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Summary:

The mobile industry saw its slowest quarter of overall subscriber growth since the dawn of the cellular age. Without new customers to connect, carriers are stealing them from one another and looking toward M2M for future growth.

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U.S. mobile carriers added only 139,000 new connections to their networks in the second quarter, making it the most lackluster period of growth in the modern age of mobile, according to a new report from Chetan Sharma Consulting.

Creating new mobile subscribers has become increasingly difficult for carriers in recent years the mobile phone proliferate across society, but operators were hoping to keep the market humming along by connecting tablets, cameras, cars, farm equipment and every manner of object in the emerging internet of things. With the exception of tablets, that’s clearly not happening.

Sharma Q2 2013 Mobile Update subscriber net adds

The second quarter was particular jarring, Sharma said, because Sprint finally shut down its old Nextel iDEN networks, shedding 2 million subscribers in the process. Unless those consumers suddenly decided to go phoneless, they had to wind up somewhere, and it looks like Verizon Wireless, AT&T and particularly T-Mobile picked them all up.

Those three carriers did see some big growth in the quarter, but it didn’t translate into overall growth in the U.S. market. They and the regional carriers basically passed their subscribers around. Net subscriber additions were down 95 percent from the second quarter of 2012.

Sharma estimates that 90 percent of all carrier subscriber gains are customers they’ve taken from another carrier, either from each other or from one of the smaller carriers. The remaining 10 percent are all that’s left for actual mobile industry growth. The industry is approaching a stalemate, where individual carriers are making small gains, but overall the number of pieces on the board remain unchanged.

Sharma Q2 2013 Mobile Update carrier share

Sharma estimated there are 240 million mobile users in the U.S. that collectively have 335 million mobile connections. That difference can be explained by people who keep separate business and personal phones, 3G/4G tablets and modems, and the machine-to-machine (M2M) links that connect a portion – though today only a small portion – of the internet of things.

While operators have clearly succeeded in creating the beginnings of a multi-device market, it’s not growing as quickly as they had hoped, Sharma said. For instance, the still emerging connected car hasn’t created a whole new device category for carriers to connect. Instead drivers are just connecting their cars with their smartphones.

The one bright spot today is one that was stagnant for many years: the connected tablet. While consumers eschewed the first wave of cellular tablets for Wi-Fi only models, they’ve recently showed signs of coming around. AT&T added more than 300,000 connected tablet users in each of the last two quarters.

“AT&T, given its push in space continues to lead by a distance,” Sharma told GigaOM. “The shared plans have helped but the explosive M2M growth (that uses cellular) is being postponed for a bit, which is not surprising since it takes a while for the ecosystem to build out and prices to come down.”

Sharma Q2 2013 Mobile Update carrier segment

So where does operators future growth come from? They can’t depend on tablets alone. If they can build the M2M ecosystem Sharma referred to, then they could potentially add millions upon millions of new connections to their networks. But in order to carve a niche out of the internet of things, they will need to lower connection prices considerably – few people will pay $5 a month in addition to data fees to connect a camera to the network. Assuming carriers do drop prices, they’ll get far less revenue per connection than they do off phones.

Sharma believes carriers are going to renew their focus on services by acting as a go-between other service providers and the consumer and building “digital lifestyles” around their devices and networks. In the interim, though, it looks like individual carriers will have to grow at the expense of each other, luring new customers away from each other’s networks.

Feature image courtesy of Shutterstock user Michael C. Gray

  1. Pricing has to come down. Eliminate the monthly base fees for M2M. Allow pre-paid plans with no monthly minimums and no expiration (or an expiration several years away, not next month).

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  2. The US cell phones are in a mature market with limited growth. That is why I think new OSs like firefox have very little chance for growth in the US or the world. They have to take marketshare from someone, I doubt it will be IOS, android or even win8. Blackberry is pretty much dead in the USA.

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  3. Nicholas Paredes Tuesday, August 13, 2013

    I have three connections, and it is difficult to justify more devices without services that cross broadband and mobile services. Seriously, why do I have a $100 bill for broadband when most of my data is mobile. So, I doubt the industry is getting more than $300 per month without substantial improvements in value.

    Value! What a shocking notion.

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  4. David Hoffman Tuesday, August 13, 2013

    Maybe we will see real competition and value. Maybe ridiculous per device charges to be allowed to access the data network, to then pay per GB fees, will be reduced significantly.

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  5. This is just a reflection of stagnant wages and stealth inflation squeezing discretionary income into staples like rent, gas and food.

    Its the same reason why PC sales have bottomed. People are keeping what they got and the consumer dollars are just not available.

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  6. #Carriers amp connections, + recharge growth via #social messaging + #CEM http://amex.co/13rIN5K

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  7. I do not know of a single senior executive at any MNO that wouldn’t say that they expect data growth in orders of magnitude from M2M in tbe next decade.
    They also all realize that voice as data and WebRTC will fundamentally change spectrum usage for TD and FD mobile data networks.

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  8. Let’s see, there’s around 300 million people in the U.S. including kids that don’t have phones and there’s an estimated 240 million mobile users that have 335 million mobile connections – maybe just maybe the market is saturated!

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