Citing a market with pricing and promotional “discipline,” the Wall Street analysts at Deutsche Bank Markets Research said they expect that the nation’s four biggest wireless network operators will, in aggregate, return to year-over-year service revenue growth in the first quarter of this year.
The firm said that point hasn’t been reached since the fourth quarter of 2014.
“What a difference a year makes,” the analysts wrote in a note to investors yesterday. “In contrast to the ‘unlimited’ price wars of first-quarter 2017, we expect first-quarter 2018 results to showcase improving ARPU/service revenue and margin results.”
The analysts pointed to two key factors driving their new assessment:
1. A “healthier pricing backdrop” that includes some increases in carriers’ pricing plans. The analysts specifically pointed to AT&T’s recent tweaks to its unlimited pricing options, which lowered the cost of its single line unlimited plan but slightly raised prices for multiline plans, as well as T-Mobile’s ONE Unlimited 55+ plan.
2. “Near record low” postpaid phone churn across the three largest carriers (AT&T, Verizon and T-Mobile).
The firm also tweaked its expectations for some carriers for the first quarter. Specifically, the Deutsche Bank analysts raised their expectations for AT&T slightly, noting they expect the carrier to record 34,000 net postpaid customers in the first quarter, a reversal of the firm’s expectations for 75,000 customer losses during the period. And for T-Mobile the firm lowered its postpaid phone net addition expectations to 650,000 from its prior guidance of 710,000, citing lower switching activity during the period.
The largely positive assessment from Deutsche Bank on the wireless market comes as wireless operators increasingly turn their focus to improving their financial footing and raising profits rather than gaining share. That’s a big reversal from last year, when most carriers were racing to offer the best unlimited plan pricing and Sprint and T-Mobile were still strongly considering a merger.
Moreover, 2018 so far has been dominated by carriers’ 5G promises. All of the nationwide wireless operators have promised to switch on some kind of 5G service this year, setting the stage for competition on the 5G front later this year.