August 21, 2014
The U.S. wireless industry has achieved many firsts lately.
From revenue shifts (Data Revenue Finally Exceeds Voice Revenue in the U.S.) to new technology upgrades (U.S. Carriers Race to Launch VoLTE) and changing landscapes in the face of innovation (Major U.S. Carriers Face More Subscribers, Less Revenue) all of this is a testament to the innovation and growth propelling the wireless industry ever-forward.
Forward, at least, until now. It turns out that in Q2, the U.S. wireless industry achieved yet another first – ZERO year-over-year growth in service revenue compared to last year.
This stagnancy poses a threat to the idea that wireless can maintain its upward trend – and many are blaming these statistics on T-Mobile.
Given T-Mobile’s recent unconventional route (T-Mobile Boldly Paves the Way to An Uncertain Future) and subsequent successes (T-Mobile Gains Customers, Advances on Competition) as an “UnCarrier,” the accusations might make sense.
Experts say that T-Mobile began the trend by being the “first to introduce new equipment installation plans in place of subsidies, causing the other operators to respond. As a result, service revenue was lower, as hardware sales went up in its place.”*
That explains the numbers: According to Craig Moffett, analyst for Moffett Research,* service revenue growth is up only 1.7 percent year-over-year — less than half the growth rate of a year ago. And on a sequential basis, even after adjusting for the effect of equipment installation plans, the growth rate is negative.
Despite the lack of growth in wireless service revenue, a carrier earnings analysis from Q2 of 2014 also revealed that mobile data services continued to increase (ever since data revenue exceeded voice revenue earlier this year).
In fact, driven by a growth in tablet usage and tiered data pricing, mobile data services are reportedly on track to exceed $100 billion in 2014.*
Furthermore, the strong mobile data service revenue numbers by top U.S. carriers Verizon Wireless and AT&T also makes them the number two and three (Verizon and AT&T, respectively) mobile data revenue generators in the world. Meanwhile, Sprint and T-Mobile remain in the top 10.
However, mobile data service growth alone isn’t enough to offset the elimination of subsidies and declining voice revenue.
It’s clear that T-Mobile’s strategies have changed industry pricing for good, as carriers now strive to propel more data usage, new pricing promotions and service partnerships* to compensate. Experts speculate that going forward, these trends will only continue, changing the dynamic of carrier earnings altogether.
* Reedy, Sarah. Where Has All the Mobile Revenue Gone?, Light Reading. Light Reading.