Record postpaid additions lifted U.S. wireless carriers to new heights in 2021, leading analysts to wonder which operator stands to see the steepest fall in 2022 and beyond as subscriber growth subsides.
Wireless companies reported record postpaid additions through the end of 2021 as phone lines continued to outpace population growth. Analysts attributed the outsized adds to a combination of factors, including converting prepaid customers into postpaid ones, low churn and Americans' desire for additional lines. Additionally, pandemic-related government subsidies helped economically vulnerable Americans hold onto their wireless services despite rapid inflation and unemployment.
All told, the top three U.S. wireless operators reported 12.2 million postpaid wireless net additions in 2021, up from 8.8 million in 2020 and 5.9 million in 2019. T-Mobile US Inc. once again led the pack with 5.5 million postpaid net adds, roughly in line with 2020. AT&T Inc., meanwhile, seemingly benefited from its promotional strategy and saw a huge jump year over year, adding nearly 4.6 million postpaid wireless net adds in 2021, up from 1.8 million a year earlier. Verizon Communications Inc. saw the smallest number of postpaid wireless gains, with 2.1 million net adds.
However, analysts believe the unprecedented growth could end this year.
Verizon added 558,000 postpaid phone net additions in the fourth quarter of 2021, the smallest adds among the top-three wireless providers. With Verizon taking a smaller share of total wireless net adds in 2021, MoffettNathanson analyst Craig Moffett asked recently whether there was a long-term growth story for the company.
Moffett noted Verizon's year-over-year growth rate of 1.1% is far below the market growth rate, which was approximately 3% in the last quarter of 2021. "That means that Verizon is still unambiguously losing market share," Moffett said in a research note.
But Verizon may have an ace up its sleeve in the coming year following its 2021 acquisition of U.S. prepaid mobile operator TracFone Wireless Inc., said Lynnette Luna, an analyst with Kagan, a media research group within S&P Global Market Intelligence. The deal provides Verizon with a ready pool of prepaid customers that the carrier can convert to postpaid adds. While postpaid subscribers pay a recurring monthly bill, prepaid customers sign up with no contract and pay for voice minutes, texts or mobile data prior to usage.
"What I think happened in 2021 was a lot of aggressive prepaid to postpaid conversion," Luna said in an interview. "I think we saw that especially at Verizon ... so it will be interesting because now they have this whole huge prepaid base from TracFone that they can work on."
Luna also noted that Verizon's 5G offerings got a shot in the arm in January following the launch of its 5G Ultra Wideband network to more than 90 million potential customers. The Ultra Wideband service relies on a combination of mid-band spectrum known as C-band and high-band spectrum known as millimeter wave. Mid-band spectrum is considered essential for 5G delivery, balancing speed and range.
Verizon's postpaid phone churn rate, the rate at which customers stop doing business with a company over a given period of time, has also remained extremely low, coming in at 0.77% for the fourth quarter of 2021.
AT&T, meanwhile, led the industry with 884,000 postpaid phone adds during the fourth quarter of 2021, and postpaid phone churn hit a record low for the full year.
Even so, MoffetNathanson analysts wrote in a recent note that AT&T's revenue growth could deteriorate due to increased competitive pressure.
"AT&T is losing revenue share, and they are entering a period when their network will be at a meaningful disadvantage to T-Mobile's, in our view, and where their prices are higher. Further share loss appears likely," Moffett said.
Both Moffett and Luna remain bullish about T-Mobile.
"I think that T-Mobile is probably in a really good position," Luna said.
Moffett agreed. "The industry has never seen a competitor that combines both best network and lowest prices. There is no solvable equilibrium market share in such a case; economic theory would suggest that T-Mobile would take all of the market," he said.