AT&T’s prepaid subscriber growth
In the previous part, we looked at the trend in AT&T’s (T) postpaid phone net additions over the last few quarters. AT&T’s prepaid subscriber growth continued to be strong. AT&T added a total of 406,000 net prepaid subscribers in 4Q16, a significant improvement compared to 304,000 prepaid subscriber net additions in 3Q16. AT&T’s loss of postpaid phone subscribers was partially offset by its Cricket business, which is its prepaid category.
Costs associated with prepaid customers are much lower than costs for postpaid subscribers, which makes them more profitable. Acquisition costs, maintenance costs, and upfront costs are all lower for prepaid subscribers.
AT&T’s peer comparison of prepaid net additions in 4Q16
Although Verizon (VZ) has not historically focused on the prepaid segment, recent results illustrate that T-Mobile (TMUS) and AT&T have the majority of the prepaid market share. In 4Q16, Sprint (S) lost 501,000 net prepaid subscribers. In contrast, Verizon reported 9,000 prepaid subscriber net losses in 4Q16. Meanwhile, according to T-Mobile’s preliminary report on January 5, 2017, the company reported net prepaid additions of 541,000 subscribers during the last quarter of 2016. This means that T-Mobile gained the most subscribers both in the postpaid and prepaid categories.
At the end of 4Q16, Verizon’s postpaid base was the largest among the top four US wireless players. However, the carrier had the smallest prepaid base among these players. T-Mobile’s prepaid subscriber base was the largest with ~19.8 million. Sprint and AT&T followed with ~11.8 million and ~13.5 million prepaid subscribers, respectively. Verizon had ~5.4 million prepaid subscribers.
In the next article of this series, we’ll discuss AT&T’s postpaid phone churn rate.