U.S. carriers were more concerned about fully monetizing their existing users than they were about poaching rivals from the competition during the second quarter of 2016, Barclays analysts say, which likely means the market will remain relatively unchanged from the first quarter. But the space could heat up in a major way during the second half of the year.
"Carriers remain diligently focused on monetizing their existing base rather than employing aggressive pricing strategies," Barclays wrote in a research note published ahead of second-quarter earnings reports. "Namely, as rising multi-platform video usage continues to gain momentum, carriers are looking to leverage video as a means to differentiate their service offerings, position themselves to capitalize on evolving consumption patterns, and potentially using video as a 'pricing mechanism' to attract and retain subscribers."
For example, T-Mobile's Binge On continued to gain traction with both customers and content providers, Barclays said. And the second quarter saw T-Mobile offer freebies such as a year of Amazon Prime and zero-rated data for streaming video from the Copa America soccer tournament, highlighting the strategy of giving away content and services to attract and maintain customers rather than monetizing them directly.
Some big developments are likely to spur competition in the relatively staid market over the next several months, though. Apple (NASDAQ: AAPL) will launch the next iPhone, AT&T (NYSE: T) will attempt to further leverage its DirecTV business by bringing OTT video offerings to market, and Verizon (NYSE: VZ) will continue to aggressively build its digital media business – perhaps with the acquisition of Yahoo's online assets. Meanwhile, T-Mobile will focus on increasing its cash flow and Sprint's (NYSE: S) ongoing network-improvement plan will progress.
Those launches and ongoing trends may lay the groundwork for an active second half of the year following what looks to be a relatively uneventful first half.
"As the cadence of promotional activity has remained fairly in-line with the prior quarters – i.e. $650 early termination fees to lure customers into switching carriers, and select buy-one get-one-free deals – we believe 2Q promotional campaigns will have a limited material impact on the competitive environment," Barclays said. "That being said, we believe industry- and carrier-specific initiatives emerging in 2H16 bear monitoring including the impact of the expected iPhone 7 launch and AT&T's push for quad play/OTT services."
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