Weekly Telecom Notes: Verizon, AT&T & China Telecom
The past week saw Verizon (NYSE:VZ) reaffirm expectations by announcing a record number of iPhone sales in Q4 2011 at a Citigroup conference held Wednesday. AT&T (NYSE:T) added 11 more markets to its rapidly increasing LTE coverage and Sprint (NYSE:S) revealed the first markets where it will roll out its LTE network in coming months. Further, China Telecom (NYSE:CHA) made clear its ambitions of expanding its operations in Europe with the sale of wireless services as a MVNO in France and Germany after launching it initially in U.K.
Verizon
Verizon more than doubled its iPhone sales in Q4 2011, selling over 4.2 million iPhones as compared to the 2 million it had sold the previous quarter. A separate report mentioned that iPhone users with Siri, consume twice as much data as their iPhone predecessors which bodes well for Verizon.
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The iPhone will bring more postpaid customers on Verizon’s network that will reduce churn and increase ARPU levels in the long run. However, the huge subsidies that Verizon has had to offer on the iPhone will have a near-term impact on the carrier’s margins, which the company expects will contract by 500 to 600 basis points in Q4 2011.
See for analysis for Verizon here
China Telecom
China Telecom will roll out its first overseas MVNO wireless service in the U.K. by March end and then expand to France and Germany if it is successful. [1] The U.K service will run on the network of Everything Everywhere, the joint venture between France Telecom and Deutsche Telekom, but be sold under China Telecom’s brand.
Continuing on this relationship, we expect China Telecom to use the networks of these carriers in their respective countries when it expands into France and Germany. After Europe, the Chinese carrier has its eyes set on the U.S. market as well.
See full analysis for China Telecom here
Sprint and AT&T
AT&T announced the addition of 11 more markets to its LTE network Thursday, taking the total number of markets to 26 and customers covered to 74 million. [2]
Sprint also announced the first markets where it would be rolling out its 4G LTE service in coming months. [3] Verizon has so far taken a huge lead ahead in terms of LTE coverage and its rivals will not want to lag much behind, as susbscribers have started demanding higher data speeds for their smartphones.
See full analysis for Sprint | AT&T here
In addition to the company specific news, a worrying trend of declining SMS texting rates emerged in advanced markets around the world that we believe will make its way into U.S. shores by 2013. This will affect the U.S. wireless industry as a whole, which has till now gotten away with over-charging for SMS services in comparison to their mobile data services.
Considering that the wireless industry is so competitive, it will be tough for carriers to quickly increase the prices of their data plans in order to compensate for the fall in SMS revenues. Over time though, we expect data plans to see an industry-wide hike in prices, with one of the market leaders Verizon or AT&T taking the lead and others following them soon after.
Understand How a Company’s Products Impact its Stock Price at Trefis
- China Telecom May Expand to France, Germany After U.K, Bloomberg, December 5th, 2011 [↩]
- AT&T Rolls Out 4G LTE to Customers in 11 More Markets, Company Press Release, December 5th, 2012 [↩]
- Sprint Announces First Major Markets to Receive 4G LTE in 2012, Company Press Release, December 5th, 2011 [↩]