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BTIG: Verizon seeing less ARPU pressure than AT&T

  • 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.
Comments (8)
  • alohafalls
    , contributor
    Comments (63) | Send Message
     
    Is there a club one has to join or a special shared handshake required to figure out what this article is about?
    1 Jul, 09:07 PM Reply Like
  • Energysystems
    , contributor
    Comments (1071) | Send Message
     
    It's typical telecom talk....ARPU=Average Revenue Per User.
    1 Jul, 09:13 PM Reply Like
  • alohafalls
    , contributor
    Comments (63) | Send Message
     
    Thanks
    2 Jul, 07:23 AM Reply Like
  • lords
    , contributor
    Comments (30) | Send Message
     
    Crap article. T and VZ have issues. The balance sheet is loaded with debt 100Billion plus, Good Wills and paying the kind of div there are does not bode well

     

    Avoid both these companies does not take much to reduce they earning potential and reduce div. All of them have 5% plus. Just the interest on debt and div cost them each year fro each of the company roughly 15-20Billions dollars.
    1 Jul, 11:37 PM Reply Like
  • King Rat
    , contributor
    Comments (651) | Send Message
     
    Interest - tax, $3billion
    dividend, $10billion
    stock repurchase, $10billion

     

    It's messy and that is why ARPU is so vital. They can calculate costs easily enough, so as long as they can calculate user count and rev/user, they can calculate how much is left over for dividends and stock repurchasing. Otherwise, they would essentially be bankrupt.
    2 Jul, 01:08 AM Reply Like
  • DoctoRx
    , contributor
    Comments (1516) | Send Message
     
    I claim no expertise in telecom, but I'm long VZ for the dividend as a bond alternative. BTIG's analysis comports with my sense of things: VZ has transformed itself into the leader in wireless communications. AT&T has however been desperately trying to "make something happen." What real synergies are there between DTV and T? It's not immediately obvious. Whereas, VZ taking on debt that should be self-liquidating by buying out VOD's stake in their JV is classic, sound business. All VZ has to do to make this deal work is predict the future with reasonable accuracy.
    1 Jul, 11:42 PM Reply Like
  • bocajoe
    , contributor
    Comments (7) | Send Message
     
    There are millions of cell phones that are totally worthless without Att and vz. If you spend $600 for a phone do you really want to save some small monthly amount to get slower speed, dropped calls,lesser coverage by going to Sprint or thus?
    2 Jul, 06:44 AM Reply Like
  • d7mead
    , contributor
    Comments (25) | Send Message
     
    Has anyone heard how the Amazon "smartphone" is doing?? With T being the only provider for this phone it could provide a revenue boost...
    2 Jul, 11:59 AM Reply Like
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