Posts Tagged ‘Apple SIM’

Happy New Year, everyone. Welcome 2015!

After taking a break in Dec, I decide to start the year with a casual discussion about 2015 predictions in wireless, IoT markets. Some are my interpretations of other people’s predictions.

1. T-Mobile CEO Shots at Rivals in His 2015 Predictions

source: T-mobile newsroom

  • “AT&T will find new ways to cause their customers pain [in 2015] – especially those still on grandfathered unlimited plans,” predicts T-Mobile CEO John Legere, feisty as ever while making his 2015 predictions. The FTC recently sued AT&T for throttling the data speeds of unlimited plan users. Legere said, AT&T will continue to miss the important step – “which is to stop punishing their customers with domestic overages and instead get rid of them.”
  • He isn’t any kinder to Verizon, predicting Big Red will “keep trying to baffle American wireless customers with BS promos, like the one they did this year telling customers they could get a free iPhone 6 (don’t forget to read the small print!), as well as misleading advertising about everything from coverage maps to device trade-ins.”
  • As for share-losing Sprint, Legere sees them “continue throwing out campaigns, offers and promotions – anything to see if it sticks.” By mid-year, he expects the carrier to “realize they can’t slash their way to growth and start to invest in their network and customer care.”
  • One positive prediction for the industry in general: Legere forecasts 2/3 of devices sold next year by carriers will be subsidy-free, up from 41% in 2014. The margin improvement that has come from moving customers from subsidies to early-upgrade and installment plans has been a silver lining for the industry during its price war.

Original post by Legere on T-mobile: link


2. Significant Slow Down in Smartphone Shipments

Research firm IDC published a report (Dec 2 2014) which expects total smartphone shipments in 2014 to reach $1.3 billion units, representing an increase of 26.4% over 2013 (good news). But slow down to year-to-year 12.2% growth in 2015 with only 1.4 billion smartphones to be shipped. Some analysts even predict single digit growth in 2015.

Per IDC, this slower growth will continue for the next several years, with unit shipments approaching 1.9 billion units in 2018, resulting in compound annual growth rate (CAGR) for 2014-2018 to be 9.8%. Smartphone revenue will be hard hit by the increasingly cut-throat in pricing. Worldwide average selling price (ASP) will drop from US$297 in 2014 to US$ 241 by 2018.

This slow-down is bad for every smartphone manufacturers, more so for Android OS phone manufacturers.

IDC analyst Ramon Llamas said in a statement. “Apple’s approach with premium pricing ensures a growing portion of overall revenues despite its declining market share. Meanwhile, Android’s multi-faceted approach–with forked versions and low-cost Android One strategy–will produce mixed results, yet it allows deeper penetration into emerging markets. That can lead to additional pressure on its vendor partners, who will need to seek greater differentiation in terms of devices and experiences in the hyper-competitive smartphone market.”

As shipment volume slows, chip and smartphone components suppliers will get impact in 2015. IHS estimates global chip sales to be 3-5% growth in 2015 after it rose 9.4% in 2014 ($353B).

For those exposed to Apple and rising Chinese 4G phone sales (tailwinds), revenue should still be trending up. However, investors should concern about a ‘coming deterioration in pricing and/or margins’ for most smartphone components suppliers. Bankruptcy filing of GTAT, a supplier for Apple’s sapphire glass, hopefully is just an one-off bad example.

(I wrote about the key iPhone suppliers in my previous post — link)


3. Marriage of IOT Software and Hardware

2014 is a year for IoT and wearables. Many smart device (healthcare, infotainment, home security, remote control) startups emerge and doing very well, such as Jawbone, Fibit, Misfit, Nest (acquired by Google).  But we haven’t yet begun to see the potential of this category.

Transparency research says global wearable tech market will grow to US$5.8 billion by 2018.  And though we won’t see its full impact in 2015, I believe that the key winning IoT strategy is to build an ecosystem combining software and hardware together.

source: infocus.emc.com

It makes lots of sense because business with hardware alone cannot generate decent profits, missing the downstream revenue and customer interactions. For example, the world third largest smartphone manufacturer – Xiaomi — is expanding its footprint into more profitable Value-Added-Services (VAS) such as mobile security, well & fitness, media content, and cloud/IaaS areas. Xiaomi claims that it is selling phones at costs while making good portion of its profits from accessory and VAS.

On the other hand, business with software alone does not always own the end-customer experience beyond apps. Customer retention, stickiness is an issue. Imagine end-users can easily switch their default search engine, browser, and payment apps on their phones. Therefore, giant software companies such as Google, Facebook, Baidu, Alibaba, Amazon, have been acquiring (or developing their own) smart device, IoT hardware, robotic/drone companies.

Without a doubt, Apple is the best company which has built a harmony of hardware and software together.  Apple Pay will bridge the gap between online and offline world commerce while Apple Watch will mark the tipping point when wearables go from niche to mainstream.

IDC estimates Apple iOS share will stay around 13-15% worldwide in 2015. Mobile payments, Apple Watch, and IBM/Apple partnership are the driving forces for Apple in 2015.

(I discuss in detail about the implications of Apple Pay and Apple SIM in my blog)


I do look forward to the CES 2015 event next week. Besides seeing what’s new and cool tech trends for this year, it kind of sets the stage for the area of growth and investments for the rest of the year. Hope to share more insights from the show.

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Many analysts talked about disruptions to the global payment industry brought by Apple Pay (my previous blog on Apple Pay) but less coverage is about Apple SIM. Like how Apple Pay virtualizes the credit cards inside smartphone, Apple SIM eliminates the need to store a carrier-specific identification in a SIM card. It revolutionizes the way consumers shop for carrier plan and consume data across devices, and even make financial metrics (like APRU) obsolete for carriers. Incumbent industry giants should be worried about their business models and strategies in near future.

Apple SIM — 10 Times Easier to Switch Carrier Without Changing Devices

A decade ago, for international travelers, carrying multiple phones was very common in order to make calls in different countries without expensive roaming fees.  Few years later a mobile phone, which is capable of storing multiple SIM cards, was invented. It became so successful and evolved into a standard for many mobile carriers, especially those price-sensitive market in SE Asia.

What’s different now is Apple last week revealed the iPad Air 2, and along with it a new way to handle SIM cards. According to Apple, the new Apple SIM, a nano SIM card that allows the cellular models to switch between multiple mobile carriers without changing the actual card.

You no longer need to choose which carrier model when you purchase iPad Air. This new card gives iPad Air 2 owners unprecedented flexibility when it comes to choosing an LTE (4G) service provider. “Whenever you need it, you can choose the plan that works best for you — with no long-term commitment,” explained Apple. ” And when you travel, you may also be able to choose a data plan from a local carrier for the duration of your trip.”

At launch the card supports AT&T, Sprint, T-Mobile, and UK carrier EE. No word on why Verizon isn’t on the list.  Given that the iPad Air 2 supports 20 different LTE bands, similar to the iPhone 6 and 6 Plus, we can expect more international carriers will sign on.

Apple SIM creates a future problem for carriers. Current Apple SIM technology is believed to store the SIM registration in carriers’ data servers, not on the device. Apple SIM can change the paradigm of existing carrier model. Future Apple devices can allow multiple users to log into a iPad and then sign up an 1-hour carrier data plan with a specific user id. It’s similar to the way we use desktop and make connection to WiFi.


Cut the Carriers Off Mobile Payments 

The mobile carriers have seen this episode back in 2006/2007 when Apple negotiated deals with the mobile operators to launch the iPhone. It granted periods of exclusivity in exchange for having the mobile operators invest massively in things that Apple wanted to do, such as marketing, control over subsidies and even a minimum order commitments (which costed Sprint a lot). By the time the exclusivity periods ended, Apple devices were wildly popular and Apple had amassed enough bargaining power to cut even better terms with those same carriers without giving them any ability to fight back.

Seven years later, when it was time for Apple to consider payments, the carriers were completely left alone in the dark and didn’t even have a seat at the table for discussions over Apple Pay. The carrier billing, carrier-backed Isis mobile payment system, and many other efforts effectively become long-gone dream, fruitless and irrelevant.

Pay-Per-Use Becomes Standard, Hard to Retain Subscribers By Carriers

Simplifying the product line instead of shipping carrier-specific versions of iPhones and iPads seems like a huge benefit for Apple.  Although this move is limited to iPad Air 2 and the iPad Mini 3, we would expect Apple will extend this Apple SIM to other Apple products, including iPhone. In theory, you can jump between carriers based on the one that’s offering the data plan for the price you want, and you never have to swap out the SIM card to do it.

For now, it’s LTE data-only. It may evolve into voice and text also. Even it’s just data, consumers are smart enough to make calls using data connection (like WiFi or Voice-over-LTE) which skips the restrictions on number of minutes completely.
What it means is that post-paid and carrier lock-in plan will becomes history.  Pay-per-use model (usage metering) will become the future standard.   This also means the future mobile carrier competition will become more intense.  New carriers or MVNO (like Virgin Mobile) may emerge to offer very competitive plan to persuade subscribers to switch carriers.  Carriers will has less incentives to offer subsidized phone plan.
Eventually, it’ll be a competition on best quality services and lowest prices based on locations.

Multi-User on iPad >> APRU Not A Right Performance Measure 

Average Revenue Per User (APRU) is a common acronym that carriers used internally and externally reported during each earning call.  APRU is used as one of the financial measures to see  how much money spent per connection (i.e. SIM card).

However, the APRU is declining quickly because the incremental revenue added by additional user to your family plan is less than the first basic subscription plan.   The  APRU decline phenomenon proliferates when you extend to friends, co-workers in the Shared Plan world and when you purchase bundled services with voice, TV, home phone, and security together.

Since APRU decline reflects trends at a SIM connection level rather than the ‘real’ average consumer spending, some carriers introduce new measures, such as APRS (subscriber) and APRA(account) to help evaluate performance. As indicated by the GSMA chart below, APRS is increasing while APRU is declining in the USA.

In the case of Apple SIM, carriers have to allow a subscriber access their data service across multiple devices or multiple users access their data service in a single device. This makes a SIM connection no longer the accurate identification of an unique subscriber or account.

All these aforementioned changes to APRU definitions and calculations require great attention from mobile carriers. Question for carriers: how to evaluate their business performances accurately in the context of their current business and forward-looking market trends.

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