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T-Mobile on Possible Churn Improvement Potential

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T-Mobile’s customer retention

In an earlier part of this series, we learned about the pace of deployment of T-Mobile’s (TMUS) 4G LTE (fourth generation long-term evolution) coverage. In addition, we mentioned how close this coverage has come to matching the coverages of Verizon (VZ) and AT&T (T).

We also learned about the continued and anticipated expansion of coverage on T-Mobile’s low-band 700 MHz (megahertz) spectrum. These network expansions and enhancements should continue to positively affect T-Mobile’s customer retention.

During the Morgan Stanley European Technology, Media, and Telecom Conference held on November 12, 2015, T-Mobile’s chief technology officer Neville Ray talked about the company’s customer retention.

Ray said, “Our churn is at the best levels we’ve seen in our history. And really, you look forward and you think about the churn levels that Verizon and AT&T have secured for some time. You see a journey and a path for us to approach those as we move into 2016.”

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Churn metrics of top US wireless players in 3Q15

Now let’s look at the postpaid customer retention metrics of significant US wireless players during 3Q15. The top four US mobile operators are AT&T, Verizon, T-Mobile, and Sprint (S).

As we can see in the above chart, T-Mobile’s postpaid churn was ~1.5% in 3Q15. Earlier in 3Q14, this metric was ~1.6%.

During 3Q15, Verizon’s postpaid churn was the best among the top US wireless carriers. The telecom (telecommunication) company’s postpaid churn fell from ~1% in 3Q14 to ~0.93% in 3Q15.

AT&T’s postpaid churn rose from ~0.99% in 3Q14 to ~1.2% during 3Q15. Meanwhile, Sprint Platform’s postpaid churn fell from ~2.2% in 3Q14 (Sprint’s fiscal 2Q14) to ~1.5% in 3Q15 (Sprint’s fiscal 2Q15).

Instead of taking direct exposure to T-Mobile’s stock, you may consider taking diversified exposure to the telecom company by investing in the Vanguard Telecommunication Services ETF (VOX).

The ETF had ~4.2% of its holdings in T-Mobile at the end of September 2015.

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