Could Intense Competition Increase AT&T’s Churn Rate in 3Q17?
Intense competition and churn rate
In the previous part of this series, we looked at AT&T’s (T) anticipated postpaid phone net customer additions in 3Q17. Now let’s take a look at its customer retention metric—churn rate—in its combined domestic wireless operations. Wall Street analysts anticipate AT&T’s postpaid phone churn rate to increase significantly due to growing competition in the postpaid space and competitors’ strong promotional offers of unlimited plans in 1Q17.
Interested in S? Don't miss the next report.
Receive e-mail alerts for new research on S
A rise in churn rate is negative for wireless carriers because they have to deal with added subscriber acquisition costs, which has a further negative impact on their operating margins. So a rise in churn rate could make investors concerned.
In 2Q17, AT&T reported a record low postpaid phone churn rate of 0.79% compared to 0.84% in 2Q16. Management attributed the decrease to the video-wireless bundle. That could be significant since T-Mobile (TMUS) and Sprint (S) have talked a lot about their ability to take customers from other wireless carriers, including AT&T and Verizon (VZ).
Peer comparison of postpaid phone churn
In 2Q17, among the top four US mobile carriers, Verizon reported the best postpaid phone customer retention rate. T-Mobile and Verizon reported postpaid phone churn rates of 1.1% and 0.70%, respectively. Sprint had a postpaid phone churn rate of 1.5%.
In the next part of this series, we’ll take a look at AT&T’s prepaid net customer additions.