Kagan comment on Comcast and other cable televisions sudden cloudy outlook

Jeff KAGAN BLOG:

Jeff KAGAN posts thoughts on the wireless and wire-line telecom industry he covers.

If helpful, you may quote Kagan and use any of these comments in your reporting of these stories.

Attribute quotes to Jeff Kagan, wireless and telecom industry analyst based in Atlanta.

Photo from New York Times article

Kagan on Nokia and the cellphone marketplace

Nokias announcement today has caused quite a mess. Nokias stock has dropped and it appears that has triggered the drop among all the wireless handset makers.

Some handset makers are recovering. The ones that are recovering for the most part are the Smartphone makers. Companies that are known for traditional cellphones are not bouncing back like makers of Smartphone's seem to be.

This seems to have been going on for several months and quarters already.

Customers are hanging on their traditional cellphones longer as the economy tightens. However the Smartphone segment is still growing strong.

When the economy strengthens it should be positive for traditional handset makers, but we may be waiting a while.

We have to remember, growth at these cellphone makers is still positive, its just slower than it has been and Wall Street doesn't like that kind of dip.

Kagan on price war for high speed internet services

This is something that many would consider unexpected. Verizon and AT&T seem to have launched a price war on high speed DSL services.

DSL growth has been vibrant during recent years, however as every market grows, it matures and the rules change. That seems to be what is happening to high speed DSL pricing.

This is good news for customers because the price they pay for some of these DSL services is going down. Almost two-thirds of the marketplace already has a high speed internet service. These services are the first wave that we have been using during the last decade. The next step may combine high-speed internet with other services.

Last quarter Verizon lost DSL customers. That was the first time we have seen that happen among the competitors. Some of those customers simply moved to Verizon's FiOS service, however there is a bigger issue at play.

Verizon has gotten much more aggressive in their pricing for these DSL services. Will that stem the flow? Will AT&T and Qwest make similar moves? What about the cable television companies?

This is new so we will see what happens next. During this last quarter cable television companies have sold more high speed lines than phone companies, perhaps because of the higher speeds. Is speed becoming a marketing issue?

We'll have to watch this area going forward for changes.

Kagan on T Mobile offering new Google Android phone

Well it looks like T Mobile may be the first carrier to offer the new Android phone by Google. Like Apple with the iPhone, Google is getting ready to launch their first phone. This is an interesting story. First there was Apple and now it is Google. Neither of these companies have anything to do with cellphones.

So far Apple has been very successful in the space. Google may also strike gold. However we have not seen a handset and we do not know how well it works. This is a new segment of the wireless industry we are watching unfold.

We have to be careful talking about this new device and not get out ahead of our headlights.

This should be good news for T Mobile who will finally have a competitive answer to the iPhone from AT&T and the Instinct from Sprint Nextel.

The question is, will this new Google device be a breakthrough or a follower.

Will it be easy to use? Will it have breakthrough technology or just another me-to phone?

We have been watching the cellphone industry get more interesting during the last few years. The devices do more, and they do it easier than ever before. That is they key.

Meanwhile we have not heard or seen anything from Google of from T Mobile about this phone. So lets not get ahead of ourselves.

Kagan on iPhone

I have been using the newest iPhone during the last few weeks. I test many wireless devices. The iPhone was a little different. I needed to hook it up to my computer and connect it to iTunes to get it to work.

During the first few days I was not that happy since some functions did not seem to work properly, but then the first iPhone update appeared and things started getting better quickly. There have been several updates over the last few weeks. Apparently as users call with problems and solutions are found, updates are issued.

At this point the iPhone seems to work very well. I have been reading some news stories about problems, but I have not seen them after the first update. Users with problems should hook their iPhone up to their laptop regularly to download the updates. Each seem to make the phone work better. The problem is many users do not regularly update their phone. Its easy, just hook it up once in a while. The software takes care of the update automatically.

The iPhone has features that are better than many other cellphones. The internet is a big deal. It is like reading a smaller version of a real internet page. You can use your fingers, on screen, to enlarge or reduce the image for easier reading. This is the same with Maps feature. While you are driving a blinking dot -- that is your car -- moves along the roads. Plus it has traffic updates, and a feature that changes from a map view to an actual photo from a satellite so you can watch yourself travel across the landscape.

If you use Microsoft Outlook and you use the Notes feature you will find that does not show up on your iPhone. On the Palm phones it is transferred and called Memos. Some phones do this and others don't. The iPhone has a Notes feature, but it does not connect synchronize with the Microsoft Outlook version.

The internet is much faster than it used to be. This makes using the iPhone much more pleasurable. Downloading email is much faster with this new version also. There are several popular features right on the screen when you hook it up. Weather lets your select a handful of your favorite cities to watch. Checking the weather can be as easy as hitting one button.

Features like text messages, camera, YouTube are popular and of course the iPod and iTunes are always with you.

The battery is improved over version one last year. Unfortunately you still cannot buy a backup battery and swap them when the first one dies. So keeping your eye on the battery is important. You don't want to use up the battery listening to music and not be able to make an important call.

All is all the iPhone is an excellent device. There are a few things that are not perfect, but generally speaking the device works very well. Just make sure to update the phone on a regular basis by plugging it into your computer and internet connection to get all the new features and fixes.

Kagan on Verizon avoiding strike

Verizon avoided a strike by their workers. That is good news.

Every several years for as long as I can remember Verizon and the Unions get into this kind of tug of war. Sometimes they go into a strike situation which usually makes customers uneasy, but eventually they settle on terms and get back to work for another few years until they do it all again.

This time things are a bit different. This time Verizon is in direct competition with several companies and the risk to the company is much higher. Ten to fifteen years ago Verizon was not really competing with anyone. During the last several years competition is getting hot. Verizon is losing traditional local telephone business to a variety of companies like cable television, wireless and VoIP providers.

Competition in telecommunications is changing. Verizon is changing. Growth is coming from services such as wireless and their FiOS which offers television, telephone and broadband.

Customers always did business with several different companies including among them, the local phone company.

However going forward customers are increasingly buying a big bundle of services from one company and saying goodbye to the others. In this new world of intense competition Verizon's chief competition is the local cable television company in each area for consumers.

That's why avoiding a strike this time was so important. Ten years ago it would have been inconvenient to the customers, but since they had no other place to go Verizon would not have lost business.

However today the customer increasingly has choice. If they want today's customers can give their business to one of Verizon's competitors and walk away from Verizon altogether.

This is a new risk and threat to Verizon. The Unions understand that. That is one main reason they did not go on strike. Verizon dodged that bullet.

Now the company can continue to compete without the longer term problems a strike would have brought.

It is interesting to watch the industry change and how that impacts otherwise common events.

Kagan on Sprint Nextel quarter

Sprint Nextel is an interesting company to watch during the last few years. The ups and downs and now the rebuilding is fascinating.

They are now in the process of repairing, reshaping and rebuilding the company. The rebuild started about 8 months ago when they hired new CEO Dan Hesse. They said it would take time and it is.

The company is still soft in too many places, however they seem to be seeing some early signs of success.

The company has lost customers again this quarter, but the loss is much less than in previous quarters. They have reduced churn to 2% from 2.45%. This is movement in the right direction. In addition, they are focusing on high value customers going forward so their customer base is more solid going forward. The company has been able to retain high value customers.

The company has been focused on strengthening the network and the relationship with the customer. The problem with the company is not so much the quality of the network, but on the relationship with the customer. Sprint Nextel network service works as well as their competitors. The problem with Sprint Nextel has become woven into the fabric of the company and that takes time to reverse.

The bad news is Sprint Nextel had another quarterly loss which we expected, however the good news looks like the loss of customers is beginning to slow.

Sprint Nextel has had several successes in recent months. They have successfully launched the Samsung Instinct phone. In fact it has broken sales records. This is a successful move into the new category of smart phone that the Apple iPhone introduced last year. The growth in wireless is in data services going forward.

The company has gotten together with several other major players like Comcast and Clearwire on their Wi Max initiative. If this is successful it will help the company expand into a new business opportunity.

Sprint Nextel has not yet turned around, but we are starting to see several areas where they are doing better. First they have to stop the bleeding, then they can focus on rebuilding. Based on what I see so far they seem to be on track. The recovery process will continue over the next several quarters, even the next few years, but the if the company is successful we should start to see more signs of success like we are seeing this quarter.

Kagan on Motorola hiring new CEO

This was the news we were waiting for. This was one of the best moves Motorola could make. As the company plans to separate the nagging question has been who will they bring in to run the businesses? As long as that question was unanswered the future of Motorola was uncertain.

This is a good move on Motorola's part and on current CEO Greg Browns part.

Someone of the caliber of Sanjay Jha is just what the wireless company needs. This is a big win on Motorola's part. Of course after the dust settles I think we can all agree that big things are going to be expected.

Motorola has plenty of areas for Sanjay Jha to focus on and try to repair.

Two CEO's at Motorola is very unusual, but maybe that's what it will take to pull the company back onto the playing field.

If we look at Motorola's recovery as a baseball game we are only at the end of the first inning. This is going to be a long game. But all of a sudden they found another key pitcher and now suddenly people are starting to watch. Suddenly it is turning into an interesting ball game.

Will Greg and Sanjay work well together? If they can, they may be able to do good things at the company. We won't know if it is working for a while. However as a choice, this was a very good choice.

Kagan on Motorola earnings, not bad this quarter

Motorola has suffered a very rough patch of years, but these earnings could be a sign that things are starting to turn around. Maybe.

Motorola is one of the historic names in the industry. There are many investors and many workers. It would be better if they could turn things around.

About seven months ago they brought in a new CEO, Greg Brown. He has made many major changes and has wrestled with many assorted issues. The company announced it will break itself up probably next year.

During all the chaos of the last several months I don't think many watchers expected any kind of order to emerge, but that may be what is starting to happen. The company earned a small profit this past quarter plus they shipped more phones than last quarter.

Motorola's troubles are not over. This is just one ray of sunshine piercing through the clouds. However this is the first good news from the company in a long time. The question now is, are the clouds starting to break up. Could we be looking at the skies beginning to clear? Or is this just a blip. We'll have to wait and watch over the next several quarters.

Perhaps we are seeing Motorola begin to stabilize itself. I think many were expecting more bad news and are surprised with this quarter results.

Motorola hung on to the number three spot behind Nokia and Samsung. They are still ahead of LG and Sony Ericsson.

While the results of this quarter look good, we cannot yet say this is the beginning of the turnaround for Motorola. We will have to keep watching and see if the positive news continues quarter after quarter. However Motorola has a few things to cheer about this quarter.

Kagan on Embarq quarter

Embarq announced their quarterly performance. This is a company that was part of Sprint years ago. Then it was spun off. Initially it got into new businesses like wireless and television and started updating its network. Then it lost its CEO Dan Hesse who was offered the opportunity to run and repair Sprint Nextel.

In recent months Embarq has a new CEO and faces a tough economy. Their initial growth has slowed. The company is still profitable and moving in the right direction, but the pace has slowed.

The question is will it pick up again, or will it continue to slow.

Is it because of the economy, or competition, or is it something else.

They have not been successful selling wireless and are exiting that business. They are not building their own television delivery network, but will continue to resell the satellite service they have been over the last couple years.

Initially when it spun off from Sprint Nextel it was breathtaking to see how rapidly they moved into other businesses and the future looked bright.

Now things have slowed a bit. They are still a strong company, but they have hit a few important problems. New CEO, not in the wireless business anymore, still reselling satellite television so it won't interact with their phone service.

At the same time their competition is taking customers. Embarq is losing significant basic lines. That might not be as much of a problem if they were robustly moving into other businesses, but they seem to have hit a stumbling block.

We'll have to watch the company to see if they can turn things around and recapture the robust growth or whether this is the beginning of a tougher time for Embarq.

Kagan on Comcast earnings and dip

Comcast's hot streak may be cooling down a bit. In the 1990's Comcast was not growing so quickly, but then it started selling high speed internet services and in the last few years they started selling a VoIP telephone service over their Internet connection and the hot streak began. Comcast growth has been robust in recent years as it sold cable television, high speed internet and telephone service mostly to their consumer marketplace.

Things seem to be slowing down at Comcast. They still have good growth, but it is not at the same rate we have seen in recent years.

They still have the vast majority of customers to market their services to so we have to wonder why things are slowing down.

The economy is one part.

The high price of their service is another part.

The robust yearly price increase is another part.

The competition from the Baby Bells is another. AT&T Uverse and Verizon FiOS are making inroads.

Some of these things Comcast can battle, but other things they just have to ride through. We'll watch Comcast over the next few quarters to see if they can fix this problem or whether it is something that is going to grow.

Kagan on Qwest announces using Verizon for wireless

Today Qwest announced they have begun selling Verizon Wireless phones and services. Months ago Qwest announced they would switch from Sprint Nextel to Verizon Wireless and this announcement made today by Qwest says they have begun.

Qwest seems excited about this change. There is a new CEO and maybe that is good news for the company since they made a mistake selling wireless in the past.

The services of both Verizon Wireless and of Sprint Nextel are excellent. I have and use phones from both carriers and they are both very high quality. Customers are not unhappy with either.

I think the reason for the switch has more to do with the deal between Verizon Wireless and Qwest than any other factor.

However Qwest was never very successful selling wireless services in the past. They sold these services as part of a bundle of wireline services only. A customer could not walk into a store and buy a stand alone wireless phone. The services were not marketed as a stand alone service.

This is the same problem the cable television companies had when trying to sell wireless themselves over the last year or two. They did not market or sell their wireless phones the way customers buy wireless. They also sold wireless only as part of a bundle of wireline services. Most customers today buy wireless as a stand alone service.

Some customers want to buy wireless as part of a bundle, and the industry is betting that number will increase. However today most customers do not buy wireless as part of a bigger bundle. Most customers buy wireless as a stand alone service. In that world companies like Qwest and the cable television companies can only hope to attract a small group of customers because of the way they approached the opportunity.

If Qwest wants to be successful marketing wireless, they have to market the way the industry works best. They have to sell wireless phones the way customers want to buy it.

They can continue selling wireless as part of bigger bundle of wireline services for the customers who want to buy that way, but more importantly they should open up and market stand alone devices and advertise the heck out of them. They should sell more than a small handful of ordinary phones. They should also sell the growing category of smart phones like Blackberry and Palm. Basically they should jump into the pool and splash around instead of just stand in the corner. They have to attract attention to themselves or they will not be successful.

Will Qwest be successful this time around selling wireless service? That depends on how they act now they are back into the game for the second inning. That is what we will keep our eyes on.

Kagan on Alcatel-Lucent CEO and Chairman stepping down

Back in the 1990's companies like Alcatel and Lucent were high flying money makers. Everyone loved them as investments, employers and corporate citizens. Everything was going right. They were opening up plants and offices so fast it would make your head spin. They had so many orders from so many companies. Things were sweet for companies like this.

Then around 2000 everything hit the brick wall. Investments were dead. Many of their customers who were not making money struggled to stay open and cancelled orders. Suddenly the good times were over. Even big companies slowed their spending.

All this spelled disaster for these high flying companies. They struggled to survive. The changing industry financially and technically shook every player. Newer, younger competitors dealing with the internet started winning new business. Updating the nations telecom networks is still a major investment, but there are many competitors now.

Suddenly the good times were over. Over a few years these companies kept shrinking quickly. Even that was not enough for some.

That's when Alcatel and Lucent decided to pool their resources and merge. It was a falling knife and you know what they say about trying to catch a falling knife.

The combined company Alcatel-Lucent put a happy face on the deal. What they didn't do was talk about how the combined company could do better than the two single companies in a changing industry. The merger bought them some time. But it looks like that time is up.

The equipment side of the industry has been changing for the better part of a decade. Some companies are doing better than others.

The CEO and Chairman have announced they are stepping down. The company says its not because of the performance. And maybe that is true. However the performance has been weak.

Will new senior executives help the company grow finally? The industry is what it is at this time. Alcatel-Lucent is a good company with good people, but is that enough to survive in a fast changing industry?

I think Alcatel-Lucent will still be in business over the next five and ten year period, but will they be stronger or weaker? Will they make money or lose money? Will it be a good investment or not. A good employer or not. There are alot of questions.

Now that the global economy is struggling with this soft patch it make take a while for a recovery, if that was in the cards in the first place.

What does the future look like for the company? We'll have to watch and see.

Kagan on Verizon quarterly results

Verizon continues to show strong results even in uncertain economic times. Revenues fell a little short, but earnings continued to grow at a double digit rate.

Verizon is a very different company from the phone company we followed ten years ago. Today it represents a wireless network along with the traditional wireline network, plus a growing FiOS network which they have been developing over the last few years. This is the service that lets Verizon compete with the cable television companies. FiOS is their bundle of telephone and high speed internet and television. This along with their wireless network gives them a strong competitive offering.

FiOS is finally available in NYC. Verizon will go into competition with the cable television company in an all or nothing battle. Customers typically do business with a variety of companies, but Verizon intends to win 100% of the customers usage. This is the beginning of an interesting battle in NYC.

NYC could see this competitive offering bring lower prices to their telephone and television bills. This has happened in other markets around the country.

Verizon is in the middle of a major transition. Moving out a few years it will be an entirely different company. Verizon has shown continued strength in wireless and their FiOS business.

One worry is about how the soft economy will affect Verizon. Many of these services are easy to avoid if they cost more, but if they cost less that should attract customers attention.

So far Verizon continues its strong growth curve. It will be interesting to watch as the company competes more and more with the cable television companies coast to coast.

Kagan on AT&T quarterly results

AT&T is reporting results right along expectations and is pointing to good news in the wireless business.

This has become a much different and much bigger company over the last several years. It started out as SBC from Texas. Then it acquired AT&T and then Bellsouth and it was suddenly very large. Those mergers gave it 100% ownership of Cingular which changed its name to AT&T Wireless. This company has been developing its Uverse service which offers television, internet and telephone over the same network and allows it to compete directly with cable television companies. Uverse is only in its early years and is not yet available yet throughout the country. The company does offer wireless as part of their bundle which the cable television competitors don't do yet.

WIRELESS

AT&T's wireless revenues grew a healthy 15.8 pecent and their wireless data revenues, Internet access, messaging and email grew a very healthy 52 percent. This incredible growth in wireless data should continue and potentially increase. New smart phones like the iPhone, Blackberry and Palm are exploding in the marketplace. Live television, movies, Internet access, banking, GPS and more is being added to traditional telephone calling, messaging and email.

Wireless data is exploding in the industry. And we are only in the early years of this growth. The cellphone is transforming itself to our third screen for communications, entertainment and web searches.

New sales will slow as there are already more than 260 million cellphones in the United States and there are only 300 million of us to buy phones. Carriers including AT&T Wireless are focused on selling additional phones to existing customers. They are also focused on other services they can sell on the cellphone and that is the wireless data portion which is in a very strong growth curve of 52 percent currently.

The soft economic issues have not yet hit the cellphone industry. Ten years ago I think it would have been different. Ten years ago the cellphone business was just basically a phone and messaging device and was not necessary. It is very different today. Voice calls, messaging, emails, as well as web access and data services has transformed the business.

The cellphone looks like it has become an essential tool to Americans. We keep thinking that the industry will be impacted by the weak economy, but so far it is not and its growth is still as robust as ever.

UVERSE

AT&T's Uverse service is seeing healthy growth. It is new and has only impacted a small percentage of their entire US marketplace. They point to one million customers by the end of the year. It will be interesting to watch how this new competition between the local telephone companies and the cable television companies pan out. I think this competition is healthy. It transforms the marketplace into a customer oriented, instead of a company oriented marketplace which the cable television companies have enjoyed over the last few decades.

As these two competitors gear up they should compete on the services and the prices. We have not seen cable television rates drop yet, but I think that will happen as their service choices improve.

Kagan on Sony Ericsson earnings

Sony Ericsson rode the horse of the low cost, low technology offerings during the last several years and that had worked for them until recently. All of a sudden the low end, more basic phones are not selling as well as they once did. All of a sudden the higher end phones like the iPhone, the Blackberry, the Treo and assorted others are hitting the sweet spot. Unfortunately that is not a space that Sony Ericsson focused on.

This is not a forever type problem for Sony Ericsson. They can focus on devices that are hot and jump back into the market during the next few quarters if they are successful.

Unfortunately we have not seen much movement in that direction yet.

There is nothing wrong with the handset market. If companies can zig and zag and match the changing industry everything is fine. Nokia reported some weakness, but continued growth of at least 10%. They see the market a slight bit stronger instead of weaker in the months to come. That is opposed to Sony Ericsson which should see continued weakness for the next several quarters.

Lets see how quickly Sony Ericsson can make the proper adjustments in the handset market to recover.

Kagan on Nokia earnings for 2Q

Nokia had great earnings in the second quarter which was a surprise. It looked like the cellphone marketplace had slowed due to a variety of issues including the US economy. However Nokia surprised with a strong quarter.

This should have a good reaction among other handset makers like Ericsson.

We are expecting slowing sales among more basic phones and a higher growth curve among smart phones. While smart phones continue to grow strong, the surprising part is so are the basic phones, for now.

The price of cell phones is dropping around the globe. This increases earnings and profits pressure on the company.

Nokia sales rose 4% as their profit rose 8%. Their share of the global cellphone market for handsets rose to 40% from 38% one year ago. They also said mobile devices in the global marketplace could grow more than their previous estimate of 10%.

Countries like Asia, Middle East, Latin America and Africa had the most robust growth. North America was up 10% and sales were about zero in Europe.

This is a mixed report, but the company is still selling cellphone world wide at a healthy rate.

Will this continue next quarter? It looks good at this point. We will have to keep our eyes on this.

Kagan on iPhone selling one million phones first weekend

Well that is impressive.

We don't yet know the breakdown of how many phones were sold to new customers and how many existing iPhone customers upgraded, but regardless sales during the first weekend were very impressive.

Apple and AT&T Wireless have sold more than 6 million before this weekend so we are looking at approximately 7 million sales so far in total around the world.

It took 74 days to sell the first million last year, and just three days to sell the first million of this new version. Any way you slice it that is very impressive.

One year ago it took 74 days to sell the first million iPhones, but they were to the US market only. This time around there were several countries involved so hitting one million in less than 74 days was expected, but in three days, that amazing.

There is something magic about anything with an Apple and AT&T Wireless on it. Much of the value of this version 2 iPhone comes from AT&T Wireless with their faster network. This is what customers have been waiting for.

It will be interesting to see how long this robust sales cycle will continue and when it will start to level off. I think selling the first ten million of these phones, globally, by the end of the year is do-able.

Kagan on new iPhone particulars

Today I got email from both AT&T Wireless and from Apple talking about the specifics of the new iPhone going on sale next Friday morning June 11. Prices, features and even a video to watch online. They are getting ready for a big rollout, again.

Last years iPhone launch was an amazing blowout. Both AT&T Wireless and Apple learned quite a bit from that experience. They want to keep to parts that worked well, and fix the parts that squeaked.

I think both AT&T Wireless and Apple are expecting another blowout this year. I tend to agree. But there are some interesting questions we will have to follow as it is launched.

Last year the iPhone created the category. They had no competition. All eyes were on iPhone. Now, one year later we see the second generation iPhone ready to be launched, but the category is one year old and there are plenty of competitors in the marketplace.

Sprint just launched their Instinct phone by Samsung a few weeks ago and it is great. This gives Sprint the ability to compete. Verizon Wireless also has a device to compete, but is their first generation that was launched a while ago. Their next generation will be better. Every generation of this new phone keeps getting better.

This new category of phone is going to be followed closely again this year, but there are a number of competitors offering phones which will delight the customer.

But customers who want an actual Apple iPhone can only get it from AT&T Wireless. They are the only provider for the next few years.

The new iPhone looks very similar to last years iPhone. There are some important improvements. One is the network. This new iPhone users AT&T Wirelesses 3G network. That will speed things up for the user. Speed was one of the only real complaints I heard about during the last year.

There are a variety of either new or improved features. I think the average user will want to upgrade. That is the question. How many of these new iPhones will be sold to people who bought the first iPhone last year? There will be some. The question is how many.

That is the difference between iPhone and another cellphone. The iPhone customer is an Apple customer and they are a different breed. They always want the newest version of anything Apple puts into the market.

A little over a week to go. Can't you just feel the energy in the marketplace building! Buckle your seatbelt. Here we go again.

Kagan on Virgin Mobile USA acquiring Helio

Virgin Mobile USA has had a strong history of growth over the last several years. However that growth has slowed over the last several months. The company is updating their handsets as it faces renewed competition from major competitors entering their market.

On Tuesday of this week Virgin Mobile USA unveiled their unlimited offering. This should help them secure their customer base.

Now they acquired Helio. This makes sense for Virgin Mobile USA. This will give them a new base of customers and revenues with more advanced services. The next question will be, can they hang onto this asset. If they can hang on to this group of customers and revenues then they will be ahead of the game.

This acquisition should help them mature their offerings with more advanced handsets and networks and customers. This will help them offer more advanced services to the youth market and maybe to help them focus on a more mature group of customers with higher monthly bills.

Virgin Mobile USA intends to continue focusing on the youth market as their target. This acquisition of Helio will help them offer a more integrated product suite to more advanced customers.

As the industry continues to consolidate I think there will be a variety of similar acquisition opportunities over the next several years. It will be interesting to see if Virgin Mobile USA continues this acquisition path.

As in the past, companies can grow through such acquisitions if it is conducted well.

Generally speaking they will use the Virgin Mobile brand in most market segments, but I expect them to continue using Helio as a brand in certain smaller groups.

This is one of many steps I see Virgin Mobile USA taking in the next few years. Virgin Mobile USA remains a strong Tier 2 competitor.

Building a wireless business can be difficult. Once Virgin Mobile reached 3-4 million customers they were sure they would continue to do well. Network costs are key and companies need a sizable customer base to have it all make sense. There have been other competitors jumping into the MVNO marketplace during the last several years. Many of those smaller competitors are now struggling. These are all potential acquisitions going forward.

Virgin Mobile USA has gotten to scale and is now doing well. I think we will start to see more of these kinds of acquisition over the next few years.

Kagan on Sony Ericsson's poor quarter

In today's marketplace some wireless competitors are doing really well, but at this time Sony Ericsson is not one of them.

This is not something that has to continue, but they have to make some changes going forward.

The marketplace has two sides. One is simple handsets. The other is the more advanced handsets that do everything we have been hearing about.

Companies like Apple with their iPhone and Samsung with their new Instinct have been doing very well. These are devices that capture the imagination. These devices have quite a bit of growth potential ahead.

Traditional handsets are not as exciting and especially in tough economic times we see sales slowing.

Sony Ericsson mostly makes basic handsets. We have not heard of their handsets in the news. They need to expand their line to include what customers are buying today.

There is plenty of change that is still coming in wireless. We are in the early innings of this game. There is still time for Sony Ericsson to shift gears and be a leader.

Lets see if they do it.

Kagan on Sprint Instinct first week sales record

Sprints new Instinct phone is off to a fast start.

Sprint unveiled the new Instinct phone a few months ago at the CTIA show in Las Vegas. It looked like a very good device.

Haven't seen one since until it was launched last week. I have been using one of the devices for a few days and it is a very advanced wireless device where you can watch live television, movies, take pictures and videos and email them or upload them, an excellent GPS to keep me from getting lost, web browser, great touch screen and more.

I don't have to explain what it looks like because everywhere you look you can find ads for this device.

Every once in a while a device captures the imagination. Last year it was the Apple iPhone. This year it may be the Sprint Instinct by Samsung. It will be interesting to see how the new Apple iPhone does in comparison.

Sprint just announced after the first full week of sales, the Instinct has sold more than any other Sprint EVDO device in the first week. That is a great start. Now we have to see if the numbers stay that strong going forward.

This is going to be a very interesting summer.

Kagan on RIM quarter and future

RIM Blackberry is still one of the hottest devices on the market today. Newer devices to existing customers, plus new potential customers around the globe keep RIM a very successful player.

The future still looks bright for the company, but there are also new competitors that could upset the apple cart.

Apple with their iPhone is a big threat to RIM with their Blackberry. There are assorted new competitors like Sprints new Instinct by Samsung which are aimed at the Apple iPhone and the RIM Blackberry and the Palm Treo and Centro.

We have already sold about 260 million cellphones in the US marketplace and there are only 300 million Americans to market to. These smart phones will capture a bigger share of the market as we go forward.

RIM hit a speed bump which has affected their stock price, but if we look out a year and beyond I think the company will continue to do well, although competing fiercely with new devices and competitors.

The segment RIM competes in is going to get white hot during the next few years.

Kagan on T-Mobile home phone service

T-Mobile is rolling out their home phone service addition to their regular wireless service. This enables users to use T-Mobile for both home phone service as well as wireless service. This looks like a simple VoIP connection over a high speed internet line.

Quality of calls over VoIP can vary depending on a number of issues around the country. However T-Mobile is rolling this out on a nationwide basis after a test for the past few months. So apparently they are satisfied with the quality. As the quality becomes more stable this will be one of the core services we will be using at home and the office.

It is important to get this right, because they don't want to upset otherwise happy customers of T-Mobile wireless service.

Today we have roughly 260 million wireless phones in the US marketplace and there are only 300 million of us in the market. New sales are slowing. Carriers are developing new ideas to market.

It will be interesting to see how successful this is. It will give us more of an idea of how ready customers are for this combined service. As we go through the years I think this kind of thinking will work. The question is will the market buy it today.

Kagan on Virgin Mobile unlimited plans

I think if we go out a few years and look back, 2008 will be the year that unlimited in wireless was born.

Following other major competitors like AT&T, Verizon, Sprint, T-Mobile, Cellular South and others Virgin Mobile is joining the flat rate, unlimited pricing model.

The reason is their growth has slowed in recent months, in part due to the unlimited plans offered by their competitors. The question is will this help them?

Having an unlimited plan is a necessary step all competitors need to offer in order to compete for this group of customers. Without this plan Virgin Mobile could have basically written off this very valuable segment of the market.

Virgin Mobile focuses on the youth market. The question is how many of their customers would qualify for this price. However it does not cost them anything to have this plan in the market. And it will help them attract higher spending customers. Does this mean they are now focusing on a higher level of customer? Or just having a plan for the smaller group of high level customers they can attract?

Their handsets are very basic. Probably good for the youth market which they focus on, but not for a more mature customer group. They plan to offer more advanced handsets. That will be helpful to them as the rest of the market continues to get better and sharper. It will be interesting to see if Virgin Mobile starts to grow past the basic youth market.

I don't know if this plan will help them kick their growth back into a higher gear, but it won't hurt them if it doesn't. So either way it is a safe move for the company.

Kagan on Verizon increasing FiOS speed

Verizon increased the speed of their FiOS service. That sounds great, and some day that will be important, but I don't think it will matter that much today.

All the carriers think that faster speeds are needed to compete.

The average customer is very happy with about a 3 Mbps connection. Once in a while they need a faster connection, but most customers would prefer the lower cost at the 3 or 5 mbps speed.

This sounds like the fast speeds offered by companies like Comcast. I think competitors think that is important.

It may be important if the customer doesn't have to pay more for the faster speed. But if they have to pay more, most customers don't need it today.

As the industry continues to mature customers will need faster speeds. Some day these fast connections will be needed. Just not yet for the average customer.

This faster speed won't hurt Verizon, and it sounds great, but I don't think it will really matter yet.

Kagan on Sprint pricing new Instinct phone

Things are starting to get exciting again in the competitive wireless marketplace for the second summer in a row. One year ago we watched Apple launch their new iPhone. This year we are watching the launch of version 2 of the iPhone and several important competitors in this space.

Sprint and Samsung introduced their new Instinct phone at the CTIA show a few months ago. It is supposed to be available for purchase within days.

Last week Apple announced the new pricing for their new iPhone.

Today Sprint announced the price for their new Samsung Instinct phone. The price is lower than the new lower priced iPhone announced last week.

Sprint has really started to manage their business much better than they have in recent years. A few months ago they positioned themselves very well among their competitors with the unlimited plans. Today Sprint seems to have done another great job of pricing their new flagship Instinct phone.

Sprints Instinct will be priced lower than the Apple iPhone. This should help them sell more units of the Instinct, then they would have otherwise. The lower the price, the bigger universe of customers will be able to buy.

I think we can expect Sprint to spend heavily on marketing and advertising this new flagship phone this summer.

This should be a very interesting summer to watch in the marketing of these two hot new wireless phones.

Kagan on new Apple iPhone and Samsung Omnia

What a day in the wireless world. Not only did Apple unveil their iPhone 2.0, but Samsung also introduced their Omnia phone which should be a solid competitor.

APPLE iPHONE

The excitement has been around following the new iPhone, but it was not as much as a year ago. This 2.0 device, while much better than their original 1.0 device is incrementally better, but it does not turn the world upside down the way the original did a year ago. Maybe its because a year ago Apple was not a cellphone company, but now it is, and this is version 2.0 of a device customers are already familiar with.

This phone goes on sale July 11 in 22 countries. This new version of the iPhone is faster on the 3G network, and the phone will have all sorts of new features. Apple talked about many of these new features, but many others will be introduced when the phone hits the streets on July 11.

These phones will be priced starting at $199 which is a big surprise compared to last years higher prices. This is the price we expected for the first generation phones that may have been left over. This means the phone will be more attractive to a bigger part of the wireless universe.

The device has a GPS feature which helps users get around. The feature should look good on the big screen.

One interesting thing, Apple CEO Steve Jobs when introducing this new device to the work did not hold one up for us to see. That is strange. Does that mean it will look different than what we were expecting?

There are still plenty of details that we will be surprised about when it comes out.

SAMSUNG OMNIA

Taking advantage of all the media attention Samsung introduced their Omnia. This looks like a hot device. Then again during the past year we have seen many new hot devices introduced by different manufacturers. This is good news. These devices with big screens that make it easy to do everything and that look hot are still selling like crazy even in the weak economy here in the US.

Some competitors are not actively in this market yet which is surprising since this is the growth sector right now.

This Samsun Omnia has a 5 megapixel camera, GPS and wi fi connectivity among other features which should make it a popular choice. We see many of the major manufacturers move into this smart phone area.

RIM BLACKBERRY

Rim Blackberry has its first touch screen device coming out soon too.

This looks like it will be an exciting summer, fall and winter with all these new devices start to compete.

We'll keep our eyes open

Kagan on Verizon Wireless and Alltel deal

Does it make sense? Probably.

The marketplace has gone through enormous change during the last year or so.

Alltel became a separate wireless company. At the same time the economy started to boil. That left the new owners of Alltel stuck with the property. At the same time one part of the rapid growth in wireless, new customer sales, is slowing because there are already 260 million handsets in the marketplace.

That means in order to grow wireless carriers have to not only continue doing what they have already done, but also focus more on winning business in the marketplace from their competition, and on acquisitions.

We have already seen several big mergers in the wireless industry in recent years. Then it cooled down. That means there are fewer companies left to acquire, but even with that said I don't think we are done yet.

Alltel is part of the Tier 2 category and there are several other companies in that space that could also be part of this next wave of acquisitions.

This deal would help Verizon Wireless grow by acquiring a new customer base. We have seen Verizon do similar deals in the past including the acquisition of MCI and one thing we have learned is they don't like to overpay. Not that it matters much anymore because they are all so big, but this deal would give Verizon Wireless the number one spot in the rankings.

Could we be seeing the beginning of the next wave of consolidation in the industry? Stay tuned.

Kagan on Microsoft announcement at the GSMA conference in Atlanta

I was attending the GSMA Mobile Innovation Marketplace - Americas in Atlanta today. The GSMA moved their main office to Atlanta.

Microsoft is playing an integral part in this conference. This is a wireless conference. Companies that use GSM as their network standard like AT&T Mobility and a variety of other smaller companies. GSM is a network standard for much of the worlds wireless networks. Most companies at the show are small companies with new ideas. This show lets small companies mix and mingle and spend time with larger companies like AT&T Mobility and Microsoft.

Microsoft? Yes.

Microsoft has been venturing into the telecom space during the last few years. When you visit a cellphone store and look at all the new handsets, check out the smart phones. A growing number have a Microsoft operating system.

This is an important new area for Microsoft which most people know as a computer giant.

Today Microsoft announced their Connected Services Accelerator Program which are projects designed to encourage the many smaller companies with big ideas to commercialize their services and make them available on Microsoft operating systems.

Most of the killer ideas started from small companies. Microsoft wants to encourage more of this kind of activity.

If Microsoft wants to be an important player in the wireless space this seems to be headed in the right direction.

Today when you say Microsoft most people think computer operating systems, but tomorrow the company hopes you will think of other businesses like wireless.