AT&T, T-Mobile, and Verizon collectively have lost nearly $5 billion in equipment sales over the past four quarters, according to their earnings reports, with a slowdown in smartphone sales being a major factor. T-Mobile, for example, saw a precipitous drop in equipment revenue of almost 25 percent last quarter. The CEOs are pointing the finger at cell phone manufacturers, saying customers are not upgrading to the latest models as quickly as before.
T-Mobile CFO Peter Osvaldik said on the carrier’s last earnings call that customers are “happy with their devices” for a longer period of time while Hans Vestberg, Verizon’s CEO, said that there hasn’t been any “major” new developments in devices recently.
Bloomberg reported that while COVID-19 created a surge in sales, with quarterly revenues of around $6 billion per carrier, the post-pandemic landscape has seen a significant drop in handset sales. The current pace, Bloomberg points out, is closer to the numbers produced prior to the pandemic.
Consumer Intelligence Research reported that in March a third of new phone buyers kept their old phone for a minimum of three years, 20 percent more than a year ago. The average age of a cell phone is three-and-a-half years, according to Assurant Inc. Handset makers Apple and Samsung Electronics have both posted a decline in sales over the past year.
New Street Research LLP Managing Partner Jonathan Chaplin said the drop in earnings isn’t all bad for the carriers. “Lower equipment sales are a good thing for the carriers,” Chaplin said, “as they often lose money on smartphone sales due to promotional discounts. If the upgrade rate declines, they are subsidizing fewer handsets, and their margins expand.”
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