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Competition from MVNOs and smaller rivals limits subscriber growth for Tier 1 U.S. and Canadian operators

Wireless revenue rose 2.2% year-to-year to $64 billion among U.S. operators covered in Technology Business Research Inc.’s (TBR) 4Q18 U.S. & Canada Mobile Operator Benchmark, driven by continued subscriber growth and adoption of premium smartphones. All benchmarked U.S. operators except Sprint were able to gain postpaid phone net additions in 4Q18 as opportunity remains to target first-time wireless customers in the country. Postpaid subscriber growth is also fueled by prepaid migrations as many subscribers are moving to postpaid plans for benefits such as bundled streaming services and increased LTE data limits for mobile hot spots.

4Q18 Wireless Revenue, OIBDA Margin & Year-to-year Revenue Growth

Subscriber growth for U.S. Tier 1 operators is, however, threatened by the growing momentum of new mobile virtual network operators (MVNOs) entering the market. Comcast’s Xfinity Mobile and Charter’s Spectrum Mobile are attracting wireless customers via low price points and the convenience of being able to enroll in multiple services through a single provider. Altice also plans on providing wireless services in 1H19, giving the company the opportunity to cross-sell mobility services to its current residential base of over 4.5 million customers. TBR also anticipates Google Fi, which was rebranded from Project Fi in November, will gain further traction in 2019 as the brand is launching new incentives to attract customers including bring-your-own-device options for most Android and iPhone smartphone models.

Combined wireless revenue among Tier 1 Canadian operators rose 6% year-to-year to $6.9 billion due to continued subscriber growth spurred by shared data programs and expanding LTE-Advanced coverage. However, subscriber growth for Tier 1 Canadian operators is limited by mounting competition from smaller competitors. Tier 2 Canadian operators, most notably Shaw Communications’ Freedom Mobile and Quebecor’s Videotron, which now have a total of about 1.5 million and 1.1 million customers, respectively, are accelerating subscriber growth via their pricing promotions and network investments. TBR anticipates Freedom Mobile will further disrupt the Canadian wireless market in 2019 as the company will expand LTE coverage to an additional 1.3 million Canadians throughout the year in markets in British Columbia, Alberta and Ontario.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

Opportunities for wireless subscriber growth remain plentiful for U.S. operators

Cable providers are disrupting the U.S. wireless market

Subscriber growth for U.S. Tier 1 operators is being limited by the growing momentum of Comcast’s Xfinity Mobile brand, which outperformed AT&T and Sprint in postpaid phone net additions in 3Q18 and now has a base of over 1 million subscribers. Xfinity Mobile will become a stronger competitor in the U.S. market over the next several years as it expands its retail footprint and Comcast gains additional broadband customers to which it can cross-sell wireless service. Spectrum Mobile, which became available across Charter’s footprint in September, will also disrupt the U.S. wireless market by offering similar pricing incentives as Xfinity Mobile.

 

TBR’s U.S. & Canada Mobile Operator Benchmark details and compares the activities of the largest U.S. and Canadian operators, including financial performance, go-to-market initiatives and resource management strategies. Covered companies include AT&T (NYSE: T), Verizon (NYSE: VZ), Sprint (NYSE: S), T-Mobile (Nasdaq: TMUS), U.S. Cellular (NYSE: USM), Rogers, Telus and Bell Mobility.