Recently the wireless industry in the US has become a lot more competitive, and in the past six months AT&T and Verizon have seen that competition first hand. This has led to MoffettNathanson deciding to downgrade their stocks. Changing Verizon from Buy to Neutral and AT&T from Neutral to Sell. While both carriers have continued to add customers – albeit not the usual smartphone customers – in recent quarters, they don’t see that continuing. They did note that shares for both have “very substantially outperformed” in the past six months.
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There are plenty of hardships facing US carriers right now, and the biggest one is the price war that is currently going on. This has led MoffettNathanson to lower their outlook for the wireless sector as a whole to Neutral. In addition to the downgrades for Verizon and AT&T we spoke about already. These analysts seem to be a bit more optimistic about Verizon because they’ve been able to keep the majority of their customers without having to launch price-cutting or aggressive campaigns to keep their customers and bring in new customers. Like we’ve seen from Sprint, T-Mobile and AT&T. They also stated that the Go90 platform is “more promising than widely appreciated”. While Verizon said that Go90 won’t break even this year, it will in a few years, once they’ve built up a decent sized customer base for Go90.
AT&T is also trying their hand at mobile video service, with their recent acquisition of DirecTV, although they haven’t launched anything just yet. MoffettNathanson stated in their research note “Our sum of the parts valuation for AT&T remains meaningfully below the stock’s current trading range.” Hence why they are being downgraded to “Sell”.
ARPU or Average Revenue Per User, has started to decline as well. Actually it has moved over to the Equipment column, as more carriers and customers are going over to the EIP or Leasing segment. The current price war has also negated any increase in ARPU for many of the carriers in the US. Between T-Mobile and Sprint dropping their prices, and AT&T and Verizon struggling to stick it to them, ARPU has suffered.