Blog Post

So Far, Wireless Data Looks Recession-proof

After taking a look at the earnings of the largest U.S. wireless carriers, it’s clear that growth in wireless data at the top carriers is still going strong, despite a recession. There are concerns that some of this is the result of holiday sales (all those new iPhones for Christmas), so we’ll keep an eye on next quarter’s numbers to see if folks are ditching their data plans so they can pay rent, or if the ongoing layoffs are resulting in disconnects as employers stop subsidizing plans.

Data revenue overall is growing, but that figure is being helped most by AT&T (s t); Verizon’s data revenue, meanwhile, appears to be slowing down. While all those holiday iPhones undoubtedly helped, AT&T actually took the lead in terms of wireless data spend for the entire fourth quarter — for the first time since the fourth quarter of 2005. For the year, Verizon still surpassed AT&T with data revenue of $10.7 billion compared to AT&T’s $10.6 billion.

With about 79 percent of its customers subscribing to a data plan, as compared to 46 percent of AT&T’s, Verizon (s vz) may be rushing its LTE plans not only for reasons I explained yesterday, but also to continue growing its wireless data business. Verizon could boost prices for the faster LTE services, or lower the cost of delivering data, and thus boost margins. It may also get innovative with its plans and services once it has access to more bandwidth.

AT&T Verizon
Amount made on wireless data in Q4 $3.07 billion $2.97 billion
Percent of revenue wireless data contributed for Q4 10% 12%
Percent of revenue wireless data contributed to in all of 2008 8.5% 11%
Year-over-year growth in wireless data 51% 44%
Growth in wireless data from Q3 to Q4 12% 6%

15 Responses to “So Far, Wireless Data Looks Recession-proof”

  1. You are using the word recession proof incorrectly. Just because something grows during any one particular recession does not make it recession proof. If however you believe it has some intrinsic quality that makes it immune to recessions then you label it as recession proof.

    In this case the business is growing due to the very recent proliferation of phones that make good use of wireless data especially 3g. Not because it’s recession proof.

  2. Stacey – I’m fairly certain that both Verizon and Cingular are both counting SMS (text messaging) and associated plans as “wireless data” and that this is what accounts for most of the growth and absolute revenue and “data plan subscriptions”. Since SMS uses the control channel of the voice network, this is simply obfuscation. The carriers want to justify their past and future massive expenditures on data networks and with the exception of At&t and the iPhone, they’ve been very slow to monetize actual wireless “data”. I’m generally shocked that Wall St. analysts don’t call them out on this and force them to report SMS revenues as separate from data.

  3. Jesse Kopelman

    You’ve got to consider the effect of early termination fees. Even if dropping the contract makes good long-term sense, it is hard to take that immediate $200 hit. This is the same reason so many people only pay their minimum credit card balance, even though taking years to pay off the card is financial suicide. I think the real question is what is the involuntary churn rate (people don’t cancel the service, they just stop paying) starting to look like. Also, they don’t cancel/suspend your account for a single missed payment — what percentage of high ARPU customers are in arrears? I bet that number is already at an all time high.