Wireless telephone companies salvation, during economic recession
This week, AT & T and Verizon Communications each reported strong growth in its mobile phone business. Verizon saw a profit gain of 15 percent, have greatly contributed to its growing wireless services. Despite a 26.3 percent drop in profits, mainly due to increased costs, AT & T was able to grow revenue through the board with the wireless provision of more benefits.
Run the leaders of the two largest phone companies say they expect to see continued growth in 2009.
“We believe that we have a very solid quarter and excellent year,” the director of Verizon, Ivan Seidenberg said at the conference on Tuesday. “And we see no reason why we have developed momentum in 2008 should not continue to some extent in 2009. We do not have perfect visibility in the economy, so the level of success could be tempered. But I think that we will be absolutely good, and about. ”
But we are not in a recession?
Indeed, the U.S. is sinking deeper into what is probably the longest and roughest recession in life. Thousands of jobs have already shed with the U.S. Labor Department reported this week that the unemployment rate rose in all 50 states for the first time since the Bureau began to take account of such records in 1976. And in some states such as Michigan and Rhode Island, the unemployment rate exceeds 10 percent.
Some of the latest layoffs come from the telecommunications industry. AT & T announced in December it would cut 4 percent of its workforce, or about 12,000 employees. And on Monday, Sprint Nextel, the third-largest wireless operator in the U.S., said that he would shed 8,000 workers, or 15 percent of its workforce.
These figures are all sound gloomy, but the truth is that, despite the troubled economy, Americans still spend money on wireless and broadband communications, which helps to keep the phone companies are far healthier than in other industries.
Nevertheless, the industry is feeling pinch. In particular, the telephone companies, there has been a rapid decline in its traditional phone business. And they see a slowdown in the provision of corporate services.
From the perspective of the traditional phone business, AT & T and Verizon have seen this part of their business decline over the past few years as consumers switch to less costly options, such as voice over IP or wireless services. But in the last quarter, as the economy deteriorated, AT & T and Verizon, each reported a sharp decline in these businesses.
Instead, consumers rely more on their mobile phone service. And many of them to replace the new voice-over IP services for their old phone service. But the registration of new VoIP services, you need a broadband connection, which are services that AT & T and Verizon also sells. Verizon even just opened a new voice over IP products and services specifically designed to address this market.
“We are in transition services right now,” Rick Lindner, chief financial director for the AT & T, said at a conference on Wednesday. “We are spending part of the heritage of our business, and at the same time is reaching and striving to improve margins in our growth products (such as IP services).”
Therefore, even though the phone companies are losing more traditional access lines, the company does not necessarily lose customers because some customers replace the old service to new services offered by phone. But now, the cost of telephone companies, more money to offer new services than to offer services to elderly, which puts pressure on its profit.
Another area where AT & T and Verizon seen some weaknesses in the business market. These carriers are selling the whole slew of services for enterprises worldwide, including long-distance telephony, data transmission services, and also manages the Internet service provider. As might be expected, as these corporate clients and firing workers to cut costs, they reduce the amount of money they spend on the phone and data transmission services, which ultimately hurts the phone company’s growth.
The cost of wireless more
Meanwhile, consumers actually increase as they spend a month on their mobile phone service. This increase in costs of voice services. Instead, he is of the data. People actually move to more expensive devices, smart phones, which require data plans.
Denny Strigl, Chief Operating Officer for Verizon, said in a company conference on Tuesday that 37 percent of new devices sold during the quarter were smartphones. As a result, Verizon Wireless also reported that it increased its average revenue per user, or ARPU, from data services up to $ 13.99 in the fourth quarter of 2008.
AT & T also reported that its customers spend more on data services. It increased data ARPU to $ 13.50 during the quarter. Apple in iPhone 3G, which sold only AT & T, most likely the biggest contribution to the AT & T to 35 percent for the year, the year the growth in data ARPU. AT & T announced that it added 1.9 million new iPhone subscribers in the quarter. The company added a total of 4.3 million iPhone subscribers in the last two quarters.
Each of the iPhone subscribers agreed to a two-year contract that locks them into the $ 30 a month, all-You-Can-have data plan. This collection of additional data, the majority of iPhone users spend about $ 100 a month for their services, which is about 1.6 times more than the average AT & T cell phone subscriber.
“The iPhone, along with embedded devices have been relatively stable in what is considered a hard time,” Randall Stephenson, chief executive officer for AT & T during the conference. “Now we feel very good about wireless.”
Elite smartphone appears to be serving as a substitute for traditional telephone services, as well as potential alternative to the broadband service to some customers. This fall, ComScore released a report which found households making between $ 25,000 and $ 49,999 a year fastest growing segment of iPhone buyers June to August period.
“As an additional household budget, $ 200, as well as a device for at least $ 70 a month for phone service seems a bit extravagant for those with less disposable income”, ComScore senior analyst Jen Wu said in his statement. “But, in fact, one realizes the savings when the device is used instead of multiple digital devices and services, turning the iPhone from luxury item to a practical communication and entertainment tool.”
If consumers choose to dump their broadband connections at home for the iPhone or any other smarthphone with Internet access, it could have a negative impact on overall growth for the wire line telephone companies. But so far it has not happened.
Indeed, AT & T and Verizon reported in the fourth quarter is stronger than ever, the sale of its new data, and television, working on its new upgraded network.
Verizon beat analyst expectations by adding 303,000 Fios TV customers and 282,000 Fios Internet customers. Analysts had expected the company added 250,000 Fios TV customers and 250,000 Fios Internet subscribers. Verizon said this marked the majority of new customers for these products in a single quarter.
AT & T added a total of 264,000 new TV subscribers in the fourth quarter, compared with 232,000 added in the third quarter of 2008. The company currently has more than 1 million subscribers to this service.
AT & T U-verse in the broadband service has also helped boost growth in the company’s IP-data services. In total, AT & T increased its consumer IP data revenues, including broadband and AT & T U-verse services at 21.4 percent.
“We understand we are working in difficult conditions,” said Stevenson. “But we showed that we have the expertise in management, just through them. And we are committed to creating a strong company.”
Sprint and T-Mobile in favor of
So this good news mean for the other two major wireless phone companies, Sprint Nextel and T-Mobile USA?
These operators should also benefit from the fact that during the economic downturn, people are less likely to cancel or reduce service. And these companies can also take advantage of the trend towards the use of smartphones and data.
T-Mobile, which is still rolling his wireless network 3G, is to sell the company’s Google Android G1, and Sprint recently announced it will be the exclusive carrier for the pre-Palm, a telephone, which many believe could be a strong competitor to the iPhone.
But more than the economy, these companies will be battling with stiff competition. AT & T added 2.1 million subscribers during the fourth quarter. Stevenson said during the conference that he expected, AT & T, took market share from its rivals because it has managed to port a number for its services from other carriers than it ported to competitors.
Sprint, in particular, is struggling for several quarters before the economic crisis in the U.S. hit. And it tries to reduce costs by more than a year. On Monday the company announced its intention to dismiss 8,000 workers, or 15 percent of its workforce. But the company has already shed 4,000 workers in 2008.
The deepening economic crisis that could help Sprint and T-Mobile to attract higher value customers. Sprint offers $ 99, you can have, and voice data, which could appeal to consumers. He also has a strong pre-paid stamps, increase.
T-Mobile is also seen as the cost of services and could attract customers from @ Home wireless service that allows mobile subscribers to switch to Wi-Fi, where the wireless hot spot. It also offers home phone replacement service Hotspot @ Home Talk Forever, which allows wireless customers to add voice over IP service for $ 9.99 per month on top of its mobile phone service.
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Tags: AT&T, Cell Phones, smartphones, tech downturn, Verizon Communications, Verizon Wireless, wireless
