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Equipment Installment Plans Make Mark on Wireless Business

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The traditional subsidy model for wireless customers is undergoing a transformation, according to a new report by Fitch Ratings. Rather than customers continuing to receive a subsidized handset device in exchange for a two year service contract, the model is shifting toward a no subsidy purchase using equipment installment plans (EIP).

From a customer perspective, EIPs can simplify the purchasing process as the cost of handset devices are more transparent and service costs are more identifiable. Following T-Mobile's launch of its Jump! equipment installment plan during 2013, all of the major wireless carriers responded with the launch of similar plans.

Postpaid subscriber net additions among the four largest wireless carriers swelled to approximately 2.15 million units during first-quarter 2014.

Fitch estimates tablets were 77% or 1.7 million of the 2.15 million postpaid subscriber units added during first-quarter 2014. This represents an uptick compared to fourth-quarter 2013, when tablets comprised approximately 58% or 1.7 million of the 2.9 million postpaid subscriber units added.

Fitch estimates the largest video service providers gained approximately 261,000 video subscribers during the quarter ended March 31, 2014 and video subscribers increased by approximately 105,000 subscribers during the year ended March 31, 2014. First-quarter 2014 marks the industry's largest subscriber gain since first-quarter 2012. The largest cable MSOs accounted for approximately 51% of video subscribers among the largest multichannel video programming distributors. Direct-broadcast satellite (DBS) service held approximately 37% of video subscribers share followed by the large telephone companies with a 12% share.

The largest cable MSOs accounted for approximately 46.6 million video subscribers, representing 50.8% of video subscribers among the largest multichannel video programming distributors. Direct broadcast satellite (DBS) service providers totaled approximately 34.3 million video customers (37.5% of video subscribers) and the large telephone companies had more than 10.7 million video subscribers (11.7% of video subscribers). The telephone companies gained 160bp of the multichannel video subscriber market in 2013, as the cable MSOs lost 200bp of the market share.

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Tags: USA