U.S. consumers are benefiting from a major price war among wireless carriers after T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) introduced unlimited plans late in 2016 that forced AT&T (NYSE:T) and Verizon (NYSE:VZ) to follow suit earlier this year. Overall, prices are down 13% from this time last year with declines of 7% in March and another 1.7% in April, according to Labor Department data.
Price declines accelerated in March, following Verizon's entry into the world of unlimited data plans. Verizon still priced its offering above the competition, but many current Verizon subscribers are able to save money each month by switching to the new plan. That move has put pressure on the entire industry.
But while average pricing is down, the competition hasn't affected each carrier equally. Here's a breakdown of the postpaid phone pricing trends for each carrier.
This year versus last year
The biggest losers over the past year were Sprint and Verizon. Both have seen average revenue per postpaid subscriber decline more than 8%. It's worth noting that Verizon's average-revenue-per-user (ARPU) numbers include connected devices such as tablets, which obfuscates the actual impact of its new phone plan. Still, the overall trend indicates that Verizon's prices are declining faster than the industry average.
AT&T also felt some pain, as the average subscriber paid about 2.5% less per month year over year in the first quarter. The company is seeing a lot of subscribers migrate to their employers' lower-priced business plans while losing lower-value subscribers to T-Mobile, Sprint, and prepaid options.
T-Mobile, meanwhile, managed to increase its pricing. It was, however, operating from a place of weakness. The company had by far the lowest average revenue per subscriber last year, and it only just surpassed Sprint's ARPU in the first quarter.
The declines will get worse in the second quarter
Since the Labor Department data says the biggest drop in pricing came in March and continued in April, it's likely ARPU will fall further for most carriers in the second quarter.
Verizon has said it expects its numbers to keep falling but that they should level out in the latter half of the year. The company also expects to grab a larger share of gross additions, many of which will go for its higher-priced unlimited plan versus a traditional data bucket. That trend should help offset the pain from customers that lower their bills by switching to unlimited.
Sprint, meanwhile, might see some relief after retiring its "Cut Your Bill in Half" promotion and changing its unlimited family plan pricing. After Verizon went unlimited, Sprint started offering five lines for $90 per month. Its new offer is four lines for $120 per month, a significant increase but still below competitors' pricing.
T-Mobile may face some pricing pressure after a move to include taxes and fees in its advertised price for its unlimited plan. It also promised not to increase customers' bills unless they change plans. But now that its new unlimited plan is the only option for new T-Mobile subscribers, the influx of gross additions should offset smaller customer bills.
AT&T could continue to experience declines, but it's heavily pushing its top-tier unlimited plan with promotions such as free HBO. That's the kind of thing that can boost service revenue, but it comes at the expense of profit margin.
Winners and losers of the price wars
T-Mobile is one of the biggest instigators of the current price war. It has the most to gain, as its pricing remains well below the competition. Its unlimited plan is still less expensive than those of AT&T and Verizon, but it's managing to close the gap in average pricing as the only carrier growing ARPU. At the same time, T-Mobile is adding millions of new subscribers. So not only is it making more revenue per user, but it also has more of them. Clearly, T-Mobile is a big winner.
Verizon and AT&T have been the biggest donors of subscribers to T-Mobile. Both have also seen significant pricing pressure, but AT&T doesn't appear to be turning things around at all, while Verizon's unlimited plan saved it from posting an even worse first quarter than it did. What's more, the trends indicate that Verizon will post strong net additions in the second quarter, while AT&T will continue to struggle.
Sprint, meanwhile, appears to only have one competitive advantage: price. It's pricing its service much lower than the competition, and then hoping customers will stick around when it raises their bill. That's an unsustainable advantage, and it will lose customers to carriers with stronger networks and better service.
Let's not forget the American consumer -- another big winner in the ongoing wireless price war.