August 08, 2012

U.S. Mobile Business is Becoming Unstable


There are growing signs that the U.S. mobile service provider market is unstable, and on the cusp of changes that could include a significant wave of provider restructuring, despite the failure of the AT&T bid to buy T-Mobile USA. 

"What is clear for now, in our view, is that the current strategy, indeed the entire current business, isn't working," said Craig Moffett, an analyst at Sanford C. Bernstein. Moffett seems to be referring to the whole business operated by regional U.S. wireless carriers. 

To be sure, Moffett has been saying that the U.S. mobile business is saturated since at least 2009. 

Regional or prepaid service providers clearly have had a tougher 2012 compared to the mid-2000s, for example. Leap hasn't been profitable since 2005, for example. MetroPCS profits dropped 63 percent during the first quarter of 2012.

A study undertaken by Tellabs suggests that mobile service provider profitability could become extremely challenging for some mobile operators within three years, with costs surpass revenue for many operators.

In North America that could happen by the fourth quarter of 2013 or as early as Q1 2013. Developed Asia Pacific service providers could see problems by the third quarter of 2014. In some cases this could happen as early as Q3 2013, Tellabs said. 

Service providers in Western Europe could run into trouble by the first quarter of 2015. In some cases this could happen as early as the first quarter of 2014.




Edited by Brooke Neuman



Related Tags

Wireless    Broadband   
       

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