How Verizon, AT&T, Sprint and T-Mobile stacked up in Q1 2015

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The first-quarter earnings season is coming to a close, so now it's time to see how the nation's top wireless carriers stacked up against each other in terms of key metrics.

Jackdaw Research analyst Jan Dawson has assembled these slides that provide an in-depth look at how Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) performed in the first quarter of 2015.

Dawson's research covers relatively standard metrics including revenue growth and net adds, but also includes deep dives into prepaid vs. postpaid performance, subscriber acquisitions vs. losses, and more.

Thanks to a partnership between Dawson and FierceWireless, we're publishing these first-quarter slides exclusively for a short time. These slides are part of a larger report Dawson has assembled on the first quarter. Dawson's quarterly slide deck, with about 40 charts, is available as part of a subscription service. In addition, he provides the underlying data behind the charts along with his analysis in custom presentations to certain clients, including carriers and device vendors.

He can be reached at [email protected] or (408) 744-6244.

Check out Dawson's first quarter slides and commentary below, and let us know what you think in the comments!

T-Mobile dominates postpaid phone growth

The first thing that becomes immediately clear when you look at the performance of the major operators in Q1 is that T-Mobile dominates US postpaid phone growth--in other words, the traditional core of the market:

As you can see, T-Mobile was the only one of the big four carriers that added phone subscribers, while the other three all lost phone subscribers. T-Mobile's growth was slightly greater than the combined losses of the other three, in part because there is still a tiny bit of growth in the market, and in part because T-Mobile also converted some of its own prepaid subscribers to postpaid. But all this continued a pattern that's been emerging over the past year or so:

  • AT&T's trend line is heading consistently downwards, and its phone net adds were negative for the second quarter in a row 
  • Sprint's phone net adds have been negative for quite some time now, but they're starting to improve a little
  • T-Mobile has fairly consistently added a million or so new postpaid phone customers a quarter
  • Verizon has had positive phone net adds most of the time, but seems to suffer in the first quarter--last year, it saw heavy losses of feature phone subscribers, and this year it saw much the same thing.

Sprint, Verizon, and AT&T have had different responses to these trends, with both AT&T and Verizon suggesting they won't pursue subscribers who are motivated only by price, while Sprint is simply trying to stem losses wherever it can, including competing on price, while attempting to steal some subscribers back. Meanwhile, T-Mobile's message of improving network performance at a compelling price seems to be working well.

Phones aren't where the growth is, though

What's interesting, though, is that postpaid phones are a smaller and smaller source of growth over time. Both postpaid tablets and "Connected Devices" are driving far more growth for the carriers than postpaid phones are at this point:

That's not to say there's no growth for individual carriers in phones--T-Mobile is clearly finding growth there by stealing subscribers from competitors--but for the market overall, phones continue to grow only slowly at this point, while the real growth opportunities are elsewhere. To be sure, those new growth areas have far lower ARPUs than smartphones do, but tablets represent a useful additional revenue opportunity for carriers, and connected devices will likely end up being largest of all. Tablets have been particularly good for Verizon, which has had its own Ellipsis tablet as a major driver of sales, and just this week AT&T announced its plans to start selling its AT&T-branded Trek tablet for similar reasons. AT&T continues to be the leader in Connected Devices, and its deals with various carmakers are a big driver of connected car subscribers in particular. 

Sprint is playing keep-away with T-Mobile, for now

John Legere famously predicted in August last year that T-Mobile would pass Sprint and take third place among the US wireless carriers by total number of subscribers. However, Sprint hired a new CEO shortly afterwards, and Marcelo Claure has been far more aggressive than Dan Hesse was in turning around the net adds trend at Sprint. As a result, Sprint successfully stayed ahead of T-Mobile in Q4, and it did so again in Q1:

Those two lines are getting awfully close at this point, and it's very likely T-Mobile will finally cross the line about six months later than Legere predicted. But this is a largely symbolic move: T-Mobile is already the larger prepaid carrier (though TracFone remains the largest prepaid operator), and Sprint is larger in postpaid. Does either metric actually matter? What really matters is that both are still massively sub-scale behind AT&T and Verizon. Until now T-Mobile has done a better job of offsetting some of the negative effects of its smaller scale, especially on the marketing front, where John Legere's Twitter presence and a variety of other moves have allowed it to apply a multiplier effect to its limited above-the-line spend. Sprint has been less effective so far in leveraging social media and other channels to boost its marketing reach, but its deal with RadioShack was a smart move to significantly boost its retail presence, which should serve it very well.

Sprint discovers leasing is extremely popular

All the carriers have now finally fully embraced installment billing models for smartphones, even though Verizon was late to the party, and this model promises to take over the market pretty completely in the next year or two. However, Sprint has been unique in that it's offered not just classic installment billing in the same way as the other carriers, but also a leasing option over the last few months. What's interesting is just how popular this model has become among Sprint's subscribers:

As you can see, though EIP (equipment installment plans) were very popular when they first launched, they've dropped significantly as Sprint has introduced leasing across multiple high-end devices, and leasing now dominates the overall monthly-payment model at Sprint, from nothing in Q2 2014 and a very small number in Q3 2014. I wouldn't be surprised if we saw other carriers adopting the leasing model as a result--it has some interesting financial characteristics which actually make it more attractive from a certain perspective than traditional EIPs. But it's also a subtly different positioning--this isn't technically ownership, but it's a way to feel like you always own the latest version of your favorite smartphone brand.

How Verizon, AT&T, Sprint and T-Mobile stacked up in Q1 2015
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