The major wireless providers fell flat in the first quarter on slowing smartphone adoption, according to a report released Thursday from Fitch Ratings.
A 36 percent annual falloff of wireless net additions led to a 32 percent plunge in revenue-generating unit (RGU) additions during the first quarter of 2012, according to the report.
RGUs include wireless, video, wired data and phone customer additions, excluding wholesale.
Comcast, Sprint, AT&T, Verizon, Time Warner Cable, CenturyLink, DirecTV, Dish TV and Charter are all included in the report.
"This is a tough year-over-year comparison, as the first quarter of 2011 marked the launch of the iPhone 4 on Verizon’s network," the report states. "Postpaid subscriber additions represented only 37 percent of retail net additions during the quarter compared with 49 percent during the same period last year."
Verizon’s 734,000 retail net additions led all service providers during the quarter, capturing nearly 55 percent of all retail customers added among the largest wireless providers. Verizon led the industry for the sixth consecutive quarter by adding about 501,000 postpaid subscribers.
Sprint maintained its strong position within the prepaid customer segment by adding about 489,000 prepaid customers, representing around 58 percent of prepaid additions.
But slowing adoption of smartphones also hit home with the carriers. Fitch estimates the largest wireless service providers – Sprint, AT&T and Verizon Wireless – activated about 6.8 million smartphones during the first quarter of 2012, reflecting a 19 percent decline relative to the 8.4 million smartphone activations reported during the first quarter of 2011.
Fitch argues that increasing smartphone penetration is a key factor in determining the relative competitive strength of a wireless operator, as well as the prospects for continued strong wireless data revenue growth. The firm forecasts wireless data revenues will continue growing at a faster pace than wireline data revenues this year, with total revenues exceeding $70 billion during 2012.
Sprint’s smartphone subscribers accounted for 69 percent of the company’s postpaid subscriber base as of the end of the first quarter, which is the highest among U.S. wireless service providers.
Sprint’s smartphone net activations totaled approximately 1 million during the current quarter, marking a year-over-year decline of 15 percent. Sprint activated 1.5 million iPhones during the first quarter, which was off from 1.8 million activations reported during the fourth quarter of 2011. However, Sprint noted that 44 percent of the activations during the first quarter were new customers, which compares favorably to 40 percent during the fourth quarter of 2011.
Fitch recognized Verizon's new Share Everything plans as a significant shift in industry pricing models, as pricing moves away from service type such as voice, text and data to a price per connection or device. Fitch concludes that shared data plans position operators to gain market share and increase profits as subscribers add more devices to the network that can generate incremental usage and revenues for the operator.
"Bundling more devices will likely lead to increased customer satisfaction, create a more stable revenue base and reduce subscriber churn," the report states, acknowledging that more value-conscious smartphone users may be encouraged to shop competitive carriers for more economical pricing.
Fitch anticipates that Verizon’s plan will push pricing higher overall but create a drag on ARPU. However, revenue generated per customer should grow.