Survey Implies a Voice Price War

Implications: The CTIA survey and ABI Research show the high growth of wireless data while voice is still the user priority.  AT&T’s first quarter results with a flat ARPU could imply a voice price war.

Analysis: The CTIA survey of the U.S. market indicates the strong 53% growth of wireless data during 2007 and the role of non-voice services being 17% of total wireless revenue.  However, the ABI Research of seven mature markets shows that the reliability and price of voice services is the user’s priority in selecting a carrier.  ABI Research also pointed out how device capabilities such as camera, Bluetooth and music are a higher priority than the mobile Internet, TV or e-commerce.  The consumer currently only wants basic data, while Internet applications are still emerging preferences. 
AT&T’s 2008 first quarter results follow the trend of consumer preferences.  AT&T exceeded the CTIA survey of 2007 results with data services growing at 57% over the same quarter last year and being almost 22% of all wireless revenue.  The AT&T results also showed a 30% increase in equipment revenue over the past year’s first quarter and supports ABI’s survey of consumers wanting device capabilities.  But the overall average-revenue-per-user (ARPU) only grew at 2% compared to the previous year’s first quarter, and the 1.7% churn was the same as last quarter.  The customer appears to be paying less for voice as the major carriers react to the competitive threat of unlimited offers from Leap Wireless and MetroPCS.  During the results presentation, the AT&T executives emphasized that the new $99.99 unlimited plan was favorable to revenue growth in that 4% of the subscriber base signed up while only 1.5% of total contract subscribers have over $100 bills.  The results are consistent with the survey priorities for quality voice at a reasonable cost, and could indicate a price war that carriers try to offset with increasing data revenues.