iPhone with AppleCare+ and annual upgrades starting at $32.41/ month (see nearby chart).  As the attached article from TheVerge.com points out, there’s a lot of value to Apple’s latest offer.  The big deal for the carriers is that Apple has made it more attractive for their biggest fans to associate iPhone 6S and 6 S Plus with an Apple Retail store (read: network/ carrier neutral) experience than with any carrier.  Over time, Apple may be able to impact quarter carrier net additions. 

 

This is not a new channel conflict (just a better financed one), and it’s completely rational to think that Apple would not want to share any retail floor space with Samsung, HTC or LG.  If Apple begins to actively notify and direct current customers to pick up their new device in an Apple Store, where does this leave Sprint’s Direct2U and 1200 RadioShack store investments?  Can these innovative alternatives produce the same experience as an Apple store, especially after the 2015 Holiday season hoopla has died down?

 

Bottom line:  Apple’s move into financing (which will likely expand to include tablets in 2016), along with their artful bundle with AppleCare+ and annual phone upgrades is going to impact carrier store iPhone sales in 2015 and 2016.  It’s the exclamation point on what is going to be a very successful release.

 

Next week, we start to look at the events that are shaping the third quarter.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Go Chiefs!