Verizon, AT&T set to lose 9M customers to cable operators by 2018, New Street says

Cell phones and millennials

Cable operators will claim 10% of the U.S. wireless market by 2020, New Street Research predicted, stealing most of those customers from the biggest wireless carriers.

T-Mobile and Sprint have increased their share of the U.S. mobile market in recent quarters, New Street analysts observed in a research note this week, even as growth in the industry has slowed to a crawl. And while the market has seen some aggressive promotions, the smaller operators haven’t had to engage in an all-out price war to poach customers from Verizon and AT&T.

“These gains happened in the context of a fairly benign competitive environment, which suggests a structural shift,” New Street analysts wrote. “This is worse than we thought for the incumbents and is set to get worse still with cable entering the market in 2017.”

Comcast said recently that it plans to join the wireless market next year, leveraging its network of 15 million Wi-Fi hotspots and a 5-year-old MVNO agreement with Verizon to create a new revenue stream. The cable operator will market mobile services within its existing footprint rather than launching a nationwide offering, bundling wireless with its existing TV, internet and landline phone services.

Meanwhile, Charter has continued to plot its entry to the U.S. wireless market. In September, the company said it had asked Verizon to activate the MVNO agreement it inherited with the purchase of Time Warner Cable earlier this year, and like Comcast, it plans to couple that deal with its network of Wi-Fi hotspots.

The two companies—and perhaps other cable operators—will combine to capture 23 million wireless customers by 2020, New Street said. T-Mobile and Sprint are “relatively insulated” from those newcomers, according to the analysts, and may actually benefit from increased competition. But the nation’s two largest mobile network operators are vulnerable.

“Comcast will be marketing an offer by the middle of next year; we expect Charter to be a couple of quarters behind,” the analysts wrote. “If carriers lose share proportionately, AT&T and Verizon stand to lose 9 million subs by the end of 2018. T-Mobile and Sprint would do worse than we expect, but perhaps not much worse than consensus expects. The incumbents may bear even more of the losses given their dominance at the high end of the market where cable companies will be focused.”

The imminent increase in competition is a major reason why Verizon and AT&T are looking to expand into digital media and advertising. Verizon is working to add Yahoo to a portfolio that includes AOL and its own Go90 video offering, while AT&T hopes to acquire Time Warner for $85 billion after pocketing DirecTV last year.