Q1 Scorecard: Wireless Operators Square Off on Data

The first quarter for the U.S. Tier 1 wireless operators was defined by trying to pitch Long Term Evolution (LTE) smartphones in an iPhone-dominated world and eking out more revenue per subscriber in the face of slowing growth.

For the smaller players, the quarter was a struggle between thinking long-term on LTE and staying competitive in the interim.

In both cases, some were more successful than others.

With the exception of T-Mobile US Inc. , which reports with its parent company Deutsche Telekom AG (NYSE: DT) on May 10, the major operators -- Verizon Wireless , AT&T Inc. (NYSE: T) and Sprint Corp. (NYSE: S) -- have reported their first-quarter numbers, as have smaller carriers Leap Wireless International Inc. (Nasdaq: LEAP) and MetroPCS Inc. (NYSE: PCS) and wholesaler Clearwire LLC (Nasdaq: CLWR).

Here's how they stacked up on some key metrics from the quarter:

Table 1: Tier 1 Q1 Scorecard
Verizon Wireless AT&T Wireless Sprint
Total Revenue $15.4 billion $16.1 billion $8.73 billion
Net Income (Loss) $3.9 billion $3.6 billion ($863 million)
Total Subscribers 93 million 103.9 million 56 million
Subscriber Additions 734,000 726,000 1.1 million
Postpaid ARPU $55.43 $64.46 $59.88
Postpaid Churn 0.96% 1.10% 2%
Source: Operators' Q1 earnings reports

Table 2: Tier 2 Q1 Scorecard
MetroPCS Leap Wireless Clearwire
Total Revenue $1.3 billion $825.6 million $322.6 million
Net Income (Loss) $21 million ($15.8 million) ($181.1 million)
Total Subscribers 9.5 million 6.19 million 11 million
Subscriber Additions 132,000 258,000 586,000
ARPU $40.56 $42.59 $46.83
Source: Operators' Q1 earnings reports

ARPU vs. subscribers
One of the most striking juxtapositions of the quarter is that for all the wireless operators, subscriber growth was stalling while average revenue per user (ARPU) driven by data was on the rise. Sanford C. Bernstein & Co. Inc. analyst Craig Moffett says it's an indication the wireless market is quickly reaching saturation.

"All is not well in Wireless Land," Moffett wrote in a research note. "Smartphone penetration, which has driven the industry's recent gains in ARPU growth, has passed 50 percent of post-paid subscribers in the U.S., suggesting that deceleration of incremental gains, for the industry at least, is a mathematical certainty."

To offset the decline, operators are working to increase the revenue they get from each subscriber they have. That's coming from new pricing plans, the move from unlimited data to tiers, higher upgrade fees and just plain ol' price increases to offset handset subsidies and stalling growth. (See Time for a 4G Price War Already?, MetroPCS Raises the Cost of Unlimited and Verizon Institutes $30 Upgrade Fee.)

Only Verizon and AT&T reported data ARPU, but both saw it rise -- Verizon by 16 percent over last year and AT&T by 15 percent. AT&T has moved 61 percent of its subscribers over to tiered plans as well.

LTE vs. the iPhone
As in quarters past, regardless of how hard LTE devices were marketed, the iPhone still dominated the scene at the big three. AT&T, Verizon and Sprint activated 4.3 million, 3.2 million and 1.5 million iPhones, respectively. That's down 43 percent for AT&T and 24 percent for Verizon from the previous quarter but still represented the majority of sales for both. (See Apple Earns $11.6B on Q2 iSales.)

Android 4G smartphones did grow in popularity during the quarter, however. Sprint didn't divulge its sales, but Verizon managed to sell 2.1 million LTE smartphones in the quarter. AT&T noted that it sold 5.5 million smartphones, and 30 percent of its customers were using 4G-capable devices, although that "4G" definition includes the high-speed packet access-plus (HSPA+) network.

For more on the first quarter

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 5:34:54 PM
re: Q1 Scorecard: Wireless Operators Square Off on Data

There's only so much money you can squeeze out of every smartphone, so what are the wireless operators going to do once smartphones reach saturation? I know their goal is to get each user to own -- and pay for -- mulitple devices to increase ARPU, but there's going to be a limit on what we're wiling to spend there too. Time to get creative.

shygye75 12/5/2012 | 5:34:51 PM
re: Q1 Scorecard: Wireless Operators Square Off on Data

Every business has a saturation point, whether or not we want to admit it. It probably wouldn't be a surprise if ARPU hit $100 at the high end of the market, but what happens after that? Even Apple has hit a satch point in that its growth is now coming from overseas markets (i.e., China). Unless new planets are discovered, that growth path will hit a dead end eventually as well.

Probably around iPhone 6 or 7.

sarahthomas1011 12/5/2012 | 5:34:42 PM
re: Q1 Scorecard: Wireless Operators Square Off on Data

The iPhone made up the majority of sales at both AT&T and Verizon. Both, along with Sprint, have a hard time to convincing consumers to buy anything but the iPhone. I was referring to the "gotta have an iPhone" mindset more so than actual global market share numbers, but that's a fair point.

Flook 12/5/2012 | 5:34:42 PM
re: Q1 Scorecard: Wireless Operators Square Off on Data

How is it an "iPhone dominated" world (as you say in your lead graph) when the story right below shows Apple, with a market share of 10 percent, coming in third--behind Samsung and Nokia? Am I missing something??

hizenson 12/5/2012 | 5:34:03 PM
re: Q1 Scorecard: Wireless Operators Square Off on Data

Just a polite suggestion...  After I read the tier 1 table showing lower subscribers for Verizon compared to AT&T, I realized these figures were being shown on a different basis.  You may want to add a note indicating that the Verizon figures are retail only while the AT&T figures include both retail and reseller.

Verizon and AT&T don't make it easy since they report differently, but Verizon's most recent 10K does have a breakdown of subscribers including an overall total.

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