Black Friday, Small Business Saturday and Cyber Monday Kickstarts Q4 After Sluggish Q3 Device Sales

The US smartphone market sell through fell almost 9% during the third quarter. The quarter was marked by weakness within prepaid, promotional activity which mainly required new lines, and continued growth in BYOD.  US carriers seemed OK with more focus on margins and bottom lines then competing over aggressive BOGOs or other service options to tempt churning subscribers.  This discipline especially hurt handset suppliers catering to the mid-tier, prepaid channels, and national retail.

Other insights:

  • LG took the largest hit from this space’s weakness—dropping 13%. LG Stylo 4 and K-series drive volumes within prepaid and national retail. These areas saw particular weakness during the quarter.
  • Samsung fell 5%. GS9/9+ trail last year’s GS8/GS8+. The success’ of J3 variants an J7 variants could not bridge the gap. Note 9 is holding serve.
  • Moto and Apple were the winners during the quarter. Moto gained momentum with E5 variants and success’ in Cricket and Boost. The company stole the most from the void left by ZTE.
  • Apple gained on the execution of this year’s launch. Having two premium devices launch first helped. Also, channel volumes were larger out the gate as the company saw fewer stockouts during the opening three weeks.

For more details see: Counterpoint USA Smartphone Market Analysis Q3 2018

Carriers activated less devices this year as they focused on margins, bottom lines, and densifying networks in anticipation for 5G. They also may be saving for late Q4 activities. Other insights:

  • Sprint: Saw a decline in handset sales on both postpaid and prepaid sides. Upgrade rate also declined. Capex spending also declined. Churn remains an Achilles heel. Sprint may be running out the clock until the potential TMO-Sprint lockup. For more, see here.
  • Verizon: Continued as the largest hardware channel in the US and competes for the largest Apple and Samsung channels with China Mobile. The company activated 10.5m devices during the quarter despite only moderate promotional activity. The focus on premium subs and strong network enabled them to sell the most XS and XS Max smartphones. For more, see here.
  • AT&T: Had a strong overall wireless quarter. Rare in that they increased hardware sales in both postpaid and prepaid. One reason was a higher postpaid upgrade rate. On the prepaid side, Cricket had a spectacular quarter adding 481k phone net adds. Jury is still out on how the carrier will be able to take advantage of expensive media purchases. For more, see here.
  • T-Mobile: Smartphone sales were down on both the postpaid and prepaid side of the ball. However, TMO had its 22nd quarter of adding more than one million postpaid subs—an incredible record. It was the second largest smartphone sales channel behind Verizon and is punching above its weight. OnePlus is off to a fast start. For more channel sales details, see here.


Black Friday and Cyber Monday Early Feedback

Overall Black Friday and Cyber Monday spending estimates were up YoY by double digit percentages. The big spending sectors included toys, games, TV’s, wearables and connected home electronics. Carrier promotions were on the weak side as most carriers required new lines of service to take advantage of discounts.  Verizon was an exception with their $400 upgrade promotion—no new line needed.  This benefitted Apple and Google Pixel 3 sales the most. For more details, see here.

T-Mobile has kept promos rolling with a new post-Black Friday weekend promo on Samsung devices. Starting on November 30th, current subscribers get a Samsung 50” 4k UHD Smart TV free when activating at least one new line and putting a Samsung flagship on an EIP (Note 9, GS9, GS9+, GS8, or GS8 Active).  New subscribers would need to activate two lines. The new line(s) requirement will keep this campaign in check as phone churn is at or under 1% at Verizon, AT&T, and T-Mobile.  Look for more promos with line activations required.