Does Facebook Want In to China? | Tech Teardown - 3/7/14 | The Motley Fool

TL;DR

Facebook appears interested in serving Chinese users, but the evidence does not confirm a China launch. A California job posting sought someone specializing in simplified Chinese, while Facebook said it continued evaluating availability in China and noted that more than 80% of its users were outside North America. The discussion also examines Facebook’s news feed redesign and major telecom developments, so read on for the evidence and broader Tech Teardown context.

Transcript

Aaron Kennedy here today with Evan new we're doing Tech tear down for Friday March 7th late last year Telecom giant AT&T said it would acquire leap Wireless for $1.2 billion in cash this comes years after AT&T's Infamous failed attempt to buy T-Mobile it now seems that T-Mobile is eating uh leap Wireless's lunch what's happening looks like they are... Read More

Key Insights

• 😀 Leap Wireless is facing customer losses due to competition from T-Mobile, which has expanded through mergers and network expansion.
• 🙈 AT&T's acquisition of Leap Wireless is seen as a necessary move to rescue the struggling company.
• 👤 Facebook is looking to expand into China and has shown interest in providing a good user experience for Chinese users by hiring someone who specializes in simplified Chinese.
• 🤱 The news feed redesign is an important product change for Facebook as it is where users spend most of their time.
• 🫠 Twitter has been experiencing declining ad prices, while Facebook has seen an increase in ad prices due to strong engagement and mobile growth.
• 🫠 BlackBerry's BBM messaging service is transitioning to an ad-supported model to monetize the service, but faces intense competition in the messaging market.
• 😘 Microsoft's reduced licensing fee for low-cost devices is an attempt to compete with Google's dominance in the operating system market.

Questions & Answers

Q: Does Facebook want to expand into China?

Facebook appeared interested, but no expansion plan was confirmed. The company said it continued to evaluate making Facebook available in China, where the service was blocked.

Q: What evidence suggested that Facebook was interested in China?

Facebook posted a California-based job seeking someone who specialized in simplified Chinese. The role appeared focused on translation and creating a good experience for Chinese users, including those living outside China.

Q: Why was international expansion important to Facebook?

Facebook noted that more than 80% of its users were outside North America. That made translation and a strong experience for international users an important part of its growth efforts.

Q: Why was Facebook’s news feed redesign significant?

The news feed was Facebook’s core product and where users spent most of their time. The redesign aimed to streamline the experience and make it more engaging, drawing cues from Facebook’s mobile apps.

Q: Why was Leap Wireless losing customers?

Leap Wireless attributed its losses to aggressive competition, particularly from T-Mobile in Cricket’s core markets. T-Mobile had also merged with MetroPCS and was expanding its LTE network, making it difficult for Leap to keep pace.

Q: How many subscribers did Leap Wireless lose?

Leap lost 92,000 net subscribers in the latest quarter discussed and about 745,000 over the full year. It had approximately 4.6 million total subscribers at the time.

Q: Why was AT&T acquiring Leap Wireless?

AT&T’s proposed $1.2 billion cash acquisition was primarily about obtaining spectrum and strengthening its prepaid business, rather than merely buying subscribers. Cricket was considered a stronger prepaid brand than AT&T’s newer Aio Wireless brand.

Q: Why did the AT&T acquisition make sense for Leap Wireless?

Wireless service was described as capital intensive, and Leap lacked the scale and funds to keep building its network. It had negative shareholder equity, substantial debt, and $1.1 billion in net losses over three years, while AT&T had the coverage and scale Leap lacked.

Summary & Key Takeaways

• Leap Wireless reported a loss of 92,000 net subscribers and 745,000 for the full year, attributing the losses to competition from T-Mobile.

• The aggressive competition and T-Mobile's merger with Metro PCS has led to Leap's struggle to keep up, resulting in a lack of ability to scale their customer base.

• AT&T's acquisition of Leap Wireless is seen as a necessary move for Leap investors due to their current financial situation.