NEW YORK-Slowing subscriber growth in the United States is an early sign that the wireless industry is approaching its maximum penetration rate, and consequently, mobile operators could have fewer subscribers generating cash flow than their business plans projected initially, Moody’s Investors Service said in a new report.
Performance is critical over the next 12-to-18 months because a significant portion of the approximately $75 billion in debt collectively owed by the six nationwide carriers will mature, said James Veneau, senior corporate finance analyst for the debt rating firm.
Because they face increasing competition and must try to increase cash flows, domestic operators likely will focus on obtaining and retaining customers with better credit quality. This approach could further slow net customer additions, which fell for the first time in 2001 and also declined during the first nine months of this year.
“Penetration levels in the United States will not match those of Europe unless the cost of using wireless services becomes more affordable, perhaps through the rollout of prepaid services,” Veneau said.
Moody’s expects nationwide industry conditions to improve only after industry restructuring leaves fewer carriers, but regulatory issues and capital access remain barriers to consolidation.
