As the apparent economic slowdown continues to shake up Wall Street and dislodge stocks, many in the wireless industry are holding their breath to see whether the situation is grave enough to cause consumers not to jump on-or jump off of- the mobile bandwagon in an effort to tighten the purse strings.
At this point in the game, it doesn’t look like the current slowdown-which is behind slashed jobs and revenues-has yet cut into wireless carriers’ subscriber numbers. Several of the nation’s operators released subscriber growth numbers for the first quarter, and so far it looks like a mixed bag.
On the low end of the scale, Verizon Wireless said earlier this month it added more than 518,000 subscribers during the first quarter-way down from analysts’ predictions of more than 700,000 customer additions.
However, Sprint PCS released its first-quarter earnings report last week and surpassed subscriber growth expectations with 826,000 customers during the quarter, ended March 31.
“It’s really kind of hard to see if we’re going to see a slowdown in subscriber growth,” said Knox Bricken, a wireless analyst at the Yankee Group.
Carriers’ fourth-quarter results showed a similar pattern. Voice-Stream Wireless Corp. came in well below expectations with 602,000 subscribers in the quarter. AT&T Wireless Services Inc. came in line of estimates with 856,000 subscribers, as did Nextel Communications Inc. with 500,000 subscribers. However, Sprint was slightly behind expectations for the fourth quarter with 1.25 million subscribers.
“It’s kind of conflicting,” Bricken said. “I don’t know how much that really tells us.”
But while carriers’ numbers aren’t showing any specific trend, many wireless operators are warning of the hard times ahead.
“Signs of a slower economy were evident in the first quarter,” said Ron LeMay, Sprint’s president and chief operating officer, in the company’s first-quarter statement. “We continue to view the near term with a certain degree of caution.”
“During the first quarter of 2001, our domestic operations have begun to feel the impact of a slowing economy and related cost control measures being implemented by many businesses,” said Tom Donahue, Nextel’s president and chief executive officer, at an investor conference recently.
However, Bricken said carriers’ warnings are not reason enough for the Yankee Group to change its tune.
“We’re not changing our forecast for the end of the year,” she said.
The reason, Bricken said, is that wireless service is becoming much more mainstream, and many users consider it a necessity.
“We don’t, at the Yankee Group, expect people to stop using their wireless phones,” she said.
Also, carriers aren’t really as at risk in an economic slowdown as other technology companies. And, Bricken said, even if the economic slowdown does start to affect carriers’ subscriber growth numbers, the result will actually show up as an increase in carriers’ revenue.
“That’s something interesting about wireless carriers,” she said.
The reason is carriers won’t have to pay the high start-up costs for each new customer, Bricken said. Instead, they’ll simply collect payments from current customers-so, in the short term, carriers would see a rise in profits.
But that particular effect would only be for the short term, Bricken warned.
And while many eyes are turned to the nation’s largest wireless carriers, some regional carriers say the economic slowdown won’t affect them at all.
“We think that we might be one of the beneficiaries of it,” said Dan Pegg, senior vice president at Leap Wireless International Inc.
Pegg said Leap’s flat-rate pricing plan would appeal to consumers in a cash-strapped economy. In addition, the company is expanding into new markets and continues to gain new customers through the growth.
Pegg expressed hope for the wireless industry in general during a slowdown because, he said, the allure of wireless will likely overcome any negative economic situations.
“It won’t be too many years before people will wonder why they were tethered to the wall with a wire,” he said.
