The churn rate for AT&T is the best among U.S. telecom providers
In one of the prior parts of this series, we mentioned that AT&T’s (T) Next program has been instrumental in getting the company’s churn rate as low as 0.86%, which the company achieved in 2Q14. This churn rate is the best in the U.S. telecom industry, with churn rates for Verizon (VZ) the second best at 0.94%. As the chart below shows, the churn rates for T-Mobile (TMUS) and Sprint (S) are 1.50% and 2.09%, respectively—much higher compared to AT&T’s.
Lower churn rates help companies save cost that they would otherwise incur acquiring new customers. So it’s an important parameter in the telecom industry.
AT&T credits its lower churn rate to the Next and Mobile Share plans
We discussed the Next and Mobile Share plans in the prior parts of this series. AT&T credited its lower churn rates to these programs as they gain more popularity. Another reason for lower churn rates is customer loyalty towards Apple’s (AAPL) iPhone with the AT&T network.
In a recent Market Realist article titled Why Apple’s iPhone is still the leading smartphone brand at AT&T, we discussed how as of 2Q14, Apple was still the leading smartphone brand at AT&T, while Samsung was the leading smartphone player at Verizon and Sprint.
How is Verizon able to maintain a lower churn rate?
As we discussed above, Verizon’s churn rate of 0.94% is only slightly higher than AT&T’s. Verizon’s strategy has been to reach out to out-of-contract customers to move them over to its EDGE program. Out-of-contract customers are customers who have finished their two-year contracts with Verizon and are free to move to another telecom provider.
If customers move on, this will increase the churn rate for Verizon. Moving these customers over to the EDGE program helps Verizon retain these customers.