Moody's lifts U.S. Wireless Industry Outlook

Moody's Investors Service has raised its outlook on at least some parts of the U.S. wireless industry to "positive" from "stable," saying AT&T's AT&T Mobility and Verizon Wireless should see their free cash flow increase sharply in 2013. 

The completion of Long Term Evolution fourth generation network construction work will help both leading carriers. 

Free cash flow is expected to increase almost 11 percent in 2012 on a combined basis for all nine carriers Moody's follows. 

For 2013, that number should rise to between 12 percent and 14 percent. But that figure shows how misleading an "industry average" number can be, when just a few contestants have a disproportionate share of customers and market share. 

But the smaller carriers, including Sprint Nextel Corp., MetroPCS Communications Inc.and Clearwire Corp., should continue to struggle, Moody's says.

At Verizon and AT&T, customer churn is expected to stay low. That might not be so true for all the other providers. 

Landline losses continue to hit at service provider revenue, but Moodys etimates the impact will get smaller, in larger part because voice revenues will dip below 30 percent of total wireline revenues in 2014, down from 44 percent two years ago. 

Access lines fell eight percent in 2011, but "as revenue from voice services becomes a smaller part of overall revenue, its drag on revenue growth will get easier for carriers to overcome – either by modest growth in data and TV revenue, or by cutting costs," said Moody's.

And that is not true just for service providers with big mobile operations. You might not be surprised that AT&T and Verizon generate 35 percent to 38 percent of landline revenues from voice services.

But even Windstream generates about that same percentage of revenue from voice services. Other fixed network service providers such as Frontier and FairPoint likewise obtain 45 percent of revenues from voice.

CenturyLink gets 40 percent of its landline revenues from voice services, the rest from other sources.