The device upgrade plans recently introduced by T-Mobile US, AT&T Mobility and Verizon Wireless could help spike the carriers' margins, according to a new research report, but that margin boost may be eroded by intensifying competition.
The device upgrade plans recently unveiled by T-Mobile US, AT&T Mobility and Verizon Wireless likely won't save too many customers money, but they could boost carriers' margins and increase smartphone sales for handset makers like Apple, analysts say.
Verizon Wireless reported a record-high profit margin in the first quarter of 2013 as it continued to benefit from its Share Everything shared data plans, which were introduced last June. The carrier said that its average revenue per account grew steadily, as it has in the past several quarters. Verizon said that 30 percent of its retail postpaid customers are now on its shared data plans.
Verizon Wireless reported a record number of retail postpaid subscriber additions in the fourth quarter but it also posted a drop in margins, as analysts had expected. The carrier followed the familiar pattern of taking a short-term hit on margins by adding a glut of smartphone users in the year-end period in the hopes of reaping long-term financial reward from those contracts.
Verizon Wireless is expected to lead U.S. wireless carriers in terms of net subscriber additions in the fourth quarter, according to analysts' estimates. However, all operators, including Verizon, will likely see their margins come under pressure as a result of higher subsidy costs for smartphones.
The fourth-quarter earnings season will get underway later this month, and analysts at Jefferies think that the major U.S. wireless carriers are likely going to report weaker margins than they did in the third quarter of 2012.
Reaction to AT&T Mobility's third quarter results were mixed today with the company reporting 6.1 million in smartphone sales in the quarter, of which 4.7 million were Apple's iPhone. However, AT&T also reported just 678,000 net adds in the quarter, of which only 151,000 were postpaid net adds. AT&T's total customer base is 105.9 million.