July 20, 2007

Pick or Pan? Stock of the Week

Shares of Clearwire jumped more than 20% at one point Thursday after the company announced a deal with Sprint Nextel to combine their WiMAX assets. Clearwire shares were trading at $30.20 while Sprint shares were up only slightly, to $22.25.

I was just getting a handle on the 700 MHz auction proposals when AT&T threw a curveball, parting with the industry with reports saying it supports FCC Chairman Kevin Martin's proposal. The company now describes Martin's plan as a creative compromise.

The entire 700 MHz discussion is getting more complicated. I've often thought that past auctions didn't work well in terms of spurring competition, even when the FCC tried to structure auctions to help the smaller guys. It seemed as though the smaller bidders usually ended up being somehow backed by the larger ones, although it wasn't always readily apparent on the surface by the bidders' names. Still, we've seen smaller companies such as Leap Wireless International successfully compete in auctions against the Bigger Guns, so the process can't be all bad, although I'm sure even smaller entities would like more of a fighting chance.

But as far as I know, even those smaller entities aren't calling for the kind of treatment for which Google is asking. In its public policy blog, Google's telecom and media counsel, Richard Whitt, rightly points out that wireless airwaves traditionally have been allocated in a fragmented manner. He acknowledges that Google has been taking a closer look at whether and how it might participate in the upcoming 700 MHz auction. But in Google's case, it is easy to see the company surely has the resources to buy spectrum and build for it. Last time I checked, Google's shares were trading at $548.59 a pop. It's not apples to apples, but one of Verizon Wireless' parents, Verizon Communications, was trading at a mere $42.26 at last check.

Yet Google is angling for special treatment. It wants the winning bidders to adhere to enforceable rules that require the adoption of four types of "open" platforms. According to Google, third parties should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis based on reasonable commercial terms, and third parties should be able to interconnect at a technically feasible point in a 700 MHz licensee's wireless network. It sort of sounds like, "you can build it, and we'll use it."

Over the past year or so, I've talked with some upstart Internet folks (not from the traditional wireless industry) who said the spectrum allocation process as we know it would be challenged, the implication being that this challenge would come from contrarian thinkers in the wired Internet world. At least one of these folks seemed to think that spectrum is an infinite resource, and I've always been of the mind that spectrum is a finite resource that must be carefully managed.

Regardless, at the moment, I'm inclined to agree with CTIA in that crafting special rules for a company with a market cap of $170 billion to address problems that don't exist makes "no sense whatsoever." In a letter to the FCC dated July 16, on behalf of about 139 small and regional operators and organizations, CTIA also points out that an open access mandate would significantly hinder small carrier participation in the 700 MHz auction and in many cases foreclose their ability to deploy the spectrum in small and rural markets.

Now that they're in cahoots to build a nationwide WiMAX network and deliver some of the 4G-ish things the industry has been talking about, as well as provide for public safety, I wonder what, if any, impact the Sprint Nextel/Clearwire WiMAX partnership will have in the 700 MHz discussions?

Comments? Send me an e-mail at monica.alleven@advantagemedia.com.

Sprint, Clearwire Combine Resources
By Monica Alleven

Sprint Nextel and Clearwire may have put a lot of investors' concerns at ease this week with their agreement to work together on building out a WiMAX network.

The arrangement, which so far is in the letter-of-intent stage, calls for Sprint and Clearwire to build their respective portions of the nationwide WiMAX network and enable roaming between their territories. The companies also will jointly work on product and service evolution, branding, marketing and distribution. Final definitive agreements are expected within the next 60 days; the deal must be reviewed by the Department of Justice, and the FCC needs to sign off on spectrum transfers.

Sprint Chairman and CEO Gary Forsee says the partnership will be good not only for consumers and businesses, but federal government and public safety agencies will benefit as well.

Under the network build-out plan, Sprint Nextel will focus its efforts primarily on geographic areas covering about 185 million people, including 75% of the people located in the 50 largest markets, while Clearwire will focus on areas covering about 115 million people. Initially, the two companies expect to build out network coverage to about 100 million people by the end of 2008, with seamless roaming enabled between the deployed areas.

It was a year ago that Sprint announced it had selected WiMAX as its 4G technology, and the company has made progress in bringing its vision to life over the past year, Forsee told analysts on a conference call.

Clearwire CEO Ben Wolff says the partnership is another step forward in implementing Clearwire's vision, one that Craig McCaw articulated several years ago that involves transforming the way people communicate, much like cellular did.

The initial term of the arrangement is 20 years, with three 10-year renewal periods. In the event either party is acquired, the expectation is the WiMAX partnership would continue.

Analysts were bullish about the deal, pointing out the partnership will save expenses for both companies.

The two companies are natural partners, but the agreement came sooner than anticipated and describes an arrangement that is more comprehensive than expected, analyst Christopher King of Stifel Nicolaus said in a research note. The agreement is especially positive for Clearwire as any cost savings will slow the company's burn rate and ease some investor concerns over its future capital requirements, the note said.

AT&T Supports Martin Proposal
By Wireless Week Staff

AT&T is now endorsing FCC Chairman Kevin Martin's proposal for the upcoming 700 MHz auction.

Jim Cicconi, AT&T's senior executive vice president of public policy, told USA Today the company believes Martin's plan is a creative compromise that balances the interests of companies and consumers.

Martin's proposal would require bidders to let consumers use any device on their networks using any software. Google and others are pushing for rules that go even farther toward open access.

Meanwhile, Verizon Wireless released a statement Thursday reiterating support for fair and open auctions. "To rig the 700 MHz auction in any way - to limit its value and potential to deliver exciting new products and services - would be a huge disservice to the nation," the carrier said. "Corporate welfare for Google is bad public policy."

Motorola Execs Not Making Predictions
By Monica Alleven

As expected, Motorola reported another challenging quarter, with revenue falling short of expectations due to a drop in mobile device shipments. The shipments were particularly problematic in Asia, Europe, the Middle East and Africa.

Results for its Home and Networks Mobility and Enterprise Mobility Solutions businesses were solid. But sales for the Mobile Devices segment were $4.3 billion, down 40% compared with the year-ago quarter. Handset shipments totaled 35.5 million units, including the 100 millionth RAZR.

Executives are more cautious than ever about making forward-making statements because, as CEO Ed Zander acknowledged in their conference call with financial analysts, the company hasn't done a great job of making such predictions in the recent past.

Asked how quickly the mobile device unit transformation will occur, Zander said it's always a tough call. A lot depends on the products, and while Motorola has a lot of products it is releasing, they hit various geographies at different times. In summary, "I think we're making progress," he said.

Business Week reported this week that the board is exploring options regarding a successor to Zander and at one point met with former MCI head Michael Capellas, but he has since taken the top job at First Data. The board eventually could elevate President and COO Greg Brown, the article noted.

In response to a question about board support, executives in Thursday's conference call didn't comment specifically. "I think we're doing the right thing," Zander said. "We just have to start demonstrating to investors and Wall Street that we are making progress."

"We had another challenging quarter," Brown said. Motorola continues to reduce its workforce as a cost-cutting measure. But Brown said the company has been careful and pragmatic not to sacrifice the product portfolio; user interface and design engineering are not among the areas being cut.

Motorola executives said the fundamentals of the underlying handset business remain strong. The company recently appointed Stu Reed to oversee the mobile device unit.

In terms of infrastructure, CDMA and iDEN are tracking and WiMAX is in line with expectations, but GSM continues to be challenging from margin and competitive pricing standpoints.

Motorola shares were trading up more than 1% early Thursday, at $18.29.

Meanwhile, LG Electronics posted record high sales in the second quarter, thanks in part to mobile communications. Overall sales in the mobile communications arena were 24.4% higher than a year earlier. Total shipments were 19.1 million units. The company expects continued growth in the handset business, including W-CDMA in emerging and developed markets.

Regional Carriers Seek Roaming Rules
By Wireless Week Staff

Smaller carriers such as Leap Wireless International and Southern LINC are getting together to urge the FCC and Congress to address what they consider anticompetitive and discriminatory roaming practices.

Called the Alliance for Fair Roaming Access, the group is asking the FCC to clarify that all wireless carriers are obligated to enter into automatic roaming agreements that are reasonable and nondiscriminatory.

Industry consolidation has reduced the number of roaming partners for small, rural and regional home carriers, and as a result, smaller carriers are frequently forced to purchase roaming services for their customers at unjustifiable high roaming rates, the group says.

Some carriers are also restricting roaming to basic voice service and do not permit roaming for newer data services. Some carriers also even refuse to provide roaming for new services such as e-mail, according to the alliance.

The FCC has acknowledged that issues exist with respect to roaming practices. Seven years ago, the FCC asked the public for input on numerous roaming issues. The FCC solicited public comments again in 2005. Recently, the FCC began to reconsider the issues.

Members of the alliance are Cricket Communications; LCW Wireless, a joint venture between Leap Wireless, CSM Wireless and WLPCS Management; the National Telecommunications Cooperative Association (NTCA); Rural Telecommunications Group (RTG); SouthernLINC Wireless; Mobi PCS; the Organization for Promotion & Advancement of Small Telecommunication Companies (OPASTCO); and Cleveland Unlimited, which offers the Revol wireless service.

Loopt Gets Sprint Deal
By Monica Alleven

A Silicon Valley startup is celebrating a big win, having scored a partnership deal with Sprint Nextel.

Loopt already works with Sprint Nextel's Boost Mobile subsidiary on its "Where you at?" service, but this marks the first direct Tier 1 carrier customer win for the company. More deals are expected as loopt seeks interoperability with as many operators as possible for its social networking/location-based service.

"We're really excited about the position we're in right now," says the 22-year-old CEO of loopt, Sam Altman, who was a computer science student at Stanford in 2005 when the idea for the loopt service emerged. After a class, he thought it would be great if he could open his mobile phone and see a map of where his friends are located, and that's what he and co-founder Nick Sivo set out to develop.

Boost and Sprint have agreed to interoperate with other carriers, he says. The Sprint service will cost $2.99 a month, and loopt supports about 25 of Sprint's devices.

The loopt team has stepped up their service with things like an alert feature to let a user know when a friend steps into a certain radius, for example.

Instead of staying locked in their virtual worlds, "we view this as bringing people together in the real world," he says.

Altman says his company is being pro-active toward those who might use the service inappropriately and routinely talks with FCC and other government officials to educate them on how the loopt service works. Loopt offers safety and privacy tips as well. "We want to make sure people are doing this responsibly, and we think we are," he says.

EA Mobile Launches Simpsons Game
By Monica Alleven

EA Mobile is releasing The Simpsons: Minutes to Meltdown, an original game for mobile phones starring none other than that famed family from Springfield.

The game was created with Fox Mobile Entertainment and Gracie Films and can be downloaded directly from major wireless carriers in North America and Europe.

"Brand names and Hollywood titles always peak consumer interest because they're well known and stand out on the deck," says Joe Ariganello, general manager of games at Sprint. "The quality of the game, though, is more important to Sprint than slapping a brand name on an inferior title because that is what keeps our users coming back for more." EA Mobile did a great job by taking a well-known brand such as the Simpsons and stayed true to the show, he adds.

EA Mobile worked with the Simpsons creators on specifics, like making sure Homer's waddle was in his walk and the characters' eyes were just right, according to Travis Boatman, vice president of worldwide studios at EA Mobile.

Movies resonate well in the mobile market, especially when they're a franchise like the Simpsons or Harry Potter that transcend the movie business and have the components for good game play, such as the magic, combat and sneaking around that are part of the Potter series. EA Mobile also recently released a Harry Potter-themed mobile game.

In the Simpsons mobile game, players start in the Simpsons' home and then move through the game to guide Homer as he rushes through the town to stop a meltdown at the Springfield Nuclear Power Plant.

EA Mobile is coming out with Orcs & Elves II in the fall, partnering with id Software and Fountainhead Entertainment.

AT&T Adds Rollover to Unity
By Wireless Week Staff

The AT&T's Unity Plan, a wireless-wireline converged calling plan, now includes Rollover minutes.

The changes to AT&T's Unity plan allow existing AT&T wireless customers to keep their Rollover minutes and only require customers to have a combined bill for AT&T local and wireless service.

In addition to free domestic wireless calling to and from other AT&T customer numbers, the AT&T Unity plan includes unlimited night and weekend minutes, as well as a package of Anytime Minutes. With the addition of Rollover minutes, AT&T Unity customers will now be able to keep their unused wireless minutes for up to 12 months.

Alltel Offers New Hue
By Wireless Week Staff

Alltel Wireless is now offering the Alltel Hue by Samsung. With rebates, the phone is priced at $40 on the Alltel Website with a 2-year service agreement.

The phone comes with Celltop technology, an MP3 player with Jump Music capabilities, a 1.3-megapixel camera with video and interchangeable faceplates.

Lynch Moves Up
By Wireless Week Staff

Dick Lynch

Dick Lynch was named executive vice president and chief technology officer of Verizon Communications, a new position reporting to Verizon President and COO Denny Strigl.

Lynch was executive vice president and chief technical officer for Verizon Wireless since that company's founding in 2000.

In his new role, Lynch will be responsible for establishing and managing the overall direction, technology and planning of all of Verizon's networks, including the wireless, telecom and business divisions.

In his prior assignment, Lynch was executive vice president and chief technical officer for Bell Atlantic Mobile.

A replacement for Lynch has not yet been named.

Europeans Not Going With the FLO
By Wireless Week Staff

The FLO Forum says it applauds the European Commission's efforts to advance the mobile TV opportunity in Europe, but says favoring one mobile TV technology for Europe could stall the advancement of the ecosystem.

"The Commission's support for DVB-H for mobile broadcasting in Europe is based, in part, on the suggestion that a mobile TV technology mandate, like the GSM mandate, is necessary to achieve economies of scale and to position European companies globally at the technology forefront. But the analogy is contrary to the market reality today," said Kamil Grajski, president of the FLO Forum, in a statement. "The mobile TV industry is still in its early stages, but the GSM mandate came after GSM had launched with wide commercial success. Technology mandation for mobile TV in Europe is not supported by the facts."

Grajski noted that recent independent trials of FLO technology in the U.K. involving several EU-based FLO Forum members highlighted significant technical advantages. FLO offers twice the capacity of DVB-H, or alternatively the same capacity, but at reduced costs, according to the forum.

Helio Updates MySpace, Offers Stats
By Wireless Week Staff

Helio is launching a new version of its MySpace service on the Ocean and giving out new stats on its users.

The new MySpace app is up to five times faster than Helio's original service, but it comes at no additional cost to its All-In members. Helio was the first to take the MySpace experience mobile.

Helio, which surpassed the 100,000 postpaid membership milepost in the second quarter, says it continues to see ARPU in the $90-$100 per month range. Members generate more than 550 text messages per month on average, and 90% of members access the Web through their mobile device versus an industry average of 13%.

RIM Combines Wi-Fi, GSM
By Wireless Week Staff

Research In Motion (RIM) unveiled its first dual-mode cellular and Wi-Fi BlackBerry, the 8820.

The GSM phone includes built-in GPS and media player enhancements. The device also supports UMA, enabling wireless carriers to offer a fixed-mobile convergence service for business and home use. The UMA solution allows for seamless switching voice calls between a carrier's cellular network and a Wi-Fi network.

RIM says AT&T is set to launch the 8820 in the United States later this summer, and other carriers around the world will offer it in coming weeks.

News Briefs for Week Ending July 20, 2007
Companies in this week's briefs: Ericsson, Bharti Airtel, Vodafone, Verizon Communications, Verizon Wireless, Veoh, Google, Intel, ZTE USA, Sprint Nextel, Hiwire, SES Americom, InPhonic, Novatel Wireless, Handmark, Garmin International, SkyTel, Nighthawk Systems.

• Ericsson struck its largest deal to date with a network expansion deal for Bharti Airtel in India. The $2 billion contract includes expansion of Airtel's GSM/EDGE network and providing capacity management.

• In response to press reports that Vodafone wants to buy all or part of Verizon Communications, the U.K. operator issued a short statement: Vodafone wishes to make it clear that it has no plans to make such an offer.

• Verizon Wireless and Veoh launched a Veoh channel on the Verizon Wireless V CAST service. Veoh features a selection of video content on the Internet.

• According to The Wall Street Journal, Google is developing a new search service for mobile phones that will help consumers find and buy ringtones, games and other mobile content. Google already offers a version of its search engine on cell phones, but the company wants to effectively become a gateway for finding and paying for mobile content, according to the report.

• Intel reported second-quarter revenue of $8.7 billion, operating income of $1.35 billion, net income of $1.3 billion and earnings per share (EPS) of 22 cents.

• ZTE USA entered into a master purchase agreement with Sprint Nextel to supply Sprint with WiMAX PC cards in express and USB form factors and advanced modem solutions for home networking.

• Hiwire and SES Americom unveiled an initial group of TV content companies and channels that will be part of its channel line-up for an upcoming consumer trial in Las Vegas. The channel lineup, procured by SES Americom, includes channels from Discovery Communications, MTV Networks and Turner Broadcasting.

• InPhonic named Kenneth Schwarz as CFO. Previously, he served in senior executive positions at Intersections, a provider of identity theft protection and credit management solutions.

• Novatel Wireless announced the Ovation MC950D USB Modem, a HSUPA Mobile Broadband device said to carry the distinction of being the world's smallest HSUPA USB modem. The MC950D also delivers upload and downlink speeds that meet or exceed traditional home DSL and cable modems.

• Handmark and Garmin International announced a strategic distribution agreement under which Handmark will distribute Garmin Mobile for BlackBerry GPS-enabled devices. Garmin Mobile is a subscription-based application that delivers maps, directions and turn-by-turn navigation on mobile phones.

• Remember SkyTel? The long-time paging company announced a deal this week with Nighthawk Systems to provide 2-way telemetry solutions to enterprise customers using the SkyTel Wireless Network. SkyTel is now a division of Bell Industries.