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This story was corrected to show that Dunston Almeida is a telecommunications consultant at Exothen Capital Consulting
Competition heated up in the fourth quarter between Verizon Wireless and AT&T, the largest U.S. mobile-phone service providers, figures released Jan. 26 show.
Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone Group (VOD), said its average revenue per retail user declined 2.2% to $50.75 in the fourth quarter. AT&T (T), due to release earnings figures Jan. 28, may say its average revenue per user (ARPU) was at $51.07 in the fourth quarter, according to analysts at Credit Suisse. This year, AT&T's ARPU may slip to $50.78, Credit Suisse (CS) says.
The falling per-user revenue figures reflect intensifying price competition among mobile-phone service providers, analysts say. Rivalry will increase if, as some analysts expect, Verizon Wireless begins carrying the iPhone, the smartphone created by Apple (AAPL). "If every carrier is offering the iPhone, you [will have to] ask which one is offering the best price," says Dunston Almeida, a telecommunications consultant at Exothen Capital Consulting.
Currently, AT&T is the only U.S. carrier of the iPhone. Apple won't say whether it plans to widen the circle of iPhone partners, though Verizon Wireless says it has made upgrades to ensure its network would be ready in the event AT&T stops being the lone iPhone carrier.
Per-subscriber revenue is also under pressure as a result of gains in the number of so-called prepaid subscribers, who tend to pay less each month for mobile-phone service. Thanks in part to a new agreement to carry traffic from prepaid brand TracFone, Verizon Wireless added more prepaid subscribers than analysts expected last quarter.
Other evidence of the carriers' competition came in the final months of 2009, when Verizon Wireless flooded TV screens with commercials highlighting what it said are weaknesses in AT&T's wireless network. Better-than-expected customer gains in the fourth quarter signal that Verizon Wireless may have gotten its message across, analysts say. The company lured 2.2 million subscribers, more than the 1.35 million expected by Thomas Weisel Partners.
Some of those customers likely would have signed up with AT&T, says Jonathan Schildkraut, an analyst at Jefferies Group (JEF). "Amidst an aggressive campaign to reinforce their positioning as the best-in-class network, and no doubt aided by AT&T's well-publicized network travails, Verizon Wireless pulled away," Sanford C. Bernstein analyst Craig Moffett wrote in a Jan. 26 report.
Verizon Wireless had 91.2 million wireless subscribers at the end of last year. As of the end of the third quarter, AT&T had 81.6 million customers.
The companies are trying to match each other's offerings on other devices, such as those based on software called Android and developed by a consortium of companies headed by Google (GOOG). In the fourth quarter, Verizon Wireless got a boost from carrying Motorola's (MOT) Droid phone, which features Android. Later this year, Verizon Wireless expects to start selling Google's Nexus One, also based on Android. AT&T, meanwhile, has promised to roll out a number of phones based on Android.
As the companies move onto each other's turf, they will be increasingly compelled to compete on price. "There's no question the winners in this battle are Apple and Google, and the losers are the carriers," Almeida says.