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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.

U.S. operators will improve service revenue in 2H18 via continued subscriber growth and adoption of premium unlimited data plans

HAMPTON, N.H. (Sept. 11, 2018) — Wireless revenue rose 2.4% year-to-year to $59.1 billion among U.S. carriers covered in Technology Business Research Inc.’s (TBR) 2Q18 U.S. & Canada Mobile Operator Benchmark. The increase came as a result of higher equipment revenue spurred by the adoption of premium devices as well as improving service revenue trends. Verizon and AT&T (when excluding the impact of the ASC 606 revenue recognition standard) were able to return to year-to-year service revenue growth in 2Q18 as the bulk of customers have transitioned to nonsubsidized service plans. Service revenue is also benefiting from customers migrating from lower-priced tiered data plans to more expensive unlimited data plans and will be further aided by the recent launch of new premium unlimited data tiers, such as Verizon’s Above Unlimited and Sprint’s Unlimited Plus plans.

Graph depicting 2Q18 wireless revenue, OIBDA margin and year-to-year growth

Service revenue will also benefit from U.S. operators sustaining smartphone and connected device subscriber growth in 2H18. “Despite growing smartphone saturation, all Tier 1 U.S. operators were able to gain postpaid phone net additions in 2Q18 as opportunity remains to target first-time wireless customers, including young adults and immigrants entering the country,” said TBR Telecom Analyst Steve Vachon. “Postpaid phone subscriber growth is also coming at the expense of prepaid growth, which is slowing as more customers qualify for postpaid plans as the economy improves. Operators are also expanding their connected device portfolios in areas including wearables and connected car to bolster postpaid subscriber growth. The Apple Watch 3 has particularly bolstered postpaid connections as the device is the first Apple Watch model capable of receiving LTE connectivity.”

Combined wireless revenue among Tier 1 Canadian carriers rose 5.1% year-to-year to $6.2 billion due to continued postpaid additions spurred by shared data programs and expanding LTE-Advanced coverage. The postpaid market in Canada continues to flourish, with Bell Mobility and Rogers increasing postpaid net additions year-to-year in 2Q18, in part due to the country having a significantly lower wireless penetration rate, which is currently estimated at about 87%, compared to the U.S. Canadian operators are also bolstering postpaid subscriber growth by providing low-cost connectivity options to support connected devices, including tablets and wearables, as part of their shared-data family plans. Competitive pressures are challenging average revenue per user (ARPU), however, as Bell Mobility and Telus experienced year-to-year blended ARPU declines in 2Q18 as the companies priced more aggressively to maintain market share. ARPU declines were also driven by Tier 1 Canadian operators offering targeted promotions to combat aggressive pricing offers from regional companies such as Videotron and Shaw’s Freedom Mobile brand.

The 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, Verizon, Sprint, T-Mobile, U.S. Cellular, Rogers, Telus and Bell Mobility.

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].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information, please visit www.tbri.com.

 

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