Are Wireless Companies Profiting From Sexting?

Update: Verizon Communications Inc. (NYSE: VZ) announced Thursday morning that it has launched a new, lower-cost plan for its Verizon Wireless customers. The new plan, called MORE Everything, increases customers’ monthly data allowances and offers a smorgasbord of other options in an effort to keep customers from defecting to competitors.

Verizon resisted competing with T-Mobile US Inc. (NYSE: TMUS) when the smaller competitor launched an attack on the other major U.S. carrier AT&T Inc. (NYSE: T) late last year. AT&T launched its own lower-cost plans earlier this month, likely forcing Verizon into doing the same thing even though the company probably does not want to. Sprint Corp. (NYSE: S) also matched the T-Mobile pricing plan earlier this year.

The images generated from the overall sexting trend tend to make most parents cringe. However, as we all know, teenagers are not the only people sexting with one another. Former U.S. Representative and recent New York City mayoral candidate Anthony Weiner was forced to resign from office over a sexting scandal. Numerous Hollywood stars and Rap music artists have been known to resort to sexting. Moral considerations put aside, at 24/7 Wall Street, we want to know if the top wireless companies are making money off this trend?

We consulted data from Pew Research, and the findings were somewhat surprising. Especially when the data was directly related to adults who are sexting.

1) 9% of adult cell phone owners have sent a sext of themselves to someone else. That’s up from 6% of cell owners in 2012. A 50% increase in this kind of traffic.

2) 20% of cell phone owners say they have received a sext of someone else they know on their phone. That’s up from 15% in 2012, a 33% increase.

Given this increase in sexting, surely the wireless carriers are making a profit on this trend? While text messaging is still on the rise in the U.S, the growth has been steadily slowing. However it is estimated that texting, which is known in the wireless business as short message service or SMS, may provide as much as 12% of service revenues for the major U.S. operators.

For its wireless business in the fourth quarter of 2013, AT&T Inc. (NYSE:T) saw operating revenues increase by 4.5 percent year-over-year to $18.44 billion, with a 16 percent bump in data revenues making up a large portion of that growth. Texting and sexting costs fall into the data revenue category. Verizon Communications Inc. (NYSE:VZ) showed an 8.0% year-over-year increase in service revenues in the fourth quarter of 2013. That was a 7.5% year-over-year increase in retail service revenues.

While sexting may or may not remain a hip trend, and texting is actually on the decline, one thing is for sure. The large wireless carriers are making big money off this kind of activity. Granted, it’s not the kind of data they want to break out in great detail, especially the sexting part, but the numbers don’t lie. Even with texting on the decline, the sexting numbers are increasing. Now if we can just get a big carrier Investors relations representative to break out those darn sexting numbers.