The thesis of this analysis is that there is a small but rapidly increasing group of Americans who will soon end up with not only two smartphones, but three. In most cases, this arsenal includes a
Research In Motion
Blackberry and an
iPhone or iPod Touch, and, starting tomorrow, the
HTC EVO 4G as the
Android tool of choice.
Let's first go down the smartphone memory lane. There have been three stages of smartphone evolution over the last 11 years:
1999-2004: Two devices! In the early days, employees were issueda Blackberry from their employer, but they still carried a separate cell phone. Yes, I know phone-enabled Blackberries didn't hit the market until March 2002, but it wasn't until late 2004 that Blackberry launched a competitive phone.
2005-2007: Consolidation. This was the time when peopleconsolidated their cell phones and their Blackberries into one, and RIM saw record increases in its stock as a result. Blackberry came to totally dominate the smartphone landscape. The market effectively "regressed" to where it had been only a few years before, in the sense that people went back to carry one device -- except now it was a Blackberry instead of a Nokia or Motorola in 1999.
2008-current: The iPhone Revolution. Almost no professional canget rid of the Blackberry as the compliance-approved and superior text/email messaging device, but it became time to also carry the better entertainment device with iTunes and all the apps, the iPhone.
"Dual carry" has become almost the norm among many professionals.
Now now, in June 2010: We are beginning the "Tri-Carry" era and I will arguebelow that initially, this will mean that the third device will be Sprint's HTC EVO 4G for three reasons: (a) Unlimited 4G WiFi tethering, (b) the best Android experience to date and (c) a far lower monthly price than competitors.
U.S. mobile phone penetration is approaching 100%, but that is still low compared to a few other countries that are starting to approach 200% -- Hong Kong, Taiwan, Germany, Russia, Italy, the Baltic/Scandinavian countries and others. These being averages (and we know there are still many people without phone service at all), it means that many people already dispose of two or more handheld communications devices.
In most cases in the U.S. today, as I described above, this means a Blackberry -- often provided by an employer -- and an iPhone.
So what's next? Purely anecdotally speaking, at no point since the three iPhone launches in 2007, 2008 and 2009, have I spoken with so many people who are going to be in line for Sprint's HTC EVO 4G when it goes on sale tomorrow morning, June 4. Unlike the first-day buyers for a new iPhone, who already tend to be owners of a previous iPhone, the stated intended buyers of Sprint's HTC EVO 4G come from all walks of life. There are three primary reasons the demand for the Sprint HTC EVO 4G appears uniquely strong:
Unlimited 4G WiFi tethering for $30 per month. No other phone onthe market has 4G tethering at all, and the price of $30 per month for unlimited service looks even lower today than it did before yesterday's AT&T announcement of metered pricing. People want to connect their iPod Touches, iPads and laptops with one wireless data subscription, and they strongly prefer unlimited service -- no 2 gig or 5 gig per month cap, above which overages must be paid. The Sprint HTC EVO 4G simultaneously connects eight such devices, and there is no worry about overage charges.
The only 4.3-inch Android smartphone on the market. WithBlackberry a must-have, the iPhone being unavoidable as a result of the AppStore and the iTunes ecosystem, Android has firmly established itself as the "third OS" and many people feel they need to get first-hand experience on what this means. If you are going to make the jump, why not do it for a device with the largest screen size by far?
Price. The Sprint HTC EVO 4G has its service plan priced belowalmost all other smartphones. The $110 per month (plus tax) gives the user unlimited calling to other cell phones, unlimited SMS, unlimited data on the device and unlimited WiFi tethering to up to eight other devices such as iPod Touch, iPad and laptops. The only other 4G (WiMax) WiFi tetherable device on the market -- the Sierra Wireless Overdrive -- costs $60 per month, so this means that the $50 per month residual ($110 minus the imputed $60) buys you the biggest Android experience.
So $50 per month for the best Android device on the market? It's hard to resist, given that most smartphone plans cost more -- and they don't have unlimited 4G WiFi tethering.
Here is the bottom line: There is a stratum of the U.S. consumer who is already carrying two devices -- Blackberry and iPhone (or the WiFi-only iPhone experience in the form of the iPod Touch). Sprint's aggressive pricing of the ONLY 4G smartphone-capable of WiFi tethering to up to eight other devices with unlimited monthly service means that we will soon be seeing people carrying a third smartphone to satisfy the modern "iPad Generation" person's needs.
Watch Sprint sell out of the HTC EVO 4G fast tomorrow morning.
Anton Wahlman was a sell-side equity research analyst covering the communications technology industries from 1996 to 2008: UBS 1996-2002, Needham & Company 2002-2006, and ThinkEquity 2006-2008.