HMD to launch own-branded phones
HMD Global, the co-owner of the Nokia branded smartphones, last week announced that it will soon be launching own-branded (HMD) smartphones in addition to its Nokia models. HMD was established in Finland, the homeland of the world’s once most-popular phone brand Nokia, with financing support from Foxconn, the world's largest smartphone original device manufacturer (ODM). The company builds phones under the Nokia brand, which it bought from Microsoft when the software giant decided to pull the plug on its mobile device aspirations in 2016. HMD’s CEO announced that their new HMD phones will join their Nokia lineup though the company will also be announcing other partnerships, to be disclosed later.
The Circana Take:
- HMD Global’s decision to launch new phones under its own HDM brand may be a pre-emptive attempt to avoid a future licensing dilemma with its financer/partner Foxconn, which runs a full ODM operation through its FIH Mobile subsidiary. HMD is likely prepping for a scenario in case the Foxconn partnership breaks up at some point.
- If HMD Global does create HMD-branded phones, the company will quickly realize the difficult challenge of building awareness for an Android smartphone brand when there is little hardware differentiation opportunity, especially when competing against Samsung or Google Pixel. The Nokia brand is well known – over half of U.S. cellphone owners (and higher elsewhere) recognize the brand – and that is enough to get shelf space at any carrier’s mid or low-end lineup and enjoy some volume.
- The global brand push may be different, but Nokia should consider the challenges of its rival TCL in the US mobile landscape. TCL enjoys substantial brand equity thanks to a strong TV lineup and volume at U.S. national retailers yet awareness and consideration rates for TCL Mobile phones are still low despite efforts. According to the Circana Connected Intelligence Mobility Survey, only 11% U.S. cellphone owners are aware of the TCL brand (compared to Nokia’s 58% awareness rate) and only 2% of Android owners consider the TCL brand for their next smartphone.
- It should also be noted that HMD has so far enjoyed high quality ODM manufacturing standards through its partnership with Foxconn and FIH Mobile. Should HMD not have access to Foxconn’s ODM excellence for its upcoming HMD-branded phones, convincing carrier partners for device merchandising will be a challenge.
T-Mobile scoops low-band spectrum from Comcast
T-Mobile last week announced that it has inked a deal with Comcast for the lease and purchase of the cable giant’s spectrum license of 10 MHz low (600 MHz) bandwidth on band 71, which is T-Mobile’s main band for nationwide 5G coverage. T-Mobile will pay Comcast up to $3.3 billion for these spectrum holdings. Comcast announced that it is nearing completion of its CBRS-based 5G network in urban areas and that its tests on this 3.5 GHz unlicensed spectrum yielded better results that its expectations, hence the decision to let go of the band 71 spectrum.
The Circana Take:
- T-Mobile’s purchase of the low-band spectrum from Comcast will further help the carrier extend its 5G coverage. The carrier’s mid-band spectrum holdings (gained through the acquisition of Sprint ) provide enough speed, but more low-band spectrum is required for blanketing the nation.
- Comcast’s announcement that it is nearing its network deployment plans (the network will initially go live in its home turf Philadelphia) is troublesome news for Verizon, which enjoys wholesale revenues from all users on the Xfinity Mobile service running on its cellular network. As Comcast and Charter, (which runs its own CBRS-based 5G network tests in multiple markets) ignite their own 5G networks, more of their customers will operate on these networks, thus providing less wholesale network revenue to Verizon over time. As the cable giants begin enjoying owner economics and improve their margins, we will likely see them get even more aggressive with their bundle offers and possibly match the top three in device subsidies.
Apple unwraps the iPhone 15
The debut of the iPhone 15 had been one of the most eagerly anticipated new product debuts from Apple. Not so much because of the design/form factor, but because of the curiosity around how much Apple could improve the series to lure its loyal users into an upgrade and end one of the slowest upgrade cycles the market has witnessed in a long time. And, of course, whether it would be able to do so while keeping the price tags the same as before despite the inflationary environment.
Here is our quick take on the much-awaited iPhone 15 series and how we think the new phone will impact the US mobile market dynamics.
The Circana Take:
- Brilliant pricing model: There had been many rumors around Apple increasing the price on the new iPhone 15 series, and while Apple did increase the price on its top-end model (the iPhone 15 Pro Max), it was subtle. The new 15 Pro Max carries a $1199 price tag, which is $100 more than last year’s super-flagship (the iPhone 14 Pro Max), but Apple doubled the lowest storage capacity from 128 GB to 256 GB. Price tags for any of the lower-tier models (the 15, 15 Plus and 15 Pro) remained unchanged from last year. Improving many of the specs, including the frame chassis material (from steel to titanium), while keeping the prices unchanged in an inflationary environment is not something the Wall Street may applaud, but it will surely help the much-needed volume lift off. The $100 price hike on the Pro Max version is nicely buried under the storage capacity increase. Plus, it should be noted that price sensitivity of users aiming the Pro models is quite low as most of them get interest free financing through their carriers.
- Apple is serious about sustainability: When Apple decided to remove the charger brick and the wired earbuds from the box starting with the iPhone 12 series three years ago, its sustainability intensions were somewhat undermined by critics pointing out the significant cost savings the company would enjoy through the carbon emission campaign. It is true that Apple has cut back on costs noticeably as the omission of the charger brick meant smaller packaging which meant serious logistics cost savings, but yesterday’s event demonstrated how committed Apple is in hitting its zero-carbon footprint goal of 2030. The new iPhone 15 series models feature more recycled components than any other iPhone built to-date, and this messaging perfectly feeds into the growing consumer sentiment around sustainability. According to Connected Intelligence’s Certified Pre-Owned Smartphone survey, 70% of smartphone owners claim that it is important that their phone and its accessories/packaging be sustainable (e.g., eco-friendly, carbon neutral) and do not harm the environment and the planet.
- Substantial product improvements: Rumors had long been circulating around many of the product enhancements such as the inclusion of the Dynamic Island on the regular 15 models, the improved lenses (including the 2x telephoto zoom on the regular 15 models) and 5x optical zoom on the 15 Pro Max, replacement of steel with titanium on the casing of the Pro models. But Apple also had a couple of other exciting improvements, such as the replacement of the side volume switch with a customizable action button. While these improvements will be welcomed by many iPhone enthusiasts, they, for the most part, put the iPhone on par with Android flagships from a tech specifications standpoint. On the other hand, iPhone users do not need much novelty to upgrade to a newer device; most of them typically follow their regular 24-to-48-month upgrade cycles. And Apple simply has no fear of seeing its base churning to Android (Apple enjoys a healthy 96% loyalty rate among US postpaid customers) due to hardware/software reasons. We expect see a healthy upgrade cycle beginning next week, but the main driving force will be the Apple and carrier-driven deals rather than the spec improvements.
- Free iPhone 15 Pro on us: The declining smartphone volumes in 2023 are partially driven by U.S. carriers’ shift in device strategies, primarily due to attaining the desired 5G adoption percentages combined with the rising interest rates. This is about to change as attractive upgrade and trade-in deals on the iPhone 15 are the easiest way to lure customers into signing up for their postpaid service plans that recently got a price bump. All three major carriers immediately announced their variations of “Free iPhone 15 or 15 Pro” promotions following yesterday’s debut. Even Dish’s fresh postpaid offering Boost Infinite joined the crowd with a new plan that offers yearly iPhone upgrades (not the Pro version) for all customers on the $60/month unlimited plan, and it requires no device trade-ins.
- Goodbye Apple Lighting: With the European Union enforcing a single charging standard for smartphones, it was inevitable that Apple would be switching to the USB-C. Of course, Apple put its positive spin on it as it touted this shift as a way of extending the USB-C standard which it adapted for the Macs and iPads over to iPhones and AirPods. Even though USB-C cables have become regular household items even among iPhone users, this shift is poised to create a new wave mobile power accessory sale as 15 Pro users will seek new cables for high-speed data transfers or faster charging. Notably, only the Pro versions support the fast USB 3.0 standard, thus any new non-Pro iPhone 15 customer purchasing a high-speed cable will be quite disappointed.
- Enhanced satellite connectivity: When Apple introduced the satellite communication feature last year it received little attention. However, in light of recent natural disasters, we have all come to recognize the significance of connectivity during moments of vulnerability. Apple took this connectivity to the next phase; iPhone 14 and 15 users can now make emergency satellite calls, in addition to the previous SMS solution. Further, satellite-based phone calls for roadside assistance (via AAA) are supported for when the traveler is out of cellular coverage. The service will be free of charge for AAA customers, though non-AAA customers will have access to it on a pay-per-use basis.
This enhancement is good news for Verizon in particular. T-Mobile and AT&T have both previously cut satellite partnerships, which left Verizon as the odd carrier out. Now the need to support satellite has been taken out of the direct hands of the carriers, with Apple taking the greater initiative. Google and chip makers such as MediaTek are working on Android-specific solutions to tackle the same satellite connectivity challenge.