Telecom Lead America: AT&T will continue to post positive revenue and subscriber results, though the results are overshadowed by the success Verizon is having in the wireless market.
AT&T reported positive results including subscriber growth and revenue growth in 1Q13, yet continued to lose ground to Verizon. Verizon more than doubled both AT&T’s wireless revenue growth and postpaid subscriber net additions as Verizon’s Share Everything plans continue to outperform the success of AT&T’s Mobile Share plans.
AT&T will continue to control the second spot in the U.S. market in 2013 until it can capitalize on its M2M segment to drive additional revenue growth over the next two years.
TBR believes AT&T will drive data revenue growth in the low double digits in 2013 by rapidly deploying its LTE network and executing Project VIP, expanding its device lineup with multiple platforms and heading toward a more data-focused strategy concentrated on connections and its Mobile Share plans. These initiatives will strengthen AT&T’s business and drive higher data consumption to better monetize its offerings.
Mobile share plans will continue to increase AT&T’s connections and support data revenue growth
AT&T’s Mobile Share plans are a primary driver for the company’s data revenue growth as they are resulting in increased connections including smartphones and tablets.
AT&T would benefit from moving away from its other tiered data options to only its Mobile Share plans, just as Verizon did with its Share Everything plans. This would help AT&T increase its connected devices adoption rate as subscribers enjoy the simple option of attaching a device to their existing monthly plan. This in turn would help the operator drive higher data revenue and as the devices consume more data.
AT&T’s Mobile Share plans reached about 10 million connections or 14 percent of its postpaid subscriber base in 1Q13 compared to Verizon’s 28 million connections, or 30 percent of its postpaid subscribers.
The two operators launched these plans around the same time frame, so the advantage is clearly stemming from Verizon’s decision to cut its other postpaid options. Other elements including the companies’ marketing campaigns also play a role in attracting net additions.
However, TBR believes if AT&T moves to a purely shared data strategy the operator will bring in a higher number of connections that will help it better compete with Verizon if the postpaid segment.
AT&T is challenging Verizon’s market lead by expanding its own leading connected device segment
AT&T controls the largest connected device market in the U.S. and continued to build on its lead during 1Q13. AT&T posts high tablet net additions each quarter, with 365,000 postpaid tablets in 1Q13. This in addition to its growing M2M services will help AT&T maintain its lead in the segment throughout 2013.
AT&T’s connected car and Digital Life services are just a couple in a large and growing portfolio of data services that AT&T is building to support additional data revenue growth over the next five years. This is an opportunity for AT&T to gain ground on Verizon in a new area, even as Verizon continues to dominate the postpaid market.
AT&T scored a major win during the first quarter when it partnered with OnStar to provide LTE coverage starting in 2014. This is a key partnership for two reasons.
Firstly, AT&T is heavily investing in the connected car M2M vertical and foresees significant growth in this market over the next two years. The entire GM portfolio of car manufacturers will soon use AT&T’s LTE network, which will help the operator gain a sizable market share.
The other reason is that OnStar has been Verizon’s partner since its inception, meaning that not only is AT&T expanding its M2M automotive segment, it is also causing Verizon a slight setback. However Verizon does have the resources from acquired automotive M2M company Hughes Telematics which it acquired in July 2012, so it will continue to be a presence in this market as well.
Eric Costa, Analyst in TBR’s Networking and Mobility Practice, Technology Business Review
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