When wireless and telecom earnings were announced last week, they revealed something important everyone needs to understand. The industry is changing and transforming, once again. Wireless has always been one of the healthiest ongoing growth stories of all time. While that continues, things are changing. Over time we have seen the wireless growth wave shift, several times in fact. So, let’s take a look at where growth will come from next for Verizon, T-Mobile, AT&T and the larger wireless industry.
Last week I was a guest on the TD Ameritrade Network, The Watch List with host Nicole Petallides discussing wireless and telecom earnings and the future of Verizon, AT&T, T-Mobile. I expanded the conversation to what is coming next and thought this was important to share some of these ideas with you here.
Check out the TD Ameritrade interview here.
Today, there are many different pressures facing the wireless and telecom sector. It is important to understand these forces since they will be with us for quite some time and are causing a change in growth strategy.
Verizon, T-Mobile and AT&T earnings show challenges and opportunities
First, let’s pull the camera back and take a longer-term, historical view of what is happening.
Wireless has already changed many times over the past several decades. Over time growth has come in both stronger and weaker waves. We have seen continued growth and transformation as we moved from analog to digital, then from 2G to 3G to 4G and now to 5G.
At the end of each growth wave, but before the next, things get quiet. This lull is normal.
However, seeing this quiet period coming, a few short years ago, both AT&T and Verizon made some acquisitions that frankly did not work. In fact, it put them even further behind the eight ball.
Weak economy and inflation are impacting traditional wireless growth
What’s new and different today is the sour economy and inflation are new stumbling blocks.
The weak economy and inflation are changing consumer demand. Money is tight forcing users to spend less.
At the same time networks are still heavily spending on and investing in 5G today.
This push/pull is impacting every player and the entire wireless industry.
In fact, the weak economy and inflation is not just a wireless issue. We see recent news discussing how automotive repossession is up significantly this year and that is expected to continue.
Pay attention to this canary in the coal mine.
Because of the bad economy, inflation and rising prices of everything, many people can no longer afford their car payment along with higher gas bills, increased car repairs and insurance bills.
This is having the same negative impact on the consumer wireless industry.
A few short years ago people had money to burn. The economy was strong and inflation low. Today, the price of everything is rising, significantly, and customers are getting squeezed.
That’s why many are increasingly switching to lower cost reseller programs to save money.
Verizon, T-Mobile, AT&T, Xfinity, Spectrum, Optimum, Google Fi, Cricket
That is having an impact on the wireless industry which is having a tough balancing the need to increase earnings, as they also continue to spend billions on 5G upgrades to their network.
Today, wireless networks cannot slow down their investment to 5G. You see, in the beginning, the networks saw it as a competitive advantage. Today, it’s a different story. Today it is a necessity for competitive reasons.
That’s why networks must continue to invest in 5G to remain competitive, while at the same time are having a tough time increasing their earnings to cover the cost.
So, wireless carriers are currently stuck between a rock and a hard place with the consumer marketplace.
Hopefully, this won’t last forever, but today it is impacting wireless networks of all sizes like Verizon, T-Mobile, AT&T, Dish, C-Spire, US Cellular and others.
Other MVNO wireless resellers are also gaining market share. Cable TV companies like Xfinity Mobile, Spectrum Mobile, Optimum, as well as other resellers like Visible, Mint Mobile, Metro by T-Mobile, Google Fi, Consumer Cellular and Cricket.
AT&T and Verizon still licking wounds over Warner Media, Yahoo, AOL
In fact, seeing this struggle coming both AT&T and Verizon took a very different path trying to increase earnings at the tail end of the 4G revolution.
That ended up being a significant mistake they both made trying to transform into a giant in the movies, entertainment, news and online space. If you recall, AT&T acquired Warner Media which meant Warner Brothers Studio and CNN. Verizon acquired Yahoo and AOL.
If it worked, AT&T and Verizon said they would become something different. Something bigger. More than just a wireless carrier. They were going to take our breath away.
As it turned out, after several years that strategy was a complete disaster. The Covid-19 environment played a role in putting the final nail in that coffin. Now, that dream is as dead as a doornail. Will it be revived down the road? Who knows.
This path was not only a waste of time, effort and money, but it was also a distraction from where they should have been focusing, namely the shift to 5G.
FWA, private wireless, AI, IoT, cloud new focus for wireless networks
Today, as we are in the middle of the 5G revolution, what’s coming next? As always, when growth in one wireless sector slows, growth in other sectors heat up.
Verizon, T-Mobile and AT&T see growth now coming from new sectors like business services, Fixed Wireless Access or FWA, private wireless, AI, IoT, the cloud and all the other technologies and companies and industries which need to use wireless to connect everyone and everything to show growth and transformation for themselves.
Bottom line, even with all the stress and forces of change the industry faces today, 5G wireless and all the sectors that entails remain a solid, growth opportunity.
Growth potential goes beyond the wireless industry. Other industries are also focused on 5G to transform themselves. It starts with a few competitors gaining a competitive advantage, then spreads to the entire industry as just a cost of doing business.
That said, the wireless industry will continue to change and transform moving forward as it always has.
Verizon, T-Mobile, AT&T will remain our top wireless carriers
Remember, even with these struggles, the nation’s top wireless carriers are not going away.
Verizon, T-Mobile and AT&T are important to our society and our economy. They will survive. The question is how rapidly they will show grow going forward?
The industry has faced these kinds of challenges in the past. Example, you remember the industry was in the middle of a serious lull when the iPhone and Android hit the marketplace. All the carriers gave away wireless data usage for free trying to jump start the marketplace.
That thrust Apple iPhone and Google Android to the top and previous leader Blackberry to the bottom. This was a huge success for the wireless networks as well.
It worked. In the beginning there were only a few hundred apps. Today, there are millions of apps. And wireless data usage is what it’s all about. Today, wireless is expanding into automated driving, automotive, health care, retail and industry after industry.
Today, Verizon, T-Mobile and AT&T are once again focusing on new areas for growth. They are just not focusing in the same place. The consumer is still struggling with the economy and inflation.
All that being said, wireless remains one of our most important growth industries. Just be aware that growth in wireless continues to change over time. It’s like a staircase going up. And step by step, change will continue going forward.
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