Evaluating AT&T’s Postpaid Phone Churn Rate Trend after 3Q17
AT&T’s postpaid phone churn rate
During AT&T’s (T) recent 3Q17 earnings conference call, its management noted that the company’s postpaid phone churn rate had improved YoY (year-over-year). AT&T reported its best-ever third quarter postpaid phone churn rate of 0.84% in 3Q17, compared with 0.90% in 3Q16.
AT&T’s management attributed this improvement to the wireless-video bundle, which may be significant because T-Mobile (TMUS) and Sprint (S) have made much of their ability to attract customers from other telecom carriers like Verizon Communications (VZ) and AT&T.
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AT&T’s peer comparison of postpaid phone churn in 3Q17
In 3Q17, among the top four major US wireless carriers, Verizon reported the best postpaid phone customer retention rate. In 3Q17, Verizon and T-Mobile had postpaid phone churn rates of 0.75% and 1.23%, respectively. Meanwhile, Sprint reported postpaid phone churn rate of 1.59% in fiscal 2Q17 (quarter ending September 2017).
Remember, a rise in churn rate is unfavorable for telecom companies because they have to deal with the added acquisition costs associated with customers, which has a further unfavorable impact on companies’ operating margins. As a result, a rise in churn rate can become a cause of concern for investors.