So far this year, for every wireless subscription they have, AT&T and Verizon made $17 per month while T-Mobile and Sprint have collectively lost 39 cents per month on their wireless subscriptions. This is according to data from Chetan Sharma, a wireless analyst who crunched the numbers for his third quarter report on the U.S. wireless market.
Sharma’s data also showed that the growth in new subscriptions for mobile operators was going to have to come from some category other than people adding more phones. Wireless providers in the U.S. are dealing with a saturated market. The percent of revenue from new customers is approaching zero, as almost everyone in the U.S. is paired off with a wireless carrier and 81% of the population has a smartphone. This means, according to Sharma, that net adds in the wireless industry will have to come from connected devices.
Yes, customers are gobbling up more and more data (3.9 gigabytes per month), but they aren’t actually paying as much as they used to for it, says Sharma, so mobile operators are turning to other devices to get their growth.
These other devices may be tablets, cars, or even wearables, but in 2015, so far, they’ve accounted for a 26% increase in revenue and 60% of net device adds. This is all well and good for AT&T (T) and Verizon (vz), which have both been emphasizing their strategy around connected devices. AT&T has been focused on connecting cars for the last few years, since it connected its first Tesla, and has reported more than $1 billion in connected device sales in 2015. Verizon should hit that number next year, according to Sharma.
Meanwhile, T-Mobile and Sprint (s) are lagging on the connected device front without any clearly defined strategy other than delivering data packages for sensors for customers who ask for it. Contrast that with AT&T and Verizon which have both built a strategy around building sensors, cloud offerings, and the realization that connectivity is only about 15% of the revenue opportunity around the Internet of things.
As for consumers, this emphasis on connected devices will increase the total amount they spend on communications each year. Sharma’s research and consumer surveys puts the total spent on connectivity and devices each year at $3,800, with $1,000 of that going to cellular providers annually for mobile data. About $800 of that is spent on the physical devices. As for those devices, Sharma estimates that the number of connected devices per U.S. household is now 5.3, with over 37% of the households in the 4-8 device range and almost 6% of households having 15 or more connected devices.
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