A Surge in Wireless Subscribers Makes Analysts Wonder

New Street Research, which tracks the industry, estimates that the U.S. market should have added about four million to six million cellphone users over the past year based on recent population and market trends. Companies instead logged a net gain of eight million phone lines. That increase included big national network operators as well as cable companies like Charter Communications Inc. and Comcast Corp. , that resell wireless service under their own brands.

“There’s something fishy going on,” said Jonathan Chaplin, a telecom analyst for New Street Research. “If you look at the subscribers at the end of the period and all the net adds they report, they don’t jibe.”

Some changes reflect normal competitive jockeying. Reseller TracFone, which Verizon is slated to buy later this year, has lost hundreds of thousands of phone lines so far this year. Dish Network Corp. , the owner of the Boost Mobile prepaid brand, also shed customers. Bigger operators have picked up some of those customer defections, analysts say.

Still, neither company’s losses were steep enough to account for the size of other wireless companies’ recent gains, according to the analysts.

Some analysts pointed to free extra phone lines—a bonus T-Mobile salespeople have sometimes offered—as another cause of the upswing. T-Mobile also recently launched a 50% discount for some new family-plan lines.

“We don’t count giving an extra line for free as a subscriber,” AT&T finance chief Pascal Desroches said in a recent interview. “We know that there are peers that do that, but we don’t do that. Our subscriber counts are legitimate subscriber counts that we’re getting paid for.”

T-Mobile executives have said the extra lines are popular among account holders looking to put additional family members on their wireless plans. Such promotions are “something we’ve done to actually a very limited extent, but we’ve done it throughout the years,” T-Mobile CEO Mike Sievert said in a May interview.

T-Mobile’s service revenue and total accounts have increased along with connections in the most recent quarter. Free lines made up “a very insignificant portion” of gross additions over that period, a T-Mobile spokeswoman said, adding that the company can’t speak to what other companies have reported.

T-Mobile said there is evidence that customers in both older and younger demographics are adding phones for the first time while other subscribers carry separate devices for business and personal use. But the company said those shifts have been gradual, “not a step function increase that fully explains the growth witnessed in the 1st half” of this year.

Telecom industry experts say cellphone shops often encourage their sales force to push free lines. Companies often benefit from a relationship with new customers, even if the customer doesn’t generate new revenue right away.

“You’re getting all these people that are getting additional lines, and they don’t need them,” said Craig Moffett, an analyst for telecom researcher MoffettNathanson LLC. “It’s clearly not sustainable.”

This isn’t the first time sector analysts have doubted the sustainability of new phone lines in a country where phone numbers outnumber people. In 2017, Sprint Corp. admitted to regulators it had overcounted the number of its subscribers using the Lifeline program, a federal telecom subsidy program for low-income users.

Sprint later told regulators that promotional offers for free lines, among other things, were driving most of its core customer growth. The cellphone carrier was seeking officials’ permission at the time to merge with T-Mobile.

T-Mobile bought Sprint in 2020, folding more than 20 million phone lines into the Bellevue, Wash., company’s network. Dish acquired roughly nine million Sprint prepaid customers who continue to rely on T-Mobile’s network while Dish builds its own infrastructure.

Write to Drew FitzGerald at [email protected]