This morning, AT&T (T) announced with pomp and circumstance that it sold 10 million new smartphones during the fourth quarter last year. It’s a new all-time record! The share price of AT&T promptly pulled back by 2.5%. Setting new records is nowhere near enough for Wall Street. A possible smartphone slow-down at AT&T started worrying investors last autumn and the new announcement did not alleviate concerns at all.
Back in Q4 2011, AT&T sold 9.4 million smartphones. So selling 10.0 million units last quarter would mean 6.4% annualized growth. Of course, AT&T may be lowballing a little in order to save a positive surprise for its earnings release. If AT&T sold 10.4 million smartphones in Q4, the growth rate would be close to 11%.
This is a problem. When AT&T sold 9.4 million smartphones in Q4 2011, that number was 50% higher than the previous quarterly record. A year later, AT&T delivers another smartphone record quarter. But this one is only 6-11% higher than the previous record.
The smartphone sales growth in America may have finally started sputtering. According to IDC, the global smartphone sales growth rate in the third quarter last year was 45%. Smartphone markets in Brazil, India, Africa and China are still expanding vigorously.
But as smartphones hit the 60% market penetration level among all mobile subscribers, the days of double-digit volume growth in America may draw to an end in 2013. This could explain why T-Mobile and Sprint (S) are now rolling out new price plans, particularly in the pre-paid market.
The U.S. mobile subscriber growth slow-down started hurting the weaker carriers in 2012. They are reacting with new pricing initiatives to stop subscriber base erosion. Now, AT&T delivers a Christmas quarter that’s a bit soft on smartphone volumes. We just might be inching closer to a situation where the American mobile market will see some serious price competition as carriers realize that growth is cooling down both on the overall subscriber level and in the smartphone category.