Wireless Services Market Share 2015

Transcription

1 Wireless Services Market Share 2015 Executive Summary CMR Market Research April 2015 Reproduction without permission 1

2 The contents of this report represent CMR s analysis of the information available to the public or released by responsible individuals in the industry. It does not contain information provided in confidence by CMR s clients. Since much of the information in the study is based on a variety of sources that we deem to be reliable, including subjective estimates and analyst opinion, CMR does not guarantee the accuracy of the contents and assumes no liability for inaccurate source materials. Copyright 2015 by CMR Market Research All Rights Reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, prior to written permission of the publisher. About CMR CMR provides in-depth analysis of major telecommunications and IT industry trends. CMR has been tracking the telecom and IT industry for over twenty years. CMR analysts are in the marketplace every day evaluating information and analyzing data, providing the most current, leading-edge market assessments. CMR tracks actual financial reporting from all of the major telecom service providers throughout the world and measures revenues and units by multiple segments, including wireless/wireline, voice/data/video, and residential/business. CMR analysts estimate upside and downside market ranges, and looks for factors that could alter future market conditions. Contact us at: , or marketing@cmarketresearch.com. Reproduction without permission 2

3 WIRELESS SERVICES MARKET SHARE 2015 TABLE OF CONTENTS I. EXECUTIVE SUMMARY 1.1 US WIRELESS MARKET 1.2 IMPORTANCE OF MAINTAINING SHARE 1.3 MARKET SHARE SUMMARY 1.4 REPORT STRUCTURE II. BACKGROUND 2.1 DEFINITIONS 2.2 SERVICE REVENUE TRENDS 2.3 DEVICES INFLUENCING SHARE 2.4 WIRELESS DATA AND MOORE S LAW 2.5 RETAIL/WHOLESALE CHANNELS 2.6 COMPANIES AT&T VERIZON SPRINT T-MOBILE III. DEMAND & REVENUE PATTERNS 3.1 TOTAL WIRELESS GROWING SUBS AND REVENUE 3.2 VOICE USAGE DECLINING 3.3 DATA AS PLATFORM 3.3 TEXT MESSAGING PLATEAUS 3.4 PRICING PARADIGM SHIFT 3.5 PENETRATION IV. WIRELESS SEGMENTS & PRICING 4.1 POST-PAID PLANS & SERVICE BUNDLES 4.2 PRE-PAID V. POST-PAID 4.3 PHONES V. CONNECTED DEVICES 4.4 RETAIL V. WHOLESALE MARKETS 4.5 PRICE SKIRMISHES 4.6 DISRUPTIVE SCENARIOS 4.7 COMPETITIVE ENVIRONMENT 4.8 WIRELESS NETWORKS V. MARKET SHARE 5.1 SUMMARY 5.2 METHODOLOGY 5.3 MARKET SHARE WIRELESS SERVICES REVENUES AND MARKET SHARE VOICE, DATA, TEXT SERVICES REVENUES AND MARKET SHARE PHONE AND CONNECTED DEVICE SERVICES REVENUES AND MARKET SHARE POST-PAID AND PRE-PAID SERVICES REVENUES AND MARKET SHARE WHOLESALE SERVICES REVENUES AND MARKET SHARE Reproduction without permission 3

4 FIGURES FIGURE I-1 US WIRELESS SERVICES MARKET SHARE, 2014 (%) FIGURE I-2 REPORT SEGMENTATION FIGURE II-1 WIRELESS SERVICES: BUSINESS AND CONSUMER FIGURE II-2 WIRELESS SERVICES EXAMPLES FIGURE II-3 WIRELESS SERVICES SEGMENTS FIGURE II-4 US WIRELINE & WIRELESS REVENUES, ($BILLIONS) FIGURE II-5 US WIRELESS REVENUES BY SERVICE, 2003, 2013 (% OF TOTAL) FIGURE II-6 US VOICE REVENUES, (%) FIGURE II-7 MOBILE TELEPHONE SERVICE TRENDS, FIGURE II-8 WIRELESS SERVICES REVENUE: VOICE, DATA, VIDEO, 2010, 2014 FIGURE II-9 WIRELESS SERVICES REVENUE: PHONE, CONNECTED DEVICES, 2010, 2014 FIGURE II-10 WIRELESS SERVICES REVENUE: POST-PAID, PRE-PAID, 2010, 2014 FIGURE II-11 WIRELESS CHANNEL REVENUE DISTRIBUTION, (%) FIGURE II-12 APPLE IPHONE SALES, (MILLIONS) FIGURE II-13 US SMARTPHONE MARKET SHARE BY OPERATING SYSTEM FIGURE II-14 NORTH AMERICA MOBILE DATA GROWTH (TERABYTES/MONTH) FIGURE II-15 WIRELESS SALES CHANNELS AND MARKETING FIGURE III-1 WIRELESS SERVICES REVENUES, 1Q13-2Q15 ($BILLION) FIGURE III-2 BASIC CABLE VOIP SUBSCRIBERS, (MILLIONS) FIGURE III-3 VOICE MINUTES OF USE, (BILLIONS) FIGURE III-4 US HOUSEHOLD WIRELESS & WIRELINE ACCOUNTS, FIGURE III-5 US WIRELESS VOICE MINUTES, (BILLIONS) FIGURE III-6 WIRELESS VOICE REVENUES, 1Q13-2Q15 ($BILLION) FIGURE III-7 US HIGH SPEED DATA SUBSCRIBERS, FIGURE III-8 WIRELESS DATA REVENUES, 1Q13-2Q15 ($BILLION) FIGURE III-9 TOTAL TEXT MESSAGE VOLUME AND TEXT MESSAGES PER SUBSCRIBERS, FIGURE III-10 WIRELESS TEXT REVENUES, 1Q13-2Q15 ($BILLION) FIGURE III-11 US WIRELESS ARPU, VOICE, DATA ($MONTH) FIGURE III-12 US WIRELESS PENETRATION, (% OR POPULATION) FIGURE IV-1 PRE-PAID & POST-PAID SERVICES REVENUES, 1Q13-2Q15 ($BILLION) FIGURE IV-2 PHONE V. CONNECTED DEVICE QUARTERLY REVENUES, 1Q13-2Q15 ($BILLIONS) FIGURE IV-3 RETAIL V. WHOLESALE QUARTERLY REVENUES, 1Q13-2Q15 ($BILLIONS) FIGURE IV-4 LTE COVERAGE OF THE BIG 4 NATIONAL CARRIERS, FIGURE V-1 US WIRELESS SERVICES MARKET SHARE, 2014 (%) FIGURE V-2 CMR TRACKING AND FORECASTING PROCESS Reproduction without permission 4

5 TABLES TABLE II-1 US WIRELESS SERVICES COMPANIES FINANCIAL, OPERATIONAL DETAIL, 2013 TABLE IV-1 POST-PAID PLANS TABLE IV-2 PREPAID PLAN COMPARISON TABLE IV-3 HOME VOICE PLANS, RATES TABLE IV-4 US WIRELESS CARRIERS 4G LTE COVERAGE (OCTOBER 2013) TABLE V-1 WIRELESS REVENUES BY COMPANY, ($MILLIONS) TABLE V-2 WIRELESS SERVICES MARKET SHARE BY COMPANY, (%) TABLE V-3 VOICE REVENUES BY COMPANY, ($MILLIONS) TABLE V-4 VOICE SERVICES MARKET SHARE BY COMPANY (%) TABLE V-5 DATA REVENUES BY COMPANY, ($MILLIONS) TABLE V-6 DATA SERVICES MARKET SHARE BY COMPANY (%) TABLE V-7 TEXT REVENUES BY COMPANY, ($MILLIONS) TABLE V-8 TEXT SERVICES MARKET SHARE BY COMPANY (%) TABLE V-9 PHONE REVENUES BY COMPANY, ($MILLIONS) TABLE V-10 PHONE SERVICES MARKET SHARE BY COMPANY (%) TABLE V-11 CONNECTED DEVICES REVENUES BY COMPANY, ($MILLIONS) TABLE V-12 CONNECTED DEVICE SERVICES MARKET SHARE BY COMPANY (%) TABLE V-13 POST-PAID REVENUES BY COMPANY, ($MILLIONS) TABLE V-14 POST-PAID SERVICES MARKET SHARE BY COMPANY (%) TABLE V-15 PRE-PAID REVENUES BY COMPANY, ($MILLIONS) TABLE V-16 PRE-PAID SERVICES MARKET SHARE BY COMPANY (%) TABLE V-17 WHOLESALE REVENUES BY COMPANY, ($MILLIONS) TABLE V-18 WHOLESALE SERVICES MARKET SHARE BY COMPANY (%) Reproduction without permission 5

6 1 EXECUTIVE SUMMARY 1.1 US Wireless Market The US Wireless Services market has been growing steadily over the past decade due to increased penetration and the addition of data packages. These gains have occurred despite challenging economic conditions. Over the past four years -- as CMR has tracked the relative market shares of the industry players -- the market has expanded by 21 percent. Based on reported revenues CMRs sizes the US Wireless Services revenues at $229.1 billion in Despite the gain in total revenue, some services actually declined. The services mix has changed dramatically over the past four years, as voice service revenues declined, data service revenues nearly doubled, and text messaging revenues declined by close to 20 percent. The voice decline is due to lower bundled minutes pricing and fewer minutes of use. The growth of data services is due to smartphone penetration (approaching 70 percent of the base) and higher data ARPUs. Text messaging may be on a path to extinction, as IP-based messaging solutions and social media communication have doomed the once highly profitable text messaging market. Mobile devices play an important part in the battle for service market share. Dozens of feature phones and smartphones are launched each year and service providers compete aggressively for the new subscribers with the latest technology as a carrot. With the launch of the Apple ipad in 2010 the Connected Device services market has soared and is now on a trajectory to exceed $10 Billion in Both Verizon and AT&T have benefited tremendously from the growth in Reproduction without permission 6

7 connected devices, which represent a low-cost, highly profitable way to reach a segment that did not exists when we started our tracking four years ago. The Apple portfolio now competes head-to-head with the Google Android platform. Each platform commands approximately 48 percent share of the US device market. The remaining four percent is spread amongst once formidable wireless operating systems such as Blackberry. The Smartphone base is crowding out the feature-phone base, as over 90 percent of all new device sales are smartphones. Wireless service plans have changed gradually over the past four years. Shared voice minute plans once dominated the market, as providers sought to acquire new family members and reduce account churn with bundles of minutes that a family could share. With the advance of smartphones and tablets, the voice minute bundle has become irrelevant, replaced by shared data plans, which seek build loyalty through increasing data commitments. These shared data plans have been extended to non-phone devices, such as tablets, allowing customers to manage all of their mobile data usage under a single plan. In 2014 the majority of Verizon subscribers are now on shared plans, while AT&T is right behind, adding three tablet subscribers for every new phone subscriber. The wireless services market has two distinct types of subscribers: Pre-paid and Post-paid. The Post-paid subscriber is more profitable and less susceptible to churn than the Pre-Paid subscriber, and accordingly, service providers remain focused on finding new Post-Paid customers and retaining their Post-Paid base. It follows that the industry leaders, Verizon and AT&T, have the largest Post-Paid base and taking these more profitable customers away is an uphill battle for the second tier players. The Pre-paid market has been growing faster than the Post- Reproduction without permission 7

8 paid market in 2013 and With penetration reaching 100 percent, providers are finding that the few remaining potential customers are highly price-sensitive, and more likely to start with a Pre-paid package. The largest players in the Prepaid market are AT&T (which recently acquired a large Pre-paid base with its acquisition of Leap Wireless) and T-Mobile, which has historically been the most aggressive in acquiring growth through attractive Pre-Paid offerings. Over the past four years US wireless service revenue growth has ranged from a low of 2.8 percent growth in 2012 to a high of 6.9 percent growth in CMR projects that revenues will continue to grow 4-5 percent per year for the next three years. New subscribers (additions) continue to exceed 15 to 18 million per year and we expect the additions to reach 20 million per year over the next few years. Much of the subscriber growth is coming from non-phone devices, principally tablets. Over the past three years US subscriber growth has ranged from a low of 1.3 percent growth in 2012 to a high of 6.0 percent growth in CMR projects that subscriber growth will stay above 5 percent per year for the next three years. Data Services will drive the wireless service market going forward. The US wireless data services market has broken through the magical $100 billion level, with over half of all wireless revenues coming from data services a segment that did not even exist a decade ago. The US is at the forefront with wireless data services, largely explained by high disposable income and richer content (e.g., video) which is unique to this market. Data coverage has become an important marketing differentiator for the providers, as they recognize that subscribers are more attuned to data bars more than voice coverage. Network coverage continues to be an important differentiator as wireless technology progresses. That distinction may be fleeting, however, in the next few years as all of the major providers will have similar LTE coverage and performance. In the US all major Reproduction without permission 8

9 providers have completed substantial 4G LTE deployments with over 300,000 towers carrying 4G LTE equipment, reaching every state and major urban area. These large cells have been the backbone of the wireless access network, but going forward, small cells will be used to handle an increasing percentage of the data traffic. Small cells are being deployed in every urban area as operators rush to mitigate capacity issues arising from rapid growth in mobile data traffic. These sites often provide faster service in dense areas such as malls, stadiums, and transportation centers. 1.2 Importance of Maintaining Share The balance of power is well understood in the US Wireless Services industry: Verizon and AT&T command two-thirds of the market, leaving the remaining one-third to Sprint, T-Mobile, and a host of third-tier providers to fight over. The $229 Billion industry generates tremendous margins for these providers and they tightly manage cash flows to preserve market share, while they continue to award their shareholders with high dividends. The balance works nicely for Verizon and AT&T (and their shareholders), but second-tier providers and new entrants continue to swarm around this market, looking for ways to chip away at these shares. Revenue market share translates directly into cash flow in the wireless business, and the players with the largest share can command pricing, terms, and conditions. With over $195 Billion annually committed to service providers under wireless contracts, the providers are in an enviable position, able to use their cash to simultaneously appease shareholders, while defending against competitive threats. Steady cash flow translates into predictable dividends for investors and accumulated reserves for future capital investments critical ingredients for maintaining low borrowing costs and developing the next generation of wireless Reproduction without permission 9

10 networks that will sustain subscriber traffic growth. As penetration rates exceed 100 percent and as revenue growth slows in this mature market holding or increasing market share becomes critical to provider health. We expect to see significant price concessions and even more aggressive marketing over the next few years as these large players defend their positions. As a corollary, under-investment and weak marketing can lead to market share losses to more aggressive providers, which, in-turn, can disrupt the delicate balance desired by the top players. Once a subscriber is lost it costs heavily to win them back, driving higher cost into sales and marketing for the same level of business. The bottom line may never recover, sending investors scurrying and raising borrowing costs further squeezing net income. One does not have to look too far to appreciate what can happen to leading companies when market share drops. Examples of failing companies abound in the wireless device business, where leaders such as Motorola, Blackberry, and Nokia came and went over the past decade. The relative valuations of each US wireless operator are based upon current cash flows and projected market shares. With subscriber penetration slowing we are likely to see one or two players change strategies, shifting to lower pricing, willing to accept lower operating margins for the long-term objective to gain higher subscriber share. Such moves could trigger across-the-board value declines in the industry, which would harm all operators over the forecast period. There are real examples of this alternative strategy being pursued outside of the US. Examples such as Free in the French market and Softbank in the Japanese market are two that have pursued this approach. Both operators elected to accept lower margins in exchange for higher market share. Accordingly, operators in the US will Reproduction without permission 10

11 become fixated on market share, as it becomes the most accurate measure of industry health. 1.3 Market Share Summary Difficult economic conditions and price competition have done little to slow the growth in wireless revenues over the past few years. Over the past four years -- as CMR has tracked the relative market shares of the industry players market shares have fluctuated modestly, within a range of one to two percentage points for the major players. CMRs sizes the US Wireless Services market at $229.1 billion in The largest player in the market is Verizon with $86.1 billion in annual revenue or 37.6 percent market share. The next largest player is AT&T with $72.1 billion in annual revenue or 31.5 percent market share. The remaining 30.9 percent of the market is spread across a handful of companies. Figure I-1 shows the relative market shares for the major players in the industry based on revenues for the year. Figure I-1 US Wireless Services Market Share, 2014 (%) A distant third behind the top two players is Sprint with $32.9 billion in annual revenue or 14.4 percent market share. Another wireless company chasing the two Reproduction without permission 11

12 big players is T-Mobile with $28.9 billion in annual revenue or 12.6 percent market share. The Other category contains all of the remaining operators in the US, including US Cellular, with $9.0 billion in annual revenue or 3.9 percent market share. This report focuses on the US Wireless Services market and measures the relative market share of each major service provider based on revenues. Within this framework CMR tracks and forecasts services units and revenues of dozens of wireless service lines, such as voice, data, and text messaging and the relative share each player has reached within these service lines. The report provides extensive data on market share by company for a number of different levels within the wireless services segment. These include: post-paid versus pre-paid, phone versus connected device subscriptions, and retail versus wholesale. 1.4 Report Structure This report, Wireless Services Market Share 2015, provides a detailed assessment of market share within the US Wireless Services market. The report provides a historical quarterly and annual measures of company market share, along with market shares at the service (voice, data, text), channel (retail/wholesale), and contract level (pre-paid, post-paid). The report provides select five year forecasts of industry revenues for some segments and an assessment of how company market shares will change over time. Reproduction without permission 12

13 In our data gathering and analyses, CMR tracks the entire US market, which includes the major service providers and the underlying services (voice, data, and text messaging) they provide. CMR also tracks provider revenues and units of phones versus other connected devices, along with revenues and units by contract type: Post-paid versus Pre-paid. Figure I-2 shows where these services fit within CMR s segmentation framework. Figure I-2 Report Segmentation WSMS Total Pre-paid Post-paid AT&T xx% xx% xx% Vz xx% xx% xx% Sprint xx% xx% xx% T-Mobile xx% xx% xx% Services Equipment Voice Wireless Data Msg Voice Wireline Data Carrier Enterprise Consumer Video BB PL FRS IPE Business Carrier Enterprise Residence Consumer ================== ================= ======= ======= ======= ======= ================================ NA US CAN EMEA AP LA NA, EMEA, AP, LA CMR s market share estimates are based upon a combination of company reporting, industry reporting (from sources such as the FCC, CTIA, NCTA, FTTH council, and other industry associations), and models of service and segment actuals. Companies use a variety of approaches to report actual volume and revenue results, and no single standard is used throughout the industry. CMR tracks company quarterly reports and uses its best judgment to reconcile these results to adhere to the segments estimated in Chapter 5. The report is structured as follows: Reproduction without permission 13

14 Chapter II, BACKGROUND, provides an overview of the US Wireless Services market, definitions used throughout the report, service revenue trends, the role devices and data services have on market shares, and an assessment of the major industry players. Chapter III, DEMAND & REVENUE PATTERNS, looks at the key wireless services technologies such as voice, data, and text messaging and provides an assessment of how pricing and demographic changes have impacted demand. Chapter IV, WIRELESS SEGMENTS, provides an assessment of the service bundles offered today, the role of price in the market, and some disruptive scenarios that may play out over the next few years. In addition, the chapter talks about wireless network and how capacity and spectrum limitations have impacted the operators. Chapter V, MARKET SHARE, provides detailed statistics on wireless services market share by company, by service (voice, data, text messaging, by contract type (Post-paid, Pre-paid, wholesale), and by device type: phone versus connected devices. Full market share tables are also provided. Reproduction without permission 14