Even if AT&T's (T) ARPU drops by a modest $1.50 in 2H14, it could still be down 10% Y/Y and set to fall below $60 in 2015, notes BTIG's Walter Piecyk. AT&T is a month removed from warning it doesn't expect any wireless service revenue growth in Q2 due to ARPU pressure caused by its participation in a T-Mobile-driven price war.
AT&T has responded to T-Mobile in part by cutting prices and removing phone-leasing requirements for Mobile Share plans. The response has been positive - AT&T expects ~2/3 all postpaid subs to be on no-subsidy Mobile Share plans by year's end - but has come at the cost of lower ARPU and (due to phone leases) higher equipment spend.
Moreover, with Piecyk expecting 75% of Mobile Share subs to be on 10GB or higher plans by the end of 2015, he thinks AT&T will be pressured to "find something to drive incremental growth that will move those customers to higher usage plans."
The story is different for Verizon (VZ), which has stuck to a premium pricing strategy and placed tougher leasing hurdles. The strategy has hurt Verizon's subscriber adds, but also led to less ARPU pressure.
Piecyk thinks Verizon can still see low- to mid-single digit service revenue growth, whereas AT&T is likely to see a 5%+ Y/Y decline later this year.
AT&T, of course, is about to lower its mobile dependence with a huge acquisition.