Banking on LTE for the Long Haul
Micro carrier MetroPCS was recently predicted to be one of the 10 brands that will fail within a year by 24/7 Wall Street. MetroPCS is joined by some big names on the list of organizations presumably sounding their death rattles: American Airlines, RIM, Suzuki, Avon, and the Oakland Raiders are some of the brands sharing the undesired spotlight.
24/7 Wall Street produces an annual list, which it arrives at by a variety of factors, including a "rapid fall-off in sales and steep losses" and "operations with rapidly withering market share." It's the latter that has 24/7 Wall Street picking MicroPCS to crash and burn ignominiously. Shares have dropped from a 52-week high of $17.84 to $5.86 — even though the company had a reported 9.5 million subscribers by the end of the first quarter.
On the one hand, the fact that BlackBerry company RIM is on the list probably wouldn't surprise anyone. Their struggles have been rather public, and just yesterday it was reported that the company might be splitting its handset division from its messaging division, and maybe even selling it.
In other disastrous news for the company, Morgan Stanley downgraded RIM's stock significantly (to a target price of $7), and as a result the company's shares plummeted to a 9-year low. Downsizing is thought to be RIM's only hope. RIM shares have lost 98% of their value since 2008, and just to break even on the expected sales volume of their BlackBerry and other devices, RIM would have to slash 90% of its workforce. Ouch.
I'm not so sure that things are quite that dire at MetroPCS, which also happens to be the 5th largest facilities-based wireless carrier in the US. The company does have significantly constrained spectrum resources, which is part of the reason it's pushing LTE so hard. In fact, MetroPCS is hanging its hat on LTE, and growth has been slower than desired (gaining just over 130,000 subscribers in the first quarter) — another reason 24/7 Wall Street has trumpeted its demise.
Still, I'm not sure anything definitive can be said one way or the other until the MetroPCS LTE network expansion (projected for the end of the third quarter) is complete. The company has a lot going for it, and forward movement is always a positive sign.
For instance, in the beginning of June, MetroPCS introduced the Huawei Activa LTE smartphone (the first Huawei 4G LTE phone in the US) for just $149, which is the first of several affordable 4G LTE smartphones MetroPCS is rolling out in a back-to-school push.
The Huawei Activa is an Android 2.3 Gingerbread phone with a 3.54-inch touchscreen and a 5-megapixel camera. It's also ineligible for an Android 4.0 upgrade, which might count against the carrier when it comes to luring new subscribers. Still, the Activa is $100 less than the next cheapest MetroPCS LTE offering.
According to Wireless Week, the MetroPCS strategy is to draw customers off of its legacy CDMA network and on to its LTE network with inexpensive LTE MetroPCS cell phones. The new MetroPCS LTE phones — the company plans to release "three or four" more low-priced models — are expected to be priced under $150.
FierceWireless reports that when its LTE network expansion is complete, MetroPCS expects to have 102-104 million pops to support its (hopefully growing) LTE user base. (LTE subscribers currently represent about 6% of MetroPCS consumers.) Plus, the flat-rate model long-followed by MetroPCS and its rival Leap Wireless (Cricket) has proven to be the winning model, as the nation's major carriers also look at dropping minutes plans and treating voice as data.