The first-quarter results Thursday from T-Mobile USA helped confirm what analysts had been predicting for weeks: U.S. wireless carriers reported a net loss of postpaid subscribers for the first time ever during the quarter.
According to a tally from the AP, the seven largest carriers, comprising more than 95 percent of the market, reported a net loss of 52,000 postpaid customers during the quarter. The carriers, including the Tier 1 operators Verizon Wireless (NYSE:VZ) AT&T Mobility (NYSE:T) Sprint Nextel (NYSE:S) and T-Mobile, have a combined 220 million postpaid devices, making up around two-thirds of the total number of U.S. wireless devices.
Meanwhile, the prepaid market surged ahead in the quarter with 2 million total net customer additions. However, while that growth is strong compared to the postpaid market, it is also down from the 5 million prepaid net additions the industry saw in the first quarter of 2011.
Verizon had 501,000 retail postpaid net additions, and AT&T had 187,000. Sprint lost 192,000 total postpaid customers and T-Mobile lost 510,000 branded contract customers. U.S. Cellular lost 38,000 postpaid customers in the quarter. Leap Wireless (NASDAQ:LEAP) and MetroPCS (NYSE:PCS) are both prepaid-only carriers.
Ultimately, the postpaid decline came because the market is reaching a saturation point, analysts said. Although carriers added machine-to-machine connections, the base of customers upgrading to postpaid plans and devices is shrinking. Additionally, the market benefited strongly in the fourth quarter from the fall launch of Apple's (NASDAQ:AAPL) iPhone 4S, and the first quarter is a traditionally weaker quarter.
"In Q4 we had a lot of things come together, which really helped," said Recon Analytics analyst Roger Entner. "Overall, we're running out of people who can pass credit checks, and that's one of these key requirements [for a postpaid plan], and everyone who can pass a credit check who wants to have a postpaid phone has one."
Entner noted that January is the biggest month for returns of phones, which helped drive down postpaid numbers in the first quarter. However, he also called it the "canary in the coal mine," and said that postpaid numbers from now on will only expand if the economy expands in a robust way. Now, he said, carriers will start simply shifting postpaid customers among each other.
Interestingly, Verizon Wireless CEO Dan Mead address the issue of a saturated wireless market during his keynote appearance earlier this week at the CTIA Wireless trade show in New Orleans. When questioned whether the wireless market would slow, he said it wouldn't.
"We are increasing our smartphone penetration. ... We like where we are," he said. "I don't think there's a wall at all. ... I'm very encouraged by what I see."
Mead explained that other markets, such as the M2M and home automation sectors, would help continue to grow the market.
- see this AP article
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