wholesale « John Caddell's blog

Posts Tagged ‘wholesale’

Sprint reveals more on its wholesale strategy

Tuesday, March 24th, 2009

Way back in the early oughts when we all thought MVNOs would change the wireless world here in the US, one question we faced was the sheer number of mobile phones people had. “Hey, 75% of people already have cellphones; how are new operators going to build scale when nearly everyone has a phone?”

And the answer was plain to me as I looked around our house. “Hey,” I said to our team. “We have six CD players. Some day we’ll all have six phones, too.”

The MVNO market didn’t take off like we’d hoped, but, as I’ve pointed out a few times recently, wireless wholesale is far from dead. In today’s Wall Street Journal, Sprint discusses its focus on embedded wireless data (”Sprint Looks To Power Gadgets Beyond Cellphones“).

Sprint is the data service behind the Amazon Kindle, as many know, and they’re looking to land more of those types of customers. The Journal article mentions GPS maker Garmin, SanDisk and Kodak as possible integrators of always-on wireless data services.

Customers of Garmin, SanDisk, etc., are strategic because they are net new customers to wireless–in other words, they are like I was when I bought my second (PC), third (another PC), fourth (clock radio) CD players. They don’t have to be lured from a competitive service.

And the article points out that wholesale accounts, while lower in revenue, are very profitable for Sprint:

Analysts say wireless wholesaling generates lower revenue than retail sales but carriers can hold down costs and maintain good profit margins. “They don’t have to bear costs like customer acquisition, billing or customer service,” said Jim Andrew, a wireless industry consultant.

Almost every review of the new Kindle I’ve read mentions its ability to wirelessly download books anytime, anyplace. That feature doesn’t exist without a ubiquitous wireless network. I’m ready, and the market’s ready, for more connected devices like the Kindle.

Tags: Kindle, Sprint, strategy, wholesale, wireless
Posted in mobile | Comments

Time for a humbler, more focused, wireless wholesale market

Monday, February 23rd, 2009

The US MVNO market is the greatest missed opportunity I’ve seen in my wireless career, stretching back almost 20 years. Through carrier resistance and MVNO hubris, a business model that works very well in Europe and Asia has floundered here. Strong, focused MVNOs, which manage their costs and market excellently, improve services and value for wireless users in many places outside the US.

Yet there may be a light flickering in the US market. It’s been several years since the meltdowns of Amp’d, Disney Mobile, ESPN and other high-profile players. The iPhone and its imitators have demonstrated the value of a (relatively) open architecture and application environment. And the carriers are still no better at rolling out truly innovative services than they have been.

Plus, nationwide carriers #3 & 4 (Sprint & T-Mobile) trail far behind the leaders in market share. This creates a strategic scenario where a customer acquired by a Sprint or T-Mobile reseller is relatively unlikely to poach the direct business of the wholesaler (and in Sprint’s case, they should welcome retaining customers by any means, even if they are transferred to an affiliated wholesaler). Therefore, the perceived opportunity cost of a full-on push into wholesale by these carriers is lower.

Who will be tomorrow’s resellers? Those that are laser-focused on markets unserved by the carriers. They will be smaller but profitable, with excellent, low-cost distribution channels. They will be true innovators, bringing high-value applications to their customers. They will have customer bases who purchase phones without subsidies. They will be able to create win-win agreements with the wholesalers.

In a perfect world, a Sprint & T-Mobile push will force AT&T and Verizon to re-enter the wholesale market. Then there will be a strong, vibrant, competitive market where resellers will have some control of their destiny.

And the biggest winner of all will be… the customer. You and I.

Tags: mobile, mvno, strategy, wholesale, wireless
Posted in wireless | Comments

A Strategic Suggestion for Sprint Nextel

Friday, February 20th, 2009

What do you do if you’re #3 in a market and falling? Jack Welch of GE would have said, “Get out.” Sprint Nextel’s management doesn’t have that option at the moment, but their outlook appears dismal. According to an article by the New York Times’ Jenna Wortham, they lost 1.3MM subscribers while their larger competitors, AT&T and Verizon, gained a total of 3.5MM subscribers.

Not a winning trend.

Sprint is sorely in need of a strategic reboot, and I have a suggestion. Rosabeth Moss Kanter wrote the other day (”The Power of Old Ideas“) about an asset companies almost never use–the ideas and strategies they shelved in the past.

In Sprint’s case, that asset is wholesale. During the MVNO era earlier this decade, Sprint was (and still is) the largest supplier of wholesale wireless service. The others aren’t even close.

Wholesale employs outside partners–resellers–to brand, sell and support wireless service powered by the wholesaler’s network. In the 1980’s, long-distance wholesale from AT&T, Sprint and MCI launched dozens of vibrant telecommunications companies and greatly reduced per-minute charges for users.

But wireless wholesale never gained critical mass due to carrier neglect and strategic conflict–the direct channel was fearful that resellers would poach its own customers (see last week’s post on cannibalization). The cannibalization excuse always seemed weak to me–any wireless operator with less than 50% market share–i.e., all of them–will lose fewer customers to resellers than its competition.

Investment analysts complained that a wholesale customer had a lower ARPU than a direct customer. Which is true, but wholesale customers also have radically lower CPGA as well. Meaning the lifetime value equation for a wholesale customer isn’t bad (and may in fact be better than retail given the lower costs). Remind me to do those numbers some time.

All of the above, added to Sprint’s current growth (decline) trajectory, to me suggests that a full embrace of wholesale is a highly-differentiated strategy which would be impossible for competitors to match. And if I were the third-place operator, it’s one I would consider seriously.

Tags: Sprint, strategy, wholesale, wireless
Posted in strategy | Comments