According to credit ratings and research firm Moody's, the U.S. wireless industry will continue to see growth in subscribers and revenues next year, though EBITDA growth will slow slightly from its previous levels. The firm said Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T) will maintain their position at the top of the industry, while T-Mobile US (NYSE:TMUS) will continue to enjoy positive momentum. The firm said Sprint (NYSE: S) likely will stabilize its position after years of difficulties with its financials and its subscribers, but that smaller carriers like U.S. Cellular (NYSE:USM) will "remain under pressure."
The outlook comes in the release of Moody's "2015 Outlook - US Telecommunications" report, by Dennis Saputo and Mark Stodden. In the report, the analysts predict that in 2015 Verizon and AT&T will report EBITDA (earnings before interest, taxes, depreciation, and amortization) growth of about 4 percent to 6 percent, and the two will generate around 71 percent of the industry's revenues and 81 percent of the industry's EBITDA.
Overall, Moody's predicted the U.S. wireless industry will enjoy subscriber growth next year of 3 percent to 4 percent, which is the same as what the firm expects for 2014 and above the 2.6 percent the firm recorded for the industry in 2013. As for overall industry EBITDA, Moody's predicts growth of 4 percent to 6 percent next year, down slightly from the 6 percent to 8 percent the firm expects the industry to report this year. In 2013, Moody's recorded EDITDA growth of 9.9 percent across the U.S. wireless industry.
Moody's also said it expects revenue growth of 2 percent to 4 percent this year, rising slightly to between 3 percent and 4 percent next year. In 2013, revenue growth for the industry was 4.5 percent.
Moody's said that the introduction of EIP (equipment installation plans, which are also called handset financing plans) from Verizon, AT&T and other carriers will help boost the industry's overall EBITDA. Specifically, Moody's said EIP "lowers the initial cost barrier for consumers to acquire expensive smartphones, driving more data usage and service revenue."
Finally, Moody's said that capital spending among U.S. wireless operators will be "flat to down in 2015, after rising about 6% - 7% in 2014." That prediction comes as little surprise since both AT&T and Verizon have largely completed their LTE buildouts.
Although U.S. carrier capital spending is expected to slow next year, Moody's noted "growing data use will stress the networks and prevent investment from decreasing too dramatically." The firm also pointed to the massive amounts of money carriers are planning to spend on spectrum in order to meet subscribers' increasing demands for data--the FCC's ongoing AWS-3 auction recently passed the $40 billion milestone in the total number of provisionally winning bids on spectrum licenses covering the country.
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