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Summary:

According to a new report from Chetan Sharma Consulting, the US has reached 50 percent smartphone penetration. The big operators may be leading the charge toward more sophisticated OS-driven devices, but smaller operators and the growing prepaid market is making a contribution as well.

smartphone users

For the first time, more people in the US own a smartphone than a regular talk and text devices, according to a new report from Chetan Sharma Consulting. Smartphone penetration exceeded 50 percent in the second quarter, making the feature phone a shrinking minority among US mobile users.

A Nielsen study found in May reached similar conclusions, revealing that 50.4 percent of US subscribers surveyed owned a smartphone, up from a mere 18 percent in 2009. But while Nielsen’s number are based on polling data, Sharma’s come from the operators’ quarterly reports.

It was an easy trend to spot as the Big 4 have been selling smartphones at a rapid clip, especially AT&T which gained a big lead over its competitors through years of exclusivity with the iPhone. In the second quarter, AT&T’s smart-device penetration rose well over 60 percent and three-quarters of all devices came embedded with an OS.

The rest of the operators are now starting to catch up, and not just the remainder of the Big 4. Regional operators like MetroPCS, Cricket Communications and U.S. Cellular as well as growing number of mobile virtual network operators (MVNOs) are all tapping into the trove of cheaper smartphones in the market.

While contract dumb-phone users are upgrading to iPhones and Android devices, the biggest boom appears to be in the prepaid segment. According to Sharma, postpaid growth in the U.S. remained flat, while prepaid subscriptions grew by 12 percent year-over-year. There are now 100 million prepaid subscribers in the U.S., more than one-third of the overall market. The NPD group recently found that prepaid smartphone penetration increased 91 percent between 2011’s second quarter and last quarter. As my colleague Kevin Tofel points out that growth rate will surely increase now that prepaid operators like Cricket and Virgin Mobile have the iPhone.

Sharma also found that all of those new smartphones subscribers aren’t necessarily turning into big money makers for the carriers. Revenues from new subscribers fell below 5 percent in the second quarter. That means operators can no longer count on adding new customers to make their profits. Instead, they’ll have to upsell their current subscribers on new services and pricing structures such as Verizon and AT&Ts’ new shared plans. That may be a tough thing to do if a good hunk of the market is gravitating toward cheaper prepaid service.

  1. Chetan Sharma’s reports are a must-read for industry insiders. Meeker may be bigger, but Sharma is better. Everyone should take the time to read it. (It’s text-heavy, but that’s a good thing.) http://www.slideshare.net/chetansharma/us-wireless-marketq22012updateaug2012chetansharmaconsulting

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  2. I found a used Nexus S for $120 on eBay for my teenage son, and got him on T-Mobile’s $30 unlimited plan, a great deal. A Galaxy Nexus for $349 and T-Mobile’s plan would be awesome too.

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  3. Now, what is the definition of a smartphone? gps, minimum screensize/resolution, acid 3 browser or any other criteria?

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    1. Kevin Fitchard Tuesday, August 14, 2012

      Hi Mentis,

      I think the definition most people use is more basic: anything with an operating system accessible by developers. So Symbian, Palm, iOS, Android, BlackBerry, etc…

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