Verizon, AT&T neck and neck in mobile wars

[Ironwalt]

Verizon, AT&T neck and neck in mobile wars

By Jeffry Bartash, MarketWatch
Last Update: 2:11 PM ET Oct 29, 2007
WASHINGTON (MarketWatch) -- When it comes to the wireless-phone business, there's AT&T Inc. and Verizon Wireless - and then there's everyone else.
The two phone giants continue to dominate the U.S. mobile business, with each growing at remarkably similar rates. And a large chunk of their growth has come at the expense of Sprint Nextel Corp., which forced out its chief executive this month because of weak growth.
Verizon Communications, which posted third-quarter results Monday, said revenue in its mobile business rose 14.4%, with an operating profit margin of 27.1% excluding onetime items. Sales from data services such as email and air cards climbed more than 63%.
AT&T's results, issued last week, were like a mirror image of Verizon. Mobile revenue also rose precisely 14.4%, with an operating profit margin of 26.4%. What's more, revenue from data services grew - you guessed it - more than 63%.
The biggest difference between the two companies is that Verizon caters to more retail customers directly than AT&T and its subscribers are more loyal. That explains why Verizon generates higher sales from its mobile division ($11.3 billion) than AT&T ($10.9 billion) even though AT&T has more customers. AT&T holds a 2-million advantage, 65.7 million to 63.7 million.
Almost all of Verizon's customers belong in the so-called postpaid category. That is, customers who sign up for annual plans and pay at the end of each month. They are the most profitable and most valuable in the industry.
In the third quarter, for instance, Verizon added a net 1.6 million mobile customers, almost of whom were signed up directly by the company through retail arrangements. On average, they paid $52.17 a month for wireless service, a record high for Verizon.
AT&T added 2 million net customers in the third quarter, but a smaller 1.2 million were postpaid retail subscribers. The company's average revenue per user also totaled a smaller $50.82 a month.
AT&T has sharply improved its wireless service over the past year, boosting margins and adding customers at a faster clip. The company has gotten a big lift from the introduction of the iPhone, adding 900,000 accounts in the third quarter for subscribers who bought Apple Inc.'s device. AT&T is the sole distributor of the iPhone via a multi-year agreement with Apple.
Yet Verizon executives say the iPhone has had little impact on their wireless business, whose customer service ranks No. 1 or No. 2 in almost every major U.S. market.
"On the iPhone question, we have seen minimal impact in the iPhone thus far," Verizon President Denny Strigl said on a conference call with analysts Monday. He point to the company's flat year-over-year churn rate as evidence.
Churn reflects the percentage of customers who cancel service and indicates a company's success in satisfying subscribers. Verizon's churn rate registered an industry low 1.21% in the third quarter, compared to 1.7% for AT&T.
The biggest loser in the wireless wars is Sprint, the No. 3 mobile operator. Sprint has already said it expects to lose 337,000 net postpaid customers in the third quarter, putting its losses in that category at more than 1.03 million over the past five quarters.
It's not AT&T and Verizon who are taking customers from Sprint, analysts say. T-Mobile USA Inc. and Alltel Corp, the No. 4 and No. 5 mobile operators in the U.S., have also been taking a bite out of Sprint.
Jeffry Bartash is a reporter for MarketWatch in Washington.

[Fred333]

That is so true. Verizon is my choice out of the two.