Keep the good times a rolling ~ AT&T and the iPhone

Recently Merrill Lynch published a white paper on how much the iPhone means to AT&T and the potential effect of AT&T losing their monopoly (maybe as early as mid-2010).broken iPod A lot depends, of course, if there is going to be a CDMA version of the iPhone.

Here is a summary of their analysis and comments.

  • approximately 11.5 million iPhone subscribers in the USA (3Q09)
  • iPhone subscribers comprise 18% of AT&T’s postpaid subscribers
  • the iPhone has driven an 8% uplift in gross add share for AT&T
  • the iPhone has taken market share away form AT&T’s base but at much higher ARPU
  • because there is little churn associated with the iPhone, the overall churn numbers for AT&T have decreased.
  • the iPhone has been the primary driver of data ARPU growth for AT&T.

The M/L’s analysis treats the iPhone as the only game in town, but with the success of Android-based phones (G1, G2 and ‘Droid) finally giving Apple a run for its money, this is not the case. While these phones have approximately 15-20% of the market share of the iPhone, they do have momentum and a catalog of applications that is beginning to rival Apple’s if not in quantity at least in quality.

A tipping point in the US Telco/Cable bundle wars?

Recently (August 2009) Merrill Lynch published an analysis of the US Telecom Services market for the first half of 2009. There were a number of surprising takeaways including;

  • Video growth continues with “The Telco facilities-based initiatives continued to take video share in 2Q09, and actually outpaced Cable VoIP for the first time with aggregate net adds of 548k (vs. 513k Cable VoIP adds), as VZ FiOS and T added 300k and
    248k video subs, respectively.”
  • Internet penetration declined in US for the first half of 2009. While there was growth in broadband access it was overshadowed by the decline in dial-up access.
  • Wireless substitution is up significantly and is expected to reach 28% of US households at the end of 2009 (up from 22% in 2008). It appears that wireless substitution is not just affecting the traditional Telco land line business but also dampening the move to Cable VoIP. A possible cause may be that wireless is almost a one-for-one substitute for fixed line voice while the various VoIP offerings can’t make that claim.
    ML wireless penetration
  • It appears that Telco’s video content is more appealing than Cable’s VoIP offerings. Telco tends to have a lower cost and Cable higher speeds but the rollout of Telco fiber tends to make a more level playing field. As the ML report states (my emphasis) –
    “for the first time Telco video adds of 548k outpaced Cable VoIP
    adds of 513k in 2Q09. The reversal represents a dramatic shift in the battle for the bundle as cable had added significantly more VoIP subs then Telco had gained on the video side in prior years.
    In 2007, for example, Cable added over 5.7mn VoIP subs, while Telco had gained only 964k video subs. The shift is significant for 2 reasons: 1) video still represents the center of the bundle and Telco is now adding significantly higher absolute video subs than in previous years (1H09 is 17% greater than all of 2007) and 2) Cable VoIP growth is slowing much faster than anticipated
    and could lead to questions of net telephony losses in coming years,
    particularly if the wireless substitution trend does not abate.”

While Cable has a substantial lead in triple play householders, this is the first time we are seeing higher net increases on the Telco side. It will be fascinating to see if this sustainable over the long term or just a blip on the horizon.