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AT&T’s Branded Smartphone Users Compensate for Basic Phone Losses

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Sep. 4 2015, Updated 10:08 a.m. ET

AT&T’s branded smartphone users

In the previous part of this series, we learned about the growth of AT&T (T) Next, the telecom company’s installment plan. We also discussed the positive impact of the plan’s growing adoption on AT&T’s per-customer wireless postpaid revenue.

During its recent analyst conference, AT&T mentioned a trend that has facilitated the growth of the wireless segment. According to the company, on a sequential basis, it is consistently losing postpaid feature phone customers. However, AT&T’s branded smartphone users—both prepaid and postpaid customers—have been increasing sequentially.

AT&T’s postpaid phone users, which include both smartphone and basic phone customers, declined by ~1.1% YoY (or year-over-year) to ~67.6 million in 2Q15. Even during the quarter, the company had a net loss of postpaid phone users of ~322,000.

The loss of phone customers of the company has been originating from basic phone users. As shown in the above chart, the company has been losing these phone users consistently since 2Q14.

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Benefits from AT&T’s branded smartphone users

On the positive side and according to AT&T, it has been gaining valuable smartphone customers. Compared to basic phone customers, smartphone users generate more unit revenue for the telecom company.

The users of smartphones such as Apple’s (AAPL) iPhones and Google (GOOG) (GOOGL) Android phones tend to use high amounts of data, which are more profitable for wireless telecom companies. According to the company, its branded postpaid and prepaid smartphone subscribers have increased ~12.1% to ~65 million at the end of 2Q15.

You can take exposure to AT&T by investing in the SPDR S&P 500 ETF (SPY) or the Technology Select Sector SPDR ETF’s (XLK). AT&T represented ~1.1% of SPY as of July 31, and, it was ~5.2% of XLK’s holdings on the same date.

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