Verizon Wireless Continues to Take Market Share

The analysts at Merrill Lynch have conducted another of their regular trawls around the US phone and network retailers and have concluded from interviews with staff that overall wireless sales volumes appear healthy for 2Q06, with Verizon Wireless continuing to take share across the board. Cingular is executing well. Alltel appears to have gained momentum. However, they believe that T-Mobile is likely to come up short on net additions during the quarter.

Merrill Lynch estimates that subscriber growth will slow in US wireless, from 25.5 million net additions in 2005 to 23 million in 2006, for an ending subscriber growth rate of about 11% YoY and 77% penetration.

Merrill Lynch found that Verizon still has an edge with regard to customer perception of network quality, and it is using that advantage to gain market share. Verizon stores are extremely busy, particularly in markets where a competitor's service is not up to par. Indeed, so busy are the stores, that it was commented that a number of stores the analysts visited could use additional sales reps in order to help meet the customer demand.

The analysts report that Sprint continues to struggle with its marketing message and many customers and some sales reps still do not understand the value added associated with the Sprint Nextel merger. Contrasting the problems at Sprint, operations at Cingular have consistently been improving, based on their store visits over the past several quarters. There are still some areas where customers remain unhappy with Cingular's network coverage, but in general customers are seeing an improvement.

As a result, Cingular and the former AT&T Wireless business are being mentioned less frequently by competitors as being ported from than had been the case throughout last year.

Cingular is also now firmly entrenched at RadioShack in terms of sales personnel knowledge and phone selection. Interestingly, customer credit quality still remains the primary way a carrier is chosen at RadioShack, based on the analysts checks. If the customer has good credit, the choice is Cingular. If the customer credit is questionable, they generally get the Sprint service.

Merrill Lynch is lowering its estimate for T-Mobile USA's net additions in 2Q06 from 900,000 to 650,000. T-Mobile USA moved primarily to 2-year contracts in April and lost momentum in its indirect channel during that month, although it seems to have recovered somewhat since then. T-Mobile has become the last national carrier to switch to two-year service plans, and while the operator is still offering one-year plans with more expensive phone prices, most customers are signing up for two-year plans in order to get the better discount on their handset.

 

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Posted to the site on 30th June 2006