Verizon, Apple lead growing smartwatch opportunity

The Apple Watch continues to generate significant sales at the nation's wireless carriers. (BayStreet Research)

Apple late last year released a version of its Apple Watch, the Series 3, that includes built-in cellular connectivity—and based on new data from BayStreet Research, the gadget is helping create a significant opportunity for the nation’s wireless operators.

Specifically, BayStreet found the nation’s wireless network operators collectively are selling tens of thousands of Apple Watch devices every month, and the vast majority of those sales include a new line of wireless service. (Apple offers both cellular and noncellular Apple Watch options, though wireless carriers in their retail channels generally only push the cellular version.)

The growth of the smartwatch opportunity is key for the nation’s wireless carriers, considering they generally charge an extra $10 a month for Apple Watch cellular service. And though many carriers are offering a free month or three of service for the gadgets, BayStreet found that, at least so far, most Apple Watch customers are electing to pay the $10 per month to keep their watch activated.

Perhaps not surprisingly, BayStreet reported that Verizon is the nation’s leading carrier retailer for smartwatches.(Verizon is also the nation’s largest wireless operator in terms of customers.) For example, the firm reported that, at Verizon, “smartwatch demand is higher, helped by stronger flagship smartphone sell-thru m/m. Sales of Apple’s Watch Series 3 remain robust and continue leading the carrier. Coinciding full-month sales of its GS9s, demand for Samsung’s Gear S3 Classic and Gear S3 Frontier is also higher m/m. VZ continues to offer devices by Fitbit and LG, although sales are nominal relative to Apple and Samsung devices.”

Carriers don’t generally report the specifics of their smartwatch businesses, but many alluded to increasing demand for the gadgets during their recent quarterly conference calls with analysts.

“Overall, we gained 260,000 post-paid net ads, consisting of phone losses of 24,000 and tablet losses of 75,000, offset by 359,000 other connected devices primarily wearables,” Verizon CFO Matt Ellis said in April, according to a Seeking Alpha transcript of Verizon’s quarterly earnings call.

“We also had strong branded postpaid net additions of 1 million, due in part to the particular success of the Apple Watch and other wearables,” added T-Mobile’s John Legere during his company’s quarterly conference call, according to Seeking Alpha.

Indeed, some analysts believe the smartwatch and wearable opportunity could be significant for the nation’s wireless carriers. “While Samsung was the first to bring a cellular enabled smartwatch to the market with the Gear S, Apple has timed the market perfectly with its Watch Series 3,” wrote NPD analyst Weston Henderek earlier this year. “As a result of Apple entering the game, expect most other smartwatch OEMs to follow suit. This is especially true given that all of the major U.S. wireless carriers have already launched services that link connected wearable devices with the user’s main smartphone telephone number. By linking the smartphone service with a wearable device, users now have seamless usability regardless of what device they are using.”