As the end of the first quarter looms, it's worth taking a minute to see where the wireless carrier industry stands now and where it's headed. Here is a look at the main themes from the nation's top operators during their critical holiday quarter.
iPhone sales: It's no secret that smartphones and their attendant data plans are driving much of the growth in the wireless industry today. Indeed, analyst Chetan Sharma Consulting found that data now drives close to 44 percent of U.S. mobile industry service revenues and is poised to eclipse the 50 percent threshold later this year.
And, at least in the fourth quarter, it was Apple (NASDAQ:AAPL) that drove a significant chunk of that growth: As industry analyst Bill Ho noted, the iPhone accounted for 65 percent of all smartphone activations at the nation's top three wireless carriers. iPhones represented fully 84 percent of the 8.6 million smartphones AT&T Mobility (NYSE:T) activated during the fourth quarter, 63 percent of Verizon Wireless' (NYSE:VZ) 6.2 million smartphone activations during the quarter and 36 percent of Sprint Nextel's (NYSE:S) 2.2 million smartphone activations.
Of course, sales of Apple's iPhone were likely spurred by the release of the iPhone 5, which hit its stride during the fourth quarter. The launch generally cut into carriers' margins due to the subsidies carriers pay out on the phone.
Summed Ho: "Customers have a lofty expectation of radical things for each iPhone (and iPad) model. Apple needs to deliver in 2013 or the early adopters (and then the mainstream) will move on."
In the first quarter, look for carriers to begin to rebound from their spending on iPhone subsidies. For example, Verizon predicted its margins would rebound to almost 50 percent this year.
Prepaid problems: Leap Wireless (NASDAQ:LEAP), MetroPCS (NYSE:PCS), Sprint and AT&T reported troubles with their respective prepaid businesses. Leap's results specifically generated concern among analysts: "Leap seems to be losing the battle over value seekers to the national carriers. Verizon, AT&T and T-Mobile have increased their share of gross adds from 50% to 57% over the last 5 quarters. At the same time, all carriers have improved churn resulting in fewer gross adds for the industry overall," wrote Jonathan Chaplin of New Street Research in a research note. Leap reported losing 337,000 net subscribers in the fourth quarter, and also warned that it would reduce its capital spending.
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Click here for full details on wireless carriers' performance during the fourth quarter. |
But Leap wasn't alone. MetroPCS also lost 93,000 customers in the fourth quarter, while AT&T noted that its prepaid business lost a total of 166,000 subscribers, primarily due to declines in GoPhone and session-based tablets. Sprint too suffered difficulties--149,000 net prepaid customer additions versus a projection by investment firm Jefferies of 193,000--which Sprint blamed on changes to the FCC's Lifeline program.
"Sprint is currently implementing a recertification process of its Assurance customer base. Customers who do not recertify will be churned off in 2Q13," wrote Jefferies analyst Thomas Seitz in an investment note. "Management indicated the process is expected to lead to a loss of 1.3-1.4 million prepaid customers, however, given the low ARPU these customers generate revenue impact should be manageable."
In the first quarter and the rest of 2013, look for further competition on prepaid pricing as T-Mobile USA rolls out its "uncarrier" business strategy.
Shared data catching fire: Both AT&T and Verizon reported solid interest in their new shared data plans, introduced last year. AT&T said that more than 6.6 million customers, or 9 percent of its postpaid subscribers, signed up for its Mobile Share plans. The carrier said the number of Mobile Share accounts reached 2.2 million in the fourth quarter for an average of about three devices per account. Interestingly, AT&T said more than a quarter of Mobile Share accounts have plans with 10 GB or higher.
Separately, Verizon Communications CFO Fran Shammo said sales of the carrier's Share Everything shared data plans continued to exceed company expectations. Jefferies analyst Seitz noted that 23 percent of Verizon's postpaid base signed up for the carrier's shared data plans.
In the first quarter, look for additional color on the progress of AT&T and Verizon's shared data plans (AT&T warned that it took a hit on revenues due to the unexpected popularity of its shared data plans). And expect possible commentary on the topic by T-Mobile and Sprint, which both launched shared data plans for business customers.
FierceWireless carefully follows the quarterly performance of the nation's top wireless carriers. Every quarter, we publish a comprehensive look at the nation's top 10 wireless carriers, including metrics ranging from net adds to average revenue per user.
Click here to see how the nation's wireless carriers performed in the fourth quarter of 2012.
And let us know what you think. --Mike | +Mike Dano | @mikeddano