Telecom giant AT&T posted solid wireless revenue and subscriber growth in second quarter, yet continues to trail behind Verizon and its Share Everything plans.
AT&T reported positive results including subscriber growth and revenue growth in Q2 2013, yet continued to lose ground to Verizon. Verizon easily outpaced AT&T in subscriber growth with 1.4 million net additions while AT&T brought in 632,000 net additions during the quarter.
AT&T will continue to post successful results in the postpaid market and with its Mobile Share plans but will continue to slowly lose ground to Verizon in terms of subscriber growth.
To combat the success of Verizon’s Share Everything plans, AT&T announced additional low end tiers for its Mobile Share plans in July. The end result will help AT&T better compete with the lower priced offerings from Sprint and T-Mobile, yet will not succeed in stealing many subscribers from Verizon.
AT&T will drive data revenue growth in the low double digits in H2 2013 by rapidly deploying the remainder of its initial LTE network and executing Project VIP to improve its network quality and reliability in addition to driving growth with its Mobile Share plans and other wireless plan offerings. These initiatives will strengthen AT&T’s business and drive higher data consumption to better monetize its offerings. In addition the pending acquisition of Leap Wireless will drive growth in the prepaid segment, an area of recent struggle for AT&T.
AT&T’s acquisition of Leap Wireless will impact the prepaid market, yet is primarily about purchasing additional spectrum
AT&T announced a July bid to acquire U.S. Tier 2 wireless operator Leap Wireless for $1.2 billion. Although the acquisition will double the size of AT&T’s current prepaid subscriber base, the deal is primarily based on the spectrum that Leap owns, especially the portion which is currently unused. AT&T will utilize this spectrum to build out additional LTE coverage to increase capacity and network speeds in some of its major markets.
The deal is not quite the perfect fit for multiple different reasons. First, TBR believes AT&T overpaid for the amount of spectrum it will receive in the acquisition. However the upside is that unused spectrum is much cheaper to begin deploying networks as there is no existing network to recycle or take down.
In addition to the price point, the Leap prepaid brand, Cricket, an unlikely fit as well. This is primarily due to AT&T’s recent Aio Wireless brand that it launched earlier in 2013. Aio Wireless targets the same prepaid customers as Leap and is a direct competitor to the Cricket brand. This leads TBR to believe the Aio Wireless brand will soon be decommissioned or sold if the Leap deal gets regulatory approval.
There are also some benefits to the acquisition as well. This includes preventing Leap from being acquired by another Tier 1 operator. T-Mobile is also interested in acquiring Leap into its fast growing prepaid portfolio of brands which now includes MetroPCS.
AT&T is not only acquiring spectrum waves to deploy LTE, but also increasing and strengthening its presence in a fiercely competitive prepaid market. Overall, despite this acquisition AT&T will remain focused on searching for a suitable European acquisition to expand its business overseas. AT&T will strike a deal during H2 2013.
Eric Costa, analyst, Networking and Mobility Practice, Technology Business Research
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