With shrinking handset lineup, AT&T shifting focus from gadgets to services

AT&T store

AT&T appears to be in the midst of an overhaul to its longtime go-to-market strategy in wireless: Instead of focusing on exclusive, flashy smartphones—like its one-time exclusive on the Apple iPhone—the carrier is now ceding the smartphone game to its competitors and focusing on selling services like its new DirecTV Now streaming TV offering.

The clearest evidence of AT&T’s newfound sales strategy comes from BayStreet Research, which recently reported that AT&T’s Android smartphone portfolio has been pared down from fully 42 units in 2015 to roughly half that today.

AT&T appears much less focused on competing for smartphone subscribers compared to the past ~10 years,” noted BayStreet Research’s Cliff Maldonado in a recent report. “Conversely, Verizon has brought in Google’s Pixels and continues to promote a differentiated Motorola line up. Except for AT&T, all carriers continue to cycle traditional device promos, such as BOGOs, bundles, and discounts.”

Maldonado wrote that AT&T is instead largely putting its hopes behind mainstream, widely available phones like the Apple iPhone or the Samsung Galaxy line of devices. “AT&T's new approach appears to assume consumers will buy either an iPhone or Samsung flagship, with reps instead focused on selling consumers a differentiated portfolio of services, not devices,” he wrote.

In response to questions from FierceWireless on the topic, AT&T largely argued that it is responding to customer demands.

“We’re focused on providing consumer and business customers an industry leading portfolio of devices and accessories based on their unique needs,” the carrier said in a statement. “We do this by listening to customers, gauging demand and delivering an outstanding experience through a variety of entertainment options, features, price points and new technologies.”

That’s a noteworthy position considering AT&T’s exclusivity on the iPhone, which lasted for several years before other carriers like Verizon and Sprint began to sell the device, helped propel AT&T into the 3G and smartphone age. Moreover, AT&T since its iPhone exclusivity has tested waters with other exclusives—with middling success. During the past several years, AT&T has been the exclusive provider of devices ranging from the Lumia 1020 from Nokia to the ill-fated Amazon Fire phone.

AT&T’s newfound distance from exclusive devices contrasts notably with Verizon’s approach to the market: Verizon today offers several noteworthy exclusives including several models from Motorola as well as Google’s high-profile Pixel phone. And indications are that Verizon’s approach has been somewhat successful: “The Pixel is a hit at Verizon, with reps claiming 12.3 percent share of smartphones sold at Verizon stores this month,” Wave7 Research wrote in a recent research note to subscribers in December. “Most Pixel SKUs are now shipping after Christmas or in January and most SKUs are not in stock at most Verizon stores.”

However, recent research shows there may not be all that much light in the gap between Verizon and AT&T, at least today. “In 1Q, we expect AT&T’s and Verizon’s Wireless revenue/EBITDA to fall annually as they continue to lose postpaid phone subs and see pressure on ARPU,” UBS analyst John Hodulik wrote in a note to subscribers this week. “While the move to unlimited could eventually be neutral to ARPU, it will initially provide a headwind due to lower overage and the optimization of plans.”

Nonetheless, AT&T’s approach to the wireless market appears to clearly favor its own services over others’ devices. The company today is selling its DirecTV Now streaming service for just $10 extra to those who subscribe to its new unlimited data plans. And AT&T is in the process of finalizing its massive bid to acquire media giant Time Warner for $84.5 billion, another reflection of the operator’s concentration on content and services.