AT&T and Verizon reported their second-quarter results this week, and both companies offered wireless results generally in line with or ahead of most Wall Street analyst expectations. Most analysts pointed out that the results reflect the industry’s relatively quiet competitive tenor, with mobile providers either remaining silent or, in some cases, raising service prices.
Specifically, according to analysts, AT&T and Verizon benefitted during the quarter from a few key trends:
- Sprint and T-Mobile announced a merger and possibly as a result, neither company had the inclination to shake up the market with a major new pricing or service initiative. For example, the analysts at Wall Street analyst firm New Street Research pointed out that T-Mobile hasn’t offered a major “uncarrier” announcement since it bundled Netflix service into its rates plans in September of last year.
- Although Charter entered the mobile industry with its Spectrum Mobile MVNO at the end of the second quarter, neither Charter nor Comcast through its own Xfinity Mobile MVNO offered much in the way of competitive intensity. “Cable MVNO pricing has been less aggressive than feared,” wrote the analysts at Deutsche Bank Research.
- And Sprint, AT&T and Verizon all introduced new, generally more expensive unlimited data plans during the quarter—a significant development in light of the pricing wars in wireless during the past few years.
As a result, both Verizon and AT&T generally reported rising wireless service revenues for the first time since 2014.
“Disciplined promotional activity and pricing tailwinds are driving meaningfully positive inflections across the industry (case in point, second-q results from both Verizon and AT&T),” the analysts at Deutsche Bank wrote.
For AT&T specifically, Wall Street analysts noted that the company’s subscriber metrics were slightly better than expected. Overall AT&T reported 3.8 million total wireless net adds in the United States and Latin America, with 3.1 million total wireless net customer additions in the United States driven by connected devices and prepaid services. In the United States specifically, AT&T reported 46,000 postpaid phone net customer additions (slightly below most expectations) alongside a surprise 356,000 phone net adds in prepaid (AT&T’s prepaid performance was far beyond most analyst expectations).
“Wireless service revenues beat our expectations and returned to growth on an apples to apples basis for the first time in over four years, with 46k postpaid phone adds and an impressive 453k prepaid adds (356k phones),” wrote the analysts at Morgan Stanley Research in a note to investors. “On a sequential basis, AT&T grew wireless service revenues some 2% as ARPU improved. This follows better than expected second-quarter service revenues reported by Verizon as well. AT&T guided to continued YoY improvements over the course of the year.”
Verizon, for its part, reported 531,000 new retail postpaid net customer additions in the second quarter, a figure that comprised 199,000 net phone customer additions and that was beyond most analyst expectations.
That said, both companies showed wildly diverging strategies. AT&T made little mention of its wireless business during its second-quarter earnings report, despite the fact that, as the analysts at MoffettNathanson pointed out, wireless still accounts for 38% of AT&T’s overall business. Not surprisingly, much of AT&T’s focus was on its new WarnerMedia content business, which spans brands like Turner, DC Comics and HBO.
At Verizon though, wireless stood as perhaps the centerpiece of the company’s strategy. Verizon’s incoming CEO Hans Vestberg made it clear that Verizon wasn’t interested in acquiring content and would instead focus on its network and 5G buildout.