T, PCS, LEAP: Wireless Industry Trends Deteriorate, Says Bernstein
Posted on May 15, 2012 at 13:11 PM EDT
Bernstein Research's Craig Moffett today reiterates a rather dour view of the U.S. wireless industry, writing that growth in " post-paid " subscribers in Q1 was just 0.2%, when stripping out mitigating factors, which he writes is "the lowest growth rate on record." Moffett writes in response to what he says has become the " Goldilocks " consensus on the U.S. cellular industry, a belief that while growth is slowing for the industry, what remains will be more profitable be because "carriers may be more disciplined about handset subsidies " that have eaten into profits in recent years. That view has merit, he writes, but the problem is that growth trends, and pricing, are "more complex than they appear." Q1 saw the industry's first-ever decline in post-paid subs , he writes, down 35,000, quarter over quarter. But when removing "internet devices" from Q1 results, writes Moffett, the drop in actual handset subs was worse, at 635,000. Moreover, although average revenue per user (ARPU) overall was flat in Q1, "the best result in years," it can't last: ARPU is rising as more and more customers add smartphones. But penetration of smartphones is now north of 50% in the U.S., suggesting that this tailwind to ARPU will fade. Underneath is something more troubling; the revenue being generated by each smartphone is falling, and rapidly so […] The overall post-paid ARPU increase has been driven only by mix; by our estimates, at AT&T the ARPU of incremental smartphone subscribers added in 2011 was just $72, down -18% from $88 in just three years ago. The non-handset devices, such as laptop cards, he adds, have "much lower ARPUs."