As reports of a slowdown in the wireless industry continue to make headlines in the news and on Wall Street, wireless carriers have been reporting strong customer addition numbers for the fourth quarter, with analysts predicting continued growth for 2001.
“Subscriber numbers have simply failed to meet the many irresponsible, grandiose predictions made for the market. Overall, wireless subscribers of every type will continue to grow,” said Allied Business Intelligence Inc. in a recent report.
The country’s largest wireless carrier, Verizon Wireless, reported adding more than 1.2 million net new subscribers during the fourth quarter of 2000, and more than 3.7 million for the year, a 16-percent increase year-over-year.
“We have an expanding position in the growth markets of the future-wireless, data, broadband, long distance-and we’re executing extremely well in these areas,” Ivan Seidenberg, president and co-chief executive officer of Verizon, said at Salomon Smith Barney’s Entertainment, Media and Telecommunications Conference.
Verizon’s news reinforced many analyst predictions that the fourth quarter would show strong subscriber growth, and continued growth in the industry.
“Given that Verizon is the largest wireless carrier in the U.S., we view the strong [fourth-quarter] subscriber results as a positive indicator for the overall health of the U.S. wireless industry,” said Peter Friedland, wireless analyst at W.R. Hambrecht & Co.
Further adding evidence, retailer Radio Shack reported a 30-percent increase in wireless handset unit sales compared with 1999, to nearly 4.1 million units. This increase should provide good news for Sprint PCS, which had an exclusive distribution agreement with Radio Shack for most of 2000, when it releases its customer addition numbers later this month.
“Given that Radio Shack has historically accounted for roughly 25 percent of Sprint PCS’ distribution, we view the 30-percent year-over-year increase during the key December holiday selling season as a positive indicator for Sprint PCS’ [fourth quarter] net subscriber addition results … which the company has previously guided to roughly 1.3 to 1.5 million, up roughly 20 percent to 40 percent from [fourth quarter 1999],” Friedland said.
Friedland added that Sprint PCS, usually a barometer for the health of other wireless carriers, should report more than 1.3 million customer additions for the fourth quarter, 300,000 more customers than were added during the fourth quarter of 1999.
Other carriers reporting strong subscribe growth numbers last week included Triton PCS Holding Inc., Leap Wireless International Inc. and Dobson Communications Corp.
“While Wall Street appears to be getting ready to write the eulogy for the wireless industry, and the fat lady is loosening up her vocal cords, I believe that the wireless industry still has plenty of room to grow,” said Todd Vernier, wireless analyst for Morningstar.com.
In addition to the usual increase in wireless customers due to the holiday season, TeleChoice analyst Mike Guertin attributed the strong numbers to carriers introducing attractive pricing plans.
“The better pricing plans carriers are introducing are attracting plenty of interest from consumers,” Guertin said. “With no roaming and loads of free long-distance minutes, consumers who were on the fence about getting wireless service are trying it out.”
Even with the positive customer addition numbers, carriers are still experiencing a high level of customer churn. Consumers are beginning to realize they have a choice in their markets and are willing to leave their current carrier if they are unsatisfied with their service.
“Carriers are going to continue to see high levels of churn throughout this year,” said Knox Bricken, a wireless analyst at the Yankee Group. “Fortunately for the industry as a whole, most customers are churning to another carrier instead of out of the industry all together, but it still costs carriers money to replace those churning customers.”
Bricken said wireless carriers should expect higher growth, higher average revenue per user and higher churn rates for 2001.
Wireless carriers are also hoping their wireless Internet offerings will help lure customers to their services and, in turn, keep them from leaving for the competition. Even though less than 10 percent of all cell phones in the hands of consumers have Internet access, carriers and analysts are banking on Web and data services to continue to drive consumer demand for wireless.
“We believe there is an inherent consumer demand for the mobile Internet, which we estimate will gain momentum as next-generation networks and new applications come online in 2001,” said Credit Suisse First Boston in a recent report on subscriber forecasts.
While carriers may not be experiencing the unprecedented growth they saw a few years ago, the number of consumers continuing to flock to wireless communications should be enough to counter the notion that the wireless industry is past its prime.
