With some cell carriers reporting historic growth in the third quarter, it’s hard not to wonder how long the momentum can last.
With 928,000 additions, AT&T Inc.’s postpaid phone subscribers in the third quarter were nearly double analysts’ expectations and at the highest rate in nearly 10 years. T-Mobile US Inc. said it added 673,000 postpaid phone lines, the strongest third-quarter account growth in nearly seven years. Verizon Communications Inc. added 429,000 subscribers to the postpaid telephone network, up by more than 50% compared to the previous year.
A combination of factors must be taken into account to understand why postpaid additions continue to rise, analysts say, stressing upselling, low churn and Americans wanting more lines. Analysts believe these factors will help wireless service providers continue to report strong additions for quarters ahead as wireless line additions outpace population growth.
Upselling is one of the main drivers of postpaid ads, according to Kagan analyst Lynnette Luna.
“AT&T and Verizon are under pressure to sell their lowest paid subscribers,” Luna said in an interview. “Verizon, in particular, is very aggressive in getting its existing customers on unlimited premium plans with promotions on smartphones that it rolls out frequently and then withdraws. Its ability to bundle many exclusive streaming services together has been a selling point. solid. “
Grants and promotions
Cable operators Comcast Corp. and Charter Communications Inc. have also had strong wireless additions, and they will need to continue offering subsidies for mobile devices in order to keep up with incumbent wireless carriers, Wave7 analyst Jeff Moore said.
“Wireless carriers offer high-end unlimited plans with streaming, which could impact video additions in cable companies as more and more people decide to rely solely on streaming,” he said. declared.
AT&T has offered large grants on devices such as the iPhone 13 Pro from Apple Inc. or the Pixel 6 Pro from Google LLC to new and existing customers, which has helped reduce the churn rate and increase churn. net additions.
“AT & T’s promotions remain by far the richest in the industry,” wrote Craig Moffett, analyst at MoffettNathanson, in a research note.
But AT&T executives say it’s more than just promotions that drive AT & T’s success, highlighting streamlined pricing plans and optimized distribution channels.
“We know, based on these metrics that we see, that we are adding high value customers and don’t think it’s just driven by some kind of subsidy or additional cash flow that is in the general market. market, ”said Jeff McElfresh, CEO of AT&T Communications.
T-Mobile credits its expanding service area with record postpaid ads.
“Small markets and rural areas already contribute about a third of our new accounts and brand shares are up across the board,” T-Mobile CEO Mike Sievert said on the call. to the results of the company.
Along with corporate sales strategies and network expansion, government spending programs are also helping to increase phone additions.
Moore said the money expelled by the government during the pandemic could explain the high postpaid additions, even indirectly. “The Broadband Emergency Benefit program has given families subsidies for Internet services, which may have helped many people pay for their wireless plans,” he said.
Recon Analytics analyst Roger Entner said low-income Americans who typically ditched their phones or considered a prepaid device during an economic downturn may have used emergency funding to keep paying for postpaid services.
“In 2008, postpaid ads collapsed while prepaid ads grew rapidly, but the Trump and Biden administrations cushioned the financial impact of the pandemic more than any other administration during a financial crisis,” Entner said.
Cell phones are more integral to the American way of life than ever, and changing consumer trends could help wireless service providers maintain high postpaid subscribers in the long run, Luna said.
“People are buying phones for their children earlier than before, and some people are buying more than one line of service,” Luna said.
Moore said more and more people have enjoyed the benefits of having two lines, and as mobile companies offer additional lines at low prices, people are ready to buy. “A lot of people just like to have two lines. Whether it’s for professional or even criminal reasons, a lot of people are willing to pay to have more than one voice line,” he said.