Moody's Investors Service expects AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ) to experience a 4 percent to 5 percent rise in revenue and a whopping 12 percent to 14 percent increase in free cash flow over the next 12 to 18 months. In a research note, the investment firm attributed the expected increase to lower churn and the completion of both Verizon and AT&T's LTE network buildouts in 2013.
Moody's analysts said that both AT&T and Verizon have been keeping their churn levels remarkably low thanks to their newly implemented upgrade fees (Verizon charges $30 for customers to upgrade and Sprint and AT&T charge $36 to upgrade) as well as increased fees for customers who decide to terminate their contracts before their two-year deadline.
T-Mobile is one exception--Moody's analysts noted that T-Mobile's churn is at 3 percent and likely will remain there unless the carrier is able to secure the Apple (NASDAQ:AAPL) iPhone for its customers. However, Moody's did say that T-Mobile's re-introduction of its unlimited data plan this month may help it differentiate its service from the competition.
Interestingly, the firm also predicted that smaller operators will struggle to maintain free cash flow. Specifically, Moody's said Sprint Nextel (NYSE:S), T-Mobile USA, Clearwire (NASDAQ:CLWR), MetroPCS (NYSE:PCS), Leap Wireless (NASDAQ:LEAP) and U.S. Cellular will all likely see their free cash flow fall to less than 1 percent next year.
Moody's is hopeful that the shared data plans introduced by AT&T and Verizon will stimulate demand for connected devices such as tablets and auto-navigation systems because of the lower cost of entry to the consumer.
- see this Reuters report
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