Q2: When AT&T and Verizon tightened their grip on the industry

Mike Dano

Despite a slowing market for postpaid wireless and increased competition, Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) managed to squeeze their hold on the wireless market during the second quarter of 2012. Both carriers reported overall gains in postpaid subscribers and both reported churn below 1 percent.

The result was that AT&T and Verizon managed to accrue a significant share of the dwindling market for high-value postpaid wireless subscribers. Verizon added a net of 880,000 postpaid customers in the quarter and AT&T added 320,000. Meantime, Sprint Nextel (NYSE:S) lost 246,000 postpaid customers in the quarter and T-Mobile USA reported losing 557,000. U.S. Cellular too reported 48,000 net postpaid customer losses for the period. (Sprint's decline was mainly due to its iDEN troubles.)

And Verizon, at least, expects its postpaid successes to continue: "Coming out of the first quarter I said that we would have an acceleration of growth [in postpaid] in the second quarter," said Verizon EVP and CFO Fran Shammo recently. "I would say that I would continue to see that acceleration happening in the third and fourth quarter."

This situation is notable considering the efforts that Sprint, T-Mobile and others have undertaken to counter AT&T and Verizon. Sprint continues to offer unlimited data service and recently added the iPhone to its lineup. T-Mobile refreshed its marketing campaign to promote the speeds and coverage of its HSPA data network. And U.S. Cellular introduced a new ad campaign focusing on its customer service.

But perhaps the most notable AT&T-Verizon statistic was that both posted record high EBITDA margins (Verizon scored a 49 percent margin and AT&T reported 45 percent). Philip Kendall, director of wireless operator strategies for research firm Strategy Analytics, said Verizon and AT&T generated five to six times the EBITDA of Sprint and T-Mobile.

How exactly did Verizon and AT&T manage this feat?

Click here for a detailed look at the top 10 U.S. wireless carriers in the second quarter.

"Low churn is contributing to that, but so are the tighter upgrade eligibility criteria they have adopted," Kendall wrote. "Extending the average time between paying out on device subsidies is one of the simpler ways to keep those costs under control, so restricting the number of users in contract who are eligible for upgrade is smart business--you can still reward the higher value customers it is worth keeping extra happy, but holding lower-value customers to their contract terms certainly makes sense. So AT&T achieved record-low postpaid upgrade levels (6 percent in the quarter, compared with 7 percent in Q1 2012 and 12 percent in Q4 2011)."

On the prepaid side of things, the market continued to grow but at a slower rate than some expected. MetroPCS (NYSE:PCS) lost 186,000 net customers during the quarter, while rival Leap Wireless (NASDAQ:LEAP) lost a whopping 289,000 customers. Sprint added 141,000 net prepaid subscribers, T-Mobile posted 227,000 prepaid customer additions, and América Móvil's U.S. MVNO, TracFone, reported a gain of around 100,000 customers (a figure that does not include its acquisition of Simple Mobile).

As the third quarter continues, the performance of Verizon Wireless and AT&T's shared data plans will likely be a key factor to watch. Verizon launched its shared plans on June 28 and AT&T plans to begin offering its plans Aug. 23.

For a complete look at how the nation's top wireless carriers performed in the second quarter, check out this report from Strategy Analytics. +Mike Dano