Despite ongoing analyst predictions that wireless will continue to grow revenue despite the recession, analyst Craig Moffett from Sanford C. Bernstein & Co. called that “inflated optimism.” In fact, wireless price wars are in the offing that could take wireless into the red despite the ongoing uptake in smartphones.
The mobile industry is suffering from near-saturation in the States, meaning that new revenue growth is coming from upgrades and increased data usage as more people opt for smartphones, netbooks and mobile broadband dongles. However, if that data uptake slows, carriers will find another way to attract subscriber revenue growth, such as slashing tariffs and offering cheap voice plans to poach users from each other. T-Mobile USA already has a $50 flat-rate voice option, for instance, while Sprint-Nextel Corp.’s “Simply Everything” plan is geared to the price consciousness in the consumer market.
“There is much more at stake than simply subscriber forecasts,” Moffet wrote in a note. “If some or all of the wireless companies fall short of their 2009 growth projections — as we expect – then there is a much higher risk that one or more will resort to aggressive price action.”