In wireless, competition is easing and revenues are poised to rise

According to Deutsche Bank Research, the U.S. wireless industry will likely see growth in service revenues into next year. (Deutsche Bank Research)

According to some of the nation’s top Wall Street analysts, wireless network operators are positioned to reap the financial benefits of a relatively quiet first half of 2018.

“US Wireless becoming a ‘good news’ story,” wrote the analysts at Deutsche Bank Research in a note to investors this week. “This will mark the first full quarter the industry laps the ‘unlimited’ price wars of 2017, and several positive data points have sweetened the narrative for US Wireless in recent periods. From a high level, pricing has stabilized (we have actually seen several fee increases in recent months), competitive intensity has moderated (churn is near all-time lows for VZ/T/TMUS), and the industry’s two biggest disruptors (TMUS/S) have announced plans to merge. In addition, Cable MVNO pricing has not been overly aggressive.”

The Deutsche Bank analysts weren’t the only ones pointing to a subdued period in wireless. “2Q is typically seasonally softer, and combined with a somewhat muted competitive environment, we expect volumes will be relatively subdued,” wrote the Wall Street analysts at Jefferies in a note to investors this week. “Promotions came in pulses, largely around holidays in the latter half of the quarter, though we do not anticipate any significant impacts.”

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Indeed, three of the country’s four nationwide wireless operators have moved to raise prices on their unlimited wireless plans during the past few months. Just today, Sprint introduced a pair of new unlimited rate plans that generally charge significantly more than the operator’s previous offerings. And that move follows similar price increases by AT&T and Verizon.

“We see fundamental trends continuing, with stabilizing ARPU benefiting service revenue, while muted competition continues to support improving margins,” added the Jefferies analysts.

Indeed, as a result of those pricing increases, many Wall Street analysts are projecting a rise in some operators’ financial footing, at least in terms of wireless service revenues and ARPU. “Verizon’s 2Q18 results to reflect a return to (normalized) service revenue growth (yoy), for the first time since late 2014, as well as continued margin improvement,” predicted the Deutsche Bank analysts. That prediction largely dovetails with guidance provided by Verizon itself in 2017.

Nonetheless, the wireless industry’s general move away from heated price competition, coupled with price increases on certain plans, likely will aid operators’ overall financial footing as they head into the latter half of this year.

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