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December 16, 2022
According to a new forecast from the financial analysts at Morgan Stanley, the US wireless industry will continue to cool next year after enjoying white-hot growth in 2021.
And although the firm maintained a relatively positive outlook on the sector – including for big players like Verizon, T-Mobile and Comcast – it warned that 5G providers might start competing more heavily on price amid tightening economic conditions.
"Carriers could move to cut pricing in order to maintain their subscriber bases," the Morgan Stanley analysts wrote in a report to investors issued Thursday. That could reduce the operators' ability to make money, they noted.
Figure 1: (Source: Abaca Press / Alamy Stock Photo)
But in their forecasts, the analysts argued that they expect operators to mostly avoid price cuts and instead focus on growing revenues with more expensive plans, filled with digital bells and whistles. "A continued adoption of premium plans could also support wireless service revenue growth," they wrote.
Coming off a high
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.
But many experts saw that growth as unsustainable. As a result, most analysts at the beginning of this year predicted that overall wireless industry growth would slow dramatically during 2022. However, it slowed only slightly.
Now, the Morgan Stanley analysts are predicting that 2023 will see a similar gradual slowdown. Specifically, they expect the US wireless industry – including Verizon, AT&T, T-Mobile, Dish Network and cable companies like Comcast and Charter Communications – to collectively add 8.7 million new postpaid phone customers during 2023. That's down only slightly from 8.9 million during 2022 and just below the record 10 million that providers collectively added over the course of 2021.
Picking winners and losers
"We see the biggest slowdown in 2023 adds at AT&T, while Verizon could grow adds modestly yoy [year over year] off a low base, and T-Mobile can do slightly better given this year saw the impact of the Sprint network shutdown," the Morgan Stanley analysts wrote. "We will be watching the growing deployment of eSIM technology to see if it opens the door to higher switching activity, while it should also help carriers lower costs through an easier activation process."
The fact that the Morgan Stanley analysts expect growth from Verizon is noteworthy, considering the operator has struggled throughout much of 2022 to gain new customers.
"Verizon's wireless trends are showing some signs of improvement with a recent recovery in gross add momentum and the benefits of targeted price increases, while pricing-driven churn should moderate," the analysts noted.
Verizon's CEO recently took over direct control of the company's consumer business, potentially setting the stage for Verizon to implement a new and more effective customer-acquisition strategy.
As for T-Mobile, Dish, Comcast and Charter, the Morgan Stanley analysts expect each to manage some gains throughout 2023. On Dish specifically, the analysts now predict that the company will gain 635,000 postpaid phone customers during 2023 – a development that would reverse more than a year of declines in the operator's wireless customer base.
For its part, Dish plans to launch its $25-per-month Boost Infinite service early next year.
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.
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