How Verizon, AT&T, T-Mobile and Sprint stacked up in Q2 2015

The second-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), T-Mobile US (NYSE:TMUS) and Sprint (NYSE: S) performed in the second 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 second-quarter slides exclusively for a short time. These slides are part of a larger report Dawson has assembled on the second 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 second quarter slides and commentary below, and let us know what you think in the comments!

Sprint makes some good progress

To my mind, the most interesting story of the quarter was Sprint. Though the headline on the day of its earnings was that T-Mobile had finally passed Sprint to take the number three spot in the U.S. carrier rankings (a couple of quarters late for John Legere's pledge made last year), the fact is that Sprint is finally making some good progress in turning its business around. Churn fell dramatically over the last two quarters, and fell year on year from 2.05 percent to 1.56 percent. The result of all this was a dramatic reduction in subscriber losses over the last two quarters, but the problem is that Sprint isn't really moving the needle on winning new subscribers (gross additions). The chart below shows Sprint's gross adds and subscriber losses for its postpaid business:

The challenge for Sprint going forward will be maintaining this new low churn level while finding ways to grow its gross adds. It has until recently had postpaid subscriber losses about twice those of T-Mobile, but it's now closing the gap rapidly. If it can bump gross adds by just a few hundred thousand a quarter, it could achieve net adds on par with T-Mobile.

Average billings per user illustrates the shift to installments

All four of the major carriers have now adopted the average billings per user/account metric in addition to the old average revenue per user metric, as they embrace the shift from subsidies to installments. But each of the carriers is at a different point in this transition, and their ABPU figures illustrate this nicely, as shown in the chart below:

T-Mobile's ABPU is on the way up, as it's worked through the transition to installment billing pretty completely by this point and is seeing benefits from up-selling customers. AT&T went through a tough period a year ago when it moved many customers onto Next-style service pricing before they were making installment device payments, but it's now worked through that and is seeing rising ABPU again. Verizon is relatively early in its transition to installment billing and has had to cut some prices to retain customers, and is also seeing continued high tablet additions, so its ABPU is falling. Sprint's ABPU is also falling, partly due to the transition to EIP and partly also because of tablet additions. 

Prepaid is facing challenging conditions

Prepaid services have had an interesting history over the last few years -- they enjoyed a brief boost in popularity as prepaid shed some of its stigma and appealed to users who could qualify for postpaid plans but wanted more flexibility. But as postpaid services have become more flexible and in some cases ditched the contract model, some of that appeal has lessened, and prepaid now faces challenging conditions for growth. TracFone, the largest prepaid provider in the U.S. and also the largest MVNO, has seen its revenue growth plummet over the last several quarters, from 15 percent year on year last year to negative growth in the second quarter of 2015. Interestingly, even as postpaid churn has been falling across the market, TracFone, T-Mobile, and Sprint have all seen prepaid churn rise over the past year or so. Total prepaid subscriber growth across the five largest providers appears to have stagnated, as this chart shows:

Why is this happening? Well, in part it's that major carriers like T-Mobile are encouraging their prepaid subs to migrate to postpaid, while some of those who chose prepaid services in the past are switching back to postpaid as those plans become more flexible. For most providers, the situation isn't dire by any means, but TracFone's slowing growth is a worrying sign and something worth watching closely.

Connected devices have crossed 10% of reported subscribers

The big four carriers crossed an interesting milestone this quarter when their reported "connected devices" -- i.e. connected cars, M2M services, and other non-traditional devices -- crossed 10 percent of the overall base of connections on the big five operators. There were 36 million of these connections at the end of the second quarter, almost double the 19 million at the end of the first quarter of 2012, which was 6 percent of the total base of connections then. For the last two quarters, connected devices net adds have come very close to outpacing postpaid subscriber growth for the same operators, and I'd expect that crossover to happen soon. This transition has been coming for a while, as postpaid phone net adds have been slowing down as the market saturates, and connected devices adds have ben rising as categories such as connected cars have been rising, as this chart shows:

What, and who, is driving this trend? Connected cars and AT&T are the obvious answers -- AT&T has seen significant net adds from connected cars for the last several quarters, and has been leading the pack in total net adds in the connected devices category. On the other hand, postpaid growth for the market as a whole has slowed, and much of the growth that remains is coming from tablets rather than phones. The fact is that traditional services simply aren't providing meaningful growth for the market, while connected devices are going to drive much of the growth we'll see going forward. AT&T is capturing the lion's share of these devices today, with Sprint coming in second and T-Mobile negligible in this category. It's worth noting, however, that Verizon -- which has performed well in this category in the past -- no longer reports anything but retail subscriber data, so we're missing their numbers in this analysis.

How Verizon, AT&T, T-Mobile and Sprint stacked up in Q2 2015