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What to Expect from AT&T’s 3Q17 Earnings

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Part 5
What to Expect from AT&T’s 3Q17 Earnings PART 5 OF 9

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.

Could Intense Competition Increase AT&amp;T&#8217;s Churn Rate in 3Q17?

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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.

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