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Expectations for AT&T’s Prepaid Net Additions in 1Q17

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AT&T’s prepaid subscriber growth

Earlier in this series, we discussed the postpaid phone churn rate that we could expect from AT&T (T) in 1Q17. Now, let’s discuss the performance of AT&T in the prepaid category.

Recent results illustrate that T-Mobile (TMUS) and AT&T are taking the majority of the share in the prepaid market. In 1Q17, AT&T’s prepaid subscriber additions are expected to remain strong.

Earlier in 4Q16, AT&T added a total of 406,000 net prepaid subscribers, 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—its prepaid category.

Costs associated with prepaid customers are much lower than costs associated with postpaid subscribers, making them more profitable. Acquisition costs, maintenance costs, and upfront costs are all lower for prepaid subscribers.

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Peer comparison of prepaid net additions in 4Q16

T-Mobile gained the maximum number of subscribers both in the postpaid and prepaid categories. T-Mobile reported net prepaid additions of 541,000 subscribers during 4Q16. In 4Q16, Sprint (S) lost 501,000 net prepaid subscribers, and Verizon (VZ) reported 9,000 prepaid subscriber net losses.

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 at ~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.

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