A few days ago, I was a panelist on Trading 360, a TD Ameritrade news program hosted by Nicole Petallides. We were there to discuss earnings reports from wireless carriers AT&T ( T ) and Verizon ( VZ ), but — thanks to yours truly — the conversation quickly turned to T-Mobile ( TMUS ).
The industry sure has changed. In recent years it was led by AT&T Mobility and Verizon Wireless. In those days, Sprint and T-Mobile were very weak indeed — but then, the story goes, T-Mobile pulled itself together and has seen success ever since.
At the same time, AT&T and Verizon, apparently blindsided by this new competition, found themselves at the short end of the stick. Which is why, several years ago, they started on a new course for growth by acquiring companies like Time Warner (which became Warner Media), as well as DirecTV, AOL, Yahoo and more.
Once upon a time, these steps together were seen as forming a transformative leap — vaulting the carriers into the news and entertainment space.
Unfortunately, the strategy proved to be a complete failure.
And so — after spinning off these acquisitions, and a period of struggle — AT&T and Verizon found a new direction for growth: 5G.
And all three wireless carriers, including T-Mobile, piled in.
Covid-19 and Weak Economy
But then times changed again. The pandemic (which seems like only yesterday) and the weak economy (definitely still today) together created a wall of resistance to growth for both AT&T and Verizon.
Curiously, during the same time period, T-Mobile seemed to continue to grow.
But here’s the thing, the reason for T-Mobile’s success was not that it was doing anything special. Or that the market was particularly robust.
It was just that its customers were switching away from AT&T and Verizon.
It’s the same reason other competitors like Xfinity Mobile, Spectrum Mobile, Optimum, Cricket, TracFone and countless others have been showing growth.
Bottom line: An increasing number of customers have been looking to lower their bills in the weak economy.
Growth from 5G wireless, AT&T Fiber and Verizon FWA
Now AT&T and Verizon have been focusing on rebuilding their wireless growth rate in the 5G market, they are also expanding through AT&T Fiber and Verizon FWA (fixed wireless).
The good news is, the most recent earnings reports suggest losses have finally started slowing, and even turning around.
Here’s the next problem: I do not expect the growth rate to accelerate as it has in the past, for one important reason: Wireless is no longer a growth industry.
In this environment, moving to 5G is not really about transformation, it’s about table stakes. It’s an expensive business to be in, but that’s what it takes to stay competitive.
Without 5G, carriers risk losing market share. That’s the reason they are all investing rapidly.
Wireless remains key to the world’s economic growth. But for the industry, rapid growth won’t be coming from the carriers. It will come from an assortment of other companies in different segments, which partner with or use these wireless networks.
In fact, many companies have been popping up on my radar which show this to be the case. Expect to read more about them in future columns.