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Report: Wireless To Be The Key Growth Driver In Telecom

December 2, 2015 - Written By Kishalaya Kundu

According to a just-published report from New York City-based credit rating agency Moody’s Investors Service, wireless services will remain the single biggest driver of growth in the US telecom industry in the foreseeable future, with an ever-expanding mobile subscriber base and a rapid increase in data usage across the board. As per the report titled, “Telecommunications — US: 2016 Outlook — Wireless to Remain Primary Driver of Revenue Growth”, wireless revenue growth is likely to outstrip overall growth significantly in the recent future. Moody’s expects operating profits for the industry to grow at about two percent next year, while the revenue growth in wireless is expected to be about three to four percent. The agency also expects wireless EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) margins to grow at about one percent in the calendar year 2016.

According to Moody’s Senior Vice President, Mr. Dennis Saputo, “Data revenue in the wireless services segment will fuel overall telecom growth, driven by the increasing use of smartphones, tablets and other connected devices, as well as the growing popularity of mobile video that has made larger data plans more alluring”. The agency however, did warn in its report about increasing competition within the industry, which may take away some of the pricing power for the leading players, thereby impacting ARPUs (Average Revenue Per User) and preventing any significant growth in margins. Mr. Mark Stodden, Moody’s Vice President and Senior Credit Officer, said the following to that effect: “We believe that strong demand for wireless will ultimately offset wireline revenue declines and margin erosion. However, pricing pressure from intensified competition will prevent any meaningful expansion in wireless margins”.

This particular report from Moody’s comes in the wake of another study from Jackdaw Research that claims postpaid subscriber additions have slowed significantly over the past two years in the country, amidst increasing popularity of prepaid connections which are often less expensive, even though they do not always come with as many bells and whistles as postpaid lines. Meanwhile, recent reports have indicated that smartphone penetration in the US is currently at an all-time high of 81 percent, with as much as 97 percent of all handsets being sold in the country fitting the description.