Submit-Election Day greetings from North Carolina the place we’re nonetheless counting votes.  I included this display screen shot of my YouTube TV industrial break as a result of it has been a rarity within the Carolinas since Labor Day.  The watchdog web site studies that over $250 million was raised for the 2 Carolinas Senate races alone.  That interprets into plenty of adverts, and my associates at Constitution (the predominant cable supplier within the Carolinas) are very grateful for the bump.  TV watchers are equally grateful that November 3rd has come and gone, and we are able to return to native auto dealership, quick meals and Black Friday(s) adverts (with much less minor key music within the background). 

This week, we’re rounding up wi-fi business earnings with a have a look at T-Cellular’s sturdy 3Q report.  We additionally can be together with the newest iPhone 12 Professional chart and speak about what to look out for with iPhone 12 Professional and iPhone 12 Mini demand.

The week that was

Because of what seem like Election Day outcomes of a Republican-controlled Senate and a Democrat-controlled Home, the markets broadly rallied, with the consensus opinion that President Biden and Senator McConnell would be the new “energy couple” in Washington.  The Fab 5 added a whopping $658 billion in market capitalization this week (greater than the mixed capitalization of AT&T, Comcast and Verizon), and are undoubtedly on monitor to surpass 2019’s document development. 

12 months up to now, the Fab 5 have added practically $2.6 trillion in worth, whereas the Telco Prime 5 have added nothing (besides longer debt maturities and barely larger dividends).  Over the previous two years (if the present values maintain), the Fab 5 can have added over $4.1 trillion in market capitalization or about $19 for each greenback gained by their telecom counterparts.  The present distinction in complete market capitalization is about 8.3x – just some years in the past, that quantity was under two – see this Brief from the start of 2016. 

Whether or not the Biden administration is kind of pleasant to those trillion-dollar Silicon Valley firms is determined by their strategy to anti-trust lawsuits making their approach by way of the courts (newest from the New York Occasions on the Fb continuing here and the Google continuing here).  Senator Elizabeth Warren could possibly be one of many key voices right here, and he or she’s undoubtedly on Legal professional Basic William Barr’s facet on this debate (this 2019 New York Times article lays it out very clearly).  And, with a excessive likelihood that she won’t keep within the Senate (regardless of hypothesis that Biden would restrict his Cupboard to earlier, not present Senators – extra here), a Secretary of Commerce (FTC) place for Warren would permit her to companion with a progressive Legal professional Basic (maybe present New York AG and John Legere not-BFF Letitia James).   That might be one of many worst outcomes for the Fab 5.  Let the parlor video games start!

Two further notes associated to Fab 5 firms.  First, there was an innocuous article in ZDNet this week about Microsoft’s plans to totally virtualize Home windows (here).  When we’ve got written about 5G (unique article right here), our focus has at all times been on functions driving adoption.  {Hardware} enhancements (smartphones, entry factors, in-building millimeter wave) set the desk, however it’s a software program meal.

Our thesis has at all times been that we’re just a few software program upgrades away from this changing into a actuality.  Microsoft, with the Cloud PC venture, affirms this view.  Merely put, virtualizing functions creates a better dependency on constant and speedy bandwidth.  The Cloud PC dream could be to have a considerably higher expertise with minimal native software program deployment.  A virtualized Home windows expertise is the proper complement to AT&T, Verizon or T-Cellular enterprise 5G choices as a result of it standardizes the expertise no matter system display screen measurement and site. 

Think about the cloud PC expertise for all Salesforce, Oracle, and SAP functions.  This has brought about us to change our thesis about in-building community deployments.  Wi-fi carriers, who’ve largely abdicated their function because the on-premise wi-fi expertise proprietor in favor of Wi-Fi offload, at the moment are having their “oh no” second.  Going from 500-600 Mbps in a carrier-controlled atmosphere within the constructing parking zone to regardless of the IT supervisor decides is most economical for a selected enterprise within the 5th flooring convention room means actual {dollars} now.  And it not is confined to YouTube video feeds – with Cloud PC, the corporate’s operations are impacted with out constant, highly effective bandwidth.  With out copious quantities of low-band spectrum (see T-Cellular commentary under), in-building deployments should speed up. 

The place does that 5G connection terminate?  To the wi-fi provider companion edge knowledge heart, in fact, which has a Microsoft Azure occasion able to course of lots of or 1000’s of digital machines.  Wi-Fi will not be useless, however it’s threatened by functions that may be written as soon as for cellular, department workplace, and HQ.  And Microsoft has lots of of billions of {dollars} in money to make sure that their Cloud PC software program is dependable and safe.  One thing to consider as we exit 2020. 

One further Fab 5 merchandise – the iPhone 12 Professional continues to promote amazingly effectively because the iPhone 12 Professional and iPhone 12 Mini pre-orders began final Friday. Right here’s the newest chart (knowledge as of Nov 7 at midday ET):

As we noticed final fall (in October versus November as a consequence of launch delays), the mid-line system availability tends to be constrained over the preliminary launch interval.  Relying on the colour (however particularly Gold), this seems to be to be barely extra provide constrained than 2019.  That could possibly be as a consequence of provide as a lot as demand, however the pending launch of the iPhone Professional Max final Friday didn’t preserve people away from the iPhone Professional.  One attention-grabbing observe versus final week’s iPhone 12 Professional chart is that Verizon and AT&T demand is beginning to choose up for sure colours and sizes.  The delayed demand could possibly be as a consequence of numerous elements, however it seems that constraints are starting to indicate for the iPhone Professional line at Large Purple (and getting extra constrained at AT&T). 

We additionally took an preliminary have a look at iPhone 12 Professional Max and iPhone 12 Mini demand to see if there are any indicators of shortages and it doesn’t but appear like these fashions are experiencing the constraints that we’re seeing on the iPhone 12 Professional.  Our greatest indication of provide constraints can be in two weeks (one full week after basic availability).  

What T-Cellular is doing proper

On Thursday, T-Cellular introduced earnings that beat expectations throughout the board and likewise raised earnings for the rest of the yr.  Their full YouTube earnings name is here and earnings info is here

T-Cellular did many issues proper, however listed here are three that caught our consideration: 

  1. Dash postpaid cellphone prospects are giving T-Cellular a second likelihood.  T-Cellular’s month-to-month postpaid cellphone churn within the quarter was 0.90%, up barely from a pre-Dash 0.89% in 3Q 2019.  Usually, acquired prospects could be keen on “procuring round,” significantly these with iPhones that had been already paid for or off lease.  That doesn’t appear to be the case.  When requested about this on the earnings name, Mike Sievert gave a small indication that T-Cellular’s legacy churn was under the 0.9% stage, however that will suggest that the legacy Dash churn plummeted. 

85% of present Dash units (and practically all iPhones) are appropriate with the brand new T-Cellular community (together with Voice over LTE which is a crucial enchancment over legacy CDMA providers).  Solely 15% of the Dash visitors has migrated.  The remaining prospects are in all probability having fun with higher protection on the legacy community (no new visitors happening to it), but in addition having fun with roaming on T-Cellular’s 600 MHz, 700 MHz and AWS spectrum if their system has these LTE bands.  Financially, it’s vital to notice that T-Cellular’s general improve price was 4.3% within the quarter, so the churn will not be “purchased” with low-cost/ free Android cellphone switching provides. 

T-Cellular is reaching these adjustments even with elevated retailer closures (and certain adjustments in personnel) and with some improve in focusing on exercise.  Treating the legacy community with care is among the classes realized from the Metro PCS integration, and T-Cellular seems to have discovered a profitable method. 

The day of reckoning at all times comes with community migrations.  From Neville Ray’s feedback, it feels like that can come later in 2021 and in 2022 (he implied on the decision that T-Cellular wish to get greater than 60% of the Dash visitors migrated by the top of 1H 2021).  Legacy Dash churn was going to be a carefully watched measure, and it seems to be exceeding expectations to date. 

  1. Legacy Dash enterprise prospects aren’t solely giving new T-Cellular a primary likelihood, they like what they see and are awarding the corporate enterprise.  Once we wrote about crucial merger success elements in the beginning of the yr (see Transient here), we famous that T-Cellular’s integration of the legacy Dash gross sales information was going to be vital.  T-Cellular doesn’t get away enterprise strains of their outcomes, however our guess is that even excluding robust instructional and authorities efficiency, T-Cellular for Enterprise did fairly effectively. 

Mike Sievert was requested a query by Michael Rollins about legacy Dash asset alternatives and his response was telling:

Business Phones, Plans, Wireless Solutions | T-Mobile for Business

“The capabilities that we inherited and that we see on this Dash workforce and a few of the know-how is unbelievable. You actually can’t consider this workforce and its capabilities by the previous enterprise outcomes of standalone Dash. That was an organization with plenty of structural challenges financially. And so, it was straightforward to type of side-eye that operation and assume that it didn’t have a lot to supply. That’s completely flawed. Now that we’ve gotten into it, there’s so many greatest practices that we’ve been in a position to start to undertake into the mixed blended complete. In order that’s very thrilling, together with the workforce.”

T-Cellular is simply starting to know the distinctive worth that Dash’s enterprise gross sales groups deliver to the desk.  If 5G should prolong by way of the constructing (together with millimeter wave as Neville Ray famous in his earnings name response), then who higher to current than a salesman with a decade-long relationship with that company. 

This doesn’t imply that all the property should stay inside T-Cellular’s management.  Dash’s fiber community was largely constructed within the Reagan/ George H. W. Bush period and must be transitioned to Zayo, Lumen, or one other world supplier.  Dash’s Community Imaginative and prescient venture began a decade in the past must rapidly fade with an LTE sundown.  And, as we talked about within the aforementioned Transient, this permits Deutsche Telekom and even perhaps Softbank the chance to increase world capabilities for enterprise prospects.  However T-Cellular inherits experience and relationships that can not be simply employed and have rightly acknowledged their worth.  

  1. T-Cellular is clearly organising new income streams for development with Dwelling Web and TVision to supply a nationwide different to cable.  We predict that this mission is totally different from Verizon (who selected YouTube TV as their out-of-region dwell TV supplier) and AT&T (who is targeted on reclaiming in-region prospects with an AT&T TV + AT&T Fiber promotion). 

Right here’s a technique to consider T-Cellular’s technique (utilizing my very own expertise with T-Cellular Dwelling Web for example): 

  1. Make it straightforward for potential prospects to attempt the service.  No quantity porting with Web or TV providers, so already simpler than smartphone transitions. Many purchasers may even run the service on a “facet by facet” foundation for a month or two, and this provides them time to firmly disconnect from cable. 
  2. Make the service most tasty to present prospects (straightforward addition).  That is precisely what they did with Dwelling Web within the earliest days and are presently going with TV providers.  They would be the most desirous to tolerate early-launch points and likewise present glorious product suggestions. 
  3. Validate service consistency and use this (versus pace) because the cable differentiator.  One of many issues that I’ve realized from my month on T-Cellular Dwelling Web is that my ageing Wi-Fi entry level (the unique Google Dwelling Hub) is working simply high quality.  Our cable supplier always struggled to maintain Zoom video working (a lot in order that I accessed audio by way of my cell phone not my laptop), and my suspicion was “it’s the Wi-Fi.”   T-Cellular Dwelling Web is LTE-based, and the 5G model can be even sooner.  However I’m discovering for two TVs streaming faculty soccer + 2 linked smartphones + 2 linked laptops, 50-70 Mbps down/ 15-20 Mbps up of constant broadband service greater than suffices. 
  4. Attractively worth the service with no contracts or “exploding” provides.  Single-play Web with cable firms (not on contract or promotion) runs ~$60-90/ mo. plus taxes.  Modem charges are often additional.  T-Cellular is pricing entry-level dwell TV + (LTE) Web for $90 to wi-fi prospects.  May Magenta be utilizing the identical bundle device towards cable that Time Warner, Cox, and Cablevision successfully used towards the telcos 15 years in the past (bundle pricing)?  Who will get there first – cable with engaging household plan pricing, or T-Cellular with 2.5 GHz built-in into 200-300 million POPs? Which may be one of the crucial vital questions for 2021. 

There’s little question that T-Cellular might stumble badly with TV.  Previous to Thursday’s earnings name, programmers were fuming that T-Cellular had already violated their retransmission agreements (we recall related grousing when Verizon launched skinny video bundles).  And with AT&T proudly owning CNN, TBS, and TNT, and Comcast proudly owning NBC and different programming, there’s certain to be sparring.

As we said final week, we predict that T-Cellular goes to consider TV as additive to the wi-fi expertise (the $10 Vibe product is especially intriguing).  It needs to be a really engaging product to present and future prospects who need to be entertained with no multi hundred-dollar contract dedication.  And better of all, it needs to be straightforward to promote by way of service and retailer channels.  (How T-Cellular will construct promoting capabilities with present small enterprise prospects is likely to be their subsequent un-carrier transfer – what higher PR transfer to beat the “we’ll be proper again” opening image for this week’s Transient than to function T-Cellular for enterprise prospects in advert slots). 

Backside line:  T-Cellular’s market capitalization is inside $40 billion of AT&T’s for a cause – they’re taking part in offense.  Hitting synergy targets, caring for their legacy Dash smartphone base, rising their enterprise presence, and launching new un-carrier merchandise that benefit from present community deployments are just a few of the methods they’re taking cost.  Little question, there’s plenty of heavy lifting forward as they face the tougher synergy challenges, however the first few months of the merger seem like on monitor.   

Subsequent week, we’ll cowl just a few remaining earnings objects and likewise focus on three new “Up and Comers” (for the U&C June Transient, click on here).  Till then, you probably have associates who wish to be on the e-mail distribution, please have them ship an electronic mail to [email protected] and we’ll embrace them on the record (or they’ll enroll immediately by way of the brand new web site).  Thanks once more for the referrals. 

Keep protected, preserve your social distance, and Go Chiefs!