As the fourth-quarter reporting season comes to a close, it's time to start parsing the information to see which carriers slipped and which managed to get ahead.
Here are some of the big themes from the quarter:
Continued successes at AT&T and Verizon
Verizon Wireless (NYSE:VZ) maintained its strong postpaid focus during the fourth quarter, adding 872,000 net postpaid subscribers out of 955,000 total net adds. Verizon, the nation's largest wireless carrier, also maintained its industry-low postpaid churn at 1.01 percent, noted Current Analysis analysts Maidy Whitesell and Weston Henderek in a detailed research note on the fourth quarter. AT&T Mobility (NYSE:T), meantime, continued to rack up solid numbers, adding 2.8 million net new subscribers driven in part by lots of iPhone additions (4.1 million iPhone activations in the quarter). AT&T also maintained a low postpaid churn rate of 1.15 percent--almost rivaling Verizon Wireless.
Further, as Strategy Analytics analyst Phil Kendall noted, both AT&T and Verizon racked up substantial net adds from their respective connective devices businesses. For example, AT&T added 2 million emerging device connections--this includes 1.5 million connected devices such as digital photo frames as well as embedded computing devices such as tablets, netbooks and laptops.
The numbers reflect the continued strength of the nation's two largest carriers in smartphones and connected devices.
Smartphone growth, margin pressure
Speaking of smartphones, Kendall said the devices represented the bulk of AT&T and Verizon's fourth quarter: Around 80 percent of AT&T's fourth quarter sales were smartphones, and about half of Verizon's net adds were smartphones.
"The smartphone growth is really what is keeping EBITDA margins suppressed," Kendall said, which he said was primarily due to the higher subsidies carriers place on smartphones.
"The challenge is that the smartphone sort of frontloads the cost today, but the payback comes back over the next eight quarters (of a subscriber on a two-year service contract)," Kendall said. "You take a short-term hit for a long-term gain."
Trouble at T-Mobile, but success at Sprint
Sprint Nextel (NYSE:S) continued its turnaround, adding 1.1 million total net subscribers in the fourth quarter, including net postpaid additions of 58,000 subscribers--the carrier's first net postpaid additions since the second quarter of 2007. Meanwhile, T-Mobile USA lost 318,000 postpaid subscribers in the fourth quarter.
"T-Mobile was the big overall loser from a postpaid subscriber perspective losing a total of 318,000 net postpaid subscribers while maintaining the highest postpaid churn rate of any national carrier at 2.5 percent," noted Current Analysis' Whitesell and Henderek. "T-Mobile is being squeezed by the larger carriers on the high end and by aggressive unlimited providers and prepaid players on the low end."
Overall, prepaid carriers during the fourth quarter--including Leap Wireless (NASDAQ:LEAP), MetroPCS (NYSE:PCS) and others--recorded positive results, and most witnessed an increase in their smartphone penetration levels--possibly indicating that subscribers' appetite for data usage is going to continue to grow in 2011.
The big winner? "The biggest winner in the prepaid segment during the fourth quarter of 2010 was TracFone," wrote Current Analysis' Whitesell and Henderek. "The company had an extraordinary season since it added over one million customers. Also, the company's ARPU is now at $14, compared to a flat $10 in 2009."
4G and the iPhone
Going into the first quarter, two major items have emerged: All of the national carriers now market "4G" services, and Verizon Wireless has begun selling the Apple (NASDAQ:AAPL) iPhone. Analysts said the outlook on both topics is mixed: On 4G, there remains considerable confusion among subscribers as to what exactly the marketing term means; on the Verizon iPhone, analysts likely will have to wait until the fourth quarter of 2011 to judge its ultimate effect.
"I think that seeing how that plays out (the Verizon iPhone and its possible effect on AT&T) will be one of the more interesting things" to watch this year, Kendall said.
For a complete analysis of wireless carriers in the fourth quarter, make sure to check out Strategy Analytics' list of the top 10 carriers in the United States in the fourth quarter. --Mike