AT&T’s postpaid phone net additions
In the previous part, we discussed AT&T’s (T) capex plans and expected free cash flow growth in 2016. In this article, we’ll look at the kind of postpaid phone net additions we could expect from AT&T in 3Q16. Postpaid phone users, especially smartphone users, are of particular value for mobile carriers. Users of smartphones such as Google’s (GOOG) Android or Apple’s (AAPL) iPhone tend to have relatively high data usage, making them the most lucrative customers for telecom companies.
Peer comparison: Postpaid phone net additions in 2Q16
In 2Q16, AT&T lost 180,000 postpaid phone subscribers. However, postpaid phone net additions by Sprint (S) and T-Mobile (TMUS) were 173,000 and 646,000 respectively. Although Verizon (VZ) had a much lower net gain of 86,000 postpaid phone subscribers, it still fared better than AT&T.
In defense of these losses, AT&T indicated that they were mainly subscribers using high-maintenance featured phones or 2G data plans, and that it plans to gradually shut down 2G network support. These subscribers are low-margin subscribers for AT&T, and it wants to focus on high-value customers with higher margins.
Last month, Sprint and T-Mobile announced that their pre-orders for iPhone 7 and iPhone 7 Plus have exceeded pre-orders for iPhone 6 and Plus by more than four times. As Verizon and AT&T haven’t made such announcements, Sprint and T-Mobile could again gain a chunk of postpaid phone subscribers by the end of 3Q16. Therefore, AT&T is likely to once again report lower postpaid phone net additions during its 3Q16 earnings announcement. Continue to the next part for a look at AT&T’s prepaid phone net additions.