In today’s rapidly evolving telecommunications landscape, the significance of digital transformation for Mobile Virtual Network Operators (MVNOs) cannot be overstated. As the industry witnesses a surge in technological advancements and changing consumer expectations, MVNOs face unprecedented opportunities as well as challenges. Digital transformation serves as the catalyst that empowers MVNOs to remain competitive, enhance customer experiences, streamline operations, and unlock new revenue streams.
This whitepaper looks at the changing MVNO landscape and how MVNOs can go “DIGITAL” – Differentiated, Intelligent, Growing, Integrated Telco that is Agile and always Listening.
US wireless communication industry body CTIA held its 5G Summit in Washington, DC, on May 17, bringing together industry and government officials.
Industry speakers were united in their warning that more spectrum must be auctioned off to keep up with rapid increases in network traffic.
Leaders also cautioned that without a clear strategy for spectrum allocation, the US risked losing its leadership position in the wireless industry to competitors like China.
Top officials from the US wireless industry and government gathered in Washington, DC, on May 17 for industry body CTIA’s 5G Summit. Speakers reflected on the impressive progress that has already been made in building out 5G networks and opening new use cases, while also looking forward to the work yet to be done and the challenges facing the industry. There was a palpable sense of optimism about the opportunities that 5G still promises and reminders that in many ways it is still in its early stages. But industry leaders made clear that for 5G to meet its potential, policymakers must do more to support it.
How far 5G has come
Speakers at the event laid plain just how much progress has been made on 5G. By most measures, it has been the most quickly adopted wireless generation yet. Between the low-band, mid-band and mmWave frequencies, Verizon, T-Mobile and AT&T cover 320 million Americans. And their mid-band rollouts have been swift – AT&T’s Egal Ilbaz noted that the operator would reach 200 million PoPs by the end of the year, while T-Mobile’s Neville Ray noted that the company was closing in on 300 million PoPs.
*Based off Earnings Call Commentary
5G rollout is quickly transforming how consumers use their devices. It has opened the first killer 5G application – fixed wireless access (FWA). Verizon Business CEO Kyle Malady stated that data consumption is growing faster than it ever has before, partially as users flock to Verizon’s FWA services in available markets, but also as mobile users take advantage of improved bandwidth and lower latency by spending more time streaming video and gaming. 5G has also made FWA a legitimate alternative or supplement to fiber in some markets, especially in rural areas where fiber to the home is too expensive to be a solution. FWA subscriber counts are growing rapidly, with net additions outpacing wireless additions in the first quarter of the year. With great speed, capacity, and low latency, FWA using mid-band 5G provides another strong solution to the toolkit for closing the digital divide.
Where 5G is going next
While 5G has already had a substantial impact on the consumer space, its impact will be the largest in enterprise in the coming years as it powers connected factories, smart cities, connected agriculture, and more. Leaders from Verizon, AT&T, T-Mobile, and DISH were all touting the opportunities and flexibility that virtualized, software-defined networks would offer for developers in enterprise, allowing networks to be optimized for the specific needs of the end use case. Distributed computing at the edge will also enable low-latency AI and ML applications for efficiency gains. Progress has been slow in enterprise, and the murky economic environment will discourage some companies from experimenting with 5G to improve their productivity. But with mid-band rollouts nearing completion, the stage is set for 5G to enable the enterprise segment. According to comments made at the event, network operators in China already have over 25,000 orders for private networks. The US is behind here, but that will change in the coming years.
The wireless industry also has a real chance to narrow the digital divide over the coming decade. The advent of FWA provides an alternative to fiber that in many topographies will be more cost-effective while providing the speeds and capacity needed to connect rural communities, enabling commerce, education, and many other activities. But as Senator Lujan of New Mexico noted, the industry must do more to make sure that underserved communities are not left behind and push to close the digital divide through programs like the affordable connectivity program for low-income Americans.
Challenges facing wireless industry
While there are major opportunities for 5G, there are also barriers to reaching its potential. The biggest challenge may be growing geopolitical tensions between the US and China. Leaders from Samsung and Ericsson warned that state subsidies for Chinese infrastructure players make them very difficult to beat on price, leading many countries to opt for Chinese providers for their wireless networks. Additionally, the Chinese state’s clear and aggressive strategy for rolling out 5G has given it a lead and Chinese network operators and enterprises are gaining practical experience in implementing new use cases before Western countries. This will give Chinese companies a significant competitive advantage over their Western counterparts and a head start in creating the platforms of the next decade. Looking further down the road towards 6G, geopolitical tensions and decoupling between the US and China could result in a split standard, which would hurt the whole industry by reducing scale and interoperability. More consequently, this would undermine global growth. The US must work alongside allies across the globe to retain a single standard from which all can benefit.
*Based off of AT&T Comments at CTIA 5G Summit
To confront these challenges, industry leaders were united in calling on US policymakers to reauthorize the FCC to hold spectrum auctions and open more spectrum for operators. Already, the rate of data consumption is growing quickly, while spectrum is also needed for new enterprise use cases. But just giving the FCC the authority to hold spectrum auctions is not enough – the US government must deliver a clear plan and strategy for when spectrum will become available so that operators, component and hardware providers, and businesses can prepare beforehand to make use of this spectrum. The haphazard and inconsistent nature of US spectrum auctions puts the country’s industry at a disadvantage compared to China.
5G has come a long way over the last several years, but there is still work to be done and opportunities to be actualized. In order to reach underserved communities, serve enterprises and compete effectively on the global stage, more spectrum must be opened to operators and a clear schedule and strategy for spectrum allocation articulated. For the US to retain its leading role in the wireless industry, policymakers and the industry must work hand in hand.
1+4+X strategy focuses on a flagship smartphone and surrounding ecosystem of products
OnePlus 11 launches without “Pro” model in open market starting at $699
OnePlus Buds 2, OnePlus Pad, and Keyboard 81 Pro also announced
New concept phone teased with showcase to come at MWC Barcelona
Smartphone OEM OnePlus launched its latest flagship OnePlus 11 globally at the Cloud 11 event in New Delhi on February 7, with viewing parties in New York and London. In addition to the new smartphone, OnePlus debuted the OnePlus Buds 2 Pro TWS, OnePlus Pad tablet, a mechanical keyboard and a sneak peek at a new concept device being revealed at MWC Barcelona. These announcement were made under OnePlus 2023 roadmap which it called 1+4+X. OnePlus, like Samsung’s Unpacked event, also featured a brief presentation from Google to showcase its partnership with the Chinese OEM.
OnePlus is tightening and refocusing its strategy in 2023. There is no more “Pro” model and, instead, OnePlus is only offering one flagship model that has all the features a premium device should have. This is the “1” in its strategy – one smartphone model offering all flagship-killer specifications at an affordable price. The OnePlus 11 will cost $699 (in the US) for 8GB RAM/128GB storage and $799 for 16GB RAM/256GB storage, with pre-orders starting February 7 and sales opening February 16. OnePlus will not range the device at T-Mobile, choosing to go open market instead. The US carrier premium market is tough, with the entrenchment of Apple and Samsung, and even Google Pixel crowding the space. This is a difficult decision for the OEM, but the marketing money it saves will be used to strengthen its community outreach and lower the cost of the flagship device.
The OnePlus 11 comes with the latest Qualcomm Snapdragon 8 Gen 2 platform, 6.7-inch 2K 120Hz AMOLED display, up to 16GB LPDDR5X RAM memory, up to 256GB UFS 4.0 storage, 5000 mAh dual-cell battery and an 80W SUPERVOOC battery charger that charges the device from 1% to 100% in 27 minutes. It is also offering four years of Android updates and five years of security updates, a must since Samsung is offering this for all its flagship and mid-range devices. The camera system includes a Sony IMX890 50MP main sensor, IMX709 32MP portrait lens and IMX581 48MP ultra-wide camera, coupled with third-generation Hasselblad color calibration software. Having tested the OnePlus 11 for several weeks now, the device has solid battery life, and taking pictures with the new Hasselblad software is impressive, especially in low-light conditions. The device is snappy and responsive due to RAM-Vita technology, which uses AI and ML to allocate onboard storage to maximize memory.
Where OnePlus falls behind with the OnePlus 11 is the lack of wireless charging, which OnePlus says is not an issue with its GaN battery-charging technology. However, as a premium device, and especially with its newly announced OnePlus Buds Pro 2 that has wireless charging, the product messaging becomes muddled. The OnePlus 11 also only has the IP64 rating instead of the standard IP68. While the OnePlus 11 supports all US carriers for certain LTE and 5G bands, it doesn’t come with mmWave for Verizon. Overall, the OnePlus 11 is a solid flagship device. However, not having the device ranged at T-Mobile will be a challenge for OnePlus in 2023.
The “4” in OnePlus’ strategy refers to its ecosystem of TWS, TV, smartwatch and, now, tablet devices that will connect together. The OnePlus Buds Pro 2 has spatial audio technology in partnership with Google, LHDC 4.05 Lossless Hi-Res Audio, up to 48dB Adaptive Noise Cancellation, dual device connectivity and Google’s Fast Pair, 54ms low latency and Bluetooth 5.3LE for a smooth gaming experience. Like other new OnePlus devices, it also has Dolby Atmos audio along with Dolby Head Tracking technology. The battery life is impressive with 10 hours of playback and up to 39 hours with the case. It is available for $179, with pre-orders starting February 7 and sales opening February 16.
The other device announced was the OnePlus Pad, the OEM’s first tablet. It will be available for pre-orders in April. The tablet has an 11.61-inch screen with a 7:5-ratio screen and 144Hz refresh rate, powered by a MediaTek Dimensity 9000 chipset.
Lastly, the “X” represents products that will connect with the OnePlus ecosystem, such as the Keyboard 81 Pro, the OEM’s first mechanical keyboard. OnePlus wants to push the envelope within IoT and create its own ecosystem approach with seamless connection and integration between products.
OnePlus’ future in North America
The launch event underscored OnePlus’ strategy for North America with CEO Robin Liu emphasizing the launch of the OnePlus 11, OnePlus Buds 2 Pro and OnePlus Pad for the US market. The departure from the premium smartphone space at T-Mobile will be tough for OnePlus as it now doubles down in the prepaid space with its N-series devices at Metro by T-Mobile. However, OnePlus now has additional resources available to spend on marketing its brand and expanding mindshare with the money it is saving from not being in the premium T-Mobile space. This is likely the reason OnePlus is launching more IoT devices, as it takes a broader approach to the North American market.
More emphasis on community. Monthly community events, NYC pop up on Feb 11, and deeper collaboration with Qualcomm and Google. #Cloud11 this is a must for OnePlus to maintain and grow it's presence in North America pic.twitter.com/kz0CZW8x9D
OnePlus has improved its overall messaging, but there are still areas that it can improve on in the future. The newest 1+4+X strategy makes sense but the messaging around the products could be more consistent still. Not having a “Pro” model but claiming flagship performance needs the inclusion of wireless charging, especially if you are marketing the Buds 2 Pro with wireless charging and a premium look and feel.
The North American market will be challenging for any OEM, especially in 2023 due to macroeconomic conditions. This is likely the best time for OnePlus to exit the premium space at T-Mobile, but in the long term, the OEM needs to re-enter this space to remain competitive and bolster revenue gains.
Over the course of 2022, Verizon, T-Mobile and AT&T each offered a bevy of strong promotions on flagship devices in the US that kept subscriber additions high and churn relatively low. In 2022, AT&T and Verizon also increased service plan prices as the two carriers looked to offset the costs brought on by rising inflation.
But towards the end of 2022, the promotional game began to evolve. In addition to offering strong promotions on hardware, carriers started to discount their service plans as well.
T-Mobile adopted a promotion on service plans, offering four lines of unlimited data for $25/month each, along with four free iPhones.
Verizon came out with a similar promotion early in 2023, offering an unlimited starter plan for $25/month with that price guaranteed for three years.
In part, these subsidized service plans are a way for the carriers to win subscribers from one another. But these promotions are also an attempt to address the changing wireless landscape, where the cable companies are snagging subscribers from the incumbent carriers by offering service plans at much lower prices.
Pricing, Bundling and Flexibility at the Core of Spectrum and Xfinity’s Playbook
In Q4 2022, cable players Spectrum and Xfinity were able to pull in a combined 980,000 postpaid phone net additions, much more than those of Verizon, T-Mobile or AT&T. The low prices offered by the cable players are resonating with consumers and driving increased adoption. As it currently stands, T-Mobile charges $45 a month per line with two lines for its cheapest unlimited plan, while Verizon charges $55 a month per line for two lines of its cheapest unlimited plan. Meanwhile, the cable players are offering a line of unlimited for just $30/month to their internet subscribers. The deal is further sweetened with the bundling of multiple services and by adding more lines. This savings calculator allows consumers to calculate how much they can save by switching to Xfinity. Apart from savings, the core message also revolves around the cable player’s ‘no strings attached’ proposition. Consumers can change their plan month-to-month, which eliminates the fear of commitment and gives users the flexibility to switch. This helps consumers save money and adjust their plan according to their lifestyle in a way that cannot be done with incumbent carriers.
*From company websites
Cox To Intensify Wireless Competition
The success of Comcast and Charter with their Xfinity and Spectrum brands has established a model that other cable companies are fast taking up. Cox Communications announced the launch of their Cox Mobile brand at CES, while Mediacom recently filed for a trademark on the name ‘Mediacom Mobile’ in September 2022. While neither Cox or Mediacom has the scale that Comcast or Charter has, the cable players will only continue to siphon off subscribers from the carriers as the market expects more entrants, and potentially in larger numbers if the carriers do not adapt.
*From company financial statements
The cable companies have been offering superior flexibility and better prices, which means the carriers will need to adjust their approach by offering better value through their service plans. There are two non-mutually exclusive approaches that can be adopted – the carriers can either offer service plan promotions like those currently offered by T-Mobile and Verizon, or they can increase the value of their plans by keeping prices consistent but adding value to them with the inclusion of streaming service subscriptions and other perks that cable companies would lack the means or scale to match. Either way, the cost of service is likely to increase, which means the pot available for device subsidies is likely to shrink.
Hardware subsidies, service bundling and value-added services with premium unlimited plans have been key drivers for prepaid-to-postpaid migration so far. However, given the substantial economic headwinds that the carriers are likely to face in 2023, including the rising cost of debt, subsidized service plans could mean a shift away from device subsidies. Certain incumbent carriers have been dropping subtle hints on halting heavy device subsidies that have been ongoing for the past few years. This transition will be slow and gradual. In the meantime, carriers will shift towards offering promotions on their service plans to defend their territory, especially during points in the year when churn accelerates. That is part of why both T-Mobile and Verizon are offering limited-time promotional offers on service plans instead of making permanent price cuts to existing plans. However, the carriers will be hesitant to be too aggressive in offering low-price service plans because there is little appetite for a race to the bottom in terms of pricing.
As of now, there have been few serious changes in hardware promotions since T-Mobile and Verizon began offering service plan promotions, but the shifting landscape begs the question of how long the two major carriers will be able to keep their feet on both the service price and hardware promotion pedals. Eventually one will have to let up.
Carriers managed yet another strong quarter of postpaid subscriber growth in Q3 2022
While part of this growth is coming from prepaid to postpaid migration, other factors are helping the total handset subscriber base in the US to grow
Subscriber growth could slow going into 2023 due to macroeconomic headwinds
The hot streak of postpaid subscriber growth continued throughout the industry in the US in Q3 2022, with T-Mobile adding over 800,000 postpaid phone subscribers and AT&T adding over 700,000. Meanwhile, Spectrum and Xfinity both posted their best quarters of mobile subscriber growth since they entered the wireless market back in 2018. Xfinity managed to net 333,000 mobile subscribers while Spectrum netted 396,000. Verizon was the biggest loser in terms of mobile subscriber growth, with its consumer business managing just 28,000 net postpaid additions. But due to its expansive subscriber base and healthy upgrade rate, the company maintained its position as the largest channel for smartphone sales in the US according to Counterpoint’s US Monthly Sell-Through Tracker.
However, this subscriber growth begs a question – Where are all these new subscribers coming from? After an initial dip during the onset of the COVID-19 pandemic, there have been major subscriber gains during the recovery. While an initial boost to subscriber growth due to the transition to work from home, large government stimulus enabling customers to migrate from prepaid to postpaid plans, and the usual trickle of young people getting their first phone was expected, this growth has been sustained for longer than most anticipated.
*Company reports and Counterpoint estimates
One common explanation has been that subscriber growth has been in part the result of prepaid-to-postpaid migration. This helps to explain sustained postpaid subscriber growth but fails to address the bigger picture. With this explanation, one would expect total mobile subscriber growth (including both prepaid and postpaid subscribers) to remain on trend with before the pandemic and simply for postpaid to increase its share of the total mobile subscriber pie. But as the chart here demonstrates, even as postpaid subscriber growth has increased, prepaid subscriptions have remained stable. So, while prepaid-to-postpaid migration is a contributing factor to explaining postpaid subscriber growth, it is inadequate in answering why the total number of mobile subscribers in the US is increasing and why most of that new growth is coming in the form of postpaid subscriptions.
There are a few factors that are contributing to growth in the overall mobile market. First, a wider range of age groups is purchasing handsets. A higher share of older adults has phones than in past years and a higher share of children are adopting phones at even younger ages. As a result, the total addressable market continues to expand. This trend also favors the postpaid market where family plan pricing offers a better value than prepaid service plans. While prepaid family plans are cheaper than postpaid plans, postpaid plans offer better total value to customers through add-ons like streaming services and other subscriptions. We expect the service aggregation and bundling to continue into the next year. Second, there has been significant growth in business lines. Separating personal and business communications is increasingly vital to companies for security reasons, so they are more likely to opt to purchase business lines for employees. Additionally, the rise in work from home during the pandemic helped encourage the adoption of business lines for employees as mobile lines served as a replacement for landlines in the office. Competition in the business segment has heated up over the last year, with the carriers recognizing the potential for growth in this segment and due to the hot labor market. Verizon’s business postpaid phone net additions have outpaced consumer postpaid phone net additions in recent quarters as they target this vertical, while T-Mobile is aggressively seeking to gain business subscribers from its weak starting position. This helps to explain the overall growth in mobile lines, as many customers now have two lines, one for business and one for personal use, as well as why that growth is in the postpaid market, as prepaid carriers do not offer services for the business segment.
What can these trends tell us about 2023?
Understanding these trends can help us get an idea of how a potential downturn in 2023 could impact the mobile industry in terms of subscriber growth. Since postpaid subscriber growth appears to be driven by prepaid-to-postpaid migration, an expanding market due to demographic trends, and growing business lines, we can assess in turn how each of these growth factors might be impacted by a downturn.
First, prepaid-to-postpaid migration will likely slow and potentially even reverse as unemployment is likely to increase and wages are likely to stagnate amid a recession. As customers look to reduce their spending, some of them who switched from prepaid to postpaid plans may find themselves needing to move back towards prepaid plans to save money. As a result, this would impact the churn levels and subscriber growth seen at the postpaid carriers.
Second, parents may be more willing to hold off on buying their child their first phone to save money during an economic contraction. While smartphones are increasingly becoming necessary across a range of age groups, the trend of adoption among ever younger age groups may slow, with parents seeing limited utility in adoption apart from entertainment. This could impact not just postpaid growth but growth for the mobile industry as a whole.
Third, business line growth is likely to slow as fewer new employees are brought on board and hiring slows. Depending on the size of the contraction, layoffs may result in business line net losses. This would impact the growth of the overall mobile industry and specifically the postpaid market, as prepaid carriers do not offer business services.
As a result, it seems likely that overall mobile subscriber growth will slow heading into 2023, and potentially turn negative in H1 2023, especially in postpaid. Meanwhile, prepaid carriers may gain slightly in the share of the overall mobile subscriber pie as prepaid-to-postpaid migration is likely to turn towards postpaid-to-prepaid migration in a contraction.
Comcast, Charter and Altice managed yet another strong quarter of wireless subscriber growth in Q3 2022, cumulatively adding 734,000 net mobile customers, the highest number of mobile customer net additions in a quarter yet. Spectrum Mobile (Charter) led the pack with 396,000 net additions, while Xfinity Mobile (Comcast) added 333,000 mobile customers. Both were record highs. Meanwhile, Optimum Mobile (Altice) managed 5,000 mobile customer additions, down from the previous quarter’s 33,000 additions.
*From Q3 earnings
Cumulatively, the cable players added more mobile customers than Verizon and AT&T combined, trailing only T-Mobile for the quarter. Strong service pricing and attractive bundling at the cable players continue to make inroads with customers, especially those looking to tighten their belts due to rising inflation and a gloomy economic outlook. This should benefit the cable players in their search for more customers in the year ahead.
*From Q3 earnings
Subscriber growth has been strong at the cable players, but penetration is still relatively low, with mobile subscriptions only penetrating about 14% of Charter and Comcast’s respective customer relationships. This means that there is plenty of runway for subscriber growth to continue, which should be expected. Mobile is an increasingly pivotal part of Charter, Comcast and Altice’s offerings as legacy video and voice services are losing customers. While mobile will likely never surmount broadband services for the cable players, it is likely to be the second most important service for these companies in the next several years and the primary driver of revenue growth. The pairing of strong mobile service pricing along with bundling opportunities like Charter’s new Spectrum One package should help to improve total revenue per customer while also making it even more difficult for broadband customers to churn away to competitors. Despite the strong growth, the cable players remain relatively small smartphone sales channels compared to the major carriers due to minimal sales through upgrades and high levels of BYOD (bring your own device) according to Counterpoint’s US Monthly Sell-Through Tracker.
*From Q3 earnings
Beginning in October, Charter doubled down on customer acquisition, announcing new mobile line pricing and a new bundle, Spectrum One. Earlier, a single mobile line of unlimited data at $45/month and two or more lines at $29.99/line/month were available. Now, mobile lines with unlimited data are available at $29.99/month starting with the first line. The new bundle that Spectrum is offering puts together home internet and a single mobile line for just $49.99/month, a very strong offering for a package that if purchased separately would be nearly $85/month. This aggressive pricing should accelerate mobile customer acquisition in Q4 2022 and into 2023.
*From Spectrum’s website
Along with the strong growth in mobile subscribers has come impressive growth in mobile revenues. Spectrum’s mobile revenues were up 40.2% YoY while Xfinity’s were up 30.8% YoY. Due to the extensive Wi-Fi networks of both companies, they are able to offload most of their traffic onto Wi-Fi, keeping payments for using Verizon’s host network at a minimum.
*From Q3 earnings
Operating margins should improve for Xfinity and Spectrum as well in the coming years. Comcast announced last month that it was partnering with Samsung to build out small cells in key metropolitan areas to offload traffic from Verizon’s host network onto the CBRS spectrum it purchased at auction. Spectrum is yet to make an announcement, but its strategy will likely be the same – to keep costs paid out to Verizon at a minimum. While this will require upfront capex, it will pay off over the long term.
Heading into Q4 2022 and 2023, the cable players are well positioned to continue skimming subscribers off the postpaid carriers. They offer a strong value proposition by bundling mobile and broadband services. Margins should continue to improve as Comcast and Charter look towards building out small cells. As economic conditions turn sour in 2023, cable players should benefit, offering strong pricing for consumers looking to trim down their budgets. Expect the cable players to continue their strong streak of growth well into 2023.
The US cable players are continuing to make their presence known across the wireless landscape, even if their total subscribers are dwarfed by those of Verizon, T-Mobile and AT&T. Over the course of the past few years, the cable players have captured an unignorable number of postpaid phone net additions throughout the industry, snatching subscribers from the major carriers and limiting their growth. In Q2 2022, Xfinity, Spectrum and Optimum Mobile together captured 694,000 postpaid phone net additions. While this lagged AT&T’s 813,000 and T-Mobile’s 723,000, their subscriber growth far outpaced Verizon’s. Together, the cable companies stand as a significant competitor to the wireless incumbents and one that is having a significant impact on the shape of the industry.
*From Q2 2022 earnings releases
Cable players offer strong value
Over the course of the past two years or so, the dynamics of the US smartphone industry have changed, with the carriers bringing back huge device subsidies that allow many customers to get new flagship devices for free. The cable players played a role in this dynamic, challenging the postpaid carriers to offer better value to their subscribers in fear that the cable players could win them over with their low service plan prices. Based on pricing for two lines of entry-level unlimited plans, the cable companies offer wireless service for half the amount per line that Verizon and AT&T charge. But there are drawbacks. For one, mobile services from the cable companies are only available to existing customers. Additionally, Xfinity and Spectrum both throttle data speeds on their unlimited plans after customers use 20 GB of data, below the threshold of the carriers. The carriers also offer Wi-Fi hotspot data with their unlimited plans, an extra perk the cable players do not offer.
Thanks to their low operating costs due to the leasing of spectrum from the carriers and the dynamic use of existing Wi-Fi networks, the cable companies have been able to offer much lower prices for wireless plans than are on offer at the carriers. This value proposition has been recognized by consumers who are looking to save money amid macroeconomic uncertainty and high inflation.
Competition to stay hot in H2 2022 as Boost Infinite and Cox Mobile launch
The competition between the postpaid carriers and cable companies has helped to keep service and device prices low for consumers even as inflation reached the highest level in decades. The battle over value is likely to stay hot through 2023, as Boost plans to launch Boost Infinite, its long-awaited postpaid service, in Q4, and as Cox Communications launches its own wireless services in several states.
With about 6.8 million customers, Cox Communications may not have the extensive subscriber base that Comcast or Charter have, but its entry into the market shows the impact that Comcast, Charter and Altice have had, pioneering a new model that other cable companies are following. Like its forebearers, Cox Mobile will operate as an MVNO while offloading traffic onto its extensive Wi-Fi network, when possible, to keep costs down. Progress will be slow at first. Right now, Cox Mobile is available in only three locations – Hampton Roads (VA), Omaha (NE) and Las Vegas (NV). Cox offers services in 18 states across the country and the strong value cable companies can offer customers is sure to capture mobile customers. If customer adoption follows in Comcast, Charter and Altice’s footsteps, wireless service penetration of existing Cox customers could be about 10% in three years.
The release of Apple’s latest flagship smartphones, the iPhone 14 series, on September 7 will unleash fierce demand among consumers who are raring to get their hands on the brand’s latest mobile technology. Fresh upgrades and strong promotions at the carriers should make the iPhone 14 series a strong seller. But where exactly do customers buy their new iPhones? Luckily enough, Counterpoint’s US Channel Share Tracker follows model-level sales by sales channel and can help provide an indication of which carrier is likely to sell the most iPhones and which carrier may lag.Source: Counterpoint US Channel Share Tracker
Last September, when the iPhone 13 series was launched, Verizon stores were able to capture 27% of all Apple sales, followed by AT&T at 24% and T-Mobile at 21%. Historically, Verizon and AT&T have had more premium subscriber bases than T-Mobile, which helped them capture a higher share of Apple sales. But this trend may be changing. As T-Mobile has merged with Sprint, it has seen higher uptake of its Magenta Max plan and has seen its customer base become more premium. It has also been selling the most smartphones overall among the carriers in recent quarters. With an increasingly premium subscriber base and a larger share of total phone sales, T-Mobile stores should gain a higher share of iPhone 14 sales at launch this year.
Source: Counterpoint US Channel Share Tracker
Note: Figures may not add up to 100% due to rounding.
Apple sales by channel so far this year
In 2022 so far, Verizon stores have been able to capture the largest share of iPhone sales due to the size and premium nature of its subscriber base. But T-Mobile stores have improved their share of Apple sales, beating out AT&T stores in several months as it grows its subscriber base and offers impressive promotions to new customers. Apple Store’s share of iPhone sales has seen a decline in recent months due to seasonality, as the demand tends to drop during the summer leading up to the iPhone launch, especially outside of the carriers. The share of iPhones sold at Apple Store will jump in September with the launch of the iPhone 14, from the roughly 8% currently to as high as 15%. Apple tends to prioritize inventory at its own stores where it can sell other hardware and accessories, which also boosts its sales share at launch. The postpaid carriers are expected to dominate iPhone 14 sales at launch, but if demand exceeds supply, as it often does, customers are likely to try and get their hands on the iPhone 14 wherever they can, which could help Best Buy, Walmart, Costco, Sam’s Club and other retailers.
iPhone promotions help drive sales at the carriers
Another major factor that will decide which carrier wins the highest share of iPhone 14 sales will be the promotions that they have on offer at launch. While all carriers currently offer impressive promotions, there are tangible differences that will impact their iPhone 14 sales. AT&T will likely continue to offer its strong promotions to both new and existing customers. Currently, AT&T is offering up to $700 off the iPhone 13. Meanwhile, T-Mobile is offering the same devices for up to $800 over 24 months of bill credits to customers who activate a new line on a qualifying plan and who trade in a qualifying device. Similarly, Verizon is offering up to $800 off the devices to switchers who have a qualifying trade-in and select a qualifying plan. Customers can expect similar promotions of between $700-$1000 off from each of the carriers, though they’ll likely need a trade-in and an unlimited plan.
A wild card in the mix is the cable players. In the past, Xfinity, Spectrum and Altice haven’t been able to match the carriers in terms of promotions on their devices, but their promotions are improving. Another issue that the cable players faced last year were shortages. With limited supply, Apple prioritized sales to the major carriers. The same could potentially happen this year if demand outpaces supply and if COVID-19 and China’s zero-covid policy disrupt production. While a significant portion of new subscribers at the cable players are still bringing their own device, expect the cable players to snag a higher share of iPhone 14 sales this year.
Apple’s growing installed base helps boost service revenues
As Counterpoint recently reported, Apple’s installed base crossed the 50% threshold in the US during Q2 2022, meaning that most Americans now use an iPhone. Strong promotions at the postpaid carriers for Apple’s latest flagship models and sales of the iPhone SE 2022 and older iPhone models at the prepaid carriers have helped Apple capture a strong share of sales. With the upcoming iPhone 14 launch, Apple is likely to further grow its installed base. While most consumers are dedicated to purchasing either Android smartphones or iPhones, there is a small trickle of Android users who switch to iPhones with each new launch, and Counterpoint expects the same with the launch of the iPhone 14.
Apple’s predominance in the US market is foundational to its business model going forward. As our Research Director Hanish Bhatia recently discussed, the room for further Apple penetration is quite small in the US and Apple will rely on upgrade cycles to continue selling its mobile hardware. But as its hardware business plateaus in the US, Apple is relying more heavily on services, which make up a growing share of Apple’s total revenues. And as Apple’s installed base continues to grow, it is not only capturing revenues from device sales but is opening bringing in a significant amount of lifetime value as it is likely to retain the consumer and sell them accessories, other hardware and, increasingly, services.
There have been worries about high global smartphone inventory and weak demand due to high inflation levels. While this might be the story in other regions, the US smartphone market has shown resilience through Q2 2022. Data from the Counterpoint US Monthly Smartphone Channel Share Tracker shows the US smartphone market was down 4% MoM but up 2% YoY in May.
Smartphone inventories in the US are higher than last year. However, 2021 may not be the best YoY comparison as the industry was going through 4G LTE chip shortages last year. Smartphone inventories in the US fluctuate between 4-6 weeks but they can go even higher during new device launches and holiday season channel fills.
We believe that the inventories are normal at present given the seasonality of demand, especially ahead of the back-to-school promotional season. The demand has been steady, driven by strong carrier promotions, especially in postpaid channels.
iOS, Android Inventory Levels in US Smartphone Market
Source: Counterpoint’s US Monthly Smartphone Inventory Tracker
Android vs iOS inventory
Apple has the fastest factory-to-consumer shipping timelines among smartphone OEMs. The iOS inventory was very low at the end of 2021 as the iPhone 13 remained in high demand. The inventory started to increase as the initial demand settled and supply improved. Sell-in continued to improve until March 2022 but dropped back again in April due to China lockdowns. We expect Apple’s Q2 2022 sell-in to remain flat YoY.
Android inventory levels have been higher than in previous years but still manageable. Samsung’s inventory went up in January 2022 driven by the Galaxy S22 series shipments. The Galaxy S22 Ultra accounted for nearly half of the Galaxy S22 series shipments. The Galaxy A13 5G, which is the cheapest 5G device in Samsung’s portfolio, also came in large volumes. Motorola recorded high volumes in Q4 2021 driven by new launches but cooled off in Q1 2021. The brand, too, was impacted by China lockdowns in April 2022 but picked up quickly in May 2022. The Walmart reset was another driver of higher inventories at the end of Q2 2022. This was further supplemented by the launch of new devices from TCL and Nokia HMD, especially in Tracfone channels.
Low-end Android market has growth potential
High smartphone inventory is mostly driven by the low-end sub-$300 Android devices in prepaid and national retail channels. This is manageable ahead of the back-to-school promotional season as the demand is likely to pick up. Besides, with rising inflation, we might see the demand shift back from postpaid to prepaid as consumers shy away from premium postpaid plans and two-year lock-ins. This would be a change from the previous 10 quarters but could further boost demand at the low end.
Verizon, AT&T, T-Mobile and Dish continue to build their prepaid brands. Verizon has strengthened its prepaid presence with the Tracfone acquisition. It now owns Tracfone, Straight Talk, Total Wireless, Net10 and Visible. AT&T, too, enjoys a strong prepaid presence with its Cricket brand. But Dish is likely to be the dark horse that can disrupt the competition in national retail with acquisitions of Republic Wireless, Ting and Gen Mobile. T-Mobile has added national retail doors and its prepaid brand Metro by T-Mobile will remain competitive.
Lastly, as the carriers shut down CDMA networks, they will continue to drive demand for low-cost 4G or entry-level 5G devices. Verizon’s acquisition of Tracfone will drive device upgrades due to compatibility issues as some Tracfone subscribers will migrate from AT&T and T-Mobile’s networks. In addition, DISH must move its Boost subscriber base from T-Mobile’s network to its new MVNO partner, AT&T.
Overall, retail trends in the US market continue to hold strong despite inflationary pressures. Smartphone demand has proved to be resilient both through COVID-19 and the steep inflationary growth of 2021. Though the market can change quickly, early indications are that the US market will see about 3% YoY growth in H2 2022 with a strong Q4 holiday season.
Dish launched commercial services in its first market, Las Vegas, in early May. Known as Project Genesis, the service costs $30 per month for unlimited data, text and voice services. Dish plans to run Genesis as an extended beta mode service for the next few months, using early adopters to provide feedback in order to improve the network’s robustness.
Dish’s Hits First FCC’s Milestone
Dish was required to provide 20% population coverage in 27 markets by June 14th as part of its regulatory commitments. Last week, the company provided confirmation that this first hurdle had indeed been achieved, adding that the Project Genesis service is now available in 120 cities in the US. However, the service offered on Dish’s network is essentially a data-only service in most markets – which nevertheless satisfies the FCC’s requirements – with voice services provided by Dish’s MVNO partners. Counterpoint Research understands that this is due to difficulties encountered in implementing seamless call transfers between the VoNR technology used on Dish’s 5G SA network and VoLTE used on partner networks. However, Dish claims that these issues have now been resolved in Las Vegas. In addition, Project Genesis offers a hotspot data service costing $20 per month. Both services are only available directly via Dish and is currently limited to just three devices: Samsung’s Galaxy S2, Motorola’s Edge+ and a 5G hotspot router from NetGear.
Falling Subscribers and Revenues
At its recent Analyst Day, Dish announced ambitious plans to increase its mobile subscriber base from just over 8 million today to 30-40 million by 2030. However, unlike its brethren Rakuten in Japan, Dish is losing subscribers and revenues are falling steadily, including in its core pay-TV business (Exhibit 1). Dish has been adversely impacted by T-Mobile’s accelerated CDMA shut down, both in terms of lost subscriber revenues, as well as incurring unexpected extra costs. To make matters worse, the company is still waiting approval from the Department of Justice (DOJ) on its joint agreement with T-Mobile relating to the CDMA shutdown.
However, this week Dish announced a new 5-year roaming deal with T-Mobile worth a minimum of $3.3 billion. Under this agreement, Dish expects to gain around 100,000+ additional Boost-branded customers as well as receive some “financial assistance” from T-Mobile. Again, this new deal requires approval from the DOJ, which is scheduled for mid-August. In recent months, uncertainty surrounding the DOJ’s approval has hindered the company’s ability to retain customers, as the worsening churn rate in Exhibit 1 shows. Clearly, Dish will be hoping that this latest deal will be approved as quickly as possible so that it can draw a line under this saga and move on.
Exhibit 1: Dish Wireless Customers and Churn Rate (3Q 2020 to 1Q 2022)
Capex, Cash Flow and Debt
With Dish’s 5G network likely to be in extended beta mode at least until the end of the year, revenues from the network will be limited. At the same time, the company’s aggressive 5G network during the next 12 months will result in high capex expenditure and coupled with declining revenues from its existing MVNO and pay-TV businesses may put pressure on cash flow. This may affect Dish’s ability to refinance the $1.5 billion of debt maturing in March 2023. Dish also needs to participate in the upcoming 2.5 GHz Auction 108 as it has less mid-band spectrum than its main rivals. However, tightening cash flows may limit its participation.
Extending Network Coverage
Deploying a 5G network using new open RAN technologies is no mean feat and the news that Dish has successfully hit its first FCC coverage target is therefore impressive. However, the company is still at the beginning of its 5G wireless journey and faces numerous challenges. Clearly, extending coverage will be its first priority. Its three biggest rivals today cover around 230-310 million people in the US, which will have risen by the time Dish reaches its statutory 70% coverage target in mid-2023.
However, Dish needs to quickly expand its 5G footprint for commercial as well as regulatory reasons, as its current limited 5G footprint will hinder its ability to compete in the retail market. This will involve deploying at least 15,000 radio sites nationally, and probably significantly more, in order to properly densify its network. Networks take time to deploy and there are always unforeseen problems, particularly with new technologies, as the issues with VoNR have shown. This is not likely to be the last such issue. In the meantime, Dish will have to rely on its MVNO partners and pay roaming costs.
Retail vs Enterprise Market
New entrants such as Dish cannot seriously compete in the retail wireless market until the user experience on its network is on a par with rivals. There are other issues too. Dish lacks a notable brand presence in the retail mobile market and currently only offers a limited number of devices. It also needs to build up its smartphone distribution channels. Clearly, these are early days and all these issues can and no doubt will be rectified – but it will take time.
As a result, Counterpoint Research believes that Dish’s commercial focus in the short-term will be on the enterprise market, where its limited network coverage may not be a problem for some companies. For example, Dish could start to offer campus wireless type private networks which could be connected to its MVNO partners’ public networks, if required. Spectrum leasing is another major opportunity, and to a lesser extent, the rural fixed wireless market, where there are synergies with its existing pay-TV business. Here, Dish could conceivably use its 12 GHz band frequencies. However, that is a contentious topic perhaps best saved for another day!
In order to access
Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.
How to unsubscribe and Termination
You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time.
In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.
Website Content and Copyright
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.
Changes or Updates to the Website
Accuracy of Information:
While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.
Third Party Links:
This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.
Cookies and Tracking
We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans. Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.