AT&T and Verizon Reach Into Your Wallet as Subscriptions Fall

by Matt Klassen on April 23, 2010

Both AT&T and Verizon announced their first quarter earnings reports this past week, and the news was surprising. Due to the recent changes in healthcare legislation both companies were forced to dole out a huge lump sum payment of almost $1 billion dollars each due to the removal of healthcare subsidies that were once in place to cover the Medicare benefits of retired employees.

While it comes as no surprise that these one-time payments took a significant chunk of the revenues of both wireless giants, there was the added revelation that both companies are experiencing a dramatic slowing of their new customer subscription rates.

This means that if they want to continue exceeding their revenue targets, both AT&T and Verizon will need to start looking elsewhere for revenue streams…and that means that both companies will reach deeper into your pockets as they charge their regular customers more for an increasingly integrated technological existence.

With the percentage of American’s who own a cellphone now passing 90% the bottom line is that almost everyone already has a cellphone, and with many already locked in to a postpaid subscription, we may be witnessing the revenue ceiling for wireless companies across the country, as there simply isn’t anyone else to sign up to a contract.

Despite the fact that AT&T set a record with 1.9 million new customers in the first quarter, this figure is bolstered by a growing trend of customers turning to prepaid cellphones, which generates significantly less revenues than new postpaid contract subscribers. Regarding this latter demographic, the overall figure of new customers only includes 513,000 new postpaid contracts, a 43% drop from last year and well short of the prediction of market analysts that AT&T would add over 600,000.

For Verizon, despite the fact that it saw a healthy 1.2% increase in overall revenues, topping $26.8 billion, it too saw a dramatic decline in its top revenue stream; new contract subscribers. The wireless giant reported an increase of only 423,000 postpaid users, again considerably less than the 500,000+ that analysts estimated.

So what does this mean for both AT&T and Verizon? Unfortunately, what it means is that existing customers will begin to increasingly pay more for the growing technological integration that these companies provide. Randall Stephenson, AT&T’s CEO, noted that this slowing subscription trend was expected, and revenues losses in one area will be offset by the expectation that customers will continue to spend more each month on service.

“Our expectation is that postpaid customer growth and net additions will come down from prior levels,” he said. “But we are seeing a continuing shift in revenue growth in higher wireless data revenues and penetration of integrated devices. This is just the tip of iceberg when it comes to the opportunity for connected devices.”

I can see it now; a future with flying cars, fully integrated technologically advanced houses, hover boards, and advanced holographic phone tech…and I can see no one utilizing these advances simply because the wireless companies of the future charge you exorbitant rates for everything you do. Simply put, technological integration is great, but there’s a high price you’ll pay to get it.

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Written by: Matt Klassen. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS >, Twitter >, Identi.ca >, or Friendfeed >

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