October 01, 2007

Pick or Pan? Stock of the Week

Shares of Vonage Holdings hit an all-time low, closing at 96 cents on Wednesday. The shares fell after two key court rulings, one ordering Vonage to pay $69.5 million to Sprint Nextel for patent infringement and another saying it infringed on three Verizon Communications patents.

The MVNO graveyard is getting bigger, and some of them are just digging their own graves.

So far, of the ones that have passed on, such as Mobile ESPN, Amp'd Mobile and most recently Disney Mobile, were suffering from more than the inherently risky MVNO business model. They were each focused to some degree or another on content, something that is becoming increasingly accessible from most all carriers. And some, like Amp'd, had what former executives there liked to call a "perfect storm" of things that went horribly wrong.

Some MVNOs today are still basically resellers with a marketing plan, harkening back to the resellers of the 1990s. They didn't have big brands back then, and they weren't very successful, either. That said, some companies today are going after a broader segment than others, such as Virgin Mobile USA, Boost Mobile and Tracfone, all of which have established themselves, by most standards, as fairly successful businesses.

The jury is still out on Helio, but it's got more going for it than some of the many other MVNOs that have come out of the woodwork. "We're basically closer to a carrier than a lot of the MVNOs out there," says Rick Heineman, Helio's senior director of communications at Helio. With the exception of the Sprint Nextel network and spectrum, "everything else is Helio." It runs its own customer care and backoffice, thanks in no small part to one of its parents, SK Telecom, which also helped the MVNO get a deal with MySpace some 15 months before most of the rest of the industry. SK's backing also helps Helio by way of specially made devices, such as the Ocean. And while I often think of Helio as a high-end service for yuppies, it now offers a range of devices, from the $295 Ocean to the $50 Heat.

The MVNO's subscriber count is up 40% in the past 90 days, which is a good sign. But it really needs to hit that 1 million mark, and it's probably got less than a year to prove itself, says Dave Whetstone, former chief marketing officer and co-founder at Virgin Mobile who is now CEO of CloneFone. An MVNO can't make a business out of just a few hundred thousand subscribers, even if the ARPU is high. "The first customers you get are always the highest ARPU," he says, and that ARPU will come down over time as the service spreads over a broader market.

One of Helio's parents, EarthLink, is struggling with its own problems, but considering the technical know-how and assistance that Helio gets out of its relationship with SK Telecom, that doesn't appear too disturbing. The South Korean company is investing up to $270 million in Helio.

Helio expects a full-year net loss of $340 million to $360 million. That doesn't sound too good for the MVNO, but company representatives insist they're in the wireless business for the long haul, not just dabbling in it as a brand with snazzy content.

Maybe SK is just using Helio to test the North American waters before making a bigger move. For now, Helio's South Korean investors have been patient with their money.

The point is that we need to look at the mechanics behind each MVNO before we give them a death sentence. Heck, I didn't even consider Tracfone an MVNO until the term came into vogue. Maybe we need a new term for the MVNOs that appear headed for the graveyard, with little more than a name, and those "tweeners" that have the backoffice systems and support that make them more like a carrier than a reseller.

Any suggestions?
Send me a message at monica.alleven@advantagemedia.com.

Disney MVNO Signs Off
By Monica Alleven

Disney Mobile will cease operations later this year, leaving it to explore a new business model for its content and services.

Current Disney MVNO customers will continue to receive service and support until Dec. 31, and reimbursements are being offered for eligible customers.

The Walt Disney Internet Group (WDIG) says its future plans might include offering its Family Center product through a partnership with a major, unnamed U.S. carrier; the company is exploring option with the major carriers.

"The MVNO model has proven, as we've seen with other companies this past year, to be a difficult proposition in the hyper-competitive U.S. mobile phone market," WDIG President Steve Wadsworth said in statement. "In assessing our business model, we decided that changing strategies was a better alternative to pursue profitable growth in the mobile services area."

Existing MVNOs were quick to defend their business models, saying they're gaining success where others have not. Amp'd Mobile flamed out earlier this year due to what its management called a "perfect storm" of events that included the inability to secure more funding. The company also had non-paying customers and other problems. Before that, the ESPN-branded MVNO shut down.

Helio representatives point out that Disney is not a mobile company but a media empire. Jumping into the telecom space requires billing, customer support, the right handsets and more, says Rick Heineman, senior director of communications at Helio. Helio boasts ARPU of about $90 and 140,000 subscribers, up 40% in the past 90 days.

Other companies like kajeet, a pay-as-you-go cell phone service, say they're successfully focused on offering service from a kid's point of view. The company recently secured $36.8 million in Series B venture capital funding.

Net Neutrality Debate Reignites
By Monica Alleven

Critics of Verizon Wireless are turning last week's controversial text messaging moves into a weapon in the net neutrality debate.

Verizon Wireless initially said it would not carry text messages for a short-code campaign by abortion rights group NARAL Pro-Choice America, but it quickly reversed course, saying that such a decision on an important, though sensitive, public policy issue was incorrect.

Upon learning of the NARAL situation, senior Verizon Wireless executives immediately reviewed the decision and determined it was an incorrect interpretation of a "dusty" internal policy, company spokesman Jeffrey Nelson said in a statement. "That policy, developed before text messaging protections such as spam filters adequately protected customers from unwanted messages, was designed to ward against communications such as anonymous hate messaging and adult materials sent to children."

"We have great respect for this free flow of ideas and will continue to protect the ability to communicate broadly through our messaging service," Verizon's statement said.

But that was too late. In a statement Sept. 27, NARAL President Nancy Keenan said the organization was deluged with calls from Americans "outraged over Verizon's corporate censorship."

Soon various entities were calling for congressional action. The SavetheInternet.com Coalition asked consumers to fill out information on its Website that it would then send to members of Congress.

"The fundamental democratic principles of free speech, privacy and open communication are too important to be entrusted to these corporate gatekeepers," said Josh Silver, executive director of Free Press, the group that coordinates the coalition, in a statement. "Whether it's liberal or conservative, Democrat or Republican, pro-choice or pro-gun, the phone companies can't get to pick and choose what messages get through. Congress needs to step in immediately to protect free speech and the free flow of information."

The group says that in August, AT&T censored a live Webcast of a Pearl Jam concert just as the lead singer was critical of President Bush.

WiMAX World Round-Up
By Monica Alleven

CHICAGO—More than 8,000 attendees converged at McCormick Place in Chicago last week to hear the latest on WiMAX during the Yankee Group's WiMAX World conference.

One of the standout events was the river tour that Motorola organized for WiMAX industry executives, analysts and media. The event on the Chicago River included live handoffs, Web browsing, voice over IP (VoIP) calls, video streaming and MobiTV.

Chicago is one of the markets where Sprint Nextel's Xohm service will begin pre-commercial service by the end of this year; commercial service is planned in Chicago and other markets starting in April.

With Sprint and Clearwire being the two main consumer-oriented service providers to use WiMAX in the United States, vendors attending last week's show acknowledged that many of their business opportunities in WiMAX are coming outside the United States. The WiMAX Forum has five certification labs worldwide it plans to have open for business by the end of this year. Motorola, for one, has 40 WiMAX trial deployments going on around the world and contracts with 12 customers for commercial WiMAX systems.

Nokia Siemens Looks for Growth
By Monica Alleven

CHICAGO—Nokia Siemens Networks head of North America, Sue Spradley, is looking ahead, not behind.

Spradley

It's easy to think of the two companies as the separate entities they were for so long, but Spradley isn't doing that. "I didn't take this job to keep us where we've been," she says. "There's no reason we cannot become a leader in North America."

Spradley was tapped in July to lead the North American region for Nokia Siemens Networks. She is a 20-year veteran of the telecom industry, previously serving as the president of Nortel Global Services and Operations.

After leaving Nortel, she took some time to work for a non-profit and think about where she wanted to go next. Nokia Siemens Networks was the venue that promised the most in terms of growth opportunities.

When asked about the business opportunities that might come with Clearwire aligning itself with Sprint Nextel and possibly looking at vendors besides Motorola, she declined to comment specifically. "There are opportunities in the market. That's something that's obviously ours to earn."

Meanwhile, Nokia Siemens Networks is working with TerreStar Networks, which is building a satellite/terrestrial network in the United States. The vendor was selected to deploy its Internet-HSPA solution for the TerreStar system, for which it will provide its Flexi W-CDMA Base Station.

Nokia Siemens Networks also says it's ready to support the 700 MHz spectrum band once it is auctioned next year. "It's just an exciting time for us," Spradley says.

MySpace Invades Mobile, Even More
By Wireless Week Staff

Just as plenty of lesser-known upstarts are challenging MySpace in the mobile world, the Fox-owned entity is getting together with other Fox brands on free new ad-supported mobile Websites.

The new MySpace Mobile Web beta service was made available last week with a wider rollout with Fox Interactive Media (FIM) brands to follow in the coming months.

The mobile beta launches mark the first time that FIM has delivered an advertising solution to marketers looking to reach Internet users on mobile devices. In exchange, users will get free content, tools and services that previously were available only to paid subscribers.

FIM is partnering with Millennial Media to both sell and serve mobile-based ads, which includes custom sponsorship packages within MySpace and more traditional display-based ads with other FIM properties, such as IGN, FOXSports.com, AskMen and RottenTomatoes.com.

The free MySpace functions include sending and receiving MySpace messages and friend requests, commenting on pictures and profiles, posting of bulletins and updating blogs.

The new launch is in addition to premium services that are optimized for devices offered by AT&T, T-Mobile USA and Helio.

While MySpace started online and is moving to mobile, other entities say they're first focusing on the mobile phone space. Crush or Flush claims more than 300,000 registered users and says nearly 98% of its members access the site on their phone instead of online.

Qualcomm Raises Guidance
By Wireless Week Staff

Shares in Qualcomm were down slightly, trading at $41.56, early Tuesday after the company raised its guidance for its fourth fiscal quarter.

The company now expects its fourth fiscal quarter pro forma revenues to be at or slightly above the high end of prior guidance of about $2.15 billion to $2.25 billion.

The revised estimated is based on the shipment of about 67 million to 68 million Mobile Station Modem (MSM) chips during the quarter.

Mobile Payment Debuts for Football Fans
By Wireless Week Staff

Mobile payment solution provider Mocapay announced a partnership with Quest, a point of sale operator in the sports and entertainment markets. Quest's systems are in more than 20,000 venues across North America, including Yankee Stadium and Invesco Field at Mile High.

University of Colorado football fans recently were among the first to use the system to buy concessions.

Mocapay worked with numerous retailers in its hometown of Boulder, Colo., to offer the payment alternative. Mocapay CEO Rod Stambaugh says users can buy anything around town from books to tanning sessions using their cell phones.

An important part of the company's strategy is opening up its platform to third-party issuers, such as banks, to speed up the process. That way, the system can be set up to take funds straight from users' bank accounts, similar to debit cards.

eRAP - News Briefs - October 01, 2007
Companies in briefs: T-Mobile USA, ArrayCom, Alltel, ABI Research, CDMA Development Group, Third Generation Partnership Project 2, Playboy.com, Quattro Wireless, AT&T, InPhonic, Groove Mobile, BitWave Semiconductor and Palm.

• T-Mobile USA announced the next evolutions of the T-Mobile Sidekick family. Two newly designed devices - T-Mobile Sidekick LX and T-Mobile Sidekick Slide - will hit the streets this fall and both feature the custom-designed MySpace application.

• ArrayComm signed agreements for funding with Merrill Lynch PCG and Ygomi. Each company purchased about $15 million in equity with an option for an additional $10 million.

• Alltel Wireless launched Axcess Game League, a free, community gaming application that enables players to seamlessly navigate between games, compete in various tournaments, check their status and post high scores.

• More than 100 million handsets with touch screens will be shipped in 2008, according to a study from ABI Research. Touch-screen handsets appearing in the market include the Apple iPhone, the LG Prada, the HTC Touch and the Ultra-Smart F700 from Samsung, as well as the P990, M600, and W950 handsets from Sony Ericsson.

• The CDMA Development Group (CDG) and the Third Generation Partnership Project 2 (3GPP2) announced the publication of the Ultra Mobile Broadband TM (UMB TM) air interface specification - 3GPP2 C.S0084-0 v2.0. The UMB specification is expected to be converted into an official global standard by the 3GPP2 organizational partners.

• Here's an eyeful. Playboy.com says it's partnering with Quattro Wireless to bring the Playboy.com experience to the mobile consumer. Playboy fans can see non-nude photos of their favorite models, according to a press release. The service is not directly connected to any one carrier and is completely ad-supported, according to a company representative. Sponsors include AXE Vice body spray and Sony Pictures Home Entertainment.

• AT&T announced a task order potentially worth up to $1 billion from the U.S. Department of the Treasury to build and transition the department to a next-generation enterprise network known as Treasury Network (TNet).

• InPhonic promoted President Andy Zeinfeld to CEO effective Oct. 1. David Steinberg, who has served as chairman and CEO since founding the company in 1999, will continue as the chairman and assist with the company's strategy and direction.

• Mobile music service provider Groove Mobile hired David Lowe as vice president of worldwide sales. Lowe will be responsible for forming strategic partnerships and building upon the company's early successes with mobile operators in the U.S. and abroad.

• BitWave Semiconductor named Michael Farese as its president and CEO. He most recently was with Palm.