Black Friday promos 'more subdued' than in past years: Cowen

Black Friday has lost a bit of its sheen this year as wireless carriers have opted not to participate in the promotional feeding frenzy that typically highlight the day.

The annual shopping orgy has traditionally prompted carriers to launch extremely aggressive promotions to poach customers from rivals and grow their market share. And this season was positioned to be particularly active, with the launch of high-profile handsets such as the iPhone and iPhone X, Google’s second-generation Pixel and the flagship phone from Essential Products, which was founded by former Android chief Andy Rubin.

Rather than focusing on building their customer bases, though, operators appear to have shifted their focus to improving their bottom lines, according to a note from Cowen Equity Research.

“Though Black Friday is still a few days away, promotions for the latest iPhones are more subdued compared to last year,” Cowen analyst Colby Synesael wrote in a note to investors this morning. “T-Mobile launched its ‘Magenta Friday’ early with a BOGO offer, but those signing up must include a new line. AT&T has a ‘buy the X get an 8 free’ but also requires a new line. Verizon and Sprint have $300-$350 in credits with trade-in. These offers are far more subdued compared to last year, when carriers offered a free iPhone and porting credit. It seems this year may remain subdued as carriers are focused more on free cash flow. Sprint has also been vocal about undercutting others, if necessary, as the ‘mutual assured destruction’ policy could keep the industry in check. It’s worth noting the iPhone supply constraints could drive the holiday competition to spill into 1Q18.”

Interestingly, the relatively tranquil postpaid market during the holiday season belies a prepaid segment that has become a key battleground for wireless network operators over the few years. The ARPU difference between prepaid and postpaid users continues to narrow, and major carriers have once again made those customers a top priority.

“All four carriers had positive prepaid net adds for the second consecutive quarter (in Q3),” Synesael wrote, an achievement last seen in 3Q12 as it seems all carriers are valuing growth in the segment. “To further the point, in the past year T-Mobile management had noted that Boost offers in the marketplace were ‘irrational’ and not sustainable. However, in October MetroPCS launched a similar offer of four lines of unlimited LTE for $100/month. With a continued promise to be the most aggressive, a few days later, Boost announced 5 lines for $100/month. The prepaid market has sown solid fundamentals over the past few years (consistent Y/Y churn improvement and ARPU gains), however the recent offers could suggest a negative shift. It seems Cricket and especially Verizon will sit these price wars out, with the latter focused on the higher end cohort in the prepaid market.”