As expected, at its “Hi, Speed” event Apple (AAPL) debuted its several new 5G iPhone models, expanded its iPhone lineup from as low as $399 to a high as $1099, and introduced a new device, the HomePod Mini. Along with the new products, CEO Tim Cook continued to reinforce the company’s commitment to privacy, calling out how the feature is intrinsic within each device. But the item that caught our attention was the special offers that were announced by mobile carriers for Apple’s new iPhone models.
Early on in the event, Hans Vestberg, Chairman and CEO of Verizon (VZ) appeared to discuss his company’s 5G nationwide network and 5G Ultra-Wideband offering, including a focus on network capacity in stadiums, airports, and music venues – if anyone can remember what those are. Investors were apparently impressed by what Vestberg had to say as his company’s share price, having dropped over 1% prior to the event, spiked up to +0.2% during but closed down 0.1% on the day, the same as the Nasdaq Composite but less than the S&P 500 which fell 0.6%.
Apple shares, on the other hand, trended mostly down during the presentation, falling 2.6% by the market’s close. To be fair, in the five trading days leading up to yesterday’s event, shares had gained 9.9%, so much of the enthusiasm had already been priced in. The takeaway is that investors didn’t see anything to tickle their fancy well beyond what they’d expected.
Apple showcased several new technologies in its high-end iPhone that will no doubt pave the way for forthcoming augmented and virtual reality applications. The Pro line will have a LiDAR scanner (Light Detection and Ranging) that will help users map rooms to provide an improved AR experience. Also of note is the custom OLED display in all model 12 phones, which has 2x the pixels of the model 11 phones, that will spur demand for Universal Display (OLED), and the cover glass developed in conjunction with Corning (GLW) that boosts 4x better drop performance – as if we’d ever drop our phones!
Ok, so maybe that happens on a daily basis.
The new A14 chip in the model 12s is reportedly the first-ever to be built on 5nm technology and Apple claims that it is 40% faster than the A13 in the model 11 phones. The faster chip in conjunction with a 5G network now makes it possible for gamers to step away from their desks and WiFi networks. The most-played PC game in the world, League of Legends, can now be enjoyed from a gamer’s phone. For those that consider their iPhone a camera that happens to allow for phone calls, texts, and emails, the advancements in both lenses and computational photography are worth a look. The company also debuted its new take on wireless charging with its MagSafe technology, which included a dual iPhone and Apple Watch charger.
Last but not least, the new HomePod Mini, an intelligent speaker, is arguably positioned to be one of the central hubs in the connected home, but we learned that Apple is continuing to fight other leading content creators. Currently, the HomePod mini can access Apple Music and podcasts (of course), iHeartRadio, RADIO.COM, and TuneIn. Amazon (AMZN) Music and Pandora — a subsidiary of Sirius XM (SIRI) — will be available soon. Noticeably absent from the streaming content lineup is Spotify (SPOT), which may for some be a dealbreaker.
But once the dust settled from the presentation, and we had time to consider what was shared during that jam-packed hour, some of the most intriguing takeaways are the wireless carrier special offers mentioned during the presentation and fleshed out further on Apple’s website. They are not just with AT&T (T) and Verizon: these special offers are available at roughly 100 mobile carriers across the globe.
Here’s the thing, we’ve seen mobile carriers try to entice consumers to hop from their existing network provider to another with trade-ins, discounts, and other promotional activity. With the iPhone 12, we’re seeing mobile carriers not only offer favorable trade-in terms to existing customers but are doing so on the latest and greatest iPhone lineup, all of which contain 5G technology. For example, after an approved trade-in, an existing Verizon customer can get the new iPhone 12 mini for as low as $11.95 per month for 24 months or the iPhone 12 for $14.95 per month for 24 months. And yes, AT&T, as well as T-Mobile USA (TMUS), have special offers for both devices as well.
We have at least one theory as to why this is.
During his part of his presentation, Verizon CEO Vestberg hit home a number of the positive attributes for 5G networks compared to 4G and earlier iterations that we shared several weeks ago – considerably higher data speeds, super lower latency, and a significant boost to network capacity. In today’s COVID-19 pandemic world, we’ve all heard stories about or experienced first-hand network outages, at often critical moments during business video calls or online education. We all know the spinning wheel of death, the “undelivered” message when a text message doesn’t go through or an email that is trapped in the dreaded Outbox. Simply put, the existing network infrastructure can’t cope with mass numbers of devices, leading to slower data speeds and longer lag time for downloads. The result is the network congestion that we are living with in 2020.
As a result of the COVID-19 pandemic, demand that was expected to grow over the coming years instead appeared much more rapidly, exposing shortcomings and network deficiencies. This was summed up succinctly by Nokia’s (NOK) Sandy Motley, President of Fixed Networks, when this past June she said, “Many customers had planned to grow their network by 30% to 40% over the next few years, assuming a similar growth in traffic, but Covid-19 brought in that traffic growth overnight.”
By pricing Apple’s iPhone 12 lineup to foster device upgrades, mobile carriers are looking to tap into the new 5G networks to alleviate congested 4G networks that often struggled during peak hours to not only offer users a more robust experience but also to allow for a greater number of them to connect simultaneously.
The bottom line here is that in the context of pandemic-induced network strains caused by near-overnight shifts in how and where the global workforce gets things done, carriers have a vested interest in moving their customers onto 5G. This has, at least for now, altered the dynamic between carriers, smartphone makers, and users. To help with this migration, carriers are willing to subsidize the purchase of 5G devices – great for users and a boost for device-makers – but a likely hit to carrier margins.
Finally, while the focus is on 5G, it’s worth noting that work is already being done on the next iteration of mobile technology dubbed 6G. On October 20-21, a virtual 6G symposium will be held, and include representatives from AT&T, Qualcomm (QCOM), Nvidia (NVDA), T-Mobile USA, NTT DoCoMo (DCMYY), and others. This event follows the recent announcement by the government of South Korea that it sees 6G trials by 2026 with planned commercial launches targeted for 2028-2030. Clearly, it’s more than premature to consider 6G just as 5G is lighting up, and following Apple’s 5G lineup being revealed we would have to agree with Verizon’s Vestberg when he said, “5G just got real.”
Nokia (NOK), NVIDIA (NVDA), Qualcomm are constituents in the Tematica BITA Digital Infrastructure and Connectivity Index.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.