What to expect from Verizon and T-Mobile in Q2

Verizon is scheduled to report its second quarter 2023 results in roughly two weeks, and most analysts don't expect the company to reverse its customer losses, despite the fact that Verizon recently introduced new pricing plans and a refreshed management team.

"We expect postpaid phone losses of -153,000," wrote the financial analysts at TD Cowen in a recent note to investors. Verizon is scheduled to report its quarterly results on July 25.

However, the analysts argued that Verizon is in a relatively stable place. They said they expect the company to continue to grow its wireless service revenues, and they don't expect much fallout from the price hikes Verizon enacted earlier this year.

"We still favor the stock in a recessionary environment," they noted of Verizon.

Verizon and its rivals are facing increasing competition from each other and from the nation's cable companies, which are offering increasingly inexpensive wireless services. Just this week, cable firm Astound said it would expand its T-Mobile-powered mobile service into a number of new locations, including New York City.

There are mounting indications that the outsized growth in the US wireless industry is coming to an end. Indeed, TD Cowen estimated that the US wireless industry collectively would gain around 1.92 million new postpaid phone net customer additions in the second quarter, a figure down 15 percent from the same quarter a year ago and down 3 percent from the first quarter.

T-Mobile on the rise

According to estimates from TD Cowen and other data sources, it appears T-Mobile is poised to continue leading the market in customer growth.

"Despite the headwinds, we continue to favor T-Mobile as a top pick," the TD Cowen analysts wrote. Specifically, the analysts expect T-Mobile to report the addition of 733,000 new postpaid phone customers during the second quarter of 2023, "which should lead the industry," they wrote.

Other firms offered similar views.

For example, KeyBanc Capital Markets recently published a report on Americans' spending trends, based on data from roughly 1.8 million KeyBank credit card and debit card customers. The firm found that monthly spending on T-Mobile's products and services rose 53.7% year over year in June, up from 47.7% in May. AT&T meanwhile grew 25.6% year over year in June, from 15.6% in May.

"Verizon continues to have the lowest growth at 1.9% year over year" in June, the analysts wrote.

The FWA equation

Finally, no discussion of the nation's big cell phone providers is complete without a mention of fixed wireless access (FWA). After all, 5G fixed wireless Internet services – which run alongside 5G mobile services – have managed to capture virtually all of the growth in the US broadband Internet market in recent months. And some analysts predict that trend will continue through next year.

Some new data points reflect that situation. "Downloads for T-Mobile's fixed wireless app accelerated into June," wrote the financial analysts at Evercore in a recent note to investors.

The analysts noted that demand for the app is lower now than during the holidays, when T-Mobile offered an FWA promotion. Nonetheless, "we expect ~500,000 T-Mobile FWA net adds in Q2, assuming a similar decline in churn that the service saw in Q1."

Interestingly, the financial analysts at New Street Research combed through the data that T-Mobile and Verizon submitted to the FCC about their FWA offerings. They found that T-Mobile claimed to offer FWA to fully 124 million locations. However, the operator said it offered 100Mbit/s speeds or greater to just 25.4 million of those locations.

Similarly, Verizon said it offers FWA to around 30 million locations and that just 3 million received speeds of 100Mbit/s or greater.

"Far fewer homes receive FWA speeds of 100Mbit/s than one might think, given the impact that the product has had on the broadband market," the analysts wrote.

They continued: "This sets up two interesting possibilities: either households need far less speed than we have been conditioned to believe, or many of the households that have adopted the product are going to discover that it doesn't meet their needs. We suspect both are true, in part."

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano