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The latest US market share data from Wireless Intelligence reveals that the country’s four largest mobile operators accounted for 90 percent of the market in 1Q09, a rise of about 5 percent over the year-earlier quarter. But the figures disguise the strong progress made by the country’s smaller operators such as MetroPCS and Leap Wireless. 

The rise in the big four’s market share was mainly due to Verizon Wireless’ US$28.1 billion acquisition of regional US operator, Alltel, which was included as part of Verizon’s figures for the first time in 1Q09. The acquisition was also responsible for Verizon’s 28.8 percent annual rise in mobile connections to 86.6 million, which was enough to see it overtake AT&T to become the country’s largest mobile operator (over 13 million Alltel subscribers were added to Verizon’s total in the quarter). Excluding customers acquired in the Alltel acquisition, Verizon added 1.3 million net new customers in the quarter, slightly better than the 1.2 million added by AT&T in the same period. Verizon is also now the largest mobile player in terms of revenues and earnings (EBITDA).

In order to meet regulatory requirements relating to the Alltel acquisition, Verizon is to transfer assets worth US$2.35 billion to AT&T later this year, a deal which includes some 1.5 million subscribers in primarily rural areas across 18 states. Similarly, AT&T is to sell assets worth US$240 million (including 120,000 subscribers) as part of its separate acquisition of Centennial, which is still pending regulatory approval. The asset swapping between the two big players – scheduled to complete in fourth-quarter 2009 – is aimed at solving the network footprint overlap issues created by both acquisitions.

In third-place, Sprint Nextel continues to lose customers to its larger rivals and remains in financial trouble, reporting a net loss of US$594 million for 1Q09 and a 12 percent annual decline in net revenues. Sprint was the only one of the big four to report an annual decline in connections, dropping 7 percent to 49.1 million over the year. Sprint is heavily rumoured to be in talks with equipment vendor Ericsson regarding the outsourcing of its network management as part of a wide-ranging cost cutting programme. Meanwhile, the operator will next month launch the much-anticipated Palm Pre on an exclusive basis; the success of the handset is seen as vital for the future health of both Sprint and Palm. To reflect changes in Sprint’s reporting procedures, our data now includes the operator’s affiliates, which increased Sprint’s connections base by approximately 1 million in 2008.

Deutsche Telekom’s T-Mobile USA, the fourth-placed operator, is also struggling to compete with Verizon and AT&T and the operator’s recent performance was partly responsible for its parent issuing a surprise profits warning in April. Deutsche Telekom cited a fall in ARPU and the cost of WCDMA rollout for the problems at T-Mobile USA. Its ARPU of US$47 is the lowest of the big four operators. However, unlike the situation at its equally beleaguered T-Mobile UK, the German telecoms giant is not thought to be looking to sell its US business due to the substantial revenue it generates. In 1Q09, T-Mobile USA accounted for 26 percent (EUR4.1 billion) of total net revenues at Deutsche Telekom, up from 23.1 percent in 1Q08. 

Despite consolidation in the market over the last year, there are a number of smaller regional or specialist operators that are registering significant growth. Leading the way are low-cost operators MetroPCS and Leap Wireless, which both reported annual double-digit connections growth in 1Q09 and in some geographic areas are claiming a greater share of net additions than the big four. Both operators have had success with their unlimited prepaid plans, a strategy mimicked recently by Sprint’s prepaid affiliate Boost Mobile, which launched a US$50 per month unlimited prepaid tariff at the beginning of the year. MetroPCS and Leap Wireless are also pioneers of the ‘hybrid’ mobile subscription, a combination of a contract and prepaid plan that offers a monthly allowance of voice and data (like a postpaid account) but is paid for upfront and without a contract (like a prepaid account).

In line with the official categorisation of the FCC, the US regulator, our category of ‘other’ mobile operators in the US includes over 120 mobile operators that serve local areas and communities across the country either on a single-state or multi-state basis. Each operator has a connections base of up to 300,000 subscriptions and a market share of below 0.15 percent. About 60 percent of these operators are GSM-based, the rest on CDMA and a tiny share on iDEN. We estimate that around 26 states have an average of two single-state (or ‘local’) mobile operators, though larger states have significantly more. In Texas, for example, around ten local operators serve different parts of the state, including Caprock Cellular in West Texas, Stelera Wireless in Wilson County, and Lamar County Cellular in North West Texas.

We have broken-out market share and other data for MetroPCS, Cincinnati Bell Wireless and nTelos Wireless separately for the first time in 1Q09. All historical data has been recalculated back to 2000 to reflect these changes.

Will Croft, Analyst, Wireless Intelligence

While the big four operators are focusing on ramping-up high-speed data coverage in their large urban markets and winning the latest handset exclusives, tier-two operators like MetroPCS and Leap Wireless are pursuing a different strategy across their ever-growing coverage areas. In the current economic climate, customers are finding their unlimited hybrid plans attractive, particularly as the plans are free from any long-term contract or credit checks. Both MetroPCS and Leap Wireless reported a record number of net additions in 1Q09 as a consequence and – despite their limited nationwide footprint – the two operators jointly captured over 23 percent of the total US prepaid market in the quarter. For the larger operators the potential for consolidation remains, with the US remaining fragmented by coverage in many markets.  Verizon’s purchase of Alltel, for example, has provided it with a route into an additional 57 rural markets, an increasingly important geography. Even though they use different network technologies, recent acquisition rumours linking AT&T with Leap Wireless make sense from a coverage perspective. However, regulators will closely examine further market consolidation on this scale.