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US Mobile Market Remains Slow As Economic Concerns Mount
Published on: 11th September 2008
During Q2 08, the US mobile market saw a marginal recovery from the depressed levels of Q1, with around 4m net additions, taking the total to 261.5m, up from 243.3m one year ago. Overall penetration has now reached 86.1%, against 80.8% in June 07.
The process of consolidation that has been such a feature of this market has continued into the current year, the latest deal being the acquisition of Alltel by Verizon. Upon completion, this will create a new industry leader, with a total of 82.2m customers, equivalent to 31.4% market share, ahead of AT&T which will lag its rival by nearly 10m connections. In fact, the enlarged Verizon will now be larger than the third and fourth placed operators, Sprint Nextel and T-Mobile USA, put together. These two have 46.9m and 31.5m customers respectively, though Sprint's number rises to 51.9m if the 5m customers connected through the Virgin Mobile MVNO are included. The divergence in the two companies' fortunes is notable: over the last year, T- Mobile has added 4.6m new customers, while Sprint has lost 2.2m. This number is made up of a gain of 2.2m CDMA connections offset by a 5.2m drop in the iDEN base.
The Mobile World Database contains detailed numbers for eight other operators, of which the largest is USC. This closed the quarter with 6.19m customers, only marginally more than in Q1. Virgin Mobile, the MVNO on the Sprint CDMA network saw a small drop in connections, from 5.1m to 4.99m and, to add insult to injury, a more significant fall in ARPU, from $19.93 to $19.32. Of the others, the largest were MetroPCS which closed the quarter with 4.6m customers and Leap Wireless, which had 3.3m.
The acquisition of Alltel also means that the various independent operators now have a smaller combined base than T-Mobile, the smallest of the big four. The Mobile World estimates that in addition to the 22m customers connected to the eight listed operators, there are some 6.5m connections spread across the other (mainly rural) operators, giving a total of 28m for the chasing pack outside of the big four, or slightly more than 10.5% of the total. Over time, we would imagine that the majority of these operators will be acquired by the industry leaders and, in this respect, Verizon has a material advantage over AT&T and T-Mobile, as the largest remaining independents - USC, MetroPCS and Leap - all use CDMA technology rather than the GSM standard.
The second chart shows the changes in the technology base over the last few quarters. CDMA became the majority technology in the US in Q2 07 and today it accounts for 135m, or 51.7% of the total. GSM's share of the total has fallen, from 38.3% to 37.7%, but this is due to the rapid growth of W- CDMA. This has seen a 163% increase over the last year, from 5.1m to 13.3m and if this is added to the GSM base, the overall share has increased, from 40.4% to 42.8%. It follows that the other technologies in use in the States have seen a reduction in their share of the total, with iDEN down from 8.1% of the total to just 5.6%, while the size of the combined TDMA/AMPS base is now negligible.
The existence of two main technologies has clearly hampered the growth in the US market, as has the regional licensing strategy. Observers of the market will also know that the "receiving party pays" approach to billing is also a factor - something that appears to have eluded Vivianne Reding, the EU commissioner in charge of telecoms. However, there is a slight upside to the peculiarities of the market, which is that churn is generally materially lower than it is in Europe. Customers are usually less ready to switch if this involves the purchase of a new handset. During the quarter, the two largest operators both announced new records for contract churn, of 0.83% (at Verizon) and 1.1% at AT&T. Sprint and T-Mobile aren't in the same league, at 2.0% and 1.9% respectively, but they are still reasonably respectable by international standards.
The other main trend in the US is the continuing increase in the level of expenditure on data services, fuelled by the growth in 3G adoption. The third and final chart shows the weighted average ARPU earned by the industry, split between data and voice. The data element has risen in every quarter over the last two years, both absolutely and as a proportion of the total. In Q1 06, the numbers were $5.22 out of a total of $49.22, while in this latest quarter, the corresponding figures were $11.31 and $51.46. This equates to 22% of the total and at this current run rate, the mobile data industry iin the USA is now worth more than $35bn, up from $25bn this time last year.
Tags: [t-mobile] [mobile data] [arpu] [t-mobile usa] [rural] [metropcs] [leap wireless] [virgin mobile] [mvno] [verizon] [alltel] [cdma] [iden] [sprint] [billing] [churn] [virgin] []
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