3 Reasons Your Cell-Phone Bill Is Rising

Americans are sending bigger checks to their cell-phone service providers lately. Major wireless companies reported collecting more cash from their subscribers over the second quarter -- as they have been for years now.

Here's a look at the trend in average monthly revenue per customer for three wireless giants:

Company

2010

2011

2012

2013 Q2

Sprint  (NYSE: S  )

$55

$57

$61

$64 

Verizon (NYSE: VZ  )

$126

$135

$144

$153 

AT&T (NYSE: T  )

$62

$64

$65

$66 

Source: Company financial filings. Verizon figures are on a per-account basis, with many accounts including more than one user.

We can blame our smartphone addictions for this bounce. Adoption of those devices has been spiking over the past few years to the point that almost all of the new customers that AT&T won last quarter were smartphone users, which now account for 73% of its subscriber base. For Sprint, that figure has climbed to 79%.

Of course, all of this increasing penetration has been good news for the wireless business: Smartphone-wielding users tend to pay twice as much per month.

Fancier phones
But at least part of that extra payment is going to fund ever-fancier phones. The latest models usually come with higher sales prices, but also with higher costs to wireless companies.

Sprint, for example, has blamed the popularity of Apple's iPhone for driving up its equipment costs and revenue lately. Ditto for AT&T. The company's phone costs are spiking, which drove down operating income last quarter.

Higher data charges
Rising data fees are also helping push cell-phone bills into record territory. Sprint's $10 premium data charge was the key reason it was able to book such a big boost in wireless revenue last quarter. Verizon's data-sharing plan also carries a much higher average cost, and has grown to 36% of the subscriber base.

More expensive networks
Still, wireless companies have a pretty good reason for charging extra for data services: It's expensive to maintain and expand a fast wireless network. Sprint spent $3.7 billion on its wireless network last year, $1 billion more than it spent in 2011. And Verizon just boosted its capital spending outlook for the year, to about $16.5 billion as it tries to prep for higher demand for wireless data consumption.

Bottom line
Wireless companies can expect revenue to keep creeping higher as they convert the rest of their subscriber base to smartphones. They also stand ready to reap the benefits from spiking demand for more powerful devices and quicker download speeds, suggesting that cell phone bills still have a way to climb.

Driving that climb is the tech world's fight over dominance of the trillion-dollar mobile industry. To find out which tech giant is set to prosper over the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


Read/Post Comments (6) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2013, at 6:20 PM, Fergieferg wrote:

    That number reported for Verizon is the average revenue per account, not per customer. Please correct.

  • Report this Comment On September 08, 2013, at 7:21 PM, TMFSigma wrote:

    Hi Fergieferg, I noted that in the discussion under the chart.

    -Demitrios

    TMFSigma

  • Report this Comment On September 08, 2013, at 8:49 PM, Riskysam wrote:

    That kind of money is for suckers.

    I am currently typing this response on a cheap Chinese android tablet. This tablet is very comparable to the unreleased Samsung mega.

    Also, I enjoy the same unlimited data, text, and call plan of the verizon customer...only at 40 bucks.

  • Report this Comment On September 09, 2013, at 2:18 PM, EBTcard wrote:

    If you have a smart phone you will find you are

    billed around $3.50 per phone to pay for

    Obama phones. If your house has several phones

    it is around $10 per month. The tax does not

    say Obama phone but it is there. If you have a

    plane phone it is around $1.50. Neighbors from Columbia get food stamps and have the Obama phone. They are in thei 60s and do not work. They fly to Columbia every winter as it gets too cold for them in KC. I guess the EBT credit is high when they come back to the USA. Must eat real good.

  • Report this Comment On September 11, 2013, at 1:35 PM, ChelseyPPR wrote:

    If you want a cell phone service that won’t empty your wallet, you should consider GIV Mobile, a no-contract wireless service. GIV Mobile’s affordable “Unlimited Everything” plans start as low as $40/month for talk, text and data. GIV Mobile utilizes the 4G network of T-Mobile USA, Inc., allowing for fast, reliable connections from nearly anywhere in the U.S. GIV Mobile is also the first no-contract wireless service to give back 8% of customer’s monthly bills to a nonprofit charity. Customers are able to choose up to three charities they would like to donate to including American Cancer Society, Children’s Scholarship Fund, Little Kids Rock and more.

  • Report this Comment On October 29, 2013, at 11:01 PM, thkim wrote:

    Hi Mr. Kalogeropoulos, I am a student wanting to do some more research for a related topic. I was wondering where you obtained the financial filings for each company for the data in the table above. Could you direct me to more specific sources? Thanks in advance for your help.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2627099, ~/Articles/ArticleHandler.aspx, 8/29/2014 12:24:43 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement