Carriers and the Mobile Expense Woes! Not!

7 thoughts on “Carriers and the Mobile Expense Woes! Not!”

  1. As a consumer, it’s EXTREMELY difficult for me to have ANY sympathy for the US Carriers. At one point in time since 1985, I’ve been a customer of almost all of them, and quite frankly they’d all have to get better to “suck”! Some more so than others to be sure. I’m looking forward to the day, in the very near future, when they NO longer have a stranglehold on the consumer, and IT IS COMING…whether they like it or not!

  2. Sharma’s estimates of wireless operator margins are grossly inflated and misleading.

    The correct way to look at profitability in a capital-intensive business like their is return on invested capital, not on revenues vs. COGS. Former FCC chief economist Gerry Faulhaber is good on this sort of thing, as is Scott Wallsten, the chief economist for the National Broadband Plan.

    To play in the network infrastructure game, you need to invest an awful lot of money, and you need to do it wisely, otherwise you end up like Clearwire.

    1. I haven’t seen Chetan Sharmas numbertouch 37% seems a bit out of touch. Agree that return on investment is an important metric to consider for the telcos, especially since they’re playing a capex-heavy, long-term game but maintaining reasonable COGS is critical for any business and more importantly, a fiduciary duty. Its the telco industry’s duty to forecast a reasonable range of financial opportunity brought by these new data-driven models and adjust capex accordingly. By only looking at their ROI, we are assuming they are the best at optimizing costs for driving network-enabled value to the end user which may or may not be true.

      1. Checking on Verizon’s 2009 annual report, they had operating revenues of $107B and net income of $10B, which is a 9% margin.

        The balance sheet is a bit tricky because they separate income from wireless and wireline, but they don’t separate expenses, so you can’t really say what the wireless margin is per se. Apparently Sharma’s trick is to assign all the costs to wireline and the revenues to wireless, which makes VZW look as profitable as a web services company. That’s not very good analysis in my book.

        See for yourself at http://investor.verizon.com/financial/quarterly/pdf/09_annual_report.pdf

  3. Carriers are primarily infrastructure companies, this is their bread and butter and this is where they need to make sure they are up to date. The main thing they manage to do well is provide connectivity (God knows they have little understanding of consumer applications and new media services, and they will most likely never will)
    Complaining about needing to invest in infrastructure is just plain ridicules.

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