While the U.S. wireless industry has been ravaged by brutal price wars when it comes to plain-vanilla voice minutes, carriers big and small have managed to turn in profits and show hefty growth, thanks to growing demand for wireless data services. In the fourth quarter, Verizon (s VZ) and AT&T (s T) raked in about $6 billion just on wireless data. Indeed, as Verizon Wireless CFO Doreen Tobin said on that company’s earnings call:
We are still in the early stages of non-messaging services, with relatively modest adoption rates so far. So, we continue to see plenty of upside potential…and as the proliferation of new devices stimulate demand for more and more wireless data usage. Smartphone sales continue to accelerate…obviously we expect that the ARPU, particularly the data component, will be significantly higher from these devices.
Taken together, the results were, as Stacey noted in her post last week, making wireless data looks recession-proof. A week later, we’re not so sure.
Today, Sierra Wireless (s SWIR), a Richmond, British Columbia-based maker of wireless modems, said it’s cut 56 jobs, or 10 percent of its staff. “Based on the expectation that economic uncertainty will continue for the foreseeable future, we felt it was prudent to reduce our cost structure now, in order to mitigate the potential impact of this uncertainty on our business,” CEO Jason Cohenour said in a press release.
Last week, UBS Research in a research note pointed out that AT&T had 1.25 million 3G laptop subscribers as of the end of the fourth quarter of 2008. Net card additions had fallen 121,000 from the 186,000 additions in the third quarter and 166,000 in the second. This was “likely due to weakening spending at both businesses and consumers,” said UBS. Going forward, severe job losses and overall belt-tightening (including less travel) on the part of companies will reduce the number of 3G laptop subscribers as well. It is going to impact everyone — from AT&T to Verizon to Sprint. (I have contacted Verizon and Sprint about this and will update the post after I receive their details.)
Now take Sierra’s announcement and marry it with slowing sales of 3G laptop connections at AT&T, and we might be looking at the first signs of a wireless data slowdown. The only silver lining for carriers is that demand for smartphones like the iPhone (s AAPL) and the BlackBerry Storm (s RIMM), which bring in a lot of data dollars, is still strong — for now!