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Verizon and AT&T grow fatter in America as mobile prices plunge in Europe

May 24th, 2013 at 12:50 PM
AT&T Verizon Monopoly

American consumers are sleepwalking into being permanently locked to ever-rising phone bills from monolithic incumbents. This is exactly the scenario that the government tried to avoid when it broke AT&T into seven Baby Bells in 1982. In France, the average mobile bill is now dropping by $7 a year. In America, the average bills from AT&T and Verizon Wireless keep rising as operators force consumers into texting bundles and sneak in new monthly charges. European incumbent operators are facing a consumer revolt as millions of Europeans switch to cheap challenger operators every month. American incumbents have no fear; AT&T and Verizon have locked in 75% of the smartphone market and keep growing.

Vodafone Spain has now started offering 250 free pre-paid minutes for anyone topping up their accounts with five euros. That is pretty darn desperate. Even as Vodafone’s stake in Verizon is delivering 30% profit growth year-on-year, Vodafone’s sales in Spain are plunging. In the first three months of 2013, 1.8 million Spaniards have switched from big carriers to small, dirt-cheap challenger operators. In the neighboring Portugal, average revenue per user of the dominant Portugal Telecom is down by nearly 11%.

The contrast between the mobile markets in Europe and America has never been sharper. T-Mobile’s share of U.S. smartphone sales has dropped below 10% as Verizon’s share is on pace to hit 40% by 2014. In France, where the overall economy has not yet cratered, the mobile price wars are just as vicious as in Spain and Portugal. A challenger operator called Free Mobile has now grabbed 9% market share while pushing the mobile revenue of giants like SFR and Vivendi into steep declines.

Can AT&T and Verizon continue cruising along, sticking customers with sneaky new charges while still increasing their smartphone market share? Probably. Both Sprint and T-Mobile have been caught in long, weird M&A dramas that have distracted them from actually competing. Both are now on the verge of becoming marginalized by the titanic Attrizon duopoly. There are no signs that anyone in America would dare to follow the hyper-aggressive pricing tactics used by European guerrilla carriers.




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