The two largest carriers in the U.S., AT&T and Verizon have had to look for growth elsewhere while the wireless market is reaching its saturation point according to the Wall Street Journal. With AT&T announcing Saturday that it intends to buy media giant Time Warner for over $80 billion and Verizon’s uncertain future with its recent purchase of Yahoo, at $4.4 billion, the wireless industry is losing its status as one of the ‘darlings’ of the growth sectors.
“They need to find a path forward for their core U.S. business that offers something better than inexorable decline,” Craig Moffett, an analyst at MoffettNathanson LLC told the Journal. “The internet, mobile phones and smartphones fueled rapid growth, but for the first time in memory, there is no ‘next big thing’ in telecom.”
Although both AT&T and Verizon have millions of customers actively on their respective networks, texting, streaming, downloading, tweeting and, yes, even calling, now that most Americans have a smartphone, the remaining growth potential is in the content according to the Wall Street Journal. Smaller carrier rivals, meanwhile are whittling away at their subscriber base.
“A big customer pain point is paying for content once but not being able to access it on any device, anywhere. Our goal is to solve that,” AT&T Chief Executive Randall Stephenson said regarding the pending deal.
AT&T’s recent deals, including last year’s purchase of DirectTV for $49 million and the prospect of adding HBO, CNN and Warner Brother’s Studio content into the mix indicate they view the future of television as being mobile.
Verizon, in the meantime, in buying AOL and Yahoo, wants to take on social media giants like Google and Facebook for the on-line advertising dollars. It has added youth-oriented media such as Awesomeness TV and Complex Media that it hopes to distribute through its media app go90, the Journal said.
“We’re skating to where the puck is going,” Verizon CEO Lowel McAdam said at an industry conference last year.
The pending purchase by AT&T may still face obstacles according to Wells Fargo Senior Analyst Jennifer Fritzsche. “While the logic makes sense for many…more eyeballs, more content and competitive leverage against Comcast (CMCSA), Amazon (AMZN), and other streaming services,” she said “many questions remain how it would fund it. With interest rates low, some say the window is closing on when it could move on such a deal.”
October 24, 2016