July 13, 2022
All 3 US Telco's Raise Prices ... The Continuation Of An Accelerating Global Trend
If you pay close attention to a number of major Telecom operators globally (outside of North America) you will see that they started to see “Service Revenue” increase at an accelerated pace in their Q1 results.
Typically Telco’s will report between 1.5% and 2.5% Service Revenue growth vs. Hardware Revenue Growth at the 20% to 35% rate (see our previous post as to the consequences.)
When looking at inflation globally (and let’s all acknowledge the cold hard reality that the stated numbers by governments do not reflect the actual reality facing their citizenry) services inflation has lagged goods inflation.
Not for much longer.
Do prices reflect 100% of a customer’s costs when experiencing a service offering? Not necessarily.
All 3 US Telcos (yes even T-Mobile) have changed their customers “experienced costs”.
See Source Article below (as many of you know we never say anything that we can support with irrefutable 3rd party evidence).
In the case of T-Mobile they have increased 1 time fees and other related fees for their “Consumer Offerings”. They were actually the 1st to cost/price signal starting in February. I’m also not seeing the $10 / line offering for B2B that was heavily advertised on LinkedIn last summer so it appears that their B2B customers can no longer get the same offer. They have also been cutting people like crazy with multiple rounds of job cuts this year and most recently this week. They are making these cuts to reduce cost pressure so as to keep their promise of not raising prices on existing rate plans. We believe that in order to maintain the price guarantee you will see an acceleration of job losses (particularly in B2B) and ultimately old rate plans being phased out with new rate plans that are priced/costed at a considerably higher level than current. T-Mobile trades at a 60 P/E ratio.
AT&T has increased prices substantially for both wireline and wireless services. They also have removed HBO Max from their premium 5G wireless offering (when you remove something that is free this is an “experienced cost” increase.) Interestingly 72 hours before the Federal Reserve increased rates by the most in 30 years the CFO of AT&T said explicitly that another price increase was likely if inflation continued unabated. The Federal Reserve increased the rates by this historic amount 72 hours later due to unabated inflation and as of today (July 13th) the inflation numbers came out in the US and they increased month over month. We anticipate a 2nd increase in rate plans within the next 60 to 120 days. AT&T trades at a 8.51 P/E ratio.
Verizon has also increased fees for B2B and Consumer plans related to “the costs associated with 5G” [see our previous articles where we predicted this due to the considerably higher costs associated with operating (OPEX) 5G networks]. They also increased prices for their legacy shared Data Plans (similar to AT&T). What was interesting is that their leadership were asked a series of very specific questions around their May price/cost increase announcement and the leadership explicitly stated this was not due to inflation. The wording was such that we anticipate 1 or more “inflation related cost/price increases” from Verizon this year. Verizon trades at a 9.82 P/E ratio.
For our Canadian audience all 3 of the Big Telcos quietly put their prices up after the Christmas 2021 shopping season.
Why do we reference P/E ratios = It speaks to a Telco’s capacity/willingness to maintain status quo (no cost increases).
You will see major price & cost increases continue in the US and globally.
You will also see an acceleration of the downsizing of Corporate Owned Retail stores in North America and globally.
Consolidation via M&A and bankruptcy in the Operator Dealer channel will accelerate in North America and globally.
We reduce the “experienced cost” and price of connectivity (hardware and plan) for both consumers and B2B organizations.
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Article Sources :
AT&T : https://www.fiercewireless.com/wireless/att-eliminates-free-hbo-max-subscription-unlimited-plan and https://www.fiercewireless.com/wireless/atts-coo-defends-wireless-price-increase and https://www.fiercetelecom.com/broadband/att-cfo-warns-it-could-raise-prices-again-if-inflation-persists
T-Mobile : https://tmo.report/2022/05/t-mobile-is-raising-their-support-fees-again/ and https://www.fiercewireless.com/wireless/verizon-claps-back-t-mobile-pricing-strategy and https://www.bloomberg.com/news/articles/2022-05-26/t-mobile-raised-fees-then-scolded-peers-for-jacked-up-prices