Price War Will Limit AT&T Mobility Revenue Gains, Even as Subscriber Gains Accelerate

One of the classic signs that a communications market is in a  more-competitive phase is that leading service providers start to trade away average revenue per account to gain net subscriber share. And that appears to be what AT&T Mobility is doing.

AT&T predicts that in its second quarter of 2014, AT&T will add a net 800,000 postpaid customers. At the same time, AT&T Mobility expects “no service revenue growth”  in the second quarter.

That is a consequence of wider adoption of AT&T Next and Mobile Share Value plans, which  shift revenue away from “services” and to “device revenue,” and also lead to lower per-account revenue for multiple-device accounts.

About half of the company’s postpaid smartphone customer base will be on no-device-subsidy Mobile Share Value pricing plans, growing to approximately 66 percent by the end of 2014.

At the same time, about half of smartphone sales now use the “Next” installment plan. All those changes will limit second quarter earnings, AT&T says.

If AT&T does gain 800,000 net postpaid accounts, it would be the biggest net gain of subscribers since the fourth quarter of 2009.

Those gains will come at the expense of revenue growth, however.

T-Mobile US has the same strategy.

What is not yet so clear is whether Verizon Wireless and Sprint will do so, as well. Up to this point, Verizon has resisted that strategy, for the most part, as has Sprint.

On the other hand, Verizon Wireless already has warned that a shift of revenue from services to device revenue will start to happen after the first quarter.

The other angle is that tablets are driving net account additions at all the top four national carriers.

Verizon Communications, for example, added a net 539,000 postpaid subscribers in the first quarter of 2014. But those figures include a net gain of 634,000 tablet accounts, meaning Verizon Wireless actually lost handset customers.

Some observers fear a widening price war, while a few have argued there is either no price war, or that the price war is having little impact.

Financial reports will settle the matter.