Editor’s note: Eric Costa, an analyst in Technology Business Research’s Networking & Mobility practice, explains how LTE and new data services will drive revenue for wireless operators.
The top two Tier 1 U.S. operators continue to dominate the market in revenue and margins. Verizon pulled further ahead of AT&T during 1Q13 with higher revenue growth, more subscriber net additions and better margins.
Verizon leads the U.S. wireless industry in revenue and subscribers due to its time-to-market lead in LTE and shared data plans that are spurring increased connected device adoption. In 1Q13 Verizon grew revenue 7.4% year-to-year and netted 720,000 additional retail subscribers. Verizon will continue to grow revenue as LTE connections increase to more than 50% of its postpaid subscriber base by year-end and connected devices continue to provide additional data revenue streams in verticals such as home automation and transportation.
AT&T reported positive subscriber and revenue growth in 1Q13, yet continued to lose ground to Verizon as Verizon’s Share Everything plans outperformed AT&T’s Mobile Share plans. AT&T will remain No. 2 in the U.S. in 2013 until it can capitalize on its machine-to-machine segment to drive additional revenue growth over the next two years in key verticals, such as automotive, healthcare and utilities.
AT&T will remain focused on LTE and small cell deployments throughout 2013 to support the rise in demand for data services and drive revenue growth. The operator will continue to increase operational efficiency by deploying LTE under its Project VIP initiative, which put the company ahead of schedule in deploying its network.
Sprint’s 1Q13 performance was negatively impacted by weak revenue growth, including 1.7% year-to-year growth from the wireless segment, in addition to anemic subscriber additions in the company’s postpaid segment. Sprint will focus on completing the investment phase of Network Vision, strengthening its robust prepaid segment and improving postpaid subscriber retention to refortify its wireless business.
Sprint is losing more than one of every two iDEN subscribers, many of whom are churning to AT&T’s push-to-talk network. Sprint remains ahead of schedule and plans to shut down the final pieces of the iDEN network by midyear, which means the operator has another rough quarter ahead before subscriber and financial gains get any easier.
North American operators remain focused on LTE builds and boosting postpaid revenues with increased connections from shared data plans. As a whole, operator industry capex spend decreased in 1Q13, primarily due to AT&T and Verizon. TBR believes that capex spend will slowly decline through 2014 as larger operators wrap up LTE deployments and as operators transition from 3G to LTE networks.
The connected device segment will create revenue streams and drive growth in the wireless industry. Operators are preparing for this growth with solutions in security, automotive, healthcare and utilities. AT&T and Verizon are using shared data plans to help drive faster connected device adoption in 2013. Connected device net additions among Tier 1 operators totaled 1.4 million in 1Q13, up from 1.1 million in 4Q12.