CLOSE

We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website https://www.hermes-investment.com, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2016, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept
CLOSE

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

Proceed

The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

US wireless industry: voice is dead, long live data

Home / Spectrum / US wireless industry: voice is dead, long live data

Mitch Reznick, Co-Head of Credit and Head of Credit Research
20 August 2014
Uncategorised

The ice-cold water that Softbank’s Masayoshi Son dumped over himself for charitable purposes is not dissimilar to the cold water that Softbank’s Sprint dumped onto the US wireless market yesterday when it introduced new, aggressive pricing plans. The launch of Sprint’s “Family Share Pack” plans are a kind of Ice Bucket Challenge to the market, one might say.

We, along with the much of the market, expected Sprint to announce new price plans following its retreat from an attempted merger with T-Mobile US and test these plans in the market ahead of the launch of the new iPhones. Since it launched its “rip-and-replace” mobile network rebuild several months ago, Sprint has lost valuable prepaid subscribers to its competitors. This was made worse when T-Mobile US “pulled an Iliad” by launching its suite of so-called “unCarrier Plans”. This took the market lower in pricing and instigated the introduction of more flexible plans for consumers across the industry. In that context, Sprint looked like an outlier. It had to do something to retain and win back customers, and the move yesterday was a big one –doubling the market “norm” of 10 megabytes of data per family plan to 20 megabytes and, on a promotional basis, offering the lowest family plan base price.

But what are the implications? For one, the move drives a final nail in the coffin of voice andSMS as the battleground to win over consumers. Voice is dead, long live data. The contest for the hearts and wallets of consumers will be played out on the data battlefield.

For the industry as whole, we think it is slightly negative in the near-term as it will put more pressure on the market-clearing price of wireless service and increase costs to carriers as they seek to differentiate themselves – be it by service plan or content. But it also confirms that a kind of bifurcation of the US wireless market is taking hold among the national carriers: value (Sprint and T-Mobile) vs premium (AT&T and Verizon). Whereas Sprint and T-Mobile are competing principally on price, which is affecting the entire market, we believe that many subscribers will be willing to forgo the lowest price to take a broader suite of services and content in the coming months. For sure, Sprint’s offer will appeal to the data-hoarding consumer who digs audio and video media, but we think that Sprint (and T-Mobile, to some degree) will have to overcome perceptions of poor network quality.

Meantime, even if these new price plans succeed in winning subscribers back, they will likely have a negative effect on near-term operating cash flow since taking on new subscribers has front-end costs. This will be compounded by the up-to-$350 incentive to switch to Sprint that they are offering. From an industry perspective, the risk is that this spreads across the whole industry. In addition, we expect spend on network capacity, or spectrum, and capex to continue to rise as data consumption increases.  All of that said, the question remains: will the other national carriers – T-Mobile USA, Verizon and AT&T – take Sprint’s ice bucket challenge?

Read more in the latest edition of Spectrum.

Share this post:
Mitch Reznick Co-Head of Credit and Head of Credit Research Mitch joined Hermes in February 2010 as head of research on the Hermes Credit team. Prior to this he was co-head of credit research for the global credit and hybrids team at Fortis Investments. Other roles at Fortis included portfolio manager of European high yield funds, based in London, and senior credit analyst, based in Paris. Before this he worked as an associate analyst in the leveraged finance group at Moody’s Investors Service in New York. Mitch earned a Master’s degree in International Affairs at Columbia University in New York City and a Bachelor’s degree in History at Pitzer College, one of the Claremont Colleges in California. He is a CFA charterholder.
Read all articles by Mitch Reznick

Find posts by author

  • Andrey Kuznetsov
  • Filippo Alloatti
  • Fraser Lundie
  • Jonathan Lee
  • Louise Dudley
  • Mark Sherlock, CFA
  • Michael Russell, CFA
  • Mitch Reznick

Find posts by category

  • Select category
  • uncategorised