Which Wireless Stock Has the Best Signal?
One year after President Biden allocated $65 billion for broadband, the nation’s 5G buildout is ramping up fast — even as the economy slows. AT&T, Verizon, and a host of challengers are scrambling to secure bandwidth to spread affordable connectivity across the country.
Companies are pulling out all the stops to get consumers to switch and stay—lower prices, flexible family plans, free smartphones, and free earbuds. Proudly displaying colorful U.S. coverage maps is simply less effective these days.
So, with the nation full speed ahead on the digital transformation, we thought we’d pause to see which companies are winning.
What features are attracting new customers?
What is causing people to switch carriers?
Let’s dial in to three of the names we’re following.
1. United States Cellular Corp. (USM)
U.S. Cellular’s 5G growth strategy is to acquire low-, mid-, and high-band spectrum at Federal Communications Commission (FCC) auctions. This allows it to cover most of its subscribers with 100+ megahertz mid-band and deploy lower-band spectrum to underserved rural areas as set forth in the infrastructure bill.
The company now offers wireless services and equipment to 5 million residential, business, and government customers across 21 states. Its sights are set on nationwide expansion to provide vital connectivity for remote work, education, and health care.
In Q3, USM added 107,000 phones and 44,000 other devices to its postpaid base. Net additions decreased but improved sequentially for the second straight quarter.
Net prepaid additions, on the other hand, were positive for the first time since Q3 21. This tells us that budget-conscious consumers are embracing USM’s prepaid plans.
They like the peace of mind that comes with a consistent monthly payment — and avoiding accidental overages.
Prepaid plans are also relevant in this inflationary environment because they:
- Offer flexibility: Current devices can be converted to prepaid, or customers can pick from a lineup of affordable devices.
- Don’t require a contract: People don’t want to be locked into a long-term contract when job and economic uncertainty are high.
- Don’t require a credit check: Prepaid can be a solution for those with poor or no credit history.
The budget-friendly nature of prepaid alternatives is driving an uptick in consumer chatter around the U.S. Cellular brand. In Q4, total mentions are tracking 27% above last year. Consumer sentiment is also trending higher.
What are retail customers happy about?
One crowd pleaser is unlimited talk and text for $25 a month, especially after U.S. Cellular sweetened the offer with 2GB of data.
Customer service is huge in this industry, and USM is faring well in this department too.
Overall, there is good buzz around U.S. Cellular heading into the holiday shopping season. The stock got clobbered on Q3 earnings, but rising consumer interest could lead to better performance in the market.
For its increasing relevance in a pricey economy, we give U.S. Cellular three out of four bars.
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2. Verizon Communications Inc. (VZ)
Verizon is proof that wireless competition is fierce.
In Q3, the company suffered 189,000 wireless retail postpaid phone losses, partly stemming from price increases. This suggests consumers are fed up with price hikes and eager to move to another carrier for a better deal.
As a result, Verizon is being forced to join peers in lowering its rates on unlimited data plans and offering unsubsidized plans.
To its credit, though, Verizon’s consumer business is growing despite the churn. Wireless plan upgrades and broadband additions drove 10.8% revenue growth in Q3.
Since then, a revamped trade-in deal for a free 5G phone and up to $1,000 in credits is generating a fair amount of buzz among holiday shoppers. Consumers that switch to Verizon also get a smartwatch, tablet, or earbuds for free.
Just as Verizon’s Q3 results were mixed (sales up, profits down), we are seeing mixed consumer sentiment on social media.
Total mentions are basically flat so far in Q4 and struggling to rebound from Q2’s record low. Happiness mentions are also flat year-over-year (YoY).
Black Friday deals and customer service are getting relatively high marks.
At the same time, Verizon is losing its edge as a high-quality network.
Customers are complaining about poor signals and dropped calls. Mysterious charges and hard-to-get billing information are irritating some.
Interestingly, USM customers are responding by urging unhappy VZ customers to join their team.
Verizon is being forced into a promotional game that’s not in its DNA. Thus far, it is having a tough time attracting customers, especially as questions about network quality pop up.
It’s two bars from us.
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3. T-Mobile US Inc. (TMUS)
T-Mobile’s merger with Sprint added a ton of mid-band spectrum to build out its next-gen 5G mobile network. It also broadened its customer base and provided a competitive edge over industry giants like AT&T and Verizon.
Unique wireless promos like “Disney Plus on us” and free music streaming are also a differentiator.
However, promotional activity and plan price cuts are squeezing margins. And consumers aren’t exactly knocking down the doors to get T-Mobile’s latest deals. Even the “free iPhone on us” and “price lock guarantee” offers have yet to attract much buzz.
LikeFolio’s comprehensive TMUS demand is pacing down 9% YoY this quarter — a bad sign when the holiday shopping period has historically been a key growth catalyst.
Of course, the weak macro environment is one reason for the soft demand. But there’s a bigger challenge here: brand reputation.
T-Mobile is still reeling from a series of data breaches that have hurt more than financial results.
Damage control from repeated exposure of customer credit information seems to be shifting resources away from customer service, a key factor in the wireless wars.
Our Consumer Happiness reading for TMUS is trending back toward 50% after nearing 60% before the hacks.
Frankly, we’re surprised it’s even that high, based on the comments we are seeing.
Customers are irritated about unexplained charges and bills for equipment they never owned or ordered. One person even got a bill despite never being a customer!
Unacceptable customer service has been a common theme. Not a good situation when people are already on edge about inflation and economic strain.
We aren’t surprised that comprehensive demand for TMUS service is hovering near a decade low and down 9% YoY.
LikeFolio data confirms a serious reputation reboot is needed at T-Mobile.
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