Sprint’s postpaid phone churn in fiscal 3Q16
Let’s take a look at Sprint’s (S) customer retention metric—churn rate. Its postpaid phone churn rose year-over-year in fiscal 3Q16, which ended on December 31, 2016. Postpaid phone churn of 1.6% in fiscal 3Q16 was more than the comparable figure of 1.5% in fiscal 3Q15.
On March 7, 2017, at the Deutsche Bank Media, Internet and Telecom Conference, Tarek Robbiati, Sprint’s chief financial officer, spoke about the significant amount of subscriber switch among carriers going forward. He said the main reason for the increase in churn rate is due to the continued competitive intensity in the postpaid space and more aggressive promotional offers from competitors. Because of this elevated competition, Sprint’s management expects postpaid phone churn rate to be stable quarter-over-quarter in fiscal 4Q16.
Robbiati said, “But it’s nothing alarming, it’s just the nature of where we stand right now in the market and we feel reasonably good. We think we can still take share. We are the attacker from a price standpoint.”
An increase in churn rate is negative for telecom companies because they have to deal with additional acquisition costs associated with customers. That has a further negative impact on companies’ operating margins. As a result, an increase in churn rate could be a cause of concern for investors.
Peer comparison of postpaid phone churn in 4Q16
Among the top four largest US mobile players, Verizon continued to have the best postpaid phone customer retention in 4Q16. That quarter, Verizon (VZ) and AT&T (T) had postpaid phone churn rates of 0.90% and 0.98%, respectively. T-Mobile (TMUS) reported a postpaid phone churn rate of 1.3% that same quarter.