us wireless market trends for q3 2014
DESCRIPTION
A review of key financial and operating metrics for the five largest wireless operators in the US: AT&T, Sprint, T-Mobile, Tracfone and Verizon Wireless. An analysis of some of the slides is available on FierceWireless at: http://www.fiercewireless.com/special-reports/how-verizon-att-sprint-t-mobile-and-tracfone-stacked-q3TRANSCRIPT
Jan Dawson Chief Analyst
(408) 744-6244 [email protected]
@jandawson
US wireless market trends for Q3 2014
Introduction• I’m making this slide deck available as a public service
• The data behind the deck are available in Excel as a paid product from Jackdaw Research, both on a one-off and annual subscription basis
• Similar decks for the two previous quarters may be found at:
• http://www.slideshare.net/JanDawson2/us-wireless-market-trends-q1-2014
• http://www.slideshare.net/JanDawson2/us-wireless-market-trends-q2-2014
• The slide deck will be available exclusively on FierceWireless.com until Monday November 10th, 2014, and thereafter will be available on slideshare.net and for embedding elsewhere
• A brief analysis of some of the slides is also available exclusively on FierceWireless.com at http://www.fiercewireless.com/special-reports/how-verizon-att-sprint-t-mobile-and-tracfone-stacked-q3
2
Contents
• Financials - revenues, profitability, capital intensity
• Subscribers - total subs, net adds, churn
• Device trends - subsidies, penetration
3
Wireless revenues
4Source: Company reporting, Jackdaw Research analysis
0
10,000
20,000
30,000
Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014Q2 2014Q3 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 Q3 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 Q3 2014
AT&T Sprint T-Mobile Tracfone Verizon
Note: TMO results in Q2 2014 adjusted to strip out the effects of a spectrum sale worth $731m
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 Q3 2014
AT&T Sprint T-Mobile Tracfone Verizon
Note: TMO results in Q2 2014 adjusted to strip out the effects of a spectrum sale worth $731m
Capital intensity
8Source: Company reporting, Jackdaw Research analysis
Wireless capital intensity
0%
10%
20%
30%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Note: Sprint changed the basis on which it reports wireless capital expenditures this quarter, and we are awaiting clarification on the new reporting standard. Sprint is therefore excluded from this chart this quarter.
Total subscribers
9Source: Company reporting, Jackdaw Research analysis
Total subscribers
0
30,000
60,000
90,000
120,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
AT&T Sprint T-Mobile Tracfone Verizon (retail only)
Total subscriber breakdown, Q3 2014
0
20,000
40,000
60,000
80,000
100,000
120,000
AT&T Sprint T-Mobile Tracfone Verizon
Postpaid PrepaidConnected 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 to avoid double-counting
Total net adds
11Source: Company reporting, Jackdaw Research analysis
Wireless net adds
-1,000
0
1,000
2,000
3,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
AT&T Sprint T-Mobile Tracfone Verizon
Net add breakdown for Q3 2014
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
AT&T Sprint platform T-Mobile Tracfone Verizon
Postpaid Prepaid Connected Wholesale
Net add breakdown
12Source: Company reporting, Jackdaw Research analysis
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
Net adds by device
13Source: Company reporting, Jackdaw Research analysis
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
Postpaid phone net adds
14Source: Company reporting, Jackdaw Research analysis
Postpaid phone net adds
-750
-500
-250
0
250
500
750
1,000
1,250
1,500
Q4 2013 Q1 2014 Q2 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Postpaid tablet net adds
15Source: Company reporting, Jackdaw Research analysis
Postpaid tablet net adds
0
300
600
900
1,200
Q4 2013 Q1 2014 Q2 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Total net adds for big 5
16Source: Company reporting, Jackdaw Research analysis
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014
Postpaid Prepaid Wholesale Connected devicesTotal Phones Tablets
Total subs for big 5
17Source: Company reporting, Jackdaw Research analysis
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
Postpaid Prepaid Connected devices Total
Total subs for big 5
18Source: Company reporting, Jackdaw Research analysis
9%
22%
69%
Postpaid Prepaid Connected devices
Note: excludes wholesale to avoid double-counting. Figures
for end of Q3 2014
Churn – postpaid
19Source: 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 Q3 2014
AT&T Sprint T-Mobile Verizon
Churn – prepaid
20Source: Company reporting, Jackdaw Research analysis
Prepaid churn
0%
2%
4%
6%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
Sprint T-Mobile Tracfone
Losses implied by churn
21Source: Company reporting, Jackdaw Research analysis
Estimated postpaid subscriber losses, based on postpaid churn, 000s
0
1,000
2,000
3,000
4,000
Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014
AT&T Sprint T-Mobile Verizon
Gross adds
22Source: 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 Q4 2012 Q2 2013 Q4 2013 Q2 2014
AT&T Sprint T-Mobile Verizon
Gross adds vs losses
23Source: Company reporting, Jackdaw Research analysis
AT&T gained vs. lost subscribers – postpaid, estimated
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 Q3 2014
Lost Gained
Gross adds vs losses
24Source: Company reporting, Jackdaw Research analysis
Sprint gained vs. lost subscribers – postpaid, estimated
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 Q3 2014
Lost Gained
Gross adds vs losses
25Source: Company reporting, Jackdaw Research analysis
T-Mobile gained vs. lost subscribers – postpaid, estimated
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 Q3 2014
Lost Gained
Gross adds vs losses
26Source: Company reporting, Jackdaw Research analysis
Verizon Wireless gained vs. lost subscribers – postpaid, estimated
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 Q3 2014
Lost Gained
Gross adds vs losses
27Source: Company reporting, Jackdaw Research analysis
Tracfone gained vs. lost subscribers – prepaid, estimated
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 Q3 2014
Lost Gained
ARPU
$45
$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 Q3 2014
AT&T (postpaid phone-only ARPU) SprintT-Mobile Verizon (ARPA/connections per account)T-Mobile ABPU AT&T phone-only plus Next billings
ARPU – postpaid
28Source: Company reporting, Jackdaw Research analysis
Verizon doesn’t report ARPU so we use a calculation which is roughly but not entirely equivalent. For both T-Mobile and AT&T we have included a second metric which includes equipment installment payments.
ARPU - prepaid
29Source: Company reporting, Jackdaw Research analysis
ARPU – prepaid
$0
$10
$20
$30
$40
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
Sprint T-Mobile Tracfone
Smartphone sales
30Source: Company reporting, Jackdaw Research analysis
% of postpaid sales that were smartphones
60%
70%
80%
90%
100%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Smartphone sales
31Source: Company reporting, Jackdaw Research analysis
Number of smartphones sold (m)
0
3
6
9
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Note: AT&T and T-Mobile sold exactly the same number of smartphones in both Q2 and Q3
2014. Hence, their lines and datapoints overlap. We have been unable as yet to ascertain how many smartphones Sprint sold in the quarter.
Smartphone penetration
32Source: Company reporting, Jackdaw Research analysis
% of postpaid base on smartphones
0%
30%
60%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
0%
3%
6%
9%
12%
Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
AT&T Sprint T-Mobile Verizon
Smartphone upgrades
33Source: 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. AT&T no longer reports this metric.
Equipment revenue
34Source: Company reporting, Jackdaw Research analysis
0
750
1,500
2,250
3,000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
AT&T Sprint T-Mobile Tracfone Verizon
Subsidies – Sprint data
35Source: Company reporting, Jackdaw Research analysis
0
500
1,000
1,500
2,000
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
Percent of hardware cost covered by revenue Wireless subsidy
Subsidies – T-Mobile data
36Source: Company reporting, Jackdaw Research analysis
0
500
1,000
1,500
0%
30%
60%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014
Value & Simple Choice as % of postpaid baseEquipment sales revenues financed on EIPEquipment sales revenue % on EIP
