T-Mobile could soon be bigger than Sprint

The tables could turn by the end of this year in the drama of the U.S. mobile underdogs, with T-Mobile possibly passing Sprint to become the third-largest carrier in the country.

That’s the outlook from analyst Chetan Sharma, who says T-Mobile may have more total customers than Sprint within two or three quarters. He also found that carriers are getting most of their new connections from tablets and other connected devices, according to the second-quarter Mobile Future Forward report from Chetan Sharma Consulting, released on Thursday.

While Sprint still has 16 percent of the country’s mobile market, its subscriber rolls are shrinking while T-Mobile, now at 15 percent, keeps growing. T-Mobile has gained customers every quarter since the beginning of last year and is about to erase all the losses it suffered in a slide that began back in 2009, Sharma said. In their most recent quarterly financial reports, T-Mobile reported a net gain of 1.5 million subscribers and Sprint posted a net loss of 220,000.

Those numbers include both postpaid and prepaid subscribers. T-Mobile already has more prepaid customers than Sprint, but postpaid is a more secure source of revenue and financial viability.

Make way for #3

If it passes Sprint’s subscriber numbers, T-Mobile can lay claim to being the third-largest mobile operator in America. In a sense, it would win the battle of the laggards, because AT&T and Verizon still dominate the market with about 68 percent of subscribers—and 68 percent of mobile data revenue—combined.

On Wednesday, Sprint named a new CEO, Marcelo Claure, while backing down from making a widely rumored bid for T-Mobile that was expected to face strong opposition from regulators. The troubled carrier faces an uncertain future even with vast spectrum license holdings and a rich parent company, Japan’s Softbank. But don’t look for T-Mobile to try to buy Sprint any time soon, Sharma said. Parent company Deutsche Telekom has been trying to sell off T-Mobile and shift its resources back to Europe for some time.

Sharma does expect the runner-up carriers to become one player with about 30 percent of the market and a stronger position against AT&T and Verizon. It’s just not clear how or when that will happen, he said.

On Wednesday, U.S. Federal Communications Commission Chairman Tom Wheeler said in a statement that “four wireless providers are good for American consumers.” That position might or might not change after a new president is elected in 2016, but a big shift in the market might affect it, too, Sharma said.

“This administration is just not going to allow this unless the facts on the ground change drastically,” he said. “It could be that one of these players starts to really have a sharp decline in their market cap, meaning that Wall Street thinks that they are in real trouble.”

T-Mobile had the best subscriber gain of any carrier in the quarter, but most of the industry’s added connections weren’t new phones. Instead, they were connected devices, which were chiefly tablets but also so-called machine-to-machine equipment such as connected cars, enterprise sensors and health-care devices. Sharma’s study found that 84 percent of net additions were from non-phone devices and that 70 percent of those were tablets.