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Low Upgrade Rates, Strong Cable Performance Highlight US Q2 2023 Wireless Landscape

The Q2 2023 earnings season is in the books for the US carriers and several clear trends from the quarter have come into focus. While much of Verizon and AT&T’s earnings calls centered around “lead-sheathed cables”, creating a buzz in the media,the top trends of the quarter for US operators were the ongoing strength of Xfinity and Spectrum Mobile, prepaid to postpaid/cable migration, and record low upgrade rates at the postpaid carriers. Overall phone net additions for Q2 2023 were down slightly YoY with the prepaid market losing value-conscious consumers to Xfinity and Spectrum Mobile, and as Verizon, AT&T and T-Mobile migrated high-value prepaid customers onto their postpaid plans. Additionally, the prepaid market continues to face challenges brought on by recent acquisitions. Meanwhile, existing customers at the postpaid carriers held off on upgrading their devices as overall economic uncertainty resulted in customers holding off on unnecessary upgrades.

*Carrier earnings and Counterpoint Estimates

Cable Players Continue to Win Subscribers

While each of the postpaid carriers posted positive net phone additions in the quarter, their share of net additions was decisively lower than last year. Verizon continues to lag AT&T and T-Mobile by a significant margin in new customer acquisition, but AT&T and T-Mobile are losing steam as the cable players snag a higher share of net additions. In Q1 2023, Xfinity and Spectrum claimed 53% of total net phone additions. In Q2 2023, the figure dropped to 44% but grew significantly from the previous year’s 29% share.

The prepaid segment saw its third consecutive quarter of overall subscriber losses.The segment is seeing value-driven customers opt for competitively priced plans at Xfinity and Spectrum, while the postpaid carriers continue to migrate high-value prepaid customers onto postpaid plans. Verizon continues to see significant subscriber losses as it is still migrating the customers it obtained through the Tracfone acquisition onto its network and off AT&T and T-Mobile’s networks. Verizon has now lost about 1 million of the subscribers it gained from Tracfone. Similarly, Dish continues to see subscriber losses as it struggles to keep the Boost Mobile brand competitive with Metro and Cricket. Dish is also banking on strong performance from its new postpaid Boost Infinite services to keep the brand afloat, although delays in the launch of Boost Infinite and Dish’s slow network buildout have inspired skepticism.

*Carrier earnings and Counterpoint estimates

Low Upgrade Rates in Postpaid

Device sales were minimal at the postpaid carriers through Q2 2023 as upgrade rates reached record lows and churn remained minimal. Consequently, equipment revenues were down significantly across the postpaid carriers. As our recent PR noted, smartphone shipments into the US were down 24% YoY, in large part driven by customers holding onto their devices for longer amid economic uncertainty, lower levels of innovation in the smartphone market, and ongoing improvements in device durability. Upgrade rates are likely to remain below last year’s levels through the end of the year and into 2024 constrained by macroeconomic headwinds, but upgrade rates should spike towards the end of Q3 2023 with the launch of the iPhone 15 and through the holiday shopping season in Q4 2023.

*Carrier earnings

在2023年第二季度,运营商提供了强有力的促销活动for upgraders on flagship devices, keeping upgrade rates and device sales from falling further during the quarter. The carriers generally lose money on device sales and make up for it from service revenues. However, as the cable players snare a higher share of customer additions, the growth potential from subscriber growth and consequent service revenues is limited. To combat this situation, the carriers are looking to increase ARPU by offering higher value plans, but also by offering plans on discount to better compete with the cable players. We have also seen AT&T and Verizon increase prices on old plans to raise ARPU or encourage subscribers to adopt new service plans. Verizon and T-Mobile both restructured their service plans during Q2 2023, simplifying their menu of services and improving the value offered to customers. Meanwhile, AT&T stood pat with its slate of service plans but announced that later this year it would reduce its autopay discount to $5/month from $10/month, which will improve ARPU.

*From carrier websites

What to Expect in H2 2023

As 2023 marches on, we expect to see the carriers become even more competitive with their service promotions as the cable players continue to win in customer acquisition. Additionally, we see the carriers offering even more “bundling” opportunities, as they aggregate streaming services, internet service, and cellular service to improve their overall value offer. Meanwhile, prepaid will continue to struggle, as customers in this segment have been the worst hit by inflation. The second half of the year will see an uptick in device sales, as usual, with the launch of the Apple iPhone 15 in September and as the holiday shopping season sets in. However, we expect overall smartphone sales to remain down YoY.

US Wireless Industry Calls for More 5G Spectrum

US wireless communication industry body CTIA held its 5G Summit in Washington, DC, on May 17, bringing together industry and government officials.
Industry speakers were united in their warning that more spectrum must be auctioned off to keep up with rapid increases in network traffic.
Leaders also cautioned that without a clear strategy for spectrum allocation, the US risked losing its leadership position in the wireless industry to competitors like China.

Top officials from the US wireless industry and government gathered in Washington, DC, on May 17 for industry body CTIA’s 5G Summit. Speakers reflected on the impressive progress that has already been made in building out 5G networks and opening new use cases, while also looking forward to the work yet to be done and the challenges facing the industry. There was a palpable sense of optimism about the opportunities that 5G still promises and reminders that in many ways it is still in its early stages. But industry leaders made clear that for 5G to meet its potential, policymakers must do more to support it.

How far 5G has come

Speakers at the event laid plain just how much progress has been made on 5G. By most measures, it has been themost quickly adopted wireless generation yet. Between the low-band, mid-band and mmWave frequencies, Verizon, T-Mobile and AT&T cover 320 million Americans. And their mid-band rollouts have been swift – AT&T’s Egal Ilbaz noted that the operator would reach 200 million PoPs by the end of the year, while T-Mobile’s Neville Ray noted that the company was closing in on 300 million PoPs.

*Based off Earnings Call Commentary

5G rollout is quickly transforming how consumers use their devices. It has opened the first killer 5G application –fixed wireless access (FWA). Verizon Business CEO Kyle Malady stated that data consumption is growing faster than it ever has before, partially as users flock to Verizon’s FWA services in available markets, but also as mobile users take advantage of improved bandwidth and lower latency by spending more time streaming video and gaming. 5G has also made FWA a legitimate alternative or supplement to fiber in some markets, especially in rural areas where fiber to the home is too expensive to be a solution. FWA subscriber counts are growing rapidly, with net additions outpacing wireless additions in the first quarter of the year. With great speed, capacity, and low latency, FWA using mid-band 5G provides another strong solution to the toolkit for closing the digital divide.

Where 5G is going next

而5克已经有一个实质性影响the consumer space, its impact will be the largest in enterprise in the coming years as it powers connected factories, smart cities, connected agriculture, and more. Leaders from Verizon, AT&T, T-Mobile, and DISH were all touting the opportunities and flexibility that virtualized, software-defined networks would offer for developers in enterprise, allowing networks to be optimized for the specific needs of the end use case. Distributed computing at the edge will also enable low-latency AI and ML applications for efficiency gains. Progress has been slow in enterprise, and the murky economic environment will discourage some companies from experimenting with 5G to improve their productivity. But with mid-band rollouts nearing completion, the stage is set for 5G to enable the enterprise segment. According to comments made at the event, network operators in China already have over 25,000 orders for private networks. The US is behind here, but that will change in the coming years.

The wireless industry also has a real chance to narrow the digital divide over the coming decade. The advent of FWA provides an alternative to fiber that in many topographies will be more cost-effective while providing the speeds and capacity needed to connect rural communities, enabling commerce, education, and many other activities. But as Senator Lujan of New Mexico noted, the industry must do more to make sure that underserved communities are not left behind and push to close the digital divide through programs like the affordable connectivity program for low-income Americans.

Challenges facing wireless industry

While there are major opportunities for 5G, there are also barriers to reaching its potential. The biggest challenge may be growing geopolitical tensions between the US and China. Leaders from Samsung and Ericsson warned that state subsidies for Chinese infrastructure players make them very difficult to beat on price, leading many countries to opt for Chinese providers for their wireless networks. Additionally, the Chinese state’s clear and aggressive strategy for rolling out 5G has given it a lead and Chinese network operators and enterprises are gaining practical experience in implementing new use cases before Western countries. This will give Chinese companies a significant competitive advantage over their Western counterparts and a head start in creating the platforms of the next decade. Looking further down the road towards 6G,geopolitical tensionsand decoupling between the US and China could result in a split standard, which would hurt the whole industry by reducing scale and interoperability. More consequently, this would undermine global growth. The US must work alongside allies across the globe to retain a single standard from which all can benefit.

*Based off of AT&T Comments at CTIA 5G Summit

面对这些挑战,行业领袖回答e united in calling on US policymakers to reauthorize the FCC to holdspectrum auctionsand open more spectrum for operators. Already, the rate of data consumption is growing quickly, while spectrum is also needed for new enterprise use cases. But just giving the FCC the authority to hold spectrum auctions is not enough – the US government must deliver a clear plan and strategy for when spectrum will become available so that operators, component and hardware providers, and businesses can prepare beforehand to make use of this spectrum. The haphazard and inconsistent nature of US spectrum auctions puts the country’s industry at a disadvantage compared to China.

In conclusion

5G has come a long way over the last several years, but there is still work to be done and opportunities to be actualized. In order to reach underserved communities, serve enterprises and compete effectively on the global stage, more spectrum must be opened to operators and a clear schedule and strategy for spectrum allocation articulated. For the US to retain its leading role in the wireless industry, policymakers and the industry must work hand in hand.

US October Spectrum Auction to be Crucial for AT&T, Dish

The USA FWA and CPE Ecosystem Analysis and Forecast

The Cable Conundrum: How will Incumbent Carriers in the US Compete with Cable Companies on Price in 2023?

在公司urse of 2022, Verizon, T-Mobile and AT&T each offered a bevy of strong promotions on flagship devices in the US that kept subscriber additions high and churn relatively low. In 2022, AT&T and Verizon also increased service plan prices as the two carriers looked to offset the costs brought on by rising inflation.

But towards the end of 2022, the promotional game began to evolve. In addition to offering strong promotions on hardware, carriers started to discount their service plans as well.

T-Mobile adopted a promotion on service plans, offering four lines of unlimited data for $25/month each, along with four free iPhones.
Verizon came out with a similar promotion early in 2023, offering an unlimited starter plan for $25/month with that price guaranteed for three years.

In part, these subsidized service plans are a way for the carriers to win subscribers from one another. But these promotions are also an attempt to address the changing wireless landscape, where the cable companies are snagging subscribers from the incumbent carriers by offering service plans at much lower prices.

Pricing, Bundling and Flexibility at the Core of Spectrum and Xfinity’s Playbook

In Q4 2022, cable players Spectrum and Xfinity were able to pull in a combined 980,000 postpaid phone net additions, much more than those of Verizon, T-Mobile or AT&T. The low prices offered by the cable players are resonating with consumers and driving increased adoption. As it currently stands, T-Mobile charges $45 a month per line with two lines for its cheapest unlimited plan, while Verizon charges $55 a month per line for two lines of its cheapest unlimited plan. Meanwhile, the cable players are offering a line of unlimited for just $30/month to their internet subscribers. The deal is further sweetened with the bundling of multiple services and by adding more lines.This savings calculatorallows consumers to calculate how much they can save by switching to Xfinity. Apart from savings, the core message also revolves around the cable player’s ‘no strings attached’ proposition. Consumers can change their plan month-to-month, which eliminates the fear of commitment and gives users the flexibility to switch. This helps consumers save money and adjust their plan according to their lifestyle in a way that cannot be done with incumbent carriers.

*From company websites

Cox To Intensify Wireless Competition

The success of Comcast and Charter with their Xfinity and Spectrum brands has established a model that other cable companies are fast taking up.Cox Communicationsannounced the launch of their Cox Mobile brand at CES, while Mediacom recently filed for a trademark on the name ‘Mediacom Mobile’ in September 2022. While neither Cox or Mediacom has the scale that Comcast or Charter has, the cable players will only continue to siphon off subscribers from the carriers as the market expects more entrants, and potentially in larger numbers if the carriers do not adapt.

*From company financial statements

The cable companies have been offering superior flexibility and better prices, which means the carriers will need to adjust their approach by offering better value through their service plans. There are two non-mutually exclusive approaches that can be adopted – the carriers can either offer service plan promotions like those currently offered by T-Mobile and Verizon, or they can increase the value of their plans by keeping prices consistent but adding value to them with the inclusion of streaming service subscriptions and other perks that cable companies would lack the means or scale to match. Either way, the cost of service is likely to increase, which means the pot available for device subsidies is likely to shrink.

Hardware subsidies, service bundling and value-added services with premium unlimited plans have been key drivers for prepaid-to-postpaid migration so far. However, given the substantial economic headwinds that the carriers are likely to face in 2023, including the rising cost of debt, subsidized service plans could mean a shift away from device subsidies. Certain incumbent carriers have been dropping subtle hints on halting heavy device subsidies that have been ongoing for the past few years. This transition will be slow and gradual. In the meantime, carriers will shift towards offering promotions on their service plans to defend their territory, especially during points in the year when churn accelerates. That is part of why both T-Mobile and Verizon are offering limited-time promotional offers on service plans instead of making permanent price cuts to existing plans. However, the carriers will be hesitant to be too aggressive in offering low-price service plans because there is little appetite for a race to the bottom in terms of pricing.

As of now, there have been few serious changes in hardware promotions since T-Mobile and Verizon began offering service plan promotions, but the shifting landscape begs the question of how long the two major carriers will be able to keep their feet on both the service price and hardware promotion pedals. Eventually one will have to let up.

Where is US Mobile Subscriber Growth Coming From?

Carriers managed yet another strong quarter of postpaid subscriber growth in Q3 2022
While part of this growth is coming from prepaid to postpaid migration, other factors are helping the total handset subscriber base in the US to grow
Subscriber growth could slow going into 2023 due to macroeconomic headwinds

The hot streak of postpaid subscriber growth continued throughout the industry in the US in Q3 2022, withT-Mobileadding over 800,000 postpaid phone subscribers andAT&Tadding over 700,000. Meanwhile, Spectrum and Xfinity both posted their best quarters of mobile subscriber growth since they entered the wireless market back in 2018.Xfinitymanaged to net 333,000 mobile subscribers while Spectrum netted 396,000.Verizonwas the biggest loser in terms of mobile subscriber growth, with its consumer business managing just 28,000 net postpaid additions. But due to its expansive subscriber base and healthy upgrade rate, the company maintained its position as the largest channel for smartphone sales in the US according toCounterpoint’s US Monthly Sell-Through Tracker.

然而,这种用户增长引起了一个问题Where are all these new subscribers coming from? After an initial dip during the onset of the COVID-19 pandemic, there have been major subscriber gains during the recovery. While an initial boost to subscriber growth due to the transition to work from home, large government stimulus enabling customers to migrate from prepaid to postpaid plans, and the usual trickle of young people getting their first phone was expected, this growth has been sustained for longer than most anticipated.

*Company reports and Counterpoint estimates

One common explanation has been that subscriber growth has been in part the result of prepaid-to-postpaid migration. This helps to explain sustained postpaid subscriber growth but fails to address the bigger picture. With this explanation, one would expect total mobile subscriber growth (including both prepaid and postpaid subscribers) to remain on trend with before the pandemic and simply for postpaid to increase its share of the total mobile subscriber pie. But as the chart here demonstrates, even as postpaid subscriber growth has increased, prepaid subscriptions have remained stable. So, while prepaid-to-postpaid migration is a contributing factor to explaining postpaid subscriber growth, it is inadequate in answering why thetotal number of mobile subscribersin the US is increasing and why most of that new growth is coming in the form of postpaid subscriptions.

There are a few factors that are contributing to growth in the overall mobile market. First, a wider range of age groups is purchasing handsets. A higher share of older adults has phones than in past years and a higher share of children are adopting phones at even younger ages. As a result, the total addressable market continues to expand. This trend also favors the postpaid market where family plan pricing offers a better value than prepaid service plans. While prepaid family plans are cheaper than postpaid plans, postpaid plans offer better total value to customers through add-ons like streaming services and other subscriptions. We expect the service aggregation and bundling to continue into the next year. Second, there has been significant growth in business lines. Separating personal and business communications is increasingly vital to companies for security reasons, so they are more likely to opt to purchase business lines for employees. Additionally, the rise in work from home during the pandemic helped encourage the adoption of business lines for employees as mobile lines served as a replacement for landlines in the office. Competition in the business segment has heated up over the last year, with the carriers recognizing the potential for growth in this segment and due to the hot labor market. Verizon’s business postpaid phone net additions have outpaced consumer postpaid phone net additions in recent quarters as they target this vertical, while T-Mobile is aggressively seeking to gain business subscribers from its weak starting position. This helps to explain the overall growth in mobile lines, as many customers now have two lines, one for business and one for personal use, as well as why that growth is in the postpaid market, as prepaid carriers do not offer services for the business segment.

What can these trends tell us about 2023?

Understanding these trends can help us get an idea of how apotential downturn in 2023could impact the mobile industry in terms of subscriber growth. Since postpaid subscriber growth appears to be driven by prepaid-to-postpaid migration, an expanding market due to demographic trends, and growing business lines, we can assess in turn how each of these growth factors might be impacted by a downturn.

First, prepaid-to-postpaid migration will likely slow and potentially even reverse as unemployment is likely to increase and wages are likely to stagnate amid a recession. As customers look to reduce their spending, some of them who switched from prepaid to postpaid plans may find themselves needing to move back towards prepaid plans to save money. As a result, this would impact the churn levels and subscriber growth seen at the postpaid carriers.

Second, parents may be more willing to hold off on buying their child their first phone to save money during an economic contraction. While smartphones are increasingly becoming necessary across a range of age groups, the trend of adoption among ever younger age groups may slow, with parents seeing limited utility in adoption apart from entertainment. This could impact not just postpaid growth but growth for the mobile industry as a whole.

Third, business line growth is likely to slow as fewer new employees are brought on board and hiring slows. Depending on the size of the contraction, layoffs may result in business line net losses. This would impact the growth of the overall mobile industry and specifically the postpaid market, as prepaid carriers do not offer business services.

As a result, it seems likely that overall mobile subscriber growth will slow heading into 2023, and potentially turn negative in H1 2023, especially in postpaid. Meanwhile, prepaid carriers may gain slightly in the share of the overall mobile subscriber pie as prepaid-to-postpaid migration is likely to turn towards postpaid-to-prepaid migration in a contraction.

US Cable Players Capture Highest Quarterly Postpaid Phone Net Adds Ever

Comcast, Charter and Altice管理的另一个强劲的季度无线子scriber growth in Q3 2022, cumulatively adding 734,000 net mobile customers, the highest number of mobile customer net additions in a quarter yet. Spectrum Mobile (Charter) led the pack with 396,000 net additions, while Xfinity Mobile (Comcast) added 333,000 mobile customers. Both were record highs. Meanwhile, Optimum Mobile (Altice) managed 5,000 mobile customer additions, down from the previous quarter’s 33,000 additions.

*From Q3 earnings

Cumulatively, the cable players added more mobile customers thanVerizonandAT&Tcombined, trailing onlyT-Mobilefor the quarter. Strong service pricing and attractive bundling at the cable players continue to make inroads with customers, especially those looking to tighten their belts due to rising inflation and a gloomy economic outlook. This should benefit the cable players in their search for more customers in the year ahead.

*From Q3 earnings

在电缆解放军用户增长强劲yers, but penetration is still relatively low, with mobile subscriptions only penetrating about 14% of Charter and Comcast’s respective customer relationships. This means that there is plenty of runway for subscriber growth to continue, which should be expected. Mobile is an increasingly pivotal part of Charter, Comcast and Altice’s offerings as legacy video and voice services are losing customers. While mobile will likely never surmount broadband services for the cable players, it is likely to be the second most important service for these companies in the next several years and the primary driver of revenue growth. The pairing of strong mobile service pricing along with bundling opportunities like Charter’s new Spectrum One package should help to improve total revenue per customer while also making it even more difficult for broadband customers to churn away to competitors. Despite the strong growth, the cable players remain relatively small smartphone sales channels compared to the major carriers due to minimal sales through upgrades and high levels of BYOD (bring your own device) according to Counterpoint’sUS Monthly Sell-Through Tracker.

*From Q3 earnings

Beginning in October, Charter doubled down on customer acquisition, announcing new mobile line pricing and a new bundle, Spectrum One. Earlier, a single mobile line of unlimited data at $45/month and two or more lines at $29.99/line/month were available. Now, mobile lines with unlimited data are available at $29.99/month starting with the first line. The new bundle that Spectrum is offering puts together home internet and a single mobile line for just $49.99/month, a very strong offering for a package that if purchased separately would be nearly $85/month. This aggressive pricing should accelerate mobile customer acquisition in Q4 2022 and into 2023.

*From Spectrum’s website

Along with the strong growth in mobile subscribers has come impressive growth in mobile revenues. Spectrum’s mobile revenues were up 40.2% YoY while Xfinity’s were up 30.8% YoY. Due to the extensive Wi-Fi networks of both companies, they are able to offload most of their traffic onto Wi-Fi, keeping payments for using Verizon’s host network at a minimum.

*From Q3 earnings

Operating margins should improve for Xfinity and Spectrum as well in the coming years. Comcast announced last month that it waspartnering with Samsungto build out small cells in key metropolitan areas to offload traffic from Verizon’s host network onto the CBRS spectrum it purchased at auction. Spectrum is yet to make an announcement, but its strategy will likely be the same – to keep costs paid out to Verizon at a minimum. While this will require upfront capex, it will pay off over the long term.

Heading into Q4 2022 and 2023, the cable players are well positioned to continue skimming subscribers off the postpaid carriers. They offer a strong value proposition by bundling mobile and broadband services. Margins should continue to improve as Comcast and Charter look towards building out small cells. As economic conditions turn sour in 2023, cable players should benefit, offering strong pricing for consumers looking to trim down their budgets. Expect the cable players to continue their strong streak of growth well into 2023.

Cable Players Capture Nearly One-third of US Postpaid Phone Net Additions in Q2 2022

The US cable players are continuing to make their presence known across the wireless landscape, even if their total subscribers are dwarfed by those ofVerizon,T-MobileandAT&T. Over the course of the past few years, thecable playershave captured an unignorable number of postpaid phone net additions throughout the industry, snatching subscribers from the major carriers and limiting their growth. In Q2 2022, Xfinity, Spectrum and Optimum Mobile together captured 694,000 postpaid phone net additions. While this lagged AT&T’s 813,000 and T-Mobile’s 723,000, their subscriber growth far outpaced Verizon’s. Together, the cable companies stand as a significant competitor to the wireless incumbents and one that is having a significant impact on the shape of the industry.

*From Q2 2022 earnings releases

Cable players offer strong value

在公司urse of the past two years or so, the dynamics of the US smartphone industry have changed, with the carriers bringing back huge device subsidies that allow many customers to get new flagship devices for free. The cable players played a role in this dynamic, challenging the postpaid carriers to offer better value to their subscribers in fear that the cable players could win them over with their low service plan prices. Based on pricing for two lines of entry-level unlimited plans, the cable companies offer wireless service for half the amount per line that Verizon and AT&T charge. But there are drawbacks. For one, mobile services from the cable companies are only available to existing customers. Additionally, Xfinity and Spectrum both throttle data speeds on their unlimited plans after customers use 20 GB of data, below the threshold of the carriers. The carriers also offer Wi-Fi hotspot data with their unlimited plans, an extra perk the cable players do not offer.

Thanks to their low operating costs due to the leasing of spectrum from the carriers and the dynamic use of existing Wi-Fi networks, the cable companies have been able to offer much lower prices for wireless plans than are on offer at the carriers. This value proposition has been recognized by consumers who are looking to save money amid macroeconomic uncertainty and high inflation.

Competition to stay hot in H2 2022 as Boost Infinite and Cox Mobile launch

The competition between the postpaid carriers and cable companies has helped to keep service and device prices low for consumers even as inflation reached the highest level in decades. The battle over value is likely to stay hot through 2023, asBoostplans to launch Boost Infinite, its long-awaited postpaid service, in Q4, and as Cox Communications launches its own wireless services in several states.

With about 6.8 million customers, Cox Communications may not have the extensive subscriber base that Comcast or Charter have, but its entry into the market shows the impact that Comcast, Charter and Altice have had, pioneering a new model that other cable companies are following. Like its forebearers, Cox Mobile will operate as an MVNO while offloading traffic onto its extensive Wi-Fi network, when possible, to keep costs down. Progress will be slow at first. Right now, Cox Mobile is available in only three locations – Hampton Roads (VA), Omaha (NE) and Las Vegas (NV). Cox offers services in 18 states across the country and the strong value cable companies can offer customers is sure to capture mobile customers. If customer adoption follows in Comcast, Charter and Altice’s footsteps, wireless service penetration of existing Cox customers could be about 10% in three years.

For more info, find the full reporthere.

Which US Carrier will sell the most iPhone 14s?

The release of Apple’s latest flagship smartphones, the iPhone 14 series, on September 7 will unleash fierce demand among consumers who are raring to get their hands on the brand’s latest mobile technology. Fresh upgrades and strong promotions at the carriers should make the iPhone 14 series a strong seller. But where exactly do customers buy their new iPhones? Luckily enough, Counterpoint’sUS Channel Share Trackerfollows model-level sales by sales channel and can help provide an indication of which carrier is likely to sell the most iPhones and which carrier may lag. Source: Counterpoint US Channel Share Tracker

Last September, when the iPhone 13 series was launched, Verizon stores were able to capture 27% of all Apple sales, followed by AT&T at 24% and T-Mobile at 21%. Historically, Verizon and AT&T have had more premium subscriber bases than T-Mobile, which helped them capture a higher share of Apple sales. But this trend may be changing. As T-Mobile has merged with Sprint, it has seen higher uptake of its Magenta Max plan and has seen its customer base become more premium. It has also been selling the most smartphones overall among the carriers in recent quarters. With an increasingly premium subscriber base and a larger share of total phone sales, T-Mobile stores should gain a higher share of iPhone 14 sales at launch this year.

Source: Counterpoint US Channel Share Tracker

Note: Figures may not add up to 100% due to rounding.

Apple sales by channel so far this year

In 2022 so far,Verizonstores have been able to capture the largest share of iPhone sales due to the size and premium nature of its subscriber base. But T-Mobile stores have improved their share of Apple sales, beating outAT&Tstores in several months as it grows its subscriber base and offers impressive promotions to new customers. Apple Store’s share of iPhone sales has seen a decline in recent months due to seasonality, as the demand tends to drop during the summer leading up to the iPhone launch, especially outside of the carriers. The share of iPhones sold at Apple Store will jump in September with the launch of the iPhone 14, from the roughly 8% currently to as high as 15%. Apple tends to prioritize inventory at its own stores where it can sell other hardware and accessories, which also boosts its sales share at launch. The postpaid carriers are expected to dominate iPhone 14 sales at launch, but if demand exceeds supply, as it often does, customers are likely to try and get their hands on the iPhone 14 wherever they can, which could help Best Buy, Walmart, Costco, Sam’s Club and other retailers.

iPhone promotions help drive sales at the carriers

Another major factor that will decide which carrier wins the highest share of iPhone 14 sales will be the promotions that they have on offer at launch. While all carriers currently offer impressive promotions, there are tangible differences that will impact their iPhone 14 sales. AT&T will likely continue to offer its strong promotions to both new and existing customers. Currently, AT&T is offering up to $700 off the iPhone 13. Meanwhile, T-Mobile is offering the same devices for up to $800 over 24 months of bill credits to customers who activate a new line on a qualifying plan and who trade in a qualifying device. Similarly, Verizon is offering up to $800 off the devices to switchers who have a qualifying trade-in and select a qualifying plan. Customers can expect similar promotions of between $700-$1000 off from each of the carriers, though they’ll likely need a trade-in and an unlimited plan.

A wild card in the mix is the cable players. In the past, Xfinity, Spectrum and Altice haven’t been able to match the carriers in terms of promotions on their devices, but their promotions are improving. Another issue that the cable players faced last year were shortages. With limited supply, Apple prioritized sales to the major carriers. The same could potentially happen this year if demand outpaces supply and if COVID-19 and China’s zero-covid policy disrupt production. While a significant portion of new subscribers at the cable players are still bringing their own device, expect the cable players to snag a higher share of iPhone 14 sales this year.

Apple’s growing installed base helps boost service revenues

As Counterpointrecently reported, Apple’s installed base crossed the 50% threshold in the US during Q2 2022, meaning that most Americans now use an iPhone. Strong promotions at the postpaid carriers for Apple’s latest flagship models and sales of the iPhone SE 2022 and older iPhone models at the prepaid carriers have helped Apple capture a strong share of sales. With the upcoming iPhone 14 launch, Apple is likely to further grow its installed base. While most consumers are dedicated to purchasing either Android smartphones or iPhones, there is a small trickle of Android users who switch to iPhones with each new launch, and Counterpoint expects the same with the launch of the iPhone 14.

Apple’s predominance in the US market is foundational to its business model going forward. As our Research Director Hanish Bhatiarecently discussed, the room for further Apple penetration is quite small in the US and Apple will rely on upgrade cycles to continue selling its mobile hardware. But as its hardware business plateaus in the US, Apple is relying more heavily on services, which make up a growing share of Apple’s total revenues. And as Apple’s installed base continues to grow, it is not only capturing revenues from device sales but is opening bringing in a significant amount of lifetime value as it is likely to retain the consumer and sell them accessories, other hardware and, increasingly, services.

美国电话电报公司(AT&T)报告强劲的第二季度数据,因投资者担心啊ver Free Cash Flow Woes

AT&Tannounced its earnings for Q2 2022 on July 21, delivering strong results for its core mobility business. Despitemacroeconomic headwinds, AT&T was able to deliver strong net additions for both its postpaid and prepaid businesses, at 813,000 and 196,000 respectively. Service revenues were up 2% QoQ and about 5% YoY on the back of strong subscriber growth. Equipment revenues were down 8% QoQ, mainly due to spillover demand for the Apple iPhone 13 in Q1 2022 following a supply-demand imbalance in Q4 2021. But equipment revenues were up 7% YoY, suggesting no slowdown in consumer spending on devices despite the highest levels of inflation in 40 years.

AT&T was able to manage strong net additions and minimal churn despite inflation-related price increases. During Q2, AT&T increased prices on single-line plans by $6 per month and on family plans by $12 per month, but this didn’t increase churn or drive customers to Verizon or T-Mobile. One reason for this is AT&T’s strong promotional lineup, which the operator suggested would remain stable in the second half of this year. AT&T offered up to $800 off the Samsung Galaxy S22 series with a trade-in of any Galaxy S-series or Note-series device, regardless of age and condition, as long as the customer chose an unlimited plan. A similar offer of up to $700 off with a trade-in and unlimited plan was available on the iPhone 13 series. For more information on model-level sales by channel, check out Counterpoint’sUS Channel Share Tracker.

AT&T also continued seeing strong uptake for its fiber services with 316,000 net additions, which more than offset the decline in legacy internet services. AT&T’s total consumer fiber subscriber base increased to 6.6 million. The company maintains its plans to lay more fiber after already expanding its footprint by 2 million locations so far this year.

While AT&T reported strong performances for its mobility and fiber businesses, there were signs of weakness this quarter and on the horizon. AT&T’s wireline business was a weak spot in the company’s performance, with its revenues declining 7.5% YoY. Besides, AT&T CEO John Stankey noted that the payment cycle was lengthening asprepaid customersstruggle to pay their bills on time, a trend that tends to emerge amid economic hardship. The company also warned that it saw the macro environment souring in the second half of 2022 and into 2023. But Stankey remained confident that AT&T would be relatively insulated, noting that the low end of the market was more likely to be impacted by inflation and a possible recession.

尽管在相对强劲的表现T managed during Q2, share prices were down over 9% following its earnings call, primarily due to a reduction in free cash flow guidance for 2022. AT&T managed only $1.4 billion in free cash flow for Q2, resulting in the company lowering its guidance from $16 billion for the full year to $14 billion. Free cash flow so far this year only amounts to $4.2 billion, meaning AT&T will need to manage an average of $5 billion per quarter for the rest of the year to meet its guidance. Free cash flow is being held back by high capital expenditures and vendor financing payments, which were up 32% and 38% respectively compared with the same period last year. High levels of capex are expected at least through the end of this year as AT&T ramps up its 5G C-band deployment and continues to lay fiber to more locations.

Follow these links for insights onT-MobileandVerizon.

US Smartphone Inventory at Manageable Levels; Resilient Demand Despite Inflationary Pressures

There have been worries about high global smartphone inventory and weak demand due to high inflation levels. While this might be the story in other regions, the US smartphone market has shown resilience through Q2 2022. Data from theCounterpoint US Monthly Smartphone Channel Share Trackershows the US smartphone market was down 4% MoM but up 2% YoY in May.

Smartphone inventories in the US are higher than last year. However, 2021 may not be the best YoY comparison as the industry was going through 4G LTE chip shortages last year. Smartphone inventories in the US fluctuate between 4-6 weeks but they can go even higher during new device launches and holiday season channel fills.

We believe that the inventories are normal at present given the seasonality of demand, especially ahead of the back-to-school promotional season. The demand has been steady, driven by strong carrier promotions, especially in postpaid channels.

iOS, Android Inventory Levels in US Smartphone Market

Source: Counterpoint’s US Monthly Smartphone Inventory Tracker

Android vs iOS inventory

Apple has the fastest factory-to-consumer shipping timelines among smartphone OEMs. The iOS inventory was very low at the end of 2021 as the iPhone 13 remained in high demand. The inventory started to increase as the initial demand settled and supply improved. Sell-in continued to improve until March 2022 but dropped back again in April due to China lockdowns. We expect Apple’s Q2 2022 sell-in to remain flat YoY.

Androidinventory levels have been higher than in previous years but still manageable. Samsung’s inventory went up in January 2022 driven by the Galaxy S22 series shipments. The Galaxy S22 Ultra accounted for nearly half of the Galaxy S22 series shipments. The Galaxy A13 5G, which is the cheapest 5G device in Samsung’s portfolio, also came in large volumes. Motorola recorded high volumes in Q4 2021 driven by new launches but cooled off in Q1 2021. The brand, too, was impacted by China lockdowns in April 2022 but picked up quickly in May 2022. The Walmart reset was another driver of higher inventories at the end of Q2 2022. This was further supplemented by the launch of new devices from TCL and Nokia HMD, especially in Tracfone channels.

Low-end Android market has growth potential

High smartphone inventory is mostly driven by the low-end sub-$300 Android devices in prepaid and national retail channels. This is manageable ahead of the back-to-school promotional season as the demand is likely to pick up. Besides, with rising inflation, we might see the demand shift back from postpaid to prepaid as consumers shy away from premium postpaid plans and two-year lock-ins. This would be a change from the previous 10 quarters but could further boost demand at the low end.

Verizon, AT&T, T-Mobile and Dish continue to build their prepaid brands. Verizon has strengthened its prepaid presence with the Tracfone acquisition. It now owns Tracfone, Straight Talk, Total Wireless, Net10 and Visible. AT&T, too, enjoys a strong prepaid presence with its Cricket brand. But Dish is likely to be the dark horse that can disrupt the competition in national retail with acquisitions of Republic Wireless, Ting and Gen Mobile. T-Mobile has added national retail doors and its prepaid brand Metro by T-Mobile will remain competitive.

Lastly, as the carriers shut down CDMA networks, they will continue to drive demand for low-cost 4G or entry-level 5G devices. Verizon’s acquisition of Tracfone will drive device upgrades due to compatibility issues as some Tracfone subscribers will migrate from AT&T and T-Mobile’s networks. In addition, DISH must move its Boost subscriber base from T-Mobile’s network to its new MVNO partner, AT&T.

Overall, retail trends in the US market continue to hold strong despite inflationary pressures. Smartphone demand has proved to be resilient both through COVID-19 and the steep inflationary growth of 2021. Though the market can change quickly, early indications are that the US market will see about 3% YoY growth in H2 2022 with a strong Q4 holiday season.

US Smartphone Market: After Q1 Drop, Postpaid to Provide Strong Momentum in Q2

The US smartphone market was off to a slow start in 2022,falling 6%由于各种因素同比。但是邮资已付的动量is expected to push growth in Q2 2022. Below is a quick recap of Q1 2022 from the perspective of carriers, MVNOs and retail channels, as well as some early views on April and Q2 expectations.

AT&T wins postpaid subscribers as T-Mobile growth slows.Verizonand US Cellular posts net-add losses

AT&Tsaw 691,000 postpaid net adds, its best Q1 in a decade. The operator’s consistent promotional offers for both new and old subscribers helped it win share from other carriers.
T-Mobile看到589000年净邮资已付的电话补充说,12月同比下降了23%rease, due to less aggressive switcher offerings and a higher focus on strengthening Sprint customer relationships.
Verizon saw 36,000 net postpaid phone losses. Consumer postpaid phone net losses were 292,000, partially offset by strong business net additions of 256,000. Verizon lost postpaid subscribers, especially to AT&T.
US Cellular had 44,000 net postpaid phone losses, citing increased competition in the market.

Prepaidsales were weak despite tax-season promos

There was strong prepaid-to-postpaid migration, affecting prepaid sales. Q1 2021 also had stimulus money that fueled the economy, which was absent this year, also impacting sales of prepaid devices.
Cricket net phone adds were down 45%, T-Mobile saw a 59% YoY decrease but remained net positive.
On the other hand, Verizon lost 77,000 TracFone subscribers and a further 3,000 Verizon Prepaid subscribers, US Cellular had 18,000 net losses while Dish saw another 343,000 net losses which it attributed to CDMA shutdown effects.

Cable players continue growing, taking subscribers from postpaid carriers

Comcast, Charter, and Altice combined had over 8.4 million subscribers in Q1 2022. While Comcast had the biggest subscriber share at 52%, Charter followed closely behind with 47%.
Comcast saw over 39% YoY subscriber growth, Charter 47% and Altice grew 14%. Comcast’s Xfinity set a new net-add record for the company while Charter’s Spectrum Mobile revenues reached $690 million, an increase of 40.2% YoY. Altice net adds were 12,000 in Q1 2022. It aims to strengthen its retail positioning by opening 75 more retail locations this year.

National retail sales soft

Sales in channels such as Best-Buy, Walmart and Target were weak as inventory was impacted post-holiday sales and some stores limited hours due to Omicron spikes in January. Prepaid demand in these channels remained soft, affecting most of the sales volumes.

April smartphone sales see growth, Q2 inflationary impact less than expected

Overall smartphone sales rebounded in April and are expected to rise mid-single digits in Q2 from the slump in Q1, heavily driven by strongpostpaidmomentum. The promotions environment has improved — Verizon began offering theiPhone 13for free to existing customers with a trade-in instead of just switchers, for example.
AT&T and Verizon both are increasing service or administrative charges for their postpaid plans due to inflationary pressures. Nevertheless, we don’t expect this to have a significant effect on consumer behavior in postpaid. It may cause some people to switch to different plans, but we don’t see postpaid-to-prepaid migration happening.
Prepaid will remain soft, however, even as supply chain issues lessen. This is where inflation may cause more headwinds, especially since smartphone costs have gone up by 10% for some OEMs.
Carriers may begin decreasing their portfolios in Q2, which would affect white-label and low- to mid-end devices. Fewer SKUs give carriers more bargaining power on volume deals.

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美国电话电报公司(AT&T)报告强劲的第二季度数据,因投资者担心啊ver Free Cash Flow Woes

US Smartphone Market: After Q1 Drop, Postpaid to Provide Strong Momentum in Q2

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