Factors affecting the churn of wireless telecommunication companies
In the previous part of this series, we learned that Verizon’s (VZ) churn rate increased marginally in 4Q14. The increase in the customer attrition metric was a common trend among national wireless carriers during the quarter. The national carriers increased promotional activities to acquire and retain customers in the high retail sales period. The quarter was also marked by high sales volume, owing to the launch of Apple’s (AAPL) iPhone 6 in September 2014, just before the holiday season. Here, we’ll compare Verizon’s customer churn with other national wireless carriers’ customer churns.
Verizon has the best churn rate among national carriers
Verizon had the best postpaid churn rate among national wireless carriers in 4Q14. As we mentioned in the previous part of this series, Verizon’s postpaid churn rate stood at ~1.1% in 4Q14. Verizon’s postpaid churn increased sequentially from ~1% in 3Q14.
Verizon was closely followed by AT&T (T), with a churn rate of ~1.2% during the quarter. In 3Q14, AT&T had the best churn rate of among national wireless carriers. However, the company’s churn rate increased at a faster rate sequentially due to high competition among wireless telecommunication companies during the quarter.
Sprint (S) continued to have the worst postpaid churn rate among national carriers during the quarter. The company had the highest postpaid churn among wireless carriers even in 3Q14.
T-Mobile (TMUS) retained its third rank—based on its postpaid phone churn—among national carriers in 4Q14.
You can take on diversified exposure to Verizon by investing in the iShares Russell 1000 Growth ETF (IWF). The ETF held ~1.8% in the company on March 19, 2015.