An Ignoble Experiment

1. T-Mobile adds 1.3M postpaid subs in Q1, blowing past rivals

Phil Goldstein

The Fierce editorial team is once again in the middle of deciding our annual Fierce 15. For those of you unfamiliar with the Fierce 15, these are the 15 most interesting and innovative startups in the wireless industry--companies that we think have the potential to become powerful forces in the years ahead.

Just as in past years, the Fierce 15 this year will be awarded a Fierce 15 designation and will be featured prominently in our newsletter and on our website.

Click here to see our selections from 2013, and click here to check out all of our winners from past years.

To qualify for the Fierce 15, a company must be privately held, well-funded, emerging (founded in the past few years) and either based in the United States or have a significant amount of business in the U.S. wireless market.

If you think your company has the potential to be a Fierce 15, you can nominate it by filling out this form. The deadline for all submissions is May 13. The 2014 Fierce 15 list will make its debut in the second week of June. --Phil

Today's Top News

By Phil Goldstein

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2. Report: Sprint to push forward with T-Mobile deal in next few months

T-Mobile US (NYSE:TMUS) continued its surging momentum in the first quarter, recording its best ever quarter in terms of branded postpaid subscriber additions largely on the back of the offering the carrier launched in January to pay off the Early Termination Fees of customers who switched over from other carriers.

In all, T-Mobile added 2.4 million total customers in the quarter, its first quarter ever with more than 2 million total customer additions. The number included total branded net additions of 1.8 million and branded postpaid net additions of more than 1.3 million.

T-Mobile easily outpaced all its rivals in terms of adding lucrative postpaid customers. AT&T Mobility (NYSE: T) surprised the market by reporting 625,000 new net postpaid customers in the first quarter, Verizon Wireless (NYSE: VZ) had 539,000 postpaid additions in the quarter, and Sprint (NYSE: S) reported that it lost 231,000 postpaid customers in the period.

"T-Mobile had an unusually strong first quarter driven by ETF payments," wrote New Street Research analyst Jonathan Chaplin. "While we expect T-Mobile to continue to grow, this is the best net add quarter we are likely to see from T-Mobile for a while."

However, T-Mobile's offer to pay up to $650 in ETFs did come at a steep cost--T-Mobile reported another quarterly financial loss.

"We are clearly proving we can accelerate growth," T-Mobile CEO John Legere said on the company's earnings conference call. He said T-Mobile would continue looking to solve customer pain points through its "uncarrier" initiatives. Indeed, T-Mobile raised its customer expectations for 2014 to between 2.8 million and 3.3 million branded postpaid net additions, up from the guidance of 2 million to 3 million it gave in February.

Here is a breakdown of T-Mobile's fourth-quarter results:

Subscribers: Of its 1.32 million branded postpaid additions, T-Mobile had more than 1.2 million phone net additions--unlike its rivals, T-Mobile has not been banking on tablet additions for growth. T-Mobile said around 21 percent of its branded postpaid gross subscriber additions took the ETF offer in the first quarter.

The company added 465,000 branded prepaid net customer additions in the first quarter, which T-Mobile said was driven by the success of MetroPCS and growth in the 30 expansion markets launched in 2013. The carrier added 383,000 customers from its MVNOs, which include Solavei, Ultra Mobile and others, as well as 220,000 M2M customers. T-Mobile ended the quarter with 49.1 million total customers. In all customer segments--branded postpaid, branded prepaid and wholesale--T-Mobile saw year-over-year improvements in its subscriber numbers.

Legere said the quarter's results showed that American consumers are getting just "a small taste of what real competition looks like" and that it is a "fantastic" time in the industry. However, he faulted T-Mobile's larger competitors for making small price adjustments or temporary offers, perhaps alluding to price changes AT&T and Verizon made in the quarter to their shared data plans and Sprint's identical ETF offer, which Sprint introduced in early April that runs through May 8. "It's a strange period where they can't just switch" and change their business models, he said.

T-Mobile executives also addressed investors' concerns that the company is gaining market share at the expense of profit. "There's no expectations on our part to sacrifice profitability," Legere said.

T-Mobile CFO Braxton Carter said that the ETF offer was introduced in the first part of the year because attracting high-quality customers early in the year will pay dividends for T-Mobile's results later in the year. T-Mobile CMO Mike Sievert echoed that and said the company is "not buying growth" in an uneconomic way. He said customers who are coming over on the ETF offer have higher credit ratings, use more data and make higher monthly device payments on equipment installment plans. He said the carrier is "pleased with the economic system that we have going right now."

LTE: T-Mobile said it now covers 220 million POPs with LTE and aims to cover 250 million by the end of 2014. T-Mobile said it now has 10x10 MHz LTE deployments in 43 of the top 50 metro areas, 15x15 MHz LTE deployments in nine metro areas and will have 19 by year-end. And T-Mobile said it deployed 20x20 MHz LTE in North Dallas and Detroit and will have seven such deployments by year-end--the carrier said the technology could support download speeds up to 147 Mbps.

T-Mobile also just recently closed its deal to acquire 700 MHz A Block spectrum from Verizon, which it will put into service late this year for LTE. In a company blog post, T-Mobile CTO Neville Ray wrote that "with this A-Block deal complete, our new low-band spectrum will be another powerful addition to our ambitious network plans, substantially improving in-building 4G LTE coverage as well as expanding coverage beyond major population centers."

MetroPCS: T-Mobile's integration of the MetroPCS customer base and network it acquired last spring is chugging along: Fully 53 percent MetroPCS customers had handsets that work on T-Mobile's GSM-based network at the end of the first quarter. More than 50 percent of MetroPCS' spectrum has been refarmed and integrated into T-Mobile's network.

T-Mobile earlier this year announced it would accelerate the shutdown of MetroPCS' CDMA network by closing three markets this year instead of next year--already the carrier plans to shutter the New England and Las Vegas CDMA markets by the second quarter. Today T-Mobile announced it may increase the number of CDMA market shutdowns this year, and said it would provide details on the effort later this year.

Smartphones: T-Mobile said it sold a record 6.9 million smartphones in the quarter. The carrier said 81 percent of its total branded customer base had a smartphone at the end of the quarter, up from 79 percent at the end of the fourth quarter of 2013.

Churn: T-Mobile's branded postpaid churn was a record low 1.5 percent, down from 1.9 percent in the year-ago period.

ARPU: T-Mobile said branded postpaid average revenue per user for the first quarter fell quarter-over-quarter by $0.69 or 1.4 percent to $50.01, which T-Mobile counted as an improvement compared to the quarter-over-quarter decline of 2.9 percent in the fourth quarter of 2013. The decline is due to T-Mobile's Value and Simple Choice plans, introduced last year.

T-Mobile said that 75 percent of its branded postpaid customers were on its Value or Simple Choice plans at the end of the first quarter, up from 69 percent at the end of the fourth quarter of 2013. T-Mobile continues to expect 85 and 90 percent of its branded postpaid customers to be on the plans by the end of 2014.

Branded prepaid ARPU for the first quarter increased by $0.25 or 0.7 percent to $36.09 compared to the fourth quarter of 2013.

Financials: T-Mobile's customer acquisitions came at a cost. The carrier swung to a net loss of $151 million for the first quarter, down from a profit of $107 million in the year-ago period. The company reported adjusted EBITDA of $1.09 billion for the first quarter, down 26 percent from $1.47 billion a year earlier, including earnings from MetroPCS before the companies merged last year. T-Mobile reported a wireless margin of 20 percent, down from 29 percent a year ago and weaker than the 22.43 percent analysts had been expecting, according to a Bloomberg survey of eight analysts.

Total revenue came in at $6.87 billion, up 15.3 percent year-over-year. Service revenues totaled $5.33 billion, up 4.5 percent year-over-year.

For more:
- see this release
-see these slides (PDF)
- see this T-Mobile blog post
- see this Bloomberg article

Special Report: Wireless in the first quarter of 2014

Read more about: quarterly earnings, Neville Ray
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This week's sponsor is IEEE Computer Society.

Actionable advice from mobile cloud leaders. Visit www.computer.org/Mobile-Cloud

By Phil Goldstein

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3. Verizon committed to VoLTE with HD Voice in 2014

SoftBank-owned Sprint (NYSE: S) is going to move ahead with a deal for No. 4 carrier T-Mobile US (NYSE:TMUS) after Sprint executives met with banks last month to secure debt arrangements for the transaction, according to a Bloomberg report.

The report, citing unnamed sources, said that Sprint CFO Joe Euteneuer and Treasurer Greg Block met with six banks to get financing in place for when Sprint decides to make a move. Sprint is expected to make a formal bid in June or July, the report added. T-Mobile has a market value of $23.5 billion.

Representatives from Sprint and T-Mobile declined to comment, according to the report.

During T-Mobile's first-quarter earnings conference call, held shortly after the release of the Bloomberg report, T-Mobile CEO John Legere reiterated that he is open to industry consolidation. "It's a matter of when, not if" such consolidation takes place, he said.

Legere said there are "multiple ways to play aggressively" and that T-Mobile has said consistently said that "one alternative" is to create a larger player with more scale. "Our scale, our growth, our momentum could benefit from a significant scaling of fixed assets," he said.

According to the Bloomberg report, SoftBank CEO Masayoshi Son is working to build an argument that could convince the FCC that a deal with T-Mobile is in the best long-term interests of the wireless industry. In March, Son explicitly called for a deal between Sprint and T-Mobile, and has said combining the No. 3 and 4 wireless carriers would spark a "massive price war" and more competition in the U.S. market. However, regulators at the FCC and Department of Justice have been decidedly cool on the proposed transaction.

The Bloomberg report also said talks with banks have been focused on how much Sprint should borrow for the deal, since Sprint would also be taking on the $8.7 billion in net debt that T-Mobile has on its balance sheet.

Moreover, SoftBank and T-Mobile parent Deutsche Telekom, which still controls around 67 percent of T-Mobile, are still debating who would run the combined company, with Legere seen as the leading candidate, the report said.

AT&T tried to buy T-Mobile in 2011, but regulatory opposition eventually squashed that transaction. T-Mobile has since merged with MetroPCS, acquired spectrum from Verizon, Sprint and U.S. Cellular (NYSE:USM), and has been growing steadily the past four quarters. In the first quarter of 2014, T-Mobile added 2.4 million total customers, including 1.3 million branded postpaid customers, the most of any U.S. carrier.

Although officials at the Department of Justice have been highly skeptical of further industry consolidation, analysts have argued the bigger roadblock is with the FCC since the DOJ must sue to block a deal on antitrust grounds while the FCC can block a deal if it finds it is not in the public interest.

For more:
- see this Bloomberg article
- see this Re/code article
- see this BTIG blog post (reg. req.)

Related Articles:
Analysts: Sprint/T-Mobile must merge or one will fail
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Analysis: Sprint, Dish could broaden partnership- but it would be complicated
AT&T CFO: We'd be surprised if regulators approved a Sprint/T-Mobile deal
SoftBank's Son: We can start a 'massive price war' following a Sprint/T-Mobile deal

Read more about: T-Mobile USA, Sprint
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By Tammy Parker

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4. Facebook unwraps mobile ad network, other mobile tools for developers

Verizon (NYSE: VZ) Wireless confirmed that it expects to introduce VoLTE this year and will simultaneously roll out mobile high-definition (HD) voice using the W-AMR speech compression algorithm.

Verizon Communications CFO Fran Shammo said at an investment conference in August 2013 that the company would introduce VoLTE in the first half of 2014. However, in an April 28, 2014, research note, Joseph Mastrogiovanni, research analyst at Credit Suisse, said Verizon expects to launch VoLTE in the second half of this year.

"We expect the company to manage the launch carefully and make customers fully aware of the tech difference, but believe VoLTE could hurt the perception of the network at a sensitive time for competition, as it is not likely to be as robust as CDMA voice," Mastrogiovanni wrote.

Verizon spokeswoman Debi Lewis told FierceWirelessTech that the official corporate stance is that VoLTE will roll out sometime in 2014. She declined to confirm or deny the second-half timing cited by Credit Suisse. But she acknowledged that Verizon is focused on making sure VoLTE technology is fully ready before commercially activating it.

"This is complicated technology. We like to test, make sure everything's good before we do any kind of rollout. And 2014 is what we're focused on," Lewis said.

She noted that the flavor of HD Voice Verizon intends to introduce alongside VoLTE service will be based upon the Adaptive Multi Rate Wideband (W-AMR) speech compression algorithm. W-AMR was standardized in 3GPP Release 5, and the first service launch using the technology occurred in 2009.

W-AMR will be more widely deployed than another flavor of HD Voice, which was designed for CDMA2000 network operators that deploy, at a minimum, Service Option 73 Enhanced Variable Rate Codec-Narrowband/Wideband (EVRC-NW), which was standardized by 3GPP2 in 2010.

Sprint (NYSE: S) introduced EVRC-NW HD Voice about two years ago on the HTC Evo 4G LTE smartphone. Earlier this week at its Spotify event in New York, Sprint CEO Dan Hesse announced that HD Voice is now available over its CDMA network in 100 Sprint markets and will expand nationwide in mid-summer. The operator intends to have some 20 million HD Voice-capable devices in use by its customer base by the end of 2014.

T-Mobile US (NYSE:TMUS) turned up W-AMR HD Voice on HSPA in January 2013. AT&T Mobility (NYSE: T) is expected to roll out HD Voice alongside VoLTE, but has delayed its VoLTE rollout from an end-2013 target date. AT&T has not provided a new VoLTE target date, but it is working to seed the market with VoLTE-capable devices, such as the PadFone X from Asus.

In a recent conference call to discuss Verizon's first-quarter 2014 earnings with investment analysts, Shammo noted that some 73 percent of the wireless unit's total data traffic is being carried over its LTE network.

"Our focus is on deploying capital to add density to our network and deliver new services such as VoLTE and multicasting to enrich our customers' wireless experience," he noted, according to a SeekingAlpha transcript of the call.

Verizon in 2010 said the carrier would launch VoLTE by late 2012 or early 2013, but subsequently delayed that launch.

For more:
- see this SeekingAlpha transcript
- see this LightReading article

Read more about: Sprint, Debi Lewis, AT&T Mobility
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By Phil Goldstein

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SPOTLIGHT ON... Will C-RAN network technology spread across the globe?

Facebook (NASDAQ: FB), as expected, unveiled a mobile advertising network at its annual f8 developers conference, catapulting the social networking giant into competition with Google (NASDAQ: GOOG) and Apple's (NASDAQ: AAPL) more established mobile ad networks. However, in addition to unwrapping the Facebook Audience Network mobile ad network, Facebook also announced a host of tools designed to make life easier for developers and consumers on mobile.

Perhaps the company's most notable announcement was that Facebook will allow users to log in to third-party mobile applications and try an application without having to first relinquish their personal data. The new feature, called "anonymous login," will let users test out apps without handing over personal information to third-party developers. "It lets you try apps without fear," Facebook CEO Mark Zuckerberg said at the conference in San Francisco, according to Re/code.

The ad network though was what most developers had been anticipating ahead of the conference. The network, details of which leaked earlier this month, uses the same targeting available for Facebook's desktop ads, including Custom Audiences, core audiences and lookalike audiences, and also features the same measurement tools marketers use for their Facebook ads.

Facebook is aiming to make it easy for marketers to transition to mobile advertising via its new platform. "For marketers already running News Feed ads on Facebook, using the Audience Network takes just one click," the company said. "The Audience Network will be available in all ad interfaces, as well as the API. Once a campaign is running in the Audience Network, our system handles optimization and delivery."

The Audience Network is designed to drive app installs and engagement, Facebook said, and will deliver ads in three different creative formats, or sizes, for mobile devices. Facebook said the network will "expand to include additional marketing objectives in the future."

The Audience Network will roll out to more advertisers in the coming months, Facebook said.

"This is really the first time that we're going to help you monetize in a serious way on mobile," Zuckerberg said, according to Bloomberg.

Facebook's mobile ad network puts it in direct competition with Google's AdMob, Millennial Media, Apple's iAd and other mobile ad networks. Mobile advertising is becoming big business for Facebook. The company said total revenue in the first quarter jumped 72 percent to $2.5 billion, with advertising revenue making up $2.27 billion of that, up 82 percent year-over-year. Facebook now gets 59 percent of its advertising revenue from mobile, up from 53 percent the fourth quarter and a huge jump from 30 percent in the year-ago period. Facebook counted 1.01 billion mobile monthly active users as of March 31, an increase of 34 percent year-over-year.

In addition to the Audience Network, the anonymous login was also a major announcement. Under the feature, each app gets a piece of unique identification code that can't be used to tie the user back to Facebook, according to Re/code.

Another feature Facebook announced is called "Send To Mobile," which allows users to send links from the desktop to their mobile phones to download apps, for instance. Another feature is a mobile "like" button, which lets users like things on their mobile devices, even without Facebook login enabled. The button is coming first to Apple's iOS and then to Google's Android platform.

For more:
- see this Facebook blog post
- see this Facebook page
- see this separate Facebook page
- see this Bloomberg article
- see this GigaOM article
- see this Re/code article

Also Noted

This week's sponsor is PCIA.

Register Today - 2014 Wireless Infrastructure Show

Unlike SDN (software-defined Networking) of NFV (network functions virtualization), C-RAN might the hottest wireless acronym you've never heard of. C-RAN stands for Cloud RAN (radio access network) as well as the less catchy Centralized RAN. In either case, C-RAN leverages distributed base station architecture to enable a host of benefits, such as capex and opex savings, increased asset utilization and savings on energy.

C-RAN separates the radio and antenna parts from the digital baseband path and pools multiple baseband units (BBUs) in a central office, or base station hotel. These digital-only base stations are linked via fiber to remote radio heads (RRHs). Combined with NFV, baseband tasks would be accomplished through the use of general purpose processors and generic server farms, which would link via fiber to a virtual server somewhere in the cloud.

That could enable companies like Intel and IBM to become the suppliers for RAN infrastructure, analysts say, challenging traditional RAN vendors like Ericsson. So far, C-RAN is dominating the advanced wireless markets of Asia, where fiber is abundant and high population densities make the architecture fiscally beneficial. But proponents of the technology believe it could eventually spread around the world. Find out more in this FierceWirelessTech special report.

Quick news from around the Web.

#Cable2014 - Cable's #WiFi ambitions about much more than customer retention - http://t.co/gZLEgbChVM (@FierceCable) May 1, 2014

> Sony again cut its predictions for profit. Article

> AT&T has been in discussions with DirecTV about purchasing the satellite TV provider, according to a report in The Wall Street Journal citing unnamed sources close to the talks. Article

> Opponents of the FCC's new plan for net neutrality are preparing to fight it. Article

> MVNO Consumer Cellular increased the number of minutes, messages and data available under its plans. Article

> Snapchat added video calls and instant messaging to its app. Article

> Stephen Elop will receive $33.4 million for leaving Nokia for Microsoft. Article

> Motorola's next smartphone, launching May 13, will be "priced for all." Article

Wireless Tech News

> Mimosa's CEO responded to critics of firm's spectrum-sharing proposal for 10 GHz. Article

> The Comcast Wi-Fi network only encompasses 1 million hotspots right now, but that number will skyrocket to a whopping 8 million by year's end, with the cable MSO promising to operate hotspots in 19 of the country's 30 largest cities. Article

> The First Responders Network Authority (FirstNet) announced the hiring of its first CTO. Named to the position is Ali Afrashteh, who has been working as a consultant but previously held executive positions with Clearwire, Sprint, Nextel Communications and PCS PrimeCo. Article

Telecom News

> Consolidated Communications reported that a 21 percent rise in Metro Ethernet revenue drove up overall first-quarter 2014 data, video and Internet services revenue to $68.2 million. Article

Cable News

> Cable's Wi-Fi ambitions are about much more than customer retention. Editor's Corner

> FCC Chairman Tom Wheeler didn't beat around the bush when he took the stage at the The Cable Show here, telling the cable industry that the FCC is not "gutting the open Internet." Article

> Here's something to chew on as Aereo's right to grab and rebroadcast over-the-air transmissions via IP wends its way through the Supreme Court: one of the cable industry's bigger names, John Malone, once considered investing in the maverick firm. Article

> Every player within the TV entertainment space--broadcasters, cable and satellite service providers and consumer groups--has an opinion on retransmission fees. Article

And finally… Samsung announced it will give its Galaxy owners exclusive access to LeBron James through a new mobile app. Release

Lowenstein's View: Can wireless compete in broadband?

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