AT&T’s prepaid subscriber growth
AT&T’s (T) prepaid subscriber growth continued to be strong in 3Q16. AT&T added a total of 304,000 net prepaid subscribers and managed to grow its prepaid revenues by 20% on a YoY (year-over-year) basis for the quarter.
AT&T’s loss of postpaid phone subscribers was partially offset by its Cricket business, which is its prepaid category. AT&T’s recent loss of subscribers in the postpaid phone category came mainly from its 2G segment. According to the company, the ARPU (average revenue per user) associated with this category was around $35. This metric was even less than the ARPU of $42 associated with prepaid customers for AT&T.
Lower costs associated with prepaid customers
Costs associated with prepaid customers are also much lower than the costs with postpaid subscribers. Acquisition costs, maintenance costs, and upfront costs are all lower for prepaid subscribers.
In 3Q16, Sprint (S) lost 427,000 prepaid subscribers. However, Verizon (VZ) and T-Mobile (TMUS) gained 83,000 and 684,000 prepaid subscribers, respectively, which means that T-Mobile gained the most subscribers both in the postpaid and prepaid categories.
MetroPCS brand driving prepaid subscriber gains for T-Mobile
For the above reason, AT&T has chosen to focus more on prepaid customers than on 2G postpaid phone customers. For T-Mobile, its MetroPCS brand has been driving business in the prepaid category. It managed to grow its prepaid subscribers by ~15% YoY in 3Q16, which was the second-best net prepaid subscriber addition in the company’s history.
Meanwhile, Verizon blamed its negligible prepaid subscriber additions on its new prepaid pricing plans. Sprint, on the other hand, mentioned that in its prepaid category, it’s looking to focus on higher value brands like Boost and Virgin Mobile.
In the next part of this series, we’ll discuss AT&T’s postpaid churn rate.