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U.S. Carriers Are Running Out of Growth Options

It’s hard to grow in a saturated market, but despite 89 percent cell phone penetration in the U.S., AT&T (s t) managed to pull out some impressive revenue growth over the past three years, not because it has the iPhone (s aapl) but because it’s been buying other companies. We’ve written about AT&T’s dependence on the iPhone, but this chart from TeleGeography illustrating AT&T’s sales growth over the period — on par with service providers in countries where cell phone subscribers are still growing — is tied primarily to Ma Bell’s acquisitions.

The companies found in the lower part of the chart, which operate in saturated Western Europe markets, are a glimpse of the future for AT&T and even Verizon (s vz) as U.S. companies run out of acquisition targets. The carriers hope that machine-to-machine communications will save them, but they’re still searching for the right business model as well as compelling applications. I suppose if times get too tough, there’s always Sprint (s S).

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9 Responses to “U.S. Carriers Are Running Out of Growth Options”

  1. Organic voice-driven revenue growth is likely a thing of the past…M2M, mobile broadband, HD voice(?)are the new focus areas. Of course, there’s the usual suspects of service bundling..But as you have rightly put, its going to be a combo of killer apps, with a sound business model that will drive growth in the future

  2. The art of war = Apple.
    One method for the big carriers to make money is to offer new services and applications and manage all the billing.

    iTunes is a completely destructive force against that effort.

  3. “I suppose if times get too tough, there’s always Sprint.”


    Makes Sprint sound like that last, malformed, overcooked bit at the bottom of a bag of pork rinds.

  4. Revenue growth for American cellphone service providers will continue for some time. But, the growth will not all come from deeper penetration. As you point out, that option is closing fast. The growth will come from increasing use of cell phones, not only as a primary means of voice communication, but as consumers of data services.

    Internet connectivity is growing rapidly, and for many, data services cost more than voice. Once 4G is rolled out, and full motion video becomes possible, look for expansion into many areas, including entertainment and business use.

  5. Even in the developing countries, where the markets is still growing – the sheer numbers could be more but the per capita revenue might still not be large enough to support the expected revenue growth. For example in India, the service providers are playing price games – offering cheaper plan than the existing competition( this cycle repeats every few days ) which benefits the consumer but might not make a good revenue proposition. Bharti is already on a lookout for expanding it’s business to other developing countries beyond India to sustain it’s growth expectations.