Moffett Sees Big Wireless Challenges Ahead if Normal Growth Returns

MoffettNathanson’s Craig Moffett sees potentially tough times ahead for the wireless industry, despite continuing rapid growth in postpaid subscriptions, tracking five times faster than annual population growth. “The industry’s super-normal growth informs every industry metric,” Moffett said in a Thursday analysis of Q2 results: “It has flattered every operator. Like the storied children of Lake Wobegon, everyone is above average.” But Moffett questioned how long that trend will continue. “Strong subscriber growth has been a welcome offset for what has otherwise been rather anemic growth in revenues and EBITDA, particularly for Verizon and AT&T,” he said. If industry subscriber growth returns to normal “the backdrop won’t be nearly so flattering,” he said. Moffett warned that customers gained through aggressive promotions, cheap lines and free phones “inevitably promote low quality phone net additions.” To keep those customers from going elsewhere “the companies now dependent on promotions to bolster growth will need them even more to maintain it,” he said. Moffett has a sell rating on AT&T, neutral on Verizon and buy on T-Mobile.