Compass Intelligence takes an in-depth look into the latest quarterly results from Verizon, AT&T, T-Mobile and Sprint, and calls for more IoT insight
Compass Intelligence just completed the final assessment of second-quarter subscribers and connections including comparisons to the first quarter of 2016, in terms of performance for the U.S. wireless carrier market. We do this each quarter to understand the subscriber and share changes, as well as evaluate the key trends taking place in the wireless industry for both consumer and enterprise markets. We have been tracking the quarterly metrics since 2007. Some metrics are our own internal modeling and estimates as the market does not report in all categories.
A snapshot of Q2 2016 is below. Compass Intelligence compared Q1 results to Q2 results to show metric changes (denoted by + or -).
Source: Compass Intelligence, 2016
Below are additional thoughts and insights based on the quarter and annual performance.
Overall notes
– T-Mobile US, followed by AT&T Mobility, had the better Q2 among the top four, with both carriers experiencing nine out of 12 in improvement ratings from Q1 to Q2 2016.
– The market ended the quarter with about 4.9 million new connections, including connected devices and mobile subscribers, of which 4.8 million connections were added by the top four carriers. During Q2, overall added connections dropped by about 2 million compared to what was added in Q1 2016, driven primarily by tablet and “internet of things” segments.
– Subscribers to the top four carriers reached 300.5 million, or an addition of 2.1 million, and about 300,000 connections were added by other mobile virtual network operators and regional carriers.
– While Verizon maintained the lowest churn in the quarter at .94%, all 4 carriers reduced their churn compared to last quarter.
– A total of 1.3 million tablets were activated in Q2 2016, with all four carriers showing positive additions and Verizon Wireless remaining the leader in this category with 12.9 million total activated tablets.
Revenue
– AT&T Mobility and T-Mobile US both increased their overall service revenue from Q1 to Q2, while the previous sequential service revenue for AT&T Mobility declined slightly. Both Sprint and Verizon Wireless experienced service revenue decline from Q1 to Q2.
– Combined, the industry experienced only a total of $302 million in wireless service revenue increases from Q1 to Q2 2016, compared to $1.4 billion in increased service revenue from the previous quarter-to-quarter comparison.
Postpaid adds
– Sprint was back in the negative after experiencing positive postpaid net adds in Q1. The industry ended Q2 with a total of 1.6 million in total postpaid additions from the previous quarter.
– Verizon Wireless added 609,000 and T-Mobile US added 890,000 postpaid subscribers in Q2, while AT&T Mobility grew by 156,000 and Sprint experienced a 6,000 postpaid decline.
Connections
– Total industry connections reached 411 million at the end of Q2 2016, including all wireless carriers and MVNOs (subscribers and IoT connections).
– Total industry subscriber base (excluding connected devices, IoT/machine-to-machine) was at 348 million.
– Total smartphone subscribers were at 255 million (about 73% of total subs carry smartphones).
– Postpaid retail subscribers for the big four reached 250 million.
Final word
The industry has reached 73% saturation among smartphone subscribers and overall service revenue has declined by 1.9%. Two avenues for major growth are centered on IoT and content, and we can’t leave out international expansion. Content drives access to applications, which in turn provides increased growth and usage of data, video and other more interactive services. The industry is seeking out new avenues for revenue and profit, including through new content revenue streams demonstrated by the recent acquisitions by Verizon Communications of Yahoo and AOL, and AT&T of DirecTV. IoT growth has primarily been driven around the connected vehicle and connected home, but the industry becomes even more interesting as the carriers leverage their new content partners to provide new offerings to entice the use of media, games, sports, streaming TV/music, news, weather and much more. Expect to see exciting announcements in the third and fourth quarters as to how carriers will leverage content to reduce churn and offer new revenue streams that may be noticed on the backend, meaning customers may require more data.
As for IoT and connected devices, the industry is experiencing an overall 17.9% growth in reported numbers from a year ago, but we have yet to really hear on a quarterly basis the overall revenue generated from IoT alone. Verizon Communications reported IoT revenue about three quarters back and we have seen some anecdotal tidbits here and there, but the industry and Wall Street will be pushing for more of that detail in the near future. Also, keep in mind that some of the reported numbers for connected devices also include activated tablets – at U.S. Cellular, for example. In the U.S. alone, IoT, M2M and connected devices reached 62.4 million in Q2.
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