Flood of cell phones gives industry sales anxieties
By Reid Kanaley
THE PHILADELPHIA INQUIRER
Friday, June 14, 2002
PHILADELPHIA -- With an astounding 130 million cell phones already in use in the United States, the wireless industry is fretting that it could lose momentum, even as it begins to introduce fancy new phones and high-speed data services.
"The key issue that everyone is facing in the wireless industry is that the extraordinary growth of the last 15 years is slowing down," said Scott Ellison, wireless and mobile communications program director at the research firm IDC.
Not that wireless companies are wringing their hands in despair. The industry took in $55 billion last year. Average monthly cell phone bills, which fell yearly for a decade until 1998, have been creeping steadily upward since then to about $47 last year, and billable wireless minutes will exceed half a trillion minutes this year, according to the Cellular Telecommunications and Internet Association, a trade group.
Jostle down any sidewalk packed with people chattering away on their phones, and it is clear that Americans are attached, sometimes obsessively, to the gadgets.
"Our customers tell us they feel naked without their phones," Sprint PCS spokesman Dan Wilinsky said. "They're using them as a vital link for business, or at play."
But to stay in the game, wireless companies are competing furiously for subscribers by offering customers ever-deeper "buckets" of mobile minutes, constantly upgrading systems and rolling out new services.
"There's no question that price and minutes is where a lot of the battle is being fought," Cingular Wireless spokesman Clay Owen said. "There is a fair amount of turnover in the industry, people switching from one carrier to another, so there is always competition on price."
Some industry analysts say consolidation among the six top wireless carriers is inevitable as the competition intensifies. But others say technological incompatibilities among various carriers, and some poor stock performances of late, could render potential mergers unattractive for the time being.
Those six carriers, which now account for more than 100 million wireless subscribers, are Verizon Wireless, Cingular Wireless, AT&T Wireless, Sprint PCS, Nextel Communications and VoiceStream.
"Right now, you have way too many players. There's no major industry in this country that could have six players in it and have everybody make money," Darron Carpenter, equity analyst at PNC Advisors in Philadelphia, said. "The main thing you need to see in the industry, overall, is consolidation."
A seventh player, Arkansas-based Alltel Corp., with 6.8 million mostly rural subscribers, is "a different animal," according to Carpenter. "They don't face the same type of competition that you face in the bigger markets. Alltel carved a niche for itself," and isn't likely to face stiff competition for the time being.
Wireless carriers are focused this year on introducing a new generation of technology that will let them offer high-speed data connections over mobile phones for such uses as e-mail, instant messaging and online games. Of course, a new wave of personal-digital-assistant-like phones, with expanded keypads and viewing screens, is appearing to facilitate such uses.
Yet the advanced services are expensive -- Verizon Wireless just introduced a high-speed data service at $99.99 a month -- and even if they catch on eventually, "the problem is still the same: too many competitors offering the same basic services," Carpenter said.
None of the leading wireless companies is known to be in merger talks, but that has not kept analysts from speculating on likely combinations.
"I think Nextel eventually gets taken out by somebody," Carpenter said. "I wouldn't be surprised if it happened with Sprint, too."
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