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August 7, 2014
For the first time ever in the US wireless industry, service revenue growth stagnated in the second quarter, and T-Mobile is partly to blame.
It's easy to blame the "uncarrier" for a lot of the dynamics of the second quarter, but here's why: T-Mobile US Inc. was the first to introduce new equipment installation plans in place of subsidies, causing the other operators to respond. As a result, service revenue was naturally lower, as hardware sales went up in its place. (See Tablets, Prepaid, Competition Shake Up Q2, T-Mobile Kills Contracts, Launches LTE Network and AT&T's Next to Shorten Wait for Device Upgrades.)
That isn't the whole story, however. Moffett Research analyst Craig Moffett points out that, adjusted for the effect of equipment installation plans, service revenue growth is up only 1.7% year-over-year -- less than half the growth rate of a year ago. And on a sequential basis, even after the adjustment, the growth rate is negative.
"Service revenue growth in the US wireless market dropped to… wait for it… 0.0% in the second quarter," Moffett wrote in a research note. "That's right. As measured by service revenue, the US wireless industry has not grown one iota in the past year. That has never happened before. Ever."
Find links to all of Light Reading's second-quarter wireless earnings coverage here.
Instead, the growth story of the second quarter was mobile data services, according to industry analyst Chetan Sharma, who actually had service revenue declining in the second quarter, not just remaining flat. He notes that while US mobile service revenue declined 2%, or around $1 billion, in the second quarter, mobile data services continued to increase and are on track to exceed $100 billion this year. Data currently makes up 55% of overall revenue for the operators, driven by tablet usage and tiered data pricing.
Unfortunately for mobile operators, the growth in mobile data services isn't offsetting the effect of killing subsidies and declining voice revenue, at least not yet.
Verizon Wireless and AT&T Inc. (NYSE: T) dominated the quarter with 68% of mobile data service revenue and 68% of the subscription base, Sharma says. That makes them the number two (Verizon) and three (AT&T) mobile data revenue generators in the world, while Sprint Corp. (NYSE: S) and T-Mobile remain in the top 10.
It's likely that these second-quarter metrics are the start of a trend, rather than just a blip. Thanks in large part to T-Mobile's competitive moves, followed by a cascade of responses, the pricing dynamics have changed in the industry. Operators are turning toward driving more data usage, new pricing promotions and service partnerships to make up for it -- trends that you can also expect to continue going forward. (See Carriers Warm Up to Service Innovation, Sprint Plans More Bundled-Content Offers and AT&T Gets 81% of Subs Off Unlimited Data.)
— Sarah Reedy, Senior Editor, Light Reading
Director, Women in Comms
Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.
She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.
As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.
Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.
Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.
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