Service revenues in the U.S. wireless industry declined 1 percent year-over-year in the second quarter, according to a report from industry analyst Chetan Sharma, following a decline in the first quarter, which has been the first decline in the history of the industry. However, Sharma points to signs of stabilization in the market as promotions faded.
In the report, Sharma noted that in 2014, data pricing came down by 77 percent to historic lows. "However, in the first half of 2015, price/GB hasn't really come down any further than the lowest levels seen in 2014," he said. "In fact, some categories even saw a jump as some of the promotions went away. It is also notable that both T-Mobile and Sprint are de-emphasizing (though the plans are still available) unlimited data plans and instead they are promoting their shared bucket data plans. This is good for profitability."
T-Mobile US' (NYSE:TMUS) postpaid average revenue per user, which has been in decline for three years, increased 3.8 percent from the first quarter to $48.19, but it was still down 2.3 percent from $49.32 in the second quarter of 2014.
AT&T Mobility's (NYSE: T) postpaid ARPU stayed flat, while Verizon Wireless (NYSE: VZ) and Sprint (NYSE: S) saw postpaid ARPU decline but by less amount than it did in the first quarter.
"The industry also delivered better EBITDA and net income numbers which shows the operators are running a tighter operation compared to last year," Sharma said. "One data point doesn't make a trend and we need to study the numbers of the next two quarters, if the industry has stemmed the decline or it was just a blip."
Meanwhile, competitive pressure seems to have abated a little bit for the time being. While Sprint saw its position slip to No. 4 in the quarter as T-Mobile passed it, Sprint's churn number looked much better than past quarters. Indeed, Sprint said postpaid churn last quarter was 1.56 percent, a record low, compared to 2.05 percent for the year-ago period and 1.84 percent for the first quarter.
AT&T said postpaid churn was 1.01 percent, up from 0.86 percent in the year-ago period but still low relative to its peers, while Verizon said retail postpaid churn was 0.90 percent, down from 1.03 percent in the first quarter and 0.94 percent in the year-ago period.
Sharma noted that "T-Mobile has literally cut down its churn rate by 50% over the last three years."
Overall, the U.S. mobile data market grew by 3 percent from the first quarter and 14 percent year-over-year. While service revenue dipped 1 percent, equipment revenue increased by 21 percent, which helped the overall revenue to grow by 3 percent.
Regarding T-Mobile's ascent to the No. 3 spot, Sharma said that it was actually "anticlimactic" but still notable. "In the service provider land, switching rank based on organic growth is rare," he said. "Most of the times, the rank switches because of M&A. This has been true for most part for U.S. mobile operators over the last 30+ years. The top two positions in the last 20 years have been held by AT&T and Verizon who have taken turns to hold the No. 1 spot. The No. 3 and 4 rankings haven't changed since 2004."
In fact, Sharma said, when Sprint acquired Nextel, T-Mobile had less than half the customers of Sprint Nextel. However, T-Mobile was aided by the MetroPCS acquisition, while Sprint added only 13 million subscribers in 11 years, and T-Mobile added more than three times--37 million.
At the time of the Nextel acquisition, T-Mobile's share of the market was roughly 10 percent, Sharma said. By the end of 2015, he predicts T-Mobile's share will increase to almost 17 percent. During the same 10-year period, Sprint's share has declined from 23 percent to 16 percent.
Verizon and AT&T controlled 51 percent of the market in 2005. Now, through growth and acquisitions, that share stands at 68 percent.
- see this Chetan Sharma report
Sprint's improved churn, shift to EIP in focus in Q2
Sprint loses No. 3 carrier spot to T-Mobile in Q2, but points to signs of turnaround
U.S. Cellular to launch LTE roaming in next 60-90 days
T-Mobile's Legere open to partnering with Google, Comcast as more firms get into mobile
AT&T adds fewer postpaid subs in Q2 than expected as it loses 322K postpaid phone customers
Verizon beats T-Mobile in postpaid net adds in Q2, thanks to tablets