No Sign Yet of an End ot U.S. Mobile Marketing War

If you want to know how much longer the U.S. mobile marketing war can continue, the answer is simple: until the two attackers conclude they cannot take financial losses anymore.

And, so far, it does not appear that either T-Mobile US or Sprint are anywhere near that point. In its most-recent quarter, for example, Sprint added 1.2 million Sprint platform net additions compared to net losses of 383,000 in the prior year quarter.

Postpaid net additions of 211,000 compared to net losses of 231,000 in the prior year quarter. Chalk that performance up to net tablet adds.

Postpaid phone losses of 201,000 improved sequentially for the fourth consecutive quarter and improved by nearly 500,000 year-over-year.

Prepaid net additions of 546,000 led the industry for second consecutive quarter and compared to net losses of 364,000 in the prior year quarter.

So it does appear that Sprint and T-Mobile US are taking market share from the other prepaid service providers. On a net basis, it is hard to see where else the subscriber gains could be coming from.

On the other hand, wholesale net additions of 492,000 increased from 212,000 in the prior year quarter. So at least some Sprint MVNOs would seem to be adding accounts as well.

Postpaid net portings (added phone accounts less lost accounts) were  positive for the quarter for the first time in nearly three years.

Sprint platform postpaid churn of 1.84 percent improved 46 basis points (.46 percent)  sequentially from 2.30 percent churn last quarter as well, Sprint said.

T-Mobile US continued to add new accounts as well. T-Mobile US reported revenue growth of 13.1 percent in the first quarter of 2015, on the strength of robust net account additions.

T-Mobile US had 1.8 million total net account additions in the quarter, marking two straight years of adding at least a million net new customers every quarter.

Some 1.1 million net adds were branded postpaid accounts, one million of those accounts being phone accounts.

At the same time, branded postpaid phone churn was 1.30 percent.

T-Mobile revenue rose to $7.8 billion from $6.88 billion a year earlier. But heavy promotions resulted in a first-quarter loss of nine cents per share.

Oddly there is disagreement about how the marketing war is affecting AT&T and Verizon. One would think stronger customer net additions by T-Mobile US and Sprint “must” be coming at the expense of AT&T and Verizon. But that does not seem to be the case, so far.

In fact, some might argue the impact on Verizon and AT&T so far has been quite slight. Churn rates for the two carriers are stable, average revenue per account is stable and gross revenue is up, though operating income dipped, year over year.

And some would point to lower industry average revenue per account, which fell for a second straight quarter, to an average of $136/month, down from$141 in the fourth quarter.
The biggest drop happened at Sprint, where heavy promotions lead to a 14 percent dip, quarter over quarter, $132/month. But it is difficult to point to clear signs of serious financial damage at AT&T and Verizon.

One might argue it is “too early” to see the impact, but the marketing battles have been underway for more than a year. That should be enough time to discern impact, if there is any serious change.

Some might argue that most of what is happening, in terms of market share shifts, is that T-Mobile US is taking share from other prepaid services, not AT&T and Verizon.  

So how long can the war continue? Some have argued that, long term, the U.S. mobile market simply cannot support four major national suppliers. But it is hard to see, at the moment, how that consolidation would happen.

ANd without consolidation, it is hard to see the end of the current marketing wars, short of dire financial results at one or more providers.

In fact, the only scenario that would reduce immediately and clearly reduce the number of suppliers is the one development regulators will not presently support: Sprint merging with T-Mobile US, or either AT&T or Verizon buying T-Mobile US or Sprint.

In other words, none of the four leading national providers will be allowed to merge. That doesn’t mean there will not be acquisitions; there simply won’t be any mergers of the top four firms.

So, like it or not, no consolidation of the U.S. mobile market is possible by means of any mergers among the top four providers.

Instead, one of the firms would have to be weakened so much that it essentially drops from contention. That might result in a three-player market at the top, with the fourth challenger unable to compete except as a niche provider.

Right now, such a circumstance does not seem likely. Which means the marketing wars might continue for quite a longer time than some us us had expected.
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