Customer growth and retention in 1Q15
In the previous part of this series, we looked at the muted performance of AT&T’s (T) wireless division in 1Q15. We also learned that per unit recurring revenue for the telecom (telecommunication) company’s wireless division declined year-over-year during the quarter.
Now we’ll look at the carrier’s two key wireless indicators: net additions and postpaid churn. In 1Q15, AT&T’s net additions increased year-over-year, albeit at a slower rate than 3Q14 and 4Q14 . The company’s customer retention improved slightly during the quarter.
AT&T’s net additions grow in 1Q15
The telecom company’s net additions increased by ~14.7% year-over-year in 1Q15. However, this growth in net additions came predominantly from connected devices. AT&T added net 945,000 connected devices during the quarter. These devices included session-based tablets.
AT&T’s postpaid net additions in 1Q15 at 441,000 were much lower than the company experienced in 1Q14. The company lost feature phone connections during the quarter. Tablets contributed significantly to AT&T’s postpaid net additions.
AT&T’s postpaid churn improves in 1Q15
AT&T’s postpaid churn improved from ~1.07% in 1Q14 to ~1.02% in 1Q15. One of the reasons for the improvement in customer retention was the higher penetration of the company’s Mobile Share Value plans. This is a shared data plan similar to Verizon’s (VZ) More Everything plan.
These plans have sticky customers. The penetration of Mobile Share Value plans in AT&T’s postpaid smartphone subscribers has almost doubled from 1Q14 to 1Q15. These smartphone customers include Apple’s (AAPL) iPhone users, who tend to use a lot of data.
You can take a diversified exposure to AT&T by investing in the Sector SPDR Trust SBI Interest ETF (XLK). AT&T made up ~4.2% of this ETF as of March 31, 2015. You can also invest in the iShares Core S&P 500 ETF (IVV). The ETF held ~0.9% in the telecom company as of the same date.