Here’s who benefits from ‘massive’ slowdown in smartphone sales

The COVID-19 pandemic is massively slowing the pace of smartphone sales and that could benefit many wireless carriers, Morgan Stanley says.

smartphone sales. Image: Apple's powerful iPhone SE starts at just US$399
Apple’s powerful iPhone SE starts at just US$399
Emily Bary for MarketWatch:

Before the coronavirus outbreak, wireless companies had been heavily promoting their wares with big discounts to attract new customers… “We are now looking at a dramatic reversal as COVID-19 drives massive reductions in retail activations,” Morgan Stanley’s Simon Flannery wrote Thursday. AT&T Inc.’s US:T results Wednesday revealed the first signs of this shift. AT&T had a low first-quarter postpaid smartphone churn rate of 0.86% as mobility equipment sales dropped about 25% in the month of March.

A sluggish handset sales environment “could be a positive” for many wireless players, Flannery wrote. His analysis of smartphone volumes going back to 2013 found that weaker sales tend to be correlated with performance of their stocks for incumbents AT&T and Verizon Communications Inc…

Instinet analysts wrote after AT&T’s report Wednesday that the company could see a “tailwind” to margins stemming from a fewer promotions for smartphones. “Lower gross adds, subscriber acquisition costs, and churn are all positives to the margin structure,” he said.

MacDailyNews Take: Well, it makes sense that churn would be way down as people decide to sit tight. They’re obviously not going into carrier stores, trying out new smartphones, and switching carriers due to the COVID-19 outbreak.


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