2017 Wireless Revenue Rose 0.6% Year-to-Year to $57.8 Billion Among U.S. Carriers

Buoyed by 1.3 million added subscribers in 2Q, as unlimited data plans constrain service revenue growth

Wireless revenue rose 0.6% year-to-year to $57.8 billion among U.S. carriers in Technology Business Research Inc.’s (TBR) 2Q17 U.S. & Canada Mobile Operator Benchmark. Growth was driven by T-Mobile’s higher service revenue, buoyed by 1.3 million subscriber net additions in 2Q17, as well as most U.S. carriers increasing equipment revenue in the quarter via device installment plans. Sprint and T-Mobile also benefit from their leasing programs as they generate equipment revenue from the residual value of returned smartphones as well as reselling the devices to third parties. Most carriers, however, are struggling to increase service revenue due to the discounts given to customers on non-subsidized pricing plans as well as operators relying on aggressive pricing promotions to attract customers.

The benchmark examines how the industry’s shift to unlimited data plans impacts subscriber growth across the U.S. market. “Verizon’s and AT&T’s new unlimited data plans, which launched in February, helped drive a year-to-year increase in the carriers’ postpaid phone net additions due to enhanced customer flexibility and video streaming capability,” said TBR Analyst Steve Vachon. “Tier 1 U.S. carriers other than Sprint improved postpaid phone churn year-to-year as adoption of unlimited data plans, along with improved network coverage, is retaining subscribers. However, adoption of unlimited data plans had mixed results on service revenue. Although the plans benefit ARPU, as customers migrate from lower-priced data plans, they also hamper ARPU by reducing overage revenue.”

In light of the industry’s shift to unlimited data, carriers are becoming more dependent on offering complementary services to attract subscribers as “extra data” promotions are no longer as relevant. These trends are exemplified by AT&T and T-Mobile recently offering HBO and Netflix, respectively, to their unlimited data customers at no extra cost as well as the launch of the new Verizon Up rewards program. Carriers are also relying on smartphone promotions, such as BOGO (buy-one, get-one) offers, to help reduce the cost of premium devices. TBR anticipates subscriber additions in 2H17 will largely be dependent on the success of iPhone promotions given the particularly high retail price of the new device models.

Combined wireless revenue among Tier 1 Canadian carriers rose 7.9% year-to-year to $5.9 billion due to continued postpaid additions spurred by shared data programs and higher data usage arising from the accelerated speeds offered by LTE-Advanced services. Bell Mobility, Rogers and Telus continue to increase service revenue as the carriers sustain consistent postpaid net additions and higher data usage. The Canadian market has also yet to shift to equipment installment plans, meaning average revenue per user (ARPU) is not diminished by subscribers migrating to discounted non-subsidized plans as is occurring in the U.S.

Though Tier 1 Canadian carriers continue to increase ARPU through customers migrating to larger data tiers, the companies are launching regional pricing promotions to counter offers from smaller carriers such as Quebec’s Videotron. The Tier 1 carriers also recently launched pricing promotions targeted at Shaw’s Freedom Mobile brand, which is expanding its LTE network to additional markets in Canada.