Apple Shouldn't 'Re-up' with AT&T

The Wall Street Journal is reporting on AT&T's negotiations with Apple to retain its exclusive deal beyond 2010 when it expires:

AT&T's exclusive deal to carry the iPhone in the U.S. expires next year, according to people familiar with the matter, and [AT&T CEO] Stephenson is now in discussions with Apple Inc. to get an extension until 2011 . . .

Keeping the iPhone away from rivals and finding the next hit devices, such as smart phones and multimedia handheld tablets, are among the challenges the 48-year-old CEO faces as he shifts AT&T's energy away from the crumbling U.S. landline phone business and into the wireless market, where technologies evolve quickly and hit products don't last long.

Apple is probably the more powerful party in these negotiations because it can say "no" -- and it should. Staying with AT&T would blunt the phone's growth and opportunity in the market. Rivals Android and BlackBerry have (or will have in the case of Android) multiple operator distribution. And while thousands of people have switched to AT&T to get the iPhone, thousands more who might buy it (like me) have not because of favorable deals with existing carriers and/or the pain of switching. 

The AT&T subsidy has been a critical part of the iPhone's success and it's not clear whether all cariers would equally subsidize the device if they got access to it. It's also unlikely that Apple would get a piece of the subscriber revenues the way it has with AT&T. But it is clear there's a larger market out there for the device if it breaks free of the exclusive relationship. 

There's a short term-long term calculation here and if Apple wants the iPhone to become a truly mainstream device --  the "iPod of smartphones" -- it must move beyond a single carrier relationship.

JumpTap Introduces tapMatch PPC Marketplace for Text, Display Ads

JumpTap debuts a new PPC mobile ad marketplace today called tapMatch. CMO and agency veteran Paran Johar says that tapMatch is distinguished from other mobile marketplaces (e.g., Google mobile AdWords) because it offers the most sophisticated targeting available: content, keywords, demographics, handset type, carrier, location and publishers.

The demo video shows the creation of a mobile banner campaign but the system equally accommodates text ads. What was impressive to me was its simplicity:

tapMatch screen

When JumpTap briefed me a couple of weeks ago, we digressed into a number of other discussions related to mobile advertising. One of the issues Johar and I discussed what whether it was desirable to make the click the coin of the mobile marketing realm in the same way it is online. That metric may be appropriate for mobile search advertising but not necessarily beyond that. However in a bad economy people are more inclined to pay on a PPC basis rather than CPM, as a general matter. 

Clearly Johar personally believes that a broader range of considerations should determine mobile ad performance -- he discussed those at our Internet2Go event earlier this year. But online marketers live and die by CTRs so it makes sense that the metric would transfer over -- marketers already "get" it.

However mobile offers more options to advertisers and agencies than simply direct response. I believe it's wise to reflect and be a bit cautious about turning the click-through into the uber-metric of mobile marketing. 

Virgin Mobile Joins the $50 Club

First Boost/Sprint, then MetroPCS and now Virgin Mobile is offering an unlimited national calling plan for $50. Unlimited texts adds $10 more per month. Virgin Mobile, an MVNO, uses Sprint's network.


Meanwhile Boost (owned by Sprint, which provides the network for Virgin) issued a press release to counter the Virgin Announcement. It points out that the $50 Boost plan is all inclusive and offers SMS and unlimited Web as part of the plan:

Not all unlimited prepaid cell phone plans are created equal. The recently launched Virgin Mobile $49.99/month plan can actually cost consumers closer to $72/month when fees for text messaging, Web and telecom taxes are added in. Alternatively, consumers get superior value – a savings of more than $240 a year – with Boost Mobile’s flat-rate prepaid plan, which offers unlimited nationwide talk, text and multimedia messaging, wireless Web access and nationwide Walkie-Talkie that reaches more than 274 million people in more than 15,800 cities across the U.S. for an all-inclusive price of $50/month.

T-Mobile offers $50 unlimited calling to loyal customers (18 mos.) and doesn't include SMS or Internet in that price. I'm waiting for these rates to break through from pre-paid to post-paid carriers more broadly. 

Speaking selfishly . . . we can only hope that it happens. 

But consistent with what I was saying earlier you've got a bifurcating market: emerging, unlimited low cost plans using lower-end phones for the highly price conscious and more expensive plans for those who want access to better handsets and more capabilities. 


Related: MetroPCS reports Q1 results -- more subscribers, higher churn. 

A Million Skype Downloads in 48 Hours

Skype said that in the two days following release, last week, of its first iPhone app there were roughly a million downloads. This indicates both the strength of the Skype brand and the fact that it has a huge installed base of users. But it also reflects the desire for cheaper calling options, especially internationally.

Several carriers appear to be digging in their heels and trying to block usage of Skype on their networks: AT&T in the US (it works on Wi-Fi but not 3G), Rogers in Canada and T-Mobile in Germany.  However an advocacy group has asked the US FCC to determine whether the exclusion of Skype from the AT&T network is legal.

An AT&T spokesman was quoted in a Wall Street Journal article resonding to the complaint:

"Customers are free to download and use the apps they want, but we have no obligation—nor should we have—to facilitate or subsidize our competitors' businesses."

This captures the carriers' fears about Skype and how VoIP may erode revenues in certain sectors over time. 

T-Mobile to Put Android on Home Phone and Tablet

According to the NY Times, T-Mobile is planning a push further into the home with an Android-based home phone and a tablet computer based on the open-source OS:

T-Mobile plans to sell a home phone early next year and soon after a tablet computer, both running Android, according to confidential documents obtained from one of the company’s partners. The phone will plug into a docking station and come with another device that handles data synchronization as it recharges the phone’s battery.

A T-Mobile spokesman, Peter Dobrow, declined to discuss the specifics of any future products but confirmed that T-Mobile had plans for several devices based on Android.

This strategy appears to be an expansion of the company's T-Mobile @ home strategy. Incumbent landline carriers AT&T and Verizon have both introduced more advanced home telephones with integrated touch screens and limited Internet access to make their landline services more compelling. 

We can probably expect to see a range of interesting Android mobile computing devices, which are not primarily phones, in the next year.

Mobility, eBook Readers & Netbooks

We are in the midst of a mobile computing "revolution," not to be hyperbolic or anything. This is marked by the rise of the smartphone as handheld computer and the ascendancy of subsidized netbooks -- and soon lots of connected MIDs. This week AT&T announced that it would essentially give away netbooks for $50 with a two year service contact (although this is a trial in one market). In Europe O2 has given netbooks away to gain the service contract.

Kids will want netbooks because they're small and "cool." Business users will get them as convenient travel alternatives to lugging laptops around. And many will simply get them because they're dirt cheap, especially with these new subsidies. Verizon will follow suit to match AT&T in the near future. 

Netbooks are in some ways more like smartphones than laptops because they will rely on the Internet more than conventional PCs/laptops and they'll have mobile chipsets in them. They will likely also develop touch screens and be widget/app friendly, at least some of them. Regardless, there will be a dramatic impact on the PC industry and potentially Microsoft. Linux and Android are set to make inroads against Windows in this expanding segment. Microsoft may be forced to lower prices on its OS to compete, which would affect margins. As the NY Times reports:

Netbook makers have turned to Linux, an open-source operating system that costs $3 instead of the $25 that Microsoft typically charges for Windows XP. They are also exploring the possibility of using the Android operating system from Google, originally designed for cellphones. (Companies like Acer, Dell and Hewlett-Packard already sell some Atom-based netbooks with Linux.)

Regardless, these cheap, small PCs are here to stay. 

Meanwhile Verizon reportedly said at CTIA that it is developing "four or five" eBook readers. All of these will be supported by the network. And we can assume that they'll allow mobile Internet access (or Internet access on the go). Then there are the MIDs like the new Samsung Mondi. But this is just one of dozens of such devices that will emerge in the next year or so. 

Stepping back, we can see that increasing mobile broadband, price competition and a wide range of new IP-connected devices will change our relationship to "the Internet" -- and mobility is the theme tying it all together.

Openwave: Social Network Demand High on Mobile Devices

Mobile platform and services provider Openwave presented a range of data in its "mobile Insiights" report for April. Some of those data are reflected in a press release put out today. The data are behavioral rather than survey based:

Social networking remains the number one area of interest to mobile internet users with Facebook and MySpace being the top two search terms on both Google and Yahoo! OneSearch. In terms of average hits per session, MySpace leads Facebook by nearly 46 percent, suggesting that MySpace could become the preferred choice of mobile communication for a particular segment of an operator subscriber base and displace some of the most frequently used email offerings. The social networking trend presents a unique opportunity for operators to partner with these leading social networking sites through co-branding efforts with a view to generating incremental revenues from messaging generated from the social networking sites. 

Many of the items in the report make carrier centric recommendations. Among the findings, engagement is highest with MySpace, followed by Yahoo!, Facebook and Google.

Top search queries on Google mobile site (assume sanitized): 

  1. MySpace
  2. Facebook
  3. YouTube
  4. Movies
  5. Gmail
  6. Weather
  7. Craigslist
  8. ESPN
  9. EBay
  10. Weather

Top search queries on Yahooo! oneSearch: 

  1. MySpace
  2. Facebook
  3. Google
  4. YouTube
  5. Yahoo
  6. funformobile
  7. Myxer
  8. EBay
  9. ESPN
  10. Gmail

 Compare Opera data, which includes some of the sites above but others not mentioned by Openwave:


Both sets of data reflect high demand and usage of social networks in mobile. However, as a percentage of the overall mobile subscriber base the number of mobile social network users is 10% or less based on our survey data. The numbers we've found have grown since last year but not as dramatically as the rankings above suggest. 

Beyond this Openwave found that carrier portals still see much more traffic (monthly uniques) than the "off deck" mobile Internet. Here's the Openwave chart:

Openwave mobile traffic comparison
Source: Openwave (3/08), US mobile traffic

On smartphones, that distribution would be quite different. But the majority of phones in the market are not smartphones and so carriers still see quite a bit of traffic. Over time there will be erosion unless they figure out value-added services and incentives to retain users.

Openwave also published a comparison of response rates on different mobile ad networks:

CTRs OpenWave
Eventually we're likely to see mobile response rates (on the display side) more closely mirror online response, which brings me to a diatribe on clicks that I'll save for later.

US Carriers in Standards Deal with MMA

In a bid to accelarate the development of mobile marketing, the MMA announced that it has reached an agreement with the four largest US carriers on a path toward common standards and practices across the industry:

This industry-first agreement is a milestone toward the continued growth of mobile marketing, a dramatic reduction in the costs of launching mobile marketing campaigns, faster time to market for campaigns and improved consumer satisfaction by improving the consistency and efficiency of mobile marketing campaigns across the four major U.S. wireless service providers. The agreement underscores the industry’s commitment to work towards standardized marketing practices which will improve consumer satisfaction and understanding of mobile marketing campaigns.

In addition to the four largest US wireless service providers, there was substantial help in securing this agreement from the major aggregators, brands and content owners. In specific, VeriSign, Neustar, Limbo, and Thumbplay, all played critical roles in the process.

Under the agreement, the four companies, all MMA members, will incorporate their individual mobile marketing guidelines and codes of conduct – known as “carrier playbooks” – into a unified document to be maintained by the MMA. As a result, the operational efficiencies for the industry is upward of $200 million annually. The MMA will work with each carrier, as well as other industry partners, to craft the unified best practices, which will have five key benefits:

  • Promote a consistent consumer experience including standardizing key consumer disclosures
  • Enhance efficiencies in running short code programs
  • Accelerate the time to market for mobile campaigns
  • Ensure monitoring programs and audit results are more consistent
  • Reduce operational costs across the mobile marketing ecosystem

The MMA’s Consumer Best Practices Committee will review the first draft of the document in early April. The document will be finalized and released to the public by the end of June 2009.

This is very helpful and will remove a range of barriers that currently exist for agencies and marketers wanting to get into mobile. As a practical matter it may play out most directly in the context of SMS advertising.

Skype App for iPhone Confirmed

The anticipated launch of Skype for the iPhone has been confirmed. The NY Times and CNET cover the story. CNET got a sneek peek at the app and has a detailed dicussion of its features, as well as screens:

Skype's screens are well organized and use the iPhone's ability to add filters, for instance, to sort your contacts alphabetically, or by who's online. There's chatting as well, though Skype's flagship feature is its VoIP calling that's free to other Skype users and an inexpensive per-minute fee to landlines. Calls on Skype for iPhone work only if you're in range of a Wi-Fi network, so your call quality will in part be at the mercy and strength of wireless networks nearby--calls will not work over the cell phone network on the iPhone (but chatting will.) 

Apparently in the US VoIP will only work over a WiFi connection and won't be able to be used on AT&T's 3G or edge data network, though IM will work over the data network. 

Here's the interesting part of the NY Times' article about whether Skype competes with carrier voice plans:

Skype tested its service in London in the last two years with Hutchison 3, a British mobile network. It said it drew more customers to Hutchison 3 and increased its revenue for each user, since people were making calls on their cellphones using Skype that high calling rates would have discouraged otherwise.

Scott Durchslag, Skype’s chief operating officer, said he did not think the limitations on using Skype on the iPhone would be a big drawback for users, since Wi-Fi networks have become common.

The point about users making calls they wouldn't normally make is probably valid: people simply wouldn't do the additional calling in the absence of Skype (or one of its competitors). It's clear that mobile callers are highly cost sensitive and will respond to price incentives accordingly. 

Right now the limitation of Skype's VoIP service to WiFi networks means that its use will probably not threaten voice minutes. Also, quality will be an issue so many people will choose not to use it except with international calling or in other, similar circumstances.

Skype, Truphone, Fring and others become most interesting perhaps in the context of MIDs that are not phones. VoIP turns those devices (with a connection) into a phone and may make MIDs more attractive accordingly. The two issues are the availability and speed of the connection and the quality of the VoIP service, which often still sounds like you're talking in a fishbowl. 


Update: Om Malik, who broke the Skype-iPhone story, has done an initial review after several hours of testing the app. He was extremely positive about the experience and the call quality ("awesome").

And the iPhone 3.0 update apparently does permit Skype work on AT&T's data network, as opposed to just WiFi (see video). 

More MIDs + the 'Laptop in the Kitchen'

I hesitate to write about this yet again but I can't help but believe there's an explosion of devices coming with the expansion of IP connectivity from wireless operators and other initiatives (e.g., White Spaces). For example, Verizon is going to start supporting netbooks in the way that AT&T has with the Acer Aspire -- purchase subsidy with a two-year contract.

The number three US carrier Sprint says it's going to do many more wholesale deals (a la Kindle) for access to its network:

The Overland Park, Kan., company is now talking with companies such as GPS device maker Garmin Ltd., Eastman Kodak Co. and SanDisk Corp., which makes storage devices, about delivering wireless Internet service for their products, according to a person familiar with the matter.

In these deals, Sprint will rent out its network and generally collect fees from manufacturers based on how much data is transmitted to the devices. Although wholesale subscribers provide less revenue than retail subscribers, Sprint doesn't have to worry about expenses for billing and customer service.

That means that new MIDs will likely start popping up left and right. For example:

Samsung WiMax device
Credit: Phonescoop

All of these devices can become phones with VoIP/Skype. But the ubiquitous connectivity will make all these devices viable in a way they would not be in its absence. As I said previously, a data connection will become more important than a voice plan.

As a related matter, this new Asus touch screen Eee Top PC may become the "laptop in the kitchen" that hasn't yet materialized. Both AT&T and Verizon are attempting to sell phone-based devices that offer combined phone and touch-screen technology with some Internet access. But this Asus PC (pictured above on upper right) is compact and offers full Internet access. As the NY Times opines:

Unlike the Hewlett-Packard TouchSmart and the forthcoming Studio One 19 from Dell, the Eee Top is small enough to tuck beneath a kitchen cabinet and cheap enough that you will not worry about the occasional dribble.

This device will be tied into the wireless network in the home. But the Asus panel PC as well as the tablets discussed above are part of a new generation of smaller, IP-connected devices that are neither traditional PCs/laptops nor smartphones. As all these machines proliferate our relationship with the Internet -- "the cloud" -- will be less about fetishizing individual devices than ensuring we have access to "our content" wherever we are and wherever we go. 


These MIDs really blur the line between mobile and the desktop in terms of advertising. In some cases they will be more like a smartphone (and probably run Android); in others they will be much more like a netbook with full pages rendered on their small screens. 

Update: Verizon confirmed that it intends to sell netbooks + mobile connectivity by the middle of this year to compete with rival AT&T. 

HTC Magic/G2 Coming to T-Mobile in the US

The HTC Magic (G2), previewed in Barcelona as a Vodafone handset, has apparetly received FCC approval and is going to be released this year by T-Mobile in the US. In all respects it appears to be superior to the G1:

HTC Magic

uLocate's WHERE Offers New Location-Aware Mobile Site with Sprint

uLocate's WHERE has launched a location-enabled mobile Web site (not an application) in conjunction with Sprint, with which it has a long-standing relationship:

With access to network-based location on the Sprint network, WHERE provides nearby search results, even on non GPS-enabled devices, without requiring users to report their location. Sprint users can now browse to WHERE ( on their phone’s Web browser and easily find locally relevant information from AccuWeather to ZipCar. 

WHERE has also been experimenting with some innovative social features on its client application for the G1. 

The benefit of the Sprint relationship is that the mobile site can detect location without the need for a download, a GPS chip in the phone or triangulation; current location is supplied via the carrier. Any user with mobile Web access can get the site; however location would need to be manually set for non-Sprint customers.

Where app

US Smartphone Price Ceiling Now $199

Sprint launched the Treo Pro in the US market. What was the price? It was $199 (subsidized) of course. The iPhone is $199, the G1 is $179 and so on. Thus, a practical matter, the ceiling for smartphones (w/subsidy) is sub-$200.

Any phone that tries to enter the market charging more than that will not see any volume sales. The Treo Pro itself may not see volume at Sprint as many people wait for the Pre, coming in the next couple months apparently. 

Treo Pro

Will Data Revenues Overtake Voice?

In the US there's more texting going on than talking. A couple of years ago people would not necessarily have predicted SMS would overtake voice at any time, let alone in just two years. But it happened.

The same question must now be asked of mobile data vs. voice. According to a Fierce Wireless summary of several different articles and reports, T-Mobile UK now sees 25% of its new customers signing up for mobile broadband services. Data revenues for carriers are growing much more quickly than voice revenues. 

Pricing is a lever than can further accelarate growth in data adoption, especially if there's a price war

It's going to take more than a couple years, but eventually we're likely to see penetration levels for data well above 50% in the US and in the West, as people see the mobile Internet no longer as a luxury but as a necessity. 

This was the path for the PC Internet as well: a novelty that only a few had in the beginning and then a necessity as more and more people went online. And once you start using the mobile Internet, especially on the iPhone, it's impossible to imagine being without it. 

Google Voice: Single Number, Free Calls, Voicemail Transcription

Google has rebranded and expanded its GrandCentral service as Google Voice. This is a dramatic announcement and, depending on the voice quality and reliability of the services, a potentially very big deal (think "next-gen telco"). 

We'll have a good deal more to say later. For now, here the services that Google Voice includes:

  • Call screening - Announce and screen callers
  • Listen in - Listen before taking a call
  • Block calls - Keep unwanted callers at bay
  • SMS - Send, receive, and store SMS
  • Place calls - Call US numbers for free
  • Taking calls - Answer on any of your phones
  • Phone routing - Phones ring based on who calls
  • Forwarding phones - Add phones and decide which ring
  • Voicemail transcripts - Read what your voicemail says
  • Listen to voicemail - Check online or from your phone
  • Notifications - Receive voicemails via email or SMS
  • Personalize greeting - Vary greetings by caller
  • Share voicemail - Forward or download voicemails
  • Conference calling - Join people into a single call
  • Call record - Record calls and store them online
  • Call switch - Switch phones during a call
  • Mobile site - View your inbox from your mobile
  • GOOG-411 - Check directory assistance
  • Manage groups - Set preferences by group

Here's my post at Search Engine Land
Here's the Google Blog post and more discussion on Techmeme
Here's Google's explanatory video

Google Voice is getting very positive reviews from those who've used it, including the NY Times' David Pogue.


Related: Comcast now says it's the third largest residential provider of phone services in the US:

Comcast Digital Voice now serves 6.47 million customers, which exceeds Qwest’s reported residential subscriber base.  The popularity of Comcast’s innovative offerings with consumers has enabled Comcast to add residential subscribers in each of the last twelve quarters.

Let the Carrier Price War Begin

When Sprint's prepaid division Boost offered a $50 unlimited "everything" plan in January it caused a stir but didn't initiate a price war because it was aimed at the low end of the market. Then T-Mobile introduced a $50 unlimited talk plan but only for loyal customers that had been with T-Mobile for 22 months. Then T-Mobile decided to expand and accelarate the rollout of the plan. 

Because of the limitations and qualifiers around these plans -- the Boost offering operates not on the Sprint network but only the slower and inferior Nextel network -- they didn't constitute the beginning of a price war, but were inching ever closer to one.

That's now changed in my mind because today prepaid carrier MetroPCS came forward with its own $50 unlimited offer (to match Boost): 

MetroPCS is also introducing two unlimited rate plans to support the BlackBerry Curve 8330 smartphone. The $50 personal rate plan, for use with the smartphone, will offer flat rate, unlimited talk, text, web browsing, MMS and BlackBerry email access through BlackBerry Internet Service. For an additional $10 per month enterprise customers can receive the same unlimited plan features on BlackBerry Enterprise Server. No other U.S. wireless carrier is offering an unlimited, no signed contract, flat rate plan for BlackBerry services at this price. Currently, these rate plans can provide customers over $550 in annual savings for BlackBerry service over certain national carriers. 

Though network quality and coverage are going to be issues for some, this is going to be pretty attractive for a lot of people: a BlackBerry with a $50 unlimited talk, text and mobile Internet plan. 

MetroPCS is a prepaid carrier and so not directly competitive with AT&T and Verizon. But I think the totality of these events now will compel a response from the majors. Sprint may be the first to "blink," given that they're already offering a $50 unlimited plan with Boost.

I think that in the US we're headed from $99 "all you can eat" to a $50-$60 price point for the same offering. All it will take is either Sprint mainstreaming that offer or T-Mobile extending its $50 talk deal to new customers to truly ignite the price war that I believe is now almost inevitable.  

My memory is that fewer than 20% in the US have formal data plans. You can bet those numbers would shoot up dramatically if these $50 plans go mainstream. 


Boost is now pitching its "monthly unlimited plan" to college students. 

Yahoo! Offers Up Inquisitor for Mobile, Near Potential Search Deal with Vodafone

Rumor has it that Yahoo! is in talks with Vodafone UK to replace Google as the default search provider in that market. In the US, Microsoft won that derby for Verizon's business at apparently great cost. Verizon Wireless is a JV of Vondafone and Verizon.

Search providers that are "behind" must win these deals to habituate users to their experience, look and feel, etc.

Yahoo! has the strongest mobile content brand, but Google is the mobile search leader. Indeed, Google has such brand strength and association with search that losing all these default deals might not significantly affect usage. Still Google will probably strive to retain and renew the Vodafone relationship. 

Separately, a week ago Yahoo!, released search tool Inquistor for the iPhone:


While Inquisitor is graphically nice to look at and generally helpful it's not a revelation. There are thus two responses to the launch in my mind:

  • Why the heck is Yahoo! launching a separate search brand/experience when it just cleaned up and de-fragmented its mobile offerings with the new and improved Yahoo! Mobile?
  • Alternatively, another search brand might give it access to some users who, for whatever reason, are disinclined to use Yahoo! as a mobile search engine. 

T-Mobile & Sprint Inch toward Price War

First Sprint's pre-paid division Boost introduced an unlimited $50 calling plan. It was something of a stroke of genius to reinvigorate Boost's brand and lure customers from MetroPCS and low-cost carriers. However, Sprint said that it was also luring customers from mainstream carrier T-Mobile as well. Then T-Mobile decided to offer its own $50 unlimited calling plan -- to very loyal customers only and in San Francisco initially.

T-Mobile has apparently started to roll it out nationally across the US ahead of schedule. When combined with an unlimited data plan ($35) T-Mobile customers will pay $85, which beats Sprint's Everything plan ($99). 

For T-Mobile, which had a mixed Q4, this fundamentally is a retention plan because it's only available to customers who have been with the carrier for almost two years. (The G1 is not yet serving to seduce many defections from other carriers but it may be holding the line on churn for high-end customers; we'll see what happens when the G2/Magic comes out.)

Combined, these two offerings take the industry up to the brink of a price war but do not constitute one -- yet. If T-Mobile were to expand the unlimited voice pricing to new customers as well, which it could if the company were to lose some of its resolve, other carriers might be forced to match. 

A price war would be good for consumers but obviously undesirable for the industry as a whole. 

Nuance [Finally] Sounds its Zi

The prospects for more convenient entry of text messages around the world became more real as Nuance Communications and Canada’s Zi Technologies finally agreed to terms whereby Nuance will acquire Zi for a combination of $17 million in cash and another $18 million worth of Nuance common stock. The price represents a 73% premium over Zi’s Friday closing share price on the Toronto Stock Exchange. However, it is $5 million less than Nuance had offered for the company roughly a month ago.

The deal is the result of protracted discussions, during which Nuance threatened to sue Zi for patent infringement and Zi’s board of directors continued to hold out against Nuance’s acquisition offers. Indeed, Zi aggressively pursued licensing agreements with carriers, device makers and content providers to incorporate its predictive text input and other technologies into solutions that support mobile search, messaging and advertising delivery.

Like Nuance, the company has impressive topline results and gross profits, but has yet to see its revenues deliver profits to bottom line (Net Income). To Nuance, Zi brings predictive text entry to multiple languages, including Arabic, Chinese and Japanese as part of a roster of 60 languages overall. That will bring the total number of languages and dialects supported by Nuance-enabled advanced text-based user input solutions to 80.

Most important will be the incorporation of speedy, more convenient ways to enter text both as commands and content over mobile phones among high-growth wireless markets in the Asia/Pacific markets and in the Middle East.

Sprint Asserts 'Stability' but Shows More Subscriber Losses

US carrier Sprint asserted in its earnings report and presentation that the carrier had stabilized and cited a number of areas of improved performance. However, it also reported these numbers:

  • The company served 49.3 million customers at the end of 2008, compared to 53.8 million at the end of 2007. The credit quality of our customer base improved every quarter in 2008, and prime customers represent almost 84% of the post-paid base, compared to 79% a year ago.
  • For the quarter, total wireless customers declined by a net 1.3 million, including losses of 1.1 million post-paid customers and 314,000 prepaid users, which was slightly offset by a 146,000 increase in the number of wholesale and affiliate subscribers.

Sprint has the best 3G network (though people may not believe that) and is the most competitive when it comes to pricing. However Sprint continues to lose a million wireless customers a quarter, for a total of 4.5 million customers lost last year. The chief beneficiaries of Sprint's defections appear to be AT&T and Verizon.   

Sprint faces challenges on a number of fronts and no single factor can be blamed for these defections. Sprint's brand as a whole is wounded. A history of poor customer service (though that's changing) and the absence of competitive handsets are all contributing. Sprint may say the Instinct is competitive or claim the HTC Touch Pro is compelling -- not so. 

The Palm Pre is supposed to make its appearance relatively soon and Samsung is supposed to come out with an Android phone for Sprint at some point this year. Sprint needs these handsets pretty desperately to return some "sizzle" to its relatively unimpressive handset lineup (although BlackBerry fans can find plenty of offerings). It may also need to cut prices (again) to get attention and/or retain customers. 

In my particular case only the promise of one of these new handsets -- Windows 6.5 won't be out until later this year --  is holding me back from an AT&T defection.