American wireless carrier AT&T reported solid Q4 2014 earnings backed by growth in the postpaid and connected device segments.
AT&T’s postpaid subscriber growth increased 50.9 percent year-to-year to 854,000 net additions in Q4 2014. AT&T is primarily relying on its Mobile Share promotions to retain subscribers and drive new subscriber adoption, including the recent offering of double data allotments on select plans at no extra cost.
AT&T’s pricing strategies are in part a reactive measure to counter promotions launched by rival carriers, exemplified by AT&T’s decision to offer Rollover Data following the launch of T-Mobile’s Data Stash program, said Eric Costa, telecom analyst, Technology Business Research.
AT&T continues to be outpaced by Verizon in postpaid subscriber growth, despite AT&T’s continued positive postpaid subscriber growth. AT&T’s postpaid segment was impacted in Q4 2014 by a decline in phone subscriber net additions as the carrier’s 1 million postpaid smartphone net additions were offset by higher basic phone subscriber losses in Q4 2014. In comparison, Verizon garnered a net total of 672,000 postpaid phone subscribers in the quarter.
AT&T’s elevated churn in Q4 2014 to cost-conscious basic phone subscribers migrating is due to aggressive pricing promotions offered by competitors such as T-Mobile’s Simple Choice and Sprint’s Cut-Your-Bill-in-Half promotions. The operator will continue to garner positive subscriber net additions in 2015, though it will rely on its connected device segment to spur the majority of this growth as the postpaid and prepaid segments will be pressured by lower priced alternatives.
AT&T is expanding its IoT portfolio to spur connected device additions through 2015
AT&T generated its highest quarterly postpaid tablet subscriber growth to date with 969,000 net additions in Q4 2014. Despite the strong net additions, AT&T trailed Verizon’s 1.4 million postpaid tablet net adds during the quarter. Though AT&T trails in tablet adoption, the operator excels in other connected device verticals.
AT&T is focused on developing segments such as connected car and its Digital Life connected home platform to augment its tablet segment. AT&T began integrating connected home solutions from third-party vendors in Q4 2014, such as LG and Samsung, with its Digital Life platform, which will provide customers greater flexibility in creating their smart home systems.
AT&T will expand its connected car portfolio in 2015 as the segment is experiencing rapid growth due to the carrier’s low-cost Mobile Share plans for vehicles. AT&T garnered 800,000 connected car additions in Q4 2014, accounting for nearly two-thirds of connected device net additions in Q4 2014.
AT&T is pursuing wireless assets in Mexico to drive long term revenue growth as the U.S. smartphone market continues to saturate
Following the closure of its acquisition of Mexican operator Iusacell, AT&T announced in January that it will also purchase the wireless assets of Nextel Mexico from NII Holdings for $1.9 billion. AT&T will acquire Nextel Mexico’s wireless network which provides coverage to 76 million POPs along with the carrier’s subscriber base of approximately 3 million customers.
AT&T will capitalize on the Iusacell and Nextel Mexico acquisitions to take advantage of the still developing smartphone market in Mexico as currently smartphone adoption in the country is roughly half that of the United States.
These investments provide AT&T an opportunity to drive long-term revenue and subscriber growth in the country to compensate for its saturating U.S. smartphone market which has reached 83 percent postpaid penetration as of 2014. AT&T will accelerate LTE deployments in Mexico over the next several years through increase Capex spend, including rural regions in the country in which LTE coverage is presently limited.
Eric Costa, telecom analyst, Technology Business Research.
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