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T-Mobile Winning Streak Seen Continuing In Q1 Amid Video Promotions

Get your free 48-inch TV. Get your free year of Major League Baseball’s online streaming service. Get your free three months of HBO Now. The nation’s big wireless phone companies —  AT&T ( T ), Verizon Communications ( VZ ), and T-Mobile US ( TMUS ) — are zeroing in on video-driven promotions to grab new subscribers amid slowing industry growth. Although wireless firms continue to be aggressive with promotions, consumers have been upgrading to new smartphones at a slower-than-usual pace. Instead, they’re holding on to older mobile phones after they’re paid off. That trend is expected to highlight wireless results when phone companies report first-quarter earnings, analysts say. Verizon kicks off telecom’s Q1 earnings season on April 21, followed by AT&T on April 26. T-Mobile, boosted by its Uncarrier-branded promotions, is expected in Q1 to again have added the most “postpaid” phone accounts, the subscribers most coveted because of higher spending on data and other services than prepaid customers. Promotional activity is expected to rise ahead of Apple ’s ( AAPL ) iPhone 7 launch, likely in September. AT&T Offering Free 48-Inch HDTV “The wireless market remains intensely competitive and has expanded to video,” said Roger Entner, analyst at Recon Analytics. “The free offers have steadily escalated from free phones to free tablets. “Last year’s big offer was free Netflix or other video services for a year. Now you can get a big-screen TV (from AT&T) just for switching providers.” New AT&T wireless or DirecTV customers can get a free 48-inch HDTV if they buy Samsung’s Galaxy 7 smartphone. Unlimited data plans have returned at AT&T, meanwhile, but only for new or existing pay-TV subscribers. At T-Mobile, customers can now stream video from 50 websites without taking a hit on their monthly data caps. And new T-Mobile subscribers get a free year of MLB’s online video service. Verizon has invested heavily in its Go90 mobile video service. To spur usage of advertising-supported Go90, Verizon no longer counts its own Go90 mobile video service toward subscriber data caps. Separately, mobile users that switch to Verizon get three free months of access to HBO Now, a $45 value. The flurry of video-centric offers coincides with other aggressive promotions. “Promotional activity picked up in mid-February and arguably accelerated through the end of Q1 (March 31),” Citigroup analyst Michael Rollins said in a research report. The fourth of the national wireless carriers, Sprint ( S ), extended its “cut your bill in half” deal into Q1. The promotion offers subscribers that switch from AT&T, Verizon or T-Mobile a 50% price cut on their existing plans. Sprint recently also re-launched a 30-day guarantee for new users. All 4 Wireless Carriers Offer Early Termination Fees So-called buy-one get-one (BOGO) offers have been expanded for Apple’s iPhone 6S and the new iPhone SE, as well as Samsung’s Galaxy S7. And all four carriers have offered up to $650 per line to cover early termination fees if consumers switch service providers. Verizon, which was the last of the four to make the ETF offer, ended that offer on Friday along with its Galaxy S7 BOGO offer. Amid the proliferation of promotions, the consensus view is that T-Mobile’s subscriber-additions winning streak will continue, though Apple’s iPhone 7 remains a wild card. “Binge On and other promotions continue to resonate with subscribers,” Michael Bowen, a Pacific Crest analyst, said in a report. After adding the most postpaid subscriber in 2014 and 2015, T-Mobile has forecast that it’ll add 2.9 million postpaid subscriber this year, at the midpoint of its guidance, which would again lead the industry, analysts say, though would be way down from 4.5 million in 2015 and 4.9 million in 2014. Observers speculate T-Mobile will continue to innovate by soon rolling out data-only wireless plans, targeting consumers adept at using Internet calling apps or making free calls over Wi-Fi networks. AT&T, meanwhile, has lost postpaid phone subscribers for five quarters in a row, including 256,000 shed in Q4, lagging its three rivals. “AT&T came out of the gates relatively aggressive in 2016,” said Colby Synesael, analyst at Cowen & Co., in a report. T-Mobile and Sprint have made share gains at AT&T’s expense, says Craig Moffett, an analyst at MoffettNathanson. “AT&T has been forced to respond by significantly upping promotional allowances, including BOGO offers and ETF buyouts,” Moffett wrote in a report. Jefferies analyst Mike McCormack estimates AT&T now has about 2 million wireless lines associated with new unlimited data plans for customers that buy both wireless and pay-TV services. AT&T launched the unlimited promotion in early January. Sprint is expected to add postpaid phone subscribers in Q1. There are mixed views on Verizon, which continues to run its business with the goal of maintaining industry-leading profit margins. Some analyst forecast that Verizon will lose postpaid phone accounts in Q1, while others see Verizon with a small gain. Verizon responded to Sprint’s Q1 inroads with advertising featuring comedian Ricky Gervais.

Yahoo Q1 Preview: Flaming Financials, Bidding Rumors, Hidden Assets

Yahoo ( YHOO ) approaching its Q1 earnings release, scheduled for after the close Tuesday, amid flaming financials and rampant speculation about which companies might bid for the wilting Web portal. First-round bids reportedly are due Monday. “At an operational level, Yahoo’s situation has gone from bad to worse in recent quarters, with poor choices at both the board and senior management levels compounding bad luck. At this point, virtually any change could help to unlock value,” wrote Pivotal analyst Brian Wieser in an April 11 research note. Yet, Yahoo has received two price-target boosts in the past week. Pivotal raised its price target on Yahoo stock to 40 from 35, primarily due to the higher current trading price of Alibaba Group ( BABA ). Most of Yahoo’s value comes from its 15% stake in the China e-commerce titan. Yahoo’s total market cap is $35.19 billion. Yahoo stock is trading near 37. Analysts polled by Thomson Reuters expect Yahoo’s Q1 revenue to fall 12% year over year to $1.07 billion. Yahoo is guiding Q1 revenue at $1.05 billion to $1.09 billion, down 14% to 11%. FactSet expects Yahoo to report revenue ex-TAC of $847 million, down 18%. TAC, or traffic acquisition costs, refer to fees Yahoo pays other sites to carry its ads. Yahoo TAC spending has climbed during each quarter of 2015. Analyst consensus calls for Yahoo’s EPS ex items to plunge 53% to 7 cents. But on Wednesday, SunTrust Robinson Humphrey gave Yahoo stock a boost, raising its price target to 44 from 40. SunTrust also maintained its buy rating on Yahoo stock and cited “hidden assets” that could drive up the bidding price for the struggling Web portal. Royalties from Yahoo Japan, thousands of patents and plentiful real estate could boost Yahoo’s bids, wrote SunTrust analyst Robert Peck in a research report. Minus a “potential upside” from those assets, SunTrust expects Yahoo to fetch bids in the $6 billion to $8 billion range for its core business. Yahoo ‘Stickiness Factor’ Lags Google, Microsoft Yahoo sent a letter to possible buyers last month, asking them to submit bids, which reportedly are due Monday. Some buyers might be interested in all or part of Yahoo’s core Web business, while others might want Yahoo’s stakes in Alibaba or Yahoo Japan. Some reports estimate that as many as 40 groups have expressed interest in the wilting Sunnyvale, Calif.-based Web portal, although Fortune said in a report on Friday that number was too high. Either way, news site Re/code said that documents Yahoo provided to potential bidders predict that the Web portal’s 2016 revenue will drop by close to 15% and its earnings by more than 20%. Yahoo stock has more than doubled since the company hired Marissa Mayer, who had been a top executive at Alphabet ’s ( GOOGL ) Google, as CEO in July 2012. But she’s been unable to spark significant earnings and revenue growth, and Yahoo has struggled to build online-ad and mobile-ad revenue vs. rivals Google and Facebook ( FB ), among others. In the meantime, the company faces a proxy fight from activist investor Starboard Value, which wants to oust Yahoo’s entire board. A study by Verto Analytics found that 229 million users accessed one of Yahoo’s online services at least once during March 2016 in the U.S., which puts Yahoo’s net reach in the U.S. at 92.5%. But, Verto said, the average 122.6 million users who access Yahoo’s services on a daily basis gives Yahoo a “stickiness factor” of 54%, much lower than Google’s 86% and Microsoft ’s ( MSFT ) 68%. In February, Yahoo announced that it will cut 15% of its workforce — roughly 1,600 jobs — and look to sell noncore divisions and assets, such as patents and real estate, as part of a strategic plan to return the company to what it forecasts as modest-though-accelerating growth in 2017 and 2018. Mayer’s turnaround plan includes continued investment in what the company calls “Mavens” — Yahoo’s mobile, video, native and social businesses — where its ad revenue is growing. Mayer said that Yahoo’s consumer products division will consist of three global platforms — search, mail and Tumblr — and that it will focus on four vertical markets: news, sports, finance and lifestyle.

Apple Rips DOJ In N.Y. iPhone Case As Big Techs Challenge Big Brother

Apple said Friday the Justice Department has “utterly failed” to show that it needs the tech giant’s help to access a locked iPhone in a Brooklyn federal drug case, reflecting a broader push by major tech companies including Microsoft ( MSFT ) and Facebook ( FB ) challenging the government over privacy. Apple, in a court filing with a federal district judge, said authorities haven’t exhausted all efforts to unlock the iPhone in question. Apple also challenged the government’s “sweeping interpretation of the All Writs Act,” a law passed in 1789. The DOJ noted that Apple has previously complied with “All Writs” requests. The DOJ recently dropped efforts to force Apple to unlock an iPhone used by one of the San Bernardino terrorists, after a third party unlocked that smartphone. Justice says that method won’t work with the Brooklyn iPhone. While Apple is playing defense, Microsoft and Facebook’s WhatsApp are playing office. Earlier in the week, Microsoft sued the government, arguing that the Electronic Communications Privacy Act that forces it to comply with government data customers without telling its customers violates their Fourth Amendment constitutional protections against unlawful search and seizures. It also violates Microsoft’s free speech rights, the company said. Facebook messaging unit WhatsApp adopted end-to-end encryption this month for its more-than one billion users. That means WhatsApp couldn’t help the government crack your messages even if it wanted to. “No one can see inside that message. Not cybercriminals. Not hackers. Not oppressive regimes. Not even us,” WhatsApp founders Brian Acton and Jan Koum said in a blog post announcing the move. Tech companies may be standing on principle, but it helps that customers wants companies to show that they will fiercely protect their privacy. And tech companies have yet to pay a political or commercial prices for standing up to Big Brother — at least in the U.S. But the political and legal fight is by no means over. The U.S. government has a week to respond to Apple’s Friday filing. On Tuesday, Apple’s general counsel will testify at a congressional hearing on encryption, along with FBI and New York policy officials.