WEEK ENDING AUGUST 30, 2013 Weekly Wireless Report

INSIDE THIS ISSUE:

This Week’s Stories THIS WEEK’S STORIES AT&T 'Extremely AT&T 'Extremely Disappointed' With FCC's Delay in Alltel Disappointed' With FCC's Purchase Review Delay in Alltel Purchase August 28, 2013 Review Sprint Plans to Use 2.5 GHz The FCC has stopped its review of AT&T Mobility's (NYSE:T) proposed $780 million purchase of Atlantic Tele-Network's retail wireless business, which still operates under the Alltel brand, arguing that Spectrum to Catch Up to AT&T has not provided enough information about how it will transition Alltel's remaining prepaid Verizon, AT&T in LTE customers to its network. U.S. Spy Agencies Spend $40 Billion On Data The FCC halted its informal 180-day "shot clock" for reviewing deals on day 175 of the review period. In a letter to AT&T, Ruth Milkman, the FCC's wireless bureau chief, wrote that the FCC in June had PRODUCTS & SERVICES requested information from AT&T regarding it plans to migrate Alltel customers. AT&T responded with information about moving postpaid customers to its network. However, Milkman wrote that so far, Apple's iPhone Trade-in despite several FCC follow-ups "about the importance of transitioning prepaid customers, we have Program Hits its Retail received no detailed responses from AT&T on its plans for transitioning ATN's significant prepaid Stores Today (Updated) customer base." EMERGING TECHNOLOGY As of the end of the second quarter, ATN counted around 591,000 U.S. retail wireless customers, of Huawei Has Already Placed which around 409,000 were postpaid subscribers and 182,000 were prepaid. Milkman wrote that the a Big Team to Work on 5G FCC will restart its shot-clock on the deal when AT&T provides the information it requested. ATN Technology operates the Alltel brand through a subsidiary called Allied Wireless.

MERGERS & ACQUISITIONS "AT&T is extremely disappointed at the FCC delay today on this small transaction," Jim Cicconi, AT&T's senior executive vice president of external and legislative affairs, said in a statement. "AT&T is ready, Vodafone Seen as AT&T willing and able to make significant network investments in these rural territories to bring HSPA+ and Prey Amid $130 Billion LTE services to Allied's customers, an investment that will not occur but for this transaction. AT&T has Verizon Deal actively worked to address FCC concerns and will continue to work with the commission until all issues are resolved." INDUSTRY REPORTS

Report: Tablet Market Under the deal, which was announced in January, AT&T would get wireless properties including Losing Uut to Wearables, licenses, network assets, retail stores and the Alltel subscribers. Specifically, AT&T will get spectrum in Larger Smartphones the 700 MHz, 850 MHz and 1900 MHz bands, which is largely complementary to AT&T's existing network. However, ATN's network uses CDMA technology so AT&T will need to covert the customers to Report: US App Makers its GSM network. Losing Share The Alltel network covers around 4.6 million people in primarily rural areas across Georgia, Idaho, Illinois, North Carolina, Ohio and South Carolina. In 2010, ATN purchased for $200 million Alltel assets divested by Verizon Wireless (NYSE:VZ) as part of Verizon's larger deal for Alltel.

The delay in the review comes as the FCC begins considering AT&T's proposed acquisition of no- contract wireless carrier Leap Wireless (NASDAQ:LEAP). AT&T said in July it expects that deal to close within six to nine months. After the transaction closes, AT&T has said it expects to keep Leap's Cricket brand and distribution.

www.fiercewireless.com

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Sprint Plans to Use 2.5 GHz Spectrum to Catch Up to Verizon, AT&T in LTE August 29, 2013

Sprint (NYSE:S) executives think that the company's nationwide deployment of Clearwire's 2.5 GHz spectrum will help it catch up to LTE market leaders Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T), according to a financial analyst research note.

As noted by Barron's, Wells Fargo Securities and investors met earlier this week with Sprint CEO Dan Hesse and CFO Joe Euteneuer, who provided more details and color on the company's Network Vision network modernization efforts, the first phase of which the carrier expects to complete by mid-2014 (as part of that, Sprint expects to cover 200 million POPs with LTE by year-end). The second phase will be the deployment of Clearwire's 2.5 GHz airwaves on a nationwide basis, and Sprint's management expects to reveal more details on that part of the company's plans "at some point in the not-too-distant future," according to note, written by Wells Fargo Securities analysts J. Davis Herbert and Eric Fishel.

Sprint disclosed in July that it plans to deploy Clearwire's 2.5 GHz spectrum using TD-LTE on all 38,000 of its planned Network Vision cell sites in a nationwide rollout. And, due to the weaker propagation characteristics of 2.5 GHz, Sprint will also deploy small cells and other sites beyond the 38,000 Network Vision sites. Previously, Sprint had said it would use Clearwire's spectrum as a "hotspot" LTE network to offload traffic in urban markets.

In markets where Sprint has fully deployed new multimode base stations as part of Network Vision, such as Chicago, Sprint is reporting fewer dropped and blocked calls, improved performance for voice and dramatically faster data speeds.

Yet Sprint remains behind its rivals in LTE coverage for its 1900 MHz FDD-LTE network (Sprint plans to deploy LTE on 800 MHz spectrum starting in the third quarter). Verizon now covers 301 million POPs with LTE. By the end of the year, AT&T plans to cover 270 million POPs with LTE, up from around 225 million now, and T-Mobile US (NYSE:TMUS) plans to cover at least 200 million POPs with LTE, up from 157 million now.

According to the note, Hesse said Verizon has "the best network in the industry and it has paid off enormously." Sprint hopes to catch up over the next several years by offering the "best network in the world." The Sprint executives said tests have shown that once Sprint is through its entire overhaul, its network speeds will be "blazing fast." (Clearwire executives have said in the past that, using carrier aggregation technology, the company could offer theoretical peak speeds of up to 168 Mbps in 2014 on LTE using its spectrum.) Upon completion of Sprint's network overhaul, Sprint expects 90 percent of its backhaul to be driven by Ethernet over fiber and the remaining over microwave.

Looking ahead in terms of capital expenditures, Sprint expects to spend around $8 billion in 2013, $8 billion in 2014, and then $6 billion per year from 2015 to 2017. The company is also still open to network sharing, depending on the economics.

The research note fleshes out some comments Sprint executives made in July. Hesse said on the company's second-quarter earnings conference call in late July that the deployment of a nationwide LTE network on 2.5 GHz will help give Sprint "competitive parity" with its rivals. "And the important thing in terms of what we believe will be a better, a superior network experience will depend upon how quickly we roll out the 2.5 [GHz spectrum], because that will give us extraordinary capacity and some speed and performance advantages in the market," he said.

Analysts think the deployment will help Sprint, but that it will take time to translate into material results for the company. "TBR believes Sprint will keep the TD-LTE network and will use it to improve its existing FDD-LTE network," TBR analyst Eric Costa wrote in a research note last month. "The acquisition of Clearwire greatly improved Sprint's position in the wireless market, yet the operator is unlikely to gain market share from AT&T and Verizon until at least 2015 as Sprint invests to build out its network over the newly acquired spectrum."

Sprint also said it is continuing to notify customers it acquired through the May 2013 deal with U.S. Cellular (NYSE:USM), that it plans to begin shutting down affected portions of the U.S. Cellular network.

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The shutdown will take effect for the St. Louis metropolitan area, including parts of Missouri and Illinois, on Oct. 31. Sprint plans to reuse the spectrum it acquired in those markets to enhance its network, and Sprint has warned affected customers that their service will be interrupted if they do not move their service to Sprint or another carrier before the change. www.fiercewireless.com

U.S. Spy Agencies Spend $40 Billion On Data August 30, 2013

Top-secret budget figures detailing the vast operations of U.S. spy agencies reveal not only the agencies' expansive reach, but also the massive size of their enterprise IT and data processing capabilities.

The figures, provided by former National Security Agency contractor Edward Snowden and published Aug. 30 by the Washington Post, provide a glimpse into the money the CIA, the NSA and the intelligence community as a whole spend annually to collect, process and analyze data.

The budget figures, from a top-secret report called the Fiscal 2013 Congressional Budget Justification Book, show that the U.S. budgeted $52.6 billion in fiscal 2013 to support the operations of 16 intelligence agencies, including $14.7 billion for the CIA, $10.8 billion for the NSA and $10.3 billion for the National Reconnaissance Office. For data collection, processing and analysis across intelligence agencies, the budget breaks down as follows:

--$25.3 billion for raw data collection, including technical surveillance from electronic and satellite sources, as well through personal interactions with sources.

--$6.1 billion for data processing and exploitation, including information filtering, message decoding, translating broadcasts, processing imagery, preparing information for computer processing, and storing and retrieving data.

--$6.2 billion for data analysis whereby data is distilled and correlated with other material and turned into intelligence reports provided to the president and policymakers.

Additionally, budget details made public by the Washington Post reveal that intelligence agencies collectively spent $4.7 billion on enterprise IT systems. An agency-by-agency breakdown shows:

-- The NSA budgeted $1.59 billion for enterprise IT systems, $1.02 billion for computer network operations and $650 million for data analysis.

-- The CIA budgeted $530 million for enterprise IT systems, $690 million for computer network operations and $660 million for data analysis.

-- The National Reconnaissance Office, which builds and operates the nation's electronic communications and imagery reconnaissance satellites, budgeted $840 million for enterprise IT systems, $2.12 billion to gather and process imagery from government satellites, and $1.38 billion for technology and personnel dedicated to intercepting communications between people, between machines or both.

--The National Geospatial-Intelligence Agency, which collects and generates location-based information and images globally, budgeted $1.02 billion for enterprise IT systems and $930 million for data analysis.

The budget reveals that the CIA and the General Defense Intelligence Program will spend $620 million to process publicly available information appearing in print or electronic form, including content from radio, TV, newspapers and the Internet.

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In publishing the budget details, the Washington Post quoted a statement from James Clapper, director of national intelligence: "The United States has made a considerable investment in the Intelligence Community since the terror attacks of 9/11."

Clapper said: "Today's world is as fluid and unstable as it has been in the past half century. Even with stepped-up spending" over the past decade, he said, the U.S. spends less than 1% of GDP on the intelligence community.

Nonetheless, intelligence IT spending now exceeds IT spending at every other federal agency except the Department of Defense, which budgeted $41.8 billion in fiscal 2013. In comparison, the next largest federal IT budgets for 2013 were for the Department of Health and Human Services, at $7.4 billion, and the Department of Homeland Security, at $5.7 billion. www.informationweek.com

Products & Services

Apple's iPhone Trade-in Program Hits its Retail Stores Today (Updated) August 30, 2013

Well folks, it seems the rumblings we heard earlier this week were indeed true. CNBC has confirmed that Apple's iPhone trade-in program -- officially labled the iPhone Reuse and Recycling Program -- is starting up in the outfit's retail stores today. According to 9to5Mac, trade-ins will be offered for iPhone 3G up to the iPhone 5 with customers receiving a gift card for the determined value of their devices. Phones will then be handed over to BrightStar for recycling.

It's worth noting that these number fluctuate, so there's no way of accurately calculating what a local shop will offer up. Of course, timing is everything, and folks looking to recoup some funds ahead of the anticipated iPhone 5S announcement now have an option.

Update: We reached out to Apple on the matter and here's the response:

"iPhones hold great value. So, Apple Retail Stores are launching a new program to assist customers who wish to bring in their previous-generation iPhone for reuse or recycling. In addition to helping support the environment, customers will be able to receive a credit for their returned phone that they can use toward the purchase of a new iPhone." www.engadget.com Emerging Technology

Huawei Has Already Placed a Big Team to Work on 5G Technology August 28, 2013

Huawei said earlier this morning that it has already placed a fairly large part of its team to work on upcoming 5G technology, and that it could provide up to almost 100 times faster speeds than with 4G.

Ken Hu, Huawei’s deputy chairman and chief executive officer, said in an email that his company has hundreds of engineers working on the next generation of mobile technology.

Huawei is also hoping that it can deploy 10 GHz wireless connections by 2020. Around 2020 is widely regarded as the timetable for when 5G technology will begin to deploy commercially, but 5G still lacks a strict definition of standards and features that the wireless industry can't seem to agree on for now.

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However, considering how Cisco is predicting that internet traffic from mobile devices will exceed traffic from wired devices as early as 2016, it stands to reason for companies like Huawei to speed up plans for mobile networks that can handle all the demand.

And Huawei is already advancing fast on 5G. Earlier this week, the company and Saudi Arabia CSP Mobily announced the deployment of a 400 Gbps IP core network to serve UMTS, LTE and FTTH users in that country. www.wirelessindustrynews.org Mergers & Acquisitions

Vodafone Seen as AT&T Prey Amid $130 Billion Verizon Deal August 30, 2013

As Vodafone Group Plc (VOD) nears an exit from its 14-year-old U.S. wireless venture with Verizon Communications Inc. (VZ), Europe’s biggest mobile-phone company may have to make a tough choice: buy or be bought.

Aug. 29 (Bloomberg) -- Craig Moffett, founder and senior analyst at Moffett Research LLC, talks about the potential sale by Vodafone Group Plc of its stake in Verizon Wireless. Moffett speaks with Sara Eisen, Tom Keene and Alix Steel on Bloomberg Television's "Surveillance." Mario Gabelli, chief executive officer of Gamco Investors Inc., also speaks. (Source: Bloomberg)

AT&T Inc., which has scoured Europe for potential acquisitions this year, would examine assets that remain after Vodafone sells its 45 percent stake in Verizon Wireless, people familiar with the matter said. The U.S. company is only interested in wireless and would be deterred if Vodafone expands in cable and fixed-line businesses, said one of the people, asking not to be named discussing internal deliberations.

Vodafone and Verizon are discussing a price of about $130 billion for the stake, people with knowledge of the talks said. AT&T could pay about 80 billion pounds ($124 billion) for what’s left of Vodafone, according to Robin Bienenstock, an analyst at Sanford C. Bernstein, basing her estimate on a valuation of six times earnings before interest, tax, depreciation and amortization.

“Were somebody to buy Vodafone, AT&T would be the primary candidate,” said James Barford, a telecommunications analyst at Enders Analysis in London. “AT&T would both be likely to summon the financial resources and has already expressed an interest in Europe.”

Europe Attraction

Vodafone is one of Britain’s most global non-financial companies with assets from Sydney to Johannesburg overseen from a bucolic headquarters outside London. To revive its European business, where wireless mergers are hampered by regulation, Chief Executive Officer Vittorio Colao has started acquiring wireline assets, agreeing in June to pay $10 billion for Germany’s largest cable-television provider.

AT&T has examined takeover candidates including Vodafone’s assets, U.K. mobile carrier EE -- a venture of Deutsche Telekom AG (DTE) and Orange SA (ORA) -- and parts of Spain’s Telefonica SA (TEF), people familiar with the company’s plans said in June. AT&T is attracted to Europe because of its relatively recent introduction of faster, fourth-generation networks, which have been available for years in the U.S.

Brad Burns, a spokesman for Dallas-based AT&T, declined to comment on any potential M&A targets. Ben Padovan, a spokesman for Newbury-based Vodafone, declined to comment on whether the carrier may become a takeover candidate.

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Vodafone gained 0.7 percent to close at 206.25 pence in London, adding to yesterday’s 8.2 percent jump. Verizon lost 0.9 percent to $47.40 at 12:24 p.m. in New York. AT&T (T) added 0.2 percent to $33.71.

Cash Conundrum

Vodafone would fit AT&T’s global strategy, and the cash proceeds from the Verizon Wireless stake sale could make it more interesting for an acquirer, Bienenstock said.

Verizon is working with several banks to raise $10 billion from each, or enough to finance about $60 billion of the buyout, people familiar with the plans have said. In a statement yesterday, Vodafone said there’s no certainty an agreement with Verizon will be reached.

“With 30 to 40 billion pounds cash in its pocket, Vodafone would quickly look an attractive target,” Bienenstock wrote in a note. “Alternatively, Vodafone could use the cash to build a bigger business itself. This would be more risky and time consuming, but it could be more fun and, depending on one’s view, more value creating.”

AT&T’s likely strategy would be to accelerate Vodafone’s 4G rollout, Enders’s Barford said. Vodafone switched on its 4G service in the U.K. yesterday, while consumers in some other European markets are still waiting for speedier connections.

Low Valuations

The U.S. carrier is unconvinced of the advantages of running combined fixed-line and wireless networks, and would be more interested in Vodafone were it to remain a primarily mobile provider, said one of the people.

Vodafone has already expanded beyond wireless service, and in June beat John Malone’s Liberty Global (LBTYA) Plc to take over Germany’s Kabel Deutschland Holding AG. (KD8) Vodafone and Verizon accelerated talks on the stake sale after the Kabel Deutschland offer, which put additional pressure on the British company’s finances, a person familiar with the matter said.

If 51-year-old Colao opts to step up acquisitions, the Verizon Wireless stake sale would supply the funds to buy almost any company in the industry at a time when valuations of European telecommunications firms are at an all-time low. At the end of its last financial year ended in March, Vodafone had about $11.8 billion in cash and cash equivalents. It reported net debt of 24.9 billion pounds as of June 30, including its joint ventures.

Cash Pile

Vodafone’s cash pile alone, including the Verizon Wireless proceeds, would be worth more than the combined market capitalization of France’s Orange, at $27 billion, and Telecom Italia SpA (TIT), at almost $12 billion. Liberty Global, which has cable operations in countries including Germany and the Netherlands, is valued at about $30 billion.

Vodafone is now heavily focused on mature European markets such as Italy, the U.K. and Germany. It also has operations in Asia and Africa.

Expansions into fixed-line businesses have two primary advantages for mobile operators. Selling so- called triple- and quadruple-play packages that combine mobile, landline, TV and broadband services makes customers more reluctant to upend their entire digital lives by switching providers. Owning high- capacity fiber-optic networks helps carriers deal with the demands of surging mobile-data traffic.

Broadband Expansion

Last year, Vodafone bought Cable & Wireless Worldwide Plc, an operator of U.K. fixed-line networks, for $1.8 billion. Its deal for Kabel Deutschland is adding a formidable fixed-line operation that Vodafone will combine with its mobile business in Germany.

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Vodafone was also considering an acquisition of Italy’s Fastweb SpA, people familiar with the matter told Bloomberg News in June. Other European cable companies that aren’t part of a larger multinational group include Spain’s Grupo Corporativo ONO SA, France’s Numericable SAS and Zon Multimedia SGPS SA in Portugal.

“Both the U.S. and European telecommunication markets stand to face some tough competition with the increasing move towards converged, triple-play offers,” said Ronald Klingebiel, a professor at the Warwick Business School. “To weather these impending storms, Vodafone is right to sell the stake so it can concentrate on its priority markets in Europe.” www.bloomberg.com

Industry Reports

Report: Tablet Market Losing Uut to Wearables, Larger Smartphones August 29, 2013

Research firm IDC thinks Google's Glass, Samsung's Galaxy Gear and Apple's rumored iWatch are set to cut into the tablet market.

In a statement Thursday, IDC noted that that tablets will face growing competition from larger smartphones and the prospect of new categories such as wearable devices that will divert consumer spending.

IDC lowered its tablet forecast for 2013 and beyond. The company now expects worldwide tablet shipments to reach 227.4 million units in 2013, down from a previous forecast of 229.3 million but still 57.7 percent above 2012 shipments.

Despite the slight reduction for this year, IDC maintains still expects global shipments of tablets to hit 407 million by 2017.

Tom Mainelli, research director of tablets for IDC said in a statement that after a lower than anticipated second quarter, hampered by a lack of major product announcements, the second half of the year is critical for makers of slates.

"We expect average selling prices to continue to compress as more mainstream vendors utilize low-cost components to better compete with the whitebox tablet vendors that continue to enjoy widespread traction in the market despite typically offering lower-quality products and poorer customer experiences," Mainelli said.

IDC also noted that it expects shipments to slow in mature markets, which have typically driven growth in the space. growth to begin to slow in these markets. As a result, IDC now expects the mature market (comprised of North America, Western Europe, and Japan) to shrink from 60.8 percent of the worldwide market in 2012 to 49 percent by 2017.

"Year-on-year growth is beginning to slow as the tablet market approaches early stages of maturity," said Jitesh Ubrani, research analyst for IDC. "Much of the long-term growth will be driven by countries like China where projected growth rates will be consistently higher than the worldwide average." www.wirelessweek.com

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Report: US App Makers Losing Share August 29, 2013

Developers in the United States beware, you're losing market share. That's the word from app analytics firm Flurry, which released research today that shows 45 percent of apps recording data through Flurry Analytics as of the start of June 2011 were made in this country. That's fallen off to just 36 percent as of June 2013.

In a blog post discussing the numbers, Flurry CEO Simon Khalaf notes that apps made in the United States still see the strongest engagement numbers. Flurry also considered how the picture changes if apps are weighted by total time, which takes into account both user numbers and engagement.

"Once time is taken into account, things look considerably better for the U.S., suggesting that, on average, user numbers or engagement are greater for apps made in the U.S. than for apps created elsewhere," Khalaf wrote, adding that this makes sense given the size of the U.S. population, the fact that it was an app pioneer country, and the number of English speakers in other countries who might be able to use U.S.-made apps without any localization.

Still, even this weighted percentage of active apps by developer country sees apps made in the U.S. falling off from 75 percent in 2011 to 60 percent in 2013.

Khalaf says the numbers show that the app market is trending towards globalization, which is he says is due to a number of factors, including the strength and reach of the App Store and Google Play, as well as the relatviely low cost of developing apps.

Khalaf notes that as of June of this year, developers in 23 countries contributed at least 1000 apps to the more than 350,000 apps Flurry measures worldwide. www.wirelessweek.com

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