U.S. wireless carriers could see the worst net customer additions in years during the first quarter, according to a research note from investment banking firm Jefferies & Company. The firm said that the U.S. wireless industry as a whole could experience its first ever net loss of postpaid subscribers during the period.
"A Jefferies proprietary handset survey suggests volume expectations for 1Q are the weakest in years, in line with our view that net adds are significantly lower in the quarter after an iPhone launch," wrote Jefferies analysts Thomas Seitz and Kunal Madhukar in a recent note.
The firm warned that there is typically a lull in carrier subscriber additions the quarter after Apple (NASDAQ:AAPL) launches a new iPhone. Apple launched its new iPhone 4S during the fourth quarter of last year. Jefferies analysts wrote that the lull in the first quarter could be the biggest ever due to sluggish smartphone sales and lowered customer demand.
Perhaps more importantly, the firm warned the lethargic growth could continue.
"Over the longer term, we believe the wireless industry faces the twin headwinds of 100%+ penetration and, eventually, decelerating smartphone additions as the base reaches saturation," Jefferies' analysts wrote. "Voice revenues are already in decline. We believe a material drop off in the growth rate of data revenues from slowing smartphone adoption, particularly in 2H12, is a growing risk."
As for the first quarter, Jefferies predicted "modest" postpaid growth for Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T), and a decline in postpaid subscribers at Sprint Nextel (NYSE:S). Sprint has struggled to boost its sluggish postpaid sales, and last year inked a four-year, $15.5 billion deal with Apple to sell the iPhone in order to reverse the trend.
Interestingly, Jefferies' analysts wrote that prepaid sales could also slow down in the first quarter due to an improving economy.
Verizon will be the first carrier to report its earnings April 19. During the fourth quarter, Verizon reported the addition of 1 million total new connections, while AT&T added 717,000 wireless postpaid subscribers, its largest increase in five quarters.
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