Wireless operators largely are expected to maintain their market share in the first quarter, which is typically a weaker quarter than the holiday-fueled fourth quarter. However, the seasonality of the wireless sales cycle is expected to be flattening, with less variation among the four quarters, according to SG Cowen & Co.
Still, Merrill Lynch estimates that net customer additions will fall off by more than a half-million subscribers from the nearly 6 million subscribers added during the first three months of 2005. Verizon Wireless is expected to be neck-and-neck with Sprint Nextel Corp. in net add numbers, according to Merrill Lynch analyst David Janazzo. Verizon Wireless should add about 1.6 million net customers, with Sprint Nextel gaining about 1.63 million net customers on its network with affiliates and mobile virtual network operators included-although Sprint Nextel’s direct customers are expected to only reach about 1.23 million net additions, Janazzo estimated.
Industry churn is expected to hold steady or possibly tick upward slightly, and Verizon Wireless seems to be benefiting from mergers involving rivals
“Verizon has become the beneficiary of any issues associated with the Cingular [Wireless L.L.C.]/AT&T Wireless [Services Inc.] and Sprint Nextel mergers,” Janazzo said. “Generally, if the consumer has a problem with one of the other companies, the next stop is Verizon, where they vent their complaints and sign up for service.”
SG Cowen’s Tom Watts sees Verizon Wireless maintaining its subscriber growth lead and gaining 1.8 million net customers during the first quarter, although he noted that checks of sales channels suggested that Verizon Wireless’ “blistering pace of gross additions will slow down” in the first quarter, although the carrier still is expected to rack up its 12th consecutive quarter with more than 3 million gross adds. Watts put Sprint Nextel’s total net adds at 1.5 million, with net direct customers coming in at 1.1 million.
Last quarter, Verizon Wireless added about 2 million customers, most of them direct. While Sprint Nextel added only 1.4 million direct customers, it gained about 2.1 million customers when MVNOs and affiliates were included.
Cingular is expected to gain between 1.14 million and 1.2 million net customers during the first quarter. Merrill Lynch’s Janazzo said that Cingular appears to have reached a “steady state in its stores” and shifted its primary focus to retaining subscribers and improving customer satisfaction, rather than growing the customer base. He also noted that billing system migration appears to have picked up in the first quarter, adding that “the hold-out AT&T Wireless customers could be more challenging to convert than the others.
“Cingular’s first-half 2006 activities should set the stage for back half improvements, although store personnel are not looking forward to another re-branding, presumably to AT&T, in 2007,” Janazzo said. That re-branding is expected to follow parent company AT&T Inc.’s purchase of BellSouth Corp.
Analysts expect T-Mobile USA Inc. to bring in around 1 million net customers. The operator, as well as Cingular, had to deal with a glitch in Motorola Inc.’s popular Razr handset, which meant the device was not available in some stores for more than a week. But Janazzo said that T-Mobile USA wasn’t impacted as much as Cingular because T-Mobile USA also sells Motorola’s Pebl handset, which is generating increasing interest.
