Despite falling overall U.S. tablet sales, the nation's Tier 1 wireless carriers continued to add cellular-connected tablets to their networks at an impressive clip in the first quarter. Analysts note that carriers have been heavily promoting and discounting tablets, which generate additional revenue streams for carriers while carrying lower subsidy costs.
Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T) and Sprint (NYSE: S) all used postpaid tablet subscriber additions to counteract postpaid phone subscriber losses in the first quarter. T-Mobile US (NYSE:TMUS) did not rely on tablets for its growth though.
The surge in tablet sales among U.S. wireless carriers comes as U.S. tablet sales overall are falling, according to multiple research firms. Total U.S. tablet shipments dipped 3 percent year-over-year to 13.4 million units in the first quarter of 2015, compared to 13.8 million a year ago, according to Strategy Analytics. "The American tablet market is maturing," Strategy Analytics analyst Neil Mawston said. "Cellular and enterprise tablets are among the few bright spots for tablet growth in the U.S. right now."
Research firm IDC said there were many fewer tablets shipped in the U.S. in the first quarter than Strategy Analytics reported. According to IDC, there were 8.9 million tablets shipped in the U.S. in the first quarter of 2015, down 7 percent from 9.6 million a year ago.
However, according to IDC, sales of cellular-connected tablets grew to 3.2 million in the first quarter, from 2.2 million in the same quarter a year ago. The firm said Wi-Fi-only tablet sales fell to 5.7 million in the first quarter, down from 7.3 million in the first quarter of 2014.
The trend toward cellular-connected tablets started in earnest last year, and it was evident in the carriers' first-quarter results. Indeed, in the first quarter of 2015, AT&T added 711,000 postpaid tablets, way up from the 313,000 it added in the first quarter of 2014. Overall, AT&T added 441,000 postpaid subscribers in the first quarter of 2015.
For its part, Verizon added 820,000 LTE tablets in the first quarter of 2015, compared to 634,000 postpaid tablets it added in the first quarter of 2014. Verizon added 565,000 retail postpaid net additions in the first quarter of 2015.
Sprint added 349,000 postpaid tablet customers in the first quarter, compared to 516,000 tablet net adds in the year-ago period. The carrier added 211,000 postpaid customers in the first quarter of 2015.
T-Mobile did not break out its tablet sales in the first quarter, but said it added 134,000 branded postpaid mobile broadband customers, up from 67,000 in the first quarter of 2014. The company did not rely on tablets to boost its growth, and added 991,000 postpaid phone customers in the first quarter of 2015, and 1.1 million branded postpaid customers overall.
"U.S. carriers are selling more of them [tablets] because they are pushing them hard: They can count tablets in their subscriber metrics, and adding tablets does tend to raise data usage overall, which leads to bigger plans," Current Analysis analyst Avi Greengart noted. "Consumers are responding to these offers because the hardware is often heavily discounted, and it is inexpensive to add one to a family plan--typically just $10/month."
"Tablets have been particularly good for Verizon, which has had its own Ellipsis tablet as a major driver of sales. And just this week AT&T announced its plans to start selling its own-brand Trek tablet for similar reasons," JackDaw Research analyst Jan Dawson said.
IDC analyst Jean Philippe Bouchard said "we really saw crazy numbers of that [Ellipsis 7] model--that tablet specifically."
"Verizon was doing 1.2 million units a quarter," he added. "They were giving it away."
In November 2013, Verizon launched its own branded tablet, the Ellipsis 7, for $250. At launch, customers could get $100 off any tablet, including the Ellipsis 7, when purchasing it with a new two-year contract. Verizon currently offers a successor tablet, the Ellipsis 8, for just $30 with a two-year contract.
AT&T is offering its own branded tablet, the TCL-made Trek HD, for just $50 with a two-year contract. The gadget runs Android 5.0 and has a 1.6 GHZ quad-core Qualcomm (NASDAQ:QCOM) Snapdragon 400 processor, a 5-megapixel rear camera, a 2-megapiel front-facing camera, and 16 GB of storage.
T-Mobile too is pushing its tablet sales. The company is offering a $100 rebate to customers who buy both newer Samsung smartphones and Samsung tablets.
T-Mobile though is not pushing tablets as hard as other carriers. "When you look at the overall tablet landscape, it's a way to put net add numbers on the table. But the incremental revenue, [customer lifetime value] and incremental margins are not nearly as exciting to us as we're seeing with postpaid voice [phone] growth," CFO Braxton Carter said today at an investor conference.
AT&T subscribers flock to Next installment plans in Q1, making up 65% of all smartphone sales
Verizon adds fewer postpaid subs in Q1 than expected, loses prepaid and 3G smartphone customers
T-Mobile expects to add more than 3M postpaid subs in 2015
Sprint clings to No. 3 carrier spot in Q1, as tablet customer additions are offset by phone losses