An Ignoble Experiment

1. Google's Motorola unveils Moto X Android smartphone, brings it to multiple carriers

A little more than a month ago I ruminated on what the impending launch of the Moto X, the flagship smartphone of Google's (NASDAQ:GOOG) Motorola Mobility unit, would mean for Android.

The Moto X is now here, and while I don't think it will have the kind of far-reaching ramifications I speculated about, the device does represent the rebirth of Motorola as a brand wholly distinct from other Android device makers. The biggest question I have now is whether Google and Motorola can market the Moto X successfully enough to ensure Motorola's continued relevance, and allow it to evolve along the path of innovation that it has started out on with the phone.

Before discussing what the Moto X is and what it could represent, let's say what it isn't: In terms of specifications, it's not Samsung Electronics' Galaxy S4, or the HTC One. Its display, at a 720p resolution, is of technically lower quality than those found on some high-end phones. It doesn't have the kind of camera that Nokia's (NYSE:NOK) Lumia 1020 sports. It doesn't have the newest Qualcomm (NASDAQ:QCOM) Snapdragon 800 processor. For some consumers, more mid-range specs will be a deal breaker, and they will be turned off by the phone. Retail sales representatives at carrier stores might not be as enthused about it, and consequently won't push it hard. Motorola is banking that none of that really matters.

The Moto X's processor is an interesting window into how I view the phone, which is as a starting point for Motorola as it refocuses away from differentiating on hardware and more on software and the user experience--which, not coincidentally, are hallmarks of Google's product strategy.

The Moto X uses a system-on-a-chip architecture called the X8, with eight processing cores, one of which is a super-low-power core used for "natural language processing," which also saves the phone a lot of battery life. That core lets the phone constantly listen for the words "OK Google Now." One of the key features of the phone is Touchless Control, an always-on voice recognition system that quickly learns a user's voice and only responds to them. When a user says "OK Google Now," users can launch the Android app Google Now to check the weather, traffic or other information simply by using their voice.

That is emblematic of the approach Motorola is taking with the Moto X--less about specs and more about what the phone can do for you and how it can solve problems. Another part of the message Motorola is delivering with the Moto X is that personalization matters--consumers will be able to make more than 2,000 customized variations of the Moto X through different colored cases and other accents (though this option will only be available to AT&T Mobility (NYSE:T) customers at launch, other carrier partners will support it as well)...Continued

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By Phil Goldstein

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2. Leap says it doesn't have to purchase additional iPhones from Apple

After months of buildup and rumors, Google's (NASDAQ:GOOG) Motorola Mobility unit unveiled its Moto X smartphone, a new flagship Android phone that is the highest-profile embodiment thus far of Google's hopes for a revived Motorola brand.

Click here for pictures, video, specifications and complete coverage of the Moto X.

Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint (NYSE:S), T-Mobile US (NYSE:TMUS) and U.S. Cellular (NYSE:USM) will carry the phone, which will be available in a 16 GB version for $199.99 with a two-year contract. A 32 GB version will be available online for more (AT&T is charging $299.99 for that version). Google is also offering up to 50 GB of free Google Drive cloud storage for Moto X owners for two years. The phone will go on sale in late August or early September in the United States, Canada and Latin America, with each carrier determining the exact launch date.

The phone will curiously not be available in T-Mobile stores at launch, and though it will work on T-Mobile's LTE network, customers will need to purchase it online. It was not clear if customers would need to purchase the phone outright on an unsubsidized basis or if the phone would work with T-Mobile's no-contract Simple Choice plans, under which customers can make a down payment and pay off the rest of the device's cost in installments.

"The Moto X optimized for T-Mobile's 4G LTE network will initially be available through Motorola's channels," T-Mobile CMO Mike Sievert told AllThingsD. "We do not plan to stock Moto X devices immediately in our stores but are working closely with Motorola to make the Moto X a great experience for T-Mobile customers. Any news about distribution in our stores would come at a later date."

The phone runs on mostly stock Android 4.2.2, has a 4.7-inch AMOLED 720p display, a 10-megapixel rear camera and a 2-megapixel front-facing camera capable of shooting 1080p HD video, 2 GB of RAM, 802.11ac Wi-Fi and support for CMDA, HSPA+42 and LTE networks. Rick Osterloh, Motorola's senior vice president of products, told The Verge that Motorola's plan was simply to "remove a lot of the customizations that have plagued Android phones for a long time, and just focus right on the core Android user experience, which has evolved to a great place."

The phone uses a specially designed system-on-chip called the X8, which is also running the new Motorola Droid Ultra, Droid Mini and Droid Maxx. As explained by PC Magazine, the system is comprised of a dual-core 1.7 GHz Qualcomm (NASDAQ:QCOM) Snapdragon S4 Pro processor and a Qualcomm graphics chip, as well as customized Motorola silicon, including a "contextual computing processor" and another core for "natural language processing."

As Google executives have hinted, the Moto X makes use of a variety of sensors to set itself apart. One of the key features of the phone is Touchless Control, an always-on voice recognition system that quickly learns a user's voice and only responds to them. When a user says "OK Google Now," users can launch the Android app Google Now to check the weather, traffic or other information simply by using their voice. The phone's super-low-power natural language processing core is constantly listening, according to Wired, which saves battery life on the phone.

Active Display automatically displays important information on the screen so that users don't have to wake it up to look at the time or see messages.

Another feature of the phone is Quick Capture, which lets users twist the phone with their wrist twice to open the phone's camera, no matter what screen they are on. Tapping anywhere on the screen automatically makes the camera focus and take a picture. The phone also constantly monitors its sensors to be contextually aware and can automatically switch into Driving Mode when it detects a user in a car.

Customers who order the Moto X via an online studio called Moto Maker will be able to pick from a variety of colored backs, and will also be able to select a personalized engraving and customized pre-loaded wallpapers for the phone. However, at launch, according to The Verge, only AT&T customers will be able to take advantage of the color customizations, but other carriers will soon follow. Motorola said it will ship online orders for free in four days or less. The company said customers can choose from more than 2,000 possible combinations, and will be adding new offerings, such as real wood backs, starting later in the year.

Motorola CEO Dennis Woodside told AllThingsD that it can take as much as eight seconds to get a phone out of a pocket and take a picture. "The challenge to the team was, 'How do you get that down to one or two seconds,'" he said. "We think we've gotten that down to about 1.8 seconds."

Since Google finalized its $12.5 billion purchase of Motorola in May 2012 the company since has slashed more than 10,000 jobs to focus on fewer devices. Woodside, who formerly ran Google's advertising sales business in the Americas, has said his directive has been to take Motorola "back to the roots of innovation and build devices that have the potential to change people's lives."

According to a Wall Street Journal report, which cited unnamed sources familiar with the matter, there were cultural clashes between Motorola and the Android team inside Google as the Moto X was being developed. The phone's development team was able to work closely with other parts of Google, but when people on the Moto X team sought help from the Android team they often received no response, the report said. The phone does not run the latest version of Android, 4.3, which may be a result of the wall that Google has created between Android and Motorola, which it has said many times it is running as an independent business that does not receive preferential treatment over other Android hardware partners. "The relationship is good," Woodside told the Journal, saying the lack of Android 4.3 was due bad timing and that it showed Motorola is independent. "I don't believe there were issues there."

Google will reportedly spend upwards of $500 million in marketing the Moto X, according to a recent Journal report. However, Google CEO Page directly addressed the speculation about the marketing budget during the company's second-quarter earnings conference call, and said Motorola is "doing things that are normal for that business." While he did not confirm or deny the $500 million figure, he said "probably too much has been made over those things," according to a Seeking Alpha transcript.

Motorola has made a great deal of the fact that it will employ 2,000 people in a 480,000-square-foot facility in Ft. Worth, Texas, that used to manufacture Nokia (NYSE:NOK) phones to build the Moto X, though the phone's processors will come from Taiwan and the device's screens will come from South Korea. Woodside has said 70 percent of the manufacturing of the Moto X will happen in the United States--a notable achievement considering most phone manufacturing has moved to Asia. In conjunction with the July 4 holiday, Motorola ran an ad campaign for the phone with the tagline "Designed by you. Assembled in the USA."

In the interview with AllThingsD, Woodside said Motorola will also be releasing new phones, including those aimed at the lower end of the smartphone market. "Without giving too much away, one area that I talked about at [the D11 conference in May] was this massive market for devices that are super high-quality but also reasonably priced," Woodside said. Those devices will be for U.S. prepaid carriers as well as emerging markets, especially in Latin America. "We think there is a big opportunity there for Motorola," he said.

"The experience of devices you can get for less than $200 is subpar right now," Woodside told CNET. "We want everyone to have access to affordable smartphones."

For more:
- see this Motorola site
- see this Motorola release
- see this Wired article
- see this WSJ article (sub. req.)
- see this The Verge article
- see this separate The Verge article
- see this AllThingsD article
- see this separate AllThingsD article
- see this CNET article
- see this separate CNET article

Related Articles:
Verizon launches Motorola's Droid Mini, Ultra and Maxx, with hints of Moto X
Google's Page 'really excited' for Moto X, swats away questions over marketing
Verizon likely to tee up new Droids during July 23 announcement
Report: Google's Moto X to feature always-on voice commands, active updates
Google reportedly planning to spend $500M in Moto X marketing
Google's Moto X to be 'the first smartphone that you can design yourself'
Motorola to release flagship 'Moto X' smartphone this summer, with others to follow

Read more about: Android, Moto X
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3. Verizon offers cheaper 500 MB Share Everything plan

Leap Wireless (NASDAQ:LEAP) CFO Perley McBride said Leap is not required to purchase additional iPhones from Apple (NASDAQ:AAPL) to meet its first year commitment to the company. On Leap's second-quarter earnings conference call, McBride said that because of Leap's efforts to increase its sales of the iPhone, the company does not have to purchase more iPhones. Leap has a three-year, $900 million deal with Apple for iPhones.

McBride noted that Leap has purchased approximately one-half of its first-year minimum purchase commitment to Apple through June. "Due to our efforts to expand sales volume for the iPhone, we have not been required to purchase additional handsets to meet the first year commitment," McBride said.

Operator commitments with Apple for iPhone purchases have become a sticking point of late. Earlier this month, Moffett Research, which analyzed SEC filings, said that it believed Verizon Wireless (NYSE:VZ) owed Apple $14 billion in purchase commitments if it doesn't sell the agreed number of iPhones this year.

Leap said in March that its customer base was not purchasing unsubsidized Apple iPhone devices and it estimated it may only sell half as many iPhones as it planned during the first year of its three-year contract with Apple. At the time, Leap said that if iPhone sales did not increase, it might be forced to buy $100 million of unsold iPhones this summer.

However, McBride noted that iPhone and other smartphone sales are improving at the company, thanks to Leap's new Phone Payment Plan, which offers Cricket customers three payment options when purchasing a smartphone. Leap executives said that they believe these options will give customers a lot of flexibility and improve gross activations.

Leap lost 289,000 subscribers in the second quarter and blamed its losses on increased competition, more expensive handsets and fewer reactivations. In addition, the company reported its total revenue in the second quarter dropped 7 percent to $731.5 million and service revenues decreased 10 percent to $678.5 million.

The company, which earlier this month announced it was being acquired by AT&T Mobility (NYSE:T) for $1.2 billion, also said that it was not going to expand its LTE coverage to the additional 10 million POPs as originally planned. Instead, Leap will improve its data coverage in existing markets. Leap currently has LTE covering 21 million POPs. The company also revised its capital expenditure forecast to between $150 million to $200 million for the year.

Here's a breakdown of Leap's key metrics for the quarter:

Subscribers: Leap reported a net loss of 364,268 customers for the second quarter of 2013, compared to a net loss of 289,270 customers for the second quarter of 2012. The company blamed the losses on increased competition in its markets and increased demand for 4G services. Leap also said that it saw fewer reactivating customers and an increase in handset pricing.

Churn: Leap's total churn for the second quarter was 4.3 percent, compared with 4.4 percent for the same quarter in 2012. Leap said there were approximately 400,000 fewer gross deactivations for the second quarter, compared to the year-ago quarter, but that was offset by fewer reactivations. Core churn was 3.6 percent, compared to 3.3 percent in the same quarter in 2012.

Smartphone sales: Leap said 72 percent of its new handset sales were smartphones and 10 percent of the company's voice customers upgraded to smartphones in the second quarter.

ARPU: Average revenue per user for the second quarter was $44.89, an increase of $3.25 over the same time in 2012. Leap attributed the increase to an improved mix of higher-value rate plans and additional fees as well as a reduction of the company's PayGO product.

Muve Music: Leap continues to see momentum with its Muve music service. The company reported that 37 percent of customers are currently using the Muve service.

For more:
- see this release

Special Report: Wireless in the second quarter of 2013

Read more about: Apple iPhone
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By Phil Goldstein

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4. U.S. Cellular sells more smartphones, still loses 127K subs in Q2

Verizon Wireless (NYSE:VZ) followed competitor AT&T Mobility (NYSE:T) in offering a lower-cost option on its shared data plans, though the new offering is more expensive per month than AT&T's cheapest shared data plan.

Verizon will start offering a Share Everything plan that comes with unlimited voice, texting and 500 MB of data for $40 per month. Adding a smartphone to the line brings the total cost up to $80. Customers can add more devices to the plan from there, $10 per month for tablets and $30 for feature phones.

The plan contrasts with AT&T's recently introduced 300 MB plan on its Mobile Share offerings, which, while offering less data than Verizon's plan, is $10 cheaper per month, at $70 when paired with a smartphone. The average U.S. consumer used 733 MB of data per month in the first quarter, according to Nielsen, which indicates that the new offerings from AT&T and Verizon likely are intended to get customers to try an inexpensive option and upgrade to higher, more expensive tiers later on.

The Verizon and AT&T plans are also more expensive than comparable offerings from Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS), which do not offer shared data plans for individual customers.

T-Mobile's entry level Simple Choice plan offers unlimited voice, messaging and 500 MB of data for $50 per month (if customers exceed 500 MB their data speeds are slowed until their next billing cycle).

Meantime, Sprint's new Unlimited, My Way plan offers unlimited voice, texting and 1 GB of data for $70 per month, and unlimited voice, texting and data for $80 per month.

For more:
- see this Verizon page
- see this WSJ article (sub. req.)
- see this Engadget article

Read more about: Verizon Wireless, Sprint
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By Phil Goldstein

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5. Obama nominates Senate aide O'Rielly for Republican FCC spot

U.S. Cellular (NYSE:USM) continued on its trajectory over the last several quarters of selling smartphones and losing customers, as the Tier 2 carrier struggles to break out of a pattern that is seeing its subscriber base dwindle. However, new CEO Kenneth Meyers said he thinks shared data plans, expanded LTE service and the iPhone will help it return to subscriber growth. The company did report a wider profit for the second quarter of $143.3 million, compared to $52.7 million a year ago.

Meyers, a longtime wireless and telecom executive and a veteran of Telephone & Data Systems, U.S. Cellular's parent company, took over in June at the end of the second quarter when Mary Dillon resigned to become CEO of Ulta Salon Cosmetics & Fragrance.

Meyers reiterated that the company is working to complete its LTE network expansion and that it will launch Apple (NASDAQ:AAPL) products, including the iPhone later this year. The company also will start offering shared data plans starting in September, which will be supported by a new billing and OSS system. The company has been working on the project with BSS/OSS vendor Amdocs for more than a year and a half. The company's billing system ran into hiccups last week when it was upgraded, and some customer transactions were unable to be processed. That led to longer than normal wait times when calling customer service, as well as extended wait times at retail stores.

Meyers said on the company's earnings conference call that the rollout of the new billing system did result in some issues, and that "we are now where we expect to be, but a few days later than planned." He said U.S. Cellular is excited about the capabilities the new system will offer, including for shared data plans and equipment installment plans, but he did not give details about those initiatives.

Also, at the end of June T-Mobile US (NYSE:TMUS) said it will buy 10 MHz of AWS spectrum from U.S. Cellular for $308 million in cash, bolstering T-Mobile's spectrum portfolio as it seeks to expand its LTE network using AWS airwaves. The spectrum covers a total of 32 million POPs in 29 markets in the Mississippi Valley region. The agreement came a little more than a month after U.S. Cellular closed a deal with Sprint (NYSE:S) for $480 million, in which U.S. Cellular sold PCS spectrum and offloaded its Chicago, St. Louis, central Illinois and three other Midwest markets to Sprint.

Meyers said on the company's earnings conference call that he did not anticipate major changes to U.S. Cellular's business, and that it will return to focusing on suburban and rural markets, primarily. He also said the company will focus on postpaid subscribers.

U.S. Cellular said it will continue to look at divesting non-core spectrum assets, though the deals will likely be smaller than the T-Mobile one. The company is also excited to participate in next year's planned incentive auctions of 600 MHz broadcast TV spectrum. The company is also considering selling its towers in divested markets, but not in its core markets.

Here is a breakdown of U.S. Cellular's key quarterly metrics:

Smartphones: Smartphones represented 66 percent of all devices sold in the second quarter, up from 61.7 percent in the first quarter and 51.9 percent in the year-ago period. Fully 45.5 percent of U.S. Cellular's postpaid subscriber base has a smartphone, up from 43.5 percent in the first quarter and 36.8 percent in the year-ago quarter. Meyers said that U.S. Cellular expects the introduction of the iPhone into its lineup later this year to help with subscriber additions, and that the company's iPhone will support its Lower 700 MHz A Block in Band Class 12 as well as Band 5, which is used on 850 MHz spectrum.

LTE: U.S. Cellular reiterated that it will bring LTE coverage to 87 percent of its customer base in 2013. The company said that in its core markets LTE smartphones were 84 percent of smartphones sold in the first quarter. U.S. Cellular also revealed that 40 percent of its data traffic is now on its LTE network. The company has said that by the end of the year customers in more than 3,800 additional cities and towns will have access to its LTE. U.S. Cellular said it will deliver LTE to "select cities" in California, Kansas and Nebraska and its existing LTE service will be expanded to include additional cities in Illinois, Iowa, Maine, Maryland, Missouri, North Carolina, Oklahoma, Oregon, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.

Subscribers: In total, for all its markets, U.S. Cellular lost 127,000 total customers in the quarter, including 120,000 postpaid subscribers, more than the 74,000 postpaid customers it lost in the first quarter and the 48,000 in the year-ago quarter. The carrier also bled 7,000 prepaid customers, a reversal from prepaid gains of 23,000 in the first quarter and 20,000 in the year-ago period.

In the company's core markets, which exclude devastated markets of Chicago, central Illinois, St. Louis and the certain Indiana, Michigan and Ohio markets, the company said it lost 53,000 postpaid customers, wider than the losses of 33,000 in the first quarter and 30,000 in the year-ago quarter. The company also gained 8,000 prepaid customers in its core markets, which is fewer than the 31,00 it added in the first quarter and 23,000 added in the year-ago period.

The company ended the second quarter with around 4.97 million total customers.

Churn: The company's total postpaid churn rate was 2 percent, higher than 1.7 percent in the first quarter and 1.6 percent in the year-ago period.

ARPU: U.S. Cellular's postpaid average revenue per user was $54.18, down slightly from $54.85 in the first quarter and $54.42 in the year-ago period.

Financials: Total revenue clocked in at $995.1 million, down 10 percent year over-year from $1.1 billion. Service revenue also fell 12 percent year-over-year to around $911 million.

For more:
- see this release

Special Report: Wireless in the second quarter of 2013

Related Articles:
Ntelos CEO talks up value of spectrum in light of AT&T/Leap deal
Regional operators disappearing in wake of industry consolidation
T-Mobile scoops up some of U.S. Cellular's AWS spectrum for $308M
Mary Dillon leaves U.S. Cellular, replaced by TDS exec Kenneth Meyers
U.S. Cellular changes course, will offer iPhone later this year

Read more about: Smartphones
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By Phil Goldstein

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