For wireless carriers like Verizon (
VZ
), AT&T (
T
) and Sprint (
S
), older mobile users remain an under penetrated group for data
subscribers and an interesting opportunity. Customers over the age
of 50 tend to text message less and use much less mobile data than
younger peers. However, with the proliferation of smartphones and
the growing popularity of social networking, this is changing
quickly.
An AT&T Vice-President recently mentioned to Bloomberg that
this demographic presented an attractive area of growth, and if
carriers can reach out to this demographic effectively, there
exists an opportunity to improve data revenue per subscriber.
Below we include the average data revenues per subscriber
estimates for the three companies, and below each chart we include
a price estimate and sensitivity scenario. Sprint was the most
sensitive to changes in the average data estimates.
(
Our price estimate for Verizon is $31.69
, slightly below the current market price. By dragging the
trend line, a 5% increase in data revenues in 2011 equals an
approximate 1.1% increase in price estimate.)
Magnitude of Opportunity
Comscore estimates that about 42% of customers in the 50+ year
old demographic segment in the U.S. used text messaging service at
least once a month in Q3 2010 compared to 85% for the 13-34
demographic. This indicates that the usage for the older segment is
almost half of the younger segment.
Additionally, the aging population is increasing in proportion
to the overall U.S. population. The US Census Bureau expects the
proportion of the U.S. population that is 65+ years old stood at
around 12.7% in 2008, and it expects this figure to increase to
14.4% by 2015 and to almost 18% by 2025. Clearly, the older segment
will become an important market for wireless carriers.
Consequently, carriers are offering lessons on how to text,
introducing phones with larger sized buttons to make it easier to
text and increasing media budgets to target older users. Text
messaging is just the start as companies hope to increase the
number of data plans and increase usage in this segment.
(
Our price estimate for AT&T is $37.84
, around 36% above the market price. By dragging the trend
line, a 5% increase in data revenues in 2011 equals an
approximate 1.3% increase in price estimate.
(
Our price estimate for Sprint is $4.35
, around 13% above the market price. By dragging the trend
line, a 5% increase in data revenues in 2011 equals an
approximate 5% increase in price estimate.)
Social Networking Goes Mobile
While carriers are devising strategies to target older
customers, there is a trend that might just make their job easier.
Social networking is increasingly mobile and older users are
catching on.
According to Comscore data, the ratio of U.S. mobile users
accessing social networking sites increased from 13.8% in Oct 2009
to 17.1% in Jan 2010. This figure further increased to 20% by April
2010.
Older users are catching on too. The Pew Research Center
estimates that social networking usage among the internet users
belonging to age group of 50+ increased from 22% to 42% between
mid-2009 and mid-2010. Additionally, Insidefacebook.com reported in
2009 that women over 55 years of age are one of the fastest growing
demographic on Facebook.
The trends of increasing mobile media and social networking and
increased use of social networking among older individuals are
likely to come together and encourage older generation to use more
mobile data services.
Click to see full estimates for:
Verizon
,
AT&T
and
Sprint
.