Wireless customer growth to remain strong in Q3 – analysts
According to several financial analysts, the US wireless industry isn't showing any signs of slowing down. That's good news for AT&T and Verizon – and especially good news for T-Mobile.
"We recommend staying long [on] T-Mobile into the third quarter 2022 earnings as the only carrier we confidently feel can meaningfully grow both subscribers and EBITDA [earnings before interest, taxes, depreciation, and amortization]," wrote the financial analysts at Wells Fargo in a recent note to investors.
Morgan Stanley analysts agreed. "Our top pick in telecom services remains T-Mobile," they wrote in their own note to investors.
Overall, analysts expect US wireless operators collectively to continue reporting solid customer growth through the third quarter of 2022. And they predict that growth will continue through the remainder of the year.
AT&T and Verizon are scheduled to report their third quarter results later this month, and T-Mobile is expected to do so shortly thereafter.
"Despite ongoing expectations that wireless [customer] adds are set to fall back to pre-COVID levels, we expect another robust net add quarter in the US and Canada, with roaming revenues, plan mix and selective price increases helping," wrote the Morgan Stanley analysts.
They said they expect AT&T, T-Mobile and Verizon to collectively add 1.4 million new postpaid phone customers in the third quarter, which is roughly similar to the 1.5 million they added in the second quarter of 2022. It's also not far off from the 2 million they collectively added in the third quarter of 2021.
Other analyst firms offered similar growth projections. For example, the financial analysts at Cowen forecast total postpaid phone net customer additions of 2.1 million, down just slightly from previous quarters.
All the firms differ slightly in how they tabulate operators' customer counts. But among the three big US wireless network operators, growth isn't expected to be even.
Verizon has already acknowledged that it expects to report an overall loss of customers in the third quarter. Officials from AT&T and T-Mobile, on the other hand, have hinted that they continue to expect to grow their customer bases.
"Verizon [customer] adds will again be pressured as consumer churn picks up after price increases, but the company appears pleased with a recent pick up in store traffic," wrote the Morgan Stanley analysts. "We expect T-Mobile to top AT&T on net adds as the Sprint integration winds down and churn pressures abate."
Cowen analysts said they expect T-Mobile to report phone customer additions of 774,000, just ahead of AT&T's 661,000. They said they expect Charter to add 350,000 new mobile customers, slightly over Comcast's 315,000.
FWA picks up
All the analyst firms expect T-Mobile and Verizon to continue to report blockbuster performances in their respective fixed wireless access (FWA) businesses.
"After stealing the show in the second quarter by taking over 100% of broadband industry [customer] adds, we expect sequential improvement in fixed wireless adds for both T-Mobile and Verizon," wrote the Morgan Stanley analysts. "We expect T-Mobile to add 600,000 and Verizon to add 303,000 FWA customers this quarter."
Cowen's forecasts are similar, with the firm expecting T-Mobile to add 575,000 new FWA customers and Verizon to add 280,000 new FWA customers.
Wells Fargo analysts similarly contend that T-Mobile and Verizon "are poised to accelerate the pace of fixed wireless net additions into the third quarter."
"We project FWA [customers] will comprise over 90% of the industry total in the third quarter. The net [customer] adds continue to be concentrated in urban areas, with ~70% of T-Mobile's subscribers in metro or suburban areas (~30% rural) vs. +80% for Verizon," continued the Wells Fargo analysts. "And while it's fair to assume that the metro markets may become more challenging to penetrate in the next 1-2 years as the carriers conserve spectrum capacity for mobile, new opportunities will emerge in rural America as new swaths of midband spectrum are built outside dense metro corridors."
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