With the second quarter financial reporting finally complete, and the school year set to begin for many across the country, we figured this was a great time to hand out some Q2 grades for the domestic market’s largest players. Analysis would seem to indicate that the strong kept getting stronger, while the weak continued to weaken, a story that is obviously nothing new as the domestic wireless market has seen the market’s dominant players continue to bolster their customer bases and bottom lines at the expense of those lacking the might to compete on that same field.
However, playing with the cards we are dealt, here are the RCR Wireless News’ carrier grades for Q2.
Verizon Wireless (A); AT&T Mobility (A)
For the most recent quarter, it would be easy to claim Verizon Wireless and AT&T Mobility as winners seeing as both operators managed to post respectable customer growth results, and more importantly strong increases in average revenues per user. Both operators managed to sign up more than 1.2 million new connections during the quarter, with AT&T Mobility just squeaking out a small margin of victory over its larger rival.
More importantly, both carriers saw their ARPU results surge thanks to continued adoption of data services that have managed to offset continued commoditization of voice and basic messaging services. This growth in data revenues is more heartening as both operators have not been shy about increasing revenue potential from those services, including the capping of data buckets and recently launched data share plans that analysts predict will continue feeding revenues.
Sprint Nextel (B-)
Beyond the top two, the climate gets a bit gloomier. Sprint Nextel again showed that it can be a force to be reckoned with, especially as it now has the might of Apple’s iPhone in which to lure consumers. The carrier managed to sell 1.5 million iPhones during the quarter, bolstered by the carrier’s continued “unlimited” data offering.
However, the carrier’s iDEN operations, which are set to be euthanized next year, continued to impact operations, cutting the carrier’s net customer additions from more than 1 million last year to just 283,000 net customer additions this year.
While its iDEN services continue to flounder, Sprint Nextel’s CDMA-based operations across both postpaid and prepaid channels provided some hope in its post-iDEN world.
T-Mobile USA (D)
If we were in school, T-Mobile USA would surely garner an “A” for effort, but since this is the real world of wireless, it’s hard to give the carrier anything other than a “D.” The nation’s No. 3 carrier continues to be hobbled by not offering the iPhone directly to consumers, as well as a lingering hang over from AT&T’s failed acquisition attempt last year. During the quarter, the carrier said it lost 205,000 customers across its networks, with the bulk coming from its higher-margined postpaid operations.
T-Mobile USA has been aggressive through the first part of the year in trying to turn around its operations, with a never-ending string of marketing and network initiatives that show the carrier is trying to maintain pace with its larger rivals. However, continued customer defections and slowing revenue growth show that those efforts are finding little traction in the market.
Hope could spring for the carrier should it manage to finally score an iPhone later this year, though the costs associated with offering the subsidy-heavy device could pressure the carrier’s bottom line.
MetroPCS (D+)
Beyond the “nationwide” operators, the second quarter was a continued struggle for relevance. MetroPCS witnessed a complete turnaround from the previous year that saw the carrier lose more than 186,000 subscribers. However, financial analysts were expecting such results, which along with cost cutting by the carrier resulted in a significant boost to the carrier’s stock price. Go figure.
Leap (D-)
MetroPCS’ twin Leap Wireless was not so lucky as the carrier’s troubled Q2 was tainted by comments that the carrier was set to announce a new round of restructuring and hints that continuing to operate under its current model may not be possible. That news sent the carrier’s stock price tumbling and fueled rumors that Leap may be closer to an exit than a revival.
Leap’s stock plunged more than 20% after it released second quarter results, hit by the double-whammy of a questionable future and a present that saw the carrier’s customer losses nearly triple from the year-ago period. The carrier did managed to grow ARPU and hinted that it would be rolling out new rate plans in the coming weeks that it hopes will keep its customer base engaged.
U.S. Cellular (C-)
Regional operator U.S. Cellular continued to blaze its own lonely path during the second quarter, staunchly refusing to carry the iPhone and seeming to pay at least a little for that decision. The carrier continued to lose postpaid customers, despite paying out higher subsidies for contract smartphone subscribers.
U.S. Cellular was able to continue growing revenues during the quarter as well as manage spending in a way that seems to keep investors if not happy, at least content. Of course, as with many of its fellow regional players, the desperate spectrum hunt by larger rivals continues to beg the question as to whether U.S. Cellular will be around in its present form to report financial results a year from now.
Clearwire (D-)
Few operators are looking towards the future as hard as Clearwire, which continues to operate in limbo as it transitions from its legacy WiMAX operations to its hopeful savior in TDD-LTE. The carrier, which is still a significant financial tentacle to Sprint Nextel, saw customer growth plummet from adding more than 1.5 million customers last year to losing 41,000 subscribers this year, which was not unexpected considering recent decisions. Those include Sprint Nextel’s move away from launching any new WiMAX-equipped devices in favor of its own LTE plans, and Clearwire’s decision to curtail its own marketing efforts in able to conserve much-needed funding for its LTE plans.
Analysts were for the most part supportive of Clearwire’s plans as the carrier’s stock price did manage to gain value following the release of its quarterly results. However, with the remainder of the year set for continued struggles ahead of its LTE plans set for next year, Clearwire could be in for a rough ride.
Tracfone/America Movil (B)
When it comes to prepaid services, few seem to have the game mastered quite like Tracfone. The carrier, which is owned by Latin America-based America Movil, lacks a network of its own, but has managed to scrape together agreements and partnerships with its rivals that have allowed the carrier to become a growing force in the prepaid space.
During the second quarter, Tracfone managed to add more than 1 million prepaid customers to its fold, though it must be noted that those customers are a fickle crowd apt to churn quickly and not looking to spend too much on services. Tracfone has managed to counter some of those tendencies with its Straight Talk offering that provides unlimited services for a flat fee per month and can market coverage using the robust networks of the nation’s largest operators.
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