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Seeking new revenue, AT&T and Verizon eye the Internet of Things

Matt Hamblen | Jan. 28, 2016
Carrier's latest earnings show drops of 5 percent in wireless business.

Also contributing to Verizon's bottom line was $882 million in revenue that benefited from AOL advertising technology — another alternative to the more traditional investment approach to wooing smartphone subscribers. If Verizon were to buy Yahoo, the deal would expand Verizon's footing in Web services and digital media markets, Vachon noted. Verizon acquired AOL in June 2015.

The long-term interest that Verizon has in a 5G wireless network rollout will also support the most futuristic of IoT applications that rely on massive data analytics, such as self-driving cars and complex medical solutions. Vachon noted that the 5G industry standard won't be established until 2020, although Verizon will begin marketing 5G beginning in 2017.

"Laying claim to offering 5G services before competitors will help Verizon distinguish the company from competitors and spur subscriber growth without succumbing to the wireless pricing war," Vachon said.

In its earnings statement, Verizon reported $200 million in IoT revenues from IoT for the quarter and $690 million for all of 2015, an increase of 18% over 2014. AT&T didn't break out the IoT category.

The price war's impact

Even though the price war has gone on for about two years and was initiated by T-Mobile, Antlitz said Sprint is now the leader. That's because Sprint has extended until mid-February a discount plan giving 50% off competitors' monthly rates.

"Sprint has acute issues and needs every subscriber they can get," Antlitz said.

"T-Mobile has been aggressive, but Sprint is now the price leader and is carrying the mantle," he added. "It has definitely become a price war for all the top tier carriers," a group that includes Verizon, AT&T, Sprint and T-Mobile.

T-Mobile's success has come largely at the expense of Sprint, at least in subscribers, although it is pretty clear that the resulting price war has affected Verizon and AT&T as well, especially by pushing them into new markets.

"T-Mobile is adding the most smartphone subscribers by far and siphoning them off from the other three," Antlitz said.

Ranking the carriers

By both subscribers and financial results, both AT&T and Verizon are far bigger than either Sprint and T-Mobile.

Carriers have recently begun reporting total wireless connections instead of subscribers, since one subscriber could own several devices with separate lines.

As of Dec. 31, Verizon was on top with 141.6 million wireless connections; AT&T had 128.6 million; and Sprint had 58.4 million. T-Mobile has not yet reported earnings for the final quarter of 2015, but TBR estimated it had 63.7 million as of Dec. 31.

In terms of financial results, most analysts noted that "free cash flow" is the most meaningful measure of financial health. Again, Verizon and AT&T come out far ahead.


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