Network Quality Differentiates Top U.S. Wireless Players

+5.74%
Upside
17.30
Market
18.29
Trefis
T: AT&T logo
T
AT&T

AT&T (NYSE:T) is the second best wireless network in the U.S. after Verizon (NYSE:VZ), according to the latest mobile network performance report by RootMetrics. The second largest U.S. carrier was ahead of market leader Verizon in text performance and was almost on par with it in most of the other parameters, including network reliability, call performance and data performance. It scored an impressive 79.5/100 in the overall performance report, trailing Verizon by a single point. The only parameter where AT&T lagged significantly behind Verizon was network speed, likely due in part to the latter’s new upgraded LTE service, XLTE. [1]

In addition to highlighting the fierce competition at the top level, the latest RootMetrics report indicates that Verizon and AT&T are far ahead of smaller players T-Mobile and Sprint (NYSE:S) in overall network performance. Although both T-Mobile and Sprint reported an improvement in absolute performance compared to last year, they are a distant third and fourth in the latest report, with scores of around 70/100 each. It is therefore no surprise that the smaller players are trying to lure customers with highly competitive data plans and pricing, while the market leaders are focusing more on network quality and retaining their high-ARPU (Average Revenue Per User) customers.

See our complete analysis for  AT&TVerizon | Sprint

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With Sprint’s new CEO rolling out a new set of attractive and cost-effective data sharing plans recently, a big question is if the bigger players will follow suit and start another price war in the ultra-competitive and saturated U.S. wireless market. It is important to note that Sprint is offering its maximum discounts only on high data usage plans (greater than 20 GB per month), which is likely to entice only a section of the user market. If this particular group of users expects to use more than 20 GB of data, it is fair to assume that they expect good network quality and speed as well. Considering that Sprint placed last in most parameters – including network speed, data performance and reliability – in the latest study, customers may be unlikely to hurriedly switch service providers strictly on the basis of lower costs.

We expect Sprint’s latest offerings to position it as a strong contender to retain its third position in the U.S. wireless market and enable it to compete with T-Mobile. However, it is unlikely that AT&T and Verizon will jump into a price war with the smaller players in the near term.

We have a $37.50 price estimate for AT&T, which is about 10% ahead of the current market price.

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Notes:
  1. Midyear Mobile Network Performance Report, RootMetrics, Aug 18 2014 []