MetroPCS (NYSE:PCS) didn’t say much about its 4G rollout in its Q4 earnngs conference call today, but from what little CEO Roger Linquist did say we can gather Metro plans to extend the same budget prepaid business model that’s served it so well for 2G voice into the new 4G mobile broadband service.
“The world is moving toward broadband services,” Linquist said. “We believe there can be a renaissance in the no-contract wireless service segment as 4G becomes readily available.”
MetroPCS’s business model for its new long-term evolution (LTE) network seems to resemble that of Clearwire’s (NASDAQ:CLWR) for WiMax: bulk broadband access by the month with no contract and no device subsidy. Verizon Wireless (NYSE:VZ, NYSE:VOD) and AT&T (NYSE:T) haven’t revealed any details about their future LTE service plans, but more likely than not they’ll extend their 3G mobile contract plans to 4G.
The big question is whether MetroPCS, AT&T and Verizon will cap data consumption or let customers have free reign over their fat new IP pipes. Clearwire, so far, has made no move to cap data consumption, though its terms and conditions reserve the right to crack down on excessive usage by throttling back broadband speeds or canceling service. LTE and WiMax network deliver data far more efficiently and far more cheaply than 3G networks, but there are limits to that efficiency, which the first 4G operators are starting to feel out.
In Russia, WiMax operator Yota reported a single user consumed 1.82 Terrabytes of data in the month of April, but rather than express concern about excessive use, Yota bragged about it. On the other hand, Yota’s average consumpton was 10 GB a month, only double the 5 GB that most US operators cap their 3G mobile broadband plans at. On Wednesday, Clearwire revealed at its Q4 earnings call that its customers consume an average of 7 GB per month. At least on the WiMax side, 4G operators seem to be taking the approach that, while there will be some heavy-volume users, everything comes out in the wash–the cost of delivering supposedly unlimited service to all subscribers on 4G network is still far cheaper than delivering it over a 3G network.
If heavy-volume use become the norm, though, 4G operators may reconsider that strategy, offering either tiered 4G plans or instituting caps network-wide. If MetroPCS does decide to cap data, there’s a model in the prepaid market it can follow. Sprint (NYSE:S) subsidiary Virgin Mobile is offering 3G broadband access the same way it offers prepaid voice, allowing customers to purchase cards with bundles of megabytes and gigabytes good for one month. If customers go over their allotment they can top off their data plans much like they top off their minute buckets. A service from Metro would probably look a little different since it doesn’t bill like the traditional prepaid provider, but it could easily offer a monthly 4G data plan with a bundle of gigs that customers could supplement if they exceeded their limit.
We probably won’t know either way until MetroPCS launches its LTE network later this year. The operator, so far, has said little about its 4G plans, revealing only Ericsson (NASDAQ:ERIC) as its infrastructure providerand Samsung as the supplier of its first LTE handset. In a recent interview, Linquist said that Metro’s primary goal is to use LTE to usher in a new wave of smartphone data services and, to that end, plans to have three to five dual-mode LTE-CDMA phones in the next 18 months. Unless Samsung far exceeds industry expectations, though, we won’t see the first LTE smartphones until 2011, meaning any commercial service from Metro will have to be data-card driven.
As for Metro’s Q4 earnings, there weren’t any big surprises. Metro revealed its subscriber numbers earlier this year, and its revenues and earnings met or exceeded analyst expectations. Metro’s average revenue per subscriber remained flat at $40.41 per month, despite growing competition and downward price pressure in the prepaid market. In January Metro unveiled a new “Wireless for All” unlimited plan that undercuts Boost Mobile’s $50 tax-and-fee-inclusive plan by $10. According to Bernstein Research senior analyst Craig Moffett it won’t be until its Q1 earnings report that we see the full effect of the escalating prepaid wars on Metro’s performance.
“MetroPCS’s fourth quarter results are more a picture of a fighter getting ready for battle than they are a picture of a fighter mid-fight,” Moffett said in a research note.
The other cell phone providers should be nervous if MetroPCS gets their hands on 4G converage. They will lose all kinds of customers.
They already have coverage. They have dongles and encryption. Samsung and Ericssion made history with the first interoperability. Think of it like this.
Ericsson will provide samsung phones with the correct language and data to program samsung phones. Metro PCs will be the first to roll out 4G with LTE because they are comparatively smaller then verizon who will be second. So atleast here in miami more and more people are learning that metro isnt just the cheap alternative…. careful AT&T.