According to a handful of financial analysts, the wireless industry is poised for another quarter of moderate, stable customer growth.
And that’s noteworthy considering the nation’s big wireless network operators have all engaged in multiple pricing increases in recent months. Indeed, AT&T, Verizon and T-Mobile have all raised prices on fees and services across broad sections of their respective customer bases, moves that could encourage some customers to look for alternatives.
Moreover, T-Mobile, AT&T and Verizon are all also dealing with the end of the US government’s Affordable Connectivity Program (ACP), which helped some low-income customers pay for their telecom services. According to one 2023 survey, fully 60% of the program’s 23 million recipients were applying their ACP subsidies to mobile services. The end of that program has raised fears that customers might no longer be able to pay their telecom bills.
Nonetheless, “wireless is enjoying an unusually benign competitive environment,” wrote the financial analysts at New Street Research in a recent note to investors. The analysts noted that, in general, operators’ average revenues per user (ARPUs) are rising while their free cash flow (FCF) is growing.
Others offered a similar take.
“We are positive on wireless heading into 2Q earnings. We see low phone upgrade rates resulting in low churn, and expect ARPUs to rise,” wrote the financial analysts at KeyBanc Capital Markets in their own recent note to investors.
The expectations
In general, the analysts expect T-Mobile to continue to lead the industry in net postpaid phone customer additions. For example, the financial analysts at Evercore predict T-Mobile will gain 650,000 postpaid phone customers in the second quarter of this year, a figure that would be above its first quarter performance.
“T-Mobile continues to take share, as it has done every quarter since the merger with Sprint,” added the financial analysts at New Street Research. They said they believe T-Mobile’s growth rate is starting to slow in big markets, but that the company is offsetting that slowdown with growth in smaller markets.
AT&T, meantime, is expected to gain 260,000 new postpaid phone customers, according to Evercore. That would be a decline from its first quarter performance.
As for Verizon, most analysts expect the company to continue its upward trajectory following the unveiling of its new logo. Specifically, the company is expected to gain 125,000 postpaid phone customers, according to Evercore – a reversal from its first quarter losses. Part of that growth may be due to Verizon’s new $10 per month second number offering.
Overall, though, wireless industry growth in the US is slowing. The TD Cowen analysts predict that industrywide postpaid phone net customer additions will top 1.85 million in the second quarter of 2024, a figure that’s down 11% from the second quarter a year ago.
As in past quarters, cable companies like Altice, Comcast and Charter Communications are expected to account for almost half of the overall US wireless industry’s net customer additions.
Open questions
As each of the nation’s big wireless network operators reports its second quarter results over the course of July, observers will be listening for commentary on a number of key topics.
The ongoing collapse of the ACP program will likely be top of mind for many market watchers. It’s not clear how many existing ACP customers might cancel their service as the program ends, or whether they will continue to pay for their mobile services using whatever funds they might have. Those same questions will likely plague wired Internet providers, albeit to a greater degree since mobile services are often considered essential to modern life.
Another big question is how wireless network operators might prepare for the second half of 2024. Apple is widely expected to release a new iPhone in the fall, and it’s not clear whether that phone and others like it will drive customers to upgrade their existing devices. Those “upgrade” rates have been historically low in recent years, but 2024 might be the year that large numbers of US customers decide they want a new phone. That’s important for network operators considering customers often switch network providers when they buy a new phone.
According to the financial analysts at TD Cowen, AT&T could face a difficult financial situation later this year if large numbers of customers opt to upgrade their phones. That’s because AT&T often offers steep phone discounts, and because it counts a large number of iPhone users.
“We believe AT&T is most at risk among the carriers,” they wrote on the topic.
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