I'm seeing some interesting comments on Leap Wireless (NASDAQ:LEAP) & Metropcs (NYSE:PCS) after T-Mobile USA launched its new pricing plans, which have been speculated about recently as part of "Project Black/Dark".
- Piper Jaffray notes the the new plans are more benign than investors' initial fears and could relieve some pressure on wireless stocks.
Firm notes they think T-Mobile's new plans most directly target Sprint's prepaid and Simply Everything plans, as well as AT&T's new GoPhone offer. The pricing levels are generally too high to be a major competitive threat to Leap or MetroPCS, yet don't offer the robust 3G networks of AT&T or Verizon.
It will also be interesting to gauge consumer interest in plans without a handset subsidy; recall iPhone sales were tepid prior to a price drop when first introduced and really accelerated once subsidies were included with a higher monthly recurring fee.
- Goldman Sachs says new pricing appears more rational than recent reports, which had indicated potential “all you can eat” unlimited talk/text/data plans for $60/month (Project Dark introduced this for as low as $80/month). So, this is not as bad as perhaps many had feared. However, on net this is another viable competitor at the lower end of the market, with an offering around no contract unlimited that more directly competes against Leap, MetroPCS and Boost in particular. Additionally, the plans aim to reinforce the company as the value alternative at the higher end of the postpaid market.
- Oppenheimer notes that as they expected, T-Mobile unveiled new prices between $50-80/month for unlimited voice+text+web contract/no contract options, which validates information leaks over the past few weeks that its new pricing scheme was not going to be as deeply discounted as originally feared. They believe this is the last major price move in the 2008-09 Wireless Price War, and expect pricing stability for at least a year. The headlines that T-Mobile is cutting prices could pressure industry shares, however we believe these less aggressive price points putting T-Mobile at a slight discount/par with Sprint should help stabilize stock prices in the industry.
Positively for LEAP/PCS, T-Mobile's new pricing remains at a premium which could relieve some pressure on its shares. We expect T and VZ to maintain their premium pricing, given the high family/enterprise plan mix (~80%) of their customer base, and the fact they continue to gain share with their handset/network/customer advantage.
- Jefferies is out positive saying investors are concerned that heightened pre-paid competition threatens LEAP's/PCS' survival. They believe that LEAP/PCS will weather the storm because of their favorable cost structure & rapidly expanding dist. Reit Buy rating.
ARPU Pressure Moderating Post Project Black. T-Mobile's expected unlimited, no-contract offering is expected to be priced at $49.99 for voice, $59.99 for voice and text and $79.99 for voice, text and web. These price points are $10-$30 above LEAP's/PCS' price plans.
LEAP's Broadband Initiative to Turn EBITDA Breakeven in Early 2010. The company expects to be near EBITDA breakeven by YE09 and expects incremental customer profitability for the segment to be similar to its existing voice business in 2010 and could represent over $100mm in run-rate EBITDA.
Significant Spectrum Value. Jefferies believes that there is significant spectrum value in these firms. LEAP has 2.9bn MHz-POPs, which they estimate would be worth $2.9bn using valuation data pointsderived from precedent spectrum sales over the last seven years. The value of LEAP's/PCS' spectrum supports a liquidation/break-up value of at least $24 & $8/share, respectively.
Notablecalls: LEAP/PCS have been taken to the back and SHOT! In five months both stocks have lost almost 2/3 of their value.
One of the major drivers behind the moves is the looming competition (read: pricing). Yet, now it looks like the DT's Project Darkness isn't that of a big deal.
I think that given the very low valuations and increasing potential to be acquired, buyers will step back in at least in the s-t.
Not going to press it but I'm looking to buy some PCS and LEAP.
- Piper Jaffray notes the the new plans are more benign than investors' initial fears and could relieve some pressure on wireless stocks.
Firm notes they think T-Mobile's new plans most directly target Sprint's prepaid and Simply Everything plans, as well as AT&T's new GoPhone offer. The pricing levels are generally too high to be a major competitive threat to Leap or MetroPCS, yet don't offer the robust 3G networks of AT&T or Verizon.
It will also be interesting to gauge consumer interest in plans without a handset subsidy; recall iPhone sales were tepid prior to a price drop when first introduced and really accelerated once subsidies were included with a higher monthly recurring fee.
- Goldman Sachs says new pricing appears more rational than recent reports, which had indicated potential “all you can eat” unlimited talk/text/data plans for $60/month (Project Dark introduced this for as low as $80/month). So, this is not as bad as perhaps many had feared. However, on net this is another viable competitor at the lower end of the market, with an offering around no contract unlimited that more directly competes against Leap, MetroPCS and Boost in particular. Additionally, the plans aim to reinforce the company as the value alternative at the higher end of the postpaid market.
- Oppenheimer notes that as they expected, T-Mobile unveiled new prices between $50-80/month for unlimited voice+text+web contract/no contract options, which validates information leaks over the past few weeks that its new pricing scheme was not going to be as deeply discounted as originally feared. They believe this is the last major price move in the 2008-09 Wireless Price War, and expect pricing stability for at least a year. The headlines that T-Mobile is cutting prices could pressure industry shares, however we believe these less aggressive price points putting T-Mobile at a slight discount/par with Sprint should help stabilize stock prices in the industry.
Positively for LEAP/PCS, T-Mobile's new pricing remains at a premium which could relieve some pressure on its shares. We expect T and VZ to maintain their premium pricing, given the high family/enterprise plan mix (~80%) of their customer base, and the fact they continue to gain share with their handset/network/customer advantage.
- Jefferies is out positive saying investors are concerned that heightened pre-paid competition threatens LEAP's/PCS' survival. They believe that LEAP/PCS will weather the storm because of their favorable cost structure & rapidly expanding dist. Reit Buy rating.
ARPU Pressure Moderating Post Project Black. T-Mobile's expected unlimited, no-contract offering is expected to be priced at $49.99 for voice, $59.99 for voice and text and $79.99 for voice, text and web. These price points are $10-$30 above LEAP's/PCS' price plans.
LEAP's Broadband Initiative to Turn EBITDA Breakeven in Early 2010. The company expects to be near EBITDA breakeven by YE09 and expects incremental customer profitability for the segment to be similar to its existing voice business in 2010 and could represent over $100mm in run-rate EBITDA.
Significant Spectrum Value. Jefferies believes that there is significant spectrum value in these firms. LEAP has 2.9bn MHz-POPs, which they estimate would be worth $2.9bn using valuation data pointsderived from precedent spectrum sales over the last seven years. The value of LEAP's/PCS' spectrum supports a liquidation/break-up value of at least $24 & $8/share, respectively.
Notablecalls: LEAP/PCS have been taken to the back and SHOT! In five months both stocks have lost almost 2/3 of their value.
One of the major drivers behind the moves is the looming competition (read: pricing). Yet, now it looks like the DT's Project Darkness isn't that of a big deal.
I think that given the very low valuations and increasing potential to be acquired, buyers will step back in at least in the s-t.
Not going to press it but I'm looking to buy some PCS and LEAP.
1 comment:
How can they ignore the new plans $30=1000 mins, $45=unlimited at Walmart that run on the Verizon network?
http://www.walmart.com/straighttalk?advrtid=WMT|Tracfone|01_TRF_10995_Str8TalkRFM|electronics-cellphones|728x90
http://www.reuters.com/article/technologyNews/idUSTRE59D3CI20091014?opattr=Wal-Mart_takes_inexpensive_mobile_plans_nationwide
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