AT&T Mobility (NYSE:T) likely added around 500,000 postpaid customers in the second quarter thanks to tablet subscriber additions as Verizon Wireless (NYSE: VZ) racked up subscribers with promotional shared data plan pricing, according to analysts at Wells Fargo.
In a research note, Wells Fargo analysts Jennifer Fritzsche, Eric Luebchow and Caleb Stein wrote that AT&T "has been somewhat quiet on the wireless front in Q2" and that while Verizon "has been aggressively promoting its $80 for 10 GB data package," AT&T has stayed at the $100 level for a similar amount of data for its shared data plans.
"While this could hurt gross add gain for T on the handset side in Q2 (which likely will be negative), the lack of promotion could have positive implications for near term wireless margin trends," they wrote. The analysts think AT&T will report wireless margins of 44.7 percent, compared to a 44.2 percent Wall Street consensus.
The analysts expect AT&T will lose 10,000 postpaid handset customers and gain around 510,000 postpaid tablet customers in the quarter, for a net gain of 500,000, below the Wall Street consensus of around 570,000. They expect around 66 percent of AT&T's smartphone sales in the second quarter to come through its Next equipment installment plan, which would be roughly flat compared to 65 percent in the first quarter.
Last week the same analysts said Verizon saw "solid wireless sub growth with recent promotions such as its 10 GB for $80 and 15 GB for $100 offerings." The Wells Fargo analysts estimate Verizon added 1.06 million postpaid customers in the second quarter, up from their previous estimate of 970,000. Like AT&T, the vast majority of the tally will come from 850,000 tablet subscriber additions, the analysts estimate, with Verizon adding 159,000 postpaid phone customers.
The Wells Fargo analysts also note that the Wall Street consensus is for Verizon to add 1.1 million postpaid customers during the second quarter.
In late April Verizon brought back lower promotional pricing for its More Everything shared data plans. The carrier started offering a 10 GB plan for $80 per month, down from $100, and it re-introduced a 15 GB plan for $100 per month. The plans do not include the price of monthly access charges for connecting smartphones, tablets and other devices. Smartphones bought on a two-year contract cost $40 per month each, while phones bought on Verizon's Edge equipment installment plan each cost $15 per month on plans with 6 GB or more of data.
Verizon is expected to launch a mobile-first over-the-top video offering this summer, and the Wells Fargo analysts happen to think AT&T is not far behind, especially once AT&T's $48.5 billion deal for DirecTV (NASDAQ: DTV) closes, which is expected to happen soon.
"The key factor to focus on for wireless is any commentary around its own over-the-top (OTT) initiative," the analyst wrote. "We expect T has not been taking a nap here and would look for more color on its strategy following the close of DTV."
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