BMI View: The ongoing trend towards consolidation has continued its momentum in Q413, with the further mergers and acquisitions and rumoured tie-ups between companies. The smaller players are finding it more difficult to compete with the likes of Verizon, AT&T, Sprint and T-Mobil, and are becoming targets for these companies to consume. One such example is Cincinnati Bell, which is considering the sale of its wireless business amid falling revenues and fierce competition. Instead, it will look to maintain its broadband internet business in order to boost its interest in data centre company, CyrusOne. As a traditional fixed telephone company established in the Cincinnati region before 1900, this would represents one of the first examples of the transition from voice to data and could signal the beginning of a trend in the industry. The US - like many mature markets - is seeing its fortunes depend increasingly on services rather than infrastructure. This leaves the country's large incumbent - and small regional - telephone companies in a difficult place.
BMI estimates the mobile market in the US reached 336.2mn subscribers at the end of Q213. This is a yearon- year (y-o-y) increase of 3.6%. The number of net additions in the year ended March 2013 was 11.483mn.
BMI estimates there were around 91.143mn fixed voice subscribers (PSTN, cable, VoIP) in the market at the end of Q313. Most operators reported declines y-o-y.
The fixed broadband market reached 96.078mn in Q313 according to BMI estimates.
We estimate that pay-TV subscribers reached 102.363mn subscribers at the end of Q313. Q-o-q statistics continue to fluctuate between growth and decline due to fierce competition among the top providers as well as customer migration to over-the-top services such as Netflix, HBO and Hulu.
Key Trends & Developments
- As of December 2013, Huawei has apparently decided to exit the US market. According to a statement by Huawei CEO, Ren Zhengfei, Huawei does not want to cause a rift in US-China relations and therefore decided to abandon the US market.
- US mobile operator AT&T has sold 9,700 wireless towers to Crown Castle International (CCI) for US $4.85bn. The deal sees CCI buy 600 towers and lease the remainder for an average of 28 years. AT&T's decision not only boosts its financial position as it considers expansion overseas but also allows the company to focus on consumers. BMI has observed the growing trend for operators to sell their network infrastructure for both strategic and financial reasons. We believe this deal will likely encourage further tower sales in the country and boost the growing market for tower operators.
- NTT DoCoMo's mobile virtual network operator (MVNO) in the US has announced its intention to offer 4G LTE services through an expanded agreement with T-Mobile US. The partnership is a positive development for both companies involved, allowing them to attract more subscribers and make use of TMobile's investment in LTE technology, resulting in the MVNO market continuing to flourish.
- In early September 2013, Vodafone Group agreed to sell its 45% stake in Verizon Wireless to Verizon Communications for a total consideration of US$130bn. The deal gives Verizon 100% ownership of Verizon Wireless, giving it greater freedom to develop new business strategies and partnerships as well as increasing its share of income from the US' largest mobile network operator business.
- In mid-July 2013, Japan's SoftBank completed its acquisition of Sprint, acquiring 72% of the operator's shares for approximately US$21.6bn, including US$5bn in new capital. In the days that followed SoftBank acquired additional shares, increasing its ownership to almost 75%. Shortly before the closure of the deal, Sprint bought out its partners in the Clearwire mobile broadband business. DISH Network was forced to withdraw its offer for Clearwire; its plans to break into the US mobile market are now in disarray and it may be forced to sell its extensive spectrum holdings.