MetroPCS' Linquist on cheap LTE devices, wholesale providers and the iPhone 4S
with Roger Linquist, Chairman and CEO of MetroPCS
Former paging executive Roger Linquist, the chairman and CEO of MetroPCS (NYSE:PCS), has seen a lot of trends come and go in the wireless industry. But he feels strongly on his company's decision to leapfrog 3G data and go directly to deploying LTE. He recently sat down with Sue Marek, editor in chief of FierceWireless, to talk about the firm's LTE rollout, his belief that inexpensive LTE smartphones are just months away from reality and why he doesn't want to see more regulation in the wireless industry.
FierceWireless: How are you progressing with your LTE deployment?
Linquist: We have made a large commitment to the 4G LTE technology. This was a difficult decision for us to make. It took us about a year and a half to get sufficient vendor interest and to get to the point where we could see an economic way of deploying this. Instead of going through the 3G data phase, which we wanted to avoid because we ... knew that 4G was going to be right on the heels of 3G. So we made the bet to deploy LTE. Now we have a two-network system. We are carrying the load and working hard to develop the ecosystem, which for us includes handsets all the way back to chip manufacturers.
Qualcomm (NASDAQ:QCOM) is 95 percent of the chip market but there are others that have chipsets that are available. We are encouraging that activity too. We see the light at the end of the tunnel. We see the second half of 2012 being the initial payoff phase. We see handsets being available at that time that we can price very close, if not on top of some of our comparable CDMA handsets in the lineup today. That for us is a breakthrough. If you can't get the handsets down to a price range in and around $100 then you don't have an offering that makes sense.
We have 4 million to 5 million [subscribers] we can still get on the LTE network. As you know, LTE is a carrier by carrier technology and we put in a 5x5 configuration in most markets. We have latent capacity and although we have interest in LTE products we aren't anywhere near the 4 to 5 million at this point. We have unused capacity. All the network investment we are carrying. We see this as upside opportunity.
In the handset arena, when this becomes a single chip worldwide production embraced by a large number of handset vendors, we can expect prices of handsets to fall. There will always be top-of-the-line handsets but there will also be a line of what we call a premium handset priced in the $100 and less range at retail.
FierceWireless: You said you have excess capacity on LTE. People have said that with your configuration of LTE you will likely use that capacity quickly. But you are saying that isn't the case.
Linquist: It's not the case. The handsets are priced between $250 and $450 so LTE is viewed as a premium service. That price range takes us out of our sweet spot, which is $100 to $150. That has been an attractive price point for the Android devices.
FierceWireless: Is MetroPCS being courted by wholesale partners like LightSquared and Clearwire? What do you think of those types of companies?
Linquist: It's fine to have these wholesalers. On one hand they are a threat, on the other hand they are a vendor. Are they a big threat? We don't think so. The economics of what they are offering is a factor of five or more expensive than what we could produce on our own. That's why we are a facilities-based carrier. That gave us the opportunity to be more aggressive on pricing.
I think LightSquared is in very difficult circumstances and will probably be delayed. Clearwire (NASDAQ:CLWR) could be a provider of services by shifting to the time-division approach to LTE. But certainly not with WiMAX. No one is touching WiMAX, that's as toxic as it gets.
I think the wholesalers have opportunities and who knows who they will foster into this race. But it comes down to the basic issue of all the MVNOs, which is in the broadband data world, they have to determine what their users expect and whether they will be commercially competitive.
Buying minutes are one thing, but when you talk about broadband usage and tiers, you have to look at tiers and how they stack up and who can provide more vs. less. I don't know the outcome of that.
FierceWireless: What did you think of the iPhone 4S?
Linquist: It looks good. I think people are disappointed that they didn't make it thinner but it's a powerful phone.
FierceWireless: Now that more operators are carrying the iPhone 4S, with the addition of Sprint Nextel (NYSE:S), do you think MetroPCS will soon be able to offer it?
Linquist: We have a customer base that would like to join that cult but at a price of $600 [for an unsubsidized device] I don't know.
FierceWireless: Are you going to sue the FCC again over net neutrality? You sued them once and they said it was premature because the rules hadn't been published. Now the rules have been published. Will you sue again?
Linquist: We don't see more regulation in this area as helpful. We see the FCC moving toward gaining more access for consumers but we think there are other ways to do it that don't impact the rate plans that we want to offer consumers. We see this as indirectly affecting our ability to serve our customers with rate plans that we would like to craft that we think they are beneficial to them.
We have had pushback from some groups protesting our offering that we have on 4G. We see that as beneficial to customers because we offered them the lowest price in the industry for service and yet it was being protested. If that is the picture we have to look at going forward, it isn't one we readily embrace.
FierceWireless: How is your music service doing?
Linquist: We have been looking at this for more than three years. First it was how many ringtones can we deliver? Can we do unlimited? We have looked at many different vendors and with Rhapsody we found a clearinghouse that we could work with and economics we could manage. I think it will be a very important part of our offering going forward.
Not everyone wants to use their phone as a jukebox but in our segment of the industry that we serve we are interested in providing it and there will be more developments in that area.