Nation's top four carriers lose a combined $45 billion in value over one month

Investors, sensing troubling times ahead for the top four mobile operators in the U.S., have whacked $45 billion off the combined market capitalization of AT&T, Verizon, Sprint and T-Mobile just since the middle of November. There are two things that seem to be worrying investors. One is the amount of money spent by carriers for more spectrum. The second worry stems from a recent warning from Verizon, saying that tough competition will affect profits.

Since the middle of last month, the U.S. government has sold $43.7 billion worth of spectrum to the mobile operators, and another auction is coming in 2016. The high quality airwaves being offered in two years are coming from television broadcasters, and are expected to raise $47 billion from mobile operators. At the same time, each carrier is becoming more aggressive, trying to persuade consumers to switch to its network. Sprint recently offered a plan that cuts a consumer's Verizon or AT&T bill in half, while keeping the same amount of data. This past week, T-Mobile announced a family plan with unlimited data starting at $100 for two lines.

Since November 12th, Verizon shares are down 10%. Last Monday, the nation's largest carrier said that profits are slipping as it becomes more aggressive in procuring new subscribers. AT&T shares are down 9% since the same date, and it has told investors to expect higher churn and lower margins when it announces its fourth quarter earnings. Sprint is off 18% in the last month, and even industry upstart T-Mobile has suffered though an 11% drop in its stock price since November 12th.

As far as the top four U.S. carriers are concerned, revenue per post paid customer is expected to decline this year for the first time in years. The price wars that are driving the industry will have to end some time as the mobile operators will have to spend money to protect their networks. UBS analyst John Hodulik says that the only way to end the price wars would be if regulators start to allow mergers in the industry, or if at least one carrier decides to focus on profits and stops cutting prices. The analyst sees neither of these things coming to fruition.

One thing that is helping the bottom line for the major U.S. carriers is the slow move away from subsidized phones to the use of installment plans. The only downside there is that once the consumer pays off his phone, there is no contract forcing him to stay with his current carrier.

source: WSJ

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11 Comments

1. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

45billion probably subsidized for the iPhone 6/6+, Apple get the hefty profits in the ends

2. fzacek

Posts: 2486; Member since: Jan 26, 2014

I like that theory...

3. mixedfish

Posts: 1555; Member since: Nov 17, 2013

So the article states that the majority is attributed to spectrum purchases, and yet you go on a tangent. Wow you smart man.

6. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

"Wow you smart man." Can't argue with that statement.

10. SuperAndroidEvo

Posts: 4888; Member since: Apr 15, 2011

lolololololololololololololololololol It happens... +1

4. Cicero

Posts: 1129; Member since: Jan 22, 2014

Spectrum purchase is a must for future presence on the market. Subsidized phones is a business conduct in America at most. Also the bill payed there are larger then in other parts of the world. Being in one European country you have inside of your post paid bill a 24% VAT and the average bill is around 20 Euros.

5. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

People are realizing cell plans are a complete rip-off and are migrating to the cheapest plans. It's funny that people praised T-Mobile's move to installment plans on phones, but forgot to mention that T-Mobile is charging FULL or ABOVE RETAIL PRICE for their phones. When AT&T added their version of installment plans, AT&T also is charging ABOVE RETAIL for many phone models. Consumers are waking up to this BS. Why buy a phone at full retail or above retail when many other phones are available for less via other channels? This whole thing is a scam and it should be ripped down by the government. Consumers are also waking up to the fact that "unlimited voice and text" should basically be free or some small charge, i.e. $5/month and unlimited data should be flat rate at some reasonable price, i.e. $10-30/month. There is no reason for consumers to support monopolistic telecoms and their massive profits. It's a zero sum game that more and more people are tired of playing and tired of losing. All that money they pay to telecoms is money they could have spent on something nice for themselves, their friends, their family.

8. michaelny2001

Posts: 328; Member since: Aug 01, 2012

Excellent point. Thi sis why i stopped paying crazy family plan of 4 lines to ATT. switched to regular, cut down the unlimited and started buying used phones from 1-2 years ago at 70% off retail. Soon... Cricket here is come!

7. AlikMalix unregistered

I dont think of it as a loss in profits, just adjusting to rate prices that should have been there in the first place. We can thank competition from the smaller guys for this. I'm on AT&T unlimited data plan - quite happy, but my other family members aren't so lucky - here's hoping that data rates will drop in face of aggressive competition...

9. DnB925Art

Posts: 1168; Member since: May 23, 2013

On my Note 4, I'm, still on SERO-P. Got the phone for $100 subsidized during the Note 4 trade-in and get $200 promo. Then $50/month for Sprint SERO-P unlimited text/data/nights/weekends/500 landline minutes. I almost never use more than 200 minutes f landline minutes a month, so it is essentially unlimited voice for me. Not many carriers can match this grandfathered plan in the US with that amount of service AND subsidized phone prices. Yeah I sign up for a new contract every 2 years, but I don't ever plan on leaving this plan because it can't be touched, and I have great Sprint Spark/LTE coverage where I live and work.

11. corporateJP

Posts: 2458; Member since: Nov 28, 2009

Somebody finally went in the pen and started kicking the pigs...

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