The second quarter may be a calm before a coming storm of aggressive carrier promotions later this year, according to Cowen Equity Research. And while ever-increasing competition is benefiting consumers, it doesn’t bode well for mobile network operators.
The U.S. mobile market has stabilized in the last several months after all four major carriers jumped aboard the unlimited bandwagon, and Cowen said Verizon, AT&T and Sprint are all expected to see “sequential improvement in postpaid phone net adds” in the second quarter while T-Mobile continues to steal market share. But overall growth in the second quarter will be weak compared to historical trends, and those modest gains will largely be overlooked as investors focus on potential M&A opportunities.
Competition will heat up later this year, though, as the industry heads into the holiday season and as a new, redesigned iPhone comes to market.
“To this last point, with the potentially delayed fall launch of the iconic tenth anniversary iPhone, it’s highly likely that the carriers will again be aggressive with promotions into the holiday season that could again lead to disappointing 4Q17 results,” Colby Synesael of Cowen Equity Research wrote in a note to investors this morning. “As such, we continue to have a negative view of wireless sector fundamentals although acknowledge valuation for AT&T/Verizon is feeling washed out while Sprint/T-Mobile continue to be influenced by M&A spec.”
Interestingly, a revised estimate from Cowen pegs AT&T as the only major U.S. carrier expected to lose postpaid phone net additions during the second quarter. Cowen maintained its estimate of AT&T postpaid phone net losses for the quarter at 216,000; but it now expects Sprint to add 116,000 such customers (up from a previous estimate of 55,000); T-Mobile to add 614,000 (up from 595,000) and Verizon to add 46,000 (up from an estimated loss of 142,000).