Year in Review: The Competitive Cellphone Industry
December 24, 2014 — by WEBOOST
The end of the year is upon us and now is the time to look at how the previous year will affect the next year. Phil Goldstein from Wired takes a look at the competition during 2014 between; AT&T, Verizon, Samsung, Apple.
For years at investor conferences I have heard executives from wireless carriers, especially those from AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE: VZ), say that they think the industry is immensely competitive. In years past, I have generally regarded that as pabulum, something they had to say as a matter of course, especially when those two companies so thoroughly dominated the industry.
This year though, competition roared across the marketplace, and I bet that executives at Verizon, AT&T and every other carrier felt it.
Pricing competition started in earnest in January and has not let up throughout the year. In fact, it got supercharged after merger talks between Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) broke down, and Sprint replaced CEO Dan Hesse with Marcelo Claure. Although financial analysts have been fretting over what all of the price competition will mean for carriers’ long-term margins and investment, I think it’s a great development for consumers and that the worries are largely overblown.
Meanwhile, pricing competition is also heating up in the smartphone market, as Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), Mozilla and their device partners hunt for new smartphone customers in emerging markets. Average selling prices are going down, while low-cost providers like Xiaomi are rising. Although Samsung Electronics and Apple (NASDAQ: AAPL) are secure in their perches as the No. 1 and No. 2 smartphone players, respectively, they are facing more pressure than ever before.
Back here in the U.S., the staggering $44 billion (and counting) AWS-3 spectrum auction has laid bare carriers’ desire for additional network capacity. The billions being spent in the auction underscore the challenges facing smaller carriers, many of whom have recently decided they do not have the resources to continue to compete with the Tier 1 operators–and have abandoned the wireless business completely as a result.
Competition heated up in 2014 on a number of fronts this year, and it seems set to intensify further in 2015. That will surely lead to further disruption and hopefully more innovation from carriers and device makers.