Wireless Providers Must Aim High And Low

By Fedor Smith, ATLANTIC-ACM

Market data suggests that wireless revenue growth in the coming years will primarily come from the higher-end consumers willing to pay for data and lower-end consumers snatching up low-cost prepaid options. ATLANTIC-ACM is about to release its annual report, "U.S. Telecom Wired and Wireless Sizing and Share: 2009-2014," which tracks current and future market share for the U.S. telecom industry, and for 2009 we have added the wireless market to the report. The data points to continued wireless revenue growth, but the underlying drivers will be data and prepaid.

Even without looking at the numbers, this trend has been evident throughout the market. On the high end, we have seen strong sales of industry-leading smartphones from Apple Inc. and RIM, while handset makers like Sony Ericsson and Nokia, whose products struggle to compete with the popular iPhone and BlackBerry, have suffered considerably. On the low end of the market, cheap monthly prepaid plans, like the Boost Unlimited offering, have been hugely successful at snatching up subscribers despite service issues and limited handset offerings.

Looking at the numbers, it makes sense for carriers to target both sides of the market. The 2009 ATLANTIC-ACM Sizing and Share study forecasts overall wireless revenue to grow at a CAGR of 2.2 percent from 2008 to 2014, while the prepaid wireless market is forecasted to grow at 3.9 percent during the same period. The forecast calls for value providers, such as MetroPCS and LEAP, to achieve the largest gains in terms of market share, followed, to a lesser degree, by value-focused national providers, such as T-Mobile and Sprint (Boost). With many prepaid packages now including higher-end services like data and unlimited text or video, these providers will be pulling from the budget conscious, but feature hungry, customer set as much as the traditional lower income prepaid customer base.

On the upper end of the customer scale are data-hungry consumers who are growing postpaid data revenues despite the floundering economy. ATLANTIC-ACM expects postpaid data revenue to grow from about 23 percent of postpaid revenues in 2008, to almost 40 percent of postpaid revenues in 2014. While continued price competition and growing per-subscriber usage may make this revenue segment less profitable than voice minutes, the subscriber and revenue growth that it will generate will be vital to competitive carriers. Carriers who offer market-leading smartphones, such as AT&T, with the iPhone, stand to reap the largest benefits from this growing demand for mobile data, which is reflected in their forecasted growth in market share.

The middle-market consumer, who sees limited value in data services, and simply wants reliable voice services at reasonable cost, will continue to be a staple of the wireless market. However, market growth is going to come from prepaid and data services, and individual carriers would be wise to make sure they have appealing offers in one or both of these segments if they hope to match or exceed market-wide revenue growth.

Fedor Smith is president of ATLANTIC-ACM, a provider of strategy research, consulting and benchmarking services to telecommunications and information industry companies. An expert in niche- and channel-based marketing and operations management, Smith specializes in customer satisfaction and benchmarking projects for ATLANTIC-ACM, where he oversees proprietary projects as well as the firm's Carrier Report Card series, which serves as the telecommunications industry's principle source of benchmarking tools. In addition, he has authored several studies on telecommunications industry growth and opportunities. Prior to joining ATLANTIC-ACM, he worked at Alloy Media and Marketing in New York developing youth-oriented marketing programs around the evolving technology consumption and adoption habits of high-school and college-age consumers. He holds a degree in history and economics from Hamilton College.