AAPL - Apple Inc.

[rkbabang]

Speaking of MVNO's.  I've never owned a smartphone and am thinking about getting a used unlocked 5S and activating it on Cricket wireless' Basic plan for $35/month.    Cricket uses the AT&T network, indeed Cricket is owned by AT&T.  What is the difference between going with a MVNO like Cricket and going with AT&T itself?    If there is no difference, why would anyone pay a higher price to AT&T if they already own their phone?  Why doesn't everyone use Cricket or H2O Wireless, etc...?

 

[supertutti]

Anyone think this could be laying the groundwork for Apple launching their own MVNO?

 

I highly doubt it.  I don't see what value they could add, not owning the network itself.  Of course anything is possible.

 

Did some quick research on just how MVNO's operate and make money:

 

MVNO Explained - Brief:

An MVNO is a wholesale arrangement that allows the Mobile Network Operator (MNO) to sell excess capacity for resale by more diversified, specialised or other markets through hosting a service on its network to an MVNO. The two most important points here are: "excess capacity" and "other markets". At the simplest level this involves re-branding a SIM and maybe the phones (most large volume MVNOs have been or still are SIM-only), having your own sales channel and customer care, and maybe some value-add services and a billing engine to offer differentiated pricing if required.

One of the best and first examples of this is Virgin Mobile UK, and its following franchises; not only because it was one of the first, but also because it is one of the biggest, but also because of its success: Virgin took a pre-pay service, that the mobile network operators were trying to move away from as a supposedly low-revenue product, and returned better revenue per user than most of the operators subscribers on supposedly higher revenue contract services. Key to this was lower cost of acquisition. Virgin Mobile UK also did this with a very lean service, with the only real difference between the host operator and the Virgin SIM, being the brand, and a different customer care number. However, with just innovative pricing, some value-add services and a different customer care provision, Virgin managed to be voted twice "best network operator" whilst its host operator "worst mobile operator" despite the former not actually having a network, and the product, in terms of a network, were identical.

 

 

Apple has all of those things, and enough loyal followers and superior customer service to potentially make a profitable MVNO of all iPhones without much effort in terms of sales team and customer care expansion.

[TheAiGuy]

Either way, I don't think Apple cares too much where you buy your iPhone. I think there's probably a segment of top customers who would have upgraded yearly but were discouraged by the hassle of dealing with carriers and breaking contracts and such, and now they might do it because their phone is their most useful possession and a few hundred dollars a year isn't material to them. Apple will also make a bit of money on the embedded interest in the monthly price. I think this is all positive.

 

I disagree -- I think Apple really does care where you buy your phone. I think they want you to buy your phone at the Apple store with their knowledgable staff and well-designed layout, instead of at a Verizon store where they might try to sell you a Samsung. I think they care about the customer experience of buying a phone, and they can only control that at their store, and I think they care about squeezing out the carrier as your primary point of contact for competitive reasons.

 

 

[snailslug]

Speaking of MVNO's.  I've never owned a smartphone and am thinking about getting a used unlocked 5S and activating it on Cricket wireless' Basic plan for $35/month.    Cricket uses the AT&T network, indeed Cricket is owned by AT&T.  What is the difference between going with a MVNO like Cricket and going with AT&T itself?    If there is no difference, why would anyone pay a higher price to AT&T if they already own their phone?  Why doesn't everyone use Cricket or H2O Wireless, etc...?

 

When there's congestion on the network, the carriers implement priority management, with their postpaid subs coming first, then prepaid, then MVNOs. So the MVNO service could be materially worse depending on where you are using the phone.

[rkbabang]

Speaking of MVNO's.  I've never owned a smartphone and am thinking about getting a used unlocked 5S and activating it on Cricket wireless' Basic plan for $35/month.    Cricket uses the AT&T network, indeed Cricket is owned by AT&T.  What is the difference between going with a MVNO like Cricket and going with AT&T itself?    If there is no difference, why would anyone pay a higher price to AT&T if they already own their phone?  Why doesn't everyone use Cricket or H2O Wireless, etc...?

 

When there's congestion on the network, the carriers implement priority management, with their postpaid subs coming first, then prepaid, then MVNOs. So the MVNO service could be materially worse depending on where you are using the phone.

 

 

Ahh, I knew there had to be something.  Back to TheAiGuy's question, would Apple want to have such an important part of its users' experience controlled by someone else like this?  Apple would probably only do this if they could convince the network owner to push Apple up in the priority list, which would be expensive.  But then again Apple doesn't usually try to compete on price anyway. So it might be a win-win for Apple and its chosen network provider.

 

[DCG]

I really wish they'd re-do the new Apple Music app (or just go back to the old app). It's of my most-used apps, and it's an atrocious buggy piece of garbage.

 

It's seemingly impossible to turn off Apple Music and the iCloud Music Library. It keeps coming back no matter what. My 'Show apple music' and 'icloud music library' prefs are both off. In the Music app, I have 'Music Available Offline' selected (which is supposed to only show music stored on the phone). Yet it constantly loads my full Apple music library. Any time you turn iCloud music library on and off, the merge functionality doesn't work correctly and f's up my entire library.

 

To begin, it duplicated all of my playlists. No big deal, delete the duplicates....

 

But I also have a lot of live music/shows on my phone.  Stuff that is store on my phone - not in the cloud.  Any time I tried to play a song that Apple has a studio version of in their database, they played the studio/album version - not the version on my phone. If a studio version didn't exist, it wouldn't load anything and skip it.  WTF.

 

Wiping my device and reloading everything through iTunes, after iCloud was disabled, fixed it, but what a pain in the ass.

 

A friend of mine had his entire music library of thousands of songs deleted from his phone by the app. His phone is his only device, so he doesn't have copies of anything stored on a computer. Lost his entire music library with one click of a button.

 

Seems like they hardly tested this app before releasing it, and haven't done anything to improve it.

[Liberty]

Either way, I don't think Apple cares too much where you buy your iPhone. I think there's probably a segment of top customers who would have upgraded yearly but were discouraged by the hassle of dealing with carriers and breaking contracts and such, and now they might do it because their phone is their most useful possession and a few hundred dollars a year isn't material to them. Apple will also make a bit of money on the embedded interest in the monthly price. I think this is all positive.

 

I disagree -- I think Apple really does care where you buy your phone. I think they want you to buy your phone at the Apple store with their knowledgable staff and well-designed layout, instead of at a Verizon store where they might try to sell you a Samsung. I think they care about the customer experience of buying a phone, and they can only control that at their store, and I think they care about squeezing out the carrier as your primary point of contact for competitive reasons.

 

I agree with that. My choice of words was poor. I meant more: as long as you buy an iPhone, anywhere, they're happy.

 

But defenitely happier in an Apple store...

[johnny]

Doesn't Apple's deal also come with Applecare+ (beefed up warranty)? That's worth something, though T-Mobile's deal might still be cheaper (though with more strings attached).

 

Apple's does come with Applecare+, but the math doesn't work out to be very great. If you just get the phone, pay off for 24 months, and never upgrade, you're basically paying MSRP. Total payments ($32.41*24 = $777.84) come very close to ($650 + $130 = $780).

 

There it is essentially just 0% financing. The real trick is when customers fall for the temptation of upgrading after a year, at which point the 24 month commitment renews, and they surrender the old phone. In this world they have essentially paid $32.41*12 = $388.92 for a one year lease on a phone that almost certainly has not depreciated by that much. And if they have damaged the phone, then they've paid $488.92 ($100 deductible).

 

What is interesting here is that iPhones are well understood to hold their value far better than other phones, but this depreciation differential is not acknowledged in these carrier pricing plans. Once you think about it, you realize that on a standard lease program, iPhones are actually better for the carriers.

 

But what sets the Apple plan apart from the carriers is that the phone is unlocked from the start, so now you have total freedom to change carriers as you wish. I think this could potentially increase the churn rate for carriers and make it more difficult for them to forecast out results in a meaningful way. Also, now people can switch to a T-Mobile or sprint from AT&T or Verizon for a month just to try out the service, since their monthly prices are lower. Could shift people to these carriers and force the big two to compete more heavily on pricing.

 

Yeah, but Apple doesn't actually care who your carrier is. I think the point is that, as you say, people using Apple's program would be more churny and less valuable as subs, which is what should motivate all carriers to match or beat the offer. It is less about hurting carriers and more about keeping them motivated.

 

The prior subsidy model was, I think, better for both Apple AND the carriers. This new world is more transparent and I think that hurts everybody. If people are jumping more between carriers, and carrier margins get tighter, that isn't necessarily a huge win for Apple, who -still- tends to get tailwinds from carrier subsidies and promotions, even if they are structured differently (T-Mobile).

 

Anyone think this could be laying the groundwork for Apple launching their own MVNO?

 

That is a businesses where it hard to make customers love you, and very easy for them to start resenting you. Like all other utilities, or lending, etc. Note that Apple has a third party bank providing the financing for the iPhones. There is no reason why Apple can't absorb all of the risk there (they almost certainly are ending up with all the trade-ins, unlike how car leasing works). But I think Apple recognizes the value in separating the Apple logo that everybody admires from the monthly statements that everybody dreads.

[innerscorecard]

I think the story here is that selling second-hand phones to third parties (either companies or individuals) is a very stressful and frictional process. A big pain in the ass. This makes upgrading while not simply losing the value of the new phone every year much, much easier.

[johnny]

That's a really good point. I've done a used iPhone buy over Craigslist, but I'm not somebody who is concerned with being axe-murdered, so I guess I never really thought about how intimidating that process might be for a huge chunk of the population.

[TheAiGuy]

That's a really good point. I've done a used iPhone buy over Craigslist, but I'm not somebody who is concerned with being axe-murdered, so I guess I never really thought about how intimidating that process might be for a huge chunk of the population.

 

It's like used cars -- yeah, you can get more money selling it your self but most people sell it to a dealer or something like carmax. Same thing from the other side, Apple here is serving a function as a trust broker.

[innerscorecard]

I think when similar plans roll out to lower-trust countries like China, they will be even more popular. Buying and selling used goods as an individual in China is extremely difficult due to trust issues, even after Taobao made it a lot easier.

[innerscorecard]

That's a really good point. I've done a used iPhone buy over Craigslist, but I'm not somebody who is concerned with being axe-murdered, so I guess I never really thought about how intimidating that process might be for a huge chunk of the population.

 

I also bought my current iPhone 5 on eBay years ago, saving over $300 off what I would have paid in the Apple Store. But it felt like rolling the dice (my phone happened to be exactly as described and pretty much brand new), and I'm willing to do the research to make sure I get a good deal. It was very complicated too - having to make sure I got the model with the right LTE bands. Selling is even worse than buying, with how platforms such as eBay protect sellers far more.

 

Look at how many people currently buy and sell on Gazelle, which gives you terrible prices. This is a huge improvement in the user experience over such an awkward model.

[Viking]

If you want to get an understanding of how fast mobile is growing watch Bennedict Evans presentation Mobile is Eating the World:  http://ben-evans.com

 

Who is best positioned to benefit from these trends in the coming years? Apple. And over the past 12 months Apple has gotten better and its competitors have gotten weaker. After decades of trading in the market, a wise investor once said the big money is made by getting positioned properly and then simply sitting and waiting...

[Hoodlum]

These are the wait times for the iphone 6s.  It looks like China is not slowing down.

 

http://iphone-inventory.blogspot.ca/2015/09/iphone-6s-pre-order-tracker.html

 

[giofranchi]

iPhone 6S Vs iPhone 6S Plus: How They Succeed, How They Fail

 

http://www.forbes.com/sites/gordonkelly/2015/09/10/iphone-6s-and-iphone-6s-plus-best-and-worst-features/?utm_campaign=Forbes&utm_source=TWITTER&utm_medium=social&utm_channel=Technology&linkId=16950738

 

Cheers,

 

Gio

[johnny]

These are the wait times for the iphone 6s.  It looks like China is not slowing down.

 

http://iphone-inventory.blogspot.ca/2015/09/iphone-6s-pre-order-tracker.html

 

Very interesting to see the Plus is so constrained this year again.

 

I suspect the mix is very heavily tilted towards the plus at launch and then skews more towards the 4.7'' version throughout the year, so maybe they're optimizing the production for the full cycle rather than making sure as many people get day 1 deliveries as possible.

[rkbabang]

That's a really good point. I've done a used iPhone buy over Craigslist, but I'm not somebody who is concerned with being axe-murdered, so I guess I never really thought about how intimidating that process might be for a huge chunk of the population.

 

I also bought my current iPhone 5 on eBay years ago, saving over $300 off what I would have paid in the Apple Store. But it felt like rolling the dice (my phone happened to be exactly as described and pretty much brand new), and I'm willing to do the research to make sure I get a good deal. It was very complicated too - having to make sure I got the model with the right LTE bands. Selling is even worse than buying, with how platforms such as eBay protect sellers far more.

 

Look at how many people currently buy and sell on Gazelle, which gives you terrible prices. This is a huge improvement in the user experience over such an awkward model.

 

I just ordered an iPhone 5S using Swappa over the weekend.  The prices are similar to what you find on ebay (I spent a few hours searching ebay and craigslist before hand.  And Swappa claims that it has a human lookover each listing and verifies that the phone is OK to be activated (not reported lost/stolen).  I plan to activate it using Cricket.  I'll see how it goes.

 

[giofranchi]

I thought AAPL was not predictable, but I have changed my mind.

I now think this trend is very clear: smartphones and tablet devices will only get used by an ever increasing number of people.

Therefore, the question is: which smartphones and tablets will those people buy?

I now think the probability some company will come up with a product which might put together software, hardware, and design better than the iPhone is very small indeed.

Add to that the value of their so-called “eco-system”, with iTunes, the iPad, the iWatch, Apple TV, etc., and the probability of switching from the iPhone to another smartphone seems even smaller.

In other words, imo predictable growth ahead for AAPL.

I have just opened a 9% position.

 

Cheers,

 

Gio

 

[Mephistopheles]

I thought AAPL was not predictable, but I have changed my mind.

I now think this trend is very clear: smartphones and tablet devices will only get used by an ever increasing number of people.

Therefore, the question is: which smartphones and tablets will those people buy?

I now think the probability some company will come up with a product which might put together software, hardware, and design better than the iPhone is very small indeed.

Add to that the value of their so-called “eco-system”, with iTunes, the iPad, the iWatch, Apple TV, etc., and the probability of switching from the iPhone to another smartphone seems even smaller.

In other words, imo predictable growth ahead for AAPL.

I have just opened a 9% position.

 

Cheers,

 

Gio

 

 

Glad to have you on board, Gio!

 

Another angle I've thought about: The smartphone is becoming ever more relevant and necessary in life. The value it provides is constantly increasing. This means that having to pay premium price for the iPhone over competitors will matter less and less to the average consumer moving forward.

[rkbabang]

This isn't unexpected or surprising, but it shows how hard it is even for a company with deep pockets and a willingness to spend R&D dollars to compete with Apple.

 

Amazon finally gives up and stops selling the Fire Phone

[adesigar]

This isn't unexpected or surprising, but it shows how hard it is even for a company with deep pockets and a willingness to spend R&D dollars to compete with Apple.

 

Amazon finally gives up and stops selling the Fire Phone

 

Why do you think they lost to Apple or were even targeting to compete with Apple? The lost to Android. Specifically they lost due to the heavily customized Fire OS (modified version of Android) which is crap. If they had put stock android on it they probably wouldn't have lost any money. They wouldn't have made any money either. Their idea was to extend Kindle fire to the Phone but they lacked the apps.

 

Apple needs to be extremely careful it doesn't repeat its mistake from the 80's. Steve Jobs said Apples mistake in the 80s was it got greedy and went for profit share vs market share and that losing market share eventually cost them their future. If they continue losing market share they might eventually lose the phone wars to Google like they lost the PC wars to Microsoft.

[johnny]

If they continue losing market share they might eventually lose the phone wars to Google like they lost the PC wars to Microsoft.

 

It is tempting to compare phones to PCs, but they really are much less similar than people think. Strong integrated design is far more critical in mobile devices than desktops (perfectly utilized space, meticulously laid out wire paths, and thoughtfully deliberated CPU clocking matter a lot when you are operating under severe volume and energy constraints). Purchasing decisions are being made by end-users (who respond positively to design and UX and other soft factors) rather than corporate or institutional buyers (who respond to price and specs). 100% of the PC buying market in the 90s could be expected to spend hundreds of dollars on software, which meant developers would rightly tend to follow market share. But in mobile, 90% of the market doesn't pay for software, so developers don't target share, they target ability to pay OR impression value, where iOS is still the winner.

 

As long as Apple continues to capture the high-value users, they'll be fine. Mobile is just too big for "30% share" to be something anybody ignores. Especially when it is the top 30%. So the question is this: do you know anybody who has been using iPhones for a few years that has expressed their desire to switch to Android because 90% of Indians use it? I don't.

[Mephistopheles]

Indians?? ^

[Liberty]

Interesting read:

 

http://www.asymco.com/2015/09/14/apple-assurance/