When major U.S. wireless operators start reporting earnings in the coming days, analysts will be closely monitoring if post-lockdown spending and pandemic-related supply chain shortages impacted their balance sheets.
The overall wireless market may benefit from a spending rebound as more retailers opened to full capacity in the second quarter and Americans resumed traveling and working in offices. A MoffetNathanson report shows overall phone subscription growth rose 2.5% year over year in the first quarter, about five times higher than population growth.
Although the trend could continue into the next quarter, this does not mean each provider is reaping the benefit. Verizon Communications Inc., AT&T Inc. and T-Mobile US Inc. have all faced increasing competition from cable wireless attempts to sweep up market share.
"Verizon has been losing phone subscribers. That looked bad when the market was growing at 3x population growth. It looks positively awful in light of now knowing that the market was growing at 5x population growth," MoffettNathanson analyst Craig Moffett wrote in a research report. "AT&T was gaining subscribers, but their hyper-aggressive promotionality was costing them ARPU, so their subscriber growth wasn’t translating into service revenue growth."
Increasing 5G reliability
Another industry report released July 13 from analytics group Opensignal suggests that the three major wireless companies are each succeeding in different areas. T-Mobile led competitors in 5G ability and reach, with average 5G download speeds up by more than 50% since the beginning of the year. Verizon and AT&T led in video, games and voice app experience.
When asked how these milestones could translate financially for these companies, Opensignal analyst Ian Fogg said continued improvements to the user experience could make customers think twice before switching to a competitor. Evidence that networks are reliable could encourage customer loyalty.
"As U.S. carriers improve user experience, it could help with churn numbers as more people stay with [their carriers]," Fogg said.
Supply chain uncertainty
The carriers may mention supply chain shortages related to the pandemic and trade regulation in upcoming earnings calls. During AT&T's first-quarter earnings call in April, CEO John Stankey suggested the national chip shortage could begin impacting its C-band equipment, an essential element to 5G deployment. Verizon announced in June that it is "on track" to deploy C-band equipment and the chip shortage would not be an obstacle.
Jeff Moore, principal at Wave7 research, said most of the shortage issues will be absorbed by device production companies such as Samsung Electronics Co. Ltd.
"Supply chain issues at two of Samsung's biggest factories due to COVID will probably impact tablets more than phones at this point," he said.
Verizon is set to announce earnings July 21 and AT&T will follow on July 22. T-Mobile is set to report July 29.