3 Reasons Your Cell-Phone Bill Is Rising
Americans are sending bigger checks to their cell-phone service providers lately. Major wireless companies reported collecting more cash from their subscribers over the second quarter -- as they have been for years now.
Here's a look at the trend in average monthly revenue per customer for three wireless giants:
We can blame our smartphone addictions for this bounce. Adoption of those devices has been spiking over the past few years to the point that almost all of the new customers that AT&T won last quarter were smartphone users, which now account for 73% of its subscriber base. For Sprint, that figure has climbed to 79%.
Of course, all of this increasing penetration has been good news for the wireless business: Smartphone-wielding users tend to pay twice as much per month.
But at least part of that extra payment is going to fund ever-fancier phones. The latest models usually come with higher sales prices, but also with higher costs to wireless companies.
Sprint, for example, has blamed the popularity of Apple's iPhone for driving up its equipment costs and revenue lately. Ditto for AT&T. The company's phone costs are spiking, which drove down operating income last quarter.
Higher data charges
Rising data fees are also helping push cell-phone bills into record territory. Sprint's $10 premium data charge was the key reason it was able to book such a big boost in wireless revenue last quarter. Verizon's data-sharing plan also carries a much higher average cost, and has grown to 36% of the subscriber base.
More expensive networks
Still, wireless companies have a pretty good reason for charging extra for data services: It's expensive to maintain and expand a fast wireless network. Sprint spent $3.7 billion on its wireless network last year, $1 billion more than it spent in 2011. And Verizon just boosted its capital spending outlook for the year, to about $16.5 billion as it tries to prep for higher demand for wireless data consumption.
Wireless companies can expect revenue to keep creeping higher as they convert the rest of their subscriber base to smartphones. They also stand ready to reap the benefits from spiking demand for more powerful devices and quicker download speeds, suggesting that cell phone bills still have a way to climb.
Driving that climb is the tech world's fight over dominance of the trillion-dollar mobile industry. To find out which tech giant is set to prosper over the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!
The article 3 Reasons Your Cell-Phone Bill Is Rising originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.