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Can ZTE and Alcatel make it in today's competitive smartphone market?

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January 9, 2015

Some say that ZTE and Alcatel's OneTouch have a bit in common and they are probably right. ZTE's Grand X Max smartphone is now going to AT&T's prepaid subsidiary, Cricket Wireless, we are told.

Both companies focus on selling affordable mobile devices for the consumer market. And, they concentrate on prepaid customers.

And they're both growing pretty fast if numbers from the last quarter are any proof. And as Chinese companies operating in the United States, they've both flown under the radar, at least so far, anyway.

Now ZTE and Alcatel both want to make more advertising in the U.S. and they made some bold claims at this year's Consumer Electronics Show (CES).

For one thing, they're preparing to spend more on marketing. They're sponsoring more events and arenas. They're increasing the quality of their products and expanding into related fields such as wearable technology.

They're also investing in Silicon Valley in hopes of drumming up developer support. To be sure, their ambitious goals underscore the constantly shifting ground in the competitive U.S. smartphone market.

With Samsung stumbling a bit in 2014, and established brands such as HTC and Motorola scaling back their product lineups, ZTE and Alcatel see an opportunity to establish a more visible beachhead in the U.S.

For consumers, that will mean more choice when it comes to affordable smartphones. Alcatel has a new Watch, which works with both Android and iOS devices.

It can also be said that, with a stronger brand comes increased consumer appeal and, ultimately, higher sales of pricier smartphones.

It's a strategy that companies such as HTC, LG and Samsung followed to household recognition-- slowly build credibility by catering to the wireless carriers' requests, expand distribution, gradually introduce the brand and roll out the marketing.

The higher profile and more profitable products should theoretically follow. Still, given the lack of awareness and the extreme competitive nature of the business, there are significant challenges.

"Most U.S. consumers don't know the Alcatel or ZTE brands, so in addition to product marketing, they'll need to bring compelling brand advertising to create awareness," said Charles Golvin, an analyst at Abelian Research.

Despite similar goals, ZTE and Alcatel are nevertheless in different situations just the same. ZTE has been in the smartphone business longer and is further along in building its name thanks to its sponsorship of a few NBA teams, which includes having its name featured on Madison Square Garden's.

Alcatel, owned by Chinese television giant TCL, is further behind the curve, having just gotten into the smartphone business in 2013.

But the company is promising several things, and on Tuesday parent TCL acquired the rights to the Palm name in the hopes of tapping into the nostalgia factor and raising its profile. But we'll see where that will take them...

In the third quarter of 2014, TCL ranked as the 6th largest maker of smartphones, with a 3.5 percent market share of the global market, according to Gartner. ZTE was the No. 9 player, with 3 percent of the market.

Over the last several years, ZTE has been steadily building a presence in the US through the prepaid market for budget phones.

In other mobile news

Verizon Cloud will be down for maintenance for up to 48 hours next weekend and virtual machines hosted there will be inoperable.

The planned maintenance period is to enable the introduction of unnamed improvements, Verizon said earlier today.

At the time of writing, Verizon's Cloud Client Care page does not mention the maintenance, but users have emitted Tweets in which they express a little incredulity about the need for the temporary shutdown.

We asked Verizon to confirm this planned service outage and the company responded by sending us the following statement:

“We are conducting regularly scheduled system maintenance on Verizon Cloud next weekend. We’re adding several new features to our platform that will continue to improve the service for our enterprise customers.

Updates of this nature typically require some system downtown and we have notified customers in advance to make sure they can plan accordingly. This is a standard practice in the industry. No customers in Australia will be impacted.

We anticipate the update will take far less than 48 hours. Previous similar updates took about 24 hours or less.”

In a very long thread following the Tweet, a number of users and commentators wonder if it is acceptable to take a cloud down for even a few minutes, never mind at least 24 hours.

Verizon acquired its cloud from Terremark back in 2011 and has since outlined plans to build its own platform based on Xen and CloudStack.

That its system requires 24 hours or more of maintenance is at odds with other cloud vendors' usual approach of effortless upgrade and downtime in tiny doses about letting IT staff innovate.”

And perhaps Verizon's new features will deliver that experience, but for now, the company's delivering an oddity that has its users very unhappy it would seem.

It looks like Vodafone is getting ready to make a deal with T-Mobile USA to get back into the United States market. This has been expected for a while now. The goal is to provide Vodafone’s global customers with an international option, that’s the 400 multinational companies in the U.S. and the 500 companies which are based outside the US but which have a large presence in the country.

To be sure, the U.S. is going to 4G a lot faster than Europe, and Vodafone is touting its good European 4G coverage as a reason why those large customers should have a Vodafone contract in the U.S. that lets them roam on the 16 Vodafone markets which have 4G and the eleven others which don’t yet.

Currently, Vodafone offers 4G roaming in 40 countries. The Vodafone enterprise services include telecommunications expense management, security products, cloud services, M2M services and Vodafone OneNet fixed-mobile converged products.

These give mobile phones landline numbers that can be diverted to colleagues and groups of colleagues. The system is heavily IP based.

The decision to work with T-Mobile is interesting, it has the advantage that customers roaming into the U.S. can use the 3G network but T-Mobile has come under some criticism for its coverage and it’s been well publicised that owner Deutsche Telekom is looking to sell its US division.

However, Vodafone’s US ambitions are modest and it is not looking to buy. When we asked Voda CEO Vittorio Colao “At what price would you be interested in T-Mobile US?”, he told us “As a gift you never say no, but we are not looking at consumer US, we don’t have plans to get into consumer US.”

Indeed, Vodafone’s initial plans in the U.S. are modest, at least for now, anyway. Colao told us-- “We have the ambition to serve our enterprise business in the U.S. and the ones that originate in Europe, specifically the enterprises that we already have in our portfolio”.

The U.S. MVNO market has a history of being very difficult with Disney Mobile failing and Virgin Mobile being sold to host Sprint.

But we're seeing reports that T-Mobile is being very aggressive in pursuing MVNO deals, signing up Univision for an Hispanic network, Walmart and even Target. The Vodafone MVNO service will launch in the autumn of 2015.

In other mobile news

The FCC’s Auction 97 proceedings rose above the $40 billion mark today, as overall activity slowed dramatically.

New bids over the past 4 rounds added just $600 million to the auction’s total. While still substantial, that was about just 48.4 percent of what it added in the previous four rounds. Following this morning’s round 46, total bids stood at more than $40.1 million. Round 46 witnessed 160 new bids that added nearly $151 million to the total.

The auction’s total is more than double of even the highest estimates put forth prior to its kick-off on November 13.

Overall bidding in the latest round didn't include any of the twenty most expensive licenses, with the J-Block license, centered on Atlanta, the priciest license receiving a new bid.

For its part, G-Block licenses centered on Sacramento, Calif., and Emmet, Mich., each received three new bids during the latest round, pushing their respective total prices to $66 million and $118,000, respectively.

Round 45 saw two new bids placed on the J-Block license centered on New York City, which pushed that license’s auction-leading price to nearly $2.7 billion.

The J-Block license centered on Los Angeles has not received a new bid in several rounds, but remained second on the price list at nearly $2.1 billion.

Outside of those two licenses attracting more than $2 billion in bids, so far three licenses have garnered more than $1 billion in bids each.

The I-Block centered on New York City ($1.3 billion). The H-Block was centered on New York City (at $1.3 billion) and the J-Block centered on Chicago (at $1.2 billion).

By comparison, the most expensive license in Auction 66, which included similar spectrum in the 1.7 and 2.1 GHz band, drew less than $500 million in winning bids.

To be sure, the paired licenses up for bid in Auction 97 include three 5×5 megahertz licenses (G-, H- and I-Blocks) and a single 10×10 megahertz license (J-Block).

The G-Block licenses are carved into commercial market area-sized licenses, which total 734 licenses covering the country.

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The remaining blocks are economic area-sized that will total 176 licenses covering the U.S.

The 15 megahertz of unpaired wireless spectrum is split into two licenses, one with 5 megahertz of total spectrum parsed out on an EA basis, and the other with 10 megahertz of spectrum also in an EA configuration.

In a move to accelerate things, the FCC also announced that beginning Dec. 4th it would increase the number of bidding rounds from four to six per day, with each round cut in half from one hour to just 30 minutes.

Overall, winning bidders will not be announced until the auction ends, with the auction set to continue until there are no new bids placed in a round.

This week, London was host to the Internet of Things (IoT) Global Forum event, and it was well attended by a mix of businesses wishing to better understand how the world of IoT will impact their business model going forward.

Additionally, wireless and telecom operators along with various hardware/software vendors were pitching their wares. At the Forum, it was well apparent that there is still a lot of work to be done to clarify the definition of IoT.

As a rapidly growing area, there are many new market entrants and terms coming into play. Is it M2M or IoT, is one a subset of the other or do they have discrete differences?

It seemed like the presentations went back and forth between those two terms. Not to take away from any of the presentations, just to illustrate that the industry players themselves are still evolving on their terminology.

Some highlights from day one came in the form of various statistics and innovative visions for future services.

Machina Research kicked off the event talking about some opportunities and barriers for IoT. One of the key obstacles to consider is the challenge of roaming, especially in Europe where it is very easy to roam across several countries in a matter of hours' drive time.

The question also pertains to national roaming. Although there is regulation coming in the E.U. to eliminate roaming, this topic is still of concern to companies thinking about incorporating IoT and M2M technology into things that move, such as vehicles and shipping containers.

In fact, experts stated that about 74.3 percent of regions worldwide were unsure as to the implications of using permanent SIMs in IoT from a regulatory perspective.

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Source: ZTE.

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