uploads/2016/05/Telecom-T-Mobiles-Postpaid-Phone-Churn1.jpg

Why T-Mobile Is Focusing on Family Plans

By

Updated

T-Mobile on family plans

In the previous part of the series, we learned about some aspects of T-Mobile’s (TMUS) subscriber growth story.

During the recent MoffettNathanson Media & Communications Summit, J. Braxton Carter, the company’s chief financial officer and executive vice president, highlighted a customer segment with relatively high customer lifetime value that the company is focusing on.

Carter said, “One of the keys to our growth is family plan penetration. And when you look at AT&T and Verizon, they are over 80% family plan and continuing to take share from those incumbent players.”

He added, “It’s really important to break that equation on the family plan. And talking about CLVs [customer lifetime value], the CLV of a family plan is much higher than the CLV on individual lines.”

Article continues below advertisement

Positive impact of family plans on customer retention

Improvement in the penetration levels of family plans among T-Mobile’s customers should positively impact its customer retention. The carrier’s postpaid churn metric is still higher than those of the top two US wireless players, Verizon (VZ) and AT&T (T).

In 1Q16, Verizon continued to have the lowest postpaid churn among the top four US wireless companies at ~0.96%. AT&T followed Verizon in this metric, with a postpaid churn of ~1.1% in domestic operations during the quarter.

T-Mobile had a postpaid churn of ~1.3% for the quarter. Sprint’s postpaid phone churn was ~1.6% during the same quarter.

Instead of taking direct exposure to T-Mobile’s stock, you may want to take diversified exposure to the telecommunications company by investing in the PowerShares QQQ Trust, Series 1 ETF (QQQ). The ETF held ~0.6% in TMUS at the end of April 2016.

Advertisement

More From Market Realist