How Did Verizon Do in Terms of Customer Retention in 1Q16?



Verizon’s postpaid churn in 1Q16

Earlier in this series, we saw that YoY (year-over-year), Verizon’s (VZ) postpaid subscribers rose in 1Q16. Moreover, the wireless carrier gained net postpaid connections of ~0.64 million in the quarter.

Now, let’s take a look at the telecommunications (telecom) company’s customer retention during the quarter. YoY, Verizon’s postpaid churn continued to improve in 1Q16. For the company, this metric was ~0.96% in 1Q16 compared to ~1.0% in 1Q15.

The telecom company’s postpaid churn improved YoY in each quarter of 2015. In 4Q15, its postpaid churn was ~0.96% compared to ~1.1% in 4Q14.

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Regarding 2Q16 guidance for the churn metric, Fran Shammo, Verizon’s chief financial officer and executive vice president, highlighted, “You saw this 7 basis point decrease in churn for the last couple of quarters. What I would say though is, if you look ahead, last year’s second quarter the churn was like at 0.90.”

Shammo continued, “I would not anticipate, nor should you anticipate, that we will achieve that churn rate again because things have kind of flattened out now.”

Churn metric of other US carriers in 4Q15

Among the top four US wireless players, Verizon continued to have the best postpaid retention in 4Q15. AT&T (T) followed Verizon in this metric, with a postpaid churn in domestic operations of ~1.2% in 4Q15. Meanwhile, Sprint’s (S) churn was ~1.6% during the quarter. T-Mobile’s (TMUS) postpaid phone churn was at ~1.5% in 4Q15.

For diversified exposure to select telecom companies in the United States, you may consider investing in the SPDR S&P 500 ETF (SPY). SPY held a combined total of ~2.8% in AT&T (T), Verizon, CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of March 2016.


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