No Mobile Price War?

Some will look at the numbers and conclude there is no mobile price war under way in the United States, despite the many changes in retail packaging and pricing we have seen over the last year.

T-Mobile US fourth-quarter and full-year 2013 results might strongly suggest there is indeed a price war going on.

In the fourth quarter, T-Mobile US posted revenues of $6.83 billion, compared with revenues of $6.19 billion in third quarter of 2012.

Adjusted earnings, though, fell from $1.36 billion to $1.24 billion. T-Mobile US average revenue per user also slipped.

Average revenue per user for T-Mobile US branded postpaid customers slipped sequentially from $52.20 to $50.70. In other words, as customers adopt T-Mobile’s lower cost plans, ARPU drops and that makes it harder to boost earnings.

In fact, some note, mobile service provider revenues are growing, at least in the U.S. market, and that the amount of an average monthly bill also is rising.

Average monthly revenue per postpaid customer across the industry rose 2.2 percent to $61.15 in the fourth quarter, according to New Street Research. That is up more than $5 per user from the first quarter of 2010, when the same measure was at $55.80.

So many would say those developments are signs that a price war has not broken out in the U.S. mobile market, and that the price war is an illusion.

Such sentiments might be scoffed at, among executives at the leading U.S. mobile service providers, who seem to be pouring lots of effort into recrafting offers and retail packaging to parry T-Mobile US attacks.

As so often happens in the communications business, multiple trends operate at once. Retail promotions offered by the leading mobile service providers are changing formal price points, even if consumers are acting in ways that do not affect recurring revenue all that much.

But U.S. mobile revenues have been a bright spot, so a marketing price war and growing revenues are not strictly and necessarily mutually incompatible. A price war could weaken either gross revenue or profit margins, or both, but in the context of a still-growing market might not necessarily lead to lower overall revenues.

In other words, a price war can exist even in aggregate market revenue growths. But the growth arguably is less than might have been the case in the absence of the price competition.