Wednesday, August 29, 2012

A Million Little Pieces: The Decline of Postpaid Cellular Service?

by G. Jack Urso
 

The following article was written for a competitive intelligence industry newsletter – March 23, 2010.
 

Sprint Nextel has a million reasons to change their business model. Actually, about 1.2 million reasons   the number of "postpaid" customers the company lost in 2009, with 504,000 bolting in the fourth quarter alone. This exodus cost Sprint approximately $1 billion for the 2009 fiscal year.

But wait, there's more!                            

Bernstein Research analyst Craig Moffett anticipates further postpaid contract losses for Sprint totaling 775,000 customers in the first quarter of 2010, according to a March 10, 2010 article the Kansas City Business Journal. 

By 2009, the total number of unlimited-calling prepaid contracts topped 10 million, and, according to analyst Scott Pope of First Analysis Securities, the market could grow to approximately 45 million to 60 million people, as reported by USA Today April 20, 2009. 

Meanwhile, as the postpaid cellular business continues to bleed customers, prepaid cellular companies are picking up the losses. While Sprint Nextel was losing one million postpaid contracts last year, Sprint's Boost Mobile service added one million new prepaid customers. A trend that was mirrored by T-Mobile USA, who also gained one million new prepaid customers in 2009, with 371,000 joining in the fourth quarter. As you may recall, that was the same fourth quarter Sprint lost 504,000 postpaid contracts. 

Sprint, seeing the writing on the wall, agreed on July 28, 2009, to purchase Virgin Mobile USA for $483 million. Not surprisingly, Virgin Mobile's next move is cut their losses and suspend their postpaid contract service altogether by May 25, 2010.  

Competitive Intelligence 

"There's no question the industry is getting more competitive," Sprint Chief Executive Dan Hesse said in the Wall Street Journal on February 10, 2010.   

In order to stay ahead of the curve, wireless telecommunications companies need to go beyond market research to provide analysis and a strategic plan to beat their competition and grow their own market. Many are turning to competitive intelligence providers for this insight. 

Though little-known outside the industries it serves, competitive intelligence (CI), provides companies with the research and analysis to know not just where a company is headed, but also what opportunities or obstacles will present themselves. 

"We take information gathered and help companies build a plan to improve their competitive position in the marketplace," reports Erik Glitman of Fletcher/CSI, a leader in the competitive intelligence industry. 

Paul Downing, head of Fletcher/CSI’s Wireless IT group noted, “Many of our wireless clients are starting to see prepaid plans emerging as the new consumer model.” 

Wireless telecommunications companies are approaching a crossroads. Consumers are increasingly abandoning the more lucrative postpaid contracts for the prepaid model. In an uncertain economy, the prepaid contract provides certainty. Analyzing not only what the customer is buying, but why and for how long is one example of the multi-layered, strategic approach the competitive intelligence advantage can give telecommunications companies at this crucial time. 

Postpaid contracts enjoyed growth for many years, but, as we know, all bubbles burst. When that bubble does burst will your company be left in a million pieces? 

Or will you be picking the pieces up?

 
 

The 2010 U.S. Defense Budget: Impact and Implications

by G. Jack Urso

 

The following article was written for a competitive intelligence industry newsletter – June 17, 2010

There's been a lot of speculation about the 2010 U.S. defense budget. Despite a $21 billion increase, many news reports have focused on the loss of big ticket items, such as the cap on F-22 Raptor production. Additionally, the Future Combat Systems (FCS) vehicle program has been scrapped, as the design would have rendered the vehicles practically useless for combat operations in Afghanistan and Iraq.


Less reported, however, is the fact that the increase in the defense budget will result in an increase in the force structure and a shift in support services expenditures.  While a $21 billion increase implies new investing opportunities, there are still potential financial landmines to avoid.

Source: Congressional Research Service Report
Defese: FY2011 Authorization and Appropriations, November 23, 2010.
Implications

Bob Nugent, Vice President of Advisory Services for AMI International, which provides naval intelligence reports to navies, shipbuilders, and naval equipment manufacturers, reviewed the 2010 defense budget and discussed its implications for the financial investor.


"The DoD (Department of Defense) is making a concerted effort to reorient the direction of the budget towards lower-intensity programs and capabilities as opposed to big ticket items," reported Nugent.  "The other part of the reorientation is going towards manpower because both the Marine Corp and the Army have increased their force structure significantly in response to what's going on in Afghanistan and Iraq.  So, a larger portion of the defense budget will also go toward personnel accounts."


One effect this shift will have is an impact on the military vehicle market, which enjoyed growth over the past decade. While the military will always need to get around, sales of military vehicles are expected to fall off a bit, as indicated by the loss of the FCS program.


"We're seeing a larger portion of the money going towards things like rifles, vehicles, personnel gear, and tactical communications, as opposed to fighter planes and big cruisers," Nugent stated.


According to Josh Cohen, Defense and Aerospace Analyst with Fletcher/CSI, a competitive intelligence and business consulting firm, “For defense companies, diversifying their manufacturing capabilities can help weather the storm of DoD project and budget cuts, which are not likely to slow anytime soon." 


Cuts like a Knife

One wildly publicized part of the budget concerns the production of the F-22 Raptor. Although production of the F-22 has been capped at 187 aircraft, four more than approved under the Bush administration in 2005, planned production has continued to drop over the past two decades. The cap means that the F-22 program will lose 13,000 jobs by 2011.


The conventional wisdom notes that the increase in F-35 production will add 44,000 jobs, more than making up the jobs lost in the F-22 program (both are manufactured by Lockheed Martin). So, problem solved. No worries, right?


Well, earnest investor, don't fire those financial afterburners just yet!


"There may be some shift in resources between the F-22 and F-35, but the F-35 is a troubled program," reports Nugent. "It's not really in a position to replace the jobs lost by the budget process for the F-22. The defense cuts do paint a pretty grim picture for that industrial infrastructure. So, there's significant concern on this issue."


There are industrial infrastructure concerns that will be affected by the future trends in the defense budget, not only in fighter planes and aerospace, but shipping as well. As the government reduces production of high-end, or big ticket, military hardware, highly skilled workers, with thousands of dollars invested in their training and education, may no longer find work that utilizes their highly-specialized skills.


"Very skilled and irreplaceable human resources are going to go away and nobody's coming in their wake," Nugent grimly noted.


Logistics

An army marches on its stomach, as Napoleon once said, so support services are essential components of any modern military force structure. Extended operations in Afghanistan and Iraq have underscored this need, which for a modern army entails more than just food and equipment.


The 2010 defense budget reduces "support service contractors" from the current 39-percent of the workforce down to a pre-2001 level of 26-percent. However, that doesn't mean the military is cutting back on support the troops in the field, in fact, just the opposite.


Bob Nugent explains: "In the last ten years, large numbers of civilian contractors have taken up those jobs that in past have been filled by people in uniform.  What they're talking about doing now is shifting it into a mix of government people as opposed to just civilians. There'll be civilians, but they'll be government service civilians, working for the U.S. government."


This in turn may affect the portfolio of companies which have been providing civilians to perform those services.


“With budgets being cut and competition increasing, those defense and aerospace firms with a keen awareness of their competition’s activities, and the ability to meet the government’s unique requirements, will likely end up winning more contracts,” said Cohen.


Housing

One confusing statistic in the 2010 defense budget is the fact that while military construction is going up 19-percent, family housing is going down about 20-percent. Is the military actually cutting housing during a time of extended overseas operations?


"I think the decrease in family housing is a little misleading because what a lot of the services have done in the last ten years has been to privatize military housing," commented Nugent.  "The Navy, the Army, and the Air Force are contracting it out, so I'd want to peel back that number on military housing and see how much of that is actually represented by spending on their own properties as opposed to money going to outsource people that are handling construction and maintenance of military housing. So, that's been a trend in the last ten years."


One area of dramatic outsourcing by the military has been in counseling, education, and related base facilities. While the government has been assimilating some of those responsibilities into its force structure in recent years, Nugent feels it’s a trend that will reverse itself.


"I think the military is very happy to have somebody else be their housing managers, their recreation managers, what have you, as opposed to putting government civilians back in those jobs," Nugent said. "If there's an area where I see the trend isn't very pronounced, or the reversal of the trend isn't going to be as pronounced, it’s in an area like support services and family housing."


Trends Analysis

Analyzing a trend requires a bit more research than scanning the headlines and listening to the latest network talking heads. Certainly, there are cuts in big ticket items, but Unmanned Aerial Vehicles (UAVs) are in high demand and the budget line for the Littoral Combat Ship has increased.  Defense electronics will be a growth area, as well as small arms, personnel equipment, and communications gear.


While some support services, such as housing, will continue the trend of being outsourced to civilian contractors, other aspects will be folded into government service, and some others will see a mix of government and civilian workers.


Cohen, of Fletcher/CSI, noted, "We see a lot of requests to look into markets that are not specifically military orientated, such as IR sensors, civilian armored vehicles, remote undersea vehicles, and testing equipment for communications and radar systems.  This is definitely a trend, but businesses with little to no experience working with the government need guidance in determining what contracts to bid for and what technology to invest in." 


Investing in the defense industry is not a passive activity. It reflects not just the direction of the defense budget, but the country as well.  It's more than asking whether we'll be building ships and planes tomorrow.  It also means asking whether anyone will be around to build the hardware we'll need tomorrow if we don't invest in those programs today.




Related Content
  


Friday, August 24, 2012

Three Kings



by G. Jack Urso




jim morrison, jim morrison


where have you gone

who wears your leathers

who sings your songs

who buys you acid

who loads your bongs

jim morrison, jim morrison

where have you gone


jimmy dean, jimmy dean

what has become of you

where have you been

i heard you wiped out

but got away clean

hiding in shadows

on the silver screen

you're the brooding, soul-eyed

androgynous mutant king*


jack kerouac, jack kerouac

where are you at

is this where you stood

is that where you sat

are you still thinking

thoughts you once thunk

are you still wasted

or just stinking drunk

do you still take neal cassady's crap

everyone said you were beat

you said you were be-at



*         James Dean: The Mutant King: A Biography, by David Dalton.

Tuesday, August 21, 2012

...at Cafe Elite

by G. Jack Urso

 
 

...at cafe elite

                just up the street

where the collectively cool

                go to meet

the men are well-groomed

                the women are petite

they watch what they say

                and how much they eat


brie, croissant, asti spumanti?

                herbal tea, or perhaps a latté?

if you haven't read the latest books

                you'll get no cappuccino – just dirty looks



quite informed, they quote the press

                and are moved to tears watching PBS

iPad, iPhone,  hybrid car

                they kindle and tweet in the cyber bar


attitude is the crime

                so when you arrive

speak with style and rhyme

                and have the table next to mine

we guarantee you a seat

                ...at cafe elite


 

Friday, August 17, 2012

Departure Time

by G. Jack Urso



a late summer day

on our way to JFK

arriving at the terminal

passing nameless moments

between anxiety and regret

waking in the late afternoon

new york sun

smiling at me one last time

before she takes to the air

and

d i s a p p e a r s…







Wednesday, August 15, 2012

Maudlin

by G. Jack Urso

 

Maura mia, cara mia

when lovers rest their heads

do they dream behind blue eyes

in half-empty beds

 

do they stir at 2 a.m.

fall asleep and dream again

do they call out in their sleep

and pray someone their soul to keep

 

Maura mia, cara mia

is what escapes my lips

and then i fall back into sleep

across an ocean so wide…so deep