US cellcos are already paying the cost of unlimited plans

Image credit: Jonathan Weiss /

All the major US wireless carriers have recently rolled out unlimited plans, and are competing fiercely to outdo each other. But this trend is taking its toll on everyone’s bottom line, according to Cowen and Company Equity Research.

“The first quarter of unlimited for all four carriers left much to be desired,” Colby Synesael of Cowen wrote in a research note. “Both AT&T and Verizon incurred postpaid losses for the first time on record, a trend that could continue. Verizon specifically had its worst quarter in recent memory with a lackluster performance on nearly all sub metrics. Even T-Mobile’s guidance included a ‘less great’ postpaid net add increase of just +250,000. Combined with continued pricing pressure, AT&T and Verizon are pivoting to new avenues of growth such as Mexico, content, media, IoT and 5G, all of which can’t come soon enough.”

Sprint’s CEO Marcelo Claure said just last month that wireless price increases are a necessity, as the current model is not sustainable. “In order for this industry to be healthy, I think eventually all carriers will have to increase prices in next few years as data consumption increases,” Claure said.

(Ironically, this week Sprint launched a new promotion aimed squarely at Verizon customers: switch to Sprint with your own device before the end of this month and get free unlimited data, talk and text for a year.)

Mike McCormack at Jefferies agrees. “The resurgence of unlimited plans is likely to delay more meaningful ARPU stabilization for multiple quarters due to the loss of overages and plan rightsizing,” McCormack wrote in a note to investors. “Impacts to ARPU on an incremental basis (i.e. for new subscribers) will depend on the number of accompanying lines activated. Our analysis suggests a willingness to use price with the hopes that multiline subscribers will churn less frequently. The move to unlimited also diminishes the ability to monetize growing data usage, removing an important lever of growth.”

Competition increasing from all directions, merger whispers on the wind and the pressure on the bottom line. While all the top carrier are feeling the costs of unlimited data mount, the question is: will the pricing pendulum swing back? And if so, how long will it take?

More Here [androidheadlines]

This article was originally published on PricingDataPlans

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