Appraising U.S. wireless operators in the third quarter

Mike DanoAs the third-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:

AT&T gaining on Verizon

AT&T Mobility (NYSE:T) lapped Verizon Wireless (NYSE:VZ) in terms of net additions during the third quarter. AT&T added a total of 2.6 million net connections during the quarter, bringing its total customer base to 92.8 million connections. Meanwhile, Verizon added 1.2 million total connections during the quarter, bringing its subscriber base to 101.1 million connections. The gap between the two has been narrowing since Verizon slipped past AT&T as the nation's largest wireless carrier via Verizon's acquisition of Alltel.

AT&T is "within striking distance," said Current Analysis' William Ho.

AT&T's ascendance is due to two clear trends: Apple's iPhone and the carrier's connected devices division. AT&T activated 5.2 million iPhones in the third quarter and 1.12 million "connected devices," which include tablets, M2M gadgets and other non-voice devices.

Susan Welsh de Grimaldo, an analyst with research firm Strategy Analytics, said smartphones and connected devices helped propel both AT&T and Verizon ahead of the rest of the wireless industry.

Prepaid, both voice and broadband, continues to grow

According to the New Millennium Research Council, one in five U.S. cell phone consumers with contract-based service--an estimated 24.6 million American adults--is likely to switch in early 2011 to less expensive unlimited prepaid wireless service with no early-cancellation penalty. And based on trends from the third quarter, that movement is already catching steam.

"We know that postpaid is flattening," Current Analysis' Ho said. "That should suggest that prepaid is increasing."

Click here for the top 10 us carriers in the third quraterFor example, Ho said TracFone recorded around 745,000 net customer additions--and increased its average monthly revenue per user to $13 from $10--during the quarter, largely thanks to the success of its Straight Talk prepaid, unlimited calling service. However, he said it's unclear whether those gains were placed onto the network of Verizon, AT&T or T-Mobile (TracFone sells service from all three carriers).

In addition, Strategy Analytics' Grimaldo pointed to the prepaid growth at Sprint Nextel (NYSE:S) (471,000 prepaid net adds in the third quarter), T-Mobile (197,000) and MetroPCS (NYSE:PCS) (223,249).

Interestingly, Ho said the popularity of no-contract plans likely will stretch into data services--he said recent prepaid data offerings from the likes of Verizon, Virgin Mobile USA and Clearwire (NASDAQ:CLWR) could help propel the no-contract data market.

But there's one company clearly uninterested in prepaid: Verizon. According to Current Analysis, Verizon lost 137,000 prepaid subscribers during the quarter.

New nationwide competitors?

MetroPCS recorded solid growth during the third quarter while rival Leap Wireless (NASDAQ:LEAP) stumbled significantly. However, both companies recently announced major new roaming agreements that essentially put them on par with larger, nationwide carriers. Ho said the actions indicate both companies are aiming at a new demographic, one that is interested in roaming across the country and paying for the privilege.

"They [Leap and Metro] are trying to acquire high-value user for sure," Ho said, pointing to Metro's new BlackBerry promotion, which includes a $10 per month discount on its $60 per month BlackBerry plan when subscribers buy a BlackBerry Curve 8530.

For a complete analysis of wireless carriers in the second quarter, make sure to check out Strategy Analytics' list of the top 10 carriers in the United States in the third quarter. --Mike