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August 13, 2014 — by WEBOOSTSHARE ARTICLE
Happy Wireless Wednesday! This week we’re looking at the Q2 report from @FierceWireless about how Verizon, AT&T, Sprint, T-Mobile and TracFone stacked up against each other. Keep reading!
Jackdaw Research analyst Jan Dawson has assembled 13 slides that provide an in-depth look at how Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) performed in the second quarter. Dawson also covers América Móvil’s U.S. MVNO, TracFone Wireless, which is by far the nation’s largest MVNO. TracFone’s service piggybacks over the networks of Verizon, AT&T and other top carriers.
Dawson’s research covers relatively standard metrics including revenue growth and net adds, but also includes deep dives into prepaid vs. postpaid performance, subscriber acquisitions vs. losses, and net additions by device type.
Thanks to a new partnership between Dawson and FierceWireless, we’re publishing these slides exclusively for a week. These 13 slides are part of a larger report Dawson has assembled on the second quarter, which he publishd here. (Check out his first quarter report here.)
Check out Dawson’s second quarter slides and commentary below, and let us know what you think in the comments!Jan Dawson’s commentary: Over the last several years, we’ve moved into a period of slower revenue growth as the US market reaches saturation, and all four major network operators have seen their growth slip below 10% year on year. However, MVNO Tracfone has managed to grow more quickly, and saw a nice bump in year on year growth in the quarter. At the same time, there’s significant variation between the four major network operators too, with Sprint struggling to achieve consistent positive growth, and T-Mobile dramatically increasing its growth rate over the last several quarters. AT&T and Verizon have been roughly neck and neck, although AT&T’s aggressive move to get customers onto Mobile Share plans and Next has dented revenues this past quarter and will likely do so for several more quarters to come, because it’s giving subscribers who were previously on subsidy plans a break on their service revenues even before they’ve started paying for their own phones. Some 17 million subscribers are in this “pre-Next” category, compared to just 7 million who are already on Next plans, and over the coming quarters AT&T expects 90% of these subscribers to move to Next billing for their upgrades, which will start growing revenues again. Verizon, meanwhile, is the most consistent performer, with revenue growth at 5-8% every quarter. The major drivers of revenue growth continue to be the addition of data plans to existing lines, growth in the size of the data bucket attached to those plans, and the addition of additional devices such as tablets to those lines.Jan Dawson’s commentary: This chart is the best possible argument for the merger of T-Mobile and Sprint, whose margins languish well below those of AT&T and Verizon, in large part due to their smaller scale. High fixed costs apply in the wireless market when you’re a network operator, and these are spread over far fewer subscribers at both Sprint and T-Mobile than they are at Verizon or AT&T. Verizon has also shifted a greater proportion of its operating costs to its wireline business than AT&T, boosting its wireless margins but depressing its wireline margins. Sprint has seen a significant improvement in its margins in the last two quarters, but T-Mobile’s margins are worsening as the cost of its subscriber acquisitions takes its toll. Since many of T-Mobile’s Uncarrier initiatives involve discounting and other financial incentives, its margins have naturally been depressed. Jan Dawson’s commentary: This comparison shows the subscriber bases of the major US wireless operators, with one significant caveat: Verizon has long since stopped reporting its wholesale and connected devices subscribers, and as such we’re only getting a partial picture of Verizon’s base. But what’s clear here is that each provider has a different focus. Verizon is the largest postpaid carrier by some margin, Tracfone is the largest prepaid operator, AT&T has the most connected devices (M2M) subscribers and the most wholesale subscribers, and Sprint and T-Mobile have a similar mix of all four subscriber types. The relative scale of the two largest carriers compared with the two smaller network operators is also highlighted by this chart: both AT&T and Verizon have around double the subscribers of Sprint and T-Mobile today, especially if Verizon’s wholesale and connected devices subs are factored in. That’s an insurmountable obstacle to both effective competition and higher margins for both of the smaller carriers.
What carrier do you have, and what do you think of this information? Let us know in the comments section below!
If you want to see the rest of the slides alluded to in the article, just click here.SHARE ARTICLE