Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.
May 1, 2023
Executives from Charter Communications and T-Mobile squabbled last week over their quarterly customer numbers, with T-Mobile's CEO raising questions about the substance behind Charter's mobile line additions.
Specifically, Charter reported adding a whopping 686,000 new mobile customer lines during the first quarter, far above the 542,000 that most Wall Street prognosticators expected. The financial analysts at New Street Research called the results "insane."
But T-Mobile's CEO Mike Sievert suggested that the figures were largely driven by Charter's offer of a free line of service, and as a result were "kind of low calorie [customer] net adds." Charter officials blasted such comments as "false market chatter," arguing that the vast majority of its new mobile lines are active, paying smartphone customers and not those simply seeking short-term discounts.
Figure 1: T-Mobile CEO Mike Sievert
(Source: UPI/Alamy Stock Photo)
Analysts appeared mixed on the topic.
"Wireless economics [at Charter] are improving from a starting point that we think is better than people realize," wrote the New Street analysts. "Wireless is still a material headwind to EBITDA [earnings before interest, taxes, depreciation and amortization] because gross adds are accelerating."
But the analysts at Wells Fargo seemed far more skeptical. "It seems highly plausible that cable is benefiting from free line promotions and/or prepaid migration," they wrote in a recent note to investors. "We think promotions like Spectrum One [from Charter], when prices reset in one year, will carry a high risk of churn. While the cable cos no longer break out wireless EBITDA, it's hard for us to imagine mobile contributing to overall profitability. And while cable should not be taken lightly, we think the subscriber add numbers can be highly misleading."
"We think that more than half of the [Charter] additions came from Spectrum One or a free line. Those lines are at high risk," wrote analyst Jim Patterson of Patterson Advisory Group in his weekly newsletter.
Charter acknowledged on its Q1 call last week that it is benefitting from Spectrum One, but execs stressed that the bulk of its new mobile lines are coming from its existing broadband subscriber base.
The wireless bubble remains
More broadly, the debate added another component to ongoing worries that the US wireless industry in general will begin to cool after several years of outsized growth.
According to the financial analysts at TD Cowen, wireless operators collectively added a total of 1.9 million new postpaid phone customers during the first quarter of 2023, ahead of their initial expectations of 1.7 million. That figure might shift slightly following final reports from the likes of Dish Network and Altice USA, but it's still far ahead of broad expectations of a decline in the number of new phone customers entering the sector.
Indeed, 2021 was a record year for the US wireless industry as operators collectively acquired almost 10 million new postpaid customers – roughly double historical figures. According to analysts and wireless execs, there were a variety of factors driving growth, including a migration of customers from prepaid to postpaid plans, growth in the sale of services to business users and an increase in the number of young children getting a phone.
Many experts continue to argue such growth is unsustainable. However, a broad slowdown did not materialize during 2022. And it still remains missing in early 2023 figures.
Nonetheless, some operators believe it's coming.
For example, AT&T's CEO John Stankey said the operator continues to expect the operator's customer figures to "normalize" to the rates it recorded prior to the start of the COVID-19 pandemic. And in its investor fact sheet, T-Mobile noted that it's seeing "continued normalization of industry growth toward pre COVID-19 pandemic level."
"Our intent here is to grow and to grow more and to continue the path that we're on," said Chris Winfrey, Charter's CEO, during his company's earnings call last week, according to Seeking Alpha. "So I think this is just the beginning, and we're excited about what we're doing, not just from a mobile perspective, but from an overall connectivity standpoint and the value that we can bring to customers both in qualitative product and save them a lot of money."
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
You May Also Like
Rethinking AIOPs — It's All About the DataMar 12, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Fiddling with Fixed WirelessMar 21, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Cable and 5G: The Odd Couple?Apr 18, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Delivering the DAA DifferenceMay 16, 2024