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May 11, 2020
What Happens To A Wireless Operator P&L When Device Shipments Tank?

The latest smartphone shipment numbers from Strategy Analytics reveal an unprecedented drop that can only be due to the COVID-19 pandemic.

Total shipments of 274.8 million units in the first quarter of this year represent a 16.8% decline on the year-ago total. No vendors were spared the austerity, bar Xiaomi, which at least managed to tread water thanks to its Indian presence. Apple declined the least out of the big three, so has gained a chunk of global market share compared to Q1 2019.

“As expected, the global smartphone market delivered its worst performance since records began,” said Linda Sui of SA. “Demand for smartphones slammed to a halt in the quarter, as the Covid-19 virus scare shut down major economies like China and shoppers placed their spending plans on hold.”

What Happens To A Wireless Operator P&L When Device Shipments Tank?

Wireless operators have had no answer to “reduce my costs” other than to “reduce prices”.

The result over the last 3 years has meant that B2B ARPU has tanked and is down at least 30% across every wireless operator in the world.

What has been propping up the P&L?

Device sales…

What is amazing is you now have device financing costs approaching the same $ value each month as the underlying monthly plan.

In Europe B2B ARPU is such that the device financing may actually be a multiplier of the underlying monthly rate plan.

It means that in Europe it is more revenue enhancing (top line statement only) to “sell” hardware than it is to sell the underlying rate plan.

Absolute madness and the complete opposite of what it should be.

Check out our previous posts from early last year and we predicted that Device volumes would dramatically shrink for 2 reasons :

1) Global wireless operators would be launching 5G into a recession 2) Who is going to upgrade their 4G device for a 5G device given lack of network & hardware costs differentials (5G way more expensive than 4G)

Operators are going to be forced to raise prices for 4G and 5G plans for a whole host of reasons including but not limited to

1) 4G Networks blowing up & need for reinvestment as we reported : 2) Telco’s balance sheets terrible & many no longer providing forward guidance including the super profitable ones 3) Need to make up for the revenue loss on the P&L associated with hardware

5G Will be more expensive :

What is a B2B Telco sales person to do when millions are laid off :

Are Operator B2B teams likely to dramatically shrink in the very short term - YES

Is there a way to reduce costs w/o prices for both the plan and the hardware – YES

Does mobilityView have the answer to the new working reality – YES

Want to save your B2B business and return Wireless B2B to profitability reach out to us.

What Happens To A Wireless Operator P&L When Device Shipments Tank?