The U.S. telecommunications industry will continue to grow in 2016, thanks to the wireless sector. But escalating competition among the nation’s four largest wireless carriers will hamper a “meaningful” increase in wireless margins, according to Moody’s Investors Service, the credit ratings agency in New York.
In maintaining its stable outlook on the telecom industry, Moody’s expressed the view that continued subscriber gains in tablet computers and smartphones will counteract the flat-to-negative growth in wireline revenue.
The ratings agency released a report (subscription required), “Telecom – US: Wireless Will Remain Primary Driver of Revenue Growth.”
“Growth in mobile video, higher network speeds, the availability of equipment installment plans and the expansion of machine-to-machine connections will continue to fuel wireless growth, which is the backbone of the telecom industry,” said Dennis Saputo, a Moody’s senior vice president.
Moody’s anticipates that the wireless industry will continue to make investments for several years to expand and maintain their networks, while wireline operations focus on slashing costs in response to declining margins.
Finally, while merger and acquisition activity was strong in 2015, Moody’s forecasts that the 2016 broadcast spectrum auction to be held by the Federal Communications Commission will drive spending next year in the wireless industry.
“Bids could surge to $60 billion if non-traditional bidders such as cable multiple system operators and technology companies participate,” Saputo said.