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Industries
Telecom


WIRELESS CARRIERS LOSE BILLIONS AS SMARTPHONE DEMAND SLOWS

 * Americans holding onto smartphones longer post-pandemic
 * Big three US carriers down nearly $5 billion over past year

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A customer looks at cellphones for sale at an AT&T store in New York, US.

Photographer: Jeenah Moon/Bloomberg
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By Immanual John Milton
August 17, 2023 at 11:20 AM GMT+1

Listen

2:44

The top three US wireless carriers have lost billions in revenue as smartphone
sales dwindle in a reversal of the pandemic boom.

AT&T Inc., T-Mobile US Inc. and Verizon Communications Inc. collectively lost
nearly $5 billion in equipment sales over the past 12 months compared to the
previous year. T-Mobile’s equipment revenue fell 23% last quarter, while AT&T’s
slipped 7% and Verizon’s postpaid phone upgrades dropped 34%.

Executives partly blame smartphone makers and say customers are content waiting
longer between upgrades. Verizon Chief Executive Officer Hans Vestberg said on a
recent earnings call that there hasn’t been any “major” new devices recently,
while T-Mobile Chief Financial Officer Peter Osvaldik said customers are “happy
with their devices” for longer time frames.


US CARRIERS' DEVICE SALES WORST SINCE EARLY 2020

Revenue from equipment has retreated to early pandemic levels

Source: Company filings

The turnaround comes after a surge in demand of wireless devices during the
Covid-19 pandemic — revenues hit about $6 billion per carrier in the last
quarter of 2020 when stimulus checks, product promotions and nationwide
lockdowns spurred consumers to upgrade their electronic devices. Now, consumers
have returned to pre-pandemic upgrade cycles as networks pull back on
promotions.



Almost a third of new phone buyers in March had kept their old device for at
least three years, up from just 20% in March last year, analysis by Consumer
Intelligence Research Partners shows. The average age of a North American’s
smartphone rose to three-and-a-half yearsBloomberg Terminal last quarter,
according to Assurant Inc. Earlier this month, Apple Inc. posted its third
straight quarter of declining sales, while other phone makers, including Samsung
Electronics Co., have also seen sales of their devices slow or remain flat.



The decline in revenues isn’t necessarily bad for telcos. “Lower equipment sales
are a good thing for the carriers,” New Street Research LLP Managing Partner
Jonathan Chaplin said, as they often lose money on smartphone sales due to
promotional discounts. “If the upgrade rate declines, they are subsidizing fewer
handsets, and their margins expand,” he said.

Still, less enticing smartphone upgrades could pose a problem for the wireless
carriers’ all-important service revenues, making up about three-quarters of
total sales, as they rely on offerings like free phones to bring in new
customers and fuel growth.

New Street’s Chaplin sees upgrades and equipment revenues continuing to decline
through the end of the year absent a “blockbuster” iPhone launch in September or
October. Though even Apple Chief Executive Officer Tim Cook has limited
visibility: “It’s very difficult to estimate real time what is going on with the
upgrade cycle,” he said on a recent earnings call.

Slowing subscriber growth has weighed on carriers’ shares this year. AT&T is
down 23%, Verizon has dropped 16%, and T-Mobile, which recently had its best
second quarter in eight years, is down about 1%.



— With assistance by Scott Moritz

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