Tier 1 carriers gain 397,000 postpaid subs in Q2, but growth slows

The nation's four largest wireless carriers added a net 397,000 postpaid subscribers in the second quarter, less than half the amount from the year-ago period, reflecting a continuing industry slowdown in adding postpaid customers.

Verizon Wireless (NYSE:VZ) added a net of 880,000 postpaid customers in the quarter and AT&T Mobility (NYSE:T) added 320,000. However, when factoring in its Nextel iDEN postpaid subscriber losses, Sprint Nextel (NYSE:S) lost 246,000 postpaid customers in the quarter and T-Mobile USA reported losing 557,000. U.S. Cellular, not considered one of the Tier 1 operators, reported 48,000 net postpaid customer losses for the period.

The overall net gains were better than the combined net loss of 52,000 postpaid customers the largest carriers reported in the first quarter of the year, but were still below historical benchmarks. Overall, in the first half of the year, the Tier 1 carriers have added fewer than 400,000 postpaid customers--a stark reversal from the 1.2 million they added in the first half of 2011.

On the one hand, the slowdown could reflect customers waiting for Apple's (NASDAQ:AAPL) next iPhone as well as tighter upgrade policies on the larger carriers. On the other hand, it could be an indication that the postpaid market is rapidly reaching saturation, and the focus going forward will be on gaining market share and increasing average revenue per user. The carriers seem to acknowledge this to some extent. "It will be very important to do very well in the switching market," Sprint CEO Dan Hesse said earlier this week.

Sanford Bernstein analyst Craig Moffett noted to Dow Jones Newswires that total postpaid subscriber growth of the industry dropped below 10 percent in 2006, below 5 percent in 2008 and is now at 1 percent annually.

While subscriber growth is slowing, carriers are increasingly looking at ways to squeeze more revenue out of customers. Verizon and AT&T reported their best-ever wireless service margins ever in the quarter. Both carriers have introduced new shared data plans designed to encourage customers to add multiple devices to their accounts.

For more:
- see this Dow Jones Newswires article (sub. req.)

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