Sony Ericsson Profits Drop; New T-Mobile 3G Phones, and New Wireless Internet Plans

Officials from the Federal Communication Commission (FCC) recently provided guidance to carriers on early termination fees (ETFs). In other news, Clearwire Corp. officials said they planned on having 30 million customers by 2017, while Starbucks Corp. settled a lawsuit on wireless network service between AT&T, Inc. and T-Mobile USA, Inc.

Focal Points:

• Officials from Sony Ericsson Mobile Communications AB announced a significant drop in second quarter profits to $9.5 million. This represents a reduction from second quarter 2007 of over $348 million. In addition, net sales fell over nine percent. Officials said shipments over phones were down two percent to 24.4 million phones, with the average handset sales price dropping from $191.64 to $183.72. Officials said they were going to cut the workforce by 2000, which should save $475 million in operating costs.
• Officials from T-Mobile USA, Inc. announced that they were announcing plans for its new 3G service with a set of four phones. 3G wireless networks are generally defined as networks with Internet bandwidth over 144 kilobits per second (Kbps). In practice, most deployed 3G networks have much higher bandwidths. T-Mobile's 3G systems use Universal Mobile Telephone System with High Speed Data Packet Access (UMTS/HSDPA). Unlike older wireless networks, these 3G networks allow users to make phone calls and use the Internet at the same time. Officials from T-Mobile expect the new 3G network will take load off of its already overloaded Global System for Mobile communication (GSM) network. As of today, New York is the only city that uses T-Mobile's 3G network. While AT&T Corp. uses 3G technology as well, AT&T and T-Mobiles phones are not compatible with each other's networks. One major shortcoming of T-Mobile's new 3G phones is that their battery life is only half of those phones on its GSM network.
• T-Mobile USA recently sent one of its executives to Washington, DC to negotiate with the FCC to get it to reconsider its plans for auctioning nationwide spectrum that would require licensees to offer free broadband services. T-Mobile's executives are asking the FCC to slow down its timeline for enacting this measure, in order to give carriers a chance to do some network testing. T-Mobile believes that Internet activity on the soon-to-be auctioned Advanced Wireless Service 3(AWS-3) band will interfere with T-Mobile's wireless services. T-Mobile paid over $4 billion for its piece of the AWS spectrum and plans to implements UMTS in 26 markets in 2008. The FCC's plan would allocate 25 percent of this spectrum to free AWS services. 

EXPERTON GROUP believes the FCC is likely to postpone the auction for AWS-3 spectrum until 2009. This will likely give carriers time to develop plans to maximize the use of this spectrum for their customers. Experton Group also expects wireless handset sales will continue to be flat, as companies and consumers wait for further advanced spectrum to be built out, as well as for some resolution on current economic instability. IT executives should hold off on new wireless handset purchases until second quarter 2009, when better advanced services and handset pricing are likely to be available.