Number-Fudging in the Wireless Industry, Part II

| About: Wireless HOLDRs (WMH)

Last summer I wrote a piece about fudging the numbers in the wireless industry, which looked through some of the statistical dirty laundry of the mobile industry. Time for a follow-up, methinks . . .

11. "X% of handset owners use feature Y or service Z"
Fudge: How often do they use it? Hourly? Monthly? Once? What do they use it for?

12. "X million musicphones were sold"
Fudge: What's a musicphone? One which can play long audio files? One with a dedicated music player and library software suite? One optimized for music, or one which just happens to have a software client buried down in the entertainment menu somewhere? One with dedicated buttons (play/stop etc)? Or maybe just one with an FM Radio, not an MP3 capability?

13. 3G phone shipments vs. 3G users
Fudge: Some 3G phones are sold into markets without a 3G network and just work in 2G mode. Others are shipped without a 3G SIM (this happened personally to me "Oh, your old SIM should be fine"), or people switch them manually to 2G when they find it doubles the battery life.

14. "X% of customers would switch broadband subcribers to sign up to Operator Z's fixed-mobile service or Carrier Y's quad-play"
Fudge: did your survey mention they'd also have to change their email address (and their family's) if the change ISPs?

15. "Lots of people are willing to 'cut the cord' and go mobile-only"
Fudge: Ah, so that'll be the segment of the population that can't afford a PC & so doesn't want fast uncapped broadband then? . . . and no, they wouldn't want IPTV on a big plasma screen, or other services in the future. And, er, do they own a fax machine or an online home security system by any chance?

16. Heavily subsidized data-oriented devices, then charge a higher tariff.
Fudge: If you tie your BlackBerry or 3G data card customers into an 18/24-month contract, you can increase your data ARPU by implicitly including the device purchase cost in the revenue stream.

17. Classification of "miscellaneous" billed revenue
Fudge: On the revenue breakdown, where do you put things like handset insurance? Or an extra fee for itemized bills? Or per-minute charges to call a customer care line on an 0870 or other premium-rate number? I bet these don't go under "voice". . .

18. "Mobile Internet use are/will be more important than PC-based use"
Fudge: Not everyone who clicks on the WAP/web browser icon on their handset is "using the Internet." And there's a huge difference between users and usage - lots of people may have tried the web icon on their handset when they first got it, or even used the number-pad keys to Google something ultra-important after a few drinks. But looking at actual ongoing use measured by pages / bytes / pixels consumed / time online / online purchases is still 99% PC-based (& yes, I know, Japan & Korea are exceptions). [99% - rough guess. Can anyone show me website logs which breakdown page hits by browser with >1% identifiable mobile browsers? Look at this analysis.]

19. "We're a next-gen content / VoIP services / social networking / managed services provider"
Fudge: So why don't you tell us just how much of your revenue stream is actually made up of mundane stuff like interconnect/termination revenues or SMS gateways?

20. "Use of 3G / smartphones increases ARPU"
Fudge: Cause & effect - can you prove that using 3G or a smartphone increases a given individual's spend against their previous usage... or do existing high-spending users just tend to migrate faster to 3G/smartphones & skew the averaged figures? (Do you actually offer 3G or smartphones to prepay customers, for example? Or is the measured user base actually self-selected contract users?)