Worst of the Week: The truth about Q3

Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!

And without further ado:

For one reason or another, I have been a bit off over the past couple of weeks in covering quarterly earnings for domestic wireless operators. This has me in a bit of a fog as despite my hatred for the “quarter-to-quarter” focus of the wireless industry’s bean counters and the financial firms that follow them, piecing together these reports over a longer time frame lays out a nice picture of how wireless carriers are performing.

With that, and with T-Mobile USA and Leap Wireless both reporting their Q3 financial results this week, effectively bringing to a close this quarter’s reporting season, I thought I would take this time to both catch up on how your favorite wireless carriers did during the third quarter while at the same time providing some “insightful” analysis on those results. And, when I say “insightful” I mean off-the-cuff commentary that is of no real value, but are thoughts that I know we are all thinking.

Here is what I took out of the results.

–All this talk about the industry being dominated by the “big 2” is really just being kind to AT&T Mobility. Verizon Wireless (again) dominated the quarter as it was the only operator that seemed to attract new customers willing to sign on the line that is dotted. Sure, some of the other operators might have managed to attract a few new postpaid customers, but the numbers show near total domination of that space by Verizon Wireless.

Some might say that the postpaid space is not where the action is anymore and that new growth will be coming from the prepaid space. While that is true, there are still a couple hundred million postpaid customers out there willing to commit to spending $60 per month for mobile service, and if current trends continue all of those customers will soon be on Verizon Wireless’ network.

Sure, Verizon Wireless may be falling behind in trying to attract finicky prepaid customers, but I would guess every carrier would be willing to trade in those higher churn, lower revenue customers for the safety and security of postpaid customers.

Oh yeah, Verizon Wireless also said it expects to have its LTE rollout completed by mid-2013, about a half-year ahead of schedule. Don’t think that won’t become central to marketing efforts.

–AT&T Mobility’s reliance on lazy iPhone customers is amazing. There does not seem to be a bigger source of “wireless humor” out there than iPhone customers complaining about their AT&T Mobility service. I know a lot of this is left over from the early days of the iPhone launch when the carrier’s network was overwhelmed by the millions of new customers discovering the joys of the mobile Internet from their new Apple device, but that perception still seems to persist.

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However, AT&T Mobility managed to sell 4.7 million iPhones during the quarter, though noted it could have sold more had it had more to sell. But, with just 151,000 net postpaid net additions during the quarter, it would seem that a vast majority of those iPhone sales were to current AT&T Mobility customers.

And that I find funny. AT&T Mobility’s results continue to show that a vast majority of those current iPhone customers continue to stay with AT&T Mobility. I know times are tight, but continuing to pay money for a service that so many spend so much time and effort bad mouthing seems ridiculous. Fork over the early termination fee or forgo one model year update and get out of that contract and too an operator that may – or may not – provide better service. Otherwise, I say there should be a moratorium on customers complaining about their cellphone service.

–Sprint Nextel, and by proxy Clearwire, can’t seem to quite catch a break. I know the $20 billion Japan’s Softbank is set to invest in Sprint Nextel should go a long way to shoring up the bleak financial side of the carrier’s business, but from a competitive standpoint, there remains a lot to be worried about.

The carrier’s ongoing attempts to shutter its iDEN service continue to weigh on operations, though the operator has done an admiral job of retaining much of that exodus. Performance of its CDMA/LTE service remains robust, with overall net customer additions on both the prepaid and postpaid side. However, at the end of the day this seesaw battle between networks was won by the losing side as the carrier finished the quarter with fewer customers than what it started with.

More disturbing going forward is the delays in pushing its network upgrades, both from Sprint Nextel’s Network Vision program and Clearwire’s move to LTE. With its larger rivals moving full steam in rolling out their marketing dependant “4G” services, Sprint Nextel/Clearwire appear set to fall further behind the pace.

–T-Mobile USA continued its transition to a prepaid operator during the quarter with nearly a half-million of its postpaid customers deciding to go elsewhere – presumably to Verizon Wireless. But, customers willing to date T-Mobile USA, or at least attracted to its spokesperson, continued to grow, a phenomenon set to further expand with its planned acquisition of no-contract expert MetroPCS.

Speaking of that MetroPCS deal, I know there is continued talk of the synergies that will be gleaned from the combination of these two operators both financially and, more importantly, spectrally, but am I the only one who sees this marriage having a rocky beginning? Few in the wireless space have been able to manage such integrations without significant growing pains, and this is made even more dire when talking about technology mergers.

–The “other guys,” meaning every other carrier, should be at least applauded for remaining upbeat regarding their operations. I know a lot of these carriers have different expectations from the market, but losing customers is still losing customers. I know there can be other ways in which these operators can adjust their focus in order to continue making money in the wireless biz, but at some point I would think that having fewer customers willing to pay for your service makes that a difficult proposition.

U.S. Cellular was a prime example of this adjustment as it decided to sell off a good portion of its operations to Sprint Nextel this week in order to focus on markets where it may experience less competition. This followed Leap Wireless announcing the push back of its LTE launches and plans to seek alternative scenarios for future expansion.

Don’t get me wrong, I am all in support of smaller operators staking a claim for themselves in the mobile space. However the realist in me, which is the one that prevents me from eating a dozen donuts every day washed down with a barrel of Mountain Dew, does not see a pretty end game for these operators in the long term. Well, I guess the “pretty” part is subjective as a nice, handsome payout from a larger rival could be an attractive alternative.

Overall, the third quarter just seemed to indicate accelerated trends across the mobile space that have been building steam as seen from recent quarterly results. Perhaps for many operators breaking apart that momentum quarter-by-quarter is a good way to show that things are not quite so bad, but the long view makes it difficult to hide the truth.

OK, enough of that.
Thanks for checking out this week’s Worst of the Week column. And now for some extras:

–AT&T Mobility attempted to straighten out the confusion over its limiting of Apple’s Facetime offering across the carrier’s network by posting a few paragraphs on its “Public Policy Blog” site. While the explanation itself is quite entertaining, the best part are the comments piling up at the bottom of the posting that seem to show a certain … how should I say this … “dissatisfaction” with how the carrier is handling the situation.

–Finally a reason to spend 99 cents on an app:

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