Several countries whose operators moved early and quickly on 5G are now providing valuable, though often worrying, data about the impact of 5G on customer behavior. Though early movers in South Korea and the Middle East have reported some 5G-driven uptick in ARPU, mainly connected to higher usage, others have seen little positive effect on key KPIs – certainly not enough to justify the cost and disruption of 5G roll-out.
The latest indicators come from the USA, and an assessment by financial analysts at LightShed Partners. The analysts warn that customer growth rates in the USA are starting to slow, prompting AT&T, Verizon and T-Mobile to raise some fees in order to meet financial growth targets.
Some problems relate to the global economic crisis, but others to a relative lack of US consumer interest in 5G. The operators have introduced few genuinely new and 5G-specific services, or certainly not ones that have been able to tempt users to upgrade their tariffs or change provider.
“Consumers have shown little interest in switching between service providers because of 5G. They have also been slow to upgrade to higher-priced 5G rate plans with their existing provider,” wrote the analysts in a recent investor note. “Meanwhile, wireless operators face a more challenging economic environment in which the consumer is struggling with the impacts of inflation. We think that will challenge their ability to bolster their primary growth engine: postpaid phone revenue, thereby limiting overall industry growth to low single digits.”
In recent weeks, the three operators have all tried to raise their fees in various ways. AT&T boosted prices for those subscribing to some older plans.
Verizon said it would raise prices for all customers, via via ‘administration’ fees of between $1.30 and $2.20 a month. According to some other Wall Street analysts, New Street Research, these fees should increase Verizon’s 2022 revenue and EBITDA by $870m, and about twice that in 2023. But LightShed say this will not be enough to hit Verizon’s 4% growth target and they estimate it will need to raise the admin fee by $3.00 “every year. In perpetuity. That would result in 5%+ growth in ARPU” – but would result in an admin fee of $13.50 by 2026.
TMO took a different tack, announcing a $1,000 promotion aimed at “AT&T and Verizon customers facing price hikes”. But it has raised its own ‘assisted support charge’ and ‘upgrade support charge’, for customers who add new lines or upgrade phones, by around $5.
These new ways to boost income may be even more necessary if customer growth slows down sharply amid recession, while the operators are still investing heavily in 5G expansion.
“The wireless industry experienced elevated growth in 2021, adding 9m new phone subscriptions, including postpaid and prepaid,” explained the LightShed analysts. “We expect a reversion to normalized levels of 5.5m subscriber net additions this year, dropping by more than a third. This means we expect last year’s 3.3% subscriber growth to moderate to less than 2% growth in the near-term and to ~1% within five years.”