While most will busy themselves with decorations and gifts this holiday season, U.S. carriers and handset makers likely will be caught up in fierce battles over pricing, services and-ultimately-customers. As Halloween makes room for Thanksgiving, wireless executives need to gird themselves for perhaps the most contentious selling season yet.
The main event will be between Verizon Wireless and Cingular Wireless L.L.C. Verizon added a staggering 1.9 million new customers during the third quarter, while Cingular only added 867,000. The numbers bring Verizon to within 3 million customers-49.3 million vs. Cingular’s 52.3 million-of stealing the No. 1 position away from Cingular.
Thus, Cingular likely will pull out all the stops during the critical fourth-quarter holiday shopping season to stem Verizon Wireless’ gain. Verizon Wireless on the other hand will pull the same levers to ratchet up its customer acquisitions. Handset makers, content vendors and the rest of the industry have a vested interested in the outcome.
“I’m expecting to see Cingular go really aggressive in the fourth quarter,” said Brad Akyuz, a senior analyst for mobile phones with research and consulting firm Current Analysis. “They’re probably going to push with aggressive handset prices and promotions.”
Akyuz said Cingular probably will match Verizon’s pricing plans as well as its handset promotions. Verizon relies largely on sales of its family plans and buy-one-get-one-free handset deals-a tactic Akyuz said Cingular likely will adopt.
As for the handsets themselves, the battle lines will be drawn around several key gadgets, Akyuz said. Cingular recently announced an EDGE-capable BlackBerry from Research In Motion Ltd. The carrier also has a deal with Motorola Inc. to sell the company’s iTunes-capable Rokr. Further, most in the industry expect Cingular will soon launch Motorola’s Slvr-a candybar-style version of its wildly popular Razr device.
It’s unclear exactly what handsets Verizon will bring to bear on the holiday season, but most analysts expect the carrier to introduce a CDMA2000 1x EV-DO version of Motorola’s Razr. Motorola executives have discussed plans to sell a CDMA Razr-one that would feature a megapixel camera and other advanced features-but the company has declined to provide specifics. And even if Verizon does manage to score a CDMA Razr, Akyuz said the device may face its own set of risks.
“The coolness factor of that phone is sort of fading since the Razr has been out (with Cingular and other GSM carriers) for more than a year,” Akyuz said.
Aside from handsets, Cingular and Verizon will battle over services and prices. For example, industry watchers expect Cingular to launch a push-to-talk offering before the end of the year. Akyuz said PTT likely will fill out Cingular’s product portfolio but probably won’t contribute significantly to the carrier’s customer-acquisition efforts.
A wild card is Cingular’s planned 3G launch. The carrier repeatedly has promised to offer W-CDMA/HSDPA services in 15 to 20 markets by the end of the year. The services will compete directly with Verizon’s recently introduced EV-DO network and Vcast service.
“They (Cingular) have to find a compelling service offering to complement that 3G rollout,” Akyuz said, pointing to Sprint Nextel Corp.’s new full-track music download service, which the carrier introduced for its Power Vision EV-DO network.
For Verizon, the carrier likely will continue to push its Vcast data service and its family-plan offerings.
“Verizon Wireless will be at the leading edge of music and media,” predicted Chris Ambrosio, an analyst with research and consulting firm Strategy Analytics.
While the title fight between Cingular and Verizon rages, other wireless players will be competing for the rest of the market. T-Mobile USA Inc. recently introduced a calling plan that puts it in direct competition with flat-rate carriers like Leap Wireless International Inc. and MetroPCS Inc. Meanwhile, Sprint Nextel is pushing its new Power Vision service and continues to work on its wholesale operations.
The outcome of such carrier battles will directly affect the rest of the industry’s players. GSM handset makers like Sony Ericsson Mobile Communications L.P. will root for Cingular, while CDMA supporters like LG Electronics Co. Ltd. will support Verizon’s bid for No. 1. Infrastructure vendors and content companies too will have stakes in the game.
Although this year’s holiday season will be critical-more phones are sold during the holidays than at any other time of the year-the race will continue on through the coming years. And carriers, vendors and others will need to position themselves for the market’s future.
In a new study released today, research and consulting firm Yankee Group forecast that worldwide wireless operator revenues will surpass $698 billion by 2009, and that data services will account for around 21 percent of the total. The firm said 2.4 billion individuals will subscribe to some kind of wireless service in 2009.
For the United States, the firm found prepaid services should gain ground over the next four years, from 12 percent of all wireless subscribers this year to 23 percent in 2009. As for data revenues, the firm said that 6.8 percent of U.S. carriers’ revenues come from data today, but that number would grow to 15 percent in 2009.
“I think it’s fair to say that data growth has been disappointing,” said Keith Mallinson, a Yankee Group analyst.
And exactly how will those revenues evolve? Market research firm InCode predicts the wireless industry will see movement in digital music, mobile TV, Voice over IP and other high-tech areas. The firm outlined its expectations in a “Top 10” list of predictions for 2006.
Among the firm’s forecasts: A digital music innovator like Apple Computer Corp. will launch a mobile virtual network operator service focusing solely on mobile entertainment services. The firm also expects that mobile TV will fail to garner interest, and will remain a relatively niche service. Further, InCode said a major carrier like Sprint Nextel will drop its direct marketing tactics and focus exclusively on wholesale sales. The firm also predicts a Chinese wireless company will attempt to enter the U.S. market through some financial tie up or acquisition.
“We see two major developments in the market,” said Jorge Fuenzalida, director of InCode’s technology and strategy group. “First, new entrants are challenging existing business models, especially in mobile music and mobile TV, which is increasing market competition. Second, network operators are working fast to monetize 3G networks, which cost billions of dollars to deploy. If these operators can better align device design with market-leading applications, they can be at the forefront of a smarter, more nimble wireless industry.”
