Rural Cellular Association

Transcription

1 Rural Cellular Association Wireless Financial and Economic Trends Affecting the Independent Wireless Provider October 2009

2 The Wireless Industry Is in the Midst of a Fundamental Economic Change

3 Wireless Voice Nears Saturation MM POPs Under 9 Years Old 250 US Subscriber Count (MM) '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '

4 Wireless Growth Slows New US Subscribers (MM) '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '

5 Minutes of Use Flattening 2,400 Wireless Minutes of Use (in Billions) 2,000 1,600 1,

6 Flat Revenue per Subscriber Average Local Monthly Bill $50 $40 $30 $20 $10 $

7 A Brief History Inception to 2000 Roaming Few subscribers, high-priced service High roaming revenue 2000 to 2006 Minutes One-Rate Plan High subscribers, low-priced service 2006 to 2009 Data Blackberry, iphone Datacentric mobility 6

8 Economy and the Independent Operator It s not the recent negative economy. Why? The Industry has done its job with regard to subscriber and network growth. So, where do we go from here? 7

9 Credit is Available $600 U.S. Acquisition and Buyout Loans (in $Billions) $400 $200 Risky Borrowers Investment-Grade Borrowers $ to Date 8

10 Importance of Growth Why is growth important? Direct correlation to system, spectrum, and tower valuations Public companies are forced to show a growth strategy Retention alone won t finance 4G rollouts No end in sight to capital expenditures 9

11 Growth Separates Winners from Losers Total Revenue - Selected Public Companies ($ Millions) $150,000 $125,000 $100,000 $75,000 $50,000 Qwest Alltel AT&T Verizon $25,000 $ e 10

12 Market Values are Softening 12.0x EBITDA Multiples - Wireless Transactions 10.0x 10.1x 8.0x 9.3x 9.2x 8.9x 7.2x 6.0x 5.3x 4.0x 2.0x 0.0x e 11

13 Where Are Wireless Growth Opportunities? Telemetrics (new customers) Meters, autos, cameras, HVAC, vending, monitoring, etc. ABI research estimates 95 million worldwide connections by 2013 ARPU likely much lower than current 12

14 Where Are Wireless Growth Opportunities? Increased data throughput (existing customers) Cisco predicts 2.5x increase in internet traffic between 2008 and 2011 Current data ARPU about $13.50 Applied pro-rata to 80 million Verizon subscribers, about $19 billion in annual incremental revenue 13

15 Where Are Wireless Growth Opportunities? Households (new customers) 89.5 million households in total, 27.6 million of which are Verizon wireless customers At $35 ARPU, translates into potential revenue of $11.6 billion within existing subscriber base 14

16 Evolution of Wireless Characteristics Designing devices and networks for applications (Apps) and data usage Moving mobile devices back to the household Applications and data shared between household and wireless devices Anticipate change from wired-broadband to wireless-broadband as 4G networks launched Auctions 66 and 73 doubled the amount of spectrum available to carriers Nationwide LTE rollout to begin in

17 AT&T HomeManager Three devices Cordless telephone handset Ethernet driven base station Touch screen frame/speakerphone Requirements Broadband connection Home phone service $350 with no recurring charge AT&T Wireless Integration: Sync contact database, calendar with your phone Visual voice mail Web access 16

18 Verizon Hub Verizon Wireless product not Verizon Unlimited nationwide calling; simultaneous ring; scheduled call forwarding; visual voice mail; call logs; video, picture sharing with VZW subscribers; text to VZW subscribers, 24 others Requirements: $35 monthly plus $200 CPE (one-time) Requires broadband connection, 2 year contract Verizon Wireless Integration: Sync contact database, calendar with your phone Video and picture sharing with Verizon subscribers Free texting to Verizon subscribers GPS tracking of associated phones (Chaperone) Web access 17

19 Apple Tablet Smartbook converges telecom and computing Home-based mobile device Up to 10 inches diagonally May provide the ability to read books, rival to Amazon s Kindle Launch Date: Fourth Quarter

20 Implications and Ramifications Implications for independent wireless operators AT&T and Verizon continue to lead industry just by size Flash-point might be characterized as another type of family pricing plan (example: one-rate plan) Apple iphones have 9% share of smart phone market and produce 48% of the data traffic 87% of Monet Mobile Network s subscribers (the first mobile broadband network system) used the service for home only Does the voice network go the way of the paging network, roaming network, and the answering machine? 19

21 Strategy Prepare for voice traffic to be marginalized Requires data-specific spectrum Unify devices between home and mobile Gain access to applications (Apps) Capital for network build-out 20

22 Summary Wireless carriers need a new revenue base and more customers All national wireless carriers have recently launched products targeting household customers Large carriers will sacrifice voice revenue for data revenue Large carriers will start reducing the value of voice and increasing the value of data, just like the cable companies Households provide a ready-made target for future applications 21

23 CONTACT: Scott Soden, Managing Partner, Alpina Capital, LLC OFFICES: 100 Jackson Street, Suite 101 Denver, CO Camp Street, Suite 201 New Orleans, LA