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Dec. 4, 2009

For the most part, market research analyst Fitch Ratings has largely dismissed the threat of possible Net neutrality legislation to the wireless industry in its industry outlook for next year.

In August, wireless carriers and the CTIA (Cellular Telephone Industries Association) had expressed some concern that net neutrality laws could have a major impact on the performance and financial sustainability of data services and the mobile phone industry.

Fitch Ratings also predicted that the wireless industry would continue to feel the effects of increased competition and the current weak economy, with subscriber growth slowing to about four percent next year, compared to less than 5.2 percent for this year.

"Overall, while there are a large number of regulatory issues that still need to be addressed in the telecommunications and cable industry, led by universal service funding (USF) and intercarrier compensation, these current issues will be more complicated and take a longer time to resolve," said Fitch Ratings' report.

"Instead, it appears that next year the FCC will focus on their involvement in the broadband development allocation of the American Recovery and Reinvestment Act and Net neutrality. Neither of these issues is likely to have any material impact on financials or prospects for the industry for next year."

The overall growth of mobile prepaid services cut into postpaid net adds, which remained relatively flat in 2009 despite the proliferation of 3G services.

Additionally, Fitch estimates that prepaid net additions will increase by nearly 9 million this year compared to approximately 5 million for postpaid.

Also, sales from voice services continued to erode for most of this year, a trend that is expected to worsen early next year.

In the case of data revenues, they were predictably stronger, with more than $44.1 billion in sales expected by December 31st, 2009.

Fitch added that the increased availability of high-end smartphones, such as the Droid and the iPhone, would help to maintain the growth of data ARPU (average revenue per user) through 2010.

Fitch Ratings also offered us a rundown of credit ratings for top wireless carriers. While AT&T and Verizon were both issued an A. Sprint Nextel got a BB.

U.S. Cellular parent TDS was also issued a down forecast, with a BBB+ rating.

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Source: Fitch Ratings.