Skip to main content

Lower-Cost Mobile Services Win Customers in America

Mobile internet users in North America have endured high-cost services (compared to other global regions) as a result of market consolidation -- where fewer service providers compete for customers. That all changed when the status-quo was broken by T-Mobile's lower prices. People rejoiced. Well, most people.

Some mobile network operators struggle to generate new wireless communication service revenue growth in the U.S., due to the ongoing pricing war and the saturated smartphone market, according to the latest study by Technology Business Research (TBR).

In an attempt to offset declining service revenue, some American mobile network operators are focused on expanding their connected device offerings and increasing equipment revenue through un-subsidized smartphone purchases. However, the smart ones also prepared for this scenario by lowering the inherent high costs within their operations.

"Verizon remained the top-ranked U.S. wireless carrier in 2Q15 and led the industry in postpaid subscriber growth and profitability in the quarter," said Steve Vachon, research analyst at TBR.

Verizon is leveraging its LTE network to create revenue streams, such as the Internet of Things (IoT) solutions and the Go90 mobile video service. But they are having difficulty competing on value, due to the higher price for their mobile subscriber plans.

Opposite Market Development Strategies

TBR believes that Verizon's growing portfolio creates an ecosystem that could retain subscribers without relying on aggressive pricing tactics. Only time will tell if this strategy is successful.

AT&T is focused on retaining smartphone customers by steering them toward connected devices. AT&T led the industry in connected device additions in 2Q15, due to their success in segments such as Connected Car and Digital Life.

T-Mobile and Sprint remained the predominant leaders in the value-based wireless telecom market segment in 2Q15, whereas Verizon and AT&T are placing greater emphasis on their technology -- such as network coverage and growing connected device portfolios.

That being said, T-Mobile garnered the highest postpaid phone net additions in 2Q15, contributing to the company being the only Tier 1 U.S. carrier to report year-to-year service and equipment revenue growth in the quarter.

Conversely, T-Mobile’s competitors are unable to increase service revenue, as they have not been able to generate sufficient subscriber growth to offset the impact of offering discounted service plans. These competitors are often trapped by their high-cost business model and relatively low employee productivity.

Moreover, to compensate for lower service revenue, some troubled mobile service providers are increasing equipment revenue by migrating customers to equipment installment plans (EIPs) and device leasing programs.

Combined wireless capex among Tier 1 U.S. operators increased 3.9 percent year-to-year to $8.6 billion in 2Q15 as Sprint, T-Mobile and Verizon increased spending in the quarter to expand and densify their 4G LTE networks.

Sprint and T-Mobile are in the final stages of their initial LTE deployments and both carriers will extend their LTE networks to reach approximately 300 million POPs by the end of 2015, which will narrow the gap in LTE coverage among U.S. carriers. Therefore, the perceived network technology advantage of Verizon and AT&T will likely become a moot point.

Popular posts from this blog

How AI Transforms Asia-Pacific Industries

The APAC region is undergoing a shift in business technology investment, with artificial intelligence (AI) emerging as the cornerstone of its digital transformation journey. IDC's latest forecast reveals that AI spending in the region will surge to $175 billion by 2028, driven by a compound annual growth rate (CAGR) of 59.2 percent for Generative AI (GenAI). This significant growth underscores the potential across industries, from healthcare to financial services, as organizations race to harness intelligent automation, predictive analytics, and next-generation customer experiences. Artificial Intelligence Market Development Generative AI leads the charge, with its ability to automate complex tasks and generate novel outputs, reshaping operational paradigms. The technology's rapid enterprise adoption is evidenced by a projected tripling of GenAI investments between 2025 and 2028. Healthcare and education sectors are also accelerating deployments, using AI for personalized medi...