AT&T’s postpaid churn in 3Q16
AT&T’s postpaid churn improved YoY (year-over-year) in 3Q16. AT&T’s postpaid churn of 1.05% in 3Q16 was lower than the comparable figure of 1.16% in 3Q15.
Despite the YoY improvement in AT&T’s postpaid churn, Verizon Communications (VZ) remained the best in this metric among the top four US wireless players in 3Q16 at around 1.04%. T-Mobile (TMUS) and Sprint (S) had higher churn rates of 1.32% and 1.52%, respectively, in 3Q16.
Apple’s iPhone 7 launch increased churn rates for AT&T
AT&T’s postpaid churn rose from 0.97% in 2Q16 to 1.05% in 3Q16. This rise was mainly due to the recent release of Apple’s (AAPL) iPhone 7 in September 2016, as many customers changed their carriers to opt for the best wireless plan. Another reason for AT&T’s rise in churn was that it has stopped supporting 2G network, and subscribers have been migrating away from 2G networks and devices.
Any increase in churn rate is negative for telecom companies because they have to deal with additional acquisition costs associated with customers, which has a further negative impact on companies’ operating margins.
The proposed acquisition of Time Warner (TWX) should enhance AT&T’s ability to create opportunities for bundling services together, which should help lower AT&T’s churn rate, thereby boosting wireless margins.
Continue to the next part for a look at AT&T’s expansion into Mexico and Latin America.