FierceWireless columnist and industry analyst Mark Lowenstein helps us kick off 2019 with his assessment of the key strategic priorities for the leading U.S. wireless operators. Today's column is focused on Verizon and AT&T, while part 2 discusses T-Mobile, Sprint, and cable's wireless strategy.
This is going to be one of the most pivotal years in the wireless industry in some time. The list of significant events includes: rollout of 5G; numerous spectrum auctions; launch of CBRS services; decision on T-Mobile/Sprint deal; first 5G phones; and more. It is also shaping up to be a critical year for the major operators. After a couple of years of homogenization (similar price plans, same phones, narrowing of deltas on network), strategies are going to diverge somewhat. To help kick off 2019, here’s my take on some of the key strategic priorities for Verizon, AT&T, T-Mobile, Sprint, and the cable folks.
There is more change going on at Verizon than at any time in its recent history. Even though the company maintains a leadership position across many metrics, there are concerns, as evidenced by Wall Street’s comparatively negative view on the company compared to its industry peers. Verizon has an almost entirely new senior management team, and many other seasoned employees will be leaving in the coming weeks as part of the company’s force reduction. So internally, these are tumultuous times, with some key decisions to make.
First off, Verizon should decide what to do with its New Media Group (formerly Oath). This unit has become an albatross. New CEO Hans Vestberg rather immediately surmised that Verizon will not be taking major share from Google, Facebook and Amazon in online advertising. My view on New Media is to either go bigger—acquire additional assets that will drive ARPU and customer retention—or spinoff/offload the puppy.
We will also know by the end of 2019 whether fixed wireless will be important for Verizon’s business going forward. The company will have rolled out Verizon 5G Home to a critical mass of markets, and we’ll see what kind of share the company is taking. Beyond FWA, Verizon needs to more clearly articulate its "mobile" 5G plan. The company is in a strong position, network-wise, given its extensive densification spending in recent years. Much as consumers might not love this, I’d like to see Verizon show some industry leadership in attaching some premium pricing to a premium 5G service. If cable can have different prices for tiers of broadband, why can’t wireless?
Another priority for Verizon is to turn around its enterprise business. Verizon has been losing share to AT&T and others in recent years. And “New T-Mobile” is likely to take a stronger run at the enterprise. There are three distinct opportunities here, in my view: private LTE networks, as part of a CBRS/LAA/5G strategy; staking early ground in 5G discussions with certain key verticals; and laying the foundation for the IoT opportunities that 5G will bring. Vestberg must rather dramatically evolve Verizon’s enterprise sales and marketing force in order to execute here.
If the T-Mobile/Sprint deal goes through, Verizon will be under greater pressure to do something about its prepaid business. This has never been a strong segment for Verizon, but with AT&T and T-Mobile investing in their Cricket and Metro PCS assets, the delta between their gains and Verizon’s losses will start materially affecting market share. It will be interesting to see whether Verizon gives its new Visible brand the resources to start growing meaningfully in 2019.
Finally, Verizon is going to have to consider some significant M&A over the next couple of years. Its rival AT&T has made some pretty big bets around media. “New T-Mobile” is going to have a pretty aggressive game plan to go after cable and telecom. Could a deal with cable be an opportunity? After all, the roadmap for the next couple of years looks like Verizon and cable are each nibbling away at each other’s businesses. DISH remains an intriguing possibility—if not an outright M&A, then perhaps a strategic partnership of some sort. I would not recommend a major foray into media a la AT&T. There are too many sharks circling that wagon (Apple, Amazon, Netflix, Comcast, Disney to name a few). One out there thought is an acquisition or some sort of strategic deal in the gaming/AR/VR area, as way of bringing some differentiation to its 5G business on the consumer side. Another area to consider is a more directed focus on the self-driving car. Even though its reality is further out there, in my view, than some believe, there’s going to be massive investment in this sector, and the wireless operator with the ‘best network’ could have something meaningful to offer here.
AT&T enters 2019 with three areas of distinct competitive advantage which, if the company plays its cards right, it can strategically leverage. First, AT&T’s capacity position has increased by about 60 MHz, between FirstNet, WCS, and AWS. This provides AT&T with the opportunity to show some network performance differentiation, and also develop some unique market offers, perhaps tied its DTV/Warner Media assets.
The second opportunity involves Warner Media. During 2018, the focus was on getting the deal approved, undertaking a strategic assessment (which has involved a reorg and numerous layoffs), and putting in place a plan for 2019. What I hope they don’t do is try to directly compete with Netflix, Amazon, Google, or the coming OTT offers from Apple and others. That market is getting very crowded, and AT&T risks upsetting a lot of people if they’re the cause of further market fragmentation. The DTV and Warner Media assets provide some great opportunities to offer creative bundles that will help attract and keep customers, and potentially grow ARPU. The video assets could be an important part of the 5G strategy going forward. The operators need something to help showcase the benefits of 5G from a consumer perspective, and Warner Media offers AT&T a great opportunity. Those assets and content relationships could also be utilized to help develop unique and differentiated content—apps, games, sports—that help get customers to buy 5G devices, upgrade plans, and so on.
With these assets, AT&T will also be under pressure to execute on the promise of developing an effective ad targeting strategy. Given the highly publicized missteps of Facebook, Google, and others over the past couple of years, and the generally higher level of scrutiny that AT&T as a telco faces in general, the company will have to do this carefully. But being relatively new to the game, AT&T has an opportunity to do it right, with the appropriate safeguards and levels of transparency.
On the enterprise side, AT&T has picked up some share as rival Verizon stumbled. A key priority for 2019, now that the FirstNet deployment has achieved critical mass, is to start converting customers and taking share at a more rapid pace. AT&T needs to do this in order to help justify the ‘next phase’ of FirstNet investments.
IoT will become a bigger priority over the next couple of years. This remains a disaggregated market, with more base hits than home runs. I’d like to see AT&T pick one or two key sectors and really go at them. Be the go-to operator for connected/self-driving car, smart cities, industrial or one of the other larger verticals. All the operators have gone broad, rather than deep, on IoT so far. In the spirit of CES being in Vegas this week, it’s time to pick a number, not just a color.
Finally, AT&T has done a lot of work over the past several years on network transformation, having virtualized some 60-65% as of the end of 2018. This has led to significant internal efficiencies and cost reductions. I’d like to see some more public-facing benefits of this strategy, such as more agile service creation.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is managing director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.