Wireless Subscriber Trends in 3Q11: Big 3 Still Rule the Roost
Thursday, November 10, 2011 at 2:39PM
Richelle Elberg in 3Q11 Earnings, AT&T:T, Clearwire:CLWR, Earnings Reports: Wireless, Leap Wireless:LEAP, MetroPCS:PCS, Phone Numbers, Sprint:S, U.S. Cellular:USM, Verizon:VZ, Wireless Subscriber Trends

And the Winner is…..AT&T Mobility

I have to hand it to AT&T…though Verizon Wireless is generally considered the “quality network” leader and was expected to start handing AT&T its hat once it obtained the iPhone last February, AT&T has fought back admirably and was in fact the top-growth company in the third quarter in terms of both gross and net subscriber additions. AT&T added 2.1m net new customers in the quarter, bringing its total to 100.7m. Churn was a respectable 1.28% and gross additions approached 6m.

Verizon Wireless, already the nation’s largest wireless service provider, added 1.4m net new customers; based on churn of 1.26% monthly, Verizon added almost 5.5m gross new customers. And Sprint Nextel, which continued to rail against AT&T’s planned acquisition of T-Mobile USA in the quarter, added just under 1.3m net new customers. T-Mobile USA hasn’t released its third quarter results yet, but based on comments in parent Deutsche Telekom’s third quarter report we know that T-Mo lost subs in the quarter. T-Mo’s revenue fell by 3.3% in the quarter YoY; since it also reported that growing data revenue led to an increase in average monthly ARPU, we can assume that subscribers fell by more than the 3.3% revenue decline.

And then there’s everyone else. The subscriber numbers are an order of magnitude smaller when we look at MetroPCS, Leap Wireless, U.S. Cellular…MetroPCS grew its base by a paltry 69k, blaming the slower growth on “seasonal factors” and the “weak economy.” Leap Wireless managed to add 10k net new customers which actually gave the stock a boost considering the big sub losses Leap had been reporting. And U.S. Cellular lost another 145k in the quarter, its biggest quarterly loss this year.

Notably, Clearwire added nearly 1.9m net new customers in the quarter. The vast majority of Clearwire’s customers are of course wholesale customers actually added by its estranged step-parent Sprint Nextel. In fact, it looks to me that without the Clearwire 4G sales, Sprint wouldn’t have grown its base at all in the quarter, though the details get murky. Sprint reported a modest decline in postpaid retail subscriber and boasted strong prepaid net adds, but ongoing losses from its Nextel/iDEN side of the business offset much of those gains. Sprint also said that results at its prepaid subsidiaries Virgin Mobile and Boost improved in the quarter.

So, AT&T and Verizon are (not surprisingly) dominant again, particularly in the postpaid segment. Sprint appears to be winning prepaid share, perhaps from T-Mo, but also from Leap and MetroPCS. Sprint’s release of the new iPhone 4s in mid-October, combined with its unlimited data plans, could help it fight back in terms of market share for post-paid customers in the fourth quarter. Remember that neither AT&T nor Verizon offer unlimited data plans any longer.

If we include Clearwire in the mix, AT&T, Clearwire, Verizon and Sprint accounted for 32%, 28.5%, 21.2% and 19.3% of the total net additions in our sample for the quarter—leaving the “also-rans” with negative market share. But considering that Clearwire’s subscribers are also Sprint subscribers, I took a look at market shares excluding Clearwire. In this scenario, AT&T grabbed nearly 45% of net adds; Verizon got just under 30% and Sprint garnered about 27%. Once again, the other public companies lost share to the big three.

I think the biggest takeaway from this exercise is the fact that AT&T continues to be VERY dominant in terms of wireless market share—which could make it tough to get court approval for the pending T-Mo buy. But with T-Mo losing subs, it’s still a mystery to me why AT&T even wants it. Of course, the substantial breakup fee that it will owe to DT is no doubt a factor, but, as I’ve written before, there are better ways for AT&T so spend $39b!

Article originally appeared on JSI Capital Advisors (http://jsicapitaladvisors.com/).
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