US wireless market trends Q2 2014
33
Jan Dawson Chief Analyst (408) 744-6244 [email protected] @jandawson US wireless market trends for Q2 2014
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An overview of trends in the US wireless market in Q2 2014, covering AT&T, Sprint, T-Mobile, Tracfone and Verizon Wireless. Includes analysis of financials, subscribers, net adds, ARPU and churn. Also, the impact of device installment billing on both the carriers and OEMs. Analysis of the content in this deck is available here: http://www.beyonddevic.es/2014/08/12/analysis-of-q2-2014-us-wireless-market/
Transcript of US wireless market trends Q2 2014
Jan Dawson Chief Analyst
(408) 744-6244 [email protected]
@jandawson
US wireless market trends for Q2 2014
Introduction• I’m making this slide deck available as a public service
• The previous quarter’s deck is available at: http://www.slideshare.net/JanDawson2/us-wireless-market-trends-q1-2014
• Analysis accompanying this deck is at:http://www.beyonddevic.es/2014/08/11/analysis-of-q2-2014-us-wireless-market
• Journalists and bloggers are welcome to embed the deck from Slideshare and are also free to use individual slides / graphics with attribution and links - contact me for high res versions
• This deck forms part of the Jackdaw Research subscription research service - for more information see http://jackdawresearch.com/services/
2
Contents• Financials - revenues, profitability, capital intensity
• Subscribers - total subs, net adds, churn
• Device trends - subsidies, penetration
Unlike last quarter, this deck doesn’t include analysis - for that, please see http://www.beyonddevic.es/2014/08/11/analysis-of-q2-2014-us-wireless-market
3
Wireless revenues
4Source: Company reporting, Jackdaw Research analysis
Wireless revenues
0
10,000
20,000
30,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
Revenue growth
5Source: Company reporting, Jackdaw Research analysis
Year on year wireless revenue growth
-10%
0%
10%
20%
30%
40%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
EBITDA margins
6Source: Company reporting, Jackdaw Research analysis
Wireless EBITDA margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
Operating margins
7Source: Company reporting, Jackdaw Research analysis
Wireless operating margins
-10%
0%
10%
20%
30%
40%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
Capital intensity
8Source: Company reporting, Jackdaw Research analysis
Wireless capital intensity
0%
10%
20%
30%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Total subscribers
9Source: Company reporting, Jackdaw Research analysis
Total subscribers
0
30,000
60,000
90,000
120,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon (retail only)
Total subscriber breakdown, Q2 2014
0
30,000
60,000
90,000
120,000
Postpaid Prepaid Connected Wholesale
Subscriber breakdown
10Source: Company reporting, Jackdaw Research analysis
Note: Verizon doesn’t report wholesale or connected devices (M2M) subscribers. In addition, since Sprint
reports its connected devices subscribers as part of its retail postpaid and wholesale subscribers, but also
reports these separately, we have broken them out and subtracted them from the postpaid and wholesale
subscriber totals
Total net adds
11Source: Company reporting, Jackdaw Research analysis
Wireless net adds
-1,000
0
1,000
2,000
3,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
Net add breakdown
12Source: Company reporting, Jackdaw Research analysis
Net add breakdown for Q2 2014
-1,000
-500
0
500
1,000
1,500
2,000
AT&T Sprint T-Mobile Tracfone Verizon
Postpaid Prepaid Connected Wholesale
Note: since Sprint reports its connected devices subscribers as part of its retail postpaid and wholesale subscribers, but also reports these separately, we have
broken them out and subtracted them from the postpaid and wholesale subscriber totals
Postpaid net adds by device type
-1,000
-500
0
500
1,000
1,500
AT&T Sprint T-Mobile Verizon Wireless
Postpaid phone net adds Postpaid tablet net adds
Net adds by device
13Source: Company reporting, Jackdaw Research analysis
Note: Verizon added 1 million 4G smartphones, but lost about 700,000 feature phones and 3G smartphones
Churn – postpaid
14Source: Company reporting, Jackdaw Research analysis
Postpaid churn
0%
1%
2%
3%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Churn – prepaid
15Source: Company reporting, Jackdaw Research analysis
Prepaid churn
0%
2%
4%
6%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Sprint T-Mobile Tracfone
Losses implied by churn
16Source: Company reporting, Jackdaw Research analysis
Estimated posptaid subscriber losses, based on postpaid churn rates, 000s
0
1,000
2,000
3,000
4,000
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Gross adds
17Source: Company reporting, Jackdaw Research analysis
Estimated postpaid gross adds, based on churn and net adds, 000s
0
1,000
2,000
3,000
4,000
5,000
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Gross adds vs losses
18Source: Company reporting, Jackdaw Research analysis
AT&T gained vs. lost postpaid subscribers
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Lost Gained
Gross adds vs losses
19Source: Company reporting, Jackdaw Research analysis
Sprint gained vs. lost postpaid subscribers
0
1,000
2,000
3,000
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Lost Gained
Gross adds vs losses
20Source: Company reporting, Jackdaw Research analysis
T-Mobile gained vs. lost postpaid subscribers
0
500
1,000
1,500
2,000
2,500
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Lost Gained
Gross adds vs losses
21Source: Company reporting, Jackdaw Research analysis
Tracfone gained vs. lost prepaid subscribers
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Lost Gained
Gross adds vs losses
22Source: Company reporting, Jackdaw Research analysis
Verizon Wireless gained vs. lost postpaid subscribers
0
1,000
2,000
3,000
4,000
5,000
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Lost Gained
ARPU – postpaid
23Source: Company reporting, Jackdaw Research analysis
Verizon doesn’t report ARPU so we use a calculation which is roughly but not entirely equivalent. T-Mobile ARPU doesn’t include equipment payments so we’ve included a second metric - average billings per user
ARPU
$50
$55
$60
$65
$70
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T (postpaid phone-only ARPU) Sprint T-MobileVerizon (ARPA/connections per account) T-Mobile ABPU
ARPU – postpaid
24Source: Company reporting, Jackdaw Research analysis
AT&T ARPU - various measures
$58
$60
$62
$64
$66
$68
$70
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Postpaid subscriber ARPU Postpaid phone-only ARPUPostpaid phone-only plus Next Derived Postpaid subscriber ARPU
This chart is included to demonstrate the wide range of ARPU figures carriers now report, and those they’ve reported in the past. The yellow line represents the best indicator for AT&T going forward, as it includes Next payments, and is roughly equivalent to T-Mobile’s ABPU measure. It should rebound in the next few quarters
ARPU - prepaid
25Source: Company reporting, Jackdaw Research analysis
ARPU – prepaid
$0
$10
$20
$30
$40
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Sprint T-Mobile Tracfone
Smartphone sales
26Source: Company reporting, Jackdaw Research analysis
% of postpaid sales that were smartphones
60%
70%
80%
90%
100%
Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014Q2 2014
AT&T Sprint T-Mobile Verizon
Smartphone sales
27Source: Company reporting, Jackdaw Research analysis
Number of smartphones sold (m)
0
1
2
3
4
5
6
7
8
9
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Smartphone penetration
28Source: Company reporting, Jackdaw Research analysis
% of postpaid base on smartphones
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Smartphone upgrades
29Source: Company reporting, Jackdaw Research analysis
Note: Sprint and T-Mobile had identical numbers in Q4 2013 and Q1 2014. Hence, the lines representing them in the chart overlap each other during those two quarters.
% of base upgrading in quarter
0%
2%
4%
6%
8%
10%
12%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Verizon
Equipment revenue
30Source: Company reporting, Jackdaw Research analysis
Wireless equipment revenues
0
1,000
2,000
3,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
AT&T Sprint T-Mobile Tracfone Verizon
Subsidies – Sprint data
31Source: Company reporting, Jackdaw Research analysis
0
500
1,000
1,500
2,000
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Percent of hardware cost covered by revenue Wireless subsidy
Subsidies – T-Mobile data
32Source: Company reporting, Jackdaw Research analysis
0
500
1,000
1,500
0%
30%
60%
90%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Value & Simple Choice as % of postpaid baseEquipment sales revenues financed on EIPEquipment sales revenue % on EIP
