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James Hong

Monday, September 24, 2012

Phone plan pricing trends

After 3 years with Nexus Ones, Julia and I decided it was finally time to get new phones.

In comparing pricing plans between all the US carriers, I noticed a few things that I found interesting. First is that carriers are shifting from a "metered voice and text / unlimited data" pricing structure to an "unlimited voice and text / metered data" pricing structure. These new "share plans" also recognize that people are going to connect lots of devices per person and are metering based on that (fixed cost per device).

The other thing I noticed is that AT&T and Sprint are now allowing facetime over 3G, and in general carriers are now ok with users using VOIP over their data networks. This makes sense as they are metering data.

I wonder if the carriers are figuring out that it's ok to go with this because: 1) people dont' have as strong a sense of how much data they use versus how many minutes they talk, so they will be more likely to overbuy, and 2) the trend in general is for data usage to go up as new bandwidth heavy applications come out over time (whereas there was not such trend for voice/text). That last one makes a big difference because it potentially builds in automatic ARPU growth, making carrier management's lives easier.

Which leads me to wonder about Sprint. Sprint still offers unlimited data plans AND they allow facetime over their network. Time will tell whether Sprint shift to metering data once their LTE network is rolled out.. in the meantime they are the ugly duckling that has to give a great deal just to scrape enough customers to survive. My guess is they will, but in the longer run, how long will it take for industry competition to lead to unlimited voice/text/data plans becoming the norm? Will that ever happen?

Friday, September 07, 2012

Will this create even more downward pressure on Facebook stock?

My friend Yishen Kuik of Katong Capital made a keen observation today..

Everyone knows that Eduardo Saverin, the Brazilian co-founder of Facebook, gave up his dual US citizenship just prior to the IPO of Facebook, and presently resides in Singapore. Lots of misinformed articles have been written about him as a tax dodger.

By leaving the US, he will trigger the Heroes Earnings Assistance and Relief Tax Act of 2008, which is Orwellian DoubleSpeak for an exit tax on 15% of his capital gains. The trouble is, when the Exit Tax is calculated, it is on the valuation of the stock on the date of renunciation.

No doubt Saverin was advised to time his renunciation prior to the IPO because most IPOs are engineered to pop and rise thereafter, as Mark Cuban is aware. FB however did not perform thus, and has dropped 50% since. What this means is that Eduardo is down 65% from when he made his renunciation. In order to pay the 15% tax, if he hasn't already sold stock, he will now have to sell 30% of his stock to do so. Based on his 4% ownership of the company, this is about 1.2% of the shares outstanding.

Of course what is left is still sufficient to support several lifetimes of spending, that is unless you are an NBA basketball player