USA Q1 2016: T-Mobile Surpasses Verizon Wireless to Become the Leading Smartphone Sales Channel

   San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul

May 27, 2016

In just eight quarters we have seen a dramatic turnaround as T-Mobile has shaken things up with its ‘uncarrier’ strategy. The US market is undergoing dynamic shifts in how smartphones are being bought and sold as devices are increasingly being unbundled from call and data plans.

According to the latest research from Counterpoint’s Market Monitor program, in Q1 2016 (Jan-Mar), the USA’s overall smartphone market declined 4% annually as the market slowed down in the first quarter of 2016 after a relatively stronger Q1 2015 due to the strength of iPhone 6 & 6 Plus demand in the year ago quarter. In 2016, we’re also seeing a slowing in smartphone upgrade cycles.

Apple led the smartphone market with 33% share (-13% YoY) followed by Samsung (+2% YoY), that increased its share to 28% in Q1 2016.

After a seven quarter growth streak, demand for LG’s phones cooled (-1% YoY), but it still commands a healthy 15% share. Meanwhile, Chinese brands continued to grow with ZTE (+32% YoY), Alcatel (+5% YoY), and, Huawei (+421% YoY) albeit from a very low base. The top five brands captured almost 90% of the smartphone market during the quarter.

Jeff Fieldhack, Research Director at Counterpoint Research, comments, “The US market decelerated due to softness in Apple iPhone demand and iPhone SE demand not materializing until Q2 2016. Carriers continued to push subscribers to non-subsidy plans as for the first time more than half of the combined subscriber base of the top four carriers are now on non-subsidized plans. This is a significant shift from the subsidy-driven model just ten to twelve quarters ago. This has changed the basis of competition in US mobile landscape.

The focus has shifted to creating more value for the consumer, instead of being device-driven. Unsubsidized device sales have educated consumers that flagship smartphones are costly. This has led to a temporary softness in the device upgrade cycle; the in-carrier upgrade run rate continues to be in 5-6% range per quarter. Handset manufacturers will continue to push hardware and marketing limits to entice subscribers to not defer upgrading.”

Mr Fieldhack adds, “During the quarter, we also saw the launch of Samsung’s flagship Galaxy S7 series and Apple’s cheapest iPhone model, the iPhone SE. Samsung was able to drive upgrades with attractive S7 bundles seeing a greater than 30% uptick in sell-through in its first month compared to the Galaxy S6 launch. This helped it become the number one brand for the month of March. We believe the iPhone SE will be able to drive decent upgrades with iPhone users preferring the smaller form-factor – and there are many. We therefore expect good traction in the coming months for the iPhone SE as supply improves.”

Exhibit 1: % of Phones on No-Subsidy Plans of Postpaid Phone Base

Neil Shah, Research Director at Counterpoint Research, adds, “The US market has undergone significant shifts in the power of the different sales channels with the move to unsubsidized plans. The growth of T-Mobile through its different “Uncarrier” moves, the removal of subsidies and enticing subscribers with ‘Simple Choice’ & ‘Jump’ plans, has helped the operator to become the top smartphone sales channel in the USA. T-Mobile, after surpassing AT&T last year to become the number two channel, and Sprint in 2014 for the number three channel, has now over taken Verizon in Q1 2016 to become the leading buyer and seller of smartphones in US market overall. The T-Mobile platform (including MetroPCS) captured 23% of the total smartphone shipments during the quarter followed by Verizon, AT&T and Sprint platforms.”

Mr. Shah, adds, “Samsung and Apple together captured almost two-thirds of the total smartphone shipments share at T-Mobile, with Samsung leading. However, it will be an uphill task for T-Mobile to maintain this lead ahead of Verizon and continue to attract millions of subscribers to its network. The move to unsubsidized and unlocked has also boosted demand in the open channel, which continued to contribute close to 10% of the total shipments in Q1 2016.”

Exhibit 2: Q1 2016: USA Smartphone Market Share by Channels
Exhibit 3: Growth Rates for OEMs Handset Shipments in Open Channels

Source: Counterpoint Research Q1 2016 USA Market Analysis Report

The Market Monitor research is based on sell-in (shipments) estimates based on vendor’s IR results, vendor polling triangulated with sell-through (sales), supply chain checks and secondary research.

Background:

Counterpoint Technology Market Research is a global research firm specializing in detailed industry analysis of the TMT sectors. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of over 15 years in high tech industries.

Analyst Contacts:

Jeff Fieldhack
+1 858.603.2703
[email protected]

Neil Shah
+91 9930218469
[email protected]

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