LG to pull the plug on mobile?
Last week The Korea Herald newspaper reported that LG Electronics is weighing options for its struggling mobile phone business and that one option under consideration is a full exit from the mobile phone business. LG officials, later on, stated that “The company is considering all possible measures, including the sale, withdrawal, and downsizing of the smartphone business." The news came a little over a month after the company’s recent reorganization that divested the development of low and mid-tier smartphones to outsourcing partners. Notably, LG’s mobile phone business has posted 23 consecutive quarters of operating losses, which totaled $4.5 billion since 2015.
The NPD Take:
- LG’s mobile phone business margins have been contracting year after year due to fierce rivalry from Chinese vendors who build competitive devices at a lower cost. In 2020, the OEM forked its device business into two separate lines; the Universal Line, which focuses on mainstream designs such as the Velvet, and the Explorer Project, which goes after the niche market with innovative products such as the Wing dual-screen phone. The Velvet line has been doing relatively well in the U.S. market, and the Wing, despite being a super-niche product, has given LG the much-needed (and reserved) exposure in the superphone market. When LG (virtually) teased the world with its rollable screen design at CES 2021, it fueled the industry with excitement as to what the next Explorer Project device would like, thus the news on possibly pulling the plug on the brand came as a surprise. While the consecutive operational losses certainly require a radical decision, LG’s streamlined business model, its current device portfolio (at least that in the US market), and the tailwind behind the innovative designs warrant a bit more time before sunsetting the mobile phone business.
- LG is a distant number three behind Apple and Samsung in the US market, but it enjoys a substantial market share in the sub-$300 device segment. The LG brand is in the consideration set of 18% of U.S. postpaid smartphone customers and this figure jumps to 26% among the prepaid base (in which LG enjoys a 13% market share). LG’s possible retreat from this market will create an important window of opportunity for all Android device OEMs. While Samsung may come out as the top beneficiary, we would expect carriers to prioritize tier-2 brands to boost diversity and break the Samsung/Apple hegemony.
Mint Mobile boost data buckets
Mint Mobile MVNO is one of the most talked-about ventures in the mobile space thanks to its colorful marketing driven by the Deadpool star Ryan Reynolds, who bought the brand in early 2020. Reynolds has been an integral part of the marketing and advertising campaigns of the brand, and the actor just last week put out a new tweet detailing the MVNO’s new rate plan upgrades to be done on January 28. The MVNO’s $15/3GB, $20/8GB, and $25/12GB rate data plans will now come with larger data buckets (4GB, 10GB, and 15GB) at the same price. Notably, the aforementioned price points require a 12-month upfront payment at the time of subscription; customers can opt for shorter multi-month payments (3 or 6), but the price paid for the plans increases as the payment period is decreased.
The NPD Take:
- Mint Mobile’s aggressive entry-level plan is noteworthy as prepaid arms of the network operators offer half of the data bucket size (i.e. T-Mobile Prepaid’s $15/2GB plan) that of Mint Mobile at the same price. According to the NPD Connected Intelligence Data Consumption Report, an average prepaid customer uses almost 10 GB of cellular data per month; however, half of the U.S. prepaid customers consume 4GB/month cellular data or less, meaning Mint’s new entry-level plan will be sufficient for many.
- Mint Mobile’s rate plans require a multi-month commitment and payments. Multi-month plans are slowly becoming an integral part of prepaid carrier’s service plan portfolios as they assist in suppressing churn while helping customers reduce their service costs (if they can afford to pay in advance).