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U.S. Carriers Are Desperate—This Week Proved It

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imageIt’s becoming clearer by the quarter that most wireless operators simply don’t have a phone or user experience that can compete with the iPhone. The financial results reported by the top three U.S. carriers this past week offered the latest evidence, with AT&T (NYSE: T) being the exception: AT&T continued to grow at a rapid pace—but mostly due to new customers coming on board because of the iPhone. T-Mobile USA, in particular, saw minuscule customer additions despite having launched the highly anticipated T-Mobile G1. Likewise, Verizon Wireless (NYSE: VZ) placed its bets on the BlackBerry Storm, and despite hitting one million in sales, had a slight decrease in subscriber additions in the fourth quarter compared to the previous period, along with a significant drop over the year-ago period. (Sprint (NYSE: S) Nextel, which is touting the Samsung Instinct as an iPhone-competitor, will report earnings in February.)

SEE ALSO: Growth Slowing At T-Mobile International

In trying to compete with the iPhone, each of the carriers has its own gap to close. The iPhone is a hit because it combines a sleek device with a popular set of services, including the Apple app store. Contrast that to what Verizon and T-Mobile are offering: The BlackBerry Storm (Verizon) doesn’t even have its own app store – or at least yet—while the G1 (T-Mobile) isn’t that great-looking, and has a store that’s limited to free apps. You can even argue, too, that AT&T hasn’t been able to figure it out, but has been just lucky enough to have an exclusive with Apple (NSDQ: AAPL). It doesn’t profit from the sale of services on the iPhone, like Apple does, and could take some of its learnings from the device to their own…Of course, it’s not completely the carriers’ fault—they also are somewhat dependent on the handset makers. But it comes back to bite the carriers nonetheless. 

More on the carriers’ performance after the jump...

Here’s a look at how the top three U.S. carriers performed in Q4 and how their flagship smartphones did or didn’t play a role in their results

AT&T and the iPhone are the ones to beat: AT&T added 2.1 million net subscribers, or slightly more than the 2 million it added in Q3. The big driver? The iPhone. AT&T said 1.9 million iPhones were activated in Q4, which is down from 2.3 million in Q3, but still was a huge lead generator for providers: 760,000 people, or 40 percent of iPhone activations, came from other operators. (Full results here.)

Verizon Wireless reports a relatively tame Storm: Verizon Wireless, which is the largest U.S. carrier after acquiring Alltel (NYSE: AT), said it added 1.4 million net subscribers in Q4; that’s slightly less than the 1.5 million added in Q3, and a significant drop from the year-ago period when it added 2 million. The company said it sold 1 million BlackBerry Storms since launching the handset on Nov. 21, which also included some January sales. That pales in comparison to the iPhone 3G, which sold 1 million in just three days. (Full results here.)

T-Mobile USA’s results fall despite Google’s help: The T-Mobile G1 was one of the hottest topics of 2008, and yet it failed to substantially lift T-Mobile USA’s subscriber additions. In Q4, T-Mobile USA added 621,000 net customers, which was less than the 670,000 added in the previous quarter and the 951,000 added in the same period a year earlier. It’s important to note that it is widely assumed that at least 1 million G1’s have been sold. While that may also include sales in the UK, the takeaway is that most of the G1s probably went to current customers, and that, unlike the iPhone, it wasn’t a big enough draw to get users to switch carriers. (Full results here.)

Jan 29, 2009 6:53 PM ET

Posted In: Technologies / Formats, Operating Systems, Companies, Apple, iPhone, AT&T, Google, RIM, Samsung, Sprint, T-Mobile, Verizon, blackberry, g1, storm

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