• Postpaid upgrade rates have hit record lows.
• Postpaid carriers continue to increase the price of legacy rate plans.
• Trade-in values at carriers have increased, with iPhones recording the biggest increases.
• The number of OEMs ranged in carrier channels is shrinking.
• Prepaid sales are consolidating to a lower number of SKUs.
• Prepaid dealers are in distress.
• The future of ACP funding remains uncertain.

The era of hyper-growth and short replacement cycles in the US smartphone market is now over, as sell-through in the US market is down 36% from its peak in 2017. When viewing US carrier earnings for Q2 2024, it is clear that the market has seen many important changes over the last few years. Counterpoint has noticed seven key trends that will continue to impact and change the US smartphone market in 2024.

Postpaid upgrade rates fall to record lows

In Q2 2024, each of the Big 3 carriers – Verizon, T-Mobile and AT&T – saw upgrade rates fall well below what they had reported in Q2 2023. This decline is linked to the increasing trend of customers holding on to their devices for longer periods before opting for an upgrade.

Carriers continue to increase prices of legacy plans

Carriers reported lower equipment revenues in Q2 2024 on a YoY basis, but service revenues continued to increase. While device sales are weak, service revenues and higher ARPU are driving top-line growth. Carriers drew attention for raising the cost of legacy rate plans in H1 2024. This move reflects their ongoing strategy to nudge customers off older, less profitable plans and onto higher-cost plans with additional perks.

Carriers have increased trade-in values YoY

Trade-in values at carriers have gone up YoY as an aggregate. Carriers have strategically increased these values in 2024 as a way to drive consumer engagement and stimulate the upgrade cycle, which, as mentioned earlier, has been slowing down in recent years. Despite this, upgrade rates remain extremely low across the wireless industry.

The number of OEMs ranged in carrier channels is shrinking

Over the years, the smartphone market has seen significant consolidation, with a few dominant players like Apple and Samsung capturing a large majority of sales. Smaller OEMs struggle to compete with these giants, who have a significant advantage in resources for the production, marketing and distribution of smartphones. As a result, many smaller brands have exited the market, significantly reduced operations or shifted their focus to other regions and market segments.

Prepaid sales are consolidating to a lower number of SKUs

A similar trend of model consolidation can be seen in the prepaid space. Prepaid channels have focused on targeted marketing of specific models to increase sales. The Galaxy A15, Moto G Play and iPhone 12 have all been championed by prepaid dealers and often have attractive promotional offers that have driven sales. Device promotions within prepaid have also created a difficult environment for white-label devices, as after promotions, many devices from brands like Samsung and Motorola fall into the white-label price range, negating the main advantage white labels have in the market.

Prepaid dealers in distress

While the postpaid market continues to remain steady, the prepaid market is going through a lot of major changes. When talking to prepaid dealers, it is apparent that many are uncertain about the immediate future of their business. Selling primarily cheap, low-margin smartphones and cheap plans in such a competitive environment is a tough ask, and many of these providers are currently facing difficulties. Many dealers are relying on selling insurance, accessories and repairs to maintain decent profits.

The future of ACP funding remains uncertain

The Affordable Connectivity Program (ACP) officially ended in June. There are ongoing efforts in Congress to restore the program, but the results remain to be seen. Boost Mobile offered ACP customers mobile lines for half the price in May and free in June. This helped Boost retain customers and keep churn low, but it came at the expense of ARPU, which declined QoQ in Q2 2024. Many other mobile providers implemented this strategy of providing free or discounted lines to affected customers, but the amount of time they will continue doing this is uncertain.