What Happened to Verizon’s Postpaid Phone Churn Rate?

Verizon’s postpaid phone churn in 4Q16

Although Verizon Communications (VZ) has continued to face headwinds in the US wireless market, it made good progress over the course of 2016 in improving service revenue trends while maintaining a postpaid phone subscriber churn rate of 0.9% in 4Q16—for the seventh consecutive quarter.

This may be significant, since T-Mobile (TMUS) and Sprint (S) have been able to steal customers from other carriers, including Verizon and AT&T (T).

What Happened to Verizon’s Postpaid Phone Churn Rate?

Peer comparisons in 4Q16

Among the top four largest US mobile players, Verizon continued to have the best postpaid phone customer retention in 4Q16. In calendar 4Q16, AT&T and Sprint had postpaid phone churn rates of 0.98% and 1.57%, respectively. Meanwhile, according to T-Mobile’s preliminary report on January 5, 2017, the company reported a postpaid phone churn rate of 1.28% in 4Q16.

Verizon’s postpaid churn rose from 1.04% in 3Q16 to 1.10% in 4Q16. This increase was mainly due to increased churn from customers who signed two-year tablet agreements.

Remember, any rise in churn rate is negative for telecom companies because it means that the companies have to deal with the additional acquisition costs associated with customers, which have further negative impacts on operating margins. As a result, any increase in churn rate is usually a cause for concern for investors.

Continue to the next part for a look at Verizon’s prepaid subscriber net additions.