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AT&T Deal - Investor Perspectives

Discussion in 'TSLA Investor Discussions' started by FluxCap, Oct 18, 2013.

  1. FluxCap

    FluxCap Active Member

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    Citizen, any thoughts on the AT&T phone partnership announcement? Do you think that moves prices at all in the near-term?
     
  2. Citizen-T

    Citizen-T Active Member

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    I can't think of any reason that would move the stock.
     
  3. aznt1217

    aznt1217 Active Member

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    #3 aznt1217, Oct 18, 2013
    Last edited by a moderator: Oct 18, 2013
    Me too. Somebody mentioned that this news could potentially move the shares, but truthfully... I don't see too much of a financial impact except for slightly more favorable pricing. I also am trying to think of where it would fall in terms of the P&L. Perhaps it might lead to slight margin improvement in the services section. Operationally, it could squeeze out a few bp's in efficiency but that's entirely subjective.

    From what I understand about the AT&T deal it's more to do with using AT&T as a provider for car telematics (which is odd because I thought they were doing this the whole time--unless they did it on an ad hoc basis and picked whatever provider was available).
     
  4. FluxCap

    FluxCap Active Member

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    #4 FluxCap, Oct 18, 2013
    Last edited: Oct 18, 2013
    Well, my eyebrow-raising on announcement of the AT&T "partnership" was as follows:

    1) People like me about to buy a Tesla consider total cost of ownership
    2) I understood that data plans for the car were free
    3) If this is going to change, this might change the price of the product
    4) If the price of the Model S changes, does this affect demand?

    I suspect the answer to this is no, it doesn't, but I did think about it.

    The second and potentially greater concern I have as a student of the effect of brand value on share price of stocks is:

    1) Anytime brand partnerships are mentioned in a press release, it can have the effect of diluting the more powerful brand and/or commingling things in a way that hurts or helps both brands
    2) AT&T is an ancient brand with tons of negative and some positive association
    3) Tesla is a fresh, exciting brand with little "baggage" in mass consciousness yet due to lower market awareness
    4) It does not seem to make immediate sense to me to tie these brands together in any way, and I am slightly concerned about the judgment of Tesla's brand management team here.

    So that's all I've got on that.
     
  5. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Tesla has never stated that data plans would be free; there was quite a lot of discussion a few months ago about likely plan prices. It was one of the perks for Signature customers to get a free year's worth of data, which should have underscored that production customers were going to be paying.

    Tesla has had two issues charging for data:
    1) Getting a national network to pay attention and give them a decent rate -- Tesla isn't a big customer; and
    2) Needing to get the WiFi working so people could use their own hotspot instead.

    SO ... I would argue that the pricing already reflects that the data plan is not included. With the AT&T announcement, Tesla has solved issue #1, and firmware 5.6 solves #2. Put them together, and Tesla can stop paying ~$20/month/car, which is something like $400,000/month or $4.8 million/year. That's real money given Tesla's current financials.
     
  6. FluxCap

    FluxCap Active Member

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    #6 FluxCap, Oct 18, 2013
    Last edited: Oct 18, 2013
    That's excellent info, thank you Robert. Are you saying that firmware 5.6 enables use of WiFi tethering via owner's cell phone? That's awesome from a cost-saving standpoint, though it would add a variable to the car's connectivity that I'm not sure is all positive. I can envision user errors galore being blamed for the car's connectivity not working, and that's bad for business. If you scale this to Gen3 sales volumes with a wider, less "tech-savvy" buyer demographic, I see the potential for problems.

    I for one would like to see the connectivity "baked in" to the price of the car and under the complete and total control of Tesla, because I think that is simpler in the consumer's mind and removes rather than adds complexity.

    Given this information, I think this definitely has the potential to affect valuation in the medium term.
     
  7. vgrinshpun

    vgrinshpun Active Member

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    The 3G connection in Model S cars currently on the road is provided by AT&T, so there is a technical reason (hardware already in the cars) for them continuing with AT&T. I suspect that at the time Tesla was negotiating with the prospective providers, which had to be some time in the begining of last year, before first Model S was manufactured, the branding was not their primary concern.

    On a different subject, does anybody thinks that Tesla confirming that Elon Musk is the secret auction buyer of the James Bond submarine Lotus car on the same day that they announced Q3 ER is pure coincidence? According to CNN Money article Elon said:" I was disappointed to learn that it can't actually transform". Hence the addition to the To Do list: make it actually work as was originally imagined.

    http://money.cnn.com/2013/10/17/autos/musk-bond-sub-tesla/

    Following everything Elon says for some time I think that there is a message here being send to the Tesla bulls...
     
  8. gym7rjm

    gym7rjm Member

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    I don't want to see mobile connectivity baked into the car price. It restricts the consumer. Maybe it would be nice to have an option at the purchase of the car to buy lifetime mobile data for the car or maybe a yearly subscription or something. This would allow less tech savvy people to just "set it and forget it" it could also be another option for Tesla to profit on . I don't, however, think that most gen3 buyers will not understand mobile options. Look at tablets, which are mostly sold to the average consumer, they sell some that are mobile/LTE capable and some that are not. If you pay the premium for the mobile version then you also know you have to buy a data plan on top of that. Super simple model, and a perfect precedent for the Tesla example.
     
  9. FluxCap

    FluxCap Active Member

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    Apologies if I was unclear: I was specifically addressing the Wi-Fi tethering information Robert just shared. Setting up Wi-Fi tethering and maintaining a stable connection is not an easy task, I am quite familiar with development in this space. It can create significant amounts of tech support tickets and confusion on the part of consumers. I'm also discussing the effect of this decision and the overt AT&T decision on future costs and revenues, and thus current share price, not personal taste. Restricting consumer options also limits consumer failures, this is the walled garden model of Apple's iProducts vs. Windows / Android. It is basically also Tesla's model. I see this as a slight deviation from that model. I am not indicating personal preference, I am analyzing information.
     
  10. brianman

    brianman Burrito Founder

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    Weird. I've never had that impression. For Model S or for any 3G/4G device ever produced on planet Earth.
     
  11. FluxCap

    FluxCap Active Member

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    I was told this by the Tesla employee who went with me when I test-drove the car earlier this year. I understand that either he or I might have been confused or some combination of the two. Take it easy, tiger?
     
  12. brianman

    brianman Burrito Founder

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    I just find it frankly amazing that anyone would believe any device that talks to our current cell phone carriers would believe a data connection will be "product lifetime" without a monthly fee. No matter what anyone said or promised.

    If I honestly believed a Tesla representative was saying that and it was part of why I bought the vehicle, I would get that in writing and make a lot of backup copies for the eventual legal activity that would follow months or years later.
     
  13. FredTMC

    FredTMC Model S VIN #4925

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    Yep. TM has always said they'll charge for data in the future. I think they'll begin charging once tethering option is deployed with firmware update (e.g, v5.6)
     
  14. FluxCap

    FluxCap Active Member

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    I worked in broadband deployment -- if you think I was suggesting that service plans are free overall, you are mistaken. Someone always pays, I just heard that it would not be the buyer of the car paying for the foreseeable future, when I drove the car back in February. I definitely knew Tesla was paying for it at the time -- are they not paying for it now? Please take this conversation offline if you wish to continue it.

    Edit: I am requesting removal of my posts in this conversation from this thread, thanks.
     
  15. austinEV

    austinEV Active Member

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    Technically the Amazon Kindle 3G has no monthly fee for owners, but that is to say Amazon pays it from book sales revenue.
     
  16. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Yes, Tesla has already released this ability in Europe and on the limited number of NA vehicles with firmware 5.x. Discussions in various places over in the Model S: User Interface sub-forum.

    - - - Updated - - -

    Lots of discussion about connectivity costs here: Connectivity: service plan/upgradability/speed
     
  17. Norse

    Norse Active Member

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    If a company gives you free electricity you wont be surprised if they give you free internet aswell. When I was testdriving in Norway they had not yet made a deal with any tele-company in the country. Still used a US based one, I bet that is pretty expensive for Tesla.
     
  18. stoebs

    stoebs Member

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    FWIW, Nissan LEAF provides a 3G connection at no charge. Granted, it's limited to telematics and some other basic features, so there isn't nearly the bandwidth draw as the Model S, since there is no web browser on board. But it does provide for remote charge/climate control and data upload back to Nissan so they can study usage habits.
     
  19. brianman

    brianman Burrito Founder

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    Does it provide navigation or other such features over 3G, or just telemetry for Nissan to use?
     
  20. stoebs

    stoebs Member

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    Navigation is also included. It was a standard feature on all 2012 versions (SL and SV trim levels). They stripped Nav out for the base model (S trim level) in 2013, but I believe that even the new base model keeps the 3G connection for telematics. I can't be 100% sure however. Mine is a 2012 SV. It was the base model up until this year.
     

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