Moody's Investors Service now predicts that the free cash flow at US-based mobile carriers isn't looking great at the moment, as the prominent investment services provider predicts no less than a 2-percent drop on average for the top mobile service providers by the end of the year. That probably doesn't come as too much of a surprise for anybody following along with the financials of US telecoms, but Moody's says the drop is primarily down to the level of competition between providers in the US as compared to elsewhere in the world. Moody's Senior Vice President, Carlos Winzer, points to Europe for comparison, noting how in that region, revenue growth for mobile service providers is expected to be maintained well into 2018, by as much as 1.5-percent.
To begin with, the US cell service market has seen a huge jump in the number of unlimited plans available, Moody's reports. That has happened at the same time as what is effectively the leveling off of service quality among major providers for the country. This means that networks are being used more than ever before leading to congestion and other negative impacts, which are adding to the costs incurred by the carriers themselves. Meanwhile, in Europe, companies are converging sales of other services such as television and broadband, bundled with mobile services. Something similar to that has begun to happen in the US, with companies like Verizon and AT&T making headway in those areas. At the same time, some cable subscription providers have also started to expand services into the mobile arena. However, pricing appears to be a key separator between the two markets. In Europe, prices have been set in a way that focuses on value-assessments for the bundles or services on offer – rather than putting efforts into beating the competition through offers of unlimited data. Something that is understood to have led to a much healthier return on investment for companies in European countries, according to Moody's, which are now preparing for a higher degree of demand for services.
Unfortunately, the trends in both areas are expected to continue as regulators in Europe move to encourage investments in high-speed data networks, while US regulators shift in favor of the operators. With that said, it should be noted that the European market is coming out of a couple of years of decline. During that time, US carriers have been taking advantage of high credit ratings to take on debt and build out networks, according to the report. That will certainly continue as those same companies push to bring 5G to their subscribers, which should eventually help return some, if not most of them to a more stable financial position.